1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Westinghouse Air Brake Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
2
WESTINGHOUSE AIR BRAKE COMPANY
1001 AIR BRAKE AVENUE
WILMERDING, PENNSYLVANIA 15148
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--APRIL 22, 1997
To The Stockholders:
The Annual Meeting of Stockholders of Westinghouse Air Brake Company (the
"Company") will be held at the Sheraton Hotel at Station Square, Pittsburgh,
Pennsylvania on Tuesday, April 22, 1997 at 9:30 a.m. (local time) for the
purpose of considering and acting upon the following:
(1) The election of two persons to serve as directors;
(2) The ratification of the appointment of Arthur Andersen LLP as
independent public accountants to audit the financial statements of the
Company and its subsidiaries for the 1997 fiscal year; and
(3) Such other business as may properly come before the Annual Meeting or
any adjournment thereof.
The close of business on March 14, 1997 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
receive notice of and to vote at the meeting, or any adjournments thereof, and
only stockholders of record on such date are entitled to receive notice of and
to vote at said meeting.
You will find enclosed a proxy card which must be completed and returned in
order to vote all Common Stock which you hold. The Company's 1996 Annual Report
to Stockholders and the Annual Report on Form 10-K are also enclosed.
By Order of the Board of Directors,
Robert J. Brooks
Chief Financial Officer
and Secretary
Wilmerding, Pennsylvania
March 31, 1997
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES
MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. YOU ARE CORDIALLY INVITED TO ATTEND
THE MEETING IN PERSON. THE GIVING OF YOUR PROXY DOES NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IN THE EVENT YOU ATTEND THE MEETING.
3
MARCH 31, 1997
WESTINGHOUSE AIR BRAKE COMPANY
1001 AIR BRAKE AVENUE
WILMERDING, PENNSYLVANIA 15148
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 22, 1997
GENERAL
This Proxy Statement is furnished to stockholders in connection with the
solicitation by the Board of Directors of Westinghouse Air Brake Company (the
"Company") of proxies in the accompanying form for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held on April 22, 1997
and at any adjournment thereof. If a proxy in the accompanying form is duly
executed and returned to the Company, the shares represented will be voted at
the Annual Meeting and, where a choice is specified, will be voted in accordance
with the specification made. Any stockholder who gives a proxy has the power to
revoke it at any time before it is exercised by notice to the Secretary. A
later-dated proxy will revoke an earlier proxy, and stockholders who attended
the Annual Meeting may, if they wish, vote in person even though they have
submitted a proxy, in which event the proxy will be deemed to have been revoked.
As of the close of business on March 14, 1997, the Company had outstanding
37,488,733 shares of Common Stock, par value $.01 per share ("Common Stock").
This proxy statement and the proxy in the accompanying form are being mailed on
or about March 31, 1997 to stockholders of record as of the close of business on
March 14, 1997.
The Annual Report to Stockholders for the fiscal year ended December 31,
1996 and the Annual Report on Form 10-K, which includes consolidated financial
statements, are enclosed with this Proxy Statement.
VOTING
Stockholders of record as of the close of business on March 14, 1997 (the
"Record Date") have the right to receive notice of and to vote at the Annual
Meeting. The presence in person or by proxy of stockholders entitled to cast a
majority of all the votes entitled to be cast at such meeting shall constitute a
quorum. A plurality of all votes cast shall be sufficient to elect a director. A
majority of the votes cast shall be sufficient to approve all other matters
which come before the meeting unless more than a majority of the votes cast is
required by statute or by the Company's By-Laws.
Under the proxy rules of the Securities and Exchange Commission, a person
who directly or indirectly has or shares voting power and/or investment power
with respect to a security is considered a beneficial owner of the security.
Voting power includes the power to vote or direct the voting of shares, and
investment power includes the power to dispose of or direct the disposition of
shares. Shares as to which voting power and/or investment power may be acquired
within 60 days are also considered as beneficially owned under these proxy
rules.
MANAGEMENT
The directors, chief executive officer, four other most highly compensated
executive officers as of December 31, 1996, and all directors and executive
officers of the Company as a group beneficially owned as of the Record Date the
number of shares of Common Stock set forth in the table below. The information
on beneficial ownership in the table and related footnotes is based upon data
furnished to the Company by, or on behalf of, the persons referred to in the
table. Unless otherwise indicated in the footnotes to the table, each person
named has sole voting power and sole dispositive power with respect to the
shares included in the table. Shares
1
4
which are described as being held in the RAC Voting Trust have the voting and
dispositive powers described in note 3 to "Other Beneficial Owners," below.
BENEFICIAL OWNERSHIP
OF COMMON STOCK
----------------------------------
NUMBER OF PERCENT
NAME SHARES OF CLASS(1)
- --------------------------------------------- -------------- -----------
William E. Kassling 5,527,260 (2) 14.74%
Howard J. Bromberg 720,200 (3) 1.92%
Robert J. Brooks 439,300 (4) 1.17%
Emilio A. Fernandez 665,865 (5) 1.78%
James C. Huntington, Jr. 8,000 (6) *
James P. Kelley 138,048 (6)(7) *
Mikael Lilius 4,000 (6)(8) *
John M. Meister 473,000 (9) 1.26%
James V. Napier 6,500 (6) *
All directors and executive officers as a
group (13 persons) 8,227,773 (10) 21.95%
- ---------
* Less than 1%
(1) The Company has entered into an agreement to repurchase 4,000,000 shares of
its Common Stock from Scandinavian Incentive Holdings, B.V. ("SIH"). The
closing of such repurchase is scheduled to occur on March 31, 1997, subject
to certain conditions being met. The effects of this transaction are not
reflected in the above table.
