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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 25049
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of earliest event reported): June 2, 1999.
Westinghouse Air Brake Company
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(Exact name of registrant as specified in its charter)
Delaware 1-13782 25-1615902
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(State or other jurisdiction (Commission file (IRS Employer Identification
of incorporation) number) Number)
1001 Air Brake Avenue
Wilmerding, Pennsylvania 15148 15222
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (412) 825-1000
Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On June 2, 1999, Westinghouse Air Brake Company, a Delaware corporation
("WABCO"), agreed to merge with and into (the "Merger") MotivePower Industries,
Inc., a Pennsylvania corporation ("MotivePower"). The terms of the Merger are
set forth in an Agreement and Plan of Merger (the "Merger Agreement"), dated as
of June 2, 1999, between WABCO and MotivePower. In the Merger, each share of
WABCO Common Stock, par value $0.01 per share (the "WABCO Common Stock"), will
be converted into 1.3 shares of MotivePower's Common Stock, par value $0.01 per
share (the "MotivePower Common Stock"). WABCO and MotivePower issued a joint
press release announcing the execution of the Merger Agreement on June 3, 1999,
a copy of which is filed as Exhibit 99.1 hereto and which is incorporated herein
by reference.
The Merger is intended to constitute a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, and will be accounted for as a
pooling of interests.
Consummation of the Merger is subject to various conditions, including:
(i) approval and adoption of the Merger Agreement and the Merger by the
shareholders of each of WABCO and MotivePower; (ii) the expiration or
termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the receipt of certain other approvals
required under foreign laws; (iii) registration of the shares of MotivePower
Common Stock to be issued in the Merger under the Securities Act of 1933, as
amended (the "Securities Act"); (iv) receipt of opinions of counsel as to the
federal tax treatment of certain aspects of the Merger; and (v) satisfaction of
certain other conditions.
The Merger Agreement and the transactions contemplated thereby will be
submitted for adoption and approval at the meetings of the shareholders of each
of MotivePower and WABCO. Prior to such meetings, MotivePower will file a
registration statement with the Securities and Exchange Commission registering
under the Securities Act the MotivePower Common Stock to be issued in the
Merger. Such shares of MotivePower Common Stock will be offered to WABCO
shareholders pursuant to a prospectus that will also serve as a joint proxy
statement for the shareholders' meetings.
The foregoing summary of the Merger Agreement is qualified in its
entirety by reference to the text of the Merger Agreement, a copy of which is
filed as Exhibit 2.1 hereto and which is incorporated herein by reference.
In connection with the execution of the Merger Agreement, MotivePower
and WABCO entered into the WABCO Stock Option Agreement (the "WABCO Option
Agreement") pursuant to which WABCO granted MotivePower an option (the "WABCO
Option") to purchase up to approximately 19% of the outstanding shares of WABCO
Common Stock (before giving effect to the WABCO Option) exercisable in the
circumstances specified in the WABCO Option Agreement. MotivePower and WABCO
also entered into the MotivePower Stock Option Agreement (the "MotivePower
Option Agreement") pursuant to which MotivePower granted WABCO an option (the
"MotivePower Option") to purchase up to approximately 19% of the outstanding
shares of
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MotivePower Common Stock (before giving effect to the MotivePower Option)
exercisable in the circumstances specified in the MotivePower Option Agreement.
The foregoing summaries of the WABCO Option Agreement and the
MotivePower Option Agreement are qualified in their entirety by reference to the
text of such agreements, copies of which are filed as Exhibits 2.2 and 2.3
hereto and which are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) -- (b) Not applicable.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of June 2, 1999,
between MotivePower Industries, Inc. and Westinghouse Air
Brake Company.
2.2 WABCO Stock Option Agreement, dated as of June 2, 1999,
between MotivePower Industries, Inc. and Westinghouse Air
Brake Company.
2.3 MotivePower Stock Option Agreement, dated as of June 2, 1999,
between MotivePower Industries, Inc. and Westinghouse Air
Brake Company.
99.1 Text of joint press release dated June 3, 1999, issued by
MotivePower Industries, Inc. and Westinghouse Air Brake
Company.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
WESTINGHOUSE AIR BRAKE COMPANY
Date: June 3, 1999 By: /s/ Robert J. Brooks
---------------------------------
Robert J. Brooks
Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
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2.1 Agreement and Plan of Merger, dated as of June 2, 1999, between
MotivePower Industries, Inc. and Westinghouse Air Brake Company.
2.2 WABCO Stock Option Agreement, dated as of June 2, 1999, between
MotivePower Industries, Inc. and Westinghouse Air Brake Company.
2.3 MotivePower Stock Option Agreement, dated as of June 2, 1999,
between MotivePower Industries, Inc. and Westinghouse Air Brake
Company.
99.1 Text of joint press release dated June 3, 1999, issued by
MotivePower Industries, Inc. and Westinghouse Air Brake Company.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
MOTIVEPOWER INDUSTRIES, INC.
AND
WESTINGHOUSE AIR BRAKE COMPANY
DATED AS OF JUNE 2, 1999
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TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
PAGE
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ARTICLE I
THE MERGER
Section 1.1. The Merger...................................................2
Section 1.2. Effective Time...............................................2
Section 1.3. Effects of the Merger........................................2
Section 1.4. Charter and By-Laws; Board of Directors;
Management Succession.....................................2
Section 1.5. Conversion of Securities.....................................3
Section 1.6. MotivePower to Make Certificates Available...................4
Section 1.7. Dividends; Transfer Taxes; Withholding.......................5
Section 1.8. No Fractional Securities.....................................6
Section 1.9. Return of Exchange Fund......................................6
Section 1.10. No Further Ownership Rights in WABCO Common
Stock.....................................................6
Section 1.11. Closing of WABCO Transfer Books..............................7
Section 1.12. Lost Certificates............................................7
Section 1.13. Further Assurances...........................................7
Section 1.14. Closing......................................................7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WABCO
Section 2.1. Corporate Organization.......................................8
Section 2.2. Capitalization...............................................9
Section 2.3. Authority; No Violation.....................................10
Section 2.4. Consents and Approvals......................................11
Section 2.5. SEC Documents and Other Reports.............................12
Section 2.6. Registration Statement and Joint Proxy
Statement................................................12
Section 2.7. Absence of Certain Changes or Events........................13
Section 2.8. Permits and Compliance......................................14
Section 2.9. Tax Matters.................................................14
Section 2.10. Actions and Proceedings.....................................15
Section 2.11. Certain Agreements..........................................16
Section 2.12. ERISA.......................................................16
Section 2.13. Labor Matters...............................................19
Section 2.14. Intellectual Property; Year 2000 Compliance.................19
Section 2.15. Environmental and Safety Matters............................20
Section 2.16. Insurance...................................................21
Section 2.17. Parachute Payments to Disqualified
Individuals..............................................21
Section 2.18. Required Vote of WABCO Stockholders.........................22
Section 2.19. State Takeover Laws.........................................22
Section 2.20. Pooling of Interests; Reorganization........................22
Section 2.21. Opinion of Financial Advisor................................22
Section 2.22. Broker's Fees...............................................22
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Section 2.23. Unlawful Payments and Contributions..........................23
Section 2.24. Real Property................................................23
Section 2.25. Material Contracts...........................................24
Section 2.26. Warranties...................................................24
Section 2.26. Pooling Letter...............................................25
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF MOTIVEPOWER
Section 3.1. Corporate Organization.......................................25
Section 3.2. Capitalization...............................................26
Section 3.3. Authority; No Violation......................................27
Section 3.4. Consents and Approvals.......................................28
Section 3.5. SEC Documents and Other Reports..............................29
Section 3.6. Registration Statement and Joint Proxy
Statement.................................................29
Section 3.7. Absence of Certain Changes or Events.........................30
Section 3.8. Permits and Compliance.......................................31
Section 3.9. Tax Matters..................................................31
Section 3.10. Actions and Proceedings......................................32
Section 3.11. Certain Agreements...........................................32
Section 3.12. ERISA........................................................33
Section 3.13. Labor Matters................................................35
Section 3.14. Intellectual Property; Year 2000 Compliance..................35
Section 3.15. Environmental and Safety Matters.............................36
Section 3.16. Insurance....................................................37
