1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MOTIVEPOWER INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Pennsylvania 3743 82-0461010
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
Two Gateway Center, 14th Floor
Pittsburgh, Pennsylvania 15222
(412) 201-1101
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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Jeannette Fisher-Garber
Vice President, General Counsel and Secretary
MotivePower Industries, Inc.
Two Gateway Center, 14th Floor
Pittsburgh, Pennsylvania 15222
(412) 201-1101
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
Leo A. Keevican, Jr., Esq. Frederick C. Lowinger, Esq. David L. DeNinno, Esq. Michael Movsovich, Esq.
David J. Hirsch, Esq. Sidley & Austin Reed Smith Shaw McClay Kirkland & Ellis
Doepken Keevican & Weiss One First National Plaza 435 Sixth Avenue 153 East 53rd Street
58th Floor, USX Tower Chicago, Illinois 60603 Pittsburgh, Pennsylvania New York, New York 10022
600 Grant Street (312) 853-7000 15219 (212) 446-4800
Pittsburgh, Pennsylvania (312) 853-7036 (fax) (412) 288-3214 (212) 446-4900 (fax)
15219 (412) 288-3218 (fax)
(412) 355-2600
(412) 355-2609 (fax)
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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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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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Common Stock, $.01 par value........ 48,514,837 shares(1) $18.469(2) $896,020,525(2) $249,094(3)
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Preferred Stock Purchase Rights..... 48,514,837 rights(1) (2)(4) (2)(4) (4)
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(1) Consists of (a) 44,297,412 shares of common stock, $.01 par value, of
MotivePower Industries, Inc. issuable pursuant to the Agreement and Plan of
Merger between MotivePower and Westinghouse Air Brake Company upon the
exchange of 34,074,932 shares of common stock of Westinghouse Air Brake
Company outstanding as of July 16, 1999 and (b) 4,217,425 shares of
MotivePower common stock issuable in respect of options of Westinghouse Air
Brake outstanding as of July 16, 1999 converted into options of MotivePower
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 July 16, 1999 ($18.469).
(3) Pursuant to Rule 457(b), $170,832.70 of the registration fee is offset by
the filing fee previously paid by MotivePower in connection with the filing
of preliminary proxy materials on June 17, 1999. Accordingly, a registration
fee of $78,261.30 is being paid herewith.
(4) The preferred stock purchase rights are evidenced by certificates for shares
of MotivePower common stock and automatically trade with MotivePower common
stock. Value attributable to such preferred stock purchase rights, if any,
is reflected in the market price of the MotivePower common stock.
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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2
SUBJECT TO COMPLETION DATED JULY 19, 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 MotivePower Industries, Inc., with its
headquarters in the Pittsburgh, Pennsylvania area.
If the merger is completed, holders of WABCO common stock will receive, for
each WABCO share, 1.3 shares of MotivePower common stock. MotivePower
shareholders will continue to own their existing shares after the merger.
MotivePower will issue approximately 44 million shares of MotivePower
common stock to WABCO shareholders in the merger, based on outstanding shares on
July 19, 1999. These shares will represent approximately % of the
outstanding MotivePower common stock after the merger. MotivePower shares held
by MotivePower shareholders before the merger will represent approximately
% of the outstanding MotivePower shares after the merger.
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:
Monday, August 23, 1999
11:00 a.m., Eastern Time
Two Gateway Center, Lobby Conference Center
Pittsburgh, Pennsylvania
For WABCO shareholders:
Monday, August 23, 1999
10:00 a.m., Eastern 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-13 OF THIS JOINT PROXY STATEMENT/ PROSPECTUS.
John C. Pope
Chairman of the Board
MotivePower Industries, Inc.
LOGO
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 MOTIVEPOWER COMMON STOCK TO BE ISSUED TO WABCO
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 July , 1999,
and first mailed to shareholders on July 26, 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.
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[MotivePower Logo]
MOTIVEPOWER INDUSTRIES, INC.
TWO GATEWAY CENTER, 14TH FLOOR
PITTSBURGH, PENNSYLVANIA 15222
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 23, 1999
To the Shareholders:
A special meeting of shareholders of MotivePower Industries, Inc. will be
held on Monday, August 23, 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 Agreement and Plan of
Merger, dated as of June 2, 1999, between Westinghouse Air Brake Company and
MotivePower, and the merger, as described in the attached joint proxy
statement/prospectus.
The close of business on July 19, 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.
By the Order of the Board of
Directors,
Jeannette Fisher-Garber
Vice President, General Counsel
and Secretary
Pittsburgh, Pennsylvania
July , 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.
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WABCO LOGO
WESTINGHOUSE AIR BRAKE COMPANY
1001 AIR BRAKE AVENUE
WILMERDING, PENNSYLVANIA 15148
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 23, 1999
To the Shareholders:
A special meeting of shareholders of Westinghouse Air Brake Company will be
held on Monday, August 23, 1999, at 10:00 a.m., at 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 Agreement and
Plan of Merger, dated as of June 2, 1999, between WABCO and MotivePower
Industries, Inc. and the merger, as described in the attached joint proxy
statement/prospectus.
The close of business on July 19, 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.
Please do not send any certificates for your stock at this time.
By the Order of the Board of
Directors,
/s/ Robert J. Brooks
Robert J. Brooks
Chief Financial Officer and Secretary
Wilmerding, Pennsylvania
July , 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.
5
TABLE OF CONTENTS
CHAPTER ONE -- THE MERGER
QUESTIONS AND ANSWERS ABOUT THE
MERGER.......................... I-1
SUMMARY............................ I-2
The Companies................. I-2
Reasons for the Merger........ I-2
Merger Recommendations to
Shareholders............... I-2
The Merger.................... I-3
HISTORICAL AND PRO FORMA SELECTED
FINANCIAL DATA.................. I-7
Selected Historical Financial
Data of MotivePower........ I-8
Selected Historical Financial
Data of WABCO.............. I-10
Selected Unaudited Pro Forma
Condensed Combined
Financial Data............. I-11
Comparative Per Share Data.... I-12
RISK FACTORS....................... I-13
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS...... I-19
INFORMATION ABOUT THE MEETINGS AND
VOTING.......................... I-21
Matters Relating to the
Meetings................... I-21
Vote Necessary to Approve
MotivePower and WABCO
Proposals.................. I-23
Proxies....................... I-23
Other Business;
Adjournments............... I-24
Presence of Auditors.......... I-25
THE MERGER TRANSACTION............. I-26
General....................... I-26
Background of the Merger...... I-26
MotivePower's Senior
Management Team............ I-29
Factors Considered by, and
Recommendation of, the
MotivePower Board.......... I-29
Factors Considered by, and
Recommendation of, the
WABCO Board................ I-32
Accounting Treatment.......... I-35
Material United States Federal
Income Tax Consequences of
the Merger................. I-35
Regulatory Matters............ I-36
Appraisal Rights.............. I-37
Federal Securities Laws
Consequences; Stock
Transfer Restriction
Agreements................. I-37
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION........ I-38
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS... I-39
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL
STATEMENTS...................... I-46
OPINIONS OF FINANCIAL ADVISORS..... I-47
Opinion of MotivePower
Financial Advisor.......... I-47
Opinion of WABCO Financial
Advisor.................... I-52
INTERESTS OF CERTAIN PERSONS IN THE
MERGER.......................... I-57
Board of Directors............ I-57
Advisory Agreements........... I-57
Indemnification; Directors'
and Officers' Insurance.... I-58
Stock Options................. I-58
Employment Agreements......... I-60
Employment Continuity
Agreements................. I-62
Executive Incentive Plan...... I-63
THE MERGER AGREEMENT............... I-64
Structure of the Merger....... I-64
Timing of Closing............. I-64
Merger Consideration.......... I-64
Treatment of WABCO Stock
Options.................... I-64
Exchange of Shares............ I-64
MotivePower Board and Related
Matters.................... I-64
Covenants..................... I-65
Representations and
Warranties................. I-68
Conditions to the Completion
of the Merger.............. I-68
Termination of the Merger
Agreement.................. I-69
Expenses...................... I-71
Amendments.................... I-71
Stock Option Agreements....... I-71
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CHAPTER TWO -- LEGAL INFORMATION
COMPARISON OF SHAREHOLDER RIGHTS............. II-1
Summary of Material Differences Between
Current Rights of WABCO Shareholders
and Rights Those Shareholders Will
Have as MotivePower Shareholders
Following the Merger................. II-1
Summary of Functions and Powers of
MotivePower and WABCO Board
Committees........................... II-11
DESCRIPTION OF MOTIVEPOWER CAPITAL STOCK..... II-15
Authorized Capital Stock................ II-15
Common Stock............................ II-15
Preferred Stock......................... II-15
Shareholder Rights Plan................. II-15
Transfer Agent and Registrar............ II-16
Stock Exchange Listing; Delisting and
Deregistration of WABCO Common
Stock................................ II-16
LEGAL MATTERS................................ II-17
EXPERTS...................................... II-17
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
ANNEXES
Annex A Agreement and Plan of Merger, As Amended (Including Exhibits)
Annex B WABCO Stock Option Agreement
Annex C MotivePower Stock Option Agreement
Annex D Opinion of Wasserstein Perella & Co., Inc.
Annex E Opinion of Credit Suisse First Boston Corporation
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CHAPTER ONE
THE MERGER
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: When and where are the shareholder meetings?
A: Each company's meeting will take place on Monday, August 23, 1999 in the
Pittsburgh, Pennsylvania area. The address of each meeting is on page I-21.
Q: What do I need to do now?
A: Just mail your signed proxy card 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 merger agreement and the 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-2.
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 appear 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 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 WABCO shareholders written
instructions for exchanging their share certificates. MotivePower shareholders
will keep their existing certificates.
Q: What will WABCO common shareholders receive for their shares?
A: WABCO shareholders will receive 1.3 shares of MotivePower common stock for
each of their shares of WABCO 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, WABCO
shareholders will not be able to determine the precise value of the shares of
MotivePower common stock they would receive in the merger at the time they vote
on the merger at their meeting. MotivePower will not issue any fractional shares
in the merger. Instead, WABCO shareholders will receive cash for any fractional
shares of MotivePower common stock owed to them in an amount based on the market
value of MotivePower 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.
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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 3,000 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 manufacturer 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-13. 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-29 through
I-35.
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-2
9
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 merger agreement is attached as Annex A to this joint proxy
statement/prospectus. We encourage you to read the merger agreement as it is the
legal document that governs the merger.
WHAT WABCO SHAREHOLDERS WILL RECEIVE (SEE PAGE I-64)
As a result of the merger, WABCO shareholders will receive, for each share of
WABCO common stock, 1.3 shares of MotivePower common stock.
MotivePower will not issue any fractional shares. WABCO shareholders will
receive cash for any fractional shares of MotivePower common stock owed to them
in an amount based on the market value of MotivePower common stock on the date
on which the merger occurs.
Example:
- - If you currently own 75 shares of WABCO common stock, then after the merger
you will receive 97 shares of MotivePower common stock and a check in an
amount equal to .5 multiplied by the closing price of the MotivePower 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 MotivePower
common stock changes prior to and after the merger.
On July 19, 1999 the last per share price of MotivePower common stock reported
on the New York Stock Exchange was $18.06. Applying the 1.3 exchange ratio to
the MotivePower last reported price on that date, each holder of WABCO common
stock would be entitled to receive MotivePower common stock with a market value
of approximately $23.48 for each share of WABCO common stock. 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 June 2, 1999, the last full trading day prior to the public
announcement of the proposed merger, MotivePower closed at $16.63 and WABCO
closed at $23.31. On July 19, 1999, MotivePower closed at $18.06 and WABCO
closed at $23.13.
LISTING OF MOTIVEPOWER COMMON STOCK
The shares of MotivePower common stock will be listed on the New York Stock
Exchange under the ticker symbol "MPO".
OWNERSHIP OF MOTIVEPOWER AFTER THE MERGER
MotivePower will issue approximately 44 million shares of MotivePower common
stock to WABCO shareholders in the merger. This includes 12 million shares to
WABCO's Employee Stock Ownership Plan, which we sometimes refer to in this joint
proxy statement/prospectus as "WABCO's ESOP". The shares of MotivePower common
stock to be issued to WABCO shareholders in the merger will represent
approximately % of the outstanding MotivePower common stock after the
merger. This information is based on the number of MotivePower and WABCO shares
outstanding on July 19, 1999 and does not take into account stock options or
other equity-based awards.
SHARE OWNERSHIP OF OFFICERS AND DIRECTORS (SEE PAGE I-23)
On the record date, directors and executive officers of MotivePower and their
affiliates owned and were entitled to vote approximately 2,511,268 shares of
MotivePower common stock, or approximately 9.28% of the shares of MotivePower
common stock outstanding on the record date.
On the record date, directors and executive officers of WABCO and their
affiliates beneficially owned and were entitled to vote shares of
WABCO common stock, or approximately 30.21% of the shares of WABCO common stock
outstanding on the record date.
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-3
10
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-37)
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 MOTIVEPOWER AND RELATED MATTERS AFTER THE MERGER (SEE PAGE
I-64)
Following the merger, the board of directors of MotivePower will have fourteen
members, including seven directors designated by MotivePower and seven directors
designated by WABCO.
INTEREST OF OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE I-57)
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-35)
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-35)
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 WABCO upon the conversion of their shares of
WABCO common stock into shares of MotivePower common stock pursuant to the
merger, except with respect to cash, if any, received in lieu of fractional
shares of MotivePower common stock.
The federal income tax consequences of the merger are discussed more fully on
pages I-35 through I-36. The consequences described herein do not address tax
consequences which may vary with, or are contingent upon, individual
circumstances. In particular, the federal income tax consequences described
herein may not apply to individuals who received WABCO 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. Also, special rules not
discussed herein might apply to WABCO's ESOP. We strongly urge each shareholder
of WABCO 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-68)
The completion of the merger depends upon meeting a number of conditions,
including the following:
- - approval and adoption of the merger agreement and the merger by the
shareholders of MotivePower and WABCO;
- - 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;
- - 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 closing of the representations and warranties made by
each party.
REGULATORY APPROVALS (SEE PAGE I-36)
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 Improvement Act with the FTC and the Antitrust Division of the U.S.
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Department of Justice. On July 19, 1999, MotivePower and WABCO received notice
of early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE I-69)
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 November 30, 1999;
- - 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 July 17, 1999, either company's Board shall have determined to
recommend an acquisition proposal made by a third party and to enter into a
written agreement concerning the takeover proposal after determining that the
proposal is more favorable than the merger.
TERMINATION FEES (SEE PAGE I-70)
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 July 17, 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 July 17, 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
In connection with the merger agreement, MotivePower and WABCO entered into the
WABCO stock option agreement under which WABCO granted to MotivePower an option
to purchase approximately 19% of WABCO's outstanding common stock, at a price of
$21.6125 per share which is adjustable in specified events. The option is
exercisable under the same circumstances in which WABCO is required
I-5
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to pay to MotivePower the $15 million termination fee referred to above.
MotivePower and WABCO also entered into the 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 $16.625 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. These stock option agreements are attached as
Annex B and Annex C. We encourage you to read these agreements.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES I-47 AND I-52)
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 MotivePower as of June 2, 1999, and WABCO received an opinion from
Credit Suisse First Boston Corporation (which we sometimes refer to as CSFB) as
to the fairness from a financial point of view of the exchange ratio to the
holders of WABCO common stock as of June 2, 1999. These opinions are attached as
Annex D and Annex E. We encourage you to read these opinions.
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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 three
months ended March 31, 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-35.
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, adjustments were made to conform the
classification of amortization expense and income taxes receivable 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-39.
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-47.
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-47.
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 three months ended March 31, 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 March 31,
1999 and 1998.
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HISTORICAL AND PRO FORMA SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL DATA OF MOTIVEPOWER
The following selected historical financial data 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 for the three months ended March 31, 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.
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
(UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
FINANCIAL DATA:
Net sales............ $107,274 $ 82,853 $ 365,218 $305,930 $291,407 $263,718 $368,537
Gross profit
(loss)............. 27,523 21,356 81,322 72,342 56,847 (5,167) (5,478)
Operating income
(loss)............. 14,805 11,003 40,363 34,618 24,232 (51,113) (49,977)
Net income (loss).... 7,878 6,648 32,197 20,276 11,509 (40,414) (42,793)
Diluted earnings per
share(1)(2)........ $0.28 $0.24 $1.15 $0.74 $0.44 $(1.56) $(1.65)
Cash flow provided by
(used in) operating
activities......... 13,169 (5,265) 31,344 35,452 43,368 (21,743) (85,141)
Cash flow provided by
(used in) investing
activities......... (36,150) (6,139) (102,324) (22,472) 12,407 (15,408) (36,941)
Cash flow provided by
(used in) financing
activities......... 28,491 490 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)............ 18,619 13,482 51,770 44,585 34,589 (39,781) (38,345)
MARCH 31, DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total assets.......... $407,812 $285,607 $371,198 $283,102 $234,044 $280,948 $311,297
Total debt............ 134,164 50,833 105,798 50,507 49,592 120,118 108,176
Shareholders'
equity.............. 186,637 151,441 177,929 144,548 120,980 94,527 114,124
- ---------------
(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.
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(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.
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SELECTED HISTORICAL FINANCIAL DATA OF WABCO
The following selected historical financial data 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 for the three months ended March 31, 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.
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
(UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
FINANCIAL DATA:
Net sales............ $191,204 $158,136 $ 670,909 $564,441 $453,512 $424,959 $347,469
Gross profit......... 61,545 51,796 219,179 186,118 153,349 146,058 117,925
Operating income..... 28,897 24,755 104,666 89,975 79,718 89,302 73,638
Net income........... 11,920 10,858 41,654 37,263 32,725 33,725 36,841
Diluted earnings per
share.............. $0.46 $0.42 $1.62 $1.42 $1.15 $1.27 $0.92
Cash flow provided by
operating
activities......... 5,915 12,467 42,067 66,974 58,911 45,881 43,711
Cash flow used in
investing
activities......... (7,493) (9,229) (141,471) (42,688) (91,745) (71,105) (12,853)
Cash flow provided by
(used in) financing
activities......... 2,953 285 102,198 (22,439) 32,507 24,261 (29,810)
Cash dividends per
share.............. 0.01 0.01 0.04 0.04 0.04 0.01 0.00
OTHER DATA:
EBITDA(1)............ 35,682 31,139 129,874 114,599 101,967 107,936 89,695
MARCH 31, DECEMBER 31,
------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
BALANCE SHEET DATA:
Total assets......... $609,460 $434,339 $ 596,184 $410,879 $363,236 $263,407 $187,728
Total debt........... 470,490 364,946 467,817 364,934 341,690 305,935 78,060
Shareholders' equity
(deficit).......... (19,362) (66,731) (33,853) (79,263) (76,195) (108,698) 46,797
- ---------------
(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.
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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-39 through
page I-47. 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.
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------
1999 1998 1998 1997 1996
----------- --------- ----------- --------- ---------
(UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
FINANCIAL DATA:
Net sales............................. $ 298,478 $240,989 $1,036,127 $870,371 $744,919
Gross profit.......................... 89,068 73,152 300,501 258,460 210,196
Operating income...................... 43,702 35,758 145,029 124,593 103,950
Income before extraordinary item...... 20,267 17,978 79,196 57,539 45,298
Diluted earnings per common share
before extraordinary item(1)(2)..... $0.33 $0.29 $1.29 $0.94 $0.72
Cash flow provided by operating
activities.......................... 19,084 7,202 73,411 102,426 102,279
Cash flow used in investing
activities.......................... (43,643) (15,368) (243,795) (65,160) (79,338)
Cash flow provided by (used in)
financing activities................ 31,444 775 161,941 (23,758) (23,728)
Cash dividends per share(1)(2)........ 0.00 0.00 0.02 0.02 0.02
OTHER DATA:
EBITDA(3)............................. 54,301 44,621 181,644 159,184 136,556
MARCH 31, DECEMBER 31,
--------------------- --------------------------------
1999 1998 1998 1997 1996
---------- -------- ---------- -------- --------
BALANCE SHEET DATA:
Total assets.......................... $1,015,052 $719,946 $ 967,382 $693,981 $597,280
Total debt............................ 604,654 415,779 573,615 415,441 391,282
Shareholders' equity.................. 126,275 84,710 144,076 65,285 44,785
- ---------------
(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 1.3 shares of MotivePower common stock for each
share of WABCO common stock outstanding.
(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.
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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
MotivePower on a pro forma combined basis and on a pro forma combined basis per
WABCO equivalent share for each of the years ended December 31, 1998, 1997 and
1996 and for the three months ended March 31, 1999 and 1998. The exchange ratio
for the business combination is 1.3 shares of MotivePower common stock for each
share of WABCO common stock.
The MotivePower 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-39. 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 WABCO equivalent share pro forma information shows the effect of the
merger from the perspective of an owner of WABCO common stock. The information
was computed by multiplying the MotivePower pro forma information by the
exchange ratio of 1.3.
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.
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ---------------
1998 1997 1996 1999 1998
------ ------ ------ ------ ------
MotivePower Historic per Common Share Data:
Income before extraordinary item--basic...... $ 1.28 $ 0.76 $ 0.48 $ 0.29 $ 0.27
Income before extraordinary item--assuming
dilution.................................. 1.23 0.74 0.48 0.28 0.26
Cash dividends............................... 0.00 0.00 0.00 0.00 0.00
Book value................................... 6.70 5.42 4.59 6.98 5.67
MotivePower Pro Forma Combined per Common Share
Data:
Income before extraordinary item--basic...... $ 1.33 $ 0.96 $ 0.72 $ 0.34 $ 0.30
Income before extraordinary item--assuming
dilution.................................. 1.29 0.94 0.72 0.33 0.29
Cash dividends............................... 0.02 0.02 0.02 0.00 0.00
Book value(1)................................ 2.42 1.11 0.71 2.11 1.43
WABCO Historic per Common Share Data:
Income before extraordinary item--basic...... $ 1.79 $ 1.45 $ 1.15 $ 0.49 $ 0.43
Income before extraordinary item--assuming
dilution.................................. 1.75 1.42 1.15 0.48 0.42
Cash dividends............................... 0.04 0.04 0.04 0.01 0.01
Book value................................... (1.34) (3.18) (2.67) (0.76) (2.66)
WABCO Pro Forma Combined Equivalent Common
Share Data:
Income before extraordinary item--basic...... $ 1.73 $ 1.25 $ 0.94 $ 0.44 $ 0.39
Income before extraordinary item--assuming
dilution.................................. 1.68 1.22 0.94 0.43 0.38
Cash dividends............................... 0.03 0.03 0.03 0.01 0.01
Book value(1)................................ 3.15 1.44 0.92 2.74 1.86
- ---------------
(1) A one-time pooling-related charge of $41 million has been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1999.