(2) Includes 38,500 shares beneficially owned by William E. Kassling and 500
shares beneficially owned by Mr. Kassling's son, beneficial ownership of
which 500 shares is disclaimed. Also includes 5,488,260 shares held of
record by the RAC Voting Trust, of which Mr. Kassling, Robert J. Brooks and
Kevin P. Conner, an executive officer of the Company, are trustees. See
note 3 to "Other Beneficial Owners," below. Beneficial ownership of these
shares is also disclaimed. The shares held by the RAC Voting Trust include
6,500 shares beneficially owned by Mr. Kassling and 1,503,336 shares
beneficially owned by Davideco, a Pennsylvania business trust organized by
Mr. Kassling.
(3) Includes 200 shares beneficially owned by Howard Bromberg. Also includes
640,000 shares beneficially owned by E.L.H. Co., all of which shares are
deposited in the RAC Voting Trust. Also includes 80,000 shares beneficially
owned by Mr. Bromberg's daughter, all of which shares are deposited in the
RAC Voting Trust. Beneficial ownership of such shares is disclaimed.
(4) Includes 77,300 shares beneficially owned by Robert J. Brooks, of which
69,300 shares are deposited in the RAC Voting Trust. Also includes 360,000
shares beneficially owned by Suebro, Inc., all of which shares are
deposited in the RAC Voting Trust, and 2,000 shares beneficially owned by
Mr. Brooks' child, beneficial ownership of which shares is disclaimed. Does
not include 5,488,260 shares held of record by the RAC Voting Trust. Such
shares are included in the reported holdings of William E. Kassling.
(5) Includes 386,269 shares beneficially owned by Emilio A. Fernandez. Also
includes 257,175 shares by Mr. Fernandez's wife and 12,421 shares
beneficially owned by his son, beneficial ownership of which shares is
disclaimed.
(6) Includes options to acquire 2,000 shares under the 1995 Non-Employee
Directors' Fee and Stock Option Plan.
(7) Includes 96,048 shares beneficially owned by James P. Kelley. Also includes
40,000 shares beneficially owned by Vestar Capital Partners, Inc., of which
Mr. Kelley is a Managing Director, beneficial ownership of which shares is
disclaimed.
(8) Does not include 10,000,000 shares beneficially owned by SIH, the parent
company of which is Incentive AB, of which Mr. Lilius is President and
Chief Executive Officer. Mr. Lilius disclaims beneficial ownership of such
shares.
(9) Includes 251,000 shares beneficially owned by John M. Meister, of which
250,000 shares are deposited in the RAC Voting Trust. Also includes 222,000
shares held in trusts for his children as to which trusts Mr. Meister is
trustee, beneficial ownership of which shares is disclaimed.
(10) Includes notes 2-9 and an additional 245,600 shares beneficially owned by
the four executive officers not named in the table.
2
5
OTHER BENEFICIAL OWNERS
The following table sets forth information with respect to each stockholder
known to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock as of the Record Date:
BENEFICIAL OWNERSHIP
OF COMMON STOCK
----------------------------
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS(1)
- -------------------------------------------------------------------- ---------- -----------
Scandinavian Incentive Holdings, B.V. 10,000,000 26.67%
Hamngatan 2
S-11147 Stockholm, Sweden
U.S. Trust Company of California, N.A., 9,330,701(2) 24.89%
as trustee for Westinghouse Air Brake Company
Employee Stock Ownership Plan and Trust
Suite 1080 East
1300 I Street N.W.
Washington, D.C. 20005
RAC Voting Trust 5,488,260(3) 14.64%
c/o Westinghouse Air Brake Company
1001 Air Brake Avenue
Wilmerding, PA 15148
- ---------
(1) See note 1 to "Management," above.
(2) Under the terms of the Westinghouse Air Brake Company Employee Stock
Ownership Plan and Trust (the "ESOP"), U.S. Trust Company of California,
N.A., as sole trustee for the ESOP (the "ESOP Trustee"), is required to vote
the shares held by the ESOP in accordance with the instructions from the
ESOP participants for all shares allocated to such participants' accounts.
Shares not allocated to the account of any employee are voted by the ESOP
Trustee in the same proportion as the votes for which participant
instructions are given. Allocated shares for which the ESOP Trustee does not
receive instructions are voted in the manner directed by the ESOP Committee,
an administrative committee comprised of persons appointed by the Board of
Directors of the Company (currently Messrs. Kassling, Brooks and Conner).
Pursuant to the Employee Retirement Income Security Act of 1974, as amended,
the ESOP Trustee has the power to override votes. The ESOP Trustee has sole
voting power with respect to 8,927,565 shares, shared voting power with
respect to 403,126 shares and sole dispositive power with respect to all
9,330,701 shares reported as beneficially owned by it.