Section 3.17. Parachute Payments to Disqualified
Individuals...............................................37
Section 3.18. Required Vote of MotivePower Stockholders....................38
Section 3.19. State Takeover Laws: Certain Charter
Provisions................................................38
Section 3.20. Pooling of Interests; Reorganization.........................38
Section 3.21. Opinion of Financial Advisor.................................38
Section 3.22. Broker's Fees................................................39
Section 3.23. Rights Agreement; Other Matters..............................39
Section 3.24. Unlawful Payments and Contributions..........................39
Section 3.25. Real Property................................................39
Section 3.26. Material Contracts...........................................40
Section 3.27. Warranties...................................................41
Section 3.28. Pooling Letter...............................................41
ARTICLE IV
CONDUCT OF BUSINESS
Section 4.1. Conduct of WABCO.............................................42
Section 4.2. Conduct of MotivePower.......................................45
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PAGE
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ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. No Solicitation...............................................48
Section 5.2. Joint Proxy Statement; Registration Statement.................50
Section 5.3. Shareholders Meetings.........................................51
Section 5.4. Access to Information.........................................52
Section 5.5. Notices of Certain Events.....................................52
Section 5.6. Appropriate Action; Consents; Filings.........................53
Section 5.7. Public Disclosure.............................................56
Section 5.8. Reorganization................................................56
Section 5.9. Comfort Letters...............................................56
Section 5.10. Compliance with the Securities Act and
Pooling of Interests Restrictions..........................57
Section 5.11. Listing or Quotation of Stock.................................58
Section 5.12. Indemnification of Directors and Officers.....................58
Section 5.13. WABCO Stock Options...........................................59
Section 5.14. WABCO Employee Stock Purchase Plan............................60
Section 5.15. Benefit Plans to be Honored...................................60
Section 5.16. State Takeover Laws...........................................60
Section 5.17. Transfer Taxes................................................61
ARTICLE VI
CONDITIONS TO MERGER
Section 6.1. Conditions to Each Party's Obligations........................61
Section 6.2. Additional Conditions to Obligations of
MotivePower................................................61
Section 6.3. Additional Conditions to Obligations of WABCO.................63
ARTICLE VII
TERMINATION
Section 7.1. Termination...................................................65
Section 7.2. Effect of Termination.........................................67
Section 7.3. Fees and Expenses.............................................67
Section 7.4. Amendment.....................................................69
Section 7.5. Extension; Waiver.............................................69
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties
and Agreements.............................................69
Section 8.2. Notices.......................................................69
Section 8.3. Interpretation................................................71
Section 8.4. Counterparts..................................................71
Section 8.5. Entire Agreement; No Third Party Beneficiaries................71
Section 8.6. Governing Law.................................................71
Section 8.7. Assignment....................................................71
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TABLE OF DEFINED TERMS
Term Section
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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)
MotivePower Leases 3.25(b)
MotivePower Material Contracts 3.26
MotivePower Multiemployer Plan 3.12(d)(ii)
MotivePower Option Agreement Recitals
MotivePower Option Plan 3.2(a)
MotivePower Owned Real Property 3.25(a)
MotivePower Permits 3.8
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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)
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"), 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
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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. 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-
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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
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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, 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.
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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
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in respect of which such deduction and withholding was made by MotivePower or
the Exchange Agent.
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
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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 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
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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.
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True and complete copies of the Restated Certificate of Incorporation (the
"WABCO Certificate of Incorporation") and Amended and Restated By-Laws of
WABCO, as in effect as of the date of this Agreement, have previously been made
available by WABCO to MotivePower.
(b) Each WABCO Subsidiary (i) is duly organized and validly existing
under the laws of its jurisdiction of organization, (ii) is duly qualified to
do business and in good standing in all jurisdictions (whether federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on WABCO and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
(c) The minute books of WABCO accurately reflect in all material
respects all material corporate actions held or taken since January 1, 1997 of
its stockholders and Board of Directors (including committees of the Board of
Directors of WABCO).
Section 2.2. Capitalization. (a) The authorized capital stock of WABCO
consists of (i) 100,000,000 shares of WABCO Common Stock, of which, as of May
27, 1999, 33,966,897 shares were issued and outstanding and 13,459,703 shares
were held in treasury, and (ii) 1,000,000 shares of Preferred Stock, par value
$.01 per share, of WABCO (the "WABCO Preferred Stock"), none of which, as of
the date hereof, were designated, issued and outstanding. All of the issued and
outstanding shares of WABCO Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except pursuant to the terms of options issued pursuant to the WABCO
1995 Stock Incentive Plan, as amended (the "1995 Option Plan"), or the 1995
Non-Employee Directors' Fee and Stock Option Plan (the "1995 Director Option
Plan" and, together with the 1995 Option Plan, the "WABCO Stock Plans"), 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
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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)
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constitutes a valid and binding obligation of WABCO, enforceable against WABCO
in accordance with its terms.
(b) Neither the execution and delivery of this Agreement or the WABCO
Option Agreement by WABCO nor the consummation by WABCO of the transactions
contemplated hereby or thereby, nor compliance by WABCO with any of the terms
or provisions hereof or thereof, will (i) violate any provision of the WABCO
Certificate of Incorporation or the WABCO By-Laws or (ii) assuming that the
consents and approvals referred to in Section 2.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to WABCO or any of its Subsidiaries or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of WABCO or any of its Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture or other agreement,
instrument for borrowed money, any guarantee of any agreement or instrument for
borrowed money or any license, lease or any other agreement or instrument
("Material Agreement") to which WABCO or any of its Subsidiaries is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have a Material Adverse Effect on WABCO.
Section 2.4. Consents and Approvals. Except (i) in connection, or in
compliance, with the provisions of the Hart- Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) for the filing of
any required applications or notices with any state or foreign agencies and
approval of such applications and notices (the "State and Foreign Approvals"),
(iii) for the filing with the Securities and Exchange Commission (the "SEC") of
a joint proxy statement in definitive form relating to the meetings of
MotivePower's shareholders and WABCO's stockholders to be held in connection
with this Agreement and the transactions contemplated hereby (the "Joint Proxy
Statement") and the registration statement on Form S-4 (the "Registration
Statement") in which the Joint Proxy Statement will be included as a
prospectus, (iv) for the filing of the Articles of Merger with the Department
of State of the Commonwealth of Pennsylvania and the filing of the Certificate
of Merger with the Secretary of State of Delaware, (v) for such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states or the NYSE in connection with the issuance or
listing of the shares of
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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 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
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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
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a description of any material changes, between December 31, 1998 and the date
of this Agreement (excluding any intervening fluctuations between such dates),
to the amount and terms of the indebtedness of WABCO and its Subsidiaries as
described in WABCO's Annual Report on Form 10-K for the year ended December 31,
1998, as filed with the SEC (other than any changes in, or the incurrence of,
indebtedness of WABCO or any of its Subsidiaries with a principal amount not in
excess of $1,000,000).