See Note 5 on page I-47. The book value per share calculation at March 31,
1999 includes the effect on shareholders' equity of the $41 million charge.
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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 merger proposal.
WABCO AND MOTIVEPOWER SHAREHOLDERS WILL NOT BE ABLE TO DETERMINE THE VALUE OF
MOTIVEPOWER STOCK AT THE TIME THAT THEY VOTE ON THE MERGER.
Each share of WABCO common stock, other than shares owned directly or
indirectly by MotivePower or WABCO, will be converted at the effective time of
the merger into 1.3 shares of MotivePower common stock. Cash will be paid in
lieu of any fractional shares of MotivePower 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, WABCO shareholders will not be
able to determine the value of the MotivePower common stock they would receive
in the merger at the time they vote on the merger, and MotivePower shareholders
will not be able to determine the value of the MotivePower common stock to be
issued to the WABCO 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 August 23, 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-64.
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 $15 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 MotivePower stock to be exchanged for
WABCO stock in the merger. For a further discussion of these matters, see
"Summary -- Termination Fees" on page I-5 and "Summary -- Stock Option
Agreements" on page I-5.
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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-47. MotivePower and WABCO
also estimate that MotivePower 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-47. 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. MotivePower and WABCO do not expect that
they will complete their systems integration before the end of 1999. 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 the economic conditions will remain favorable
or that there will not be significant fluctuations adversely affecting the
industry as a whole and, as a result, the combined company.
I-14
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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
DERIVE 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 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 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.
I-15
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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 LEVERAGE AND
SERVICING DEBT WILL REQUIRE A SUBSTANTIAL PORTION OF THE COMBINED COMPANY'S CASH
FLOWS.
Following the merger, MotivePower's leverage will increase as a result of
the assumption of WABCO's indebtedness. On a pro forma basis, after giving
effect to the merger, total indebtedness of the combined company as of December
31, 1998 would have been $573.6 million resulting in pro forma total
capitalization of the combined company of approximately 80% debt and 20% equity,
exclusive of the effect of any prepayment premiums, costs of refinancing or
costs of the merger, compared with actual company total indebtedness of $105.8
million and total capitalization of 37% debt and 63% equity as of December 31,
1998. The additional indebtedness will require the combined company 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.
WABCO'S CURRENT CREDIT FACILITIES 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 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 constitute an
event of default under WABCO's credit agreement but not directly under either of
its indentures. WABCO anticipates receiving a waiver or renegotiating its credit
agreement prior to the merger. However, WABCO may not receive this
I-16
23
waiver or renegotiate the credit agreement on favorable terms. If WABCO does not
receive a waiver or successfully renegotiate the credit agreement prior to 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.
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.
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.
I-17
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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.
MOTIVEPOWER'S ANTI-TAKEOVER DEFENSE PROVISIONS MAY DETER POTENTIAL ACQUIRORS AND
MAY DEPRESS ITS STOCK PRICE.
MotivePower's articles of incorporation and bylaws 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
MotivePower. These provisions allow MotivePower 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 MotivePower
shareholders to effect some corporate actions.
In addition, under MotivePower's shareholder rights plan, holders of
MotivePower common stock are entitled to one preferred share purchase right for
each outstanding share of common stock they hold, exercisable under specified
circumstances involving a potential change of control, as discussed in
"Description of MotivePower Capital Stock -- Shareholder Rights Plan" on page
II-15. The preferred share purchase rights have the anti-takeover effect of
causing substantial dilution to a person or group that attempts to acquire
MotivePower on terms not approved by the MotivePower Board. The foregoing
provisions could reduce the premium that potential acquirors might be willing to
pay in an acquisition or that investors might be willing to pay in the future
for shares of MotivePower common stock.
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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," "The Merger
Transaction -- Background of the Merger," "The Merger Transaction -- Factors
Considered by, and Recommendation of, the Motive Power 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-19
26
- 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
I-20
27
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 July 26, 1999.
MATTERS RELATING TO THE MEETINGS
- -------------------------------------------------------------------------------------------------------------
MOTIVEPOWER MEETING WABCO MEETING
- -------------------------------------------------------------------------------------------------------------
Time and Place: August 23, 1999 August 23, 1999
11:00 a.m., Eastern Time 10:00 a.m., Eastern Time
Two Gateway Center, Westin William Penn
Lobby Conference Center 530 William Penn Place
Pittsburgh, PA 15222 Pittsburgh, PA 15219
- -------------------------------------------------------------------------------------------------------------
Purpose of To approve and adopt the merger To approve and adopt the merger
Meeting is to agreement and the merger, as described agreement and the merger, as described
Vote on the under "The Merger under "The Merger
Following Item: Transaction -- General" on page I-26. Transaction -- General" on page I-26.
- -------------------------------------------------------------------------------------------------------------
Record Date: The record date for shares entitled to The record date for shares entitled to
vote is July 19, 1999. vote is July 19, 1999.
- -------------------------------------------------------------------------------------------------------------
Outstanding As of July 19, 1999, there were As of July 19, 1999, there were
Shares Held on 27,019,235 shares of MotivePower common 34,074,932 shares of WABCO common stock
Record Date: stock outstanding. outstanding.
- -------------------------------------------------------------------------------------------------------------
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, July 19, business on the record date, July 19,
1999. 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.
- -------------------------------------------------------------------------------------------------------------
I-21
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- ------------------------------------------------------------------------------------------------------------
MOTIVEPOWER MEETING WABCO MEETING
- ------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------
I-22
29
- ------------------------------------------------------------------------------------------------------------
MOTIVEPOWER MEETING WABCO MEETING
- ------------------------------------------------------------------------------------------------------------
Shares Beneficially Owned by 941,805 shares of MotivePower 10,279,856 shares of WABCO com-
MotivePower and WABCO common stock or 2,511,268 shares mon stock or 10,397,606 shares
Directors and Executive of MotivePower common stock, of WABCO common stock, including
Officers as of July 19, 1999: including exercisable options. exercisable options. These
These shares represent in total shares represent in total
approximately 3.48% of the approximately 30.21% of the
voting power of MotivePower's voting power of WABCO's voting
voting securities or 9.28% securities or 30.55% including
including exercisable options. exercisable options.
We believe these individuals We believe these individuals
intend to vote in favor of intend to vote in favor of
approval and adoption of the approval and adoption of the
merger agreement and other merger agreement and the merger
proposals recommended by the and the merger and other
MotivePower Board. proposals recommended by the
WABCO Board.
- ------------------------------------------------------------------------------------------------------------
VOTE NECESSARY TO APPROVE MOTIVEPOWER AND WABCO PROPOSALS
- ----------------------------------------------------------------------------------------------------------
ITEM VOTE NECESSARY*
- ----------------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------------
- ---------------
* 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.
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.
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.
I-23
30
How to Vote by Proxy
- --------------------------------------------------------------------------------------------------------
MOTIVEPOWER WABCO
- --------------------------------------------------------------------------------------------------------
Complete, sign, date and return your proxy card Complete, sign, date and return your proxy card
in the enclosed envelope. in the enclosed envelope.
- --------------------------------------------------------------------------------------------------------
If you submit your proxy but do not make specific choices, your proxy will
follow the Board's recommendations and vote your shares:
- --------------------------------------------------------------------------------------------------------
MOTIVEPOWER WABCO
- --------------------------------------------------------------------------------------------------------
- "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.
- --------------------------------------------------------------------------------------------------------
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 July 19, 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 "The Companies" on
page I-2.
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.
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.
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 WABCO common stock to former WABCO 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.
I-24
31
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.
I-25
32
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 merger agreement and the merger.
WABCO Proposal
At the WABCO meeting, holders of WABCO common stock will be asked to vote
upon approval and adoption of the merger agreement and the 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.
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.
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
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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 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 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 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 CSFB 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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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 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 merger agreement and the 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 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 merger
agreement and stock option agreements and various financial, legal, accounting
and other issues relating to the 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 exchange ratio within
which it would be prepared to authorize WABCO to enter into the merger agreement
and stock option agreements. CSFB orally delivered its fairness opinion to the
WABCO Board. After due consideration, the WABCO Board unanimously approved the
merger agreement, the stock option agreements and the related merger matters
described in this document and determined to recommend that the WABCO
shareholders adopt and approve the merger agreement and the 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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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 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 merger agreement
and the stock option agreements, the MotivePower Board unanimously approved the
merger agreement and the stock option agreements and determined to recommend
that the MotivePower shareholders adopt and approve the merger agreement and
merger.
Following the approval of their Boards, MotivePower and WABCO executed the
merger agreement and the 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 merger agreement in
certain minor respects.
MOTIVEPOWER'S SENIOR MANAGEMENT TEAM
Our senior management team is expected to consist of the 6 individuals
named below.
John C. Pope Chairman of the Board
William E. Kassling Chief Executive Officer
Gregory T.H. Davies President and Chief Operating Officer
Joseph S. Crawford, Jr. Executive Vice President, Railroad
Robert J. Brooks Senior Vice President, Chief Financial
Officer and Secretary
William F. Fabrizio Senior Vice President, Mergers and
Acquisitions
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE MOTIVEPOWER BOARD
At a meeting of the MotivePower Board held on June 2, 1999, after due
consideration, the MotivePower Board unanimously:
(1) determined that the merger agreement, the merger, the MotivePower
stock option agreement, the WABCO stock option agreement and the related
transactions are advisable, consistent with, in furtherance of and
otherwise in the best interests of MotivePower and its shareholders,
(2) approved the merger agreement, the merger, the stock option
agreements and the related transactions, and
(3) determined to recommend that the shareholders of MotivePower
approve and adopt the merger agreement and the merger.
Accordingly, the MotivePower Board recommends that the MotivePower
shareholders vote "FOR" the approval and adoption of the merger agreement and
the merger.
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In approving the 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 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 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 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 merger and compatibility of the companies
as described above;
(9) the fact that WABCO shareholders would hold approximately 55% of
the outstanding stock of the combined company after the merger, on a fully
diluted basis, excluding shares held by the WABCO ESOP;
(10) the intended accounting of the 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 merger as a tax-free reorganization
for U.S. federal income tax purposes;
(12) the terms and conditions of the merger agreement, including the
fact that shares of MotivePower common stock are being issued in the
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 merger agreement may be terminated after
November 30, 1999 due to the failure of the conditions to the merger to be
met, the merger agreement provides for its earlier termination on or prior
to July 17, 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 stock option
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agreements (see "The Merger Agreement -- Conditions to the Completion of
the Merger" on page I-68, "The Merger Agreement -- Termination of the
Merger Agreement" on page I-69 and "The Merger Agreement -- Stock Option
Agreements" on page I-71);
(13) the grant to MotivePower of an option to acquire WABCO common
stock exercisable under specified circumstances pursuant to the WABCO stock
option agreement (see "The Merger Agreement -- Stock Option Agreements" on
page I-71);
(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");
(15) that while the termination payment provisions of the merger
agreement could have the effect of discouraging alternative proposals for a
business combination with MotivePower and that the 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 termination fee was reasonable in light of the size and
benefits of the transaction;
(16) the role that MotivePower's current management is expected to
have in the management of the combined company, in particular MotivePower
management's participation in the transition and the intention of
MotivePower and WABCO to capitalize on the best management resources of
both companies in the combined company;
(17) the corporate governance structure reflected in the merger
agreement, including that immediately after the merger the MotivePower
Board would be comprised of an equal number of directors from MotivePower
and WABCO and that seven of the WABCO Board's members would become
directors of MotivePower, as described under "The Merger
Agreement -- MotivePower Board and Related Matters" on page I-64, and that
deadlocks on the MotivePower Board would be referred to an Executive
Committee of MotivePower, a majority of members of which would be former
WABCO directors and the Chairman of which would initially be the former
Chief Executive Officer of WABCO;
(18) the interests that executive officers and directors of
MotivePower may have with respect to the merger in addition to their
interests as shareholders of MotivePower generally (see "Interests of
Certain Persons in the Merger" on page I-57);
(19) the analyses and presentations of Wasserstein Perella, and
Wasserstein Perella's written opinion to the effect that, as of June 2,
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;
(20) 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" on page I-13 and "Cautionary Statement Concerning Forward-Looking
Statements" on page I-19, and of diverting management focus and resources
from other strategic opportunities and operational matters for an extended
period of time;
(21) 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;
(22) the fact that the number of shares of MotivePower common stock to
be issued to the shareholders of WABCO in the merger is a fixed number of
shares per share of WABCO common stock that will not fluctuate due to
changes in the share price of MotivePower;
(23) 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;
(24) the lack of availability of dissenters' rights; and
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(25) the likelihood of consummation of the merger.
In view of the wide variety of factors considered in connection with its
evaluation of the 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 merger. See "Opinions of
Financial Advisors -- Opinion of MotivePower Financial Advisor" on page I-47. 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 items 9, 14, 17, 20,
21 and 24 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 June 2, 1999, after due
consideration, the WABCO Board unanimously:
(1) determined that the merger agreement, the merger, the MotivePower
stock option agreement, the WABCO stock option agreement 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 merger agreement, the merger, the stock option
agreements and the related transactions, and
(3) determined to recommend that the shareholders of WABCO approve and
adopt the merger agreement and the merger.
Accordingly, the WABCO Board recommends that the WABCO shareholders vote
"FOR" the approval and adoption of the merger agreement and the merger.
In approving the 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;
(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;
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(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 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 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 merger and compatibility of
the companies as described above;
(9) the fact that WABCO shareholders would hold approximately 55% of
the outstanding stock of the combined company after the merger, on a fully
diluted basis, excluding shares held by the WABCO ESOP;
(10) the intended accounting of the 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 merger as a tax-free reorganization
for U.S. federal income tax purposes;
(12) the terms and conditions of the merger agreement, including the
fact that MotivePower would be the surviving corporation in the 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 merger agreement may be terminated after
November 30, 1999 due to the failure of the conditions to the merger to be
met, the merger agreement provides for its earlier termination on or prior
to July 17, 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 stock option agreements (see "The
Merger Agreement -- Conditions to the Completion of the Merger" on page
I-68, "The Merger Agreement -- Termination of the Merger Agreement" on page
I-69 and "The Merger Agreement -- Stock Option Agreements" on page I-71);
(13) the grant to MotivePower of an option to acquire WABCO common
stock exercisable under specified circumstances pursuant to the WABCO stock
option agreement (see "The Merger Agreement -- Stock Option Agreements" on
page I-71);
(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-71);
(15) that while the termination payment provisions of the merger
agreement could have the effect of discouraging alternative proposals for a
business combination with WABCO and that the 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
termination fee was reasonable in light of the size and benefits of the
transaction;
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(16) the role that WABCO's and MotivePower's current management is
expected to have in the management of the combined company, in particular
WABCO management's participation in the senior management of the surviving
corporation, the continuation of Mr. Pope as Chairman of MotivePower, and
the intention of WABCO and MotivePower to capitalize on the best management
resources of both companies in the combined company;
(17) the corporate governance structure reflected in the merger
agreement, including that immediately after the merger the MotivePower
Board would be comprised of an equal number of directors from MotivePower
and WABCO and that seven of the WABCO Board's members would become
directors of MotivePower, as described under "The Merger
Agreement -- MotivePower Board and Related Matters" on page I-64, that
specified deadlocks on the MotivePower Board would be referred to an
Executive Committee of MotivePower, a majority of members of which would be
former WABCO directors and the Chairman of which would initially be Mr.
Kassling, Chief Executive Officer of WABCO, and the other provisions of
MotivePower's corporate governance documents that will become effective
upon consummation of the Merger;
(18) 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-57);
(19) the analyses and presentations of Credit Suisse First Boston, and
Credit Suisse First Boston's written opinion to the effect that, as of June
2, 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;
(20) 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" on page I-13 and "Cautionary Statement Concerning Forward-Looking
Statements" on page I-19 and of diverting management focus and resources
from other strategic opportunities and operational matters for an extended
period of time;
(21) 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;
(22) the fact that the number of shares of MotivePower common stock to
be issued to the shareholders of WABCO in the merger is a fixed number of
shares per share of WABCO common stock that will not fluctuate due to
changes in the share price of MotivePower;
(23) 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;
(24) the necessity to terminate prior to the merger the existing
voting trust arrangements and stockholders agreement among various of the
WABCO stockholders in order to facilitate the intended accounting as a
pooling of interests;
(25) the lack of availability of dissenters' rights; and
(26) the likelihood of consummation of the merger.
In view of the wide variety of factors considered in connection with its
evaluation of the 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-52. 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
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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, 20, 24 and 25
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 MotivePower. See
"Unaudited Pro Forma Condensed Combined Financial Statements."
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 WABCO shareholder may vary depending upon the
shareholder's particular situation, and certain WABCO shareholders, including
insurance companies, tax-exempt organizations, financial institutions, broker
dealers, persons who do not hold WABCO common stock as capital assets, employees
of WABCO, and individuals who hold WABCO common stock as part of a straddle or
conversion transaction, may be subject to special rules not discussed below. For
example, special rules not discussed below might apply to WABCO's ESOP. Each
WABCO 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 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.
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Tax Consequences to WABCO Shareholders. For federal income tax
purposes, (1) no gain or loss will be recognized by the shareholders of
WABCO upon the conversion of their shares of WABCO common stock into shares
of MotivePower common stock pursuant to the merger, except with respect to
cash, if any, received in lieu of fractional shares of MotivePower common
stock, (2) the aggregate tax basis of the shares of MotivePower common
stock received in exchange for shares of WABCO common stock pursuant to the
merger, including a fractional share of MotivePower common stock for which
cash is paid, will be the same as the aggregate tax basis of those shares
of WABCO common stock, (3) the holding period for shares of MotivePower
common stock received in exchange for shares of WABCO common stock pursuant
to the merger will include the holder's holding period for those shares of
WABCO common stock, provided those shares of WABCO common stock were held
as capital assets by the holder at the effective time of the merger, and
(4) a shareholder of WABCO who receives cash in lieu of a fractional share
of MotivePower 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
WABCO 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, WABCO or, after the effective time of the
merger, MotivePower, as the surviving corporation, on behalf of WABCO, 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 WABCO shareholders are held to be
liable for any transfer and gains taxes, payment of such taxes by WABCO or
MotivePower, as the surviving corporation, on behalf of WABCO might be
characterized as a dividend taxable to the WABCO 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 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. 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
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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 WABCO
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. Holders
of WABCO common stock are not entitled to dissenters' appraisal rights under
Delaware law in connection with the merger because the shares of MotivePower
common stock that they will be entitled to receive in the merger will be listed
on the NYSE at the closing. 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
MotivePower common stock to be received by the shareholders of WABCO 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 MotivePower common stock received by WABCO shareholders in
the merger will be freely transferable, except that shares of MotivePower common
stock received by persons who are deemed to be "affiliates" of WABCO under the
Securities Act of 1933, as amended, at the time of the WABCO 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 WABCO for these purposes generally include individuals or entities
that control, are controlled by or are under common control with WABCO and
include directors and executive officers of WABCO. The merger agreement requires
WABCO 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 MotivePower 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 MotivePower after the
merger.
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44
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.
MOTIVEPOWER COMMON STOCK WABCO COMMON STOCK
-------------------------- --------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------ ------ -------- ------ ------ --------
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 (through July 19,
1999)..............................
- ---------------
On June 2, 1999, the last full trading day before the public announcement
of the proposed merger, the last reported closing price was $16.63 for
MotivePower common stock and $23.31 for WABCO common stock. On July 19, 1999,
the most recent practicable date prior to the printing of this joint proxy
statement/prospectus, the last reported closing price was $18.06 for MotivePower
common stock and $23.13 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, MotivePower common stock will be traded on the NYSE
under the ticker symbol "MPO."
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, the combined company's Board will review
and vote on whether to pay a quarterly dividend on the combined company's common
stock. We advise WABCO shareholders that the Board may choose to no longer pay a
dividend on your shares.
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45
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 three months ended March 31, 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 three months ended March 31, 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 three months ended
March 31, 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 March 31, 1999. The accounting policies of MotivePower
and WABCO are substantially comparable. However, adjustments were made to
conform the classification of amortization expense and income taxes receivable
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.
