DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

WABCO HOLDINGS INC.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

  (2)  

Aggregate number of securities to which transaction applies:

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  (4)  

Proposed maximum aggregate value of transaction:

 

  (5)  

Total fee paid:

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     


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LOGO

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

May 20, 2019

Dear WABCO Stockholders,

It is my pleasure to invite you to a special meeting of stockholders, which we refer to as the special meeting, of WABCO Holdings Inc., which we refer to as WABCO, to be held at Four Times Square, New York, New York 10036 on June 27, 2019, at 8:30 a.m., Eastern time. I hope that you will be able to attend.

At the special meeting, you will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time), which we refer to as the merger proposal, dated as of March 28, 2019, which we refer to as the merger agreement, by and among WABCO, ZF Friedrichshafen AG, which we refer to as ZF, and Verona Merger Sub Corp., which we refer to as Merger Sub, an indirect wholly owned subsidiary of ZF. Pursuant to the terms of the merger agreement, Merger Sub will merge with and into WABCO, with WABCO surviving the merger as a wholly owned subsidiary of ZF, which we refer to as the merger.

If the merger agreement is adopted and the merger is completed, you will be entitled to receive $136.50 in cash, without interest and less any applicable withholding taxes, for each share of our common stock, par value $0.01, which we refer to as WABCO common stock, you own (unless you have properly exercised your appraisal rights with respect to such shares), which represents a 13.0% premium to the last undisturbed closing stock price of $120.75 on February 26, 2019, the date prior to media reports that ZF was considering a transaction with WABCO. The transaction also represents a premium of approximately 23.1% to WABCO’s undisturbed trailing three month volume-weighted average per share price of $110.90 and 21.8% to WABCO’s undisturbed trailing six month volume-weighted average per share price of $112.00, each as of February 26, 2019.

The receipt of cash in exchange for shares of WABCO common stock pursuant to the merger will generally be a taxable transaction to “U.S. holders” (as defined in the accompanying proxy statement) for United States federal income tax purposes. For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 59 of the accompanying proxy statement.

In addition to the merger proposal, you also will be asked to consider and vote on (i) a proposal to approve, by means of a non-binding, advisory vote, compensation that will or may become payable to the named executive officers of WABCO in connection with the merger and (ii) a proposal to approve one or more adjournments or postponements of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the then-scheduled date and time of the special meeting.

The WABCO board of directors, which we refer to as the Board, after considering the reasons more fully described in this proxy statement and after consultation with legal and financial advisors, unanimously determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of WABCO and its stockholders, and declared it advisable to enter into the merger agreement and consummate the merger, approved the execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, directed that the adoption of the merger agreement be submitted to a vote at the special meeting and unanimously resolved to recommend that WABCO stockholders vote in favor of the adoption of the merger agreement. The Board unanimously recommends that you vote:

 

  (i)

“FOR” the proposal to adopt the merger agreement, thereby approving the merger and the other transactions contemplated by the merger agreement;


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  (ii)

“FOR” the proposal to approve, by means of a non-binding, advisory vote, compensation that will or may become payable to the named executive officers of WABCO in connection with the merger; and

 

  (iii)

“FOR” the proposal to approve one or more adjournments or postponements of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the then-scheduled date and time of the special meeting.

The enclosed proxy statement provides detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Annex A to the proxy statement. The proxy statement also describes the actions and determinations of the Board in connection with its evaluation of the merger agreement and the merger. We encourage you to read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety. You may also obtain more information about WABCO from documents we file with the U.S. Securities and Exchange Commission, which we refer to as the SEC, from time to time.

Whether or not you plan to attend the special meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you attend the special meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you will receive from your broker, bank or other nominee.

Your vote is very important, regardless of the number of shares that you own. We cannot complete the merger unless the proposal to adopt the merger agreement is approved by the affirmative vote of a majority of the shares of WABCO common stock outstanding and entitled to vote thereon. The failure of any stockholder to vote in person by ballot at the special meeting, to submit a signed proxy card or to grant a proxy electronically over the Internet or by telephone will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. If you hold your shares in “street name,” the failure to instruct your broker, bank or other nominee on how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

If you have any questions or need assistance voting your shares of WABCO common stock, please contact Innisfree M&A Incorporated, our proxy solicitor, by calling +1 (888) 750-5834 toll-free.

On behalf of the Board, I thank you for your support and appreciate your consideration of this matter.

 

Sincerely,

LOGO

Jacques Esculier

Chairman and Chief Executive Officer

Neither the SEC nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated May 20, 2019 and, together with the enclosed form of proxy card, is first being mailed to WABCO stockholders on or about May 23, 2019.


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 27, 2019

NOTICE IS HEREBY GIVEN that a special meeting of stockholders, which we refer to as the special meeting, of WABCO Holdings Inc., which we refer to as WABCO, will be held:

 

TIME AND DATE:    8:30 a.m., Eastern time, on June 27, 2019
PLACE:    Four Times Square, New York, New York 10036
ITEMS OF BUSINESS:   

1.  To consider and vote on the proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time), which we refer to as the merger proposal, dated as of March 28, 2019, which we refer to as the merger agreement, by and among WABCO, ZF Friedrichshafen AG, which we refer to as ZF, and Verona Merger Sub Corp., which we refer to as Merger Sub, an indirect wholly owned subsidiary of ZF, a copy of which is attached as Annex A to the proxy statement accompanying this notice;

  

2.  To consider and vote on the proposal to approve, by means of a non-binding, advisory vote, compensation that will or may become payable to the named executive officers of WABCO in connection with the merger, which proposal we refer to as the merger-related compensation proposal; and

  

3.  To consider and vote on the proposal to approve one or more adjournments or postponements of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the then-scheduled date and time of the special meeting, which proposal we refer to as the adjournment proposal.

ADJOURNMENTS AND POSTPONEMENTS:    Any action on the items of business described above may be considered at the special meeting or at any time and date to which the special meeting may be properly adjourned or postponed.
RECORD DATE:    Stockholders of record at the close of business on May 17, 2019 are entitled to notice of, and to vote at, the special meeting and at any adjournments or postponements thereof.

INSPECTION OF LIST

OF STOCKHOLDERS

OF RECORD:

   A list of stockholders of record will be available for inspection at our principal executive offices located at 1220 Pacific Drive, Auburn Hills, Michigan 48326, during ordinary business hours during the ten day period before the special meeting and at the location of the special meeting during the special meeting.
VOTING:    Whether or not you plan to attend the special meeting, we urge you to vote your shares via the toll-free telephone number or over the Internet as described in the proxy materials. You may also sign, date and mail the proxy card in the pre-paid envelope provided.
IMPORTANT INFORMATION:    Your vote is very important to us. The merger contemplated by the merger agreement, which we refer to as the merger, is conditioned on the receipt of, and we cannot consummate the merger unless the merger proposal receives, the affirmative vote of a majority of the shares of WABCO’s common stock, par value $0.01 per share, which we refer to as WABCO common stock, outstanding and entitled to vote thereon.


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The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote is required to approve the merger proposal. The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, and voting at the special meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the merger-related compensation proposal. The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, whether or not a quorum is present, is required to approve the adjournment proposal.

 

The failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the special meeting will have the same effect as a vote “AGAINST” the merger proposal but will not have any effect on the merger-related compensation proposal or the adjournment proposal. If you hold your shares in “street name,” the failure to instruct your broker, bank or other nominee on how to vote your shares will have the same effect as a vote “AGAINST” the merger proposal but will not have any effect on the merger-related compensation proposal or the adjournment proposal. Abstentions will have the same effect as a vote “AGAINST” the merger proposal, the merger-related compensation proposal and the adjournment proposal.

 

Stockholders who do not vote in favor of the merger proposal will have the right to seek appraisal of the fair value of their shares of WABCO common stock if they deliver a demand for appraisal before the vote is taken on the merger proposal and comply with all applicable requirements under Delaware law, which are summarized herein and reproduced in their entirety in Annex C to the accompanying proxy statement.

 

The WABCO Board of Directors unanimously recommends that you vote: (i) “FOR” the merger proposal, (ii) “FOR” the merger-related compensation proposal and (iii) “FOR” the adjournment proposal.

 

       

By Order of the Board of Directors,

May 20, 2019        

LOGO

 

       

Lisa Brown

       

Chief Legal Officer & Secretary

 


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YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO VOTE YOUR SHARES VIA THE TOLL-FREE TELEPHONE NUMBER OR OVER THE INTERNET AS DESCRIBED IN THE PROXY MATERIALS. YOU MAY ALSO SIGN, DATE AND MAIL THE PROXY CARD IN THE PRE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before the special meeting. If your shares are held in the name of a broker, bank or other nominee, please follow the instructions on the voting instruction card furnished to you by such broker, bank or other nominee, which is considered the stockholder of record, in order to vote. As a beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote the shares in your account. Your broker, bank or other nominee cannot vote on any of the proposals, including the proposal to adopt the merger agreement, without your instructions.

IF YOU FAIL TO RETURN YOUR PROXY CARD, TO GRANT YOUR PROXY ELECTRONICALLY OVER THE INTERNET OR BY TELEPHONE, OR TO VOTE BY BALLOT IN PERSON AT THE SPECIAL MEETING, IT WILL HAVE THE SAME EFFECT AS A VOTE “AGAINST” THE MERGER PROPOSAL AND YOUR SHARES WILL NOT BE COUNTED FOR PURPOSES OF DETERMINING WHETHER A QUORUM IS PRESENT AT THE SPECIAL MEETING. If you are a stockholder of record, voting in person by ballot at the special meeting will revoke any proxy that you previously submitted. If you hold your shares through a broker, bank or other nominee, you must obtain from the record holder, and bring to the special meeting, a valid proxy issued in your name in order to vote in person at the special meeting.

We encourage you to read the accompanying proxy statement, including all documents incorporated by reference into the accompanying proxy statement, and annexes to the accompanying proxy statement, carefully and in their entirety. If you have any questions concerning the merger, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of WABCO common stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Toll-free: +1 (888) 750-5834

Banks & Brokers may call collect: +1 (212) 750-5833

Unless otherwise indicated or as the context otherwise requires, any references in this proxy statement to:

 

   

Board” refers to the Board of Directors of WABCO;

 

   

CFIUS” refers to the Committee on Foreign Investment in the United States and each member agency thereof acting in such capacity;

 

   

closing” refers to the closing of the merger;

 

   

closing date” refers to the date on which the closing occurs;

 

   

Code” refers to the U.S. Internal Revenue Code of 1986;

 

   

company incentive plans” refers to WABCO’s amended and restated 2009 omnibus incentive plan and its predecessor plans;

 

   

continuing employees” refers to employees of WABCO and its subsidiaries who continue employment with ZF after the effective time;

 

   

DGCL” refers to the General Corporation Law of the State of Delaware;

 

   

DOJ” refers to the Antitrust Division of the U.S. Department of Justice;

 

   

DPA” refers to the Defense Production Act of 1950, as amended (50 U.S.C. §4565), and all interim or final rules and regulations issued and effective thereunder;


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DSU” refers to a deferred stock unit granted pursuant to a company incentive plan;

 

   

effective time” refers to the effective time of the merger;

 

   

end date” refers to March 28, 2020, which will be extended to September 28, 2020 if certain conditions have not been satisfied on or before March 28, 2020, as set forth in the merger agreement;

 

   

Exchange Act” refers to the U.S. Securities Exchange Act of 1934, as amended;

 

   

FTC” refers to the U.S. Federal Trade Commission;

 

   

Goldman Sachs” refers to Goldman Sachs International;

 

   

HSR Act” refers to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

 

   

merger” refers to the merger of Merger Sub with and into WABCO, with WABCO continuing as the surviving entity and as a wholly owned subsidiary of ZF;

 

   

merger agreement” refers to the Agreement and Plan of Merger (as it may be amended from time to time), dated as of March 28, 2019, by and among WABCO, ZF and Merger Sub;

 

   

merger consideration” refers to $136.50 in cash, without interest, for each share of WABCO common stock held immediately prior to the effective time;

 

   

merger proposal” refers to the proposal to adopt the merger agreement;

 

   

Merger Sub” refers to Verona Merger Sub Corp., a Delaware corporation and an indirect wholly owned subsidiary of ZF;

 

   

new plans” refer to employee benefit plans of ZF and its subsidiaries that continuing employees become eligible to participate in after the effective time;

 

   

NYSE” refers to the New York Stock Exchange;

 

   

old plans” employee benefit plans of WABCO and its subsidiaries (and their respective predecessors) before the effective time;

 

   

preliminary proxy statement” refers to the preliminary proxy statement on Schedule 14A filed by WABCO with the SEC on April 18, 2019;

 

   

PSU” refers to a performance stock unit granted pursuant to a company incentive plan;

 

   

qualifying termination” refers to a termination of employment by WABCO without cause or a resignation by the executive officer for good reason, each occurring within twenty-four months after the effective time;

 

   

RSU” refers to a restricted stock unit granted pursuant to a company incentive plan, other than a DSU;

 

   

SEC” refers to the Securities and Exchange Commission;

 

   

special meeting” refers to the special meeting of WABCO stockholders;

 

   

stock option” refers to a stock option to purchase shares of WABCO common stock issued under a company incentive plan;

 

   

stockholder approval” refers to the vote required to approve the merger proposal;

 

   

Treasury Regulations” refers to the U.S. Treasury regulations promulgated under the Code;

 

   

WABCO” refers to WABCO Holdings Inc., a Delaware corporation;

 

   

WABCO common stock” refers to each share of WABCO common stock, par value $0.01 per share, issued and outstanding immediately prior to the effective time;

 

   

WABCO stockholders” refers to the holders of shares of WABCO common stock; and

 

   

ZF” refers to ZF Friedrichshafen AG, a stock corporation organized and existing under the laws of the Federal Republic of Germany.


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TABLE OF CONTENTS

 

     Page  

PROXY SUMMARY

     1  

Parties Involved in the Merger (page 30)

     1  

Certain Effects of the Merger on WABCO (page 32)

     2  

Effect on WABCO if the Merger is Not Completed (page 32)

     3  

Effect on Capital Stock; Merger Consideration (page 64)

     3  

The Special Meeting (page 25)

     4  

Recommendation of the WABCO Board and Reasons for the Merger (page 42)

     6  

Opinion of WABCO’s Financial Advisor (page 48)

     6  

Financing of the Merger (page 58)

     6  

Treatment of Equity and Cash Incentive Compensation (page 64)

     7  

Interests of WABCO Non-Employee Directors and Executive Officers in the Merger (page 55)

     7  

Appraisal Rights (page 93)

     8  

U.S. Federal Income Tax Consequences of the Merger (page 59)

     8  

Regulatory Approvals (page 60)

     9  

Legal Proceedings Regarding the Merger (page 62)

     9  

No Solicitation (page 72)

     10  

Change of Recommendation (page 74)

     11  

Conditions to the Closing (page 80)

     11  

Termination of the Merger Agreement (page 82)

     12  

Termination Fees (page 83)

     13  

Market Prices and Dividend Data (page 89)

     13  

QUESTIONS AND ANSWERS

     14  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     23  

THE SPECIAL MEETING

     25  

Date, Time and Place

     25  

Purpose of the Special Meeting

     25  

Record Date; Shares Entitled to Vote; Quorum

     25  

Vote Required; Abstentions and Broker Non-Votes

     25  

Shares Held by WABCO Directors and Executive Officers

     26  

Voting of Proxies

     26  

Revocability of Proxies

     27  

Board of Directors’ Recommendation

     27  

Tabulation of Votes

     28  

Solicitation of Proxies

     28  

Anticipated Date of the Closing

     28  

Attending the Special Meeting

     28  

Assistance

     29  

Rights of Stockholders Who Seek Appraisal

     29  

PARTIES INVOLVED IN THE MERGER

     30  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     32  

THE MERGER

     32  

Certain Effects of the Merger on WABCO

     32  

Effect on WABCO if the Merger is Not Completed

     32  

Background of the Merger

     33  

Recommendation of the WABCO Board and Reasons for the Merger

     42  

Opinion of WABCO’s Financial Advisor

     48  

Certain WABCO Prospective Financial Information

     52  

Interests of WABCO Non-Employee Directors and Executive Officers in the Merger

     55  

Financing of the Merger

     58  

U.S. Federal Income Tax Consequences of the Merger

     59  

Regulatory Approvals

     60  

Legal Proceedings Regarding the Merger

     62  

 

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TERMS OF THE MERGER AGREEMENT

     63  

Structure of the Merger

     63  

Closing and the Effective Time of the Merger

     63  

Directors and Officers; Certificate of Incorporation; Bylaws

     64  

Effect on Capital Stock; Merger Consideration

     64  

Representations and Warranties

     67  

Conduct of Business Pending the Merger

     70  

Additional Agreements

     72  

Employee Matters

     78  

Other Covenants and Agreements

     80  

Conditions to the Closing

     80  

Termination of the Merger Agreement

     82  

Expenses

     84  

Amendment and Waiver

     85  

Governing Law

     85  

Specific Performance

     85  

PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR WABCO’S NAMED EXECUTIVE OFFICERS

     86  

The Merger-Related Compensation Proposal

     87  

PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

     88  

The Adjournment Proposal

     88  

Vote Required and Board of Directors Recommendation

     88  

MARKET PRICES AND DIVIDEND DATA

     89  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     90  

Ownership by Our Directors and Executive Officers

     90  

Ownership of More than 5% of Our Common Stock

     91  

APPRAISAL RIGHTS

     93  

FUTURE STOCKHOLDER PROPOSALS

     98  

HOUSEHOLDING INFORMATION

     99  

WHERE YOU CAN FIND MORE INFORMATION

     100  

MISCELLANEOUS

     101  

Annexes

 

Annex A—Agreement and Plan of Merger

     A-1  

Annex B—Fairness Opinion of WABCO’s Financial Advisor

     B-1  

Annex C—Section 262 of the General Corporation Law of the State of Delaware

     C-1  

 

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PROXY SUMMARY

This summary highlights selected information from this proxy statement related to the merger (as defined below). This summary may not contain all of the information that is important to you. To understand the merger more fully and for a more complete description of the legal terms of the merger, you should read carefully this entire proxy statement, the annexes to this proxy statement, including the merger agreement (as defined below), and the documents incorporated by reference in this proxy statement. You may obtain the documents and information incorporated by reference in this proxy statement without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 100. The merger agreement is attached as Annex A to this proxy statement.

Except as otherwise specifically noted in this proxy statement or as the context otherwise requires, “WABCO,” “the Company,” “we,” “our” or “us” and similar words in this proxy statement refer to WABCO Holdings Inc., including, in certain cases, its subsidiaries. Throughout this proxy statement we refer to ZF Friedrichshafen AG, a stock corporation organized and existing under the laws of the Federal Republic of Germany, as “ZF” and to Verona Merger Sub Corp., a Delaware corporation and an indirect wholly owned subsidiary of ZF, as “Merger Sub”. In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger (as it may be amended from time to time), dated as of March 28, 2019, by and among WABCO, ZF and Merger Sub, as the “merger agreement”. All references to the “merger” refer to the merger of Merger Sub with and into WABCO with WABCO surviving as a wholly owned subsidiary of ZF. WABCO, following completion of the merger, is sometimes referred to in this proxy statement as the “surviving corporation”.

Parties Involved in the Merger (page 30)

WABCO Holdings Inc.

WABCO is a leading global supplier of electronic, mechanical, electro-mechanical and aerodynamic products for the world’s major manufacturers of commercial trucks, buses and trailers, as well as passenger cars. WABCO engineers, develops, manufactures and sells integrated systems controlling advanced braking, stability, suspension, steering, transmission automation, as well as air compression and processing. These systems improve vehicle safety, efficiency and performance while reducing overall vehicle operating costs. WABCO estimates that approximately two out of every three commercial vehicles with advanced and conventional vehicle control systems worldwide are equipped with our products. For passenger cars, including sports utility vehicles, which we refer to as SUVs, WABCO supplies products for sophisticated, niche applications. WABCO provides components and systems throughout the life of a vehicle, from design and development to the aftermarket. By leveraging fleet connectivity, WABCO mobilizes vehicle intelligence to advance fleet safety, efficiency and security.

WABCO’s corporate headquarters is located at Giacomettistrasse 1, 3000 Bern 31, Switzerland and its telephone number is +45-315-813-300. WABCO common stock, par value $0.01 per share, which we refer to as WABCO common stock, is currently listed on the New York Stock Exchange, which we refer to as the NYSE, under the symbol “WBC.”

History of Our Company

WABCO was founded in the United States in 1869 as Westinghouse Air Brake Company. WABCO was purchased by American Standard Companies Inc., which we refer to as American Standard, in 1968 and operated as the Vehicle Control Systems business division within American Standard until WABCO was spun off from American Standard on July 31, 2007. Subsequent to WABCO’s spin-off, American Standard changed its name to Trane Inc., which we refer to as Trane. On June 5, 2008, Trane was acquired in a merger with Ingersoll-Rand Company Limited, which we refer to as Ingersoll Rand, and exists today as a wholly owned subsidiary of Ingersoll Rand.



 

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Products and Services

WABCO engineers, develops, manufactures and sells advanced braking, stability, suspension, steering, transmission automation and air management systems primarily for commercial vehicles. WABCO’s largest-selling products are pneumatic anti-lock braking systems, electronic braking systems, electronic stability control systems, brake controls, automated manual transmission systems, air disc brakes, and a large variety of conventional mechanical products such as actuators, air compressors and air control valves for medium and heavy-duty trucks, buses and trailers.

WABCO is also a global market leader in hydraulic components, controls and brake systems for heavy-duty, off-highway vehicles used, for example, in agriculture, construction and mining. WABCO is the only supplier with a complete portfolio of pneumatic and hydraulic braking and control systems for off-highway vehicles worldwide. WABCO is also the only supplier that provides a full range of aerodynamic devices for commercial vehicles worldwide. Aerodynamic products reduce the air drag of commercial trucks traveling long distances at highway speeds, thereby lowering fuel consumption and CO2 emissions. Aerodynamic devices help commercial vehicle fleet operators improve their operational efficiency and environmental performance. Furthermore, WABCO supplies advanced electronic suspension controls and vacuum pumps to the passenger car and SUV markets in Europe, North America and Asia. Additionally, WABCO supplies commercial vehicle aftermarket distributors and service partners, as well as fleet operators, with replacement parts, fleet management solutions, diagnostic tools, training and other expert services. WABCO also provides remanufacturing services globally.

Additional information about WABCO and its subsidiaries is included in documents incorporated by reference in this proxy statement (see the section entitled “Where You Can Find More Information” beginning on page 100) and on its website: https://www.wabco-auto.com. The information provided or accessible through WABCO’s website is not part of, or incorporated by reference in, this proxy statement.

ZF Friedrichshafen AG

ZF is a global leader in driveline and chassis technology as well as active and passive safety technology. ZF has a global workforce of 149,000 with approximately 230 locations in some 40 countries. In 2018, ZF achieved sales of €36.9 billion and as such, is one of the largest automotive suppliers worldwide.

ZF enables vehicles to see, think and act. ZF invests more than six percent of its sales in research and development annually—in particular for the development of efficient and electric drivelines and also in striving for a world without accidents. With its broad portfolio, ZF is advancing mobility and services for passenger cars, commercial vehicles and industrial technology applications.

ZF’s corporate headquarters is located at Löwentaler Straße 20, 88046, Friedrichshafen, Germany and its telephone number is +49 7541 77-0. ZF’s corporate web address is https://www.ZF.com.

Verona Merger Sub Corp.