Section 2.8. Permits and Compliance. Each of WABCO and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, charters, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity (collectively,
"Permits") necessary for WABCO or any of its Subsidiaries to own, lease and
operate its properties or to carry on its business as it is now being conducted
(the "WABCO Permits"), except where the failure to have any of the WABCO
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on WABCO, and, as of the date of this Agreement, no suspension or
cancellation of any of the WABCO Permits is pending or, to the Knowledge of
WABCO, threatened, except where the suspension or cancellation of any of the
WABCO Permits, individually or in the aggregate, would not have a Material
Adverse Effect on WABCO. Neither WABCO nor any of its Subsidiaries is in
violation of (i) its charter, by-laws or equivalent documents, (ii) any
applicable law, ordinance, administrative or governmental rule or regulation or
(iii) any order, decree or judgment of any Governmental Entity having
jurisdiction over WABCO or any of its Subsidiaries, except, in the case of
clauses (i), (ii) and (iii), for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on WABCO. "Knowledge of
WABCO" means the actual knowledge, after reasonable investigation, of the
individuals identified in Section 2.8 of the WABCO Disclosure Letter.
Section 2.9. Tax Matters. Except as otherwise set forth in Section 2.9
of the WABCO Disclosure Letter, (i) WABCO and each of its Subsidiaries have
filed all federal, and all material state, local, foreign and provincial, Tax
Returns required to have been filed or appropriate extensions therefor have
been properly obtained, and such Tax Returns are correct and complete, except
to the extent that any failure to so file or any failure to be correct and
complete, individually or in the aggregate, would not have a Material Adverse
Effect on WABCO; (ii) all Taxes shown to be due on such Tax Returns have been
timely paid or extensions for payment have been properly obtained, or such
Taxes are being timely and properly contested, (iii) WABCO and each of its
Subsidiaries have complied in all material respects with all rules and
regulations relating to the withholding of Taxes except to the extent that any
failure to comply with such rules and regulations, individually or in the
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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
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its or their properties, assets or business or any WABCO Plan that,
individually or in the aggregate, would have a Material Adverse Effect on
WABCO. There are no actions, suits, labor disputes or other litigation, legal
or administrative proceedings or governmental investigations pending or, to the
Knowledge of WABCO, threatened against or affecting WABCO or any of its
Subsidiaries or any of its or their officers, directors or employees, as such,
or any of its or their properties, assets or business relating to the
transactions contemplated by this Agreement or the WABCO Option Agreement.
Section 2.11. Certain Agreements. Except as set forth in Section 2.11
of 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
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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
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
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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
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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.
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.
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(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
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27
obligation that, individually or in the aggregate, has not had, and would not
have, a Material Adverse Effect on WABCO.
(b) WABCO and its predecessors and Subsidiaries have not caused or
permitted any property, asset, operation, including any previously owned
property, asset or operation, to use, generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer or process hazardous or toxic
materials, substances, wastes, pollutants or contaminants, except in material
compliance with all Environmental Laws and Worker Safety Laws, other than any
such activity that, individually or in the aggregate, has not had, and would
not have, a Material Adverse Effect on WABCO. WABCO and its Subsidiaries have
not reported to any Governmental Entity, or been notified by any Governmental
Entity of the existence of, any material violation of an Environmental Law or
any release, discharge or emission of any hazardous or toxic materials,
substances, wastes, pollutants or contaminants, other than any such violation,
release, discharge or emission that, individually or in the aggregate, has not
had, and would not have, a Material Adverse Effect on WABCO.
(c) With respect to WABCO, neither this Agreement nor the consummation
of the transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or consent of
any Governmental Entity or third party, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental Laws,
other than any such obligations that, individually or in the aggregate, would
not have a Material Adverse Effect on WABCO.
(d) This Section sets forth the sole representations and warranties of
WABCO with respect to environmental, health or safety matters, including
without limitation all matters arising under Environmental Laws and Worker
Safety Laws.
Section 2.16. Insurance. WABCO and its Subsidiaries have in effect
insurance coverage with reputable insurers, which in respect of amounts,
premiums, types and risks insured, constitutes reasonably adequate coverage
against all risks customarily insured against by companies of comparable size
and with similar operations.
Section 2.17. Parachute Payments to Disqualified Individuals. Except
as set forth in Section 2.17 of the WABCO Disclosure Letter, no payment or
other benefit, and no acceleration of the vesting of any options, payments or
other benefits, will, as a direct or indirect result of the transactions
contemplated by this Agreement, be (or under Section 280G of the Code and the
Treasury Regulations thereunder be presumed to be) a "parachute payment" to a
"disqualified individual" (as those terms are defined in Section 280G of the
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28
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 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
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29
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with the Merger or
related transactions contemplated by this Agreement or the WABCO Option
Agreement.
Section 2.23. Unlawful Payments and Contributions. To the Knowledge of
WABCO, neither WABCO, any Subsidiary nor any of their respective directors,
officers or any of their respective employees or agents has (i) used any WABCO
funds for any unlawful contribution, endorsement, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any person.
Section 2.24. Real Property. (a) Section 2.24(a) of the WABCO
Disclosure Letter lists each material parcel of real property owned by WABCO or
any of its Subsidiaries (the "WABCO Owned Property"). WABCO or its applicable
Subsidiary has good and marketable title in and to all of the WABCO Owned
Property, subject to no Liens that would have a Material Adverse Effect on
WABCO or materially impair WABCO's rights to or ability to use any such
property, except as described on Section 2.24(a) of the WABCO Disclosure
Letter.
(b) Section 2.24(b) of the WABCO Disclosure Letter sets forth a list
of all material leases, subleases and other occupancy agreements, including all
amendments, extensions and other modifications (the "WABCO Leases") for real
property (the "WABCO Leased Property"; the WABCO Owned Property and the WABCO
Leased Property collectively the "WABCO Real Property") to which WABCO or any
of its Subsidiaries is a party. WABCO or its applicable Subsidiary has a good
and valid leasehold interest in and to all of the WABCO Leased Property,
subject to no Liens except as described in Section 2.24(b) of the WABCO
Disclosure Letter. Each WABCO Lease is in full force and effect and is
enforceable in accordance with its terms. There exists no default or condition
which, with the giving of notice, the passage of time or both, could become a
default under any WABCO Lease in any case, that would have a Material Adverse
Effect on WABCO or materially impair WABCO's rights to or ability to use any
such property. WABCO has previously delivered to MotivePower true and complete
copies of all the WABCO Leases. Except as described on Section 2.24(b) of the
WABCO Disclosure Letter, no consent, waiver, approval or authorization is
required from the landlord under any WABCO Lease as a result of the execution
of this Agreement or the consummation of the transactions contemplated hereby
the failure to obtain would have a Material Adverse Effect on WABCO or
materially impair WABCO's rights to or ability to use any such property.
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Section 2.25. Material Contracts. There have been made available to
MotivePower, its affiliates and their representatives true and complete copies
of all of the following contracts to which WABCO or any of its Subsidiaries is
a party or by which any of them is bound (collectively, the "WABCO Material
Contracts"): (i) contracts with any current officer or director of WABCO or any
of its Subsidiaries; (ii) contracts for the sale of any of the assets of WABCO
or any of its Subsidiaries other than in the ordinary course of business or for
the grant to any person of any preferential rights to purchase any of its
assets other than inventory in the ordinary course of business; (iii) contracts
containing covenants of WABCO or any of its Subsidiaries not to compete in any
line of business or with any person in any geographical area or covenants of
any other person not to compete with WABCO or any of its Subsidiaries in any
line of business or in any geographical area; (iv) material indentures, credit
agreements, mortgages, promissory notes, and all contracts relating to the
borrowing of money; and (v) all other agreements contracts or instruments
which, in the reasonable opinion of WABCO, are material to WABCO or any of its
Subsidiaries. Except as set forth in Section 2.25 of the WABCO Disclosure
Letter or as would not have a Material Adverse Effect on WABCO, all of the
WABCO Material Contracts are in full force and effect and are the legal, valid
and binding obligation of WABCO or its Subsidiaries, enforceable against them
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as set forth in Section 2.25 of the
WABCO Disclosure Letter, neither WABCO nor any Subsidiary is in default in any
material respect under any WABCO Material Contract nor, to the Knowledge of
WABCO, is any other party to any WABCO Material Contract in default thereunder
in any material respect except, in each case, for those defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
WABCO.