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46
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1999
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
Cash................................... $ 11,170 $ 4,627 $ $ 15,797
Accounts receivable.................... 56,615 137,921 194,536
Inventories............................ 99,539 107,703 207,242
Deferred taxes......................... 7,639 12,842 20,481
Other.................................. 7,661 8,731 (2,220) 14,172
--------- --------- --------- ----------
Total current assets........... 182,624 271,824 (2,220) 452,228
Property, plant and equipment............ 154,726 223,849 378,575
Accumulated depreciation................. (58,249) (95,783) (154,032)
--------- --------- --------- ----------
Property, plant and equipment, net..... 96,477 128,066 224,543
Other assets
Goodwill and other intangibles......... 87,571 196,535 284,106
Underbillings.......................... 26,868 -- 26,868
Other noncurrent assets................ 14,272 13,035 27,307
--------- --------- --------- ----------
Total other assets............. 128,711 209,570 338,281
--------- --------- --------- ----------
Total assets................... 407,812 609,460 (2,220) 1,015,052
========= ========= ========= ==========
LIABILITIES
Current portion of long-term debt...... 557 20,264 20,821
Accounts payable....................... 32,780 51,347 84,127
Accrued income taxes................... -- 10,039 (2,220) 7,819
Customer deposits...................... 282 17,310 17,592
Other accrued liabilities.............. 33,453 51,802 41,000 126,255
--------- --------- --------- ----------
Total current liabilities...... 67,072 150,762 38,780 256,614
Long-term debt........................... 133,607 450,226 583,833
Accrued pension and postretirement
costs.................................. -- 20,454 20,454
Commitments and contingencies............ 17,692 -- 17,692
Deferred income taxes.................... 1,419 3,533 4,952
Other long-term liabilities.............. 1,385 3,847 5,232
--------- --------- --------- ----------
Total liabilities.............. 221,175 628,822 38,780 888,777
SHAREHOLDERS' EQUITY
Preferred stock.......................... -- -- --
Common stock............................. 260 474 148 882
Additional paid-in capital............... 207,418 108,066 (187,162) 128,322
Treasury stock, at cost.................. (5,986) (187,014) 187,014 (5,986)
Unearned ESOP shares, at cost............ -- (127,397) (127,397)
Retained earnings........................ (15,368) 193,965 (41,000) 137,597
Deferred compensation.................... 5,634 (103) 5,531
Accumulated other comprehensive income
(loss)................................. (5,321) (7,353) (12,674)
--------- --------- --------- ----------
Total shareholders' equity..... 186,637 (19,362) (41,000) 126,275
--------- --------- --------- ----------
Liabilities and shareholders' equity... $ 407,812 $ 609,460 $ (2,220) $1,015,052
========= ========= ========= ==========
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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 $ -- $ 1.33
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 1.23 $ 1.75 $ -- $ 1.29
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,771 25,081 7,524 59,376
Diluted............................. 27,929 25,708 7,712 61,349
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
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48
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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 $ -- $ 0.96
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 0.74 $ 1.42 $ -- $ 0.94
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,541 25,693 7,708 59,942
Diluted............................. 27,314 26,173 7,851 61,338
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
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49
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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 $ -- $ 0.72
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 0.48 $ 1.15 $ -- $ 0.72
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,345 28,473 8,542 63,360
Diluted............................. 26,349 28,473 8,542 63,364
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
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50
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales................................ $ 107,274 $ 191,204 $ $ 298,478
Cost of sales............................ (79,751) (129,659) (209,410)
--------- --------- --------- ----------
Gross profit........................ 27,523 61,545 89,068
Selling, general and administrative
expenses............................... (12,718) (21,331) 971 (33,078)
Engineering expenses..................... -- (8,907) (8,907)
Amortization expense..................... -- (2,410) (971) (3,381)
--------- --------- --------- ----------
Total operating expenses............ (12,718) (32,648) -- (45,366)
--------- --------- --------- ----------
Operating income.................... 14,805 28,897 -- 43,702
Other income (expense):
Interest expense.................... (2,194) (9,096) (11,290)
Other income (expense), net......... (201) (66) (267)
--------- --------- --------- ----------
Income before income taxes and
extraordinary item................ 12,410 19,735 -- 32,145
Income taxes............................. (4,532) (7,346) -- (11,878)
--------- --------- --------- ----------
Income before extraordinary item......... $ 7,878 $ 12,389 $ -- $ 20,267
========= ========= ========= ==========
Earnings per common share-basic:
Income before extraordinary item.... $ 0.29 $ 0.49 $ -- $ 0.34
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 0.28 $ 0.48 $ -- $ 0.33
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,986 25,371 7,611 59,968
Diluted............................. 28,146 25,776 7,733 61,655
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
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51
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
MOTIVEPOWER WABCO PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales................................ $ 82,853 $ 158,136 $ $ 240,989
Cost of sales............................ (61,497) (106,340) (167,837)
--------- --------- --------- ----------
Gross profit........................ 21,356 51,796 73,152
Selling, general and administrative
expenses............................... (10,353) (18,498) 826 (28,025)
Engineering expenses..................... -- (6,438) (6,438)
Amortization expense..................... -- (2,105) (826) (2,931)
--------- --------- --------- ----------
Total operating expenses............ (10,353) (27,041) -- (37,394)
--------- --------- --------- ----------
Operating income.................... 11,003 24,755 -- 35,758
Other income (expense):
Interest expense.................... (1,213) (7,373) (8,586)
Other income (expense), net......... 957 131 1,088
--------- --------- --------- ----------
Income before income taxes and
extraordinary item................ 10,747 17,513 -- 28,260
Income taxes............................. (3,627) (6,655) -- (10,282)
--------- --------- --------- ----------
Income before extraordinary item......... $ 7,120 $ 10,858 $ -- $ 17,978
========= ========= ========= ==========
Earnings per common share-basic:
Income before extraordinary item.... $ 0.27 $ 0.43 $ -- $ 0.30
========= ========= ========= ==========
Earnings per common share-diluted:
Income before extraordinary item.... $ 0.26 $ 0.42 -- $ 0.29
========= ========= ========= ==========
Weighted average shares outstanding:
Basic............................... 26,709 24,962 7,489 59,160
Diluted............................. 27,824 25,669 7,701 61,194
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
I-45
52
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 three months ended March 31,
1999 and 1998. The unaudited pro forma condensed combined balance sheet is based
on the consolidated financial statements of MotivePower and WABCO at March 31,
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. The unaudited pro forma combined condensed balance sheet
reflects a reclassification adjustment to conform the presentation of income
taxes receivable and payable.
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.
Certain assets and liabilities in the consolidated balance sheets for
MotivePower and WABCO have been reclassified to conform to the line item
presentation in the pro forma condensed combined balance sheet.
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 1.3 shares of
MotivePower common stock for each share of WABCO 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 WABCO shares for the
exchange ratio of 1.3 shares of MotivePower 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.
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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 efficiently. The unaudited pro forma condensed combined financial
statements do not reflect the benefits from the expected synergies.
A one-time pooling-related charge of $41 million has been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 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 WABCO
common stock accounted for as treasury stock and the assumed issuance of
MotivePower common stock in exchange for all of the outstanding WABCO common
stock based on the exchange ratio of 1.3. The actual number of shares of
MotivePower common stock to be issued in connection with the merger will be
based on the number of shares of WABCO 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 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
MotivePower. Wasserstein Perella was not requested to recommend the amount of
consideration to be paid; it was requested to evaluate, among other things, the
fairness of the exchange ratio which MotivePower and WABCO negotiated.
On June 2, 1999, Wasserstein Perella orally delivered its 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 the opinion and based upon specified
assumptions, the exchange ratio in the merger is fair, from a financial point of
view, to MotivePower. Wasserstein Perella also presented to the MotivePower
Board the analyses described below.
A COPY OF WASSERSTEIN PERELLA'S OPINION IS ATTACHED AS ANNEX D 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 MOTIVEPOWER 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.
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In arriving at its opinion, Wasserstein Perella reviewed, among other
things,
- the 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
MotivePower common stock will trade following the merger.
Summary and Analysis of the Merger
During a June 2, 1999 teleconference with the MotivePower Board, and
supported by materials presented to the MotivePower Board dated June 1, 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 process that is
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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 WABCO options into options to purchase MotivePower
common stock;
- the merger's effect on WABCO's ESOP;
- the increase of the MotivePower Board from seven members to fourteen,
with MotivePower and WABCO each designating seven members; and
- customary conditions to closing.
MotivePower and WABCO Historical Stock Price Ratios and Trading Analysis
Wasserstein Perella reviewed the ratio of the closing price per share of
WABCO common stock to the closing price per share of MotivePower common stock
over the 90-day period, the 60-day period, the 30-day period and the 7-day
period before May 28, 1999, based on actual trading days. Wasserstein Perella
noted that the mean of the ratios of the closing price per share of WABCO common
stock to the closing price per share of MotivePower common stock for these
periods were 1.13x, 1.22x, 1.20x and 1.28x, respectively. Wasserstein Perella
also noted that the ratio of the closing price per share of WABCO common stock
to the closing price per share of MotivePower common stock for May 28, 1999 was
1.35x.
Wasserstein Perella also performed an analysis of the market trading
multiples as of May 28, 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 1.3x for 1999 estimated
sales, 7.3x for 1999 estimated EBITDA and 9.2x for 1999 estimated EBIT; and (2)
the equity value market multiples were 12.7x for 1999 estimated net income and
2.2x for 1999 estimated book value. For WABCO, (1) the enterprise value market
multiples were 1.5x for 1999 estimated sales, 7.0x for 1999 estimated EBITDA and
8.6x for 1999 estimated EBIT; and (2) the equity value market multiples were
10.8x for 1999 estimated net income and 25.4x 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.
Analysis of the Exchange Ratio
On June 2, 1999, Wasserstein Perella orally updated the materials which it
previously presented to MotivePower's Board and noted that the calculation of
the exchange ratio, based on the closing price of MotivePower common stock on
June 2, 1999, implied a consideration of $21.6125 per share of WABCO common
stock, a discount of 7.3% to the closing price of WABCO common stock on June 2,
1999, a market equity value of $557 million and an enterprise value of $1.02
billion and would result in a pro forma direct ownership of MotivePower
following the completion of the merger by the current shareholders of
MotivePower of 45.2%, excluding shares of common stock held by WABCO's ESOP, and
38.3% 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 MotivePower after the completion of the
merger by the current shareholders of MotivePower.
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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 the
fiscal years 1999 through 2001, 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. This analysis suggested
that, with respect to MotivePower's shareholders, the merger would be accretive
to earnings per share in fiscal years 1999, 2000 and 2001. The actual results
that the combined company achieves may, however, vary from projected results and
these variations may be material.
Contribution Analysis
Wasserstein Perella compared the relative contributions of the implied
equity value of MotivePower and WABCO to the combined entity based on the last
twelve months ("LTM") and 1999 estimated net income, EBITDA and EBIT. Based on
the median LTM comparable trading multiples, financial data and the implied
equity values, MotivePower's relative contributions were 41.1%, 41.7% and 39.7%,
respectively, and based on the median 1999 estimated comparable trading
multiples, financial data and the implied equity values, MotivePower's relative
contributions were 40.3%, 43.7% and 42.1%, respectively.
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., Trinity
Industries, Inc. and Varlen Corp. Wasserstein Perella calculated market trading
multiples for each of these companies based on their (1) enterprise values as a
multiple of LTM sales, next fiscal year ("NFY") sales, LTM EBITDA, NFY EBITDA,
LTM EBIT and NFY EBIT and (2) equity values as a multiple of LTM net income, NFY
net income, LTM book value and NFY book value.
Based on these calculations, Wasserstein Perella noted that the range of
enterprise value market multiples was 0.4x to 1.1x for LTM sales, 0.5x to 1.1x
for NFY sales, 4.4x to 10.4x for LTM EBITDA, 4.0x to 8.2x for NFY EBITDA, 5.2x
to 14.3x for LTM EBIT and 5.1x to 15.1x for NFY EBIT. The range of equity value
market multiples was 6.8x to 19.4x for LTM net income, 7.3x to 24.1x for NFY net
income, 0.7x to 2.8x for LTM book value and 1.0x to 2.6x for NFY book value.
Based on this range of enterprise value market multiples and equity value market
multiples, Wasserstein Perella noted that the exchange ratio was within or above
the foregoing valuation range and that this fact supported a determination that
the exchange ratio was fair to MotivePower.
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.
(pending), 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 and Dimeling, Schreiber & Park/VMV Enterprise Inc. In conducting its
review of each of these transactions, Wasserstein Perella calculated the equity
purchase price transaction 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.
Based on these calculations, Wasserstein Perella noted that the range of
implied enterprise value market 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. The range of implied equity value
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market multiples was 9.7x to 33.1x of LTM net income for the calendar year in
which the applicable transaction was announced. Based on this range of implied
enterprise value market multiples and implied equity value market multiples,
Wasserstein Perella noted that the exchange ratio was within or above the
foregoing valuation range and that this fact supported a determination that the
exchange ratio was fair to MotivePower.
Discounted Cash Flow Analysis
Wasserstein Perella performed discounted cash flow analyses for MotivePower
and WABCO using financial projections for fiscal years 1999 through 2003
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.
Wasserstein Perella aggregated the present value of the cash flows from 1999
through 2003 with the present value of a range of terminal values. All cash
flows were discounted at rates of 10.0%, 11.0% and 12.0%. The terminal values
were computed using multiples of 6.0x. 7.0x and 8.0x for fiscal year 2003
EBITDA. 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. This analysis indicated a
range of values for the MotivePower common stock of $15.09 and $21.21 per share
with a midpoint of $18.15 per share, and a range of values for WABCO common
stock of $25.68 and $39.75 per share with a midpoint of $32.72 per share. Based
on this range of implied share prices, Wasserstein Perella noted that the
exchange ratio was within or above the foregoing valuation range and that this
fact supported a determination that the exchange ratio was fair to MotivePower.
Premiums Analysis
Wasserstein Perella reviewed 25 announced transactions from January 22,
1996 through January 18, 1999 involving mergers of equals of publicly-held
companies where transaction values were greater than $500 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 6.4%, 10.7% and 13.8%,
respectively, and that the means of premiums paid in the transactions over the
public per share trading prices one day, one week and four weeks before the
announcement were 8.1%, 11.5%, and 15.2%. Based on this range of implied
premiums, Wasserstein Perella noted that the exchange ratio was within or above
the foregoing valuation range and that this fact supported a determination that
the exchange ratio was fair to MotivePower.
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.
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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 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 MotivePower. 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 MotivePower.
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 $5.24
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 MotivePower and, before completion of the merger, WABCO
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 merger. On June 2, 1999, CSFB orally
delivered its opinion, subsequently delivered in writing, that, as of June 2,
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 the WABCO
shareholders. CSFB has consented to the inclusion of the CSFB opinion as Annex E
to this joint proxy statement/prospectus.
WE HAVE ATTACHED THE FULL TEXT OF THE CSFB OPINION, WHICH SETS FORTH THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN AS ANNEX E 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 THE WABCO SHAREHOLDERS, DOES
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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
MotivePower common stock will be when issued to shareholders of WABCO pursuant
to the merger or the prices at which such shares of MotivePower 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 before
considering the pro forma impact of any cost savings, operating synergies or
strategic benefits 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 a discounted cash flow
("DCF") analysis 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 management 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%. CSFB did not consider cost savings and other potential synergies
anticipated to result from the merger.
MotivePower Discounted Cash Flow Analysis. CSFB performed a DCF analysis 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 years 1999
through 2001, the management 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
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
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average cost of capital for MotivePower's industry segments. CSFB did not
consider cost savings and other potential synergies anticipated to result from
the merger.
Based on the foregoing, the DCF analysis for WABCO and MotivePower resulted
in an implied exchange ratio reference range of 1.09 to 1.47.
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
COMPONENTS CAR BUILDERS
Westinghouse Air Brake Company Greenbrier Companies
ABC-NACO Johnstown America
Harmon Industries Trinity Industries
MotivePower Industries
Varlen Corporation
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 EBITDA and EBIT and market equity values as multiples of
estimated fiscal 1999 net income. 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
estimated EBITDA of 5.9 to 7.7 and a range of enterprise values as multiples of
1999 estimated EBIT of 8.6 to 9.4. The range of market equity values as
multiples of 1999 estimated net income was 10.9 to 14.1. 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 management estimates for
EBITDA and EBIT for each of WABCO and MotivePower. CSFB's analysis resulted in
an implied exchange ratio reference range of 1.13 to 1.80.
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 transitions, 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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ACQUIROR COMPANY TARGET COMPANY
Rail 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................ Allied Signal
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
LOW HIGH MEAN MEDIAN
--- ---- ---- ------
Revenues.................................................... 0.4 2.3 1.1 1.0
EBITDA...................................................... 5.8 11.5 8.0 7.6
EBIT........................................................ 8.1 14.9 11.3 10.9
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 1.15 to 1.96.
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 management case and the MotivePower management case and without
consideration of potential synergies, WABCO's and MotivePower's contributions
would be as set forth in the following table:
WABCO MPO
----- ---
1999 estimated Revenues 63% 37%
1999 estimated EBITDA 65% 35%
1999 estimated EBIT 66% 34%
1999 estimated Net Income 60% 40%
2000 estimated Revenues 65% 35%
2000 estimated EBITDA 66% 34%
2000 estimated EBIT 67% 33%
2000 estimated Net Income 63% 37%
In summary, CSFB's analysis resulted in an implied exchange ratio range of
1.30 to 1.80.
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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 May 25, 1999, the implied exchange ratio range was 1.12 to 1.37.
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 management case and the MotivePower management
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 June 2, 1999, CSFB owned approximately 581,300 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 merger agreement and the 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
MotivePower has agreed that, as of the closing, it will cause James C.
Huntington, Jr., James V. Napier, Kim G. Davis, William E. Kassling, Gregory T.
H. Davies, Emilio A. Fernandez and James P. Kelley, to be elected to the
MotivePower Board, each of whom were directors of WABCO prior to the merger. In
addition, at the closing Michael A. Wolf, chief executive officer of
MotivePower, will resign from the MotivePower Board and Robert S. Miller will
fill the vacancy created by Mr. Wolf's resignation. See "The Merger
Agreement -- MotivePower Board and Related Matters" on page I-64.
ADVISORY AGREEMENTS
In connection with the merger, WABCO entered into agreements with Vestar
Capital Partners and Charlesbank Capital Partners, LLC providing for the payment
by WABCO to Vestar of a fee of $1,400,000 and to Charlesbank of a fee of
$250,000 for their respective assistance in the evaluation, negotiation and
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consummation of the merger. Both agreements were approved by a disinterested
majority of the WABCO Board. Vestar Capital Partners is affiliated with Vestar
Equity Partners, L.P. which owned 2,400,000 shares of WABCO common stock, or
7.08% of the outstanding WABCO common stock, and Vestar Capital Partners, Inc.
which owned 40,000 shares of WABCO common stock, in each case, as of March 31,
1999. Mr. James P. Kelley is affiliated with Vestar Capital Partners and Vestar
Equity Partners, L.P. and serves as a director of WABCO and will serve as a
director of MotivePower following the merger. Charlesbank Capital Partners, LLC
acts as the investment advisor to Harvard Private Capital Holdings, which owned
2,401,000 shares of WABCO common stock, or 7.08% of the outstanding WABCO common
stock, as of March 31, 1999. Mr. Kim G. Davis is a Managing Director and
Co-founder of Charlesbank and serves as a director of WABCO and will serve as a
director of MotivePower following the merger.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
MotivePower has agreed to indemnify, to the extent provided under WABCO's
charter and by-laws in effect on June 2, 1999, the individuals who on or before
the closing were officers or directors of WABCO or its subsidiaries with respect
to all acts or omissions before the closing by these individuals in these
capacities. MotivePower has also agreed to provide, for six years after the
closing, a directors' and officers' liability insurance and indemnification
policy that provides WABCO's officers and directors in office immediately prior
to the closing coverage substantially equivalent to WABCO's policy in effect on
June 2, 1999. See "The Merger Agreement -- Covenants -- Indemnification and
Insurance of WABCO Directors and Officers" on page I-68.
STOCK OPTIONS
WABCO Stock Options. At the effective time, each outstanding option granted
by WABCO to purchase shares of WABCO common stock will be assumed by MotivePower
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 WABCO stock option
prior to the effective time, the number, rounded down to the nearest whole
number, of shares of MotivePower common stock determined by multiplying:
- the number of shares of WABCO common stock subject to the option
immediately before the effective time by
- the exchange ratio.
The exercise price of each of these options will be a price per share of
MotivePower common stock, rounded up to the nearest cent, equal to:
- the per share exercise price for WABCO common stock that otherwise could
have been purchased under the WABCO stock option divided by
- the exchange ratio.
Except as described above with regard to the conversion of WABCO options
into options to purchase MotivePower common stock, the merger will not
materially affect options granted to WABCO employees, including WABCO executive
officers, or non-employee directors of WABCO. The WABCO 1995 Stock Incentive
Plan and the WABCO 1995 Non-Employee Directors' Fee and Stock Option Plan will
continue to govern those outstanding options. Options granted to these
individuals that are not exercisable prior to the effective time of the merger
will become exercisable at the same times, on the same terms and subject to the
same conditions as applied to the options prior to the effective time of the
merger.
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
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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
terminated effective immediately following the purchase period under that plan
ending June 30, 1999. There will be no additional purchase periods in which
WABCO employees may participate and purchase shares of WABCO stock through the
use of payroll deductions.
We anticipate that the WABCO 1997 Executive Retirement Plan will continue
in effect for eligible employees and shares of MotivePower common stock will be
substituted under the plan for shares of WABCO common stock at the effective
time of the merger.
MotivePower Stock Options, Restricted Stock and Stock Appreciation
Rights. Each outstanding option granted by MotivePower to purchase shares of
MotivePower common stock will, after the effective time, continue to be an
option to purchase the same number of shares of MotivePower common stock at the
same exercise price per share.
The merger will have no effect upon options granted to nonemployee
directors of MotivePower. Thus, options granted to these nonemployee directors
that are not exercisable prior to the effective time will become exercisable at
the same times, on the same terms and subject to the same conditions as applied
to the options prior to the effective time.
The merger will 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 are not exercisable prior to the effective time will
become exercisable if and at the time that the MotivePower shareholders
approve the merger agreement.
- Restrictions on shares of restricted stock granted by MotivePower to
Messrs. Pope and Wolf that will not have lapsed prior to the effective
time will lapse if and at the time that the MotivePower shareholders
approve the merger agreement. The numbers of shares of restricted stock
held by Messrs. Pope and Wolf with respect to which restrictions will
lapse as a result of the merger are 37,500 and 75,000 respectively.
- Stock appreciation rights granted to Mr. Wolf that are not exercisable
prior to the effective time will become exercisable for shares of
MotivePower common stock immediately prior to the effective time. The
aggregate market value of the shares of MotivePower common stock issuable
upon the exercise of these stock appreciation rights is $303,750.
The following table shows the options to purchase shares of MotivePower
common stock that will become exercisable as a result of the merger held by each
of the executive officers of MotivePower, assuming the merger is effective
August 31, 1999. All references in the table and elsewhere in this joint proxy
statement/prospectus to shares that may be purchased upon the exercise of
MotivePower stock options and their exercise price per share and to shares of
restricted stock and stock appreciation rights granted by
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MotivePower reflect the three-for-two split of the shares of MotivePower common
stock effective April 2, 1999.
OPTIONS BECOMING EXERCISABLE
AS A RESULT OF THE MERGER
NUMBER OF
SHARES OF
DATE OF MOTIVEPOWER EXERCISE
NAME AND PRINCIPAL POSITION GRANT COMMON STOCK PRICE ($)
- --------------------------- ------- ------------ ---------
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 Officer 2/10/97 18,750 $ 7.17
David L. Bonvenuto 11/6/97 5,625 $16.77
Vice President, Controller and Principal 9/8/98 15,000 $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 Administration 2/10/97 7,500 $ 7.17
Timothy R. Wesley 4/10/96 1,875 $ 3.33
Vice President, Investor and Public Relations 2/10/97 7,500 $ 7.17
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. 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 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 have lapsed and the restrictions on the
remaining shares of restricted stock will lapse pursuant to MotivePower's Stock
Incentive Plan if and at the time that the MotivePower shareholders approve the
merger agreement. If the merger agreement is not approved, these restrictions
will lapse 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
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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. If Mr. Pope terminates his employment at any
time within a period of two years, which period was 90 days prior to an
amendment to the employment agreement dated as of May 27, 1999, following the
effective time of the merger, or if MotivePower terminates Mr. Pope's employment
following the effective time of the merger, Mr. Pope will be entitled, in lieu
of any further salary and bonus payments, 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 his termination of employment or the rate in effect
immediately preceding the effective time of the merger, whichever is
greater, and the amount of Mr. Pope's annual bonus received for the year
prior to his termination of employment or the year prior to the effective
time of the merger, or the amount of Mr. Pope's target bonus for either
of those years, whichever is greatest;
- for a period of two years after Mr. Pope's employment is terminated,
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;
- the restrictions on all shares of restricted stock shall lapse and all
stock options shall become exercisable, as described above; 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. 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 will
lapse pursuant to MotivePower's Stock Incentive Plan if and at the time that the
MotivePower shareholders approve the merger agreement. If the merger agreement
is not approved, these restrictions will lapse 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,
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,
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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 is
subject to monthly automatic one-month extensions through June 30, 1999, so that
there remains a 24-month term at all times through June 30, 1999. Thereafter,
the term of the agreement expires on July 1, 2001. If Mr. Wolf terminates his
employment at any time within a period of 90 days following the effective time
of the merger, or if MotivePower terminates Mr. Wolf's employment following the
effective time of the merger or 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, 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 or the rate in
effect immediately preceding the effective time, whichever is greater,
and the amount of Mr. Wolf's annual bonus received for the year prior to
his termination of employment or the year prior to the effective time, or
the amount of Mr. Wolf's maximum target bonus for either of those years,
whichever is greatest;
- 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 shares of restricted stock shall lapse and all
stock options and 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 agrees to continue the employee's employment by
MotivePower for the period which began on June 3, 1999 and will continue until
the effective time of the merger or until the merger is abandoned. Each
agreement provides that MotivePower will pay a retention bonus to the employee
promptly following the end of that period if the employee remains employed by
MotivePower until the end of the period or MotivePower terminates the employee's
employment before the end of the period other than for good cause, as defined in
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the agreement. The retention bonus is 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, each agreement provides that if within 24 months after the
effective time of the merger 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.