Merger Sub is a Delaware corporation and an indirect wholly owned subsidiary of ZF formed on March 22, 2019, solely for the purpose of engaging in the merger and the other transactions contemplated under the merger agreement. Merger Sub’s principal executive offices are located at 12001 Tech Center Drive, Livonia, Michigan 48150 and its telephone number is +1 (734) 855-3539. Upon the closing of the merger, which we refer to as the closing, Merger Sub will merge with and into WABCO, and thereafter will cease to exist.

Certain Effects of the Merger on WABCO (page 32)

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merger will become effective, which we refer to as the effective time, Merger Sub will merge with and into WABCO, with WABCO continuing as the surviving corporation and a wholly owned subsidiary of ZF.

Effect on WABCO if the Merger is Not Completed (page 32)

If the merger agreement is not adopted by the holders of shares of WABCO common stock, which we refer to as WABCO stockholders, or if the merger is not completed for any other reason, WABCO stockholders will not receive any payment for their shares of WABCO common stock. Instead, WABCO will remain a public company, WABCO common stock will continue to be listed and traded on the NYSE, and registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and WABCO will continue to file periodic reports with the U.S. Securities and Exchange Commission, which we refer to as the SEC.

Under certain specified circumstances, WABCO will be required to pay ZF a termination fee upon the termination of the merger agreement, and under certain other specified circumstances, ZF will be required to pay WABCO a reverse termination fee upon the termination of the merger agreement, as described under the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Termination of the Merger Agreement—Merger Consideration—Termination Fees” beginning on page 83.

Effect on Capital Stock; Merger Consideration (page 64)

If the merger is completed, at the effective time, and without any action on the part of the holder, each share of WABCO common stock issued and outstanding immediately prior to the effective time (other than (i) shares of WABCO common stock owned by ZF, Merger Sub or any other direct or indirect wholly owned subsidiary of ZF immediately prior to the effective time (other than shares of WABCO common stock held on behalf of third parties), (ii) shares of WABCO common stock owned by WABCO immediately prior to the effective time, including treasury shares (other than shares of WABCO common stock held on behalf of third parties), which, in the case of clauses (i) and (ii), we collectively refer to as the cancelled shares and (iii) dissenting shares (as defined in the section entitled “Proxy Summary—Appraisal Rights (page 93)” beginning on page 8)) will be converted into the right to receive $136.50 per share in cash, without interest, which we refer to as the merger consideration, less any applicable withholding taxes. All shares, when so converted into the right to receive the merger consideration, will automatically be cancelled and will cease to exist.

As described under the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Merger Consideration—Exchange Procedures” beginning on page 65, at the closing, and concurrently with the effective time, ZF will deposit, or cause to be deposited, with a designated paying agent (as defined in “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Exchange Procedures” beginning on page 65) a cash amount in immediately available funds sufficient for the payment of the merger consideration.

After the merger is completed, under the terms of the merger agreement, you will have the right to receive the merger consideration, but you no longer will have any rights as a WABCO stockholder as a result of the merger (except for the right to receive the merger consideration and except that stockholders who properly exercise and perfect their demand for appraisal will instead have such rights as granted by Section 262 of the DGCL, as described under the section entitled “Appraisal Rights” beginning on page 93).



 

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The Special Meeting (page 25)

Date, Time and Place

The special meeting of WABCO stockholders, which we refer to as the special meeting, will be held at Four Times Square, New York, New York 10036 on June 27, 2019, at 8:30 a.m., Eastern time.

Purpose

At the special meeting, we will ask WABCO stockholders of record as of the close of business on May 17, 2019, which we refer to as the record date, to consider and vote on the following proposals:

 

   

the adoption of the merger agreement, a copy of which is attached as Annex A to the proxy statement accompanying this notice, which we refer to as the merger proposal;

 

   

the approval, by means of a non-binding, advisory vote, of compensation that will or may become payable to the named executive officers of WABCO in connection with the merger, which we refer to as the merger-related compensation proposal; and

 

   

the approval of one or more adjournments or postponements of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the then-scheduled date and time of the special meeting, which we refer to as the adjournment proposal.

Record Date; Shares Entitled to Vote

You are entitled to vote at the special meeting if you owned shares of WABCO common stock as of the close of business on the record date. You will have one vote at the special meeting for each share of WABCO common stock you owned as of the close of business on the record date.

Quorum

A majority in voting power of WABCO common stock issued and outstanding and entitled to vote at the special meeting, which are present in person or by proxy, constitutes a quorum at the special meeting. As of the close of business on the record date, there were 51,234,022 shares of WABCO common stock issued and outstanding and entitled to vote. If you submit a properly executed proxy by mail, telephone or the Internet, you will be considered a part of the quorum. In addition, abstentions will be counted for purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum. As a result, 25,617,012 shares of WABCO common stock must be present in person or by proxy to have a quorum. If a quorum is not present, the special meeting will be adjourned or postponed until a quorum is obtained, subject to the terms of the merger agreement. The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting or the chairman of the special meeting may adjourn or postpone the special meeting.

Required Vote

The merger proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote is required to approve the merger proposal, which we refer to as stockholder approval. This means that the proposal will be approved if the number of shares voted “FOR” the merger proposal is greater than 50% of the total number of the votes that can be cast in respect of the outstanding shares of WABCO common stock entitled to vote. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.



 

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The merger-related compensation proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, and voting at the special meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the merger-related compensation proposal. This means that the proposal will be approved if the number of shares voted “FOR” the merger-related compensation proposal is greater than 50% of the total number of shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, provided a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the merger-related compensation proposal. Broker non-votes will not have any effect on the merger-related compensation proposal.

The adjournment proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, whether or not a quorum is present, is required to approve the adjournment proposal. This means that the proposal will be approved if the number of shares voted “FOR” the adjournment proposal is greater than 50% of the total number of shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal. Broker non-votes will not have any effect on the adjournment proposal.

Share Ownership of WABCO Directors and Executive Officers

As of the close of business on the record date, WABCO directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 280,737 shares of WABCO common stock (excluding any shares of WABCO common stock that would be delivered upon exercise or conversion of stock options or other equity-based awards), which represented approximately 0.55% of the outstanding shares of WABCO common stock on that date. It is expected that WABCO directors and executive officers will vote their shares “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal, although none of them has entered into any agreement requiring them to do so.

Voting of Proxies

Any WABCO stockholder of record entitled to vote at the special meeting may submit a proxy by returning a signed proxy card by mail or voting electronically over the Internet or by telephone, or may vote in person by appearing at the special meeting. If your shares are held in a brokerage account at a brokerage firm, bank, broker-dealer, or similar organization, then you are the “beneficial owner” of shares held in “street name,” and you should instruct your broker, bank or other nominee on how you wish to vote your shares of WABCO common stock using the instructions provided by your broker, bank or other nominee. Under applicable stock exchange rules, if you fail to instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee only has discretion to vote your shares on discretionary matters. The merger proposal, the merger-related compensation proposal and the adjournment proposal are non-discretionary matters, and brokers, banks and other nominees therefore cannot vote on these proposals without your instructions. Therefore, it is important that you cast your vote or instruct your broker, bank or other nominee on how you wish to vote your shares.

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy, signing another proxy card with a later date and returning it to us prior to the special meeting or attending the special meeting and voting in person. Proxies submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern time, on June 26, 2019. If you hold your shares of WABCO common stock in “street name,” you should contact your broker, bank or other nominee for instructions regarding how to change your vote.



 

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Recommendation of the WABCO Board and Reasons for the Merger (page 42)

The board of directors of WABCO, which we refer to as the Board, after considering various factors described under the section entitled “Proposal 1: Adoption of the Merger Agreement—The Merger—Recommendation of the WABCO Board and Reasons for the Merger” beginning on page 42 and after consultation with legal and financial advisors, unanimously determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of WABCO and its stockholders, and declared it advisable to enter into the merger agreement and consummate the merger, approved the execution and delivery of the merger agreement by WABCO and the consummation of the transactions contemplated thereby, including the merger, directed that the adoption of the merger agreement be submitted to a vote at the special meeting, and unanimously resolved to recommend that WABCO stockholders vote in favor of the adoption of the merger agreement.

The Board unanimously recommends that you vote (i) “FOR” the merger proposal, (ii) “FOR” the merger-related compensation proposal and (iii) “FOR” the adjournment proposal.

Opinion of WABCO’s Financial Advisor (page 48)

Opinion of Goldman Sachs International

Goldman Sachs International, which we refer to as Goldman Sachs, delivered its opinion to the Board that, as of March 28, 2019 and based upon and subject to the factors and assumptions set forth therein, the $136.50 in cash per share to be paid to the holders of shares (other than ZF and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated March 28, 2019, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board in connection with its consideration of the merger and the other transactions contemplated by the merger agreement. The Goldman Sachs opinion is not a recommendation as to how any holder of shares should vote with respect to the merger or the other transactions contemplated by the merger agreement or any other matter. Pursuant to an engagement letter between WABCO and Goldman Sachs, WABCO has agreed to pay Goldman Sachs a transaction fee of approximately $46,600,000, all of which is contingent upon consummation of the merger.

Financing of the Merger (page 58)

The merger is not conditioned on ZF’s ability to obtain financing. ZF and Merger Sub have represented to WABCO that they will have available to them, together with WABCO’s cash on hand, sufficient funds at the effective time to pay all amounts required to be paid by ZF and Merger Sub pursuant to the terms of the merger agreement, including amounts required to pay the aggregate merger consideration, the amounts required in connection with the Indian offer (as defined in “Proposal 1: Adoption of the Merger Agreement—The Merger—Financing of the Merger” beginning on page 58), the amounts required to refinance any outstanding indebtedness of WABCO required to be refinanced pursuant to the terms of the merger agreement and to pay all associated fees, costs and expenses. ZF expects to finance the merger through proceeds from debt financing.

ZF has made available to WABCO a copy of a fully executed credit facilities agreement, dated the date of the merger agreement, which we refer to as the credit facilities agreement, with J.P. Morgan Securities plc, JPMorgan Chase Bank, N.A., London Branch and J.P. Morgan Europe Limited, which we collectively refer to as the financing sources. Pursuant to the credit facilities agreement, and subject to the terms and conditions set forth therein, the financing sources have committed to provide ZF with loans under senior unsecured credit facilities,



 

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which we refer to as the credit facilities. The funding of the credit facilities provided for in the credit facilities agreement is contingent on the satisfaction of customary conditions, including the consummation of the merger in accordance with the merger agreement.

For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—The Merger—Financing of the Merger” beginning on page 58.

Treatment of Equity and Cash Incentive Compensation (page 64)

WABCO executive officers and employees hold various types of compensatory awards with respect to WABCO common stock, in addition to annual and long-term cash incentive awards granted under WABCO’s amended and restated 2009 omnibus incentive plan and its predecessor plans, which we collectively refer to as company incentive plans. Our non-employee directors hold awards of deferred stock units granted pursuant to company incentive plans, which we refer to as DSUs. The merger agreement provides that at the effective time, all equity awards will be converted into the right to receive a payment in cash equal to $136.50 (less the applicable exercise price for any stock option) multiplied by the number of shares underlying the applicable equity award, with shares underlying PSU (as defined in the section entitled “Proxy Summary—Interests of WABCO Non-Employee Directors and Executive Officers in the Merger (page 55)” beginning on page 7) awards determined based on actual performance for PSUs with a performance period ending on December 31, 2019 and at the target level of performance for all other PSUs. Cash awards, including annual and long-term incentive awards granted under the company incentive plans, will convert into the right to receive cash based on the actual level of achievement of the applicable performance metrics, as determined by the Board or a committee thereof, pro-rated to reflect the period from and including the first day of the applicable performance period through and including the day on which the effective time occurs. Payment in respect of such awards will be less applicable tax withholding and the parties will cooperate to minimize the tax impact of the treatment described above for individuals located outside of the United States, to the extent such actions do not result in any increased costs or liabilities to WABCO or its subsidiaries.

For a more complete description of the treatment of equity and cash incentive awards granted under the company incentive plans, see the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Treatment of Equity and Cash Incentive Compensation” beginning on page 64.

Interests of WABCO Non-Employee Directors and Executive Officers in the Merger (page 55)

WABCO non-employee directors and executive officers may have interests in the merger that are different from, or in addition to, your interests as a stockholder. The Board was aware of and considered these, among other matters, in evaluating and overseeing the negotiation of the merger agreement, in approving the merger agreement and the merger and in recommending that WABCO stockholders vote in favor of the merger proposal. As described in more detail below, these interests potentially include:

 

   

the accelerated vesting upon the closing of 49,265 restricted stock units granted pursuant to company incentive plans, other than DSUs, which we refer to as RSUs, and 86,012 performance stock units granted pursuant to company incentive plans, which we refer to as PSUs, held by WABCO executive officers with an aggregate estimated value of $18,465,311;

 

   

the payment upon the closing of 27,815 DSUs held by WABCO non-employee directors with an aggregate estimated value of $3,796,748;

 

   

the accelerated vesting upon the closing of cash incentive awards granted pursuant to the company incentive plans held by WABCO executive officers with an aggregate estimated value of $9,974,520;



 

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the payment of certain severance payments and benefits that the executive officers of WABCO may become entitled to receive under the WABCO change of control severance plan, if they experience a qualifying termination of employment following the closing, with an aggregate estimated value of $18,535,254; and

 

   

certain indemnification arrangements for WABCO directors and executive officers and the continuation of certain insurance arrangements for WABCO directors and executive officers for six years after the closing.

For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—The Merger—Interests of WABCO Non-Employee Directors and Executive Officers in the Merger” beginning on page 55.

Appraisal Rights (page 93)

Any shares of WABCO common stock that are issued and outstanding immediately prior to the effective time and as to which the holders thereof have not voted in favor of the merger proposal and are entitled to demand and properly demand appraisal of such shares of WABCO common stock pursuant to Section 262 of the DGCL and, as of the effective time, have neither failed to perfect, nor effectively withdrawn or lost rights to appraisal under the DGCL, which we collectively refer to as the dissenting shares. Any dissenting shares will not be converted into the right to receive the merger consideration, unless and until the holder of such shares will have effectively withdrawn or lost such holder’s right to appraisal under the DGCL, or if a court of competent jurisdiction determines that such holder is not entitled to the relief provided by Section 262 of the DGCL. At the time of such withdrawal, loss or determination, such shares of WABCO common stock will no longer be deemed dissenting shares and will be treated as if they had been converted into the right to receive, as of the effective time, the merger consideration, less applicable tax withholdings, upon surrender of such certificates that formerly represented such shares of WABCO common stock, and such holder thereof will cease to have any other rights with respect to such shares. Each holder of dissenting shares will only be entitled to such consideration as may be due with respect to such dissenting shares pursuant to Section 262 of the DGCL.

To exercise your appraisal rights, you must submit a written demand for appraisal to WABCO before the vote is taken on the merger proposal, you must not submit a blank proxy or otherwise vote in favor of the merger proposal and you must continue to hold the shares of WABCO common stock of record through the effective time. Your failure to follow the procedures specified under the DGCL will result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this proxy statement. If you hold your shares of WABCO common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such broker, bank or other nominee. Stockholders should refer to the discussion under the section entitled “Appraisal Rights” beginning on page 93 and the DGCL requirements for exercising appraisal rights reproduced and attached as Annex C to this proxy statement.

U.S. Federal Income Tax Consequences of the Merger (page 59)

The exchange of WABCO common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. holder (as defined in “Proposal 1: Adoption of the Merger Agreement—The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 59) of WABCO common stock who exchanges shares of WABCO common stock for cash in the merger generally will recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with



 

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respect to such shares and the U.S. holder’s adjusted tax basis in such shares. If you are a non-U.S. holder, the merger generally will not result in U.S. federal income tax to you unless you have certain connections with the United States.

This proxy statement contains general discussions of U.S. federal income tax consequences of the merger. This description does not address any non-U.S. tax consequences, nor does it pertain to state, local or other tax consequences. Consequently, you are urged to contact your own tax advisor to determine the particular tax consequences to you of the merger.

Regulatory Approvals (page 60)

WABCO and ZF have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the merger and the other transactions contemplated by the merger agreement, including obtaining any requisite approvals, subject to certain specified limitations under the merger agreement. This includes using reasonable best efforts to obtain all requisite approvals, clearances, orders, decisions, decrees or authorizations or expirations of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and from the Committee on Foreign Investment in the United States and each member agency thereof acting in such capacity, which we refer to as CFIUS, under the Defense Production Act of 1950, as amended, which we refer to as the DPA. The merger is also conditioned upon receipt of certain foreign approvals.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained or obtained at all, or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the closing, including the requirement to divest assets. In furtherance thereof, WABCO and ZF have also agreed to work together and use their respective reasonable best efforts to cause WABCO to divest certain interests and assets, which we refer to as the specified business. ZF has agreed, subject to certain exceptions, to make divestitures and take remedial actions required by regulators so long as such actions do not result in a material adverse effect on the combined company, after giving effect to the merger. ZF is not required to divest a portion of, or certain assets primarily related to, specific product lines or business divisions. These conditions or changes could result in the conditions to the closing not being satisfied.

Legal Proceedings Regarding the Merger (page 62)

On April 23, 2019, a putative class action complaint was filed against WABCO and the Board in the United States District Court for the District of Delaware under the caption Collier v. WABCO Holdings Inc., et al., No. 1:19-cv-00729 (D. Del.). A second putative class action complaint was filed on April 24, 2019 against WABCO and the Board in the United States District Court for the District of Delaware under the caption Kent v. WABCO Holdings Inc., et al., No. 1:19-cv-00735 (D. Del.). A third complaint was filed on April 29, 2019 against WABCO and the Board in the United States District Court for the District of Delaware under the caption Stein v. WABCO Holdings Inc., et al., No. 1:19-cv-00782 (D. Del.). A fourth complaint was filed on May 2, 2019 against WABCO and the Board in the United States District Court for the District of Delaware under the caption Kengchoon v. WABCO Holdings Inc., et al., No. 1:19-cv-00816 (D. Del.). The complaints allege that the preliminary proxy statement on Schedule 14A filed by WABCO with the SEC on April 18, 2019, which we refer to as the preliminary proxy statement, among other things, omitted material information in violation of Sections 14(a) and 20(a) of the Exchange Act, rendering the preliminary proxy statement false and misleading. Among other remedies, the complaints seek to enjoin the special meeting and the closing, as well as damages, costs and attorneys’ fees. The defendants believe that the lawsuits are without merit.



 

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No Solicitation (page 72)

As of the date of the merger agreement, WABCO agreed, and to cause its subsidiaries and their respective attorneys, investment bankers and other advisors or representatives, which we collectively refer to as representatives, to immediately cease and cause to be terminated any solicitations, discussions, negotiations or other activities with any person (other than ZF or Merger Sub) in connection with an acquisition proposal (as defined in “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Additional Agreements—No Solicitation” beginning on page 72).

Under the merger agreement, WABCO is generally not permitted to solicit or discuss acquisition proposals with third parties, subject to certain exceptions.

Except as expressly permitted by the merger agreement, WABCO will not, and will cause its subsidiaries, directors, officers and employees not to, and will direct and use its reasonable best efforts to cause the representatives of WABCO and its subsidiaries not to, directly or indirectly:

 

   

initiate, solicit or knowingly encourage or otherwise knowingly facilitate any inquiries with respect to, or the making of, any acquisition proposal or any offer or proposal that could reasonably be expected to lead to an acquisition proposal;

 

   

engage, continue or otherwise participate in any negotiations or discussions concerning, or provide access to properties, books and records or any confidential information or data to, any person relating to an acquisition proposal or any offer or proposal that could reasonably be expected to lead to an acquisition proposal;

 

   

approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any acquisition proposal;

 

   

execute or enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement or other similar agreement relating to any acquisition proposal or enter into any agreement or agreement in principle requiring WABCO to abandon, terminate or fail to consummate the transactions contemplated by the merger agreement or breach its obligations under the merger agreement;

 

   

amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of WABCO or any of its subsidiaries;

 

   

approve any transaction under, or any third party becoming an “interested stockholder” under, Section 203 of the DGCL other than in connection with a change of recommendation (as defined in “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Additional Agreements—Change of Recommendation” beginning on page 74) or termination of the merger agreement permitted pursuant to the merger agreement; or

 

   

resolve or agree to do any of the foregoing.

Notwithstanding the restrictions described above, under certain circumstances prior to obtaining the stockholder approval at the special meeting, WABCO is permitted to furnish information with respect to WABCO and its subsidiaries subject to a confidentiality agreement and engage in negotiations or discussions with the person making a bona fide acquisition proposal that was not initiated, solicited, encouraged or facilitated in violation of the merger agreement in any material respect (including the non-solicitation restrictions described above) if the Board determines in good faith, after consultation with its outside legal counsel and financial advisor, that such acquisition proposal could reasonably be expected to constitute, result in or lead to a superior proposal (as defined in “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Additional Agreements—No Solicitation” beginning on page 72), and which acquisition proposal did not result from a breach of the merger agreement.



 

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For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Additional Agreements—No Solicitation” beginning on page 72.

Change of Recommendation (page 74)

As described under the section entitled “The Special Meeting—Board of Directors’ Recommendation” beginning on page 27, the Board has recommended that WABCO stockholders vote “FOR” the merger proposal. The merger agreement provides that the Board will not withdraw, modify or change its recommendation (or formally resolve to effect or publicly propose to effect any of the foregoing), subject to certain exceptions. If the Board withdraws, modifies or changes its recommendation (or formally resolves to effect or publicly proposes to effect any of the foregoing), it constitutes what we refer to as a change of recommendation.

The Board may effect a change of recommendation only if either (i) a bona fide acquisition proposal that was not initiated, solicited, encouraged (in any material respect) or facilitated (in any material respect) in violation of the merger agreement is received and the Board determines in good faith, after consultation with its outside legal counsel and financial advisor, that such acquisition proposal constitutes a “superior proposal” or (ii) there exists any event, development, change, effect or occurrence that was not known by the Board (or if known, the consequences of which were not known or reasonably foreseeable) as of the date of the merger agreement (each of which we refer to as an intervening event) and, in each case of clauses (i) and (ii) above, the Board determines in good faith after consultation with its outside legal counsel that the failure of the Board to effect a change of recommendation would be inconsistent with its fiduciary duties.

Additionally, prior to effecting a change of recommendation based on a superior proposal described in clause (i) above, WABCO must comply with certain notice procedures promptly and, in any event, within twenty-four hours (including by providing notice of the material terms and conditions of the superior proposal and the identity of the third party making such superior proposal) and provide ZF a five business day “match right.” Prior to effecting a change of recommendation based on an intervening event as described in clause (ii) above, WABCO must deliver to ZF a written notice informing ZF that the Board proposes to change its recommendation based on such intervening event no less than three business days prior to effecting such change of recommendation.

Unless the merger agreement is terminated, WABCO is required to take all reasonable action to duly call, give notice of, convene and hold the special meeting of WABCO stockholders to adopt the merger agreement, even if the Board has changed its recommendation with respect to the merger; however, in no event is WABCO required to give notice of the special meeting prior to May 23, 2019 or hold the special meeting prior to June 27, 2019.

For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Additional Agreements—Change of Recommendation” beginning on page 74.