(3) Pursuant to the Second Amended WABCO Voting Trust/Disposition Agreement
dated as of December 13, 1995 (the "Amended Voting Trust Agreement"),
certain employees of the Company have delivered their shares of Common Stock
of the Company to the trustees of the RAC Voting Trust (currently Messrs.
Kassling, Brooks and Conner). The trustees of the RAC Voting Trust have sole
voting power with respect to all shares reported as beneficially owned by
it. All shares deposited in the RAC Voting Trust are subject to certain
restrictions on disposition as described in the Amended Voting Trust
Agreement.
PROXY PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
Two directors will be elected at the Annual Meeting to serve until the
annual meeting of stockholders in 2000 and until their successors are elected
and qualified or until their earlier resignation or removal. The Nominating
Committee of the Board of Directors has nominated, and the Board has approved
the nominations of, Robert J. Brooks and Mikael Lilius and recommends a vote for
their election. Each of the nominees has consented to be named as a nominee and
to serve if elected.
3
6
The members of the Nominating Committee are William E. Kassling, Robert J.
Brooks and James P. Kelley. The Nominating Committee has exclusive authority to
nominate persons to be elected to the Board.
Unless authority to so vote is withheld, it is intended that the proxies
solicited by the Board of Directors will be voted FOR the election of the two
nominees. In the event that at the date of the Annual Meeting either of the
nominees should for any reason not be available for election, the proxies
solicited by the Board will be voted for the election of the other nominee and
such substitute nominee as shall be designated by the Board.
Information with respect to the two nominees, each of whom is presently a
member of the Board of Directors, and the continuing directors is set forth in
the table below. The nominees and continuing directors have held the positions
shown for more than five years unless otherwise indicated.
DIRECTOR PRINCIPAL OCCUPATION OR
NAME SINCE EMPLOYMENT; DIRECTORSHIPS; AGE
- ------------------------- -------- ---------------------------------------------------------
Nominees for a term expiring in 2000:
Robert J. Brooks 1990 Chief Financial Officer of the Company since prior to
1992; Director of Crucible Materials Corporation; Age 52
Mikael Lilius 1995 President and Chief Executive Officer of Incentive AB
(holding company) since prior to 1992; Director of
Huhtamaki Oy and Perlos Oy, both of which are Finnish
corporations, and Director of Incentive AB, a Swedish
corporation; Age 48
Continuing Directors with a term expiring in 1998:
James P. Kelley 1990 Managing Director of Vestar Capital (private equity
investment firm) since prior to 1992; Director of
LaPetite Academy, Inc. and Celestial Seasonings, Inc.;
Age 42
James C. Huntington, Jr. 1995 Independent businessman since prior to 1992; Director of
Cyprus Amax Minerals Company, Alumax, Inc. and Dravo
Corporation; Age 69
Continuing Directors with a term expiring in 1999:
William E. Kassling 1990 President, Chairman and Chief Executive Officer of the
Company; Director of Dravo Corp., Scientific Atlanta,
Inc. and Commercial Intertech, Inc.; Age 52
Emilio A. Fernandez 1995 Executive Vice President of WABCO since January 1995 and
President of Pulse Electronics, Inc. since prior to 1992;
Director of Pulse Medical Instruments Inc.; Age 52
James V. Napier 1995 Chairman of Scientific Atlanta, Inc. since July 1994;
Chairman and interim Chief Executive Officer of
Scientific Atlanta, Inc. from November 1993 to July 1994;
Chairman and Chief Executive Officer of Commercial Tel.
Group from prior to 1992 to November 1993; Director of
Engelhard Corporation, Vulcan Materials Company, Rhodes,
Inc., HBO and Company, Personnel Group of America, Inc.
and Intelligent Systems, Inc.; Age 60
VOTE REQUIRED
Only affirmative votes are counted in the election of directors. The two
nominees for election as directors at the Annual Meeting who receive the highest
number of votes cast for the election of directors by the holders of the
Company's Common Stock present in person or voting by proxy, a quorum being
present, will be elected as directors.
4
7
COMMITTEES OF BOARD OF DIRECTORS
In addition to the Nominating Committee, the principal committees of the
Board of Directors are the Audit Committee and the Compensation Committee.
The members of the Audit Committee are James V. Napier, Mikael Lilius,
James C. Huntington, Jr. and James P. Kelley. The Audit Committee may (i) make
recommendations to the Board regarding the engagement of the Company's
independent accountants, (ii) review the plan, scope and results of the annual
audit, the independent accountants' letter of comments and management's response
thereto and the scope of any non-audit services which may be performed by the
independent accountants, (iii) manage the Company's policies and procedures with
respect to internal accounting and financial controls and (iv) review any
changes in accounting policy. The Audit Committee may also review any possible
violations of the Company's business ethics and conflicts of interest policies.
The members of the Compensation Committee are Messrs. Napier, Lilius,
Huntington and Kelley. The Compensation Committee may establish compensation
levels for officers of the Company, review management organization and
development, review significant employee benefit programs and establish and
administer executive compensation programs and the Company's 1995 Stock
Incentive Plan.