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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, WABCO will merge into MotivePower.
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 WABCO common stock
outstanding immediately prior to the effective time will, at the effective time,
be converted into the right to receive 1.3 shares of MotivePower common stock.
However, any shares of WABCO common stock held by WABCO as treasury stock or by
any wholly-owned subsidiary of WABCO or owned by MotivePower or any wholly-owned
subsidiary of MotivePower will be canceled without any payment for those shares.
TREATMENT OF WABCO STOCK OPTIONS
At the effective time, each outstanding option granted by WABCO to purchase
shares of WABCO common stock will be converted into an option to acquire
MotivePower common stock having the same terms and conditions as the WABCO stock
option had before the effective time. The number of shares that the new
MotivePower option will be exercisable for and the exercise price of the new
MotivePower option will reflect the exchange ratio in the merger. See "Interests
of Certain Persons in the Merger -- Stock Options" on page I-57.
EXCHANGE OF SHARES
We will appoint an exchange agent to handle the exchange of WABCO common
stock certificates in the merger for MotivePower common stock and the payment of
cash for fractional shares of WABCO common stock. Soon after the closing, the
exchange agent will send to each holder of WABCO stock a letter of transmittal
for use in the exchange and instructions explaining how to surrender WABCO
common stock certificates to the exchange agent. Holders of WABCO 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 WABCO common stock will not be
entitled to receive any dividends or other distributions payable by MotivePower
after the closing until their certificates are surrendered.
MotivePower will not issue any fractional shares in the merger. Holders of
WABCO common stock will receive cash for any fractional shares of MotivePower
common stock owed to them in an amount based on the market value of MotivePower
common stock on the date on which the merger occurs.
MOTIVEPOWER BOARD AND RELATED MATTERS
The merger agreement provides that as of the effective time:
- The MotivePower Board size will be increased from 7 to 14.
- Two employee directors of WABCO will become directors of MotivePower.
They are William E. Kassling and Gregory T.H. Davies.
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- Five non-employee directors of WABCO will become directors of
MotivePower. They are Kim G. Davis, Emilio A. Fernandez, James C.
Huntington, Jr., James V. Napier and James P. Kelley.
- Michael A. Wolf will resign from the MotivePower Board at the closing and
Robert S. Miller will fill the vacancy created by Mr. Wolf's resignation.
Mr. Miller has served as a director of Waste Management Inc. since May
1997. He served as Chairman of the Board of Waste Management from October
1997 until May 1999. He served as Acting Chief Executive Officer from
October 1997 until March 1998. On March 10, 1998, Mr. Miller was named
Chief Executive Officer of Waste Management. Mr. Miller is serving as
Vice Chairman of Morrison Knudsen Corporation, an engineering and
construction firm. He also served as Chief Executive Officer of
Federal-Mogul Corporation, an automotive parts manufacturing firm, from
September until November 1996 and as Chairman of Morrison Knudsen
Corporation from April 1995 until September 1996. He was a member of the
Board of Directors of MotivePower from April 1995 until September 1996.
In addition, since 1993 he has served as Vice President and Treasurer of
Moore Mill and Lumber, a privately-held forest products firm, and from
1992 to 1993, he served as Senior Partner of James D. Wolfensohn, Inc.,
an investment banking firm. From 1979 to 1992, Mr. Miller worked at
Chrysler Corporation, an automobile and truck manufacturing firm, rising
to become Vice Chairman of the Board after serving as Chrysler's Chief
Financial Officer. Mr. Miller is a director of Federal-Mogul Corporation,
Fluke Corporation, Morrison Knudsen Corporation, Pope & Talbot, Inc., and
Symantec Corporation.
- Mr. Pope will remain Chairman of the MotivePower Board.
- Ernesto Fernandez-Hurtado has indicated his intention to step down as a
director of MotivePower prior to the completion of his term. The Board of
the combined company intends to appoint a Mexican national to fill this
vacancy in light of the significant amount of business the combined
company will have in Mexico.
- The MotivePower Board will have the following Committees:
- Executive Committee -- comprised of Messrs. Kassling (Chairman),
Kelley and Pope.
- Audit Committee -- comprised of Messrs. Miscoll (Chairman), Davis,
Fernandez-Hurtado and Stanley.
- Nominating Committee -- comprised of Messrs. Huntington (Chairman),
Kassling and Carmichael.
- Compensation Committee -- comprised of Messrs. Napier (Chairman),
Fernandez and Miller. Mr. Fernandez will not participate in
determinations relating to (1) compensation of the Chief Executive
Officer or its other four highest compensated employees, to the
extent such compensation could exceed $1,000,000, in any one year
for any such employee and MotivePower intends the compensation to
qualify for the performance-based exception to the limitation on
deductibility of compensation in excess of $1,000,000 as provided in
Section 162(m) of the Internal Revenue Code, or (2) compensation for
persons subject to Section 16 of the Securities Exchange Act of
1934, should such matters be presented to the Compensation
Committee.
- Operations Committee -- comprised of Messrs. Kassling (Chairman),
Davies, Davis, Pope and Foster.
See a description of the functions of the committees, including the
Executive Committee's ability to resolve deadlocks of the MotivePower Board and
its Committees, in "Summary of Functions and Powers of the MotivePower and WABCO
Board Committees" on page II-11.
COVENANTS
Each of MotivePower and WABCO has undertaken covenants in the merger
agreement. The following summarizes the more significant of these covenants.
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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 July 17, 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 determines, 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, receives 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.
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, 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, deposing 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
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- 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 June 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 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 MotivePower
will honor all MotivePower and WABCO employee benefit plans and employment
agreements.
The merger agreement provides that all individuals who are employees of
WABCO or any of its subsidiaries at the effective time shall be given credit for
all service with WABCO and its subsidiaries under all employee benefit plans and
arrangements currently maintained by MotivePower in which they become
participants for purposes of eligibility, vesting and certain other matters to
the same extent as if rendered to MotivePower.
Please see "Interests of Certain Persons in the Merger," beginning on page
I-57, for additional information on employee benefits matters covered in the
merger agreement.
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Indemnification and Insurance of WABCO Directors and Officers. MotivePower
has agreed that:
- It will indemnify WABCO directors and officers for liabilities from their
acts or omissions in those capacities occurring prior to closing to the
extent provided under WABCO's charter and by-laws as in effect on June 2,
1999.
- For six years after closing, it will provide to WABCO's directors and
officers liability insurance protection substantially equivalent in kind
and scope as the coverage provided by WABCO's current officers' and
directors' liability insurance policies, except that, subject to
limitations, MotivePower will not be obligated to pay in any one year an
amount in excess of 150% of the annual premium paid by WABCO for this
insurance on June 2, 1999.
Other Covenants. The merger agreement contains mutual covenants of the
parties, the most significant of which are:
- 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; and
- that WABCO agrees to have the stockholders agreement and voting trust to
which it is a party terminated prior to the closing.
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:
o corporate organization o capitalization o corporate authorization to
enter into the contemplated transaction o absence of any breach of
organizational documents, law or specified material agreements as a result
of the contemplated transaction o governmental approvals required in
connection with the contemplated transaction o filings with the
SEC o information provided by it for inclusion in this joint proxy
statement/prospectus o absence of specified material changes since a
specified balance sheet date o compliance with laws o tax
matters o litigation o employee benefits matters o labor matters
o intellectual property matters o environmental and safety
matters o insurance matters o the shareholder votes required to approve
the contemplated transaction o absence of circumstances inconsistent with
the intended accounting or tax treatment of the merger o brokers' or
advisors' fees o real property matters o product warranty
matters o foreign corrupt practices o material contracts and o 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 and the WABCO stock option
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 MotivePower stock option agreement. For
information about the anti-takeover statute and the rights plan, see "Legal
Information -- Comparison of Shareholder Rights -- 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
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- 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
- MotivePower's registration statement on Form S-4, which includes this
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 MotivePower 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 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 November 30, 1999,
(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 July 17, 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,
- 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-71,
or
(5) - on or prior to July 17, 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
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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" below.
(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-65 or " -- Covenants -- MotivePower Board's Covenant to
Recommend" on page I-66, 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-68 not to be satisfied, and these conditions are
incapable of being satisfied by November 30, 1999.
(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-65 or
" -- Covenants -- WABCO Board's Covenant to Recommend" on page
I-66, 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-68 not to be satisfied, and these conditions are incapable of
being satisfied by November 30, 1999.
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 November 30, 1999.
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
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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" above
- 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 after June 2, 1999 and prior to the WABCO shareholders
meeting 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-69
- 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 June 2, 1999 and prior to the MotivePower
shareholders meeting 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 this joint proxy
statement/prospectus. 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.
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. 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.
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.
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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 $21.6125. 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 $16.625. 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-70) 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-71)
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 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.
I-72
79
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 agreement 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
$30 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 $30 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 $15 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 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 MotivePower stock to be exchanged for WABCO stock in the merger.
I-73
80
CHAPTER TWO
LEGAL INFORMATION
COMPARISON OF SHAREHOLDER RIGHTS
The rights of WABCO shareholders under Delaware law, the WABCO charter and
the WABCO by-laws prior to the merger are similar to the rights they will have
following the merger as MotivePower shareholders under Pennsylvania law, the
MotivePower charter and the MotivePower 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 WABCO 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 MotivePower by-laws will be
amended and restated as described in Exhibit 1.4(a) of the merger agreement. The
primary amendments made to the MotivePower by-laws relate to the establishment
of Board Committees of the MotivePower Board. The functions and powers of the
MotivePower and WABCO Board Committees are summarized in the chart below. 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
shareholders' agreement and the voting trust agreement referenced herein.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF WABCO SHAREHOLDERS AND
RIGHTS THOSE SHAREHOLDERS WILL HAVE AS MOTIVEPOWER SHAREHOLDERS FOLLOWING THE
MERGER
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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
who become MotivePower shareholders will be governed by
shareholders in the merger will Pennsylvania law, the
be governed by Pennsylvania law, MotivePower charter and the
the MotivePower charter and the MotivePower by-laws. The charter
MotivePower by-laws. The charter and by-laws of MotivePower after
and by-laws of MotivePower after the merger will be identical in
the merger will be identical in all material respects to those
all material respects to those in effect prior to the merger
in effect prior to the merger with the exception of the
with the exception of the amendments contemplated by the
amendments contemplated by the merger agreement, some of which
merger agreement, some of which are material, described in this
are material, described in this chart and under "Summary of
chart and under "Summary of Functions and Powers of the
Functions and Powers of the MotivePower and WABCO Board
MotivePower and WABCO Board Committees" on page II-11.
Committees" on page II-11.
- ------------------------------------------------------------------------------------------------------------
II-1
81
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
Corporate Governance: As of March 31, 1999, ownership
(continued) of WABCO's common stock was held
in the following approximate
percentages: by management and
WABCO ESOP (58%), 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
public shareholders (25%). A
stockholders agreement exists
among some members of
management, Vestar, Harvard
Private Capital Holdings,
American Industrial Partners
Capital and WABCO that provides
for, among other things, the
composition of the WABCO Board
as long as minimum stock
percentages are maintained. The
stockholders agreement will be
terminated at the effective
time.
Those shareholders comprising
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. The voting
trust will be terminated at the
effective time of the merger.
- ------------------------------------------------------------------------------------------------------------
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. The merger
agreement provides that at the
effective time there will be an
increase in the authorized
capital stock of MotivePower to
165,000,000 shares, consisting
of 150,000,000 shares of common
stock and 15,000,000 shares of
preferred stock. See a more
comprehensive discussion under
"Description of MotivePower
Capital Stock" on page II-15.
- ------------------------------------------------------------------------------------------------------------
II-2
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- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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
not more than 15. The
MotivePower Board currently
consists of 7 directors.
If the merger is completed, the
MotivePower by-laws will be
amended to provide that the
MotivePower Board shall consist
of 14 directors, subject to the
rights, if any, of any series of
preferred stock specified in a
certificate of designation and
to the minimum and maximum
number of authorized directors
provided in the charter.
- ------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------
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.
No changes will be made to these
provisions in connection with
the merger.
- ------------------------------------------------------------------------------------------------------------
II-3
83
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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.
No changes will be made to these
provisions in connection with
the merger.
- ------------------------------------------------------------------------------------------------------------
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 by law. No
substantially all of a changes will be made to these
corporation's assets requires provisions in connection with
the affirmative vote of a the merger.
majority of the total votes
represented by the outstanding Under Pennsylvania law, unless
stock of the corporation required by the by-laws of a
entitled to vote on the matter. constituent corporation,
shareholder approval is not
required for a plan of merger or
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
- ------------------------------------------------------------------------------------------------------------
II-4
84
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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 and no
change will be made in
connection with the merger.
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. No changes will
be made to these provisions in
connection with the merger.
- ------------------------------------------------------------------------------------------------------------
II-5
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- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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
a majority of the capital stock
However, the WABCO charter entitled to vote thereon or by a
provides that any adoption of majority of the entire
new by-laws by shareholders MotivePower Board, provided that
cannot invalidate any prior act no amendment adopted by the
of the WABCO Board which would Board varies or conflicts with
have been valid if such by-laws any amendment adopted by the
had not been adopted. shareholders.
Under Delaware law, the WABCO However, the MotivePower charter
charter may be amended by the provides that the amendment of
affirmative vote of a majority specified by-law provisions by
of the outstanding stock the shareholders requires the
entitled to vote thereon at the affirmative vote of at least
shareholders meeting and a 66 2/3% of the voting power of
majority of the outstanding MotivePower's outstanding voting
stock of each class entitled to stock voting as a single class.
vote thereon as a 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 merger agreement. No shares securities.
were repurchased pursuant to the
program.
- ------------------------------------------------------------------------------------------------------------
II-6
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- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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
his or her duties.
A director would be liable under
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
liability of its directors for
A director would also be liable monetary damages for any action
by reason that the director taken or failure to take any
action unless:
- breached the director's duty
of loyalty to the corporation or - the directors have breached or
its shareholders, failed to perform their
duties; and
- acted or failed to act in a
manner that was not in good - the breach or failure to
faith or acted in a manner perform constitutes
that involved intentional self-dealing, willful
misconduct or a knowing misconduct or recklessness.
violation of law, or
However, a Pennsylvania
- derived an improper personal corporation is not empowered to
benefit. eliminate personal liability
where the responsibility or
The WABCO charter does not liability of a director is
contain a provision limiting the pursuant to any criminal statute
liability of officers in this or is for the payment of taxes
manner. 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 continue to be in
effect after the merger. See
"Description of MotivePower
Capital Stock--Preferred Stock"
on II-15.
- ------------------------------------------------------------------------------------------------------------
II-7
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- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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
shares of any class that is
In addition, unless otherwise listed on a national securities
provided in the charter, no exchange in the case of sales or
appraisal rights are available transfers of all or
under Delaware law to holders of substantially all of the assets
shares of any class of stock of the corporation and are not
which is either (1) listed on a provided in the case of other
national securities exchange or such transactions to the holders
designated as a national market of shares of any class that is
system security on an either (1) listed on a national
interdealer quotation systems by securities exchange or (2) held
the NASD or (2) held of record of record by more than 2,000
by more than 2,000 shareholders, shareholders unless:
unless those shareholders are
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
other corporation and cash in
- shares of stock of the lieu of fractional shares;
surviving corporation
- if the shares constitute a
- shares of stock of another preferred or special class of
corporation which, as of the stock, the charter of the
effective date of the merger corporation, the corporate
or consolidation, are of the action under consideration or
kind described in clause (1) the express terms of the
or (2), above; or transaction encompassed in the
corporate action do not
- cash instead of fractional entitle all holders of the
shares shares of the class to vote on
the matter and require for the
- any combination of the above adoption of the matter the
three bullets. affirmative vote of a majority
of the votes cast by all
Appraisal rights are not shareholders of the class; or
available under Delaware law in
the event of the sale of all or - if the shares constitute a
substantially all of a group of a class or series which
corporation's assets or the are to receive the same
adoption of an amendment to its special treatment in the
charter, unless the rights are corporate action under
granted in the corporation's consideration, the holders in
charter. The WABCO charter does that group are not entitled to
not grant such rights. vote as a special class in
respect of the corporate
action.
- ------------------------------------------------------------------------------------------------------------
II-8
88
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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.
shareholder," 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
to make the provisions of
- the board of directors Section 203 incorporated in its
approved the acquisition of charter inapplicable to the
stock or the transaction prior merger and the related
to the time that the person transactions. A summary of
became an interested Section 203 is provided in the
stockholder; adjacent column. No changes will
be made to these provisions in
- the person became an connection with the merger.
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. No changes will be made
to these provisions in
connection with the merger.
- ------------------------------------------------------------------------------------------------------------
II-9
89
- ------------------------------------------------------------------------------------------------------------
WABCO MOTIVEPOWER
- ------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------
II-10
90
SUMMARY OF FUNCTIONS AND POWERS OF THE MOTIVEPOWER AND WABCO BOARD COMMITTEES
- --------------------------------------------------------------------------------------------------------------------------
COMMITTEE WABCO MOTIVEPOWER BEFORE MERGER MOTIVEPOWER AFTER MERGER*
- --------------------------------------------------------------------------------------------------------------------------
Audit Committee The Audit Committee (1) The Audit and Corporate The Audit Committee will:
makes recommendations to the Responsibility Committee (1) make recommendations to
Board regarding the reviews the activities of the Board regarding the
engagement of independent the internal auditors and engagement of the
accountants; (2) reviews the independent accountants to MotivePower's independent
plan, scope and results of determine whether accountants, (2) review the
the annual audit, the MotivePower's organization, plan, scope and results of
independent accountants' internal controls and the annual audit, the
letter of comments and policies are reasonably independent accountants'
management's response designed to assure the letter of comments and
thereto and the scope of any adequacy of MotivePower's management's response
non-audit services performed financial statements and thereto and the scope of any
by the independent records and to provide for non-audit services which may
accountants; (3) manages the safekeeping of the be performed by the
policies and procedures with assets of MotivePower. This independent accountants, (3)
respect to internal Committee has other manage MotivePower's
accounting and financial responsibilities focused on policies and procedures with
controls; (4) reviews corporate compliance and respect to internal
changes in accounting ethics. accounting and financial
policy; and (5) reviews controls and (4) review any
possible violations of changes in accounting
WABCO's business ethics and policy. See "The Merger
conflicts of interest Agreement--MotivePower Board
policies. and Related Matters" on page
I-64 for information about
the composition of the Audit
Committee after the
effective time of the
merger.
- --------------------------------------------------------------------------------------------------------------------------
- ---------------
* The by-law provision establishing the various MotivePower Board Committees and
their responsibilities terminates immediately after the conclusion of the 2002
annual meeting of shareholders. Upon the termination, the by-law provision
relating to the establishment of the MotivePower Board Committees reverts to
the language effective prior to the merger which provides, generally, that
there will be an Executive and Finance Committee which will have the authority
to exercise the powers of the Board, subject to exceptions, and any other
committees as shall be established by the entire Board.
II-11
91
- --------------------------------------------------------------------------------------------------------------------------
COMMITTEE WABCO MOTIVEPOWER BEFORE MERGER MOTIVEPOWER AFTER MERGER
- --------------------------------------------------------------------------------------------------------------------------
Compensation The Compensation Committee The Compensation and The Compensation Committee
(1) establishes compensation Management Development will: (1) have sole
levels for WABCO officers; Committee has the primary authority to establish the
(2) reviews management responsibility for compensation for, and
organization and establishing and reimbursement of expenses
development; (3) reviews administering MotivePower's of, the Directors; (2)
significant employee benefit compensation program for determine the compensation
programs; and (4) some highly paid executive of senior management based
establishes and administers officers and other key upon recommendations of the
executive compensation personnel and for other Chief Executive Officer and
programs and WABCO's 1995 matters involving establish on an annual basis
Stock Incentive Plan. The compensation and benefit the compensation of the
Stock Option Subcommittee of policies. Chairman and the Chief
the Compensation Committee Executive Officer subject to
administers the 1995 Stock a majority vote of the whole
Incentive Plan and Board to change or modify
determines eligibility for its actions; (3) have the
stock options and grants. authority to administer the
existing option and benefit
plans; and (4) have the
exclusive authority to
resolve deadlocks of the
board regarding the
termination, replacement of,
or any other matter
regarding, the Chief
Executive Officer. See "The
Merger Agreement--
MotivePower Board and
Related Matters" on page
I-64 for information about
the composition of the
Compensation Committee after
the effective time of the
merger.
- --------------------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------------------
COMMITTEE WABCO MOTIVEPOWER BEFORE MERGER MOTIVEPOWER AFTER MERGER
- --------------------------------------------------------------------------------------------------------------------------
Executive and None To the extent permitted by The Executive Committee will
Finance law, the Executive and have the power of the Board
Finance Committee has and to resolve any matter
may exercise all the powers considered by the Board,
of the MotivePower Board, except as described in the
other than the power to next sentence, including the
amend the MotivePower by- power to resolve deadlocks
laws or charter, to fix of the Board and of the
designations and other terms other committees of the
of preferred stock, to Board. The Executive
authorize the issuance of Committee may not approve
stock or declare a dividend, some fundamental changes,
to adopt an agreement of matters not permitted by
merger or consolidation and Pennsylvania law to be
to recommend to the delegated to a board
shareholders some committee and matters
fundamental changes. delegated to other
committees. See "The Merger
Agreement--MotivePower Board
and Related Matters" on page
I-64 for information about
the composition of the
Executive Committee after
the effective time of the
merger.