Conditions to the Closing (page 80)

The following are certain of the conditions that must be satisfied or waived before the merger may be consummated:

 

   

receipt of the stockholder approval;

 

   

the absence of a law, statute, rule, regulation, executive order or other order (whether temporary, preliminary or permanent) having been enacted, entered, promulgated or enforced by any governmental entity of competent jurisdiction which prohibits, restrains or enjoins the consummation of the merger;

 

   

the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the merger under the HSR Act and the receipt of any approvals required in connection with the merger by the competent authorities pursuant to the non-U.S. antitrust laws applicable in certain jurisdictions;



 

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the receipt of CFIUS clearance;

 

   

the accuracy of the representations and warranties of WABCO, ZF and Merger Sub in the merger agreement, subject in certain instances to materiality or material adverse effect qualifiers, as of the date on which closing occurs, which we refer to as the closing date;

 

   

(i) the performance in all material respects by WABCO, on the one hand, and ZF and Merger Sub, on the other hand, of their respective obligations and (ii) the compliance in all material respects by WABCO, on the one hand, and ZF and Merger Sub, on the other hand, of the agreements and covenants required to be performed by or complied with by each of the parties, in each case, under the merger agreement at or prior to the closing; and

 

   

since the date of the merger agreement, no events, developments, changes, effects or occurrences having occurred that have had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect.

For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Conditions to the Closing” beginning on page 80.

Termination of the Merger Agreement (page 82)

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time:

 

   

by the mutual written consent of ZF and WABCO;

 

   

by either ZF or WABCO, if:

 

   

the merger has not been consummated by 11:59 p.m., Eastern time, on March 28, 2020, which we refer to as the end date, provided that the end date will be extended to September 28, 2020 if all conditions are satisfied other than receipt of antitrust or CFIUS regulatory approvals and absence of legal restraints related to antitrust or CFIUS laws; provided that a party will not be able to terminate the merger agreement if it is in material breach of the merger agreement and such breach is the primary cause of the failure of the merger to occur on or before the end date;

 

   

an order or action having the effect of making the merger illegal or otherwise prohibiting consummation of the merger becomes final and nonappealable or in the event of a CFIUS turndown (as defined in the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Termination of the Merger Agreement—Termination” beginning on page 82); provided that a party will not be able to terminate the merger agreement if it is in material breach of the merger agreement and such breach is the primary cause of the issuance of such legal restraint; or

 

   

the stockholder approval has not been obtained at the special meeting or any adjournment or postponement thereof.

 

   

by ZF if:

 

   

WABCO has breached any representation, warranty, covenant or agreement or any representation or warranty is untrue, such that the conditions relating to the accuracy of WABCO’s representations and warranties or performance of covenants and agreements would not be satisfied (and such breach or condition is not curable); provided that ZF will not be able to terminate the merger agreement if ZF or Merger Sub is in material breach of any of its covenants or agreements contained in the merger agreement;



 

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prior to, but not after, obtaining the stockholder approval, a change of recommendation has occurred;

 

   

the Board has recommended, approved or otherwise declared advisable, prior to obtaining the stockholder approval, to WABCO stockholders an acquisition proposal other than the merger;

 

   

the Board has formally resolved to effect or publicly announced an intention to effect a change of recommendation or entry into an acquisition proposal other than the merger, prior to obtaining the stockholder approval; or

 

   

WABCO has willfully breached the non-solicitation covenants described above or its obligation to hold the special meeting in accordance with the timeframe set forth in the merger agreement and, in such case, such breach is not curable or such breach has not been cured within three business days’ notice thereof by ZF to WABCO.

 

   

by WABCO if:

 

   

ZF or Merger Sub has breached any representation, warranty, covenant or agreement or any representation or warranty is untrue, such that the conditions relating to the accuracy of ZF’s or Merger Sub’s representations and warranties or performance of covenants and agreements would not be satisfied (and such breach or condition is not curable); provided that WABCO will not be able to terminate the merger agreement if WABCO is in material breach of any of its covenants or agreements contained in the merger agreement; or

 

   

prior to, but not after, obtaining the stockholder approval, in order to enter into a definitive written agreement providing for a superior proposal, in accordance with, and subject to the terms and conditions of the merger agreement.

For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Termination of the Merger Agreement—Termination” beginning on page 82.

Termination Fees (page 83)

WABCO will be required to pay a termination fee of $211 million to ZF if the merger agreement is terminated under specified circumstances, which we refer to as the termination fee. ZF will be required to pay a termination fee of $211 million to WABCO if the merger agreement is terminated under certain other specified circumstances, which we refer to as the reverse termination fee. In no event will WABCO or ZF, as the case may be, be required to pay the termination fee or the reverse termination fee, as applicable, on more than one occasion. For a more complete description, see the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Termination of the Merger Agreement—Termination Fees” beginning on page 83.

Market Prices and Dividend Data (page 89)

On May 17, 2019, the latest practicable trading day before the date of this proxy statement, the closing price of WABCO common stock was $130.67 per share and on February 26, 2019, the date prior to media reports that ZF was considering a transaction with WABCO, the closing price of WABCO common stock was $120.75 per share.

Under the terms of the merger agreement, from March 28, 2019, until the effective time, WABCO may not declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock without ZF’s prior written consent.

Neither the SEC nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.



 

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QUESTIONS AND ANSWERS

The following questions and answers are intended to address some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a WABCO stockholder. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement (including the merger agreement), and the documents we incorporate by reference in this proxy statement. You may obtain the documents and information incorporated by reference in this proxy statement without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 100. The merger agreement is attached as Annex A to this proxy statement.

 

Q:

Why am I receiving these proxy materials?

 

A:

On March 28, 2019, WABCO entered into the merger agreement providing for the merger of Merger Sub with and into WABCO, with WABCO surviving the merger as a wholly owned subsidiary of ZF. The Board is furnishing this proxy statement and form of proxy card to the holders of WABCO common stock in connection with the solicitation of proxies in favor of the proposal to adopt the merger agreement and to approve the other proposals to be voted on at the special meeting or any adjournments or postponements thereof. This proxy statement includes information that we are required to provide to you under the rules of the SEC and is designed to assist you in voting on the matters presented at the special meeting. WABCO stockholders of record as of the close of business on May 17, 2019 may attend the special meeting and are entitled and requested to vote on the proposals described in this proxy statement.

 

Q:

What is included in the proxy materials?

 

A:

The proxy materials include the proxy statement and the annexes to the proxy statement, including the merger agreement, and a proxy card or voting instruction form.

 

Q:

When and where is the special meeting?

 

A:

The special meeting will take place on June 27, 2019, at 8:30 a.m., Eastern time, at Four Times Square, New York, New York 10036.

 

Q:

What is the proposed merger and what effects will it have on WABCO?

 

A:

The proposed merger is the acquisition of WABCO by ZF through the merger of Merger Sub with and into WABCO pursuant to the merger agreement. If the proposal to adopt the merger agreement is approved by the requisite number of shares of WABCO common stock and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into WABCO, with WABCO continuing as the surviving corporation. As a result of the merger, WABCO will become a wholly owned subsidiary of ZF and you will no longer own shares of WABCO common stock. WABCO expects to delist its common stock from the NYSE as promptly as practicable after the effective time and de-register its common stock under the Exchange Act as promptly as practicable after such delisting. Thereafter, WABCO would no longer be a publicly traded company.

 

Q:

What will I receive if the merger is completed?

 

A:

Upon the closing, you will be entitled to receive the merger consideration of $136.50 in cash, without interest and less applicable tax withholdings, for each share of WABCO common stock that you own, unless you have properly exercised and perfected and not withdrawn your demand for appraisal rights under the DGCL with respect to such shares. For example, if you own 100 shares of WABCO common stock, you will receive $13,650.00 in cash, without interest and less any applicable withholding taxes, in exchange for your shares of WABCO common stock. In no case will you own shares in the surviving corporation.

 

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Q:

Who is entitled to vote at the special meeting?

 

A:

If your shares of WABCO common stock are registered in your name in the records of the transfer agent, Computershare Trust Company, N.A., which we refer to as Computershare, as of the close of business on the record date, you are a “stockholder of record” for purposes of the special meeting and are eligible to attend and vote. If you hold shares of our common stock indirectly through a broker, bank or similar institution, you are not a stockholder of record, but instead hold your shares in “street name” and the record owner of your shares is your broker, bank or similar institution. Instructions on how to vote shares held in street name are described under the question “How do I vote my shares?” below.

 

Q:

How many votes do I have?

 

A:

You will have one vote for each share of WABCO common stock owned by you, as a stockholder of record or in street name, as of the close of business on the record date.

 

Q:

May I attend the special meeting and vote in person?

 

A:

Yes. All WABCO stockholders as of the close of business on the record date may attend the special meeting and vote in person. All WABCO stockholders will need to present government-issued photo identification to be admitted to the special meeting. The use of cameras, sound recording equipment, communication devices or any other similar equipment is prohibited at the special meeting without the express written permission of WABCO. Even if you plan to attend the special meeting in person, we encourage you to complete, sign, date and return the enclosed proxy card or vote electronically over the Internet or via telephone to ensure that your shares will be represented at the special meeting. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you held your shares in “street name,” because you are not the stockholder of record, you may not vote your shares in person in the special meeting unless you request and obtain, and bring to the special meeting, a valid proxy from your broker, bank or other nominee.

 

Q:

What am I being asked to vote on at the special meeting?

 

A:

You are being asked to consider and vote on the following proposals:

 

   

the merger proposal;

 

   

the merger-related compensation proposal; and

 

   

the adjournment proposal.

 

Q:

How does the Board recommend that I vote?

 

A:

The Board, after considering various factors described under “Proposal 1: Adoption of the Merger Agreement—The Merger—Recommendation of the WABCO Board and Reasons for the Merger” beginning on page 42, and after consultation with its legal and financial advisors, unanimously determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of WABCO and its stockholders, and declared it advisable to enter into the merger agreement and consummate the merger, approved the execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, directed that the adoption of the merger agreement be submitted to a vote at the special meeting and unanimously resolved to recommend that WABCO stockholders vote in favor of the adoption of the merger agreement.

The Board unanimously recommends that you vote

 

   

“FOR” the merger proposal;

 

   

“FOR” the merger-related compensation proposal; and

 

   

“FOR” the adjournment proposal.

 

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Q:

How does the merger consideration compare to the market price of WABCO common stock?

 

A:

The merger consideration represents a 13.0% premium to the last undisturbed closing stock price of $120.75 on February 26, 2019, the date prior to media reports that ZF was considering a transaction with WABCO and WABCO’s confirmation that it had been approached by ZF and had engaged in preliminary discussions with ZF. The merger consideration represents a premium of approximately 23.1% to WABCO’s undisturbed trailing three month volume-weighted average per share price of $110.90 and 21.8% to WABCO’s undisturbed trailing six month volume-weighted average per share price of $112.00, each as of February 26, 2019.

 

Q:

Will WABCO pay a quarterly dividend before the closing?

 

A:

Under the terms of the merger agreement, from March 28, 2019 until the effective time, WABCO may not declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock. See the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Conduct of Business Pending the Merger” beginning on page 70.

 

Q:

Does ZF have the financial resources to complete the merger?

 

A:

ZF has secured committed debt financing from the financing sources providing ZF with sufficient funds, together with other sources of funds available to ZF at the effective time, to consummate the merger and pay all associated fees, costs and expenses with respect to the merger. In connection with entering into the merger agreement, ZF entered into a credit facilities agreement. Consummation of the merger is not conditioned on ZF or Merger Sub obtaining financing. The funding of the credit facilities provided for in the credit facilities agreement is contingent on the satisfaction of customary conditions, including the consummation of the merger in accordance with the merger agreement.

For a more complete description of sources of funding for the merger and related costs, see “Proposal 1: Adoption of the Merger Agreement—The Merger—Financing of the Merger” beginning on page 58.

 

Q:

What do I need to do now?

 

A:

We encourage you to read this proxy statement, the annexes to this proxy statement (including the merger agreement), and the documents we refer to in this proxy statement carefully and consider how the merger affects you. Then complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone, so that your shares can be voted at the special meeting. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your broker, bank or other nominee to vote your shares.

 

Q:

How do I vote my shares?

 

A:

For WABCO stockholders of record: If you are eligible to vote at the special meeting and are a stockholder of record, you may submit your proxy or cast your vote in any of four ways:

 

   

By Internet—If you have Internet access, you may submit your proxy by following the instructions provided with your proxy materials and on your proxy card. Proxies submitted via Internet must be received by 11:59 p.m., Eastern time, on June 26, 2019.

 

   

By Telephone—You can also submit your proxy by telephone by following the instructions provided with your proxy materials and on your proxy card. Proxies submitted via telephone must be received by 11:59 p.m., Eastern time, on June 26, 2019.

 

   

By Mail—You may submit your proxy by completing the proxy card enclosed with those materials, signing and dating it and returning it in the pre-paid envelope we have provided.

 

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In Person at our Special Meeting—You can vote in person at our special meeting. In order to gain admittance, you must present valid government-issued photo identification, such as a driver’s license or passport.

For holders in street name: If you hold your shares in street name and, therefore, are not a stockholder of record, you will need to follow the specific voting instructions provided to you by your broker, bank or other similar institution. If you wish to vote your shares in person at our special meeting, you must obtain a valid proxy from your broker, bank or similar institution, granting you authorization to vote your shares. In order to attend and vote your shares held in street name at our special meeting, you will need to present valid government-issued photo identification, such as a driver’s license or passport, and hand in the valid proxy from your broker, bank or similar institution, along with a signed ballot that you can request at the special meeting. You will not be able to attend and vote your shares held in street name at the special meeting without valid government-issued photo identification such as a driver’s license or passport, a valid proxy from your broker, bank or similar institution and a signed ballot.

If you submit your proxy by Internet, telephone or mail, and you do not subsequently revoke your proxy, your shares of WABCO common stock will be voted in accordance with your instructions.

Even if you plan to attend the special meeting in person, you are strongly encouraged to vote your shares of WABCO common stock by proxy. If you are a stockholder of record or if you obtain a valid proxy to vote shares which you beneficially own, you may still vote your shares of WABCO common stock in person at the special meeting even if you have previously voted by proxy. If you are present at the special meeting and vote in person, your previous vote by proxy will not be counted.

 

Q:

Can I change or revoke my proxy?

 

A:

For WABCO stockholders of record: Yes. A proxy may be changed or revoked at any time prior to the vote at the special meeting by submitting a later-dated proxy (including a proxy submitted via the Internet or by telephone) or by giving written notice to our Company Secretary at our principal executive offices located at 1220 Pacific Drive, Auburn Hills, Michigan 48326. You may not change your vote over the Internet or by telephone after 11:59 p.m., Eastern time, on June 26, 2019. You may also attend the special meeting and vote your shares in person.

For holders in street name: Yes. You must follow the specific voting instructions provided to you by your broker, bank or other similar institution to change or revoke any instructions you have already provided to them.

 

Q:

How will my shares be voted if I do not provide specific instructions in the proxy card or voting instructions form that I submit?

 

A:

If you are a stockholder of record and if you sign, date and return your proxy card but do not provide specific voting instructions, your shares of WABCO common stock will be voted “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.

If your shares are held in street name at a broker, bank or similar institution, your broker, bank or similar institution may under certain circumstances vote your shares on “discretionary” matters if you do not timely provide voting instructions in accordance with the instructions provided by them. However, if you do not provide timely instructions, your broker, bank or similar institution does not have the authority to vote on any “non-discretionary” proposals at the special meeting and a “broker non-vote” would occur, as explained in the following question and explanation.

 

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Q:

What is “broker discretionary voting”?

 

A:

If you hold your shares in street name, your broker, bank or other similar institution may be able to vote your shares without your instructions depending on whether the matter being voted on is “discretionary” or “non-discretionary.” Because brokers, banks and other nominee holders of record do not have discretionary voting authority with respect to any of the three proposals, if a beneficial owner of shares of WABCO common stock held in street name does not give voting instructions to the broker, bank or other nominee with respect to any of the proposals, then those shares will not be present in person or by proxy at the special meeting. If there are any broker non-votes, then such broker non-votes will be counted as a vote “AGAINST” the merger proposal, but will not have any effect on the merger-related compensation proposal or the adjournment proposal. Therefore, it is important that you instruct your broker, bank or other nominee on how you wish to vote your shares.

 

Q:

I understand that a quorum is required in order to conduct business at the special meeting. What constitutes a quorum?

 

A:

A majority in voting power of WABCO common stock issued and outstanding and entitled to vote at the special meeting, which are present in person or by proxy, constitutes a quorum at the special meeting. As of the close of business on the record date, there were 51,234,022 shares of WABCO common stock issued and outstanding and entitled to vote. If you submit a properly executed proxy by mail, telephone or the Internet, you will be considered a part of the quorum. In addition, abstentions will be counted for purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum. As a result, 25,617,012 shares must be present in person or by proxy to have a quorum. If a quorum is not present, the special meeting will be adjourned or postponed until a quorum is obtained, subject to the terms of the merger agreement. The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting or the chairman of the special meeting may adjourn or postpone the special meeting.

 

Q:

What is required to approve the proposals submitted to a vote at the special meeting?

 

A:

The merger proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote is required to approve the merger proposal. This means that the proposal will be approved if the number of shares voted “FOR” the merger proposal is greater than 50% of the total number of the votes that can be cast in respect of the outstanding shares of WABCO common stock entitled to vote. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.

The merger-related compensation proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, and voting at the special meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the merger-related compensation proposal. This means that the proposal will be approved if the number of shares voted “FOR” the merger-related compensation proposal is greater than 50% of the total number of shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, provided a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the merger-related compensation proposal. Broker non-votes will not have any effect on the merger-related compensation proposal.

The adjournment proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, whether or not a quorum is present, is required to approve the adjournment proposal. This means that the proposal will be approved if the number of shares voted “FOR” the adjournment proposal is greater than 50% of the total number of shares of WABCO common stock entitled to vote which are present, in person

 

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or by proxy, at the special meeting, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal. Broker non-votes will not have any effect on the adjournment proposal.

 

Q:

How can I obtain a proxy card or voting instruction form?

 

A:

If you lose, misplace or otherwise need to obtain a proxy card or a voting instruction form, please follow the applicable procedure below.

For WABCO stockholders of record:      Please contact Innisfree M&A Incorporated by mail at 501 Madison Avenue, 20th Floor, New York, New York 10022 or by telephone. Stockholders may call toll-free at +1 (888) 750-5834.

For holders in street name:                     Please contact your account representative at your broker, bank or other similar institution.

 

Q:

Should I send in my stock certificates now?

 

A:

No. After the merger is completed, under the terms of the merger agreement, you will receive shortly thereafter the letter of transmittal instructing you to send your stock certificates to the paying agent (as defined in “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration” beginning on page 64) in order to receive the cash payment of the merger consideration for each share of your WABCO common stock represented by the stock certificates. You should use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled upon the closing. Please do not send in your stock certificates now.

 

Q:

If I do not know where my stock certificates are, how will I get the merger consideration for my shares of WABCO common stock?

 

A:

If the merger is completed, the transmittal materials you will receive after the closing will include the procedures that you must follow if you cannot locate your stock certificates. This will include an affidavit that you will need to sign attesting to the loss of your stock certificates. You may also be required to post a bond as indemnity against any potential loss.

 

Q:

What happens if I sell or otherwise transfer my shares of WABCO common stock after the close of business on the record date but before the special meeting?

 

A:

The record date is earlier than both the date of the special meeting and the date the merger is expected to be completed. If you sell or transfer your shares of WABCO common stock after the close of business on the record date but before the special meeting, unless special arrangements (such as the provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies WABCO in writing of such special arrangements, you will transfer the right to receive the merger consideration if the merger is completed to the person to whom you sell or transfer your shares of WABCO common stock, but you will retain your right to vote these shares at the special meeting. Even if you sell or otherwise transfer your shares of WABCO common stock after the close of business on the record date, we encourage you to complete, date, sign and return the enclosed proxy card or vote via the Internet or telephone.

 

Q:

When do you expect the merger to be completed?

 

A:

We are working toward completing the merger as quickly as possible and currently expect to complete the merger in early 2020. However, the exact timing of the closing cannot be predicted because the closing is subject to conditions, including the adoption of the merger agreement by WABCO stockholders and the receipt of regulatory approvals.

 

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Q:

What happens if the merger is not completed?

 

A:

If the merger agreement is not adopted by WABCO stockholders or if the merger is not completed for any other reason, WABCO stockholders will not receive any payment for their shares of WABCO common stock. Instead, WABCO will remain a public company, WABCO common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and WABCO will continue to file periodic reports with the SEC.

Under certain specified circumstances, WABCO will be required to pay ZF the termination fee if the merger agreement is terminated, and under certain other specified circumstances, ZF will be required to pay WABCO the reverse termination fee if the merger agreement is terminated, as described under the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Termination of the Merger Agreement—Termination Fees” beginning on page 83.

 

Q:

Are there any other risks to me from the merger that I should consider?

 

A:

Yes. There are risks associated with all business combinations, including the merger. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 23.

 

Q:

Do any of the WABCO directors or officers have interests in the merger that may differ from those of WABCO stockholders generally?

 

A:

Yes. For a description of the interests of WABCO directors and executive officers in the merger, see “Proposal 1: Adoption of the Merger Agreement—The Merger—Interests of WABCO Non-Employee Directors and Executive Officers in the Merger” beginning on page 55.

 

Q:

What happens if the merger-related compensation proposal is not approved?

 

A:

Approval of the merger-related compensation proposal is not a condition to the closing. The vote is an advisory vote and is not binding. Accordingly, regardless of the outcome of the advisory vote, if the merger is completed, WABCO may still pay such compensation to WABCO named executive officers in accordance with the terms and conditions applicable to such compensation.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, date, sign and return (or vote via the Internet or telephone with respect to) each proxy card and voting instruction card that you receive.

 

Q:

Who counts the votes?

 

A:

Votes are counted by Broadridge Financial Solutions, Inc., which we refer to as Broadridge, which has been appointed to serve as the inspector of election at the special meeting.

 

Q:

Who may attend the special meeting?

 

A:

WABCO stockholders who held shares of WABCO common stock as of the close of business on May 17, 2019.

 

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Q:

How can I obtain directions to the special meeting?

 

A:

WABCO stockholders may contact WABCO Investor Relations at +1 (248) 270-9287 to obtain directions to the special meeting.

 

Q:

Who pays for the expenses of this proxy solicitation?

 

A:

WABCO will bear the entire cost of this proxy solicitation, including the preparation, printing, mailing and distribution of these proxy materials. We may also reimburse brokerage firms and other persons representing stockholders who hold their shares in street name for reasonable expenses incurred by them in forwarding proxy materials to such stockholders. In addition, certain directors, officers and other employees, without additional remuneration, may solicit proxies in person, or by telephone, facsimile, email and other methods of electronic communication.

 

Q:

Where can I find the vote results after the special meeting?

 

A:

We are required to publish final vote results in a Current Report on Form 8-K to be filed with the SEC within four business days after our special meeting.

 

Q:

Will I be subject to U.S. federal income tax upon the exchange of WABCO common stock for cash pursuant to the merger?

 

A:

The exchange of WABCO common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. holder (as defined in “Proposal 1: Adoption of the Merger Agreement—The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 59) of WABCO common stock who exchanges shares of WABCO common stock for cash in the merger generally will recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. holder’s adjusted tax basis in such shares. If you are a non-U.S. holder, the merger generally will not result in U.S. federal income tax to you unless you have certain connections with the United States.

For a more complete description of the U.S. federal income tax consequences of the merger, see “Proposal 1: Adoption of the Merger Agreement—The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 59.

This proxy statement contains a general discussion of U.S. federal income tax consequences of the merger. This description does not address any non-U.S. tax consequences, nor does it pertain to state, local or other tax consequences. Consequently, you are urged to contact your own tax advisor to determine the particular tax consequences to you of the merger.

 

Q:

What will the holders of outstanding WABCO equity awards receive in the merger?