The Board of Directors met six times in 1996. All of the directors attended
at least 75% of the aggregate of all meetings of the Board of Directors and the
committees on which they served during 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Napier, Lilius, Huntington
and Kelley. William E. Kassling, the President, Chairman and Chief Executive
Officer of the Company, served on the Board of Directors of Scientific Atlanta,
Inc. James V. Napier, a director of the Company, is the Chairman of Scientific
Atlanta, Inc. No executive officer served on a compensation committee (or other
board committee performing equivalent functions) or board of directors of any
entity related to any member of the Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive a retainer or
fees for attending meetings of the Board of Directors or meetings of Committees
of the Board. Directors who are not employees of the Company each receive a
$10,000 annual retainer, $1,000 for each meeting they attend, $750 ($1,000 for
the Committee chairperson) for each Committee meeting they attend that is not
held on the same day as a Board meeting and $500 for each Board or Committee
meeting in which they participate by conference telephone. Directors are also
reimbursed for travel expenses to and from Board and Committee meetings.
In addition, non-employee directors participate in the 1995 Non-Employee
Directors' Fee and Stock Option Plan (the "Directors' Plan") whereby each
receives annually 1,000 shares of Common Stock of the Company and a nonstatutory
option to purchase 5,000 additional shares upon initial election to the Board
and thereafter upon any subsequent re-election. The exercise price per share of
Common Stock of each option granted is 100% of the fair market value per share
of the Common Stock on the date of grant, except that for any stock option
granted on or prior to October 31, 1998, the exercise price will be the greater
of fair market value or $14 per share. The term of each option commences on the
date of grant and, unless earlier terminated in accordance with the Directors'
Plan, expires ten years after such date. If a recipient is removed from the
Board for cause, such recipient's options terminate on the earlier to occur of
the expiration date of the options or 90 days following the date of such
removal.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission reports of ownership and reports of changes in ownership
of the Common Stock and other equity securities of the Company. These persons
are required to furnish the Company with copies of all Section 16(a) reports
they file.
5
8
The Company believes that all such filing requirements applicable to its
directors and executive officers were complied with in 1996, except that late
filings were made by seven executive officers in March 1997 reporting the grant
to each such officer of stock options on October 31, 1996. The filings were due
by February 14, 1997.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation paid
for services rendered in all capacities to the Company for the last three fiscal
years to those persons who were, as of December 31, 1996, the Chief Executive
Officer of the Company and the other four most highly compensated executive
officers of the Company.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES OTHER
FISCAL ----------------------- UNDERLYING ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
- --------------------------------- ------ -------- ---------- ------------ ---------------
William E. Kassling 1996 $350,000 $ 114,000 146,250 $41,924
Chief Executive Officer 1995 350,000 157,000 -- 33,440
1994 318,394 1,377,108 -- 38,562
Emilio A. Fernandez 1996 195,348 147,000 99,206 10,000
Executive Vice President of 1995 185,000 75,000 -- --
Integrated Railway Products 1994 -- -- -- --
Group
Robert J. Brooks 1996 154,004 50,000 73,125 23,540
Chief Financial Officer 1995 140,000 50,000 -- 23,008
1994 123,587 75,000 -- 29,025
Howard J. Bromberg 1996 165,000 74,000 73,125 25,946
Vice President; General 1995 145,000 20,000 -- 24,072
Manager,
Locomotive and Molded Products 1994 125,929 75,000 -- 26,672
John M. Meister 1996 159,509 72,000 73,125 23,906
Vice President; General 1995 150,000 25,000 -- 24,687
Manager,
Passenger Transit 1994 137,472 45,000 -- 22,001
- ---------
(1) Primarily consists of split dollar life insurance premiums paid by the
Company on behalf of the named executive and other cash benefit perquisites.
6
9
OPTION GRANTS IN 1996
The following table sets forth as to the individuals named in the Summary
Compensation Table information with respect to the stock options granted during
1996 under the 1995 Stock Incentive Plan.
OPTION GRANTS IN LAST FISCAL YEAR
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE GRANT DATE
UNDERLYING OPTIONS EMPLOYEES OR BASE PRICE EXPIRATION PRESENT
NAME AND PRINCIPAL POSITION GRANTED(1) IN FISCAL YEAR PER SHARE DATE VALUE(2)
- --------------------------------- ------------------ --------------- ------------- ---------- ----------
William E. Kassling 146,250 15.25% $ 14.00 10/30/04 $592,313
Chief Executive Officer
Howard J. Bromberg 73,125 7.63% $ 14.00 10/30/04 $296,156
Vice President; General
Manager, Locomotive and Molded
Products
Robert J. Brooks 73,125 7.63% $ 14.00 10/30/04 $296,156
Chief Financial Officer
Emilio A. Fernandez 99,206 10.35% $ 14.00 10/30/04 $401,784
Executive Vice President of
Integrated Railway Products
Group
John M. Meister 73,125 7.63% $ 14.00 10/30/04 $296,156
Vice President; General
Manager, Passenger Transit
- ---------
(1) The above option grants were made on October 31, 1996 pursuant to the 1995
Stock Incentive Plan. The options become fully exercisable on October 26,
2004 but are subject to early exercisability based upon the attainment of
certain performance targets.