- --------------------------------------------------------------------------------------------------------------------------
Nominating The Nominating Committee The Nominating and Corporate The Nominating Committee
nominates persons to be Governance Committee has the will have the sole authority
elected to the Board. primary responsibility for to recommend persons to be
monitoring and making elected to the Board,
recommendations with respect including filling vacancies
to developments in the area or newly created
of corporate governance and directorships. The
Board policies, including Nominating Committee will
identifying, evaluating and have the authority, subject
recommending candidates for to the provisions of the
Board membership. MotivePower by-laws and
charter, to review and make
recommendations with respect
to the size and composition
of the Board. See "The
Merger Agreement--MotivePower
Board and Related Matters" on
page I-64 for information about
the composition of the
Nominating Committee after the
effective time of the merger.
- --------------------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------------------
COMMITTEE WABCO MOTIVEPOWER BEFORE MERGER MOTIVEPOWER AFTER MERGER
- --------------------------------------------------------------------------------------------------------------------------
Operations None None The Operations Committee
will communicate with
management regarding day-
to-day operations of the
MotivePower and
implementation of the
business plan as approved by
the Board. The Operations
Committee will have the
authority to approve
modifications to the
business plan that are not
material to the company's
business as a whole. See
"The Merger Agreement--
MotivePower Board and
Related Matters" on page
I-64 for information about
the composition of the
Operations Committee after
the effective time of the
merger.
- --------------------------------------------------------------------------------------------------------------------------
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DESCRIPTION OF MOTIVEPOWER CAPITAL STOCK
The following summary of the current terms of the capital stock of
MotivePower and the terms of the capital stock of MotivePower to be in effect
after completion of the merger is not meant to be complete and is qualified by
reference to the MotivePower charter and MotivePower by-laws. The MotivePower
charter is incorporated by reference and a copy will be sent to holders of
shares of MotivePower common stock and WABCO common stock upon request. See
"Where You Can Find More Information" on page III-1. The MotivePower by-laws are
incorporated by reference and included as an exhibit to the merger agreement
attached as Annex A.
AUTHORIZED CAPITAL STOCK
Prior to Completion of the Merger. Under the MotivePower charter,
MotivePower's authorized capital stock consists of 55,000,000 shares of
MotivePower common stock, par value $0.01 per share, and 10,000,000 shares of
preferred stock, par value $0.01 per share.
Following Completion of the Merger. The merger agreement provides that at
the effective time, the MotivePower charter will be amended to increase the
authorized number of shares of MotivePower common stock to 150,000,000 and the
authorized number of shares of MotivePower preferred stock to 15,000,000.
COMMON STOCK
As of July 19, 1999, 27,019,235 MotivePower shares were issued and
outstanding, no shares were issued and held in MotivePower's treasury and
4,848,750 shares were reserved for issuance upon the exercise of stock options.
The holders of common stock are entitled to one vote per share on all matters to
be voted upon by the shareholders, and there is no cumulative voting in the
election of directors, nor are there preemptive rights upon the issuance of
additional MotivePower shares. Upon dissolution of MotivePower, which does not
include the merger, the holders of MotivePower common stock will be entitled to
a ratable portion of any assets remaining after payment of all priority claims.
PREFERRED STOCK
MotivePower currently has 1,600,000 shares of preferred stock which have
been designated Series C Junior Participating Preferred Stock for issuance in
connection with MotivePower's shareholder rights plan. The MotivePower board of
directors is authorized to issue shares of preferred stock in classes or series
and to determine for any such class or series its voting rights, preferences,
limitations and any special rights. This action may be taken by the board at
anytime and without shareholder approval. While MotivePower has no current
understandings, plans or agreements for the issuance of preferred stock, the
shares of preferred stock may be used in connection with the raising of
additional capital, future acquisitions, and for other corporate purposes. In
addition, some or all of the preferred stock could be used in connection with
the shareholder rights plan described below.
SHAREHOLDER RIGHTS PLAN
On January 19, 1996, the board of directors of MotivePower adopted a
shareholder rights plan, which has been subsequently amended by the board, and
declared that a dividend of one share purchase right be distributed on each
outstanding share of common stock to shareholders of record as of the close of
business on January 30, 1996. Each right entitles the registered holder to
purchase from MotivePower one one-hundredth of a share of Series C Preferred
Stock, par value $0.01 per share, or, in some circumstances, shares of common
stock, other securities, and/or cash or other property, at a purchase price of
$80 per share of Series C Preferred Stock or, when applicable, MotivePower
common stock, securities, cash, and/or other property, subject to adjustment.
The complete terms and conditions of the rights are set forth in a rights
agreement dated as of January 19, 1996, as amended, between MotivePower and
ChaseMellon Shareholder Services, L.L.C., as rights agent.
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95
All shares of MotivePower common stock currently outstanding have
associated rights and all shares of MotivePower common stock issued at the
effective time of the merger will have associated rights. Initially, the rights
attached to the outstanding shares of common stock without a separate
distribution of right certificates. The rights will detach from the outstanding
shares of common stock and separate right certificates will be issued when there
is a Distribution Date. A "Distribution Date" will occur on (1) the tenth day
following a public announcement that a person has become an Acquiring Person, or
(2) if earlier, the tenth business day, or a later date as may be determined by
the MotivePower board of directors prior to the time any person becomes an
Acquiring Person, following the commencement or announcement of a tender or
exchange offer that would result in a person or group of affiliated or
associated persons becoming the beneficial owner of 10% or more of the
outstanding shares of common stock. Subject to limitations and exceptions
specified in the rights agreement, an "Acquiring Person" is a person or group of
affiliated or associated persons that beneficially owns 10% or more of the
outstanding shares of common stock. The rights are not exercisable until the
Distribution Date and will expire at the close of business on August 22, 2007,
unless the expiration date is extended or unless the rights are earlier redeemed
or exchanged by MotivePower.
Once a person has become an Acquiring Person, all rights that are, or,
under circumstances specified in the rights agreement, were, beneficially owned
by an Acquiring Person will be null and void. In the event that, at any time
after a person becomes an Acquiring Person, (1) MotivePower is acquired in a
merger or other business combination, or (2) 50% or more of the assets or
earning power of MotivePower and its subsidiaries (taken as a whole) is sold or
otherwise transferred, proper provision will be made so that each holder of a
right, other than a right that is or was beneficially owned by an Acquiring
Person that has become null and void pursuant to the terms of the rights
agreement, shall thereafter have the right to receive upon exercise of that
right, in lieu of shares of Series C Preferred Stock, shares of common stock of
the acquiror then having a current market value equal to two times the
then-current purchase price.
At any time prior to the time any person becomes an Acquiring Person, the
MotivePower board of directors may redeem the rights in whole, but not in part,
at a price of $0.001 per right, subject to adjustment. The redemption of the
rights may be made effective at such time, on such basis, and with such
conditions as the MotivePower Board in its sole discretion may establish.
Immediately upon any redemption of the rights, the right to exercise the rights
will terminate and the only right of the holders of rights will be to receive
$0.001 per right. Until a right is exercised, the holder thereof, as such, will
have no rights as a shareholder of MotivePower, including, without limitation,
the right to vote or to receive dividends.
On June 2, 1999, MotivePower amended its rights agreement to render the
rights agreement inapplicable with respect to the merger, to exclude WABCO's
ESOP from the definition of Acquiring Person and to make additional amendments
in connection with MotivePower's reincorporation from Delaware to Pennsylvania.
The shareholder rights plan was primarily written to meet the standards
established in Delaware case law. Pennsylvania law explicitly approves such
rights plans, but specific plans will probably still be subject to evaluation on
a case-by-case basis. In that regard, differences between Delaware's and
Pennsylvania's court systems and legal precedents could potentially affect the
outcome of any legal challenge to the shareholder rights plan.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the transfer agent and
registrar for the MotivePower common stock.
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF WABCO COMMON STOCK
It is a condition to the merger that the shares of MotivePower 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,
WABCO common stock will cease to be listed.
II-16
96
LEGAL MATTERS
The validity of the MotivePower common stock to be issued to WABCO
shareholders pursuant to the merger will be passed upon by Doepken Keevican &
Weiss. 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 Agreement--Conditions to the
Completion of the Merger" and "The Merger Transaction--Material United States
Federal Income Tax Consequences of the Merger."
EXPERTS
The consolidated financial statements of MotivePower Industries, Inc. and
subsidiaries and the related financial statement schedule incorporated in this
prospectus by reference from MotivePower's Annual Report on Form 10-K for the
year ended December 31, 1998 have been audited by 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 Westinghouse Air Brake Company 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 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-17
97
CHAPTER THREE
ADDITIONAL INFORMATION FOR SHAREHOLDERS
FUTURE SHAREHOLDER PROPOSALS
MOTIVEPOWER
Any shareholder proposal for MotivePower's annual meeting in 2000 must be
sent to the Secretary at the address of MotivePower's principal executive office
given under "The Companies" on page I-2. 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
WABCO will hold an annual meeting in the year 2000 only if the merger has
not already been completed. 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 February 2, 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.
MotivePower filed a registration statement on Form S-4 to register with the
SEC the MotivePower common stock to be issued to WABCO shareholders in the
merger. This joint proxy statement/prospectus is a part of that registration
statement and constitutes a prospectus of MotivePower 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
98
documents set forth below that we have previously filed with the SEC. These
documents contain important information about our companies and their finances.
MOTIVEPOWER SEC FILINGS (FILE NO. 001-13225) PERIOD
- --------------------------------------------------------------------------------------------
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
The description of MotivePower common stock
set forth in the Registration
Statement on Form 8-A as filed on
May 4, 1999 and amended on June 3, 1999
WABCO SEC FILINGS (FILE NO. 001-13782) PERIOD
- --------------------------------------------------------------------------------------------
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
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:
MOTIVEPOWER WABCO
Two Gateway Center 1001 Air Brake Avenue
14th Floor Wilmerding, PA 15148
Pittsburgh, PA 15222 Tel: (412) 825-1000
Tel: (412) 201-1101
If you would like to request documents from us, please do so by August 16,
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 JULY ,
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 MOTIVEPOWER COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
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ANNEX A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
MOTIVEPOWER INDUSTRIES, INC.
AND
WESTINGHOUSE AIR BRAKE COMPANY
---------------
DATED AS OF JUNE 2, 1999
AND AMENDED AS OF JULY 19, 1999
100
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
PAGE
----
ARTICLE I
THE MERGER
Section 1.1. The Merger.................................................. 1
Section 1.2. Effective Time.............................................. 1
Section 1.3. Effects of the Merger....................................... 2
Section 1.4. Charter and By-Laws; Board of Directors; Management 2
Succession..................................................
Section 1.5. Conversion of Securities.................................... 2
Section 1.6. MotivePower to Make Certificates Available.................. 2
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 WABCO Common Stock........... 4
Section 1.11. Closing of WABCO Transfer Books............................. 4
Section 1.12. Lost Certificates........................................... 4
Section 1.13. Further Assurances.......................................... 4
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..................................... 6
Section 2.4. Consents and Approvals...................................... 7
Section 2.5. SEC Documents and Other Reports............................. 7
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...................................... 8
Section 2.9. Tax Matters................................................. 9
Section 2.10. Actions and Proceedings..................................... 9
Section 2.11. Certain Agreements.......................................... 10
Section 2.12. ERISA....................................................... 10
Section 2.13. Labor Matters............................................... 11
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........................ 13
Section 2.21. Opinion of Financial Advisor................................ 13
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.......................................... 14
Section 2.26. Warranties.................................................. 15
Section 2.27. Pooling Letter.............................................. 15
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PAGE
----
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MOTIVEPOWER
Section 3.1. Corporate Organization...................................... 15
Section 3.2. Capitalization.............................................. 16
Section 3.3. Authority; No Violation..................................... 16
Section 3.4. Consents and Approvals...................................... 17
Section 3.5. SEC Documents and Other Reports............................. 17
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...................................... 18
Section 3.9. Tax Matters................................................. 19
Section 3.10. Actions and Proceedings..................................... 19
Section 3.11. Certain Agreements.......................................... 19
Section 3.12. ERISA....................................................... 20
Section 3.13. Labor Matters............................................... 21
Section 3.14. Intellectual Property; Year 2000 Compliance................. 21
Section 3.15. Environmental and Safety Matters............................ 22
Section 3.16. Insurance................................................... 22
Section 3.17. Parachute Payments to Disqualified Individuals.............. 22
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............................................... 23
Section 3.23. Rights Agreement; Other Matters............................. 23
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................................... 31
Section 5.6. Appropriate Action; Consents; Filings....................... 32
Section 5.7. Public Disclosure........................................... 33
Section 5.8. Reorganization.............................................. 34
Section 5.9. Comfort Letters............................................. 34
Section 5.10. Compliance with the Securities Act and Pooling of Interests 34
Restrictions; Registration Rights; Termination of Voting
Trust and Stockholder Agreement.............................
Section 5.11. Listing or Quotation of Stock............................... 35
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PAGE
----
Section 5.12. Indemnification of Directors and Officers................... 35
Section 5.13. WABCO Stock Options......................................... 35
Section 5.14. WABCO Employee Stock Purchase Plan.......................... 36
Section 5.15. Benefit Plans to be Honored................................. 36
Section 5.16. State Takeover Laws......................................... 36
Section 5.17. Transfer Taxes.............................................. 36
ARTICLE VI
CONDITIONS TO MERGER
Section 6.1. Conditions to Each Party's Obligations...................... 36
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....................................... 40
Section 7.3. Fees and Expenses........................................... 40
Section 7.4. Amendment................................................... 41
Section 7.5. Extension; Waiver........................................... 41
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties and Agreements... 41
Section 8.2. Notices..................................................... 42
Section 8.3. Interpretation.............................................. 42
Section 8.4. Counterparts................................................ 43
Section 8.5. Entire Agreement; No Third Party Beneficiaries.............. 43
Section 8.6. Governing Law............................................... 43
Section 8.7. Assignment.................................................. 43
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TABLE OF DEFINED TERMS
TERM SECTION
- ---- -------
Affected Employees 5.15(b)
Agreement Preamble
AIP 5.10(c)
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
Harvard 5.11(c)
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)
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TERM SECTION
- ---- -------
MotivePower Leases 3.25(b)
MotivePower Material Contracts 3.26
MotivePower Multiemployer Plan 3.12(d)(ii)
MotivePower Option Agreement Recitals
MotivePower Option Plan (a)
MotivePower Owned Real Property 5(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 Shareholders Meeting 5.3
MotivePower SEC Documents 3.5
MotivePower Series C Preferred Stock 3.2(a)
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 Rights Agreement 5.11(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
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)
WABCO Leased Property 2.24(b)
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TERM SECTION
- ---- -------
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)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 2, 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, the respective Boards of Directors of MotivePower and WABCO have
approved and declared advisable the merger of WABCO with and into MotivePower
(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 WABCO ("WABCO Common Stock") not owned directly or indirectly by
MotivePower or WABCO will be converted into shares of Common Stock, par value
$.01 per share, of MotivePower ("MotivePower Common Stock");
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 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 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, 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.
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"), WABCO shall be
merged with and into MotivePower at the Effective Time (as defined in Section
1.2). Following the Merger, the separate corporate existence of WABCO shall
cease and MotivePower shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of WABCO 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.
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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 Articles of Incorporation of
MotivePower, as in effect immediately prior to the Effective Time, shall be
amended as set forth in Exhibit 1.4(a) and such Articles of Incorporation, as so
amended, shall be the Articles of Incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
Immediately prior to the Effective Time, the Board of Directors of MotivePower
shall amend and restate the By-Laws of MotivePower as set forth in Exhibit
1.4(a). At the Effective Time, the By-Laws of MotivePower, as amended and
restated immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by the Articles of Incorporation.
(b) From and after the Effective Time, until duly changed in compliance
with applicable law and the Articles 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(b). At the Effective Time, the
persons set forth on Exhibit 1.4(b) shall be the initial members of the
committees of the Board of Directors of the Surviving Corporation.
(c) At the Effective Time, Mr. John C. Pope shall be Chairman of the Board
of Directors of the Surviving Corporation and Mr. William E. Kassling shall be
the Chief Executive Officer of the Surviving Corporation. The other officers of
the Surviving Corporation shall include those persons listed on Exhibit 1.4(c)
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 MotivePower, WABCO or the
holders of any securities of the Constituent Corporations:
(a) All shares of WABCO Common Stock that are held in the treasury of WABCO
or by any wholly-owned Subsidiary of WABCO and any shares of WABCO Common Stock
owned by MotivePower or by any wholly-owned Subsidiary of MotivePower shall be
cancelled and no capital stock of MotivePower 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 WABCO Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares to be cancelled in accordance with Section 1.5(a)) shall
be converted into 1.30 (such number being the "Exchange Ratio") validly issued,
fully paid and nonassessable shares of MotivePower Common Stock. All such shares
of WABCO 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 MotivePower
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 WABCO Stock Options (as defined in Section 2.2(a)) outstanding at
the Effective Time shall become options to purchase MotivePower Common Stock
pursuant to Section 5.13.
SECTION 1.6. MOTIVEPOWER TO MAKE CERTIFICATES AVAILABLE. (a) Exchange of
Certificates. MotivePower shall authorize ChaseMellon Shareholder Services,
L.L.C. (or such other person or persons as shall be reasonably acceptable to
MotivePower and WABCO) to act as Exchange Agent hereunder (the "Exchange
Agent"). As soon as practicable after the Effective Time, MotivePower shall
deposit with the Exchange Agent, in trust for the holders of shares of WABCO
Common Stock converted in the Merger,
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certificates representing the shares of MotivePower Common Stock issuable
pursuant to Section 1.5(b) in exchange for outstanding shares of WABCO 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 MotivePower 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 MotivePower 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 WABCO 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 MotivePower 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 MotivePower 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 MotivePower
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 MotivePower 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
MotivePower 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 MotivePower 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
MotivePower 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
MotivePower 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 MotivePower
Common Stock is to 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
MotivePower 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. MotivePower or
the Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement such amounts as
MotivePower 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
MotivePower 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 MotivePower or the Exchange Agent.
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SECTION 1.8. NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of MotivePower Common Stock shall be issued upon
the surrender for exchange of Certificates pursuant to this Article I, and no
MotivePower 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 MotivePower. In lieu of any
such fractional share, each holder of WABCO Common Stock who would otherwise
have been entitled to a fraction of a share of MotivePower 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 MotivePower Common Stock (as reported in the NYSE Composite
Transactions) on the date of the Effective Time (or, if the shares of
MotivePower Common Stock do not trade on the NYSE on such date, the first date
of trading of shares of MotivePower 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 MotivePower, and MotivePower 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 WABCO for six months
after the Effective Time shall be delivered to MotivePower, upon demand of
MotivePower, and any such former stockholders who have not theretofore complied
with this Article I shall thereafter look only to MotivePower for payment of
their claim for MotivePower Common Stock, any cash in lieu of fractional shares
of MotivePower Common Stock and any dividends or distributions with respect to
MotivePower Common Stock. MotivePower shall not be liable to any former holder
of WABCO Common Stock for any such shares of MotivePower 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 WABCO COMMON STOCK. All shares
of MotivePower 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 WABCO Common Stock
represented by such Certificates.
SECTION 1.11. CLOSING OF WABCO TRANSFER BOOKS. At the Effective Time, the
stock transfer books of WABCO shall be closed and no transfer of shares of WABCO
Common Stock shall thereafter be made on the records of WABCO. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, the
Exchange Agent or MotivePower, 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, if required by
MotivePower or the Exchange Agent, the posting by such person of a bond, in such
reasonable amount as MotivePower 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 MotivePower Common Stock, any cash in lieu
of fractional shares of MotivePower 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
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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 MotivePower and WABCO
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. 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 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).
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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"), 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 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.
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(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 MotivePower 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 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
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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, (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 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
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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. WABCO 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). 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 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,
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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
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 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 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
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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 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.
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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,
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,
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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 September 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) necessary to exempt MotivePower,
its Subsidiaries and affiliates, the Merger, this Agreement, the WABCO Option
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
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Ratio is fair to WABCO's stockholders 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 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.
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
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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 as of June 2, 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 June 2, 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 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
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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 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 and (iv) this Agreement, 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 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
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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 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 MotivePower
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
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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 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
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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. 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.
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
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
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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 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.
(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.
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(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
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
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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 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
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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 September 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 ByLaws 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.
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. RIGHTS AGREEMENT; OTHER MATTERS. (a) MotivePower has amended
the Rights Agreement to (i) render the MotivePower Rights Agreement inapplicable
to the Merger and the other transactions contemplated by this Agreement and (ii)
provide that the WABCO Employee Stock Ownership Trust (the "Trust") shall not be
deemed an Acquiring Person (as defined in the MotivePower Rights Agreement), 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 or consummating the Merger and the other
transactions contemplated hereby.
(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.
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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 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
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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 as of June 2, 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 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,
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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 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 June 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;
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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 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 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;
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(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 June
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;
(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.
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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 the 45th calendar day after the date hereof, 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.
(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.
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(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 MotivePower
shall prepare and file with the SEC the Registration Statement (in which the
Joint Proxy Statement will be included). WABCO 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 this Agreement and 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" 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. MotivePower will advise WABCO, 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 MotivePower 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
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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). 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. 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. 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 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,
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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 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.
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(ii) Notwithstanding any other provision of this Agreement and except as
provided in Section 5.6(a)(iii), 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, 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 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.
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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; REGISTRATION RIGHTS; TERMINATION OF VOTING TRUST AND STOCKHOLDERS
AGREEMENT. (a) Within 10 business days after the date hereof, WABCO shall cause
to be prepared and delivered to MotivePower a list (reasonably satisfactory to
counsel for MotivePower) identifying all persons who may be, at the time of the
WABCO Stockholders Meeting, deemed to be "affiliates" of WABCO as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule
145 Affiliates"). WABCO shall use its reasonable best efforts to cause each
person who is identified as a Rule 145 Affiliate in such list to deliver to
MotivePower 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. MotivePower 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, MotivePower shall
deliver to WABCO a list (reasonably satisfactory to counsel for WABCO)
identifying those persons who may be, at the time of the MotivePower
Shareholders Meeting, affiliates of MotivePower under applicable SEC accounting
releases with respect to pooling of interests accounting treatment. MotivePower
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.