Section 2.26. Warranties. To WABCO's Knowledge, the accrual for
warranty related expenses as of December 31, 1998 reported in WABCO's audited
financial statement contained in WABCO's Form 10-K for the year ended December
31, 1998, adequately reflects an amount required for satisfaction of warranty
claims due in respect of goods sold or services provided by WABCO or any of its
Subsidiaries prior to such date. Such provision has been established in
accordance with GAAP. Neither WABCO nor its Subsidiaries have agreed to provide
any express product or service warranties other than (a) standard warranties,
the terms of which have been provided to MotivePower and identified as WABCO's
standard warranties, (b) warranties that (i) parts and components are free from
defects in workmanship or comply with standard or agreed specifications that
are extended
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31
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 2.26. 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
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standing in all jurisdictions (whether federal, state, local or foreign) where
its ownership or leasing of property or the conduct of its business requires it
to be so qualified and in which the failure to be so qualified would have a
Material Adverse Effect on MotivePower and (iii) has all requisite corporate
power and authority to own or lease its properties and assets and to carry on
its business as now conducted.
(c) The minute books of MotivePower accurately reflect in all material
respects all material corporate actions held or taken since January 1, 1997 of
its shareholders and Board of Directors (including committees of the Board of
Directors of MotivePower).
Section 3.2. Capitalization. (a) The authorized capital stock of
MotivePower consists of (i) 55,000,000 shares of MotivePower Common Stock, of
which, as of May 27, 1999, 27,019,235 shares were issued and outstanding and no
shares were held in treasury, and (ii) 10,000,000 shares of Preferred Stock,
par value $.01 per share, of MotivePower (the "MotivePower Preferred Stock"),
1,600,000 shares of which, as of the date hereof, have been designated Series C
Junior Participating Preferred Stock (the "MotivePower Series C Preferred
Stock") and none of which, as of the date hereof, were, issued and outstanding.
All of the issued and outstanding shares of MotivePower Common Stock have been
duly authorized and validly issued and are fully paid, nonassessable and free
of preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except 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
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33
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 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
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34
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
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and delivery by MotivePower of this Agreement and the MotivePower Option
Agreement and (B) the consummation by MotivePower of the Merger and the other
transactions contemplated by this Agreement and the MotivePower Option
Agreement.
Section 3.5. SEC Documents and Other Reports. MotivePower has filed
all required documents with the SEC since January 1, 1997 (the "MotivePower SEC
Documents"). As of their respective dates, the MotivePower SEC Documents
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and, at the respective times they were
filed, none of the MotivePower SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of
MotivePower included in the MotivePower SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as of their respective
dates of filing, were prepared in accordance with GAAP (except, in the case of
the unaudited statements, as permitted by Regulation S-X of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented in all material respects
the consolidated financial position of MotivePower and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as
disclosed in the MotivePower SEC Documents or as required by GAAP, MotivePower
has not, since December 31, 1998, made any change in the accounting practices
or policies applied in the preparation of its financial statements.
Section 3.6. Registration Statement and Joint Proxy Statement. None of
the information to be supplied by MotivePower for inclusion or incorporation by
reference in the Registration Statement or the Joint Proxy Statement will (i)
in the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Joint Proxy Statement, at the
time of the mailing of the Joint Proxy Statement and at the respective times of
the Shareholders Meetings, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event with respect to MotivePower, its officers and directors or any of
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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).
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Section 3.8. Permits and Compliance. Except as set forth in Section
3.8 of the MotivePower Disclosure Letter, each of MotivePower and its
Subsidiaries is in possession of all Permits necessary for MotivePower or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "MotivePower Permits"), except where
the failure to have any of the MotivePower Permits would not, individually or
in the aggregate, have a Material Adverse Effect on MotivePower, and, as of the
date of this Agreement, no suspension or cancellation of any of the MotivePower
Permits is pending or, to the Knowledge of MotivePower, threatened, except
where the suspension or cancellation of any of the MotivePower Permits,
individually or in the aggregate, would not have a Material Adverse Effect on
MotivePower. Neither MotivePower nor any of its Subsidiaries is in violation of
(i) its charter, by-laws or equivalent documents, (ii) any applicable law,
ordinance, administrative or governmental rule or regulation or (iii) any
order, decree or judgment of any Governmental Entity having jurisdiction over
MotivePower or any of its Subsidiaries, except, in the case of clauses (i),
(ii) and (iii), for any violations that, individually or in the aggregate,
would not have a Material Adverse Effect on MotivePower. "Knowledge of
MotivePower" means the actual knowledge, after reasonable investigation, of the
individuals identified in Section 3.8 of the MotivePower Disclosure Letter.
Section 3.9. Tax Matters. Except as otherwise set forth in Section 3.9
of the MotivePower Disclosure Letter, (i) MotivePower and each of its
Subsidiaries have filed all federal, and all material state, local, foreign and
provincial, Tax Returns required to have been filed or appropriate extensions
therefor have been properly obtained, and such Tax Returns are correct and
complete, except to the extent that any failure to so file or any failure to be
correct and complete, individually or in the aggregate, would not have a
Material Adverse Effect on MotivePower; (ii) all Taxes shown to be due on such
Tax Returns have been timely paid or extensions for payment have been properly
obtained, or such Taxes are being timely and properly contested, (iii)
MotivePower and each of its Subsidiaries have complied in all material respects
with all rules and regulations relating to the withholding of Taxes except to
the extent that any failure to comply with such rules and regulations,
individually or in the aggregate, would not have a Material Adverse Effect on
MotivePower; (iv) neither MotivePower nor any of its Subsidiaries has waived
any statute of limitations in respect of its Taxes which waiver is currently in
effect; (v) any Tax Returns referred to in clause (i) relating to federal and
state income Taxes have been examined by the IRS or the appropriate state
taxing authority or the period for assessment of the Taxes in respect of which
such Tax Returns were required to be filed has expired; (vi) no issues that
have been raised in writing by the relevant taxing authority in connection with
the
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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 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
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39
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
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have, individually or in the aggregate, a Material Adverse Effect on
MotivePower. Except as listed on Section 3.12(c) of the MotivePower Disclosure
Letter, all MotivePower Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the IRS to be so qualified, or a
timely application for such determination is now pending or will be filed on a
timely basis and, except as listed on Section 3.12(c) of the MotivePower
Disclosure Letter, to the Knowledge of MotivePower there is no reason why any
MotivePower Plan is not so qualified in operation. Neither MotivePower nor any
of its ERISA Affiliates has been notified by any MotivePower Multiemployer Plan
that such MotivePower Multiemployer Plan is currently in reorganization or
insolvency under and within the meaning of Section 4241 or 4245 of ERISA or
that such MotivePower Multiemployer Plan intends to terminate or has been
terminated under Section 4041A of ERISA. To the Knowledge of MotivePower,
neither the termination of any MotivePower Multiemployer Plan nor the complete
or partial withdrawal by MotivePower or any of its ERISA Affiliates from any
MotivePower Multiemployer Plan would result in any liability of MotivePower or
any of its ERISA Affiliates that would have, individually or in the aggregate,
a Material Adverse Effect on MotivePower. Except as disclosed in Section
3.12(c) of the MotivePower Disclosure Letter, neither MotivePower nor any of
its ERISA Affiliates has any liability or obligation under any welfare plan to
provide life insurance or medical benefits after termination of employment to
any employee or dependent other than as required by (i) Part 6 of Title 1 of
ERISA or (ii) the laws of a jurisdiction outside the United States.