 

A:

For information regarding the treatment of WABCO’s outstanding equity awards, see the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Treatment of Equity and Cash Incentive Compensation” beginning on page 64.

 

Q:

Am I entitled to appraisal rights under the DGCL?

 

A:

If the merger is adopted by WABCO stockholders, stockholders who do not vote (whether in person or by proxy) in favor of the adoption of the merger agreement and who properly exercise and perfect their demand for appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. This means that holders of WABCO common stock are entitled to have their

 

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  shares appraised by the Court of Chancery of the State of Delaware and to receive payment in cash of the “fair value” of the shares of WABCO common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with interest to be paid upon the amount determined to be fair value, if any, as determined by the court. Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. Stockholders should refer to the discussion under the section entitled “Appraisal Rights” beginning on page 93 and the DGCL requirements for exercising appraisal rights reproduced and attached as Annex C to this proxy statement.

 

Q:

What is “householding”?

 

A:

Some banks, brokers and similar institutions may be participating in the practice of “householding” proxy materials. This means that only one copy of our proxy materials may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of the proxy materials to you if you write to us at the following address or call us at the following phone number:

WABCO Holdings Inc.

1220 Pacific Drive

Auburn Hills, Michigan 48326

Attention: Investor Relations

Phone: Call +1 (248) 270-9287 and ask to speak to Sean Deason.

To receive separate copies of the proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or similar institution or you may contact us at the above address or telephone number.

 

Q:

How can I obtain more information about WABCO?

 

A:

You can find more information about us from various sources described in the section entitled “Where You Can Find More Information” beginning on page 100.

 

Q:

Who can help answer my questions?

 

A:

If you have any questions concerning the merger, the special meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of WABCO common stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Toll-free: +1 (888) 750-5834

Banks & Brokers may call collect: +1 (212) 750-5833

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us or on our behalf, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements relating to the closing. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed merger and the anticipated benefits thereof. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements, including the failure to consummate the proposed merger or to make any filing or take other action required to consummate such merger in a timely matter or at all. The inclusion of such statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. You should not place undue reliance on such statements.

Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, that: (1) WABCO may be unable to obtain stockholder approval as required for the merger; (2) conditions to the closing, including obtaining required regulatory approvals, may not be satisfied or waived on a timely basis or otherwise; (3) a governmental entity or a regulatory body may prohibit, delay or refuse to grant approval for the consummation of the merger and may require conditions, limitations or restrictions in connection with such approvals that can adversely affect the anticipated benefits of the proposed merger or cause the parties to abandon the proposed merger; (4) the merger may involve unexpected costs, liabilities or delays; (5) the business of WABCO may suffer as a result of uncertainty surrounding the merger or the potential adverse changes to business relationships resulting from the proposed merger; (6) legal proceedings may be initiated related to the merger and the outcome of any legal proceedings related to the merger may be adverse to WABCO; (7) WABCO may be adversely affected by other general industry, economic, business, and/or competitive factors; (8) unforeseen events, changes or other circumstances that could give rise to the termination of the merger agreement or affect the ability to recognize benefits of the merger; (9) risks that the proposed merger may disrupt current plans and operations and present potential difficulties in employee retention; (10) risks related to diverting management’s attention from WABCO’s ongoing business operations; (11) other risks to consummation of the merger, including the risk that the merger will not be consummated within the expected time period or at all which may affect WABCO’s business and the price of WABCO common stock; and (12) the risks described from time to time in WABCO’s reports filed with the SEC under the heading “Risk Factors,” including the Annual Report on Form 10-K for the fiscal year ended December 31, 2018, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and in other of WABCO’s filings with the SEC. Such risks include, without limitation: the effects of competition in the businesses in which WABCO operates; WABCO’s ability to adapt to a rapidly changing industry and maintain strategic relationships with industry leading companies; and the impacts of security breaches and data loss and WABCO’s vulnerability to technology infrastructure failures. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on WABCO’s financial condition, results of operations, credit rating or liquidity. There can be no assurance that the merger will be completed, or if it is completed, that it will close within the anticipated time period or that the expected benefits of the merger will be realized. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which such statements were made.

All of the forward-looking statements we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including, but not limited to, (i) the information contained under

 

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this heading and (ii) the information in our consolidated financial statements and notes thereto included in our most recent filing on Form 10-K for the fiscal year ended December 31, 2018 and subsequent periodic and interim report filings (see the section entitled “Where You Can Find More Information” beginning on page 100).

Except as required by applicable law, WABCO undertakes no obligation to update forward-looking statements to reflect events or circumstances arising after such date.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Board for use at the special meeting or at any adjournments or postponements thereof.

Date, Time and Place

We will hold the special meeting on June 27, 2019 at 8:30 a.m., Eastern time, at Four Times Square, New York, NY 10036.

Purpose of the Special Meeting

At the special meeting, we will ask WABCO stockholders of record as of the close of business on the record date to consider and vote on the following proposals:

Proposal 1Adoption of the Merger Agreement. To consider and vote on the merger proposal;

Proposal 2Approval, by Means of a Non-Binding, Advisory Vote, of Certain Compensatory Arrangements with Named Executive Officers. To consider and vote on the merger-related compensation proposal; and

Proposal 3Adjournment of the Special Meeting. To consider and vote on the adjournment proposal.

Record Date; Shares Entitled to Vote; Quorum

Only WABCO stockholders of record as of the close of business on May 17, 2019 are entitled to notice of the special meeting and to vote at the special meeting or at any adjournments or postponements thereof. A list of stockholders entitled to vote at the special meeting will be available for inspection in WABCO’s principal executive offices located at 1220 Pacific Drive, Auburn Hills, Michigan 48326 during regular business hours for a period of at least ten days before the special meeting and at the location of the special meeting during the special meeting.

A majority in voting power of WABCO common stock issued and outstanding and entitled to vote at the special meeting, which are present in person or by proxy, constitutes a quorum at the special meeting. As of the close of business on the record date for the special meeting, there were 51,234,022 shares of WABCO common stock issued and outstanding and entitled to vote. If you submit a properly executed proxy by mail, telephone or the Internet, you will be considered a part of the quorum. In addition, abstentions will be counted for purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum. As a result, 25,617,012 shares must be present in person or by proxy to have a quorum. If a quorum is not present, the special meeting will be adjourned or postponed until a quorum is obtained, subject to the terms of the merger agreement. The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting or the chairman of the special meeting may adjourn or postpone the special meeting.

Vote Required; Abstentions and Broker Non-Votes

The merger proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote is required to approve the merger proposal. This means that the proposal will be approved if the number of shares voted “FOR” the merger proposal is greater than 50% of the total number of the votes that can be cast in respect of the outstanding shares of WABCO common stock entitled to vote. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the merger proposal.

The merger-related compensation proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, and voting at the

 

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special meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the merger-related compensation proposal. This means that the proposal will be approved if the number of shares voted “FOR” the merger-related compensation proposal is greater than 50% of the total number of shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, provided a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the merger-related compensation proposal. Broker non-votes will not have any effect on the merger-related compensation proposal.

The adjournment proposal: The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, whether or not a quorum is present, is required to approve the adjournment proposal. This means that the proposal will be approved if the number of shares voted “FOR” the adjournment proposal is greater than 50% of the total number of shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, whether or not a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal. Broker non-votes will not have any effect on the adjournment proposal.

Broker non-votes are shares held by a broker, bank or other nominee that are present in person or by proxy at the special meeting, but with respect to which the broker, bank or other nominee is not instructed by the beneficial owner of such shares on how to vote on a particular proposal and the broker does not have discretionary voting power on such proposal. Because brokers, banks and other nominee holders of record do not have discretionary voting authority with respect to any of the three proposals, if a beneficial owner of shares of WABCO common stock held in “street name” does not give voting instructions to the broker, bank or other nominee with respect to any of the proposals, then those shares will not be present in person or by proxy at the special meeting. If there are any broker non-votes, then such broker non-votes will be counted as a vote “AGAINST” the merger proposal, but will have no effect on the merger-related compensation proposal and the adjournment proposal.

Shares Held by WABCO Directors and Executive Officers

As of the close of business on the record date, WABCO directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 280,737 shares of WABCO common stock (excluding any shares of WABCO common stock that would be delivered upon exercise or conversion of stock options or other equity-based awards), which represented approximately 0.55% of the outstanding shares of WABCO common stock on that date. It is expected that WABCO directors and executive officers will vote their shares “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal, although none of them has entered into any agreement requiring them to do so.

Voting of Proxies

If your shares are registered in your name with the transfer agent, Computershare, you may cause your shares to be voted by returning a signed proxy card by following the instructions on your proxy card, or you may vote in person at the special meeting. Additionally, you may submit electronically over the Internet or by phone a proxy authorizing the voting of your shares by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the special meeting in person. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

Voting instructions are included on your proxy card. All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in accordance with the instructions

 

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of the stockholder. Properly executed proxies that do not contain voting instructions will be voted (i) “FOR” the merger proposal, (ii) “FOR” the merger-related compensation proposal and (iii) “FOR” the adjournment proposal. No proxy that is specifically marked against the merger proposal will be voted in favor of the merger-related compensation, unless it is specifically marked “FOR” the approval of such proposal.

If your shares are held in “street name” through a broker, bank or other nominee, you may vote through your broker, bank or other nominee by completing and returning the voting form provided by your broker, bank or other nominee, or by the Internet or telephone through your broker, bank or other nominee if such a service is provided. To vote via the Internet or telephone through your broker, bank or other nominee, you should follow the instructions on the voting form provided by your broker, bank or other nominee. Under applicable stock exchange rules, brokers, banks or other nominees have the discretion to vote your shares on discretionary matters if you fail to instruct your broker, bank or other nominee on how to vote your shares with respect to such matters. The merger proposal, merger-related compensation proposal and the adjournment proposal are non-discretionary matters, and brokers, banks and other nominees therefore cannot vote on these proposals without your instructions. If you do not return your broker’s, bank’s or other nominee’s voting form with voting instructions, do not vote via the Internet or telephone through your broker, bank or other nominee, if applicable, or do not attend the special meeting and vote in person with a proxy from your broker, bank or other nominee, such actions will have the same effect as if you voted “AGAINST” the merger proposal but will not have any effect on the merger-related compensation proposal or the adjournment proposal.

Revocability of Proxies

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:

 

   

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to our Company Secretary;

 

   

signing another proxy card with a later date and returning it to us prior to the special meeting; or

 

   

attending the special meeting and voting in person.

Please note that to be effective, your new proxy card, Internet or telephonic voting instructions or written notice of revocation must be received by our Company Secretary prior to the special meeting and, in the case of Internet or telephonic voting instructions, must be received before 11:59 p.m., Eastern time, on June 26, 2019. If you have submitted a proxy, your appearance at the special meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.

If you hold your shares of WABCO common stock in “street name,” you should contact your broker, bank or other nominee for instructions regarding how to change your vote. You may also vote in person at the special meeting if you obtain a valid proxy from your broker, bank or other nominee. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow WABCO stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting, as adjourned or postponed.

Board of Directors’ Recommendation

The Board, after considering various factors described under the section entitled “Proposal 1: Adoption of the Merger Agreement—The Merger—Recommendation of the WABCO Board and Reasons for the Merger” beginning on page 42 and after consultation with legal and financial advisors, unanimously determined that the transactions contemplated by the merger agreement, including the merger, are in the best interests of WABCO and its stockholders, and declared it advisable to enter into the merger agreement and consummate the merger, approved the execution and delivery of the merger agreement by WABCO and the consummation of the

 

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transactions contemplated thereby, including the merger, directed that the adoption of the merger agreement be submitted to a vote at the special meeting, and unanimously resolved to recommend that WABCO stockholders vote in favor of the adoption of the merger agreement.

The Board unanimously recommends that you vote (i) “FOR” the merger proposal, (ii) “FOR” the merger-related compensation proposal and (iii) “FOR” the adjournment proposal.

Tabulation of Votes

All votes will be tabulated by Broadridge, who will act as the inspector of election appointed for the special meeting and will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

Solicitation of Proxies

The expense of soliciting proxies in the enclosed form will be borne by WABCO. We have retained Innisfree M&A Incorporated, a proxy solicitation firm, to solicit proxies in connection with the special meeting at a cost of approximately $50,000, plus expenses. We have also agreed to indemnify Innisfree M&A Incorporated against losses arising out of its provision of these services as requested by WABCO. In addition, we may reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by certain of our directors, officers and employees, personally or by telephone, facsimile or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of the Closing

Assuming timely satisfaction of necessary closing conditions, including the approval by WABCO stockholders of the merger proposal, we anticipate that the merger will be consummated in early 2020.

Attending the Special Meeting

WABCO stockholders as of the close of business on the record date may attend the special meeting in person. All WABCO stockholders should bring valid government-issued photo identification, such as a driver’s license or passport.

If you hold your shares in street name and wish to vote your shares in person at our special meeting, you must obtain a valid proxy from your broker, bank or similar institution, granting you authorization to vote your shares. In order to attend and vote your shares held in street name at our special meeting, you will need to present valid government-issued photo identification, such as a driver’s license or passport, and hand in the valid proxy from your broker, bank or similar institution, along with a signed ballot that you can request at the special meeting. You will not be able to attend and vote your shares held in street name at the special meeting without valid government-issued photo identification, such as a driver’s license or passport, a valid proxy from your broker, bank or similar institution and a signed ballot.

The use of cameras, sound recording equipment, communication devices or any other similar equipment is prohibited at the special meeting without the express written permission of WABCO.

Even if you plan to attend the special meeting in person, we encourage you to complete, sign, date and return the enclosed proxy card or vote electronically over the Internet or via telephone to ensure that your shares will be represented at the special meeting. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you hold your shares in “street name,” because you are not the stockholder of record, you may not vote your shares in person at the special meeting unless you follow the procedures set forth above.

 

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Assistance

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Innisfree M&A Incorporated by mail at 501 Madison Avenue, 20th Floor, New York, New York 10022 or by telephone. Stockholders may call toll-free at +1 (888) 750-5834 and banks and brokers may call collect at +1 (212) 750-5833.

Rights of Stockholders Who Seek Appraisal

If the merger proposal is approved by WABCO stockholders, stockholders who do not vote (whether in person or by proxy) in favor of the adoption of the merger agreement and who properly exercise and perfect their demand for appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. This means that holders of WABCO common stock are entitled to have their shares appraised by the Court of Chancery of the State of Delaware and to receive payment in cash of the “fair value” of the shares of WABCO common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with interest to be paid upon the amount determined to be fair value, if any, as determined by the court. Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than $136.50 per share consideration payable pursuant to the merger agreement if they did not seek appraisal of their shares.

To exercise your appraisal rights, you must submit a written demand for appraisal to WABCO before the vote is taken on the merger proposal, you must not submit a blank proxy or otherwise vote in favor of the merger proposal and you must continue to hold the shares of WABCO common stock of record through the effective time. Your failure to follow the procedures specified under the DGCL will result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this proxy statement. If you hold your shares of WABCO common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such broker, bank or other nominee. Stockholders should refer to the discussion under the section entitled “Appraisal Rights” beginning on page 93 and the DGCL requirements for exercising appraisal rights reproduced and attached as Annex C to this proxy statement.

 

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PARTIES INVOLVED IN THE MERGER

WABCO Holdings Inc.

WABCO is a leading global supplier of electronic, mechanical, electro-mechanical and aerodynamic products for the world’s major manufacturers of commercial trucks, buses and trailers, as well as passenger cars. WABCO engineers, develops, manufactures and sells integrated systems controlling advanced braking, stability, suspension, steering, transmission automation, as well as air compression and processing. These systems improve vehicle safety, efficiency and performance while reducing overall vehicle operating costs. WABCO estimates that approximately two out of every three commercial vehicles with advanced and conventional vehicle control systems worldwide are equipped with our products. For passenger cars, including SUVs, WABCO supplies products for sophisticated, niche applications. WABCO provides components and systems throughout the life of a vehicle, from design and development to the aftermarket. By leveraging fleet connectivity, WABCO mobilizes vehicle intelligence to advance fleet safety, efficiency and security.

WABCO’s corporate headquarters is located at Giacomettistrasse 1, 3000 Bern 31, Switzerland and its telephone number is +45-315-813-300. WABCO common stock is currently listed on the NYSE under the symbol “WBC.”

History of Our Company

WABCO was founded in the United States in 1869 as Westinghouse Air Brake Company. WABCO was purchased by American Standard in 1968 and operated as the Vehicle Control Systems business division within American Standard until WABCO was spun off from American Standard on July 31, 2007. Subsequent to WABCO’s spin-off, American Standard changed its name to Trane. On June 5, 2008, Trane was acquired in a merger with Ingersoll Rand and exists today as a wholly owned subsidiary of Ingersoll Rand.

Products and Services

WABCO engineers, develops, manufactures and sells advanced braking, stability, suspension, steering, transmission automation and air management systems primarily for commercial vehicles. WABCO’s largest-selling products are pneumatic anti-lock braking systems, electronic braking systems, electronic stability control systems, brake controls, automated manual transmission systems, air disc brakes, and a large variety of conventional mechanical products such as actuators, air compressors and air control valves for medium and heavy-duty trucks, buses and trailers.

WABCO is also a global market leader in hydraulic components, controls and brake systems for heavy-duty, off-highway vehicles used, for example, in agriculture, construction and mining. WABCO is the only supplier with a complete portfolio of pneumatic and hydraulic braking and control systems for off-highway vehicles worldwide. WABCO is also the only supplier that provides a full range of aerodynamic devices for commercial vehicles worldwide. Aerodynamic products reduce the air drag of commercial trucks traveling long distances at highway speeds, thereby lowering fuel consumption and CO2 emissions. Aerodynamic devices help commercial vehicle fleet operators improve their operational efficiency and environmental performance. Furthermore, WABCO supplies advanced electronic suspension controls and vacuum pumps to the passenger car and SUV markets in Europe, North America and Asia. Additionally, WABCO supplies commercial vehicle aftermarket distributors and service partners, as well as fleet operators, with replacement parts, fleet management solutions, diagnostic tools, training and other expert services. WABCO also provides remanufacturing services globally.

Additional information about WABCO and its subsidiaries is included in documents incorporated by reference in this proxy statement (see the section entitled “Where You Can Find More Information” beginning on page 100) and on its website: https://www.wabco-auto.com. The information provided or accessible through WABCO’s website is not part of, or incorporated by reference in, this proxy statement.

 

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ZF Friedrichshafen AG

ZF is a global leader in driveline and chassis technology as well as active and passive safety technology. ZF has a global workforce of 149,000 with approximately 230 locations in some 40 countries. In 2018, ZF achieved sales of €36.9 billion and as such, is one of the largest automotive suppliers worldwide.

ZF enables vehicles to see, think and act. ZF invests more than six percent of its sales in research and development annually—in particular for the development of efficient and electric drivelines and also in striving for a world without accidents. With its broad portfolio, ZF is advancing mobility and services for passenger cars, commercial vehicles and industrial technology applications.

ZF’s corporate headquarters is located at Löwentaler Straße 20, 88046, Friedrichshafen, Germany and its telephone number is +49 7541 77-0. ZF’s corporate web address is https://www.ZF.com.

Verona Merger Sub Corp.

Merger Sub is a Delaware corporation and an indirect wholly owned subsidiary of ZF formed on March 22, 2019, solely for the purpose of engaging in the merger and the other transactions contemplated under the merger agreement. Merger Sub’s principal executive offices are located at 12001 Tech Center Drive, Livonia, Michigan 48150 and its telephone number is +1 (734) 855-3539. Upon the closing, Merger Sub will merge with and into WABCO, and thereafter will cease to exist.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

Certain Effects of the Merger on WABCO

Upon the terms and subject to the conditions of the merger agreement and in accordance with the applicable provisions of the DGCL, at the effective time, Merger Sub will merge with and into WABCO, with WABCO continuing as the surviving corporation and a wholly owned subsidiary of ZF. WABCO expects to delist its common stock from the NYSE as promptly as practicable after the effective time and de-register its common stock under the Exchange Act as promptly as practicable after such delisting. Thereafter, WABCO would no longer be a publicly traded company. If the merger is completed, you will not own any shares of the capital stock of the surviving corporation, and instead will only be entitled to receive the merger consideration, as described under the section entitled “Terms of the Merger Agreement—Merger Consideration” beginning on page 64.

The effective time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as WABCO and ZF may agree in writing and specify in the certificate of merger).

Effect on WABCO if the Merger is Not Completed

If the merger agreement is not adopted by WABCO stockholders or if the merger is not completed for any other reason, WABCO stockholders will not receive any payment for their shares of WABCO common stock. Instead, WABCO will remain a public company, WABCO common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act and WABCO will continue to file periodic reports with the SEC.

Furthermore, if the merger is not consummated, and depending on the circumstances that caused the merger not to be consummated, it is likely that the price of WABCO common stock will decline significantly. If that were to occur, it is uncertain when, if ever, the price of WABCO common stock would return to the price at which it trades as of the date of this proxy statement.

Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of WABCO common stock. If the merger is not consummated, the Board will continue to evaluate and review WABCO’s business operations, properties and capitalization, among other things, and make such changes as are deemed appropriate and continue to seek to enhance stockholder value. If the merger agreement is not adopted by WABCO stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to WABCO or its stockholders will be offered or that WABCO’s business, prospects or results of operations will not be adversely impacted.

Under certain specified circumstances, WABCO will be required to pay ZF the termination fee upon the termination of the merger agreement, and, under certain other specified circumstances, ZF will be required to pay the reverse termination fee to WABCO if the merger agreement is terminated, in each case, as described under the section entitled “Terms of the Merger Agreement—Termination of the Merger Agreement—Termination Fees” beginning on page 83.

 

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Background of the Merger

The Board regularly reviews WABCO’s results of operations and competitive position in the commercial vehicle industry. As part of its review process, the Board considers strategic options available to WABCO, in light of current economic and regulatory conditions, with a focus on enhancing stockholder value. In connection with these considerations, the Board evaluates industry changes, including technological changes related to the growing adoption of autonomous driving and electrification. In recent years, the Board has considered possible strategic alternatives to gain access to new technologies, which included potential collaborations, acquisitions, joint ventures and strategic combinations with third parties. The Board has also discussed the increasing level of investment required for WABCO to maintain its competitive position over the long term, in light of evolving and new emerging technologies in the automotive industry.

In September of 2015, the CEO of a publicly traded global automotive company, Company A, approached Jacques Esculier, the Chief Executive Officer of WABCO, about potentially acquiring WABCO. As a follow up to the meeting, a senior officer of WABCO had several discussions with his counterpart at Company A to discuss the industrial logic of a combination between Company A and WABCO and potential areas of synergies. In February of 2016, the CEO of Company A met again with Mr. Esculier and communicated that, following a closer review of WABCO’s publicly available information and the discussions between the two companies, an acquisition of WABCO was no longer a priority for Company A.

In May of 2016, the former Chief Executive Officer of ZF, Dr. Stefan Sommer, called Mr. Esculier and informed him that ZF was interested in exploring a potential strategic transaction with WABCO. In June of 2016, the Board constituted a Transaction Committee to assist the Board in its review and consideration of a potential transaction with ZF as well as strategic alternatives to a transaction with ZF. ZF and WABCO management engaged in preliminary discussions based on publicly available information, but discussions did not progress beyond the preliminary stage.

In June 2016, WABCO memorialized its engagement of Goldman Sachs as its financial advisor.

In January of 2017, Dr. Sommer contacted Mr. Esculier again and expressed an interest in re-engaging in discussions with respect to a potential strategic transaction between WABCO and ZF. The parties entered into a confidentiality agreement on March 3, 2017, and WABCO provided ZF with limited non-public information about its business, strategy and financial performance.