(c) MotivePower acknowledges and agrees that the Common Stock Registration
Rights Agreement, dated as of March 5, 1997, as amended March 28, 1997 (the
"Registration Rights Agreement"), among WABCO, Harvard Private Capital Holdings,
Inc. ("Harvard"), American Industrial Partners Capital Fund II, L.P. ("AIP"),
the Voting Trust created under the Second Amended WABCO Voting Trust/Disposition
Agreement, dated as of December 13, 1995 (the "Voting Trust"), Vestar Equity
Partners, L.P. ("Vestar"), Vestar Capital Partners, Inc., Emilio A. Fernandez,
Jr. and Emilio A. Fernandez, Jr., as custodian for Eric A. Fernandez and Ofelia
B. Fernandez, upon the Effective Time, will be binding upon the Surviving
Corporation as successor to WABCO as though the Surviving Corporation was a
party thereto and the Surviving Corporation hereby agrees to perform all of the
duties and covenants of WABCO ascribed therein, subject to the terms and
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conditions thereof. MotivePower agrees that any references to "Common Stock" in
the Registration Rights Agreement shall be references to MotivePower Common
Stock.
(d) Prior to the Effective Time, WABCO shall cause the Voting Trust and the
Amended and Restated Stockholders Agreement, dated as of March 5, 1997, among
the Voting Trust, Vestar, Harvard, AIP and WABCO to be terminated.
SECTION 5.11. LISTING OR QUOTATION OF STOCK. MotivePower shall use its
reasonable best efforts to cause the shares of MotivePower 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 WABCO Certificate of Incorporation
and the WABCO 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 WABCO and each Subsidiary of WABCO
(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 WABCO's current directors and officers liability
insurance protection substantially equivalent in kind and scope as that provided
by WABCO's current directors' and officers' liability insurance policies (copies
of which have been made available to MotivePower); 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 WABCO 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. WABCO STOCK OPTIONS. At the Effective Time, each WABCO Stock
Option, vested or unvested, which is outstanding immediately prior to the
Effective Time pursuant to the WABCO Stock Plans in effect on the date hereof
shall become and represent an option to purchase the number of shares of
MotivePower Common Stock (a "Substitute Option") (decreased to the nearest full
share) determined by multiplying (i) the number of shares of WABCO Common Stock
subject to such WABCO Stock Option immediately prior to the Effective Time by
(ii) the Exchange Ratio, at an exercise price per share of MotivePower Common
Stock (rounded up to the nearest cent), equal to the exercise price per share of
WABCO Common Stock immediately prior to the Effective Time divided by the
Exchange Ratio. It is the intention of the parties that the above formula shall
be applied in a manner consistent with Section 424(a) of the Code. MotivePower
shall pay cash to holders of WABCO Stock Options in lieu of issuing fractional
shares of MotivePower Common Stock upon the exercise of Substitute Options for
shares of MotivePower Common Stock, unless in the judgment of MotivePower 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 shall be exercisable upon the same
terms and conditions as were applicable under the related WABCO Stock Option
immediately prior to the Effective Time. MotivePower shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of
MotivePower Common Stock for delivery upon exercise of WABCO Stock Options.
Promptly following the Effective Time of the Merger, MotivePower shall file a
registration statement on Form S-8 or another appropriate form with respect to
the shares of MotivePower Common Stock subject to such options 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 options remain
outstanding. 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,
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MotivePower shall administer WABCO Option Plans in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act to the extent WABCO Option Plans
complied with such rule prior to the Merger. WABCO and MotivePower shall take
all necessary action to implement or to provide for the implementation of the
provisions of this Section 5.13.
SECTION 5.14. WABCO EMPLOYEE STOCK PURCHASE PLAN. WABCO agrees to take any
and all action necessary pursuant to the terms of the ESPP to terminate such
plan on June 30, 1999.
SECTION 5.15. BENEFIT PLANS TO BE HONORED. (a) From and after the Effective
Time, MotivePower shall honor and shall cause the WABCO Subsidiaries to honor
all MotivePower Plans, all WABCO Plans and all employment agreements entered
into by MotivePower or WABCO (or their Subsidiaries) prior to the date hereof;
provided, however, that nothing in this Agreement shall be interpreted as
limiting the power of MotivePower or the WABCO Subsidiaries to amend or
terminate any WABCO Plan or any other individual employee benefit plan, program,
agreement or policy or as requiring MotivePower to offer to continue (other than
as required by its terms) any written employment contract.
(b) All individuals who are employees of WABCO or a WABCO Subsidiary at the
Effective Time (the "Affected Employees") shall be given credit for all service
with WABCO and its Subsidiaries (or service credited by WABCO or such
Subsidiaries) under all employee benefit plans and arrangements currently
maintained by MotivePower 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 MotivePower or any of its
Subsidiaries. MotivePower 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. MotivePower agrees to recognize
(or cause to be recognized) the dollar amount of all expenses incurred by
Affected Employees during the calendar year in 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 MotivePower and
its Subsidiaries that may cover such employees.
SECTION 5.16. 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
WABCO Option Agreement or the MotivePower Option Agreement, WABCO and
MotivePower 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. WABCO or, after the Effective Time, the
Surviving Corporation on behalf of WABCO, 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,
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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 MotivePower 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 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 stockholders of WABCO
upon the conversion of their shares of WABCO Common Stock into shares of
MotivePower Common Stock pursuant to the Merger, except with respect to
cash, if any, received in lieu of fractional shares of MotivePower Common
Stock;
(iv) the aggregate tax basis of the shares of MotivePower Common Stock
received in exchange for shares of WABCO Common Stock pursuant to the
Merger (including a fractional share of MotivePower Common Stock for which
cash is paid) will be the same as the aggregate tax basis of such shares of
WABCO Common Stock;
(v) the holding period for shares of MotivePower Common Stock received
in exchange for shares of WABCO Common Stock pursuant to the Merger will
include the holder's holding period for such shares of WABCO Common Stock,
provided such shares of WABCO Common Stock were held as capital assets by
the holder at the Effective Time; and
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(vi) a stockholder of WABCO who receives cash in lieu of a fractional
share of MotivePower 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.
(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 stockholders of WABCO
upon the conversion of their shares of WABCO Common Stock into shares of
MotivePower Common Stock pursuant to the Merger, except with respect to
cash, if any, received in lieu of fractional shares of MotivePower Common
Stock;
(iv) the aggregate tax basis of the shares of MotivePower Common Stock
received in exchange for shares of WABCO Common Stock pursuant to the
Merger (including a fractional share of MotivePower Common Stock for which
cash is paid) will be the same as the aggregate tax basis of such shares of
WABCO Common Stock;
(v) the holding period for shares of MotivePower Common Stock received
in exchange for shares of WABCO Common Stock pursuant to the Merger will
include the holder's holding period for such shares of WABCO Common Stock,
provided such shares of WABCO Common Stock were held as capital assets by
the holder at the Effective Time; and
(vi) a stockholder of WABCO who receives cash in lieu of a fractional
share of MotivePower 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.
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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 November 30, 1999 (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 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 the 45th day after
the date hereof, 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
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(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 the 45th day after
the date hereof, 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 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) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements 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.
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(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.
(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. 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
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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
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
One First National Plaza
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
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"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, and (b)
except as provided in Section 5.12 of this Agreement and this 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(a)
Article 4, Section 1 of the MotivePower Articles of Incorporation shall be
amended and restated to read as follows:
"Section 1. The Company is authorized to issue One Hundred Sixty-Five
Million (165,000,000) shares of capital stock, consisting of One Hundred Fifty
Million (150,000,000) shares of Common Stock, par value $0.01 per share, and
Fifteen Million (15,000,000) shares of Preferred Stock, par value $0.01 per
share."
150
EXHIBIT 1.4(a)
The By-Laws of MotivePower are attached. The bracketed directors shall be named
by MotivePower.
151
MOTIVEPOWER INDUSTRIES, INC.
A PENNSYLVANIA CORPORATION
BY-LAWS
STOCKHOLDERS' MEETINGS
1. Time and Place of Meetings. All meetings of the shareholders for the
election of Directors or for any other purpose will be held at such time and
place, within or without the Commonwealth of Pennsylvania, as may be designated
by the Board or, in the absence of a designation by the Board, the Chairman, the
Chief Executive Officer, or the Secretary, and stated in the notice of meeting.
The Board may postpone and reschedule any previously scheduled annual or special
meeting of the shareholders.
2. Annual Meeting. An annual meeting of the shareholders will be held at
such date and time as may be designated from time to time by the Board, at which
meeting the shareholders will elect by a plurality vote the Directors to succeed
those whose terms expire at such meeting and will transact such other business
as may properly be brought before the meeting in accordance with By-Law 8.
3. Special Meetings. Special meetings of the shareholders may be called
only by (i) the Chairman or (ii) the Secretary within 10 calendar days after
receipt of the written request of a majority of the Whole Board. Any such
request by a majority of the Whole Board must be sent to the Chairman and the
Secretary and must state the purpose or purposes of the proposed meeting.
Special meetings of holders of the outstanding Preferred Stock, if any, may be
called in the manner and for the purposes provided in the applicable Preferred
Stock Designation. For purposes of these By-Laws, "Whole Board" shall mean the
total number of Directors provided for in By-Law 10(a), which number shall
include any vacancies.
4. Notice of Meetings. Written notice of every meeting of the shareholders,
stating the place, date, and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, will be given
not less than 10 nor more than 60 calendar days before the date of the meeting
to each shareholder of record entitled to vote at such meeting, except as
otherwise provided herein or by law. When a meeting is adjourned to another
place, date, or time, written notice need not be given of the adjourned meeting
if the place, date, and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than 30 calendar days, or if after the adjournment a new record date is fixed
for the adjourned meeting, written notice of the place, date, and time of the
adjourned meeting must be given in conformity herewith. At any adjourned
meeting, any business may be transacted which properly could have been
transacted at the original meeting.
5. Inspectors. The Board may appoint one or more inspectors of election to
act as judges of the voting and to determine those entitled to vote at any
meeting of the shareholders, or any adjournment thereof, in advance of such
meeting. The Board may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of shareholders, the presiding officer of the meeting may
appoint one or more substitute inspectors.
6. Quorum. Except as otherwise provided by law or in a Preferred Stock
Designation, the holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, will
constitute a quorum at all meetings of the shareholders for the transaction of
business thereat. If, however, such quorum is not present or represented at any
meeting of the shareholders, the shareholders entitled to vote thereat, present
in person or represented by proxy, will have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present or represented.
7. Voting. Except as otherwise provided by law, by the Articles of
Incorporation, or in a Preferred Stock Designation, each shareholder will be
entitled at every meeting of the shareholders to one vote for each share of
stock having voting power standing in the name of such shareholder on the books
of the Company on the record date for the meeting and such votes may be cast
either in person or by written proxy. Every proxy must be duly executed and
filed with the Secretary. A shareholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the
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proxy or another duly executed proxy bearing a later date with the Secretary.
The vote upon any question brought before a meeting of the shareholders may be
by voice vote, unless otherwise required by the Articles of Incorporation or
these By-Laws or unless the Chairman or the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon present in
person or by proxy at such meeting otherwise determine. Every vote taken by
written ballot will be counted by the inspectors of election. When a quorum is
present at any meeting, the affirmative vote of the holders of a majority of the
stock present in person or represented by proxy at the meeting and entitled to
vote on the subject matter and which has actually been voted will be the act of
the shareholders, except in the election of Directors or as otherwise provided
in these By-Laws, the Articles of Incorporation, a Preferred Stock Designation,
or by law.
8. Order of Business. (a) The Chairman or such other officer of the Company
designated by a majority of the Whole Board will call meetings of the
shareholders to order and will act as presiding officer thereof. Unless
otherwise determined by the Board prior to the meeting, the presiding officer of
the meeting of the shareholders will also determine the order of business and
have the authority in his or her sole discretion to regulate the conduct of any
such meeting, including without limitation by imposing restrictions on the
persons (other than shareholders of the Company or their duly appointed proxies)
who may attend any such shareholders' meeting, by ascertaining whether any
shareholder or his proxy may be excluded from any meeting of the shareholders
based upon any determination by the presiding officer, in his or her sole
discretion, that any such person has unduly disrupted or is likely to disrupt
the proceedings thereat, and by determining the circumstances in which any
person may make a statement or ask questions at any meeting of the shareholders.
(b) At any annual meeting of the shareholders, only such business will be
conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board in accordance with By-Law 4, (ii) otherwise properly brought before
the meeting by the presiding officer or by or at the direction of a majority of
the Whole Board, or (iii) otherwise properly requested to be brought before the
meeting by a shareholder of the Company in accordance with By-Law 8(c).
(c) For business to be properly requested by a shareholder to be brought
before an annual meeting, the shareholder must (i) be a shareholder of the
Company of record at the time of the giving of the notice for such annual
meeting provided for in these By-Laws, (ii) be entitled to vote at such meeting,
and (iii) have given timely notice thereof in writing to the Secretary. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Company not less than 60 calendar days
prior to the annual meeting; provided, however, that in the event public
announcement of the date of the annual meeting is not made at least 75 calendar
days prior to the date of the annual meeting, notice by the shareholder to be
timely must be so received not later than the close of business on the 10th
calendar day following the day on which public announcement is first made of the
date of the annual meeting. A shareholder's notice to the Secretary must set
forth as to each matter the shareholder proposes to bring before the annual
meeting (A) a description in reasonable detail of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (B) the name and address, as they appear on the Company's
books, of the shareholder proposing such business and the beneficial owner, if
any, on whose behalf the proposal is made, (C) the class and number of shares of
the Company that are owned beneficially and of record by the shareholder
proposing such business and by the beneficial owner, if any, on whose behalf the
proposal is made, and (D) any material interest of such shareholder proposing
such business and the beneficial owner, if any, on whose behalf the proposal is
made in such business. A shareholder must also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth in this By-Law
8(c). For purposes of this By-Law 8(c) and By-Law 13, "public announcement"
means 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 Company with the Securities and Exchange Commission pursuant to
Sections 13, 14, or 15(d) of the Securities Exchange Act of 1934, as amended, or
furnished to shareholders. Nothing in this By-Law 8(c) will be deemed to affect
any rights of shareholders to request
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inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended.
(d) At a special meeting of shareholders, only such business may be
conducted or considered as is properly brought before the meeting. To be
properly brought before a special meeting, business must be (i) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the Chairman or a majority of the Whole Board in accordance with By-Law 4 or
(ii) otherwise properly brought before the meeting by the presiding officer or
by or at the direction of a majority of the Whole Board.
(e) The determination of whether any business sought to be brought before
any annual or special meeting of the shareholders is properly brought before
such meeting in accordance with this By-Law 8 will be made by the presiding
officer of such meeting. If the presiding officer determines that any business
is not properly brought before such meeting, he or she will so declare to the
meeting and any such business will not be conducted or considered.
DIRECTORS
9. Function. The business and affairs of the Company will be managed under
the direction of its Board.
10. Number, Election and Terms. (a) Subject to the rights, if any, of any
series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation and to the minimum and maximum number
of authorized Directors provided in the Articles of Incorporation, the Board
shall consist of 14 Directors. Upon a vote of a majority of the Whole Board this
By-Law 10 may be amended to reduce the number of Directors, and upon a vote of
at least 66 2/3% of the Whole Board this By-Law 10 may be amended to increase
the number of Directors, in each case, within the minimum and maximum number of
Directors provided by the Articles of Incorporation. The Directors, other than
those who may be elected by the holders of any series of the Preferred Stock,
will be classified with respect to the time for which they severally hold office
in accordance with the Articles of Incorporation.
(b) Notwithstanding anything contained in the Articles of Incorporation or
these By-Laws to the contrary, the term of any Director who is also an officer
of the Company will terminate automatically, without any further action on the
part of the Board or such Director, upon the termination for any reason of such
Director in his or her capacity as an officer of the Company; provided, however,
that nothing herein shall limit the power of the Nominating Committee to
recommend to the Board that such person serve as a Director, including the
ability to again recommend to the Board that such person fill the vacancy on the
Board resulting from such person's termination as an officer of the Company.
Notwithstanding anything contained in the Articles of Incorporation or these
By-Laws to the contrary, the affirmative vote of at least 66 2/3% of the
Directors then in office will be required to amend, repeal, or adopt any
provision inconsistent with this By-Law 10(b).
11. Vacancies and Newly Created Directorships. Subject to the rights, if
any, of the holders of any series of Preferred Stock to elect additional
Directors under circumstances specified in a Preferred Stock Designation, newly
created directorships resulting from any increase in the number of Directors and
any vacancies on the Board resulting from death, resignation, disqualification,
removal, or other cause will be filled solely from among persons recommended to
the Board by the Nominating Committee and by the affirmative vote of a majority
of the Whole Board; provided, however, that at the sole option of the Board,
effected by a resolution of a majority of the Whole Board, one or more such
vacancies or newly created directorships may be filled by the shareholders at a
meeting of the shareholders called by the Board of Directors. Any Director
elected in accordance with the preceding sentence will hold office for the
remainder of the full term of the class of Directors in which the new
directorship was created or the vacancy occurred and until such Director's
successor is elected and qualified. No decrease in the number of Directors
constituting the Board will shorten the term of an incumbent Director.
12. Removal. Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect additional Directors under circumstances specified in a
Preferred Stock Designation, any Director may be
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removed from office by the shareholders only for cause and only in the manner
provided in the Articles of Incorporation and, if applicable, any amendment to
this By-Law 12.
13. Nominations of Directors: Election; Nomination of Chairman of the
Board. (a) Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect additional Directors under circumstances specified in a
Preferred Stock Designation, only persons who are nominated in accordance with
the following procedures will be eligible for election at a meeting of
shareholders as Directors of the Company.
(b) Except as provided by By-Law 11 in respect to vacancies and newly
created directorships, nominations of persons for election as Directors of the
Company may be made only at an annual meeting of shareholders (i) by or at the
direction of a majority of the Whole Board, subject to the powers of the
Executive Committee to resolve any Deadlock (as defined in By-Law 19(a))
(provided that the Board shall nominate only persons recommended to the Board by
the Nominating Committee), or (ii) by any shareholder who is a shareholder of
record at the time of giving of notice provided for in this By-Law 13, who is
entitled to vote for the election of Directors at such meeting, and who complies
with the procedures set forth in this By-Law 13. All nominations by shareholders
must be made pursuant to timely notice in proper written form to the Secretary.
(c) To be timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Company not less than 60
calendar days prior to the annual meeting of shareholders; provided,
however,that in the event that public announcement of the date of the annual
meeting is not made at least 75 calendar days prior to the date of the annual
meeting, notice by the shareholder to be timely must be so received no later
than the close of business on the 10th calendar day following the day on which
public announcement is first made of the date of the annual meeting. To be in
proper written form, such shareholder's notice must set forth or include (i) the
name and address, as they appear on the Company's books, of the shareholder
giving the notice and of the beneficial owner, if any, on whose behalf the
nomination is made; (ii) a representation that the shareholder giving the notice
is a holder of record of stock of the Company entitled to vote at such annual
meeting and intends to appear in person or by proxy at the annual meeting to
nominate the person or persons specified in the notice; (iii) the class and
number of shares of stock of the Company owned beneficially and of record by the
shareholder giving the notice and by the beneficial owner, if any on whose
behalf the nomination is made; (iv) a description of all arrangements or
understandings between or among any of (A) the shareholder giving the notice,
(B) the beneficial owner on whose behalf the notice is given, (C) each nominee,
and (D) any other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the shareholder giving the
notice; (v) such other information regarding each nominee proposed by the
shareholder giving the notice as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated, or intended to be nominated, by the
Board; and (vi) the signed consent of each nominee to serve as a Director of the
Company if so elected. At the request of the Board, any person nominated by the
Board for election as a Director must furnish to the Secretary that information
required to be set forth in a shareholder's notice of nomination which pertains
to the nominee. The presiding officer of any annual meeting will, if the facts
warrant, determine that a nomination was not made in accordance with the
procedures prescribed by this By-Law 13, and if he or she should so determine,
he or she will so declare to the meeting and the defective nomination will be
disregarded. A shareholder must also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this By-Law 13.
(d) The Chairman of the Board's term shall expire each year at the annual
regular meeting of the Board. Only persons who are recommended to the Board by
the Nominating Committee will be eligible for election as the Chairman of the
Board. The affirmative vote of the majority of the Whole Board, subject to the
powers of the Executive Committee to resolve any Deadlock (as defined in By-Law
19(a)), will elect the Chairman.
14. Resignation. Any Director may resign at any time by giving written
notice of his resignation to the Chairman or the Secretary. Any resignation will
be effective upon actual receipt by any such person or, if later, as of the date
and time specified in such written notice.
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15. Regular Meetings. Regular meetings of the Board may be held immediately
after the annual meeting of the shareholders and at such other time and place
either within or without the Commonwealth of Pennsylvania as may from time to
time be determined by the Board. Notice of regular meetings of the Board need
not be given.
16. Special Meetings. Special meetings of the Board may be called by the
Chairman or the Chief Executive Officer on one day's notice to each Director by
whom such notice is not waived, given either personally or by mail, telephone,
telegram, telex, facsimile, or similar medium of communication, and will be
called by the Chairman or the Chief Executive Officer in like manner and on like
notice on the written request of three or more Directors. Special meetings of
the Board may be held at such time and place either within or without the
Commonwealth of Pennsylvania as is determined by the Board or specified in the
notice of any such meeting.
17. Quorum. At all meetings of the Board, a quorum shall be present for the
transaction of business only if a majority of the total number of Directors then
in office are present at such meeting. Except for the designation of Committees
as hereinafter provided and any provision requiring the vote of a greater number
of Directors, and notwithstanding any other provision of the By-Laws to the
contrary, any act of the Board shall require the affirmative vote of a majority
of the Whole Board at such meeting at which there is a quorum. If a quorum is
not present at any meeting of the Board, the Directors present thereat may
adjourn the meeting from time to time to another place, time, or date, without
notice other than announcement at the meeting, until a quorum is present.
18. Participation in Meetings by Telephone Conference. Members of the Board
or any Committee designated by the Board may participate in a meeting of the
Board or any such Committee, as the case may be, by means of telephone
conference or similar means by which all persons participating in the meeting
can hear each other, and such participation in a meeting will constitute
presence in person at the meeting.
19. Committees. The Board shall have an Executive Committee (the "Executive
Committee") consisting of three members of the Board. At the Effective Time (as
defined below), the members of the Executive Committee shall be William E.