(d) As used in this Agreement, (i) "MotivePower Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a MotivePower
Multiemployer Plan (as hereinafter defined))), a "welfare plan" (as defined in
Section 3(1) of ERISA), or any material bonus, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, severance, death benefit, insurance or other
plan, arrangement or understanding, in each case established or maintained or
contributed to by MotivePower or any of its ERISA Affiliates or as to which
MotivePower or any of its ERISA Affiliates or otherwise may have any liability,
whether or not covered by ERISA (other than a MotivePower Ex-U.S. Pension Plan
(as hereinafter defined)), and (ii) "MotivePower Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which
MotivePower or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability.
(e) Section 3.12(e) of the MotivePower Disclosure Letter contains a
list of each MotivePower Ex-U.S. Pension Plan and MotivePower has provided to
WABCO a copy of any written plan document. Except as would not have,
individually or in the
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41
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
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42
Rights as are necessary in connection with the business of MotivePower and its
Subsidiaries, taken as a whole, except where the failure to have such
Intellectual Property Rights, individually or in the aggregate, would not have
a Material Adverse Effect on MotivePower. Neither MotivePower nor any of its
Subsidiaries has infringed any Intellectual Property Rights of any third party
other than any infringements that, individually or in the aggregate, would not
have a Material Adverse Effect on MotivePower. Neither MotivePower nor its
Subsidiaries are aware of any infringement or misappropriation by any person
with respect to the Intellectual Property Rights owned or used by MotivePower
or its Subsidiaries other than any such infringement or misappropriation that
would not have a Material Adverse Effect on MotivePower. All Intellectual
Property Rights owned or used by MotivePower or its Subsidiaries as of the date
hereof will be owned or available for use by MotivePower and its Subsidiaries
on terms and conditions immediately following the Effective Date that are not
materially different from those existing prior to the Effective Date.
(b) MotivePower and each of its Subsidiaries have conducted a
commercially reasonable inventory and assessment of the Computer Systems used
by MotivePower and its Subsidiaries in its business, in order to determine
which parts of the Computer System are not yet Year 2000 Compliant and to
estimate the cost of rendering such Computer Systems Year 2000 Compliant prior
to January 1, 2000 or such earlier date on which the Computer Systems may shut
down or produce incorrect calculations or otherwise malfunction without
becoming totally inoperable. Based on the above inventory and assessment, the
estimated cost to be incurred after the date of this Agreement of rendering the
Computer Systems Year 2000 Compliant is $300,000, which has been included in
the current budget adopted by MotivePower.
Section 3.15. Environmental and Safety Matters. (a) Except as set
forth in Section 3.15 of the MotivePower Disclosure Letter, the properties,
assets and operations of MotivePower and its predecessors and Subsidiaries have
complied and are in compliance with all Worker Safety Laws and Environmental
Laws, except for any violations that, individually or in the aggregate, have
not had, and would not have, a Material Adverse Effect on MotivePower. With
respect to such properties, assets and operations, including any previously
owned, leased or operated properties, assets or operations, except as set forth
in Section 3.15 of the MotivePower Disclosure Letter, there are no past,
present or reasonably anticipated future events, conditions, circumstances,
activities, practices, incidents, actions or plans of MotivePower or any of its
predecessors or Subsidiaries that would interfere with or prevent compliance or
continued compliance with or give rise to any liabilities or investigatory,
corrective or remedial obligations under applicable Worker Safety Laws and
Environmental Laws, other than any such interference,
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43
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
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44
transactions contemplated by this Agreement, be (or under Section 280G of the
Code and the Treasury Regulations thereunder be presumed to be) a "parachute
payment" to a "disqualified individual" (as those terms are defined in Section
280G of the Code and the Treasury Regulations thereunder) with respect to
MotivePower or any of its Subsidiaries, without regard to whether such payment
or acceleration is reasonable compensation for personal services performed or
to be performed in the future. The approximate aggregate amount of "parachute
payments" related to the matters set forth in such Section 3.17 of the
MotivePower Disclosure Letter, assuming the Closing occurs on 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.
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45
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.
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
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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
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contracts or instruments which, in the reasonable opinion of MotivePower, are
material to MotivePower or any of its Subsidiaries. Except as set forth or as
would not have a Material Adverse Effect on MotivePower, all of the MotivePower
Material Contracts are in full force and effect and are the legal, valid and
binding obligation of MotivePower or its Subsidiaries, enforceable against them
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as set forth in Section 3.26 of the
MotivePower Disclosure Letter, neither MotivePower nor any Subsidiary is in
default in any material respect under any MotivePower Material Contract nor, to
the Knowledge of MotivePower, is any other party to any MotivePower Material
Contract in default thereunder in any material respect except, in each case,
for those defaults that, individually or in the aggregate, would not have a
Material Adverse Effect on MotivePower.
Section 3.27. Warranties. To MotivePower's Knowledge, the accrual for
warranty related expenses as of December 31, 1998 reported in MotivePower's
audited financial statement contained in MotivePower's Form 10-K for the year
ended December 31, 1998, adequately reflects an amount required for
satisfaction of warranty claims due in respect of goods sold or services
provided by MotivePower or any of its Subsidiaries prior to such date. Such
provision has been established in accordance with GAAP. Except as set forth in
Section 3.27 of the MotivePower Disclosure Letter, neither MotivePower nor its
Subsidiaries have agreed to provide any express product or service warranties
other than (a) standard warranties, the terms of which have been provided to
MotivePower and identified as MotivePower's standard warranties, (b) warranties
that products are free from defects in workmanship or comply with standard or
agreed specifications that are extended for terms of no more than two (2) years
each and that expressly provide that cure is to be effected by repair or
replacement of the defective or noncomplying products and (c) other warranties
that, individually or in the aggregate, will not, if material claims are made
thereunder, have a Material Adverse Effect on MotivePower.