ZF engaged in a preliminary due diligence review of WABCO during March of 2017, and, on March 29, 2017, ZF delivered an indication of interest letter to WABCO confirming ZF’s interest in acquiring all of the outstanding common stock of WABCO for $125.00 per share in cash, subject to approval by the ZF supervisory board. The Board concluded that the price proposed by ZF did not adequately value WABCO, and did not authorize additional due diligence by ZF. Mr. Esculier called Dr. Sommer and communicated that the price indicated was insufficient. In a subsequent conversation between the two CEOs, Dr. Sommer responded that, subject to due diligence, ZF could be prepared to propose a price in the range of $125.00 to $130.00 per share. After consulting with the Board, Mr. Esculier communicated that the high end of the range was the minimum price at which the Board would be willing to transact. During the month of April through early May of 2017, business teams from ZF and WABCO met in expert sessions to facilitate ZF’s due diligence review of WABCO, and WABCO provided ZF with non-public information about its financial outlook, growth opportunities, core strategies and financial performance. ZF conducted site visits to further evaluate WABCO’s business. Also during this time, the Board authorized WABCO management and representatives of Goldman Sachs to reach out to the three other potential acquirers to gauge their interest in a potential strategic transaction with WABCO.

In April of 2017, Mr. Esculier called a senior representative of Company B to inquire as to whether Company B would be interested in a potential strategic transaction with WABCO. The senior representative of Company B communicated to Mr. Esculier that Company B was not interested in a strategic combination with WABCO but would be interested in continuing to discuss with WABCO a potential commercial collaboration

 

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opportunity. A representative of Goldman Sachs called the CEO of Company C, a large publicly traded automotive company, to gauge its interest in a potential acquisition of WABCO, and later that week the CEO of Company C told Goldman Sachs that there was no interest on the part of Company C in such a transaction. The representative of Goldman Sachs subsequently communicated this information back to Mr. Esculier.

Also in April of 2017, a representative of Goldman Sachs called the CEO of Company D to determine if Company D would be interested in a potential strategic transaction with WABCO. WABCO and Company D executed a confidentiality agreement, and WABCO management participated in a management presentation with Company D management, at which WABCO management shared information with Company D management about WABCO’s business, strategy and financial performance. Thereafter, representatives of Company D informed Mr. Esculier that Company D was unable to pursue a strategic transaction with WABCO because it would be unable to propose a price to WABCO stockholders at a premium to WABCO’s then-current trading price.

On April 26, 2017, Mr. Esculier and Prashanth Mahendra-Rajah, the former Chief Financial Officer of WABCO, met with Dr. Sommer and Dr. Konstantin Sauer, the Chief Financial Officer of ZF, and Dr. Sommer indicated that, subject to the completion of satisfactory due diligence, he was prepared to recommend to the ZF supervisory board that ZF acquire WABCO at a price of $130.00 per share. Later that day, Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to WABCO, which we refer to as Skadden, was instructed to send an initial draft of a proposed form of merger agreement to Latham & Watkins LLP, legal counsel to ZF, which we refer to as Latham, and, from April 26, 2017 through May 4, 2017, WABCO, ZF and their respective advisors exchanged drafts of the merger agreement and engaged in negotiations and discussions regarding the terms and conditions of the merger agreement. Significant areas of negotiation included the efforts of the parties in connection with obtaining certain regulatory approvals, the amount of, and terms under which, ZF would receive a termination fee, the terms upon which WABCO could solicit competing proposals and consider alternative proposals as well as certain employee- and compensation-related provisions. During this time period, Mr. Esculier discussed the proposed terms of the potential transaction with members of the Transaction Committee and the Board, including at meetings of each group. Mr. Esculier and Dr. Sommer also had several telephone discussions about the terms of the transaction, as well as the price to be delivered to stockholders in such transaction, but did not discuss whether Mr. Esculier would remain employed as an officer of the combined company after consummation of the merger.

On May 3, 2017, after consultation with the Transaction Committee and the Board, Mr. Esculier told Dr. Sommer that ZF needed to propose a price higher than $130.00 per share to reflect a higher premium to WABCO’s then-current stock price. After several conversations, Dr. Sommer informed Mr. Esculier that he would recommend a purchase price of $132.00 per share to the ZF supervisory board.

During the time period from March of 2017 through May 4, 2017, the Board met six times and the Transaction Committee met once, and received updates from Mr. Esculier and WABCO management on the status of negotiations with ZF. During this period, Goldman Sachs made presentations to the Board of its preliminary financial analyses of WABCO and the proposed transaction. Skadden reviewed with the Board the legal terms of the proposed transaction and legal matters in connection with the Board’s consideration of the transaction. The Board discussed the terms of the proposed transaction with Mr. Esculier and WABCO management, and provided guidance with respect to the negotiation of price and other terms of the merger agreement.

On May 5, 2017, Dr. Sommer informed Mr. Esculier that the ZF supervisory board had met earlier that day and decided not to move forward with a potential transaction of WABCO. The parties terminated all discussions at that time, and WABCO requested that ZF destroy all confidential information of WABCO.

In January of 2018, the CEO of a large publicly traded company in the automotive industry, Company E, contacted Mr. Esculier and requested a meeting to discuss a potential strategic transaction with WABCO. Mr. Esculier met with the CEO of Company E in late February of 2018, and they discussed the benefits of a potential transaction between the two companies. In late March of 2018, Mr. Esculier and the CEO of Company E had further discussions, including the potential cultural and strategic fit between WABCO and Company E and

 

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the potential form of consideration that Company E could pay in a transaction, with the CEO of Company E, noting that it was unlikely that Company E would be able to offer all-cash consideration to WABCO stockholders. Mr. Esculier and the CEO of Company E agreed to speak again after discussing the benefits of a potential transaction with their respective boards and financial advisors. In late May of 2018, the CEO of Company E called Mr. Esculier and informed him that the lead independent director of Company E was supportive of Company E exploring a transaction with WABCO, and suggested that representatives of WABCO and Company E meet so the companies could learn more about each other.

On May 25, 2018, Wolf-Henning Scheider, the newly appointed CEO of ZF, called Mr. Esculier to discuss the evolution of WABCO’s and ZF’s businesses since discussions between the two companies terminated in May of 2017, and raised the possibility of ZF exploring a strategic transaction with WABCO in the future. Mr. Esculier and Mr. Scheider agreed to meet in person for a formal introduction following Mr. Scheider’s new appointment and to further discuss matters of mutual interest to WABCO and ZF. On June 8, 2018, Mr. Esculier, together with a representative of Goldman Sachs, met with Mr. Scheider to discuss current industry trends and developments in their respective businesses. Mr. Scheider told Mr. Esculier that the ZF supervisory board was in the process of conducting a strategic review, which included a review of potential acquisitions and strategic transactions. Mr. Scheider asked Mr. Esculier if WABCO would be open to considering a strategic combination with ZF if the ZF supervisory board determined, following the completion of its strategic review, that such a transaction was in the best interests of ZF. Mr. Esculier responded that WABCO would be open to considering the potential for a strategic transaction with ZF and that he would discuss with the members of the Board.

On June 19, 2018, members of WABCO management, together with a representative of Goldman Sachs, met with members of Company E management and discussed developments in WABCO’s business, based on publicly available information. On July 31, 2018, WABCO received a list of due diligence questions from Company E, and Company E informed WABCO that Company E had engaged an industry consultant and two financial advisors to assist Company E in its review of WABCO’s business. In June of 2018, WABCO and Company E exchanged drafts of a confidentiality agreement and executed the agreement in August 2018. In early September of 2018, the CEO of Company E contacted Mr. Esculier to inform him that Company E’s consultant and financial advisors had completed their evaluation of WABCO, and Company E’s advisors were not able to identify a compelling level of synergies between the two companies. The CEO of Company E also expressed concern about Company E’s ability to finance a transaction. There were no further discussions between WABCO and Company E concerning a strategic transaction.

On July 31, 2018, Mr. Esculier and Mr. Scheider spoke telephonically and agreed upon a meeting at an upcoming industry trade fair.

On September 21, 2018, Mr. Esculier and Mr. Scheider met at the industry trade fair in Hannover, Germany. Mr. Scheider told Mr. Esculier that the ZF supervisory board was continuing its strategic review, and had not reached any determination with respect to future acquisitions, but that it remained interested in analyzing a combination with WABCO.

On October 22, 2018, Mr. Scheider called Mr. Esculier, and informed him that there was support within ZF for exploring a potential strategic transaction with WABCO. Mr. Scheider told Mr. Esculier that he planned to discuss the potential strategic transaction at the next ZF supervisory board meeting in early December, and that he would contact Mr. Esculier after the meeting to inform him of the outcome of the supervisory board discussions.

On December 14, 2018, Mr. Scheider called Mr. Esculier and told him that the ZF supervisory board and key stakeholders had authorized senior management of ZF to explore a strategic combination with WABCO.

Between January of 2018 and December of 2018, Mr. Esculier regularly updated the Board regarding the status of his conversations with potential strategic buyers, including Company E and ZF.

 

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On December 26, 2018, Mr. Esculier informed the Board about his communications with Mr. Scheider regarding a potential transaction with ZF and that WABCO management intended to share limited non-public information with ZF management to assist them in their evaluation of WABCO, subject to a confidentiality agreement.

On January 17, 2019, WABCO and ZF amended their existing confidentiality agreement, extending the term to facilitate further discussions between the parties.

On February 1, 2019, Mr. Esculier, Roberto Fioroni, the former Chief Financial Officer of WABCO, and Lisa Brown, Chief Legal Officer and Company Secretary of WABCO, together with representatives of Goldman Sachs, met with Mr. Scheider, Dr. Sauer, Wilhelm Rehm, a member of the management board of ZF, Dieter Eckhardt, Head of M&A of ZF, Fredrik Staedtler, the Head of Commercial Vehicle Technology Division of ZF, and a representative of J.P. Morgan Limited, financial advisor to ZF, which we refer to as J.P. Morgan, and shared information about WABCO’s business and its 2018 financial performance, as well as a preliminary forecast for fiscal years 2019 through 2023 and projections for selected financial line items for fiscal years 2024 through 2027. Representatives of WABCO shared information on WABCO’s products, segment operating performance and areas of potential growth. The parties did not discuss price or any other potential terms for a strategic transaction. Mr. Scheider informed Mr. Esculier that ZF expected to communicate a preliminary indication of price and transaction terms to WABCO following a meeting of the ZF supervisory board scheduled for March 9, 2019.

On February 4, 2019, WABCO held a regularly scheduled in-person Board meeting, which was also attended by Mr. Fioroni and Ms. Brown, and representatives of Skadden and Goldman Sachs. At this meeting, Mr. Esculier updated the Board on recent contacts with ZF, including the management presentation by WABCO to ZF on February 1, 2019. Mr. Esculier presented an update on WABCO’s strategic plan for the fiscal years 2019 through 2023, and projections for the fiscal years 2024 through 2027, and noted that this information had been shared with ZF to assist them in their evaluation of WABCO. At the meeting, Skadden made a presentation to the Board on its fiduciary duties under Delaware law, and Goldman Sachs presented an overview of developments in the commercial vehicle industry and its preliminary views on WABCO’s valuation. Goldman Sachs’ presentation to the Board included an illustrative discounted cash flow sensitivity analysis for the Company. Goldman Sachs explained to the Board that the illustrative discounted cash flow analysis used all nine years of the internal forecasts for WABCO provided by WABCO management to Goldman Sachs in advance of this meeting. The Board focused on the illustrative discounted cash flow analysis presented by Goldman Sachs as reflective of the value of WABCO over the long-term. In addition, Goldman Sachs explained at this meeting that its presentation did not include an analysis of comparable transactions solely in the commercial vehicle industry due to the limited number of publicly disclosed transactions in this sector. The Board discussed certain risks and opportunities for WABCO, including industry trends and macroeconomic factors and their impact on the commercial vehicle industry, and noted that increased investment in new technologies was necessary to remain competitive and to support new growth opportunities in autonomous driving and electrification. The Board also discussed the fact that industry consolidation and realignment among the roles of original equipment manufacturers, which we refer to as OEMs, and suppliers could impact WABCO’s margins and revenue growth. The Board discussed strategic opportunities for WABCO, including partnerships, collaborations, commercial arrangements and joint ventures to access new technologies, and the increased cost of investment and implementation risk associated with such strategic opportunities. The Board also considered whether it would be beneficial to contact representatives of companies with which WABCO had previously engaged in discussions with respect to a potential combination, but the Board determined not to do so. The Board discussed with representatives of Goldman Sachs (i) the financial and business profile of potential strategic buyers of WABCO, (ii) the lack of interest in 2017 in acquiring WABCO, as expressed by those potential buyers contacted in 2017 and (iii) the fact that no party other than Company E (which had decided not to pursue a transaction) had come forward following the public acknowledgement by WABCO in 2017 that it had been engaged in discussions to be acquired and discussed further with Goldman Sachs how it was unlikely that any industry participant, other than ZF, would be interested in acquiring WABCO. The Board also discussed WABCO’s CEO succession

 

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planning and succession planning for other senior roles in the Company. The Board also discussed the benefits of a strategic transaction with ZF, and the fact that a transaction with ZF could eliminate the risks to WABCO stockholders associated with achievement of the Company’s strategic plan, and that such a transaction could be more attractive to WABCO stockholders than remaining independent if the price proposed by ZF appropriately valued WABCO. The Board determined to reactivate the Transaction Committee formed in June of 2016, in order to assist the Board in its review and consideration of a potential transaction with ZF, and any alternatives thereto.

On February 27, 2019, several media outlets reported that ZF and WABCO were considering a strategic transaction, and WABCO issued a statement confirming that it had been approached by ZF and had engaged in preliminary discussions with ZF. Following the media reports, WABCO’s stock price increased from an undisturbed price of $120.75, the closing price of WABCO common stock on February 26, 2019, the day before the media reports, to $130.49, the closing price of WABCO common stock on February 27, 2019. Mr. Esculier called Mr. Scheider on February 28, 2019, and they discussed the media reports, the parties’ subsequent confirmations of preliminary discussions between the parties and the effect of such media reports on WABCO’s stock price.

On March 1, 2019, Jan Eckert, General Counsel & Chief Compliance Officer at ZF, Mr. Eckhardt, Christoph Horn, Head of Corporate Communications at ZF, Ms. Brown, Jane McLeod, Communications Consultant to WABCO, and representatives from Goldman Sachs and J.P. Morgan had a telephonic meeting regarding the communication strategy with respect to the media reports.

On March 5, 2019, the Transaction Committee met telephonically, with Ms. Brown, Mr. Fioroni and representatives of Skadden and Goldman Sachs also in attendance. At the meeting, Goldman Sachs provided the Transaction Committee with an update on recent trading in WABCO common stock following the media reports of ZF’s interest in WABCO on February 27, 2019. Goldman Sachs noted that since the publication of media reports of ZF’s interest in WABCO, and WABCO’s confirmation of ZF’s approach, WABCO’s stock price had increased from an undisturbed price of $120.75 per share on February 26, 2019 to $140.13 per share, the closing price of WABCO common stock on March 4, 2019. Mr. Esculier informed the Transaction Committee that, since the media reports of ZF’s interest in WABCO, no third parties had contacted WABCO to express an interest in acquiring WABCO. He also informed the Transaction Committee that, at his instruction, representatives of Goldman Sachs had contacted a senior executive at Company F, a publicly traded Asian company, to ascertain whether Company F was aware of WABCO’s public confirmation that it had engaged in preliminary discussions with ZF, and that the senior executive had agreed to meet with representatives of Goldman Sachs the following week to discuss Company F’s potential interest in a transaction with WABCO.

On March 9, 2019, Mr. Scheider called Mr. Esculier and told him that ZF would be sending a letter later that day, setting out its proposal to acquire WABCO at $132.50 per share in cash. Mr. Esculier told Mr. Scheider that, although he would present ZF’s proposal to the Board, the proposed price did not appropriately value WABCO. Later that day, WABCO received a letter from ZF, setting forth ZF’s proposal to acquire 100% of WABCO common stock for $132.50 per share in cash, subject to the final approval of the ZF supervisory board. The letter stated that ZF expected to provide WABCO with committed and fully documented financing prior to signing a definitive agreement, and that ZF expected to complete its confirmatory due diligence by March 27, 2019. In the letter, ZF suggested that the parties use the same form of merger agreement that the parties had negotiated in 2017 as a basis for future negotiations.

On March 10, 2019, the Board held a telephonic meeting to discuss the proposal received from ZF. Ms. Brown, Mr. Fioroni and representatives of Skadden and Goldman Sachs were also in attendance at the meeting. Mr. Esculier first updated the Board on his recent discussions with Mr. Scheider and reported that he had informed Mr. Scheider that the Board believed WABCO should be valued at greater than $132.50 per share. The Board authorized opening a data room to ZF, so long as ZF was informed that the Board expected ZF to increase its price after conducting due diligence on WABCO. At the meeting, Skadden presented a summary of the draft merger agreement from the prior negotiations in 2017, including the transaction structure, covenants,

 

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conditions to closing and termination provisions, which ZF proposed to use as the basis for negotiating a definitive agreement with respect to a transaction with WABCO. The Board also discussed the fact that under the draft merger agreement from 2017, executives’ equity awards would accelerate, vest and be cashed out in connection with the merger and discussed any potential conflicts among the executives that could result from such treatment. The Board discussed appropriate modifications to the 2017 draft merger agreement to reflect changes in the businesses of ZF and WABCO, which included modifications to provisions addressing potential regulatory approvals and regulatory efforts to be negotiated with ZF. The Board also discussed how regulatory approvals could affect the timing of consummating a transaction with ZF. At the direction of the Board, Mr. Esculier informed Mr. Scheider that, although WABCO was willing to provide ZF with access to additional due diligence information, the Board expected that ZF’s review of WABCO’s business plan and its analysis of potential synergies with ZF would lead to a valuation above $132.50 per share, and that the Board expected ZF to deliver a revised proposal to WABCO on or before March 25, 2019.

On March 11, 2019, at the direction of the Board, representatives of Goldman Sachs met with the chairman of Company F to discuss Company F’s interest in a potential transaction with WABCO. The chairman of Company F informed the representatives of Goldman Sachs that Company F would be interested in a strategic transaction with WABCO only if WABCO were able to guarantee that U.S. regulators would approve the transaction, and noted that if WABCO could not guarantee approval from U.S. regulators, Company F was not interested in exploring a potential transaction with WABCO. Representatives of Goldman Sachs subsequently communicated this information back to Mr. Esculier. WABCO did not engage in further discussions with Company F following the March 11, 2019 meeting.

On March 11, 2019, Ms. Brown and Mr. Eckert spoke telephonically regarding negotiation logistics and the timing of board meetings.

Between March 11 and March 26, 2019, ZF and its representatives and advisors conducted business, legal, tax and accounting due diligence on WABCO.

On March 12, 2019, a representative from a global automotive and industrial company, Company G, informed a representative of WABCO that Company G might be interested in acquiring WABCO. The WABCO representative informed Mr. Esculier of the comment from the representative of Company G and, at the instruction of Mr. Esculier, a representative of Goldman Sachs contacted a senior executive of Company G and asked whether Company G would be interested in a potential strategic transaction with WABCO. The Company G senior executive informed the Goldman Sachs representative that Company G did not have any interest in acquiring WABCO at this time. The representative of Goldman Sachs subsequently communicated this information back to Mr. Esculier.

On March 15, 2019, WABCO and ZF entered into a “clean room” confidentiality agreement detailing the terms, conditions and procedures for the review of certain sensitive WABCO business information by a limited number of representatives of ZF. Between March 15 and March 26, 2019, ZF’s “clean team” engaged in additional business due diligence in order to further evaluate a potential transaction with ZF.

Also on March 15, 2019, Skadden sent an initial draft of the merger agreement to Latham, based on the 2017 draft merger agreement with certain revisions, including a revised regulatory efforts provision, which required ZF to take all necessary actions to satisfy any conditions imposed by regulatory authorities in order to consummate a transaction with WABCO.

Also on March 15, 2019, members of WABCO management and ZF management met to provide an overview of the WABCO business to the ZF due diligence team. On March 16, 2019, Mr. Esculier and Mr. Scheider had a telephone discussion regarding the progress of due diligence, expert sessions and the overall status of the potential transaction.

On March 18, 2019, Latham and Skadden spoke telephonically and held initial discussions regarding the merger agreement and open issues.

 

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From March 18, 2019 through March 21, 2019, representatives of ZF attended expert sessions hosted by representatives of WABCO, addressing, among other topics, business strategy, finance, tax, human resources, legal and intellectual property matters. On March 19, 2019, Latham delivered an updated draft of the merger agreement to Skadden.

From March 20, 2019 through March 21, 2019, representatives of WABCO, ZF, Skadden and Latham met to discuss the draft merger agreement. The parties discussed open points in the merger agreement, including regulatory efforts, matters related to WABCO’s special meeting, the amount and payment triggers of a termination fee and employee benefit matters.

On March 20, 2019, senior executives of WABCO and ZF met for dinner in Stuttgart, Germany, to further discuss due diligence topics. After the dinner, Mr. Esculier and Mr. Scheider spoke privately about the information furnished by WABCO to ZF in its due diligence review, and how that information should factor into ZF’s proposal to WABCO. Mr. Scheider told Mr. Esculier that, after due diligence, ZF still considered $132.50 appropriate to reflect WABCO’s valuation; however, there was some limited room to increase price, but not to a price close to the then-current market price. Mr. Esculier suggested that ZF consider a special dividend payable to WABCO stockholders prior to the closing of a transaction as a means of delivering additional value to WABCO stockholders. Mr. Esculier provided Mr. Scheider with several reasons for doing so, including that stockholders should be compensated for WABCO’s 2019 free cash flow and the fact that the time between signing a definitive agreement and consummation of the merger was expected to be longer than it would have been for the transaction contemplated in 2017 because of changes in the business of the two companies. Mr. Scheider responded that he would discuss the proposal for a special dividend with the ZF board members and its financial advisors.

On March 21, 2019, Latham delivered a proposal with respect to the regulatory efforts provision of the merger agreement. On March 22, 2019, Latham delivered a draft credit facilities agreement to Skadden.

On March 23, 2019, the Board met telephonically to discuss the potential transaction with ZF, with Ms. Brown, Mr. Fioroni and representatives of Goldman Sachs and Skadden in attendance. Mr. Esculier updated the Board on the management meetings between WABCO and ZF, and his discussions with Mr. Scheider, including with respect to the price that ZF would be willing to pay for WABCO. Mr. Esculier also informed the Board of the discussions with Company F and Company G since WABCO’s last Board meeting, and noted that WABCO had received no inbound indications of interest since media reports of a potential transaction first appeared on February 27, 2019. Skadden discussed the remaining open issues in the merger agreement, including regulatory efforts commitments, matters related to WABCO’s special meeting, the termination fee amount and payment triggers and employee benefits matters. The Board instructed WABCO management to negotiate a regulatory efforts standard, subject to specified exceptions, that would require ZF to agree to conditions imposed by regulatory authorities, so long as such conditions would not result in a material adverse effect on ZF and WABCO, taken as a whole, after giving effect to the merger. Skadden also discussed with the Board the timing of a special meeting for WABCO stockholders to vote on the potential transaction. The Board discussed the treatment of employee equity and cash awards in the draft merger agreement. The Board also considered an amendment to WABCO’s bylaws which would require certain types of lawsuits relating to internal corporate governance matters to be pursued in Delaware, and the bylaw amendment was unanimously approved by the Board.