Kassling, James P. Kelley and John C. Pope. These individuals shall serve as
members of the Executive Committee so long as they remain Directors of the
Company. If there shall be any vacancy on the Executive Committee, the remaining
members of the Executive Committee shall select a Director to fill the vacancy
from among the other Directors of the Board. If there shall be a Deadlock of the
remaining members of the Executive Committee in the determination of filling the
vacancy, the Chairman of the Executive Committee shall have the authority to
resolve the Deadlock. If there are no remaining members of the Executive
Committee, the Board, by the affirmative vote of a majority of the Whole Board,
shall select Directors to fill the vacancies from among the Directors of the
Board. If there shall be a Deadlock of the Board in the determination of filling
any vacancy, the Chief Executive Officer shall have, or, in the event that there
is no Chief Executive Officer, the Compensation Committee shall have, the
authority to resolve the Deadlock. At the Effective Time, the Chairman of the
Executive Committee shall be William E. Kassling. The Chairman of the Executive
Committee shall have exclusive authority to designate an alternate Chairman in
the event that the Chairman cannot attend meetings or ceases to be a member of
the Executive Committee; provided that the Chairman of the Executive Committee
may change the alternate Chairman at any time. If at the time the Chairman of
the Executive Committee ceases to be Chairman and an alternate Chairman has not
been designated, then the Board, by the affirmative vote of a majority of the
Whole Board, shall select from the members of the Executive Committee the person
to be Chairman. If there shall be a Deadlock of the Board in the determination
of Chairman, the Chief Executive Officer shall have, or, in the event that there
is no Chief Executive Officer, the Compensation Committee shall have, the
authority to resolve the Deadlock. The Executive Committee will have and may
exercise the powers of the Board to resolve any matter that is considered by the
Board (other than as set forth below) and, notwithstanding the provisions of
By-Law 17, to resolve Deadlocks of the Board and the Committees; provided,
however, that the Executive Committee is not authorized (i) to recommend to the
shareholders a merger, consolidation, or sale, lease, or exchange of all or
substantially all of the Company's property and assets, a dissolution to the
Company, or a revocation of a dissolution or (ii) to resolve any other matter
that may not be delegated by the Board to any committee pursuant to sec.1731 of
the Pennsylvania Business Corporation Law or any successor provision, or (iii)
any
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matter that has been delegated by these By-Laws or the Board to any other
committee. In addition, the Executive Committee may not resolve any Deadlock
regarding the termination, replacement or compensation of the Chief Executive
Officer or the Chairman of the Board (resolutions of such matters shall be made
by the Compensation Committee). Any action decided by the Executive Committee in
accordance with this By-law shall be the action of the Board. For purposes of
these By-Laws, the term "Deadlock" shall mean (A) with respect to the Board, any
matter (i) that is not approved or disapproved by the Board due to an equal
number of Directors voting in favor of and against the matter or (ii) for which
a majority of the Whole Board has not voted either for or against such matter,
and (B) with respect to any Committee, any matter (i) that is not approved or
disapproved by such Committee due to an equal number of members of such
Committee voting in favor of and against the matter or (ii) for which a majority
of such entire Committee has not voted either for or against such matter; and
the term "Effective Time" shall have the meaning set forth in the Agreement and
Plan of Merger, dated as of June 2, 1999, between, the Company and Westinghouse
Air Brake Company.
(b) Any Director shall have the power to declare that a Deadlock be
resolved by the Executive Committee if a matter has been voted upon twice and
each vote resulted in a Deadlock. If any vote results in a Deadlock, any
Director may submit such matter to a second vote at any time.
(c) The Board shall have a Nominating Committee (the "Nominating
Committee") consisting of three members of the Board. At the Effective Time, the
members of the Nominating Committee shall be William E. Kassling, James C.
Huntington, Jr. and [a MotivePower Director]. These individuals shall serve as
members of the Nominating Committee so long as they remain Directors of the
Company. If there shall be any vacancy on the Nominating Committee, the
remaining members of the Nominating Committee shall select a Director to fill
the vacancy from among the other Directors of the Board. If there shall be a
Deadlock in the determination of filling the vacancy, the Chairman of the
Nominating Committee shall have the authority to resolve the Deadlock. If there
are no remaining members of the Nominating Committee, the Board, by the
affirmative vote of a majority of the Whole Board, shall select Directors to
fill the vacancies from among the Directors of the Board. If there shall be a
Deadlock of the Board in the determination of filling any vacancy, the Executive
Committee shall have the authority to resolve the Deadlock. At the Effective
Time, the Chairman of the Nominating Committee shall be James C. Huntington, Jr.
The Chairman of the Nominating Committee shall have exclusive authority to
designate an alternate Chairman in the event that the Chairman cannot attend
meetings or ceases to be a member of the Nominating Committee; provided that the
Chairman of the Nominating Committee may change the alternate Chairman at any
time. If at the time the Chairman of the Nominating Committee ceases to be
Chairman and an alternate Chairman has not been designated, then the Board, by
the affirmative vote of a majority of the Whole Board, shall select from the
members of the Nominating Committee the person to be Chairman. If there shall be
a Deadlock of the Board in the determination of Chairman, the Executive
Committee shall have the authority to resolve the Deadlock. Subject to the
provisions of By-Law 13(b), the Nominating Committee shall have the sole
authority to recommend persons to be elected to the Board, including, but not
limited to, persons to fill vacancies or newly created directorships, or for
elections. Subject to By-Law 10, By-Law 13(b), and the Articles of
Incorporation, the Nominating Committee shall review and make recommendations
with respect to the size and composition of the Board.
(d) The Board shall have an Audit Committee (the "Audit Committee")
consisting of four members of the Board. At the Effective Time, the members of
the Audit Committee shall be James P. Miscoll, [a MotivePower Director], [a
MotivePower Director] and Kim G. Davis. These individuals shall serve as members
of the Audit Committee so long as they remain Directors of the Company. If there
shall be any vacancy on the Audit Committee, the remaining members of the Audit
Committee shall select a Director to fill the vacancy from among the other
Directors of the Board. If there shall be a Deadlock in the determination of
filling the vacancy, the Chairman of the Audit Committee shall have the
authority to resolve the Deadlock. If there are no remaining members of the
Audit Committee, the Board, by the affirmative vote of a majority of the Whole
Board, shall select Directors to fill the vacancies from among the Directors of
the Board. If there shall be a Deadlock of the Board in the determination of
filling any vacancy, the Executive Committee shall have the authority to resolve
the Deadlock. At the Effective Time, the Chairman of the Audit
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Committee shall be James P. Miscoll. The Chairman of the Audit Committee shall
have exclusive authority to designate an alternate Chairman in the event that
the Chairman cannot attend meetings or ceases to be a member of the Audit
Committee; provided that the Chairman of the Audit Committee may change the
alternate Chairman at any time. If at the time the Chairman of the Audit
Committee ceases to be Chairman and an alternate Chairman has not been
designated, then the Board, by the affirmative vote of a majority of the Whole
Board, shall select from the members of the Audit Committee the person to be
Chairman. If there shall be a Deadlock of the Board in the determination of
Chairman, the Executive Committee shall have the authority to resolve the
Deadlock.
(e) The Board shall have an Operations Committee (the "Operations
Committee") consisting of five members of the Board. At the Effective Time, the
members of the Operations Committee shall be William E. Kassling, Kim G. Davis,
Gregory T.H. Davies, John C. Pope and [a MotivePower Director]. These
individuals shall serve as members of the Operations Committee so long as they
remain Directors of the Company. If there shall be any vacancy on the Operations
Committee, the remaining members of the Operations Committee shall select a
Director to fill the vacancy from among the other Directors of the Board. If
there shall be a Deadlock in the determination of filling the vacancy, the
Chairman of the Operations Committee shall have the authority to resolve the
Deadlock. If there are no remaining members of the Operations Committee, the
Board, by the affirmative vote of a majority of the Whole Board, shall select
Directors to fill the vacancies from among the Directors of the Board. If there
shall be a Deadlock of the Board in the determination of filling any vacancy,
the Executive Committee shall have the authority to resolve the Deadlock. At the
Effective Time, the Chairman of the Operations Committee shall be William E.
Kassling. The Chairman of the Operations Committee shall have exclusive
authority to designate an alternate Chairman in the event that the Chairman
cannot attend meetings or ceases to be a member of the Operations Committee;
provided that the Chairman of the Operations Committee may change the alternate
Chairman at any time. If at the time the Chairman of the Operations Committee
ceases to be Chairman and an alternate Chairman has not been designated, then
the Board, by the affirmative vote of a majority of the Whole Board, shall
select from the members of the Operations Committee the person to be Chairman.
If there shall be a Deadlock of the Board in the determination of Chairman, the
Executive Committee shall have the authority to resolve the Deadlock. From time
to time between meetings of the Board, the Operating Committee shall communicate
with management regarding the day-to-day operations of the Company and
implementation of the Company's business plan as approved by the Board, and
shall be available to management to do so. The Operations Committee shall have
the authority to approve modifications to the Company's business plan that are
not material to the Company's business as a whole.
(f) The Board shall have a Compensation Committee (the "Compensation
Committee") consisting of three members of the Board. At the Effective Time, the
members of the Compensation Committee shall be James V. Napier, Emilio A.
Fernandez and [a MotivePower Director]. These individuals shall serve as members
of the Compensation Committee so long as they remain Directors of the Company.
If there shall be any vacancy on the Compensation Committee, the remaining
members of the Compensation Committee shall select a Director to fill the
vacancy from among the other Directors of the Board. If there shall be a
Deadlock in the determination of filling the vacancy, the Chairman of the
Compensation Committee shall have the authority to resolve the Deadlock. If
there are no remaining members of the Compensation Committee, the Board, by the
affirmative vote of a majority of the Whole Board, shall select Directors to
fill the vacancies from among the Directors of the Board. If there shall be a
Deadlock of the Board in the determination of filling any vacancy, the Executive
Committee shall have the authority to resolve the Deadlock. At the Effective
Time, the Chairman of the Compensation Committee shall be James V. Napier. The
Chairman of the Compensation Committee shall have exclusive authority to
designate an alternate Chairman in the event that the Chairman cannot attend
meetings or ceases to be a member of the Compensation Committee; provided that
the Chairman of the Compensation Committee may change the alternate Chairman at
any time. If at the time the Chairman of the Compensation Committee ceases to be
Chairman and an alternate Chairman has not been designated, then the Board, by
the affirmative vote of a majority of the Whole Board, shall select from the
members of the Compensation Committee, the person to be Chairman. If there shall
be a Deadlock of the Board in the determination of Chairman, the Executive
Committee shall have the authority to resolve the Deadlock. The Compensation
Committee shall have the sole authority to establish the
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compensation for, and the reimbursement of the expenses of, Directors for
membership on the Board and on Committees, attendance at meetings of the Board
or Committees of the Board, and for other services by Directors to the Company,
of all officers and agents of the Company who are also Directors of the Company.
The Compensation Committee shall determine the compensation of senior management
and the personnel of the Company based upon the recommendations of the Chief
Executive Officer, and shall establish on an annual basis the compensation of
the Chairman of the Board and the Chief Executive Officer, subject in each case
to the discretion of the Board of Directors upon a vote of a majority of the
Whole Board to change or modify such actions. In addition, the Compensation
Committee shall have the authority to administer the existing options and
benefits plans of the Company. The Compensation Committee shall have the
exclusive authority to resolve any Deadlock of the Board regarding the
termination, replacement of, or any other matter regarding the Chief Executive
Officer.
(g) The Board, by resolution passed by a majority of the Whole Board, may
designate one or more additional Committees, each such Committee to consist of
one or more Directors and each to have such lawfully delegable powers and duties
as the Board may confer.
(h) The Executive Committee, the Nominating Committee, the Audit Committee,
the Operations Committee, the Compensation Committee and each other Committee of
the Board will serve as provided in these By-Laws or if not provided herein at
the pleasure of the Board or as may be specified in any resolution from time to
time adopted by the Board. The majority of the Committee may designate one or
more Directors as alternate members of any such Committee, who may replace any
absent or disqualified member at any meeting of such Committee. In the event of
a Deadlock of the Committee in the determination of who may replace the absent
or disqualified member at any meeting, the Chairman of the Committee shall
resolve the Deadlock.
(i) Except as otherwise provided in these By-Laws or by law, any Committee
of the Board, to the extent provided in By-Law 19(a), (c), (d), (e), (f) or, if
applicable, in the resolution of the Board, will have and may exercise all the
powers and authority of the Board in the direction of the management of the
business and affairs of the Company. Any such Committee designated by the Board
will have such name as may be determined from time to time by resolution adopted
by the Board. Unless otherwise prescribed by the Board or these By-Laws, a
majority of the members of any Committee of the Board will constitute a quorum
for the transaction of business, and the act of a majority of the members
present at a meeting at which there is a quorum will be the act of such
Committee. In the event of a Deadlock of the Committee, the Chairman of the
Committee shall resolve the conflict. If the Chairman is not present to resolve
the conflict, no action may be taken by the Committee. To the extent not
provided in these By-Laws, each Committee of the Board may prescribe its own
rules for calling and holding meetings and its method of procedure, subject to
any rules prescribed by the Board, and will keep a written record of all actions
taken by it.
(j) By-Law 19 shall terminate immediately after the conclusion of the
annual meeting of shareholders of the Company in the year 2002, at which time
the following By-Law 19 shall be effective:
"19. Committees. (a) The Board, by resolution passed by a majority of the
Whole Board, will designate an executive and finance committee ("Executive and
Finance Committee") of not less than three members of the Board, one of whom
will be the Chairman. The Executive and Finance Committee will have and may
exercise the powers of the Board, except the power to amend these By-Laws or the
Articles of Incorporation (except, to the extent authorized by a resolution of
the Whole Board, to fix the designation, preferences, and other terms of any
series of Preferred Stock), adopt an agreement of merger or consolidation,
authorize the issuance of stock, declare a dividend, or recommend to the
shareholders the sale, lease, or exchange of all or substantially all of the
Company's property and assets, a dissolution of the Company, or a revocation of
a dissolution, and except an otherwise provided by law.
(b) The Board, by resolution passed by a majority of the Whole Board, may
designate one or more additional committees, each such committee to consist of
one or more Directors and each to have such lawfully delegable powers and duties
as the Board may confer.
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(c) The Executive and Finance Committee and each other committee of the
Board will serve at the pleasure of the Board or as may be specified in any
resolution from time to time adopted by the Board. The Board may designate one
or more Directors as alternate members of any such committee, who may replace
any absent or disqualified member at any meeting of such committee. In lieu of
such action by the Board, in the absence or disqualification of any member of a
committee of the Board, the members thereof present at any such meeting of such
committee and not disqualified from voting, whether or not they constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member.
(d) Except as otherwise provided in these By-Laws or by law, any committee
of the Board, to the extent provided in By-Law 19(a) or, if applicable, in the
resolution of the Board, will have and may exercise all the powers and authority
of the Board in the direction of the management of the business and affairs of
the Company. Any such committee designated by the Board will have such name as
may be determined from time to time by resolution adopted by the Board. Unless
otherwise prescribed by the Board, a majority of the members of any committee of
the Board will constitute a quorum for the transaction of business, and the act
of a majority of the members present at a meeting at which there is a quorum
will be the act of such committee. Each committee of the Board may prescribe its
own rules for calling and holding meetings and its method of procedure, subject
to any rules prescribed by the Board, and will keep a written record of all
actions taken by it."
Nothing contained in this subsection shall preclude the Board or the
shareholders of the Company from amending, modifying or adopting any provision
inconsistent with the provisions of this By-Law 19(j), whether before or after
their effectiveness, in accordance with the terms of these By-Laws, the Articles
of Incorporation and applicable law.
20. Rules. The Chairman of the Board and Chief Executive Officer shall
jointly establish, or, in the absence of the Chairman of the Board, the Chief
Executive Officer shall establish, an agenda and the order of business of each
meeting of the Board of Directors and shall conduct such meeting; provided,
however, that this shall not preclude any Director from raising any order of
business which may be appropriately raised at such meetings. The Board may adopt
rules and regulations for the conduct of meetings by a vote of the majority of
the Whole Board.
NOTICES
21. Generally. Except as otherwise provided by law, these By-Laws, or the
Articles of Incorporation, whenever by law or under the provisions of the
Articles of Incorporation or these By-Laws notice in required to be given to any
Director or shareholder, it will not be construed to require personal notice,
but such notice may be given in writing, by mail, addressed to such Director or
shareholder, at the address of such Director or shareholder as it appears on the
records of the Company, with postage thereon prepaid, and such notice will be
deemed to be given at the time when the same is deposited in the United States
mail. Notice to Directors may also be given by telephone, telegram, telex,
facsimile, or similar medium of communication or as otherwise nay be permitted
by these By-Laws.
22. Waivers. Whenever any notice is required to be given by law or under
the provisions of the Articles of Incorporation or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time of the event for which notice is to be given,
will be deemed equivalent to such notice. Attendance of a person at a meeting
will constitute a waiver of notice of such meeting, except when the person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction, of any business because the meeting is not lawfully
called or convened.
OFFICERS
23. Generally. The officers of the Company will be elected by the Board and
will consist of a Chairman, a Chief Executive Officer, a President (who may also
be the Chief Operating Officer), a Chief Operating Officer, a Secretary, and a
Treasurer; provided that the Chairman shall have only those powers
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specifically granted to him by a majority of the Whole Board, in any event no
other officer will report directly to the Chairman nor will the Chairman have
the power to appoint or remove any officer. The Chief Executive Officer will
report directly to the Board. The Board of Directors may also choose any or all
of the following: one or more Vice Chairmen (each of which shall possess all the
rights and powers designated by the Board), one or more Assistants to the
Chairman, one or more Vice Presidents (who may be given particular designations
with respect to authority, function, or seniority), and such other officers as
the Board may from time to time determine. Notwithstanding the foregoing, by
specific action the Board may authorize the Chief Executive Officer to appoint
any person to any office other than Chairman, Chief Executive Officer,
President, Secretary, or Treasurer. Any number of offices may be held by the
same person. Any of the offices may be left vacant from time to time as the
Board may determine. In the case of the absence or disability of any officer of
the Company or for any other reason deemed sufficient by a majority of the
Board, the Board, subject to the powers of the Executive Committee to resolve
any Deadlock, may delegate the absent or disabled officer's powers or duties to
any other officer or to any Director.
24. [INTENTIONALLY OMITTED].
25. Succession. The officers of the Company will hold office until their
successors are elected and qualified. Any officer may be removed at any time by
the affirmative vote of a majority of the Whole Board. Any vacancy occurring in
any office of the Company may be filled by the Board, subject to the powers of
the Executive Committee to resolve any Deadlock and to the powers of the
Compensation Committee to resolve Deadlock matters regarding the Chief Executive
Officer, as provided in By-Law 23.
26. Authority and Duties. Each of the officers of the Company will have
such authority and will perform such duties as are customarily incident to their
respective offices or as may be specified from time to time by the Board.
STOCK
27. Certificates. Certificates representing shares of stock of the Company
will be in such form as is determined by the Board, subject to applicable legal
requirements. Each such certificate will be numbered and its issuance recorded
in the books of the Company, and such certificate will exhibit the holder's name
and the number of shares and will be signed by, or in the name of, the Company
by the Chairman and the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer, and will also be signed by, or bear the facsimile
signature of, a duly authorized officer or agent of any properly designated
transfer agent of the Company. Any or all of the signatures and the seal of the
Company, if any, upon such certificates may be facsimiles, engraved, or printed.
Such certificates may be issued and delivered notwithstanding that the person
whose facsimile signature appears thereon may have ceased to be such officer at
the time the certificates are issued and delivered.
28. Classes of Stock. The designations, preferences, and relative
participating, optional, or other special rights of the various classes of stock
or series thereof, and the qualifications, limitations, or restrictions thereof,
will be set forth in full or summarized on the face or back of the certificates
which the Company issues to represent its stock or, in lieu thereof, such
certificates will set forth the office of the Company from which the holders of
certificates may obtain a copy of such information.
29. Lost, Stolen, or Destroyed Certificates. The Secretary may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Company alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact, satisfactory
to the Secretary, by the person claiming the certificate of stock to be lost,
stolen, or destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the Secretary may require the owners of such lost,
stolen, or destroyed certificate or certificates to give the Company a bond in
such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Company with respect
to the certificate alleged to have been lost, stolen, or destroyed or the
issuance of the new certificate.
30. Record Dates. (a) In order that the Company may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, the Board may fix a record date, which
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will not be more than 60 nor less than 10 calendar days before the date of such
meeting. If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders will be at the close of business on the calendar day next preceding
the day on which notice is given, or, if notice is waived, at the close of
business on the calendar day next preceding the day on which the meeting is
held. A determination of shareholders of record entitled to notice of or to vote
at a meeting of the shareholders will apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
(b) In order that the Company may determine the shareholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the shareholders 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 may fix a record date, which record date will not be more than 60
calendar days prior to such action. If no record date is fixed, the record date
for determining shareholders for any such purpose will be at the close of
business on the calendar day on which the Board adopts the resolution relating
thereto.
(c) The Company will be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes, and will
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Company has notice
thereof, except as expressly provided by applicable law.
INDEMNIFICATION
31. Damages and Expenses. (a) Without limiting the generality or effect of
Article Ninth of the Articles of Incorporation, the Company will go the fullest
extent permitted by applicable law as then in effect indemnify any person (an
"Indemnitee") who is or was involved in any manner (including without limitation
as a party or a witness) or is threatened to be made so involved in any
threatened, pending, or completed investigation, claim, action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (including
without limitation any action, suit, or proceeding by or in the right of the
Company to procure a judgment in its favor) (a "Proceeding") by reason of the
fact that such person is or was or had agreed to become a director, officer,
employee, or agent of the Company, or is or was serving at the request of the
Board or an officer of the Company as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
whether for profit or not for profit, or anything done or not by such person in
any such capacity, against all expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by such
person in connection with such proceeding. Such indemnification will be a
contract right and will include the right to receive payment in advance of any
expenses incurred by an Indemnitee in connection with such Proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Company as authorized by this By-Law 31 or otherwise.
(b) The right of indemnification provided in this By-Law 31 will not be
exclusive of any other rights to which any person seeking indemnification may
otherwise be entitled and will be applicable to Proceedings commenced or
continuing after the adoption of this By-Law 31, whether arising from acts or
emissions occurring before or after such adoption.
(c) The indemnification and advancement of expenses provided by, or granted
pursuant to, this By-Law 31 shall, unless otherwise provided when authorized or
ratified, continue as to a person-who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
32. Insurance, Contracts, and Funding. The Company may purchase and
maintain insurance to protect itself and any Indemnitee against any expenses,
judgments, fines, and amounts paid in settlement or incurred by any Indemnitee
in connection with any Proceeding referred to in By-Law 31 or otherwise, to the
fullest extent permitted by applicable law as then in effect. The Company may
enter into contracts with any person entitled to indemnification under By-Law 31
or otherwise, and may create a trust fund, grant a security
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interest, or use other means (including without limitation a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in By-Law 31.