Section 3.28. Pooling Letter. MotivePower has received a draft of a
letter (the "Draft Letter") from Deloitte & Touche LLP and addressed to
MotivePower, a copy of which has been delivered to WABCO, in which Deloitte &
Touche LLP concurs with the MotivePower management's conclusions that no
conditions exist related to MotivePower that would preclude MotivePower from
accounting for the Merger as a pooling of interests. MotivePower has also
received a letter from Deloitte & Touche LLP dated as of June 2, 1999 and
addressed to MotivePower, a copy of which has
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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, consolidation, spinoff or other
dispositions of stock or assets) of WABCO or any of its
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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
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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;
(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;
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(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
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52
hereof, (B) the award of options in connection with new employee hires in the
ordinary course of business and consistent with past practice; provided,
however, that no such new employee shall receive options to purchase more than
5,000 shares of MotivePower Common Stock, (C) pursuant to existing obligations
under contracts or agreements in force at the date of this Agreement and (D)
sales or other dispositions of property and assets of MotivePower and its
Subsidiaries in an aggregate amount that does not exceed $1,000,000;
(e) create or incur any material Lien on any material asset (tangible
or intangible) other than in the ordinary course of business and consistent
with past practice;
(f) make any material loan, advance or capital contributions to or
investments in any Person other than loans, advances or capital contributions
to or investments in wholly-owned Subsidiaries of MotivePower made in the
ordinary course and consistent with past practices;
(g) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock (except for dividends paid by any direct or indirect
wholly-owned Subsidiary of MotivePower to MotivePower or to any other direct or
indirect wholly-owned Subsidiary of MotivePower) or enter into any agreement
with respect to the voting of its capital stock;
(h) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(i) (i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any interest in any Person or
any division thereof (other than a wholly-owned Subsidiary) or any assets,
other than acquisitions of assets in the ordinary course of business and
consistent with past practice and any other acquisitions for consideration that
is not, in the aggregate, in excess of $25,000,000, (ii) incur any indebtedness
for borrowed money or guarantee such indebtedness of another Person, or issue
or sell any debt securities or warrants or other rights to acquire any debt
security of MotivePower or any of its Subsidiaries, except for (A) indebtedness
for borrowed money incurred in the ordinary course of business and consistent
with past practice or in connection with transactions otherwise permitted under
this Section 4.2, (B) other indebtedness for borrowed money with a maturity of
not more than one year in a principal amount not, in the aggregate, in excess
of $5,000,000, and (C) other indebtedness for borrowed money incurred under
MotivePower's credit agreement for working capital purposes only, (iii)
terminate, cancel, waive any rights under or request any material
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53
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
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(n) agree or commit to do any of the foregoing.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. No Solicitation. (a) WABCO and MotivePower each agree
that it shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any officer, director or employee or any investment banker,
attorney, accountant, agent or other advisor or representative of WABCO or
MotivePower, as the case may be, or any of their respective Subsidiaries to,
(i) solicit, initiate or knowingly encourage the submission of any Takeover
Proposal, (ii) enter into any agreement with respect to a Takeover Proposal or
(iii) participate in any discussions or negotiations regarding, or furnish to
any Person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; provided, however,
that on or prior to 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
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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.
(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.
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(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
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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 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
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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.
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(b) WABCO shall promptly notify MotivePower of any actions, suits,
claims, investigations or proceedings commenced or, to the Knowledge of WABCO,
threatened against, relating to or involving or otherwise affecting WABCO or
any of its Subsidiaries which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 2.10 or which
relate to the consummation of the transactions contemplated by this Agreement,
the WABCO Option Agreement or the MotivePower Option Agreement. In addition,
WABCO shall promptly notify MotivePower of (a) (i) it becoming aware of any
fact or event which would be reasonably likely to demonstrate that any
representation or warranty of any party hereto contained in this Agreement was
or is untrue or inaccurate in any material respect as of the date of this
Agreement or (ii) the occurrence or non-occurrence of any fact or event which
would be reasonably likely to cause any material covenant, condition or
agreement of any party hereto under this Agreement not to be complied with or
satisfied in all material respects and (b) any failure of any party hereto to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder in any material respect; provided, however, that
no such notification shall affect the representations or warranties of any
party or the conditions to the obligations of any party hereunder.
(c) MotivePower shall promptly notify WABCO of any actions, suits,
claims, investigations or proceedings commenced or, to the Knowledge of
MotivePower, threatened against, relating to or involving or otherwise
affecting MotivePower or any of its Subsidiaries which, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant to
Section 3.10 or which relate to the consummation of the transactions
contemplated by this Agreement, the WABCO Option Agreement or the MotivePower
Option Agreement. In addition, MotivePower shall promptly notify WABCO of (a)
(i) it becoming aware of any fact or event which would be reasonably likely to
demonstrate that any representation or warranty of any party hereto contained
in this Agreement was or is untrue or inaccurate in any material respect as of
the date of this Agreement or (ii) the occurrence or non-occurrence of any fact
or event which would be reasonably likely to cause any material covenant,
condition or agreement of any party hereto under this Agreement not to be
complied with or satisfied in all material respects and (b) any failure of any
party hereto to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder in any material respect;
provided, however, that no such notification shall affect the representations
or warranties of any party or the conditions to the obligations of any party
hereunder.
Section 5.6. Appropriate Action; Consents; Filings. (a) (i) Subject to
the terms and conditions of this Agreement and except to the extent that (x)
the Board of Directors of WABCO
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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.
(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
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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.
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(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.
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
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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,
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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 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
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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, 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
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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 contem plated 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.
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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, 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
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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
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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, Sidley & Austin may rely as to matters of fact upon
the representations contained herein and may receive and rely upon
representations from MotivePower, WABCO, and others, including representations
from MotivePower to the effect of the representations in the MotivePower Tax
Certificate and representations from WABCO to the effect of the representations
in the WABCO Tax Certificate.
Section 6.3. Additional Conditions to Obligations of WABCO. The
obligation of WABCO to effect the Merger is subject to the satisfaction of each
of the following additional conditions, any of which may be waived in writing
exclusively by WABCO:
(a) Representations and Warranties. The representations and warranties
of MotivePower set forth in this Agreement that are qualified as to materiality
shall be true and correct as of the Closing Date and the representations and
warranties that are not so qualified, taken together, shall be true and correct
in all material respects, in each case as though made on and as of the Closing
Date (except to the extent any such representation or warranty expressly speaks
as of an earlier date); and WABCO shall have received a certificate signed on
behalf of MotivePower by an executive officer of MotivePower to such effect.
(b) Performance of Obligations. MotivePower shall have performed in
all material respects each obligation and agreement and shall have complied in
all material respects with each covenant required to be performed or complied
with by it under this Agreement at or prior to the Effective Time; and WABCO
shall have received a certificate signed on behalf of MotivePower by an
executive officer of MotivePower to such effect.
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(c) Tax Opinion. WABCO shall have received an opinion of Kirkland &
Ellis, in form and substance reasonably satisfactory to WABCO, dated the
Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing as of the Effective Time, for federal income
tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and WABCO and MotivePower will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by MotivePower or WABCO as a
result of the Merger;
(iii) no gain or loss will be recognized by the 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
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72
a Superior Proposal; provided, however, that MotivePower may not terminate this
Agreement pursuant to this Section 7.1(g) unless (i) MotivePower has delivered
to WABCO a written notice of MotivePower's intent to enter into such an
agreement to effect the Superior Proposal, attaching the most current version
of such agreement to such notice (which version shall be updated on a current
basis), (ii) five business days have elapsed following delivery to WABCO of
such written notice by MotivePower and (iii) during such five business
day-period MotivePower has fully cooperated with WABCO, including informing
WABCO (to the extent not otherwise done so pursuant to clause (i) or Section
5.1(b)) of the terms and conditions of the Takeover Proposal, with the intent
of enabling WABCO to agree to a modification of the terms and conditions of
this Agreement so that the transactions contemplated hereby may be effected;
provided, further, that MotivePower may not terminate this Agreement pursuant
to this Section 7.1(g) unless at the end of such five business day-period the
Board of Directors of MotivePower continues reasonably to believe that the
Takeover Proposal constitutes a Superior Proposal and prior to such termination
MotivePower pays to WABCO the amounts specified under Section 7.3(d); or
(h) by MotivePower, if a material breach of or failure to perform any
representation, warranty, covenant or agreement on the part of WABCO set forth
in this Agreement shall have occurred which would cause the conditions set
forth in Sections 6.2(a) or 6.2(b) not to be satisfied, and such conditions are
incapable of being satisfied by the End Date; or
(i) by MotivePower, if the Board of Directors of WABCO shall not have
recommended or shall have modified in a manner materially adverse to
MotivePower its recommendation of this Agreement and the Merger; or
(j) by MotivePower, if WABCO or any of its Affiliates shall have
materially and knowingly breached the covenant contained in Section 5.1; or
(k) by MotivePower or WABCO at any time on or prior to 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
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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
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74
("MotivePower Fees and Expenses") incurred or paid by or on behalf of
MotivePower or any Subsidiary of MotivePower in connection with this Agreement
and the transactions contemplated herein, including all fees and expenses of
counsel, investment banking firms, accountants and consultants; provided,
however, that WABCO shall not be required to reimburse MotivePower for any
MotivePower Fees and Expenses in excess of $2,000,000 in the aggregate, and
(ii) pay to MotivePower a termination fee of $15 million in cash within one
business day after such termination.