On March 25, 2019, Mr. Esculier and Mr. Scheider had a telephonic discussion, during which Mr. Scheider agreed to raise the price to $134.50 for each share of WABCO common stock, noting that the price would represent a premium of 11.5% to WABCO’s undisturbed stock price of $120.75 per share on February 26, 2019, and that the premium of 11.5% was greater than the premium that ZF had considered paying for WABCO shares in 2017.

Mr. Esculier discussed the revised proposal from ZF with WABCO’s lead independent director, Mr. Jean-Paul Montupet. Although they noted the premium to the undisturbed price was higher than the premium proposed

 

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by ZF in 2017, they discussed the possibility that the merger could take longer to close than the transaction contemplated in 2017 because of changes in the businesses of the two companies, and that WABCO stockholders should be compensated for the additional time between signing and closing. They determined that Mr. Esculier should ask for an additional $4.00 per share, or $138.50 per share, and should express a willingness to take all or part of the additional $4.00 in the form of a special dividend if ZF preferred that structure.

Following the discussion with Mr. Montupet, Mr. Esculier called Mr. Scheider and told Mr. Scheider that in addition to the purchase price of $134.50 per share, the Board believed that WABCO stockholders should be compensated for the additional time between signing and closing, that $4.00 per share of additional consideration would be appropriate compensation and that WABCO would be willing to take all or part of that increase in the form of a special dividend. Mr. Scheider told Mr. Esculier that he would need to discuss the proposal with members of his supervisory board and that he would call Mr. Esculier the following day after such consultation.

On March 26, 2019, Mr. Scheider and Mr. Esculier had a telephonic discussion as a follow up to their call on the previous day. Mr. Scheider told Mr. Esculier that the ZF supervisory board did not see the rationale for a special dividend. Mr. Esculier responded that if there was no special dividend, he had discussed with the Board the potential purchase price of $138.00 per share. Mr. Scheider then told Mr. Esculier that he was willing to recommend a purchase price of $136.50 per share to the ZF supervisory board, if WABCO dropped its request for a special dividend. Mr. Scheider noted that a purchase price of $136.50 per share represented a premium of 13% to WABCO’s undisturbed stock price of $120.75 on February 26, 2019. After Mr. Scheider offered $136.50 per share, Mr. Esculier responded that he was not authorized at that level and would have to consult with the members of the Transaction Committee and the Board before responding to Mr. Scheider. Mr. Scheider responded that ZF was not prepared to increase further. Mr. Esculier and Mr. Scheider also discussed the appropriate amount of a termination fee, without reaching agreement. Shortly after his discussion with Mr. Scheider, Mr. Esculier consulted with Mr. Montupet and other members of the Transaction Committee, who agreed that Mr. Esculier should convey to Mr. Scheider agreement on a price per share of $136.50. They also determined that Mr. Esculier should seek a termination fee of 3% of the equity value of WABCO under circumstances described in the merger agreement, with no expense reimbursement in the event that WABCO stockholders do not vote in favor of the merger. Later that day, Mr. Esculier called Mr. Scheider and informed him that a purchase price of $136.50 was likely to be acceptable to the Board, so long as the parties could resolve the other points that remained open.

Between March 26, 2019 and March 27, 2019, Latham and Skadden exchanged drafts of the merger agreement and the credit facilities agreement and WABCO and ZF reached agreement on the events giving rise to a termination fee, matters related to the WABCO special meeting, the amount of the termination fee and the standard for regulatory efforts.

Also on March 27, 2019, the Board met in person to discuss the potential transaction, with members of WABCO management and representatives of Skadden and Goldman Sachs in attendance. The Board reviewed WABCO’s strategic plan and forecasts for the first quarter of 2019. Goldman Sachs presented the Board with a further preliminary financial analysis of WABCO and the proposed transaction. Skadden reviewed the provisions of the draft merger agreement where agreement had been reached with ZF, including the events giving rise to a termination fee, the amount of the termination fee, matters related to the WABCO special meeting and efforts with respect to regulatory matters. The Board discussed a new provision in the draft merger agreement proposed by ZF which carved a specified business of ZF out of the regulatory efforts covenant. The Board determined that WABCO should receive a reverse termination fee in the event that regulatory approvals were not obtained under certain circumstances in which ZF refused to divest certain of its assets. Skadden made a presentation to the Board on its fiduciary duties under Delaware law in the context of a sale transaction. The Board discussed the benefits of the proposed transaction with ZF, including the benefits of eliminating the anticipated long-term risks and challenges associated with continuing to implement WABCO’s strategic plan, particularly in light of the transformational changes and realignments expected in the automotive/truck industry. The Board also discussed the potential values, benefits, risks and uncertainties associated with possible strategic alternatives to the merger,

 

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which included potential collaborations, acquisitions, joint ventures, strategic combinations with third parties and investments in new technologies. The Board considered numerous contacts made by WABCO or by its advisors with third parties over the past several years with respect to a potential transaction involving the acquisition of WABCO, none of which resulted in a transaction. The Board also noted that no interested parties contacted WABCO or its financial advisor to express an interest in acquiring WABCO following media reports on February 27, 2019 that ZF was considering a transaction with WABCO. The Board also discussed the treatment of stock options, stock units and cash incentive awards in the proposed merger agreement and whether this treatment could create any potential conflicts. The Compensation, Nomination and Governance Committee of WABCO also met on March 27, 2019 to approve resolutions regarding the treatment of stock options, stock units and cash incentive awards in the proposed merger agreement, provided that the Board subsequently approved entry into the merger agreement.

Later that day, Mr. Esculier called Mr. Scheider and asked whether ZF would be willing to pay a reverse termination fee in the event regulatory approvals were not obtained in connection with the transaction under certain circumstances in which ZF was required to sell a business specified in the merger agreement and refused to do so. On the call, Mr. Scheider agreed to a reverse termination fee of 3% of the equity value of WABCO under the circumstances described in the draft merger agreement. Shortly thereafter, representatives of Skadden and Latham exchanged drafts of the merger agreement, reflecting the matters agreed by Mr. Esculier and Mr. Scheider.

Early in the day on March 28, 2019, the Board met in person, with members of WABCO management and representatives of Goldman Sachs and Skadden in attendance. Representatives of Skadden reviewed the terms of the final draft of the merger agreement with the Board. Goldman Sachs reviewed updated financial analyses that reflected the closing trading price of WABCO common stock on March 26, 2019. Goldman Sachs then delivered its oral opinion to the Board, subsequently confirmed in writing, that, as of March 28, 2019 and based upon and subject to the factors and assumptions set forth therein, the $136.50 in cash per share to be paid to the holders of shares (other than ZF and its affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. Although the Board was supportive of WABCO’s strategic plan, the Board determined that the merger consideration is more favorable to WABCO stockholders than the potential value that is reasonably expected to result from WABCO continuing as an independent public company, taking into account the anticipated long-term risks and challenges associated with continuing to implement its strategic plan, particularly in light of the transformational changes and realignments expected in the automotive/truck industry, including those resulting from the potential growing adoption of autonomous driving and electrification. The Board also considered the terms of the transaction, including the certainty of consummation of the transaction in light of the conditions to closing of the merger contained in the merger agreement and the regulatory efforts required by ZF, as well as the fact that ZF would have fully committed financing in place upon execution of the merger agreement. In connection with its evaluation of the merger, the Board considered strategic alternatives to the merger, and its assessment that no other alternatives were reasonably likely to create greater value for WABCO stockholders than the merger. The Board also considered the other factors described in the section entitled “The Merger—Recommendation of the WABCO Board of Directors and Reasons for the Merger” beginning on page 42, as well as regulatory approval risks, financing requirements of the proposed transaction and the various risks, including those described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 23, arising in connection with the proposed transaction. Following such deliberations, the Board determined that it is in the best interests of WABCO and WABCO stockholders to enter into the merger agreement with ZF, declared it advisable to enter into the merger agreement and consummate the merger and approved the execution and delivery of the merger agreement by WABCO and consummation of the merger.

On March 28, 2019, after execution of the credit facilities agreement between ZF and the financing sources, a copy of which was provided to WABCO and its financial and legal advisors, WABCO, ZF and Merger Sub executed and delivered the merger agreement.

On the morning of March 28, 2019, prior to the opening of trading on the NYSE, the parties each issued a press release announcing the transaction and the execution of the merger agreement.

 

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Recommendation of the WABCO Board and Reasons for the Merger

Recommendation of the WABCO Board

At a meeting of the Board held on March 28, 2019, the Board unanimously determined that it is in the best interests of WABCO and the WABCO stockholders, and declared it advisable, to enter into the merger agreement and consummate the merger, approved the execution and delivery of the merger agreement by WABCO and the consummation of the transactions contemplated thereby, including the merger, directed that the adoption of the merger agreement be submitted to a vote at the special meeting, and unanimously resolved to recommend that the WABCO stockholders vote in favor of the adoption of the merger agreement.

The Board unanimously recommends that you vote “FOR” the adoption of the merger agreement.

Reasons for the Merger

In reaching its determination, the Board met and consulted with WABCO management and its legal and financial advisors. The Board reviewed a significant amount of information and considered a number of factors with respect to WABCO and the industry in which it operates, which it regularly reviews in connection with WABCO’s strategic planning. The Board also reviewed the terms of the merger agreement and the transactions contemplated thereby, including, among other things, the factors listed below (not necessarily in order of relative importance) which the Board viewed as being generally positive or favorable in coming to its determination, approval and related recommendation.

 

   

Merger consideration. The Board considered the merger consideration of $136.50 per share in cash in relation to the Board’s views of the current and future value of WABCO as an independent public company. The Board also considered the fact that the merger consideration of $136.50 per share in cash represents a premium of 13.0% over WABCO’s last undisturbed closing share price of $120.75 as of February 26, 2019, the day before media reports that ZF was considering a transaction with WABCO, 23.1% over WABCO’s undisturbed trailing three month volume-weighted average price of $110.90 as of February 26, 2019 and 21.8% over WABCO’s undisturbed trailing six month volume-weighted average price of $112.00 as of February 26, 2019. The Board also considered that the merger consideration of $136.50 per share in cash represents a 12.7x adjusted performance EBITDA multiple for the 12 months ended December 31, 2018. The Board also considered the presentations delivered by representatives of Goldman Sachs, financial advisor to the Company, which included an illustrative discounted cash flow analysis, using all nine years of the internal forecasts for WABCO provided by WABCO management to Goldman Sachs. The Board focused on the illustrative discounted cash flow analysis presented by Goldman Sachs as reflective of the value of WABCO over the long-term. The Board also considered that Goldman Sachs explained that its presentation did not include an analysis of comparable transactions solely in the commercial auto industry due to the limited number of publicly disclosed transactions in this sector.

 

   

Cash consideration. The Board considered the fact that the merger consideration is payable entirely in cash, which provides liquidity and certainty of value to WABCO stockholders.

 

   

Forward price/earnings multiples of WABCO relative to comparable companies. The Board considered WABCO’s undisturbed forward price/earnings trading multiples relative to the multiples of companies that it considered to be comparable to WABCO. The Board noted that prior to media reports that ZF was considering a transaction with WABCO and WABCO’s subsequent statement acknowledging that it had been approached by ZF and had engaged in preliminary discussions with ZF on February 27, 2019, the shares of WABCO common stock were trading at a higher forward price/earnings multiple premium than those comparable companies than had been the case for many long-term historical time periods, including for the six month, one year, three year and five year periods ending on March 26, 2019. The Board believed that the merger consideration of $136.50 presented an opportunity for WABCO stockholders to capture a premium in addition to an undisturbed share price

 

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of $120.75 as of February 26, 2019 that reflected a wider than historical average price/earnings multiple relative premium to the comparable companies.

 

   

De-risking WABCO’s strategic plan. While the Board remains supportive of WABCO’s strategic plan and optimistic about WABCO’s prospects, the Board took into account the uncertainties associated with the long-term risks and challenges in continuing to implement its strategic plan. The Board considered that, after completion of the merger, WABCO stockholders would no longer bear the strategic business and execution risks related to a continuing investment in WABCO, particularly in light of the transformational changes and realignments expected in the automotive/truck industry resulting from the growing adoption of autonomous driving and electrification, and the potential for increased competitive pressures from new entrants into the industry from the adjacent automotive/truck sector and from the high-tech/digital space.

 

   

Review of WABCO’s business and strategic position as an independent company. The Board reviewed the state of WABCO’s business and operations as well as its business strategy and competitive position based on its in-depth familiarity with such matters. The Board took note of WABCO’s position in the supply chain in terms of its reliance on stand-alone relationships with suppliers, OEMs and other customers, and lack of significant partnerships with any large automotive supplier. The Board also considered industry cycles and trends, and economic and market conditions, both on a historical and on a prospective basis, in the regions where WABCO operates, noting the highly cyclical nature of the industry, and that several industry analysts and participants (including WABCO management) informed the Board of the risk that the industry may be at the beginning of a downward cycle. The Board also considered the potential impact of the possible introduction of new automotive tariffs, Brexit and the uncertainty created by the current political environment in multiple regions.

The Board determined that the merger consideration would enable WABCO stockholders to realize WABCO’s value, without having to bear the strategic business and execution risks associated with continuing as an independent public company, including:

 

   

Risks associated with the changing pace of technology in WABCO’s industry and whether WABCO will be able to continue to develop and deploy breakthrough technologies to meet the evolving needs of its customers;

 

   

Risks associated with significant investments beyond investments currently anticipated, which would become necessary over time to support WABCO’s long-term strategic objectives as it faces evolving technologies in the automotive/truck industry and the related effects of such investments on operating margins;

 

   

Risks resulting from the shifting roles of industry participants, including the pressure on WABCO’s operating margins that could result from the potential industry re-alignment among OEMs, Tier 1 suppliers and other industry participants; and

 

   

Risks associated with the continued implementation of the succession plan currently underway for WABCO’s CEO, which involves the selection of a replacement CEO candidate for WABCO and a transition period.

 

   

Review of evolving industry dynamics. The Board considered the fact that the industry is expected to experience profound changes in the coming years, primarily related to the growing adoption of autonomous driving and electrification. The timing and nature of such changes are difficult to predict. The Board noted that the introduction of vehicles equipped with these technologies is linked to the industry’s ability to develop economically viable solutions and could be affected by the ability of governments in various jurisdictions to develop safety regulations, as well as the time needed for industry participants to develop technologies that comply with such regulations. As a result, significant investments by all industry participants will be necessary in order to develop and deploy the necessary technologies for autonomous driving and electrification as well as the regulations with respect to such

 

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vehicles. In addition, the Board discussed the likelihood that the roles played by various industry participants could shift and cause major disruptions in the supply chain—for example, OEMs may decide to interact with their suppliers differently and large automotive industry suppliers may decide to expand their market to address the commercial vehicle sector, capitalizing on their experience and capabilities to directly supply sensors in large volume. The Board also discussed that consolidation through acquisitions, joint ventures or partnerships may accelerate throughout the industry at both the OEM and supplier levels, as industry participants seek to gain scale and achieve better amortization of their required investments. The Board considered that continued industry consolidation could negatively affect WABCO’s ability to identify partners to engage in joint ventures or collaborations necessary for developing and accessing new technologies.

 

   

Effect of evolving industry dynamics on WABCO. The Board discussed the effect such industry changes could have on a stand-alone public company of WABCO’s size, noting that WABCO depends on a limited number of automotive suppliers to source its sensors. In addition, the required level of investment to develop breakthrough technologies may put pressure on WABCO’s operating margins, with the return on investment and its timing being uncertain, particularly as compared to larger industry participants that may be able to amortize these costs over significantly larger volume passenger car platforms. Further, the strategic positioning chosen by WABCO may not ultimately align well with the roles taken by other industry participants. The Board also noted that its choice of strategic partners could affect WABCO’s relationship with other industry participants. The Board considered that WABCO may be less able to compete for the talent necessary to develop such technologies given larger industry participants in competition for the same talent. The Board discussed the effect of the merger on WABCO in light of the challenges presented by these evolving industry dynamics and noted that, after consummating the merger, WABCO stockholders would no longer bear the risks related to a continuing investment in WABCO.

 

   

Review of strategic alternatives to the merger. The Board considered strategic alternatives to the merger, and its assessment that no other alternatives were reasonably likely to create greater value for WABCO stockholders than the merger. The Board discussed the potential values, benefits, risks and uncertainties associated with possible strategic alternatives to the merger, which included potential collaborations, acquisitions, joint ventures, strategic combinations with third parties and investments in new technologies. The Board also considered numerous contacts made by WABCO or by its advisors with third parties over the past years with respect to a potential transaction involving the acquisition of WABCO, including inquiries made by WABCO of third parties in connection with potential acquisition discussions in 2017 and again in 2019, none of which resulted in a transaction. The Board noted that notwithstanding WABCO’s disclosure in 2017 regarding a prior acquisition proposal it had received, only one other interested party contacted WABCO since that time, and discussions did not progress beyond a preliminary stage. The Board also noted that no interested parties contacted WABCO or its financial advisor to express an interest in acquiring WABCO following media reports in 2019 that ZF was considering a transaction with WABCO and WABCO’s subsequent statement acknowledging that it had been approached by ZF and had engaged in preliminary discussions with ZF. The Board also considered that if discussions with respect to the merger with ZF were to terminate, it is possible that ZF would seek an alternative acquisition target, which would render it unlikely that it would continue to be interested in an acquisition of WABCO.

 

   

Fairness opinion. The Board considered the opinion of Goldman Sachs delivered to the Board that, as of March 28, 2019, and based upon and subject to the factors and assumptions set forth therein, the $136.50 in cash per share to be paid to the holders of WABCO common stock (other than ZF and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders. The Board also considered the financial analyses presented by Goldman Sachs in connection with the delivery of its opinion, which are summarized in such section of this proxy statement.

 

   

Merger agreement. The Board considered the terms of the merger agreement, which were negotiated on an arm’s-length basis by WABCO management, in coordination with WABCO’s outside legal

 

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counsel, the Board’s transaction committee, the lead independent director and other Board members, more fully described in the section entitled “Terms of the Merger Agreement” beginning on page 63. Certain provisions of the merger agreement that the Board considered important include:

 

   

The representations, warranties and covenants of the parties, and the parties’ ability to terminate the merger agreement, which the Board considered to be reasonable and customary;

 

   

ZF’s covenants in furtherance of obtaining required regulatory approvals, which may require ZF to (i) sell or dispose of assets or businesses of WABCO or ZF, (ii) agree to other remedial actions, if required by regulatory authorities and (iii) pay a fee under certain circumstances where divestitures of specified ZF assets are required and ZF refuses to divest of such assets;

 

   

The limited number and nature of the conditions to ZF’s obligation to consummate the merger;

 

   

The fact that WABCO has sufficient operating flexibility to conduct its business in the ordinary course between the execution of the merger agreement and consummation of the merger;

 

   

The right of the Board to respond to a competing superior proposal, subject to certain restrictions and the requirement that WABCO pay ZF the applicable termination fee if WABCO terminates the merger agreement to accept a superior proposal;

 

   

The Board’s view that the termination fee was reasonable in the context of comparable transactions, and would not unduly deter any interested party from submitting a competing proposal to acquire WABCO;

 

   

The fact that WABCO would not owe ZF a fee or reimbursement of expenses if WABCO stockholders did not approve the merger; and

 

   

The Board’s right to change its recommendation, subject to certain restrictions, in connection with an intervening event or a superior proposal.

The Board noted that, on all matters, WABCO management took direction from, and acted in consultation with, the Board’s transaction committee, the lead independent director and other Board members, and also consulted with the chair of the Compensation Nominating and Governance Committee on compensation matters, including amounts paid to WABCO’s senior executives in connection with change of control payments and acceleration of vesting for then-outstanding equity awards.

 

   

Negotiations with ZF. The Board considered the benefits that the WABCO management team, taking direction from and acting in consultation with the Board’s transaction committee, the lead independent director and other Board members, was able to obtain during negotiations with ZF, including an increase in the merger consideration from ZF’s initial proposal of $132.50 per share to the final merger consideration of $136.50 per share, commitments with respect to ZF’s efforts to obtain regulatory approvals, a reduction in the termination fee required to be paid by WABCO to ZF in certain circumstances involving a superior proposal or a recommendation change by the Board from 3.75% of the transaction value to 3.0% of the transaction value, and ZF’s commitment to pay a reverse termination fee of 3.0% of the transaction value in the event of a failure to obtain regulatory approval of the merger due to ZF’s refusal to divest certain ZF assets. The Board concluded that WABCO had obtained the highest price per share that ZF was willing to agree to pay, considering the extensive negotiations between the parties.

 

   

ZF’s reputation and resources. The Board considered the business reputation and capabilities of ZF and its management, and ZF’s access to the resources needed to complete the merger, which should facilitate consummation of the merger and the other transactions contemplated by the merger agreement.

 

   

No financing condition. The Board considered the terms of the executed credit facilities agreement providing for ZF’s committed debt financing in connection with the merger and other related

 

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transactions and the financial capabilities and reputation of the financing source. The Board also noted that the receipt of financing is not a condition to closing.

 

   

Appraisal rights. The Board considered the fact that stockholders who properly exercise their rights under the DGCL will have the right to dissent from the merger, which would give these stockholders the ability to seek and be paid a judicially determined “fair value” of their shares at the completion of the merger.

 

   

Stockholders’ ability to reject the merger. The Board considered the fact that the merger is subject to the adoption of the merger agreement by the affirmative vote of holders of a majority of the outstanding shares of WABCO common stock entitled to vote thereon.

In reaching its decision, the Board also considered, and balanced against the potentially positive factors, a variety of risks and other potentially negative factors concerning the merger and the merger agreement, which included the following factors (not necessarily in order of relative importance).

 

   

Inability to participate in future gains. The Board considered the fact that WABCO stockholders would not have the opportunity to realize the potential long-term value of the potential successful execution of WABCO’s current strategy as an independent public company and, given the all-cash consideration, the merger will not allow WABCO stockholders to benefit from any potential future appreciation in the value of the WABCO business once combined with ZF after the merger.

 

   

Merger consideration is at a discount to trading price of WABCO common stock. The Board considered the fact that, although the merger consideration of $136.50 represents a 13.0% premium to the closing price of WABCO common stock on February 26, 2019, the day before media reports that ZF was considering a transaction with WABCO, the merger consideration represented a discount to the trading price of WABCO’s common stock at the close of trading on the date the merger agreement was considered and approved.

 

   

Regulatory risk. The Board considered the risk that regulatory approvals necessary to consummate the merger may be delayed or not granted, which may delay or jeopardize the merger.

 

   

Risks associated with announcement and pendency of the merger. The Board considered the possibility that the consummation of the merger might not occur, or might be delayed, despite the companies’ efforts, including by reason of a failure to obtain the approval of WABCO stockholders or a failure of the parties to obtain the applicable regulatory approvals. The Board also considered the risk that the announcement and pendency of the merger may cause substantial harm to WABCO’s relationships with its employees, suppliers, customers and strategic partners.

 

   

Risks associated with a failure to consummate the merger.

 

   

The Board discussed the fact that the merger is subject to a number of closing conditions, some of which are outside of WABCO’s control. The Board considered the fact that, if the merger is not completed, (i) WABCO will have incurred significant risks, transaction expenses and opportunity costs, including the possibility of disruption to WABCO’s operations, diversion of management and employee attention, employee attrition, a potentially negative effect on WABCO’s business and customer relationships, including the potential loss of business opportunities and the inability to implement projects while the merger agreement is pending and realize the associated financial benefits if the closing fails to occur, (ii) depending on the circumstances that caused the merger not to be completed, the price of WABCO common stock could decline and (iii) the market’s perception of WABCO’s prospects could be adversely affected.