GENERAL
33. Fiscal Year. The fiscal year of the Company will end December 31st of
each year or such other date as may be fixed from time to time by the Board.
34. Seal. The Board may adopt a corporate seal and use the same by causing
it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
35. Reliance upon Books, Reports, and Records. Each Director, each member
of a Committee designated by the Board, and each officer of the Company will, in
the performance of his or her duties, be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions,
reports, or statements presented to the Company by any of the Company's officers
or employees, or Committees of the Board, or by any other person or entity as to
matters the Director, Committee member, or officer believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company.
36. Time Periods. In applying any provision of these By-Laws that requires
that an act be done or not be done a specified number of days prior to an event
or that an act be done during a period of a specified number of days prior to an
event, calendar days will be used unless otherwise specified, the day of the
doing of the act will be excluded, and the day of the event will be included.
37. Amendments. Except as otherwise provided by law or by the Articles of
Incorporation or these By-Laws, these By-Laws or any of them may be amended in
any respect or repealed at any time, either (i) at any meeting of shareholders,
provided that any amendment or supplement proposed to be acted upon at any such
meeting has been described or referred to in the notice of such meeting, or (ii)
at any meeting of the Board by the affirmative vote of at least 66 2/3% of the
Whole Board until immediately after the conclusion of the annual meeting of
shareholders of the Company in the year 2002 and afterwards, by the majority of
the Whole Board, provided that no amendment adopted by the Board may vary or
conflict with any amendment adopted by the shareholders.
38. Certain Defined Terms. Terms used herein with initial capital-letters
that are not otherwise defined are used herein as defined in the Articles of
Incorporation.
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EXHIBIT 1.4(b)
Class I with terms expiring in 2000
Gilbert E. Carmichael
Ernesto Fernandez Hurtado
James C. Huntington, Jr.
James V. Napier
[An additional Director to be named by
MotivePower]
Class II with terms expiring in 2001
Kim G. Davis
Leo B. Foster II
William E. Kassling
James P. Miscoll
Class III with terms expiring in 2002
Gregory T. H. Davies
Emilio A. Fernandez
James P. Kelley
Nicholas J. Stanley
John C. Pope
Executive Committee:
Chairman: William E. Kassling
Member: James P. Kelley
Member: John C. Pope
Audit Committee:
Chairman: James P. Miscoll
Member: Director to be named by MotivePower
Member: Director to be named by MotivePower
Member: Kim G. Davis
Compensation Committee:
Chairman: James V. Napier
Member: Emilio A. Fernandez
Member: Director to be named by MotivePower
Nominating Committee:
Chairman: James C. Huntington, Jr.
Member: William E. Kassling
Member: Director to be named by MotivePower
Operations Committee:
Chairman: William E. Kassling
Member: Gregory T. H. Davies
Member: Kim G. Davis
Member: John C. Pope
Member: Director to be named by MotivePower
164
EXHIBIT 1.4(c)
POSITION NAME
- -------- ----
Chairman of the Board John C. Pope
Chief Executive Officer William E. Kassling
President and Chief Operating Officer Gregory T. H. Davies
Executive Vice President, Railroad Joseph S. Crawford, Jr.
Vice Chairman Gilbert E. Carmichael
Senior Vice President, Chief Financial Officer and Secretary Robert J. Brooks
Senior Vice President, Mergers and Acquisitions William F. Fabrizio
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
165
EXHIBIT 5.10(a)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF WABCO
MotivePower Industries, Inc.
Two Gateway Center
14th Floor
Pittsburgh, PA 15222
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 (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 Agreement and Plan of Merger dated as
of June 2, 1999 (the "Merger Agreement") between MotivePower Industries, Inc., a
Pennsylvania corporation ("MotivePower"), and WABCO, WABCO will be merged with
and into MotivePower (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 MotivePower (the "MotivePower Shares") in exchange for shares
of Common Stock, par value $.01 per share, of WABCO (the "WABCO 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 MotivePower Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
MotivePower 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 MotivePower Shares, to the extent I felt necessary, with my counsel
or counsel for WABCO.
C. I have been advised that the issuance of the MotivePower 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 WABCO, (a) I may be deemed to be an
affiliate of WABCO and (b) the distribution by me of the MotivePower
Shares has not been registered under the Act, I may not sell, transfer
or otherwise dispose of the MotivePower Shares issued to me in the
Merger unless (i) in the opinion of counsel reasonably satisfactory to
MotivePower, 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 MotivePower, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
D. I understand that MotivePower is under no obligation to register
the sale, transfer or other disposition of the MotivePower 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.
166
E. I also understand that there will be placed on the certificates
for the MotivePower 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
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
MOTIVEPOWER INDUSTRIES, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICES OF MOTIVEPOWER INDUSTRIES, INC."
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, MotivePower 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, MotivePower 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 WABCO Shares or shares of the capital stock of MotivePower
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 MotivePower
Shares received by me in the Merger or any other shares of the capital
stock of MotivePower until after such time as results covering at least
30 days of combined operations of WABCO and MotivePower have been
published by MotivePower, 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 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.
2. By MotivePower's acceptance of this letter, MotivePower hereby
agrees with me as follows:
A. For so long as and to the extent necessary to permit me to sell
the MotivePower Shares pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, MotivePower 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
MotivePower has complied with such reporting requirements during the 12
months preceding any proposed sale of the MotivePower Shares by me under
Rule 145. MotivePower has filed all reports required to be filed with
the Commission under Section 13 of the 1934 Act during the preceding 12
months.
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 MotivePower 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
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from the date the undersigned acquired the MotivePower Shares received
in the Merger and the provisions of Rule 145(d)(3) are then applicable
to the undersigned, or (iii) the MotivePower has received either an
opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to MotivePower, 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
MOTIVEPOWER INDUSTRIES, INC.
By
- ---------------------------------------
Name:
Title:
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EXHIBIT 5.10(b)
FORM OF AFFILIATE LETTER FOR AFFILIATES OF MOTIVEPOWER
MotivePower Industries, Inc.
Two Gateway Center
14th Floor
Pittsburgh, PA 15222
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 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 Agreement and Plan of
Merger dated as of June 2, 1999 (the "Merger Agreement") between MotivePower,
and Westinghouse Air Brake Company, a Delaware corporation ("WABCO"), WABCO will
be merged with and into MotivePower (the "Merger").
I represent to, and covenant with, MotivePower 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 MotivePower,
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 MotivePower ("MotivePower
Stock") or WABCO that I may hold.
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.
Very truly yours,
--------------------------------------
Name:
Accepted this day of
[ ], 1999, by
MOTIVEPOWER INDUSTRIES, INC.
By
- ---------------------------------------
Name:
169
ANNEX B
WABCO STOCK OPTION AGREEMENT
BETWEEN
WESTINGHOUSE AIR BRAKE COMPANY,
A DELAWARE CORPORATION,
AND
MOTIVEPOWER INDUSTRIES, INC.,
A PENNSYLVANIA CORPORATION
DATED AS OF JUNE 2, 1999
170
TABLE OF CONTENTS
PAGE
----
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............................................... 5
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
171
WABCO STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of June 2, 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 entering into an Agreement and
Plan of Merger dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, for the merger of Grantor with and into Grantee
(the "Merger");
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, the Grantee has requested that the Grantor grant to
the Grantee an option to purchase up to 6,453,710 shares of Common Stock, par
value $0.01 per share, of the Grantor (the "Common Stock"), upon the terms and
subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
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 $21.6125
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
172
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
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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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(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
One First National Plaza
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.
14. Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
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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
days 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 $30 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 $30 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 $15 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 $15 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 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
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(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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ANNEX C
MOTIVEPOWER STOCK OPTION AGREEMENT
BETWEEN
WESTINGHOUSE AIR BRAKE COMPANY,
A DELAWARE CORPORATION,
AND
MOTIVEPOWER INDUSTRIES, INC.,
A PENNSYLVANIA CORPORATION
DATED AS OF JUNE 2, 1999
179
TABLE OF CONTENTS
PAGE
----
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............................................... 5
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
180
MOTIVEPOWER STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of June 2, 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 entering into an Agreement and
Plan of Merger dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, for the merger of Grantee with and into Grantor
(the "Merger");
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, the Grantee has requested that the Grantor grant to
the Grantee an option to purchase up to 5,133,655 shares of Common Stock, par
value $0.01 per share, of the Grantor (the "Common Stock"), upon the terms and
subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
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 $16.625
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
181
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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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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(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
One First National Plaza
Chicago, IL 60603
Attention: Frederick C. Lowinger
Facsimile No.: (312) 853-7036
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.
14. Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
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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
days 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 $30 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 $30 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 $15 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 $15 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(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
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(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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ANNEX D
Wasserstein Perella & Co., Inc.
Three First National Plaza
Chicago, Illinois 60602
June 2, 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 Agreement and Plan of Merger, dated as of
June 2, 1999 (the "Agreement"). The Agreement provides for, among other things,
a merger of WABCO with and into the Company (the "Merger"), pursuant to which
each outstanding share of WABCO's common stock, par value $.01 per share ("WABCO
Shares"), will be converted into 1.3 shares (the "Exchange Ratio") of the common
stock, par value $.01 per share, of the Company ("Company Shares").
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the Company of the Exchange Ratio.
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.
188
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 they 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, and we have 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 from a financial point of view to
the Company of the Exchange Ratio, 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 disseminated, quoted, referred to or reproduced at any time or in any
manner without our prior written
189
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 to the Company from a financial
point of view.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
----------------------------------------
WASSERSTEIN PERELLA & CO., INC.
190
ANNEX E
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
June 2, 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 the stockholders
of Westinghouse Air Brake Company (the "Company") from a financial point of view
of the consideration to be received by such stockholders pursuant to the terms
of the Agreement and Plan of Merger, dated as of June 2, 1999 (the "Merger
Agreement"), among the Company and MotivePower Industries, Inc. (the
"Acquiror"). The Merger Agreement provides for the merger (the "Merger") of the
Company into the Acquiror and each outstanding share of common stock, par value
$.01 per share, of the Company being converted in the Merger into 1.30 shares
(the "Exchange Ratio") of common stock, par value $.01 per share, of the
Acquiror (the "Common Stock").
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company and the Acquiror, as well as
the Merger Agreement. We have also reviewed certain other information, including
financial forecasts, provided to us by the Company and the Acquiror, and have
met with the Company's and the Acquiror's management to discuss the business and
prospects of the Company and the Acquiror. We have also relied upon the views of
the Company's and the Acquiror's management concerning the business, operational
and strategic benefits and implications of the Merger, including financial
forecasts provided to us by the Company and the Acquiror relating to the
synergistic values and operating cost savings expected to be achieved through
the combination of the operations of the Company and the Acquiror.
We have also considered certain financial and stock market data of the Company
and the Acquiror, and we have compared those data with similar data for other
publicly held companies in businesses similar to the Company and the Acquiror
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 the Acquiror's management as to the future financial performance
of the Company and the Acquiror 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 the
Acquiror, 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 Company's stockholders pursuant to the Merger or the prices at which such
Common 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.
191
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 the Acquiror 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 581,300 shares of the Acquiror.
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 stockholders of the Company from a
financial point of view.
Very truly yours,
/s/ CREDIT SUISSE FIRST BOSTON
CORPORATION
----------------------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION
192
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
MotivePower's charter and by-laws provide for indemnification of
MotivePower's directors and officers for liabilities and expenses that they may
incur in such capacities. The MotivePower charter provides that, to the fullest
extent permitted by Pennsylvania law, no director will be personally liable to
the corporation for or with respect to any acts or omissions in the performance
of his or her duties. Pennsylvania law permits a corporation to eliminate the
personal liability of its directors for monetary damages for any action taken or
failure to take any action unless: (1) such directors have breached or failed to
perform their duties; and (2) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. MotivePower has adopted such a
provision in its charter. However, a Pennsylvania corporation is not empowered
to eliminate personal liability where the responsibility or liability of a
director is pursuant to any criminal statute or is for the payment of taxes
pursuant to any federal, state or local law. Reference is made to MotivePower's
charter incorporated by reference as set forth below as Exhibit 3.1 hereto, and
by-laws set forth below as Exhibit 3.2 hereto.
MotivePower also maintains directors and officers liability insurance which
provides for coverage against loss arising from claims made against directors
and officers in their capacity as such.
MotivePower has agreed to indemnify, to the extent provided under WABCO's
charter and by-laws in effect on June 2, 1999, the individuals who on or before
the closing were officers or directors of WABCO or its subsidiaries with respect
to all acts or omissions before the closing by these individuals in these
capacities. MotivePower has also agreed to provide, for six years after the
closing, a directors' and officers' liability insurance and indemnification
policy that provides WABCO's officers and directors in office immediately prior
to the closing coverage substantially equivalent to WABCO's policy in effect on
June 2, 1999.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following is a list of Exhibits included as part of this
Registration Statement. MotivePower agrees to furnish supplementally a copy of
any omitted schedule to the SEC upon request. Items marked with an asterisk are
filed herewith.
EXHIBIT NUMBER DESCRIPTION
*2.1 Agreement and Plan of Merger, as amended (included as Annex A to the
Joint Proxy Statement/ Prospectus filed as part of this Registration
Statement).
3.1 Articles of Incorporation (included as Appendix B to MotivePower's
Definitive Proxy Statement filed on March 19, 1999).
3.2 By-laws of MotivePower (incorporated by reference to Exhibit 2 to
MotivePower's Registration Statement on Form 8-A filed on May 4, 1999).
4.1 Rights Agreement, dated as of January 19, 1996 between MotivePower and
Chase Mellon Shareholder Services, L.L.C., as Rights Agent (incorporated
by reference to Exhibit 1 to MotivePower's Report on Form 8-K filed on
January 31, 1996).
4.2 First Amendment to the Rights Agreement, dated April 5, 1996
(incorporated by reference to Exhibit 2 to MotivePower's Amendment No. 1
on Form 8-A/A filed on April 25, 1996).
4.3 Second Amendment to the Rights Agreement, dated June 20, 1996
(incorporated by reference to Exhibit 3 to MotivePower's Amendment No. 2
on Form 8-A/A filed on July 3, 1996).
4.4 Third Amendment to the Rights Agreement, dated July 25, 1996
(incorporated by reference to Exhibit 4 to MotivePower's Registration
Statement on Form 8-A filed on August 1, 1997).
4.5 Fourth Amendment to the Rights Agreement, dated August 22, 1997
(incorporated by reference to Exhibit 1 to MotivePower's Amendment No. 1
on Form 8-A/A filed on October 23, 1997).
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193
4.6 Fifth Amendment to the Rights Agreement, dated June 2, 1999
(incorporated by reference to Exhibit 1 to MotivePower's Amendment No. 1
on Form 8-A/A filed on June 3, 1999).
*5.1 Opinion of Doepken Keevican & Weiss, as to the legality of the
securities being registered.
*8.1 Opinion of Sidley & Austin, as to certain United States federal income
tax consequences of the merger.
*8.2 Opinion of Kirkland & Ellis, as to certain United States federal income
tax consequences of the merger.
*10.1 MotivePower Stock Option Agreement (included as Annex B to the Joint
Proxy Statement/Prospectus filed as part of this Registration
Statement).
*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).
21.1 Subsidiaries of the Registrant (incorporated by reference to
MotivePower's Annual Report on Form 10-K for the year ended December 31,
1998).
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of Doepken Keevican & Weiss (included in Exhibit 5.1 to this
Registration Statement).
*23.4 Consent of Sidley & Austin (included in Exhibit 8.1 to this Registration
Statement).
*23.5 Consent of Kirkland & Ellis (included in Exhibit 8.2 to this
Registration Statement).
*24.1 Powers of Attorney.
*99.1 Form of proxy card to be mailed to MotivePower shareholders.
*99.2 Form of proxy card to be mailed to Westinghouse Air Brake shareholders.
*99.3 Form of proxy card to be mailed to participants in the Westinghouse Air
Brake Company Employee Stock Ownership Plan.
*99.4 Notice to Participants in the Westinghouse Air Brake Company Employee
Stock Ownership Plan.
*99.5 Notice to Participants in the Westinghouse Air Brake Company RAC Voting
Trust.
*99.6 Consent of Robert S. Miller to be named as a nominee for director of
MotivePower.
*99.7 Consent of James C. Huntington, Jr. to be named as nominee for director
of MotivePower.
+99.8 Consent of James V. Napier to be named as nominee for director of
MotivePower.
*99.9 Consent of Kim G. Davis to be named as nominee for director of
MotivePower.
*99.10 Consent of William E. Kassling to be named as nominee for director of
MotivePower.
*99.11 Consent of Gregory T. H. Davies to be named as nominee for director of
MotivePower.
*99.12 Consent of Emilio A. Fernandez to be named as nominee for director of
MotivePower.
*99.13 Consent of James P. Kelley to be named as nominee for director of
MotivePower.
- ---------------
* Filed herewith.
+ To be filed by amendment.
(b) Not applicable.
(c) The opinion of Wasserstein Perella & Co., Inc. is included as Annex D
to the Joint Proxy Statement/ Prospectus. The opinion of Credit Suisse First
Boston Corporation is included as Annex E to the Joint Proxy
Statement/Prospectus.
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194
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.
II-3
195
(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.
(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-4
196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh,
State of Pennsylvania, on July 19, 1999.
MOTIVEPOWER INDUSTRIES, INC.
By: /s/ JEANNETTE FISHER-GARBER
------------------------------------
Jeannette Fisher-Garber
Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
* Non-Executive Chairman July 19, 1999
- ------------------------------------------ and Director
John C. Pope
* President, Chief Executive July 19, 1999
- ------------------------------------------ Officer and Director
Michael A. Wolf (principal executive officer)
* Senior Vice President and July 19, 1999
- ------------------------------------------ Chief Financial Officer
William F. Fabrizio (principal financial officer)
* Vice President and Controller July 19, 1999
- ------------------------------------------ (principal accounting officer)
David L. Bonvenuto
* Vice Chairman and Director July 19, 1999
- ------------------------------------------
Gilbert E. Carmichael
* Director July 19, 1999
- ------------------------------------------
Ernesto Fernandez-Hurtado
* Director July 19, 1999
- ------------------------------------------
Lee B. Foster II
* Director July 19, 1999
- ------------------------------------------
James P. Miscoll
* Director July 19, 1999
- ------------------------------------------
Nicholas J. Stanley
*By /s/ JEANNETTE FISHER-GARBER
- -----------------------------------------
Jeannette Fisher-Garber
Attorney-in-Fact
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197
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
------- ----------- --------
*2.1 Agreement and Plan of Merger, as amended (included as Annex
A to the Joint Proxy Statement/Prospectus filed as part of
this Registration Statement).
3.1 Articles of Incorporation (included as Appendix B to
MotivePower's Definitive Proxy Statement filed on March 19,
1999).
3.2 By-laws of MotivePower (incorporated by reference to Exhibit
2 to MotivePower's Registration Statement on Form 8-A filed
on May 4, 1999).
4.1 Rights Agreement, dated as of January 19, 1996 between
MotivePower and Chase Mellon Shareholder Services, L.L.C.,
as Rights Agent (incorporated by reference to Exhibit 1 to
MotivePower's Report on Form 8-K filed on January 31, 1996).
4.2 First Amendment to the Rights Agreement, dated April 5, 1996
(incorporated by reference to Exhibit 2 to MotivePower's
Amendment No. 1 on Form 8-A/A filed on April 25, 1996).
4.3 Second Amendment to the Rights Agreement, dated June 20,
1996 (incorporated by reference to Exhibit 3 to
MotivePower's Amendment No. 2 on Form 8-A/A filed on July 3,
1996).
4.4 Third Amendment to the Rights Agreement, dated July 25, 1996
(incorporated by reference to Exhibit 4 to MotivePower's
Registration Statement on Form 8-A filed on August 1, 1997).
4.5 Fourth Amendment to the Rights Agreement, dated August 22,
1997 (incorporated by reference to Exhibit 1 to
MotivePower's Amendment No. 1 on Form 8-A/A filed on October
23, 1997).
4.6 Fifth Amendment to the Rights Agreement, dated June 2, 1999
(incorporated by reference to Exhibit 1 to MotivePower's
Amendment No. 1 on Form 8-A/A filed on June 3, 1999).
*5.1 Opinion of Doepken Keevican & Weiss, as to the legality of
the securities being registered.
*8.1 Opinion of Sidley & Austin, as to certain United States
federal income tax consequences of the merger.
*8.2 Opinion of Kirkland & Ellis, as to certain United States
federal income tax consequences of the merger.
*10.1 MotivePower Stock Option Agreement (included as Annex B to
the Joint Proxy Statement/Prospectus filed as part of this
Registration Statement).
*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).
21.1 Subsidiaries of the Registrant (incorporated by reference to
MotivePower's Annual Report on Form 10-K for the year ended
December 31, 1998).
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of Doepken Keevican & Weiss (included in Exhibit 5.1
to this Registration Statement).
*23.4 Consent of Sidley & Austin (included in Exhibit 8.1 to this
Registration Statement).
*23.5 Consent of Kirkland & Ellis (included in Exhibit 8.2 to this
Registration Statement).
*24.1 Powers of Attorney.
*99.1 Form of proxy card to be mailed to MotivePower shareholders.
*99.2 Form of proxy card to be mailed to Westinghouse Air Brake
shareholders.
*99.3 Form of proxy card to be mailed to participants in the
Westinghouse Air Brake Company Employee Stock Ownership
Plan.
*99.4 Notice to Participants in the Westinghouse Air Brake Company
Employee Stock Ownership Plan.
*99.5 Notice to Participants in the Westinghouse Air Brake Company
RAC Voting Trust.
*99.6 Consent of Robert S. Miller to be named as a nominee for
director of MotivePower.
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198
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
------- ----------- --------
*99.7 Consent of James C. Huntington, Jr. to be named as nominee
for director of MotivePower.
+99.8 Consent of James V. Napier to be named as nominee for
director of MotivePower.
*99.9 Consent of Kim G. Davis to be named as nominee for director
of MotivePower.
*99.10 Consent of William E. Kassling to be named as nominee for
director of MotivePower.
*99.11 Consent of Gregory T. H. Davies to be named as nominee for
director of MotivePower.
*99.12 Consent of Emilio A. Fernandez to be named as nominee for
director of MotivePower.
*99.13 Consent of James P. Kelley to be named as nominee for
director of MotivePower.
- ---------------
* Filed herewith.
+ To be filed by amendment.
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