(c) If this Agreement is terminated pursuant to Section 7.1(d)(i) and
either (I) a Takeover Proposal with respect to WABCO shall have been made after
the date of this Agreement and prior to the WABCO Stockholders Meeting or (II)
the Board of Directors of WABCO shall not have recommended or shall have
modified in a manner materially adverse to MotivePower its recommendation of
this Agreement and the Merger, WABCO shall (i) reimburse MotivePower upon
demand for all MotivePower Fees and Expenses; provided, however, that WABCO
shall not be obligated to reimburse MotivePower for any MotivePower Fees and
Expenses in excess of $2,000,000 in the aggregate, and (ii) pay to MotivePower
a termination fee of $15 million in cash within one business day after such
termination.
(d) If this Agreement is terminated pursuant to Section 7.1(e), 7.1(f)
or 7.1(g), MotivePower shall (i) reimburse WABCO upon demand for all
out-of-pocket fees and expenses ("WABCO Fees and Expenses") incurred or paid by
or on behalf of WABCO or any Subsidiary of WABCO in connection with this
Agreement and the transactions contemplated herein, including all fees and
expenses of counsel, investment banking firms, accountants and consultants;
provided, however, that MotivePower shall not be obligated to reimburse WABCO
for any WABCO Fees and Expenses in excess of $2,000,000 in the aggregate, and
(ii) pay to WABCO a termination fee of $15 million in cash within one business
day after such termination.
(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.
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(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 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
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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
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77
Section 8.3. Interpretation. When a reference is made in this
Agreement to a section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
Section 8.4. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
Section 8.5. Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein), the
WABCO Option Agreement and the MotivePower Option Agreement (a) constitute the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
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.
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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 2.2
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
2
TABLE OF CONTENTS
-----------
PAGE
----
1. The Option; Exercise; Payment of Spread.......................................................................1
2. Adjustments...................................................................................................2
3. Conditions to Delivery of Shares..............................................................................3
4. The Closing...................................................................................................4
5. Listing of Shares; Filings; Governmental Consents.............................................................4
6. Repurchase of Shares..........................................................................................4
7. Sale of Shares................................................................................................5
8. Registration Rights...........................................................................................5
9. Expenses......................................................................................................7
10. Specific Performance.........................................................................................7
11. Notice.......................................................................................................7
12. Interpretation...............................................................................................8
13. Entire Agreement.............................................................................................8
14. Amendment....................................................................................................8
15. Severability.................................................................................................8
16. Governing Law................................................................................................9
17. Counterparts.................................................................................................9
18. Parties in Interest..........................................................................................9
19. Corporate Authorization......................................................................................9
20. Assignment...................................................................................................9
21. Termination..................................................................................................9
22. Profit Limitation...........................................................................................10
23. Public Announcement.........................................................................................10
3
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
4
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 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.
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5
(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.
- 3 -
6
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 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
- 4 -
7
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.
- 5 -
8
(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 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
- 6 -
9
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):
(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
- 7 -
10
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.
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
- 8 -
11
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),
- 9 -
12
(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 (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
- 10 -
13
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.
- 11 -
14
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
- 12 -
1
EXHIBIT 2.3
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
2
TABLE OF CONTENTS
-----------
PAGE
----
1. The Option; Exercise; Payment of Spread.......................................................................1
2. Adjustments...................................................................................................2
3. Conditions to Delivery of Shares..............................................................................3
4. The Closing...................................................................................................4
5. Listing of Shares; Filings; Governmental Consents.............................................................4
6. Repurchase of Shares..........................................................................................4
7. Sale of Shares................................................................................................5
8. Registration Rights...........................................................................................5
9. Expenses......................................................................................................7
10. Specific Performance..........................................................................................7
11. Notice........................................................................................................7
12. Interpretation................................................................................................8
13. Entire Agreement..............................................................................................8
14. Amendment.....................................................................................................8
15. Severability..................................................................................................8
16. Governing Law.................................................................................................9
17. Counterparts..................................................................................................9
18. Parties in Interest...........................................................................................9
19. Corporate Authorization.......................................................................................9
20. Assignment....................................................................................................9
21. Termination...................................................................................................9
22. Profit Limitation............................................................................................10
23. Public Announcement..........................................................................................10
3
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
4
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 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.
- 2 -
5
(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.
- 3 -
6
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 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
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7
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.
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8
(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 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
- 6 -
9
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):
(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
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10
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.
15. Severability. The invalidity or unenforceability of any provision
of this Agreement in any jurisdiction shall not
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11
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
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12
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 (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
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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.
- 11 -
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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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EXHIBIT 99.1
[MOTIVEPOWER [WABCO LOGO] PRESS
INDUSTRIES LOGO] RELEASE
CONTACT: TIM WESLEY AT (412) 201-2830 FOR MOTIVEPOWER INDUSTRIES
ALVARO GARCIA-TUNON AT (412) 825-1317 FOR WESTINGHOUSE AIR BRAKE
MOTIVEPOWER INDUSTRIES AND WESTINGHOUSE AIR BRAKE ANNOUNCE
MERGER OF EQUALS
TO CREATE PREMIER RAIL EQUIPMENT SUPPLY COMPANY
-----------------------------------------------------------
ACCRETIVE COMBINATION OF COMPLEMENTARY MARKET LEADERS WILL OFFER
MOST COMPLETE RANGE OF LOCOMOTIVE AND FREIGHT CAR PRODUCTS AND SERVICES
----------------------------------------------------------
UNIQUELY POSITIONED TO CAPITALIZE ON INDUSTRY GROWTH,
CONSOLIDATION, AND OUTSOURCING TRENDS
PITTSBURGH and WILMERDING, PA, June 3, 1999 - MotivePower
Industries, Inc. (NYSE: MPO) and Westinghouse Air Brake Company (NYSE:
WAB) today announced the signing of a definitive merger of equals
agreement that will create the premier supplier of products and services
for the railroad industry, with combined revenues of $1.2 billion
projected in 1999 and an equity market capitalization in excess of $1
billion. The merger is subject to regulatory and shareholder approvals,
and is expected to be completed by the end of the third quarter.
The combined company will retain the name MotivePower Industries and
the New York Stock Exchange symbol "MPO." The prestigious Westinghouse
Air Brake name, which is recognized throughout the world, will also be
retained and will continue to be used as a division and product name. The
combined company will be based in the Pittsburgh area.
Management of the combined company will be as follows: John C.
(Jack) Pope, chairman of MotivePower Industries, will be chairman;
William E. Kassling, chairman and chief executive officer of Westinghouse
Air Brake, will be chief executive officer; Gregory T.H. Davies,
president and chief operating officer of Westinghouse Air Brake, will
hold the same position; and Robert J. Brooks, chief financial officer of
Westinghouse Air Brake, will hold the same position.