(2) Based on the Black-Scholes option pricing model adopted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price at the time of exercise over
the exercise price on the date the option is exercised. There is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The estimated values under that model
were calculated based on the following assumptions:
(a) Grant Price: $14.00
(b) Exercise date: On the date of expiration
(c) Risk-Free Interest Rate: 6.25%
(d) Volatility: 30.43%
7
10
The following table sets forth as to the persons named in the Summary
Compensation Table information with respect to (i) the stock options exercised
during 1996, (ii) the net value realized upon such exercises, (iii) the number
of shares covered by unexercised stock options held at December 31, 1996 and
(iv) the value of such unexercised options at December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND DECEMBER 31, 1996 OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, DECEMBER 31, 1996(1)
ACQUIRED ON VALUE 1996 EXERCISABLE/
NAME AND PRINCIPAL POSITION EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- -------- ------------------------- -------------------------
William E. Kassling 0 $0 0/146,250 $0/$0
Chief Executive Officer
Howard J. Bromberg 0 $0 0/73,125 $0/$0
Vice President; General
Manager, Locomotive and Molded
Products
Robert J. Brooks 0 $0 0/73,125 $0/$0
Chief Financial Officer
Emilio A. Fernandez 0 $0 0/99,206 $0/$0
Executive Vice President of
Integrated Railway Products
Group
John M. Meister 0 $0 0/73,125 $0/$0
Vice President; General
Manager, Passenger Transit
- ---------
(1) As of December 31, 1996, the options granted to executives had an exercise
price higher than the fair market price of the Common Stock on December 31,
1996. Consequently, the options are not considered "in-the-money" for
purposes of this chart.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement in whole or in part, the following report and the
Stock Performance Graph on page 10 shall not be incorporated by reference into
any such filings.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee is comprised entirely of non-employee members of
the Board of Directors. The Compensation Committee's principal responsibility is
to review, recommend and approve changes to the Company's compensation policies
and programs. The Committee is also responsible for reviewing and approving all
compensation actions for the Chief Executive Officer and the other executive
officers.
The Company's compensation plan has three components: base salaries and
bonuses, benefit plans and stock options.
Base Salaries and Bonuses. The base salaries and bonuses of the executive
officers are established each year by the Board of Directors upon the
Committee's recommendations. Base salaries are determined at the commencement of
each fiscal year, and bonuses are awarded after the Company's financial results
for the fiscal year have become available.
Executive officers' base salaries depend primarily upon their offices and
responsibilities and are reviewed annually. William E. Kassling is the only
executive officer to have an employment agreement with the Company.
8
11
That agreement entitles Mr. Kassling to a base salary and an incentive bonus of
up to 100% of his base salary based upon the Company's achievement of certain
targeted consolidated net income levels. Mr. Kassling is also eligible for
additional incentive bonuses attributable to superior performance at the
discretion of the Board of Directors. The Committee, however, reviews and
approves Mr. Kassling's salary annually.
The Committee's philosophy with respect to bonuses is that executive
officers should have a meaningful portion of their total compensation tied to
the Company's profitability. Financial results for the Company and related
divisions for the fiscal year in question are the primary consideration. There
are guidelines as to the payment of bonuses if certain criteria are met although
the Committee may exercise its discretion with respect to such guidelines.
Executive officers with the greatest opportunity to impact the Company's profits
typically receive bonuses which are a higher percentage of base salary than the
other executive officers.
While the Committee has not recommended base salaries or bonuses based on
compensation at other companies, the Committee from time to time has reviewed
studies showing ranges of compensation of executive officers of manufacturing
companies with comparable sales.
Stock Options. Stock options are the only form of long-term compensation
presently received by the Company's executive officers. The Committee views
stock options as particularly beneficial long-term incentives because such
options connect the interests of employees with those of the shareholders
inasmuch as any value to employees is tied directly to stock price increases.
The Committee granted options to seven executive officers in 1996 including the
Chief Executive Officer, six of which officers received options which first
become exercisable based upon attainment of specified financial performance
targets ("Performance Options") and one of which officers received both
Performance Options and options which become exercisable solely based upon the
passage of time ("Annual Options"). The decision to grant all of these options
was based upon individuals' job levels.
The Performance Options granted in 1996 are intended to motivate and reward
performance by the Company's executive officers. Such options generally may be
exercised if the three-year average of the fully-diluted earnings per share of
the Company ("EPS") for the years 1997, 1998 and 1999 equals or exceeds the
three-year average of the EPS targets for such years (each a "Target") as
determined by the Committee. The number of shares for which the options may be
exercised depends upon the percentage (100% or greater) of the three-year
average of the Targets that is attained. Regardless of whether the three-year
average of the Targets has been attained, the options will become fully
exercisable for all shares subject thereto during the period from October 16,
2004 through October 30, 2004.
The Annual Options granted in 1996 become exercisable in annual 25%
increments on each of October 31, 1996, October 31, 1997, October 31, 1998 and
October 31, 1999.
Five executive officers (including Messrs. Bromberg, Brooks and Meister)
were granted Performance Options for 73,125 shares; Mr. Fernandez was granted
options for 99,206 shares; and Mr. Kassling was granted options for 146,250
shares. The exercise price for all of these options is $14.00 per share. One
executive officer (who is not one of the persons named in the Summary
Compensation Table) also received 25,000 Annual Options with an exercise price
of $11.00 per share. On October 31, 1996, the date of grant, the closing price
of the Company's Common Stock was $10.875.