 

   

The Board considered the possibility that regulatory or governmental authorities might seek to prevent or delay the consummation of the merger, including the risk that they might seek an injunction and/or commence an administrative proceeding seeking to prevent the parties from consummating the transaction.

 

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Restrictions on the operation of WABCO’s business. The Board considered the restrictions on the conduct of WABCO’s business prior to the completion of the merger, which could delay or prevent WABCO from realizing certain business opportunities or taking certain actions with respect to the operations WABCO would otherwise take, absent the pending merger.

 

   

Litigation risk. The Board considered the risk of litigation challenging the merger, which could delay the closing, or if there is an adverse judgment, indefinitely enjoin completion of the merger.

 

   

Compensation arrangements of officers and directors. The Board discussed the fact that WABCO directors and members of WABCO’s senior executive team may have interests in the merger that may be different from, or in addition to, those of WABCO’s other stockholders, including in connection with amounts paid to senior executives in connection with change of control payments and acceleration of vesting for WABCO’s equity awards.

 

   

Non-solicitation provision. The Board considered the limitations imposed in the merger agreement on the active solicitation of alternative proposals and the possibility that a termination fee payable to ZF if the merger is terminated under certain circumstances might have the effect of discouraging alternative acquisition proposals or reducing the price of such proposals, although the Board believed the termination fee was reasonable in amount and would not unduly deter any other party that might be interested in making a competing proposal.

 

   

Requirement to hold the special meeting in certain circumstances following a change in recommendation. The Board considered the limitation imposed in the merger agreement that, if WABCO does not terminate the merger agreement in accordance with its terms to enter into a competing superior proposal, WABCO is required to take all reasonable action necessary to duly call, give notice of, convene and hold the special meeting of WABCO stockholders, even if the Board effects a change of recommendation and no longer recommends the transaction with ZF to WABCO stockholders.

 

   

Financing. The Board considered the possibility that the financing for the transaction may not be available to ZF or may not be available on the terms set forth in the commitment letter.

 

   

Diversion of management attention. The Board discussed the fact that substantial time and effort would be required of management to consummate the merger, which could disrupt WABCO’s business operations and could divert employees’ attention away from WABCO’s day-to-day operations.

 

   

Tax treatment. The Board considered the fact that receipt of the all-cash merger consideration would be taxable to WABCO stockholders that are treated as U.S. persons for U.S. federal income tax purposes.

After taking into account all of the factors set forth above, as well as others, the Board concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the merger were outweighed by the potential benefits of the merger to WABCO stockholders.

The foregoing discussion of factors considered by the Board is not intended to be exhaustive, but summarizes the material factors considered by the Board. In light of the variety of factors considered in connection with its evaluation of the merger agreement and the merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the Board applied his own personal business judgment to the process and may have given different weight to different factors. The Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determinations. The Board based its recommendations on the totality of the information presented, including thorough discussions with, and questioning of, WABCO management and the Board’s financial advisor and outside legal counsel. It should be noted that this explanation of the reasoning of

 

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the Board and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in the “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 23.

Opinion of WABCO’s Financial Advisor

Goldman Sachs delivered its opinion to the Board that, as of March 28, 2019 and based upon and subject to the factors and assumptions set forth therein, the $136.50 in cash per share to be paid to the holders of shares (other than ZF and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated March 28, 2019, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board in connection with its consideration of the merger and the other transactions contemplated by the merger agreement. The Goldman Sachs opinion is not a recommendation as to how any holder of shares should vote with respect to the merger or the other transactions contemplated by the merger agreement or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

   

the merger agreement;

 

   

annual reports to stockholders and Annual Reports on Form 10-K of WABCO for the five fiscal years ended December 31, 2018;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of WABCO;

 

   

certain other communications from WABCO to WABCO stockholders;

 

   

certain publicly available research analyst reports for WABCO; and

 

   

certain internal financial analyses and forecasts for WABCO prepared by WABCO management, as approved for Goldman Sachs’ use by WABCO, which we refer to as the WABCO forecasts in this section of the proxy statement.

Goldman Sachs also held discussions with members of the senior management of WABCO regarding their assessment of the past and current business operations, financial condition and future prospects of WABCO; reviewed the reported price and trading activity for the shares; compared certain financial and stock market information for WABCO with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain business combinations; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering this opinion, Goldman Sachs, with WABCO’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with WABCO’s consent that the WABCO forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of WABCO management. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of WABCO or any of its subsidiaries and it was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on the expected benefits of the merger in any way meaningful to its analysis.

 

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Goldman Sachs has also assumed that the merger will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of WABCO to enter into the merger agreement or engage in the transaction or the relative merits of the transactions contemplated by the merger agreement as compared to any strategic alternatives that may be available to WABCO; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to the holders of shares (other than ZF and its affiliates), as of the date of the opinion, of the $136.50 in cash per share to be paid to such holders pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the other transactions contemplated by the merger agreement or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transactions contemplated by the merger agreement, including, the mandatory open offer as required under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended, which we refer to as the SEBI Takeover Code, or the fairness of the transactions contemplated by the merger agreement to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of WABCO; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of WABCO, or class of such persons, in connection with the merger, whether relative to the $136.50 in cash per share to be paid to the holders of shares (other than ZF and its affiliates) pursuant to the merger agreement or otherwise. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions, as in effect on, and the information made available to it as of the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the impact of the transactions contemplated by the merger agreement on the solvency or viability of WABCO or ZF or the ability of WABCO or ZF to pay their respective obligations when they come due. Goldman Sachs’ advisory services and its opinion were provided for the information and assistance of the Board in connection with its consideration of the merger and such opinion does not constitute a recommendation as to how any holder of WABCO common stock should vote with respect to the merger proposal or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before March 26, 2019, the second-to-last trading day before the Board approved the merger agreement, and is not necessarily indicative of current market conditions.

Historical Stock Trading Analysis. Goldman Sachs reviewed the historical trading prices for the shares through March 26, 2019. In addition, Goldman Sachs analyzed the consideration to be paid to holders of shares pursuant to the merger agreement in relation to (i) the closing price per share on March 26, 2019, the second-to-last trading day before the Board approved the merger agreement, (ii) the closing price per share on February 26, 2019, which we refer to as the undisturbed price, the last trading date prior to media reports and WABCO’s confirmation that ZF had approached WABCO, (iii) the volume-weighted average price per share, which we refer to as VWAP, for the 30-day, 60-day, 90-day and 180-day periods ended February 26, 2019 and (iv) the high trading price per share for the 52-week period ended February 26, 2019.

This analysis indicated that the price per share to be paid to holders of shares pursuant to the merger agreement represented:

 

   

a discount of 4.1% based on the closing price of $142.4 per share on March 26, 2019;

 

   

a premium of 13.0% based on the undisturbed price of $120.75 per share;

 

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a premium of 17.7% based on the VWAP per share of $116.0 for the 30-day period ended February 26, 2019;

 

   

a premium of 21.2% based on the VWAP per share of $112.6 for the 60-day period ended February 26, 2019;

 

   

a premium of 23.1% based on the VWAP per share of $110.9 for the 90-day period ended February 26, 2019;

 

   

a premium of 21.8% based on the VWAP per share of $112.0 for the 180-day period ended February 26, 2019; and

 

   

a discount of 4.6% based on the highest closing trading price per share of $143.0 for the 52-week period ended February 26, 2019.

Illustrative Present Value of Future Share Price Analysis. Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s financial multiples. For this analysis, Goldman Sachs used the WABCO forecasts for each of the fiscal years 2019 to 2022. Goldman Sachs first calculated the implied values per share as of March 31 for 2019 through 2021, by applying price to one-year forward earnings per share multiples of 15.2x to 17.2x to the earnings per share estimates for each of the 12-month periods ending on March 31, 2020 through 2022. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account the forward P/E multiple for the shares on February 26, 2019 and historical average forward P/E multiples for the shares during the 5-year period ended February 26, 2019. Goldman Sachs then discounted the implied values per share as of March 31, 2020 and March 31, 2021 back one year and two years, respectively, using an illustrative discount rate of 9.0%, reflecting an estimate of WABCO’s cost of equity. Goldman Sachs derived this discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of implied present values of $122.6 to $147.9 per share.

Illustrative Discounted Cash Flow Analysis. Using the WABCO forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis of WABCO to derive a range of implied values per share as of December 31, 2018. Using discount rates ranging from 8.00% to 9.50%, reflecting estimates of WABCO’s weighted average cost of capital, Goldman Sachs discounted to present value as of December 31, 2018 (i) estimates of unlevered free cash flow for WABCO for the years 2019 through 2027 as reflected in the WABCO forecasts and (ii) a range of illustrative terminal values for WABCO, which were calculated by applying perpetuity growth rates ranging from 1.5% to 2.5%, to a terminal year estimate of the free cash flow to be generated by WABCO, as reflected in the WABCO forecasts (which analysis implied a range of multiples of exit year terminal EBITDA (defined as performance operating income plus depreciation and amortization (excluding transaction-related amortization)) of 7.8x to 11.2x). Goldman Sachs derived such range of discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including the company’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The range of perpetuity growth rates was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the WABCO forecasts and market expectations regarding long-term real growth of gross domestic product and inflation. Goldman Sachs derived ranges of illustrative enterprise values for WABCO by adding the ranges of present values it derived above. Goldman Sachs then subtracted from the range of illustrative enterprise values it derived for WABCO the amount of WABCO’s net debt and other enterprise value adjustments, in each case, as provided by and approved for Goldman Sachs’ use by WABCO management, to derive a range of illustrative equity values for WABCO. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares, as provided by WABCO management, to derive a range of illustrative present values per share of $106 to $157, rounded to the nearest dollar.

 

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Premia Analysis. Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for all-cash acquisition transactions announced during the time period from January 1, 2014 through December 31, 2018 involving a public company based in the United States as the target, where the disclosed transaction values were greater than $2,500,000,000. For the entire period of January 1, 2014 through December 31, 2018, using publicly available information, Goldman Sachs calculated the median, 25th percentile and 75th percentile premiums of the price paid in the 155 transactions relative to the target’s last closing stock price prior to announcement of the transaction. This analysis indicated a median premium of 27.3% across the period. This analysis also indicated a 25th percentile premium of 14% and 75th percentile premium of 41% across the period. Then, for each individual year from 2014 to 2018, Goldman Sachs also calculated the median, 25th percentile and 75th percentile premia of the price paid in the transactions relative to the target’s last closing stock price prior to announcement of the transaction. This analysis indicated a range of individual year median premia of 15% to 33% with the most recent year (2018) showing a median premium of 15% to the target’s last closing stock price prior to announcement of the transaction. This analysis also indicated a range of individual year 25th percentile premia of 7% to 21% and individual year 75th percentile premia of 31% to 49%. Using this analysis, Goldman Sachs applied a reference range of illustrative premia of 15% (the median premium paid in 2018) to 27% (the median premium paid across the period from January 1, 2014 through December 31, 2018) to the undisturbed price per share of $120.75 and calculated a range of implied equity values per share of $139 to $154, rounded to the nearest dollar.

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to WABCO or ZF or the merger.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Board as to the fairness from a financial point of view to the holders of shares (other than ZF and its affiliates), as of March 28, 2019, of the $136.50 in cash per share to be paid to such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of WABCO, ZF, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The amount of the merger consideration was determined through arm’s-length negotiations between WABCO and ZF and was approved by the Board. Goldman Sachs provided advice to WABCO during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to WABCO or the Board or that any specific amount of consideration constituted the only appropriate consideration for the transaction.

As described above, Goldman Sachs’ opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities in

 

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which they invest or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of WABCO, ZF, any of their respective affiliates and third parties, including The Zeppelin Foundation and The Dr. Jürgen and Irmgard Ulderup Foundation, each a significant shareholder of ZF, or any currency or commodity that may be involved in the transactions contemplated by the merger agreement. Goldman Sachs acted as financial advisor to WABCO in connection with, and participated in certain of the negotiations leading to, the execution of the merger agreement. Goldman Sachs has provided certain financial advisory and/or underwriting services to WABCO and/or its affiliates from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation. During the two-year period ended March 28, 2019, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to WABCO and/or its affiliates of approximately $300,000. During the two-year period ended March 28, 2019, the Investment Banking Division of Goldman Sachs has not been engaged by ZF or its affiliates, including The Zeppelin Foundation and The Dr. Jürgen and Irmgard Ulderup Foundation, to provide financial advisory or underwriting services for which Goldman Sachs has recognized compensation. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to WABCO, ZF and their respective affiliates, including The Zeppelin Foundation and The Dr. Jürgen and Irmgard Ulderup Foundation, for which the Investment Banking Division of Goldman Sachs may receive compensation.

The Board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transactions contemplated by the merger agreement. Pursuant to a letter agreement, dated April 18, 2012, as amended on June 21, 2016, May 2, 2017 and March 22, 2019, WABCO engaged Goldman Sachs to act as its financial advisor in connection with the transactions contemplated by the merger agreement. The engagement letter between WABCO and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of announcement, at approximately $46,600,000, all of which is contingent upon consummation of the merger. In addition, WABCO has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Certain WABCO Prospective Financial Information

WABCO does not as a matter of course make public long-term projections as to future revenues, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, as part of its regular annual strategic planning process, the Board reviews with WABCO management estimates and forecasts for future periods prepared by WABCO management. In connection with that strategic planning process, on February 4, 2019, WABCO management presented to the Board its then-current strategic planning forecasts for the years 2019 through 2027, updating forecasts previously presented to the Board in May of 2018 and October of 2018. We refer to the forecasts discussed with the Board on February 4, 2019 as the 2018 WABCO Forecasts. On March 27, 2019, WABCO management, as part of its regular strategic planning, presented to the Board its then-current strategic planning forecasts and market outlook for the years 2019 through 2027, which were previously discussed with the Board on March 10, 2019. We refer to the forecasts discussed with the Board on March 27, 2019 as the 2019 WABCO Forecasts. WABCO is electing to provide the 2018 WABCO Forecasts and the 2019 WABCO Forecasts, which we collectively refer to as the WABCO Forecasts, in this proxy statement because such information was provided to WABCO’s financial advisor in connection with its financial analyses and partially to ZF for the purpose of considering and evaluating the merger. See also the sections entitled “The Merger—Background of the Merger” and “The Merger—Opinion of WABCO’s Financial Advisor” beginning on pages 33 and 48, respectively. The WABCO Forecasts were not prepared with a view toward public disclosure. The inclusion of the WABCO Forecasts below should not be regarded as an indication that WABCO, ZF, their respective financial advisors or any other recipient of this information considered, or now considers, such information to be necessarily predictive of actual future results.

 

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The WABCO Forecasts are subjective in many respects and thus subject to interpretation. While presented with numeric specificity, the WABCO Forecasts reflect numerous estimates and assumptions made by WABCO management with respect to industry performance and competition, general business, economic, market and financial conditions and matters specific to WABCO’s business, all of which are difficult to predict and many of which are beyond WABCO’s control. As a result, there can be no assurance that the WABCO Forecasts will be realized or that actual results will not be significantly higher or lower than estimated. Portions of the WABCO Forecasts cover multiple years. Such information by its nature becomes less predictive with each successive year. WABCO stockholders are urged to review WABCO’s most recent SEC filings for a description of risk factors with respect to WABCO’s business, and a description of the reported financial condition and results of operations during 2018 of WABCO. See also the sections entitled “Cautionary Statement Regarding Forward-Looking Statements”, “The Merger—Recommendation of the WABCO Board and Reasons for the Merger” and “Where You Can Find More Information” beginning on pages 23, 42 and 100, respectively. The WABCO Forecasts are unaudited and were not prepared with a view toward complying with GAAP, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

The WABCO Forecasts were prepared based on WABCO as a standalone company. Such forecasts do not take into account the merger, including the impact of negotiating or executing the merger, the expenses that may be incurred in connection with consummating the merger, the effect of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions which would likely have been taken if the merger agreement had not been executed but which were instead altered, accelerated, postponed or not taken in anticipation of the merger.

The following table summarizes the 2019 WABCO Forecasts. The 2019 WABCO Forecasts were approved by WABCO for use by its financial advisor in connection with delivering its oral opinion to the Board, subsequently confirmed in writing, that, as of March 28, 2019 and based upon and subject to the factors and assumptions set forth therein, the $136.50 in cash per share to be paid to the holders of shares (other than ZF and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders, and performing its financial analyses in connection therewith.

 

     2019 WABCO Forecasts  
     ($ in millions)  
     2019(E)     2020(E)     2021(E)     2022(E)     2023(E)     2024(E)     2025(E)     2026(E)     2027(E)  

Revenues

   $ 3,930     $ 4,080     $ 4,354     $ 4,782     $ 5,214     $ 5,527     $ 5,859     $ 6,210     $ 6,583  

Operating Income—Performance

   $ 533     $ 555     $ 599     $ 680     $ 758     $ 805   $ 854   $ 907   $ 963

Operating Income—Reported

   $ 492     $ 515     $ 558     $ 640     $ 717     $ 764     $ 814     $ 867     $ 923  

EBIT—Performance

   $ 486     $ 509     $ 548     $ 625     $ 701     $ 746     $ 794     $ 845     $ 898  

Cash Tax Rate

     17.6     14.5     18.3     18.7     19.6     22.2     15.3     15.4     15.4

Depreciation and Amortization

   $ 132     $ 139     $ 146     $ 153     $ 160     $ 167     $ 174     $ 181     $ 188  

Capex

   $ (139   $ (145   $ (152   $ (159   $ (166   $ (172   $ (179   $ (186   $ (192

Change in Net Working Capital(1)

   $ (18   $ (27   $ (50   $ (78   $ (79   $ (57   $ (60   $ (64   $ (68

 

(1)

Cash flow impact

 

*

Represents forecasted financials shared by WABCO with its financial advisor and not with ZF.

Note: Goldman Sachs calculated estimated unlevered free cash flows for WABCO for the years 2019 through 2027 by subtracting Cash Taxes, Capex and increases in Net Working Capital from Operating Income—Reported and adding back Depreciation and Amortization. All of the data that Goldman Sachs used to calculate the

 

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unlevered free cash flows were provided by WABCO management and approved by WABCO for such use by Goldman Sachs. The results of these calculations of unlevered free cash flows for 2019 through 2027 were as follows ($ in millions): 381, 406, 401, 437, 493, 533, 625, 665 and 709, respectively.

For the purposes of this proxy statement:

Operating Income—Performance” means operating income adjusted for streamlining, separation costs and acquisition-related costs.

Operating Income—Reported” means reported operating income unadjusted for streamlining, separation costs and acquisition-related costs.

EBIT—Performance” means earnings before interest and taxes adjusted for streamlining, separation costs, acquisition-related costs and other items that management believes may mask the underlying operating results of WABCO.

Capex” means net investments in PP&E, tooling and capitalized software.

WABCO management also calculated projected earnings per share (performance) based upon the 2019 WABCO Forecasts and provided such calculations to Goldman Sachs in March of 2019, as reflected in the following table.

 

     Fiscal Year Ending December 31,  
     ($ per share)  
     2019(E)      2020(E)      2021(E)      2022(E)      2023(E)      2024(E)      2025(E)      2026(E)      2027(E)  

EPS—Performance

   $ 7.91      $ 8.48      $ 9.71      $ 11.83      $ 14.21      $ 16.27      $ 18.71      $ 21.67      $ 25.27  

“EPS—Performance” means reported earnings per share adjusted for streamlining, separation, one-time tax & discrete tax items and acquisition-related costs.

WABCO management had previously shared with its financial advisor and ZF the 2018 WABCO Forecasts in February of 2019, reflecting WABCO management’s best estimates at the time of their preparation. As is customary for WABCO, WABCO management prepared the 2019 WABCO Forecasts in March of 2019, as part of its regular annual strategic planning process. The 2019 WABCO Forecasts (as compared to the 2018 WABCO Forecasts) reflect refined expectations with respect to revenue growth and profitability, as well as refined cash tax rate calculations.

 

     2018 WABCO Forecasts  
     ($ in millions)  
     2019(E)     2020(E)     2021(E)     2022(E)     2023(E)     2024(E)     2025(E)     2026(E)     2027(E)  

Revenues

   $ 3,903     $ 4,074     $ 4,407     $ 4,827     $ 5,181     $ 5,492     $ 5,821     $ 6,171     $ 6,541  

Operating Income—Performance

   $ 529     $ 554     $ 614     $ 690     $ 743     $ 789   $ 839   $ 891   $ 947

Operating Income—Reported

   $ 489     $ 514     $ 574     $ 649     $ 703     $ 749   $ 799   $ 851   $ 907

EBIT—Performance

   $ 483     $ 508     $ 564     $ 635     $ 687     $ 731     $ 779     $ 829     $ 882  

Cash Tax Rate

     18.0     18.0     18.0     18.0     18.0     18.0 %*      18.0 %*      18.0 %*      18.0 %* 

Depreciation and Amortization

   $ 132     $ 139     $ 146     $ 153     $ 160     $ 167     $ 174     $ 181     $ 188  

Capex

   $ (139   $ (145   $ (152   $ (159   $ (166   $ (172   $ (179   $ (186   $ (192

Change in Net Working Capital(1)

   $ (13   $ (31   $ (61   $ (76   $ (65   $ (57   $ (60   $ (64   $ (67

 

(1)

Cash flow impact

 

*

Represents forecasted financials shared by WABCO with its financial advisor and not with ZF.

 

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Note: Goldman Sachs calculated estimated unlevered free cash flows for WABCO for the years 2019 through 2027 by subtracting Cash Taxes, Capex and increases in Net Working Capital from Operating Income—Reported and adding back Depreciation and Amortization. All of the data that Goldman Sachs used to calculate the unlevered free cash flows were provided by WABCO management and approved by WABCO for such use by Goldman Sachs. The results of these calculations of unlevered free cash flows for 2019 through 2027 were as follows ($ in millions): 381, 384, 404, 451, 506, 553, 590, 630 and 672, respectively.

WABCO management also calculated projected earnings per share (performance) based upon the 2018 WABCO Forecasts and provided such calculations to Goldman Sachs in February of 2019, as reflected in the following table.

 

     Fiscal Year Ending December 31,  
     ($ per share)  
     2019(E)      2020(E)      2021(E)      2022(E)      2023(E)      2024(E)      2025(E)      2026(E)      2027(E)  

EPS—Performance

   $ 7.85      $ 8.47      $ 9.99      $ 12.02      $ 13.91      $ 15.93      $ 18.34      $ 21.25      $ 24.81  

Readers of this proxy statement are cautioned not to rely on the WABCO Forecasts set forth above. No representation or warranty is or has been made to WABCO stockholders by WABCO, its financial advisor or any other person regarding the information included in the WABCO Forecasts described herein. The inclusion of the WABCO Forecasts in this proxy statement should not be regarded as an indication that such prospective financial information will be necessarily predictive of actual future events nor construed as financial guidance, and they should not be relied on as such. Factors that could cause the above future results to differ from the above WABCO Forecasts include general economic, regulatory and market conditions, changes in actual or projected cash flows, competitive pressures, changes in tax laws or accounting rules, changes in government regulations and regulatory requirements and the other matters discussed in WABCO’s most recent SEC filings. For a description of risk factors with respect to WABCO’s business, see the sections entitled “Cautionary Statement Regarding Forward-Looking Statements”, “The Merger—Recommendation of the WABCO Board and Reasons for the Merger” and “Where You Can Find More Information” beginning on pages 23, 42 and 100, respectively.