Under the terms of the definitive agreement, Westinghouse Air Brake
shareholders will receive 1.3 shares of MotivePower Industries stock for
each share they own, representing a 55 percent interest in the combined
company on a fully diluted basis. The transaction will be tax-free to
Westinghouse Air Brake shareholders and is expected to be accounted for
as a
2
[MOTIVEPOWER [WABCO LOGO] PRESS
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pooling-of-interests. The merger agreement contains no collars, and each
company has granted to the other company a 19 percent stock option.
The merger is expected to be accretive to MotivePower Industries'
earnings per diluted share by about 10 percent in 1999, 2000 and 2001,
excluding synergies, transaction costs and a restructuring reserve to be
determined. In addition, the combined company is expected to achieve a
substantial combination of revenue growth opportunities, efficiency
improvements and cost savings through synergies. They include: marketing
Westinghouse Air Brake's products through MotivePower Industries'
existing distribution and service channels, and vice versa; offering an
integrated electronics package for locomotive overhauls; combining
efforts to penetrate growing international markets using bases of
operation established by each company in places such as Mexico, the
United Kingdom, Australia and Italy; jointly developing new products and
improving existing products; expanding use of the WABCO Quality and
Performance System (QPS); and improving the use of existing facilities.
These synergies are expected to result in operating income improvements
of $10 million pre-tax, or 10 cents per diluted share after-tax, in 2000.
By year-end 2000, these synergies are expected to reach an annual run
rate of $20 million pre-tax, or 20 cents per diluted share after-tax; and
they are expected to increase in future years.
The combined company is expected to have operating cash flow
(operating income plus depreciation and amortization) of more than $225
million in 1999. With debt of about $600 million, this level of operating
cash flow is expected to result in a coverage ratio of about 5.8-to-1
(earnings before interest, taxes, depreciation and amortization divided
by interest expense). While MotivePower Industries expects to reduce debt
with cash flow from operations, its financial structure will be a strong
base for future growth and acquisitions.
Pope said: "This merger is clearly a win-win for the shareholders of
both companies. We are taking two very strong, highly successful entities
with very little product overlap and combining them into one company,
with powerful earnings accretion in 1999 and beyond. The combined company
will have a highly talented and experienced management team capable of
generating superior growth opportunities and even stronger operating cash
flow. We fully expect to further enhance our position as a high-quality,
customer-focused, low-cost supplier, and to solidify the new MotivePower
Industries as the leading consolidator in the rail equipment supply
sector."
Kassling said: "The new MotivePower Industries will be uniquely
positioned to serve its global customers as a true `one-stop shop' for a
complete package of locomotive and freight car components and services.
We will also have increased financial strength to continue to invest in
new products and new technologies. In particular, we expect to capitalize
on the growth of locomotive and freight car electronics in the rail
industry. We will also look for opportunities to expand our very
successful WABCO QPS, which has led to dramatic improvements in quality,
productivity and efficiency during the past several years. We are
3
[MOTIVEPOWER [WABCO LOGO] PRESS
INDUSTRIES LOGO] RELEASE
very excited by the opportunities created from this merger and are
anxious to put our plans into motion."
The merger will combine two complementary companies with leading
shares of their respective rail market segments and minimal product
overlap. MotivePower Industries is a leading provider of power-related
locomotive components and services for the aftermarket, and a leading
manufacturer of new low-horsepower locomotives. Westinghouse Air Brake is
a leader in both the aftermarket and the original equipment market for
its locomotive and freight car components, and has a leading position in
the growing public transit segment of the rail market. The companies also
have complementary market shares for international business, with
MotivePower Industries' leading position in the Mexican rail industry,
and Westinghouse Air Brake's presence in Canada, Europe, Asia and the
Pacific Rim. The combined company will also have improved diversity of
sales by customer, by region and by product line.
The combined company's Board of Directors will have seven members
from each company.
The new MotivePower Industries will have nearly 7,500 employees,
with 50 manufacturing, distribution and service facilities throughout the
U.S., Mexico, Canada, Europe, Asia and the Pacific Rim.
The Board of Directors of Westinghouse Air Brake also announced that
it has terminated its previously adopted, open-market, stock purchase
plan.
Wasserstein Perella served as financial adviser to MotivePower
Industries, and Credit Suisse First Boston served as financial adviser to
Westinghouse Air Brake.
MotivePower Industries (www.motivepower.com) is a leader in the
manufacturing of products for rail and other power-related industries.
Through its subsidiaries, the company manufactures and distributes
engineered locomotive components; provides locomotive and freight car
fleet maintenance; overhauls locomotives, freight cars and diesel
engines; manufactures new, environmentally friendly, switcher, commuter
and mid-range locomotives up to 4,000 horsepower; and manufactures
components for power, marine and industrial markets.
Westinghouse Air Brake Company (www.wabco-rail.com) is North
America's largest manufacturer of value-added equipment for locomotives,
railway freight cars and passenger transit vehicles. The company's
mission is to be the leading supplier of world-class products and
services to the railroad freight and transit industries, helping its
customers to achieve higher levels of safety and productivity so they can
compete more effectively.
4
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This press release contains forward-looking statements, such as the
statements regarding the benefits and cost savings that can be achieved
through the merger of equals transaction. The company's actual results
could differ materially from the results suggested in any forward-looking
statement. Factors that could cause or contribute to these material
differences include, but are not limited to, the following: the company's
inability to achieve planned synergies; a slowdown in the U.S. or Mexican
economy; a decrease in NAFTA rail traffic; continued consolidation by
U.S. and Canadian railroads, which could cause them to reduce purchases
of goods and services; a strengthening or a weakening of the U.S. dollar
and/or a change in the availability of letters of credit in targeted
foreign markets; the company's ability to timely and efficiently
implement productivity improvement plans; the company's ability to
maintain current favorable relations with its labor unions; the company's
ability to successfully complete its information technology upgrade and
business improvement project, including "Year 2000" compliance; and other
factors contained in each company's regulatory filings, which are herein
incorporated by reference. The company assumes no obligation to update
these forward-looking statements or advise of changes in the assumptions
on which they were based.
5
MOTIVEPOWER INDUSTRIES AND WESTINGHOUSE AIR BRAKE COMPANY
UNAUDITED PRO FORMA FINANCIAL SUMMARIES
FOR THE YEAR ENDED DECEMBER 31, 1998
($ in millions, except per share data) Combined
MotivePower Westinghouse Company
----------- ------------ ---------
Net sales $ 365.2 $ 670.9 $ 1,036.1
Gross profit 81.3 219.2 300.5
Operating income 40.4 104.7 145.1
Net income 32.2 41.6 73.8
Average shares outstanding 27.9 25.7 61.3
Earnings per diluted share 1.15 1.62 1.20
Depreciation & Amortization 11.4 25.2 36.6
Capital expenditures 28.9 29.0 57.9
Total assets 371.2 596.2 967.4
Total net debt 100.1 464.5 564.6
Total stockholders' equity 177.9 (33.8) 144.1
FOR THE QUARTER ENDED MARCH 31, 1999
($ in millions, except per share data) Combined
MotivePower Westinghouse Company
----------- ------------ ---------
Net sales $ 107.3 $ 191.2 $ 298.5
Gross profit 27.5 61.5 89.0
Operating income 14.8 28.9 43.7
Net income 7.9 11.9 19.8
Average shares outstanding 28.1 25.8 61.7
Earnings per diluted share 0.28 0.46 0.32
Depreciation & Amortization 3.8 6.8 10.6
Capital expenditures 3.8 6.5 10.3
Total assets 407.8 609.5 1,017.3
Total net debt 123.0 465.9 588.9
Total stockholders' equity 186.6 (19.4) 167.2