Other. The executive officers may participate in the Company's Section
401(k) Plan. The Company provides certain perquisites and other personal
benefits to certain of its employees, including its executive officers, which in
the aggregate are not significant.
Respectfully submitted,
/s/ James C. Huntington, Jr.
/s/ James P. Kelley
/s/ Mikael Lilius
/s/ James V. Napier
9
12
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
among the Company's Common Stock, the Standard & Poor's 500 Stock Index and a
peer community of manufacturing companies selected by the Company. The Company
believes that the business and operations of the peer group members closely
resemble those of the Company. The graph assumes a $100 investment as of June
16, 1995 in the Company's Common Stock, the Index and the peer group and assumes
the reinvestment of dividends. Returns for the month of June 1995 have been
prorated.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P 500 INDEX AND PEER GROUP INDEX
WESTINGHOUSE
MEASUREMENT PERIOD AIR BRAKE
(FISCAL YEAR COVERED) COMPANY S&P 500 PEER GROUP
- ----------------------------- ------------------ ------------- --------------
1994 100.00 100.00 100.00
1995 75.97 117.10 78.50
1996 90.59 143.99 87.17
The peer group includes publicly traded manufacturing companies engaged in
similar lines of business of the Company. The peer group consists of the
following companies: ABC Rail Products Corp., Atchison Casting Corp., The
Greenbrier Companies, Harmon Industries, Ltd., Johnstown America Corp., Portec
Inc., MotivePower Industries (formerly MK Rail Corp.) and Varlen Corporation.
One of the companies included in the prior year's peer group, Brenco, Inc.,
was acquired by Varlen Corporation; another company, Union Switch and Signal,
was combined with its parent, Ansaldo Signal, N.V. Neither Brenco nor Union
Switch is included in the 1996 peer group. In addition, Varlen Corporation has
been substituted for Trinity Industries, as Varlen's market capitalization more
closely resembles that of the Company and its peer group. The Company believes
that the inclusion of Trinity, weighted to reflect its market capitalization,
would distort the results so as to make a peer group comparison less meaningful.
10
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PULSE NOTES
A subordinated promissory note in the amount of $17 million issued by the
Company in connection with the acquisition of Pulse Electronics, Inc. in 1995
remains outstanding. The note is in favor of the former shareholders of Pulse,
including Emilio A. Fernandez.
PULSE LEASE
In connection with the Pulse Acquisition, the Company assumed a lease
agreement between Old Pulse and Jollo Associates Limited Partnership ("Jollo")
covering a 37,000 square foot building housing Old Pulse's offices,
manufacturing facilities and some warehouse space. Jollo is a Maryland limited
partnership in which Mr. Fernandez, his wife and certain other Pulse
Shareholders are the sole partners. Rent, payable monthly in arrears, is the
greater of (a) the debt service under a financing agreement dated December 1982
with Montgomery County, Maryland, pursuant to which Montgomery County loaned Old
Pulse $1.44 million for the acquisition of the premises, or (b) fair market
value of the lease, as readjusted at five year intervals through the lease term.
The lease expires December 31, 2002. Total rent paid under the lease in 1996 was
$374,460.
EMPLOYMENT AGREEMENT
The Company and Mr. Kassling have entered into an employment agreement
pursuant to which Mr. Kassling received a base salary of $350,000 in 1996. Mr.
Kassling is also entitled to an incentive bonus payment and certain other
perquisites and benefits.
The Company believes that each of the transactions above contains terms no
less favorable to the Company than could be obtained from unaffiliated third
parties on an arms' length basis.
PROXY PROPOSAL NO. 2
RATIFICATION OF APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
On February 14, 1997, the Board of Directors appointed Arthur Andersen LLP
as independent public accountants to audit the books and records of the Company
and its subsidiaries for the year ended December 31, 1997. Arthur Andersen LLP
served as the Company's independent public accountants for the year ended
December 31, 1996. Although the appointment of independent public accountants is
not required to be approved by stockholders, the Board of Directors believes
that stockholders should participate in such selection through ratification. If
the stockholders fail to ratify Arthur Andersen LLP as the independent public
accountants, the Board of Directors will reconsider its selection.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and, while they are not expected to make a statement, they will
have the opportunity to do so if they desire. They will also be available to
respond to appropriate questions.
VOTE REQUIRED
Adoption of the proposal requires the approval of a majority of the votes
cast. An abstention from voting by a stockholder present in person or
represented by proxy and entitled to vote is not a vote cast "for" or "against"
the proposal and is therefore not counted in determining whether the required
vote for ratification has been obtained.
It is intended that the proxies solicited by the Board of Directors will be
voted FOR ratification of the appointment of Arthur Andersen LLP.
11
14
OTHER MATTERS
No business other than that set forth above is expected to come before the
Annual Meeting or any adjournment thereof. Should other business properly come
before the Meeting or any adjournment thereof, the proxy holders will vote upon
the same according to their discretion and best judgment.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies for the Annual Meeting will be paid by
the Company. In addition to the solicitation of proxies by mail, the officers
and regular employees of the Company may solicit proxies in person or by
telephone or telegraph. Brokerage houses and other nominees, custodians or
fiduciaries will forward proxy soliciting material and the Company's Annual
Report to Stockholders to the beneficial owners of the shares of the Company's
Common Stock held of record by them, and the Company will reimburse these record
holders for their reasonable out-of-pocket expenses incurred in doing so.
1998 STOCKHOLDER PROPOSALS
A proposal submitted by a stockholder for the regular annual meeting of
stockholders to be held in 1998 must be received by the Secretary, Westinghouse
Air Brake Company, 1001 Air Brake Avenue, Wilmerding, Pennsylvania 15148 on or
prior to December 1, 1997 in order to be eligible for inclusion in the Company's
Proxy Statement for that annual meeting.
By Order of the Board of Directors,
Robert J. Brooks
Chief Financial Officer
and Secretary
12
15
PLEASE MARK
YOUR VOTES
AS THIS
[ X ]
ITEM (1) - The election of the following two Directors for a term expiring in
2000: Robert J. Brooks and Mikael Lilius. A vote FOR includes discretionary
authority to vote for a substituted nominee if any of the nominees listed
becomes unable to serve or for good cause will not serve.
FOR All WITHHOLD
Nominees AUTHORITY
(except as shown to Vote for
to the right) All Nominees
[ ] [ ]
(To withhold authority to vote for one or more
nominees, print such nominee's or nominees' name(s) on the line below).
- -------------------------------------------------
ITEM (2) - The ratification of the appointment of Arthur Andersen LLP as
independent public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date and sign exactly as your name appears hereon and return in the
enclosed envelope. If acting as attorney, executor, administrator, guardian or
trustee, please so indicate with your full title when signing. If a
corporation, please sign in full corporate name, by duly authorized officer. If
shares are held jointly, each stockholder named should sign.
Signature(s) Date
------------------------------------------------ ------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee, or guardian, please give
full title as such.
FOLD AND DETACH HERE
WESTINGHOUSE AIR BRAKE COMPANY
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
Sheraton Hotel at Station Square, Pittsburgh, Pennsylvania
TUESDAY, APRIL 22, 1997 - 9:30 A.M. (LOCAL TIME)
The undersigned stockholder of WESTINGHOUSE AIR BRAKE COMPANY (the "Company")
does hereby appoint WILLIAM E. KASSLING and ROBERT J. BROOKS, and each of them
acting individually, with full power of substitution, as proxies of the
undersigned to vote at the Annual Meeting of Stockholders of the Company, to be
held April 22, 1997 (the "Annual Meeting"), and at all adjournments thereof,
all the Shares of Common Stock of the Company which the undersigned may be
entitled to vote, on the matters set out on the reverse side of this card and
described in the Proxy Statement and, in their discretion, on any other
business which may properly come before the Annual Meeting.
The undersigned stockholder hereby also revokes all previous proxies for the
Annual Meeting, acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement both dated March 31, 1997, and of the Annual
Report to Stockholders for 1996.
You are urged to promptly return this proxy in the enclosed envelope whether or
not you expect to attend the Annual Meeting in person so that your shares may
be voted in accordance with your wishes and in order that the presence of a
quorum may be assured at the Meeting.
The shares represented by this proxy will be voted as directed by the
stockholder. If this proxy is executed but no direction is given, such shares
will be voted "FOR" Items 1 and 2.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
FOLD AND DETACH HERE
16
PLEASE MARK
YOUR VOTES
AS THIS
[ X ]
ITEM (1) - The election of the following two Directors for a term
expiring in 2000:
Nominees: Robert J. Brooks and Mikael Lilius
FOR All Nominees WITHHOLD AUTHORITY
(except as shown to Vote for
to the right) All Nominees
[ ] [ ]
A vote FOR includes discretionary authority to vote for a substituted nominee
if any of the nominees listed becomes unable to serve or for good cause will
not serve.
(To withhold authority to vote for one or more
nominees, print such nominee's or nominees' name(s) on the line below).
- -------------------------------------------------
ITEM (2) - The ratification of the appointment of Arthur Andersen LLP as
independent public accountant of the company for the 1997 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please date and sign exactly as your name appears hereon and return in the
enclosed envelope.
Signature(s) Date
----------------------------------------------- -------------
NOTE: Please sign as name appears hereon.
FOLD AND DETACH HERE
WESTINGHOUSE AIR BRAKE COMPANY
VOTING INSTRUCTIONS FOR THE ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE ESOP TRUSTEE
Sheraton Hotel at Station Square, Pittsburgh, Pennsylvania
TUESDAY, APRIL 22, 1997 - 9:30 A.M. (LOCAL TIME)
The undersigned participant in the WESTINGHOUSE AIR BRAKE COMPANY EMPLOYEE
STOCK OWNERSHIP PLAN does hereby instruct the ESOP Trustee to vote at the
Annual Meeting of Stockholders of Westinghouse Air Brake Company (the
"Company"), to be held April 22, 1997 (the "Annual Meeting"), and at all
adjournments thereof, all the Shares of Common Stock of the Company for which
the undersigned may be entitled to provide instructions, on the matters set out
on the reverse side of this card and described in the Proxy Statement and, in
its discretion, on any other business which may properly come before the Annual
Meeting.
The undersigned participant hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement both dated March 31, 1997, and of
the Annual Report to Stockholders for 1996.
The shares represented by this card will be voted as directed by the
participant. If this card is executed but no direction is given or if such
direction is not received by the ESOP Trustee on or before April 17, 1997, such
shares will be voted in accordance with the Westinghouse Air Brake Company
Employee Stock Ownership Plan and Trust.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
FOLD AND DETACH HERE
17
NOTICE TO PARTICIPANTS
IN THE
WESTINGHOUSE AIR BRAKE COMPANY
RAC VOTING TRUST
Dear Voting Trust Participant:
Enclosed with this notice is Westinghouse Air Brake Company's Proxy
Statement and its 1996 Annual Report to Stockholders. These materials refer to
the Annual Meeting of Stockholders which will be held on
April 22, 1997. The Annual Meeting is being called for the purpose of (i)
electing two nominees for the Board of Directors and (ii) ratifying the
appointment of Arthur Andersen LLP as independent public accountants, as well as
considering any other matters that may properly come before the Meeting.
As a Voting Trust Participant and stockholder, you are cordially invited to
attend the Annual Meeting and I hope that you will make an effort to do so. As
you know, by the terms of the Second Amended WABCO Voting Trust/Disposition
Agreement dated as of December 13, 1995 by which we deposited our shares in the
Voting Trust, we agreed that the Trustees of the Voting Trust will be
responsible for voting the shares we have delivered to the Trust. Accordingly, a
proxy card has not been included with the enclosed materials.
Thank you for your continued cooperation and for your faith in the success
of our joint efforts.
Sincerely,
William E. Kassling
Chairman, President and
Chief Executive Officer
18
U.S. TRUST COMPANY 515 SOUTH FLOWER STREET
OF CALIFORNIA, N.A. SUITE 2700
LOS ANGELES, CA 90071-2291
TELEPHONE: 213 861-5000
U.S.TRUST
NOTICE TO PARTICIPANTS
IN THE
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
Dear ESOP Participant:
Enclosed with this notice is a Proxy Statement and the 1996 Annual Report
of Westinghouse Air Brake Company (the "Company"), describing the Annual Meeting
of Stockholders to be held on April 22, 1997 (the "Annual Meeting"). The Annual
Meeting will be for the purpose of (i) electing two nominees for the Board of
Directors and (ii) ratifying the appointment of Arthur Andersen LLP as
independent public accountants. The Proxy Statement has been prepared by the
Board of Directors of the Company, in connection with the business to be
transacted at the Annual Meeting. THE ITEMS TO BE PRESENTED AT THE ANNUAL
MEETING ARE IMPORTANT AND ARE DESCRIBED IN THE PROXY MATERIALS BEING ENCLOSED
WITH THIS NOTICE.
DIRECTIONS TO THE TRUSTEE
Only U.S. Trust Company of California, N.A. as trustee (the "Trustee") of
the Westinghouse Air Brake Company Employee Stock Ownership Plan (the "ESOP"),
can vote the shares of the Company's stock (the "shares") held by the ESOP.
However, under the terms of the ESOP, you, as a participant in the ESOP, are
entitled to instruct the Trustee how to vote.
Enclosed with this notice is a confidential voting instruction card which
is provided to you for the purpose of instructing the Trustee how to vote the
shares concerning the above matters, which are described in the enclosed Proxy
Statement. Your interest in these matters is important. Please take the time to
complete the voting instruction card and return it to the Trustee. You may
instruct the Trustee to vote for, against, or to abstain approval of such
matters. If you do not provide instructions to the Trustee, your shares will be
voted in the discretion of the Trustee.
The Trustee will vote all shares of the ESOP in accordance with the
instructions set forth on the voting instruction cards which are received by the
Trustee on or before April 17, 1997, unless the Trustee determines such
instructions are contrary to the requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
CONFIDENTIALITY
How you vote will not be revealed, directly or indirectly, to any officer,
any other employee, or any director of the Company or to anyone else, except as
otherwise required by law. You should, therefore, feel completely free to
instruct the Trustee to vote your shares in the manner you think best.
19
VOTING DEADLINE
Because of the time required to tabulate voting instructions from
participants before the Annual Meeting, the Trustee must establish a cut-off
date for receiving your instruction cards. The cut-off date established by the
Trustee is 5:00 P.M. Eastern Time on April 17, 1997. The Trustee cannot insure
that instruction cards received after the cut-off date will be tabulated.
Therefore, it is important that you act promptly and return your instruction
card on or before April 17, 1997, in the envelope provided for your convenience.
If the Trustee does not receive timely instructions from you with respect to
your Shares, the Trustee will vote such shares in its discretion.
If you are a direct stockholder of the Company, you will receive, under
separate cover, proxy solicitation materials including a proxy card. That card
should be used to vote the shares you hold directly and CANNOT be used to direct
the voting of shares held by the ESOP.
FURTHER INFORMATION
If you have questions regarding the information provided to you, you may
contact the Trustee at (800) 535-3093 between 11:30 A.M. and 8:00 P.M. Eastern
Time, Monday through Friday.
Your ability to instruct the Trustee how to vote your ESOP shares is an
important part of your rights as an ESOP participant. Please consider the
enclosed material carefully and then furnish your voting instructions promptly.
Dated March 31, 1997
U.S. Trust Company of California,
N.A., as Trustee of
WESTINGHOUSE AIR BRAKE COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