WABCO DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE WABCO FORECASTS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE SUCH PROSPECTIVE FINANCIAL INFORMATION WAS COMPILED OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE WABCO FORECASTS ARE NO LONGER APPROPRIATE.

Interests of WABCO Non-Employee Directors and Executive Officers in the Merger

In considering the recommendation of the Board that you vote in favor of the merger proposal, you should be aware that, aside from their interests as WABCO stockholders, WABCO directors and executive officers have interests in the merger that are different from, or in addition to, the interests of WABCO stockholders generally. The Board was aware of and considered these, among other matters, in evaluating and negotiating the merger agreement and in recommending to WABCO stockholders that they vote in favor of the merger proposal. See the sections entitled “The Merger—Background of the Merger” and “The Merger—Recommendation of the WABCO Board and Reasons for the Merger” beginning on pages 33 and 42, respectively. These interests are described in more detail below.

Treatment of WABCO Executive Officer Equity and Cash Incentive Compensation

Our executive officers hold various types of compensatory awards with respect to WABCO common stock. Our non-employee directors hold awards of DSUs that are fully vested at grant. At the effective time, each equity award relating to a share of WABCO common stock and each cash incentive award granted under a company incentive plan that is held by a WABCO executive officer immediately prior to the effective time will be

 

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cancelled and converted into the right to receive a cash payment as described in the section entitled “Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Treatment of Equity and Cash Incentive Compensation” beginning on page 64.

Summary of Unvested Equity and Cash Incentive Awards Held by Executive Officers

The table below sets forth the estimated value of unvested equity and cash incentive awards held as of May 13, 2019, the last practicable date prior to the date of this proxy statement, by WABCO executive officers, including named executive officers, based on the merger consideration of $136.50 per share of WABCO common stock, without interest and less any applicable withholding taxes. Depending on when the merger is completed, certain outstanding equity awards shown in the table below may become vested in accordance with their terms without regard to the merger. All equity awards held by our directors, which consist of DSUs, and all stock options held by executive officers, if any, are fully vested and are therefore not reflected in the table below. The amounts shown are estimates based on multiple assumptions and do not reflect compensation actions that could occur after May 13, 2019 and before the effective time.

Unvested Equity and Cash Incentive Awards Held by Executive Officers

 

Named Executive Officers

  Aggregate Value of
Unvested Cash
Incentive Awards

($)(1)
    Aggregate
Number of
Unvested RSUs

(#)
    Aggregate
Value of
Unvested RSUs

($)
    Aggregate
Number of
Unvested
PSUs

(#)(2)
    Aggregate
Value of
Unvested PSUs

($)
    Total Value
($)
 

Jacques Esculier

    5,592,296       26,654       3,638,271       52,662       7,188,363       16,418,930  

Sean Deason(3)

    337,169       3,130       427,245       2,876       392,574       1,156,988  

Roberto Fioroni(4)

    —         —         —         —         —         —    

Nick Rens

    440,684       4,229       577,259       8,052       1,099,098       2,117,041  

Lisa Brown

    2,385,137       3,160       431,340       5,978       815,997       3,632,474  

Christian Brenneke

    320,655       4,516       616,434       4,789       653,699       1,590,788  

Alexander De Bock(5)

    274,382       2,484       339,066       1,598       218,127       831,575  

Other Executive Officers

           

Nicolas Bardot

    314,774       2,425       331,013       4,789       653,699       1,299,486  

Mazen Mazraani

    309,423       2,667       364,046       5,268       719,082       1,392,551  

Jorge Solis(6)

    —         —         —         —         —         —    

 

(1)

The cash incentive awards column reflects cash annual incentive plan and long-term incentive plan awards granted under the company incentive plans at the actual level of performance as of May 13, 2019, pro-rated to reflect the period elapsed from the first day of the applicable performance period through May 13, 2019. Mr. Esculier’s 2018 long-term cash incentive award will vest at the target level of performance upon the occurrence of the effective time and a cash retention award of $2 million for Ms. Brown will vest and be paid at the effective time if not earlier vested.

 

(2)

The PSU column includes (i) PSUs with a performance period ending on December 31, 2019 with the number of underlying shares reflected at actual performance as of May 13, 2019 and (ii) all other PSUs, with the number of underlying shares reflected at the target level of performance.

 

(3)

Mr. Deason was appointed as WABCO’s chief financial officer & controller effective April 1, 2019.

 

(4)

Mr. Fioroni resigned as WABCO’s chief financial officer effective April 1, 2019 and will not receive any compensation in connection with the closing.

 

(5)

Mr. De Bock, WABCO’s vice president finance planning & analysis and treasurer, previously served as WABCO’s interim chief financial officer from September 2017 until June 2018.

 

(6)

Mr. Solis, former president, truck, bus & car original equipment manufacturers division, terminated employment with WABCO effective February 28, 2019 and will not receive any compensation in connection with the closing.

 

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As of May 13, 2019, all equity awards held by our directors, which consist of 27,815 DSUs in the aggregate, are fully vested and, based on the merger consideration of $136.50 per share of WABCO common stock, have an aggregate estimated value of $3,796,748.

Future WABCO Equity and Cash Incentive Awards

WABCO may grant equity awards and cash incentive awards in the ordinary course of business prior to the closing, subject to certain restrictions, including that the aggregate grant date value of any annual equity grants will not exceed $16 million. All such equity and cash incentive awards will be subject to the same treatment applicable to such awards as described in the section entitled “Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Treatment of Equity and Cash Incentive Compensation” beginning on page 64.

Potential Payments to Executive Officers upon Termination in Connection with a Change of Control

Each WABCO executive officer, including named executive officers, is eligible to receive enhanced severance benefits under the WABCO change of control severance plan in the event of termination of employment by WABCO without cause or a resignation by the executive officer for good reason (each term cause and good reason as defined in the WABCO change of control severance plan), each occurring within twenty-four months after the effective time, which we refer to as a qualifying termination, of employment in connection with the merger. Upon such a qualifying termination, WABCO executive officers would be eligible to receive (i) a severance payment in an amount equal to two times (three times for the chief executive officer, the chief financial officer, the chief legal officer and the chief human resources officer) the sum of the named executive officer’s annual base salary in effect immediately prior to the qualifying termination plus the executive officer’s target annual incentive bonus in effect for the calendar year in which the qualifying termination occurs plus (ii) the estimated value of company-provided group insurance plan and group medical coverage for two years (three years for the chief executive officer, the chief financial officer, the chief legal officer and the chief human resources officer) and reimbursement of financial planning services up to $5,000.

If any payments or benefits made in connection with the merger would be subject to any excise tax under Sections 280G or 4999 of the Code, then the payments and benefits will be either delivered in full or delivered to such lesser extent as would result in no portion of such amounts being subject to any golden parachute excise tax, whichever results in the greater after-tax benefit to the recipient. No employee is entitled to any gross-up payments in respect of any golden parachute excise tax.

Information related to the estimated amounts each named executive officer would receive upon a qualifying termination of employment is set forth in the section entitled “Proposal 2: Advisory Vote on Merger-Related Compensation for WABCO’s Named Executive Officers” beginning on page 86. The estimated amount that would be payable to the WABCO executive officers who are not named executive officers is $1,180,880 for Mr. Bardot and $1,653,232 for Mr. Mazraani, assuming that (i) the closing occurs on May 13, 2019, (ii) salary and target bonus levels are those in effect as of May 13, 2019 and (iii) a qualifying termination of each WABCO executive officer’s employment occurs immediately following the effective time.

Equity Replacement Program with ZF

For twenty-four months after the effective time, ZF has agreed to provide WABCO employees, including WABCO executive officers, who continue employment with ZF after the effective time, with (i) at least the same base salary and wage rate as provided immediately prior to the effective time, (ii) incentive compensation opportunities (excluding equity awards) that are no less favorable in the aggregate than those provided immediately prior to the effective time and (iii) employee benefits which are no less favorable in the aggregate than those provided immediately prior to the effective time. In place of the equity-based component of compensation provided by WABCO immediately prior to the effective time, ZF has agreed to establish, promptly after the effective time, a cash-based retention program for the benefit of certain WABCO employees, including

 

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WABCO executive officers. Awards under the equity replacement program will consist of cash-based grants equal to two times the value of the target equity compensation award for the applicable employee for 2019, and if the effective time has not occurred as of January 1, 2020, for 2020. Awards will vest in full on the second anniversary of the effective time, subject to continued service through that date, or if earlier, upon a termination of employment by ZF, the surviving corporation or their respective subsidiaries without cause, resignation by the employee for good reason, or upon death or disability. 2019 target equity compensation for WABCO executive officers is as follows: $3,300,000 for Mr. Esculier; $500,000 for Mr. Rens; $400,000 for Mr. Deason; $400,000 for Ms. Brown; $300,000 for Mr. Bardot; $330,000 for Mr. Mazraani; $300,000 for Mr. Brenneke; and $125,000 for Mr. De Bock.

Directors’ and Officers’ Indemnification and Insurance

The merger agreement requires that, from and after the effective time, each of ZF and the surviving corporation will indemnify and hold harmless each present and former director and officer of WABCO and its subsidiaries (in each case, when acting in such capacity), determined as of the effective time, against any costs or expenses (including reasonable attorneys’ fees and disbursements), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding, litigation, arbitration, hearing or investigation, whether civil, criminal, administrative or investigative and whether formal or informal, arising out of matters existing or occurring at or prior to the effective time, to the fullest extent that WABCO and its subsidiaries would have been permitted under Delaware law and its organizational documents in effect on the date of execution of the merger agreement, subject to certain limitations. In addition, from and after the effective time, the surviving corporation will maintain in effect provisions in the surviving corporation’s organizational documents related to indemnification, advancement of expenses and exculpation of former or present directors and officers that are no less favorable than those provisions set forth in WABCO’s organizational documents in effect on the date of the merger agreement.

Financing of the Merger

The merger is not conditioned on the ability of ZF or Merger Sub to obtain financing. ZF and Merger Sub have represented to WABCO that they will have available to them, together with WABCO’s cash on hand, sufficient funds at the effective time to pay all amounts required to be paid by ZF or Merger Sub pursuant to the terms of the merger agreement, including amounts required to pay the aggregate merger consideration, the amounts required in connection with the Indian offer, the amounts required to refinance any outstanding indebtedness of WABCO required to be refinanced pursuant to the terms of the merger agreement and to pay all associated fees, costs and expenses. ZF expects to finance the merger through proceeds from debt financing.

ZF has made available to WABCO a copy of the fully executed credit facilities agreement. Pursuant to the credit facilities agreement, and subject to the terms and conditions set forth therein, the financing sources have committed to provide ZF with the credit facilities.

The funding of the credit facilities provided for in the credit facilities agreement is contingent on the satisfaction of customary conditions, including the consummation of the merger in accordance with the merger agreement.

The credit facilities commitments will terminate on the earliest of (i) the date that is four months after the closing, (ii) the date on which the merger agreement is terminated prior to the closing and (iii) the date that is eighteen months after the signing of the credit facilities agreement.

The “Indian offer” means the mandatory open offer as required under the SEBI Takeover Code.

 

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U.S. Federal Income Tax Consequences of the Merger

The following is a summary of U.S. federal income tax consequences of the merger to U.S. holders and non-U.S. holders (each as defined below) of WABCO common stock who hold their stock as a “capital asset” within the meaning of Section 1221 of the Internal Revenue Code of 1986, which we refer to as the Code. This summary is based on the Code, the U.S. Treasury Department regulations issued under the Code, which we refer to as the Treasury Regulations, and administrative rulings and court decisions in effect as of the date of this proxy statement, all of which are subject to change at any time, possibly with retroactive effect. This summary is not binding on the Internal Revenue Service, which we refer to as the IRS, or a court, and there can be no assurance that the tax consequences described in this summary will not be challenged by the IRS or that they would be sustained by a court if so challenged. No ruling has been or will be sought from the IRS, and no opinion of counsel has been or will be rendered, as to the U.S. federal income tax consequences of the merger.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of WABCO common stock that is, for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes. A “non-U.S. holder” means a beneficial owner of WABCO common stock that is neither a U.S. holder nor a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes).

This summary is not a complete description of all of the U.S. federal income tax consequences of the merger and, in particular, may not address U.S. federal income tax considerations applicable to holders of WABCO common stock who are subject to special rules under U.S. federal income tax law including, for example, partnerships (or entities or arrangements treated as partnerships for U.S. federal income tax purposes) and partners and beneficial owners therein, financial institutions, dealers in securities, insurance companies, tax-exempt entities, mutual funds, real estate investment trusts, personal holding companies, regulated investment companies, securities or currency dealers, traders in securities who elect to use the mark-to-market method of accounting, non-U.S. holders that hold, directly or constructively (or that held, directly or constructively, at any time during the five-year period ending on the date of the merger), 5% or more of the outstanding WABCO common stock, tax-exempt investors, S corporations, holders whose functional currency is not the U.S. dollar, tax-deferred or other retirement accounts, U.S. expatriates, former long-term residents of the United States, holders who acquired WABCO common stock pursuant to the exercise of an employee stock option or right or otherwise as compensation, and holders who hold WABCO common stock as part of a hedge, straddle, constructive sale, conversion transaction, or other integrated investment. Also, this summary does not address U.S. federal income tax considerations applicable to holders of WABCO common stock who exercise appraisal rights under Delaware law. In addition, no information is provided with respect to the tax consequences of the merger under any U.S. federal law other than income tax laws (including, for example the U.S. federal estate, gift, Medicare, and alternative minimum tax laws), or any applicable state, local, or foreign tax laws. This summary does not address the tax consequences of any transaction other than the merger (whether or not such transaction occurs in connection with the merger).

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds WABCO common stock, the tax treatment of a partner or a beneficial owner of such a partnership generally will depend on the status of the partner or beneficial owner, the activities of the partnership and certain determinations made at the partner or beneficial owner level. Any entity treated as a partnership for U.S. federal income tax purposes that holds WABCO common stock, and any partners and beneficial owners of such partnership, should consult their own independent tax advisors regarding the tax consequences of the merger to their specific circumstances.

 

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The tax consequences of the merger will depend on a holder’s specific situation. Holders should consult their tax advisor as to the tax consequences of the merger relevant to their particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, non-U.S. or other tax laws and of changes in those laws.

Tax Consequences to U.S. Holders

The receipt of cash by U.S. holders in exchange for shares of WABCO common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of WABCO common stock pursuant to the merger will recognize capital gain or loss in an amount equal to the difference, if any, between (i) the amount of cash received in the merger and (ii) the U.S. holder’s adjusted tax basis in its WABCO common stock exchanged therefor.

A U.S. holder’s adjusted tax basis in its shares of WABCO common stock will generally equal the price the U.S. holder paid for such shares. If a U.S. holder’s holding period in the shares of WABCO common stock surrendered in the merger is greater than one year as of the date of the merger, the gain or loss will be long-term capital gain or loss. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of a capital loss recognized on the exchange is subject to limitations. If a U.S. holder acquired different blocks of WABCO common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of WABCO common stock.

Tax Consequences to Non-U.S. Holders

Payments made to a non-U.S. holder in exchange for shares of WABCO common stock pursuant to the merger generally will not be subject to U.S. federal income tax unless:

 

   

the gain, if any, on such shares of WABCO common stock is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to the non-U.S. holder’s permanent establishment in the United States), in which case such gain will generally be subject to U.S. federal income tax at rates applicable to U.S. holders and, if such non-U.S. holder is a corporation, such gain may also be subject to an additional “branch profits tax” at a 30% rate (or lower applicable treaty rate); or

 

   

the non-U.S. holder is an individual who is present in the U.S. for one hundred eighty-three days or more in the taxable year of the exchange of shares of WABCO common stock for the merger consideration pursuant to the merger and certain other conditions are met, in which case the gain, if any, on such shares of WABCO common stock will be subject to tax at a rate of 30% (or lower applicable treaty rate) and such gain may be offset by certain U.S.-source capital losses recognized in the same taxable year, provided that the non-U.S. holder timely files U.S. federal income tax returns with respect to such losses.

Holders of WABCO common stock are urged to consult their own tax advisors with respect to the tax consequences of the merger in their particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, non-U.S. or other tax laws and of changes in those laws.

Regulatory Approvals

General

WABCO and ZF have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and

 

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regulations to consummate the merger and the other transactions contemplated by the merger agreement, including obtaining any requisite approvals, subject to certain specified limitations under the merger agreement. This includes using reasonable best efforts to obtain all requisite approvals, clearances, orders, decisions, decrees or authorizations or expirations of any waiting period under the HSR Act, the DPA and certain foreign regulations. The merger is also conditioned upon receipt of certain foreign approvals.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained or obtained at all, or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the closing, including the requirement to divest assets. In furtherance thereof, WABCO and ZF have also agreed to work together and use their respective reasonable best efforts to cause WABCO to divest the specified business. ZF has agreed, subject to certain exceptions, to make divestitures and take remedial actions required by regulators so long as such actions do not result in a material adverse effect on the combined company, after giving effect to the merger. ZF is not required to divest a portion of, or certain assets primarily related to, specific product lines or business divisions. For a more complete description, see the section entitled “Terms of the Merger Agreement—Additional Agreements—Efforts to Complete the Merger” beginning on page 76.

Other than the approvals and notifications described below, neither WABCO nor ZF is aware of any material regulatory approvals required to be obtained, or waiting periods required to expire, to consummate the merger. If the parties discover that other approvals or filings and waiting periods are necessary, they will seek to obtain or comply with them, although, as is the case with the regulatory approvals described above, there can be no assurance that they will be obtained on a timely basis, if at all.

At any time before or after the consummation of the merger, notwithstanding the expiration or termination of any applicable waiting periods, the U.S. Federal Trade Commission, which we refer to as the FTC, or the Antitrust Division of the U.S. Department of Justice, which we refer to as the DOJ, could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the merger, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. In addition, at any time before or after the closing, notwithstanding the expiration or termination of the applicable waiting period under the HSR Act or the equivalent in any foreign jurisdictions, non-U.S. regulatory bodies and U.S. state attorneys general could take action under other applicable regulatory laws as they deem necessary or desirable in the public interest. Such action could include seeking to enjoin consummation of the merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

U.S. Antitrust

Under the HSR Act and the rules promulgated thereunder, the merger cannot be completed until WABCO and ZF each file a notification and report form with the FTC and the DOJ, and the applicable waiting period thereunder has expired or been terminated.

CFIUS

The merger agreement provides for the parties to file a joint voluntary notice with CFIUS under the DPA. The DPA provides for national security reviews and, where appropriate, investigations by CFIUS of transactions in which a foreign person or entity acquires control of a U.S. business, which we refer to as a covered transaction. CFIUS review of a covered transaction is subject to an initial forty-five day review period that may be extended by CFIUS for an additional forty-five day investigation period. Both the initial review period and the investigation period may be suspended if the parties to the merger agreement fail to respond promptly to additional questions or requests from CFIUS. As a result of its review or investigation, CFIUS may determine that the proposed transaction is not a covered transaction; may decline to take any action relative to the covered

 

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transaction; may propose mitigation terms to resolve any national security concerns presented by the covered transaction; may send a report to the President of the United States recommending that the transaction be suspended or prohibited; or may send a report notifying the President of the United States that CFIUS cannot agree on a recommendation related to the covered transaction. Should CFIUS send a report to the President of the United States, the President of the United States then has fifteen days to decide whether to block the transaction or to take other action. Under the terms of the merger agreement, consummation of the merger is subject to the condition that, either: (a) CFIUS has determined that none of the transactions contemplated by the merger agreement is a “covered transaction” under the DPA, (b) CFIUS has concluded its review and determined that there are no unresolved national security concerns with respect to the transactions contemplated by the merger agreement or (c) following the investigation period, CFIUS reports the transactions contemplated by the merger agreement to the President of the United States and the President of the United States has either made a decision not to suspend or prohibit the transactions contemplated by the merger agreement or has taken no action within fifteen days after the earlier of the date that CFIUS completed its investigation or the date the President of the United States received such report from CFIUS (the satisfaction of one of the foregoing options we refer to as CFIUS clearance).

Non-U.S. Regulatory Approvals

In addition to the required U.S. antitrust and CFIUS clearance described above, pursuant to conditions to the consummation of the merger set forth in the merger agreement, the parties are seeking governmental antitrust or merger control approvals in the European Union (which we refer to as the EU), Brazil, China, India, Japan, Russia, Serbia, South Africa, South Korea and Turkey. There can be no assurance that such approvals will be obtained.

Legal Proceedings Regarding the Merger

On April 23, 2019, a putative class action complaint was filed against WABCO and the Board in the United States District Court for the District of Delaware under the caption Collier v. WABCO Holdings Inc., et al., No. 1:19-cv-00729 (D. Del.). A second putative class action complaint was filed on April 24, 2019 against WABCO and the Board in the United States District Court for the District of Delaware under the caption Kent v. WABCO Holdings Inc., et al., No. 1:19-cv-00735 (D. Del.). A third complaint was filed on April 29, 2019 against WABCO and the Board in the United States District Court for the District of Delaware under the caption Stein v. WABCO Holdings Inc., et al., No. 1:19-cv-00782 (D. Del.). A fourth complaint was filed on May 2, 2019 against WABCO and the Board in the United States District Court for the District of Delaware under the caption Kengchoon v. WABCO Holdings Inc., et al., No. 1:19-cv-00816 (D. Del.). The complaints allege that the preliminary proxy statement, among other things, omitted material information in violation of Sections 14(a) and 20(a) of the Exchange Act, rendering the preliminary proxy statement false and misleading. Among other remedies, the complaints seek to enjoin the special meeting and the closing, as well as damages, costs and attorneys’ fees. The defendants believe that the lawsuits are without merit.

 

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TERMS OF THE MERGER AGREEMENT

The following summary describes certain material provisions of the merger agreement. This summary is not complete and is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. We encourage you to read the merger agreement carefully in its entirety because this summary may not contain all the information about the merger agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the merger agreement and not by this summary or any other information contained in this proxy statement.

The representations, warranties, covenants and agreements described below and included in the merger agreement were made for purposes of the merger agreement and as of specific dates, were for the benefit of the parties to the merger agreement except as expressly stated therein and may be subject to important qualifications, limitations and supplemental information agreed to by WABCO, ZF and Merger Sub in connection with negotiating the terms of the merger agreement, including certain qualifications, limitations and supplemental information disclosed in the confidential disclosure schedules to the merger agreement. In addition, the representations and warranties were included in the merger agreement for the purpose of allocating contractual risk between WABCO, ZF and Merger Sub, and may be subject to standards of materiality applicable to such parties that differ from those generally applicable to investors. In reviewing the representations, warranties, covenants and agreements contained in the merger agreement or any description thereof in this summary, it is important to bear in mind that such representations, warranties, covenants and agreements or any descriptions were not intended by the parties to the merger agreement to be characterizations of the actual state of facts or condition of WABCO, ZF and Merger Sub or any of their respective affiliates or businesses except as expressly stated in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement. In addition, you should not rely on the covenants in the merger agreement as actual limitations on the respective businesses of WABCO, ZF and Merger Sub because the parties to the merger agreement may take certain actions that are either expressly permitted in the confidential disclosure schedules to the merger agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The merger agreement is described below, and attached as Annex A hereto, with the intention of providing you with information regarding the terms of the merger. Accordingly, the representations, warranties, covenants and other agreements in the merger agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding WABCO and our business. Please see the section entitled “Where You Can Find More Information” beginning on page 100.

Structure of the Merger

Upon the terms and subject to the conditions of the merger agreement and in accordance with the applicable provisions of the DGCL, at the effective time, Merger Sub will merge with and into WABCO, with WABCO continuing as the surviving corporation and a wholly owned subsidiary of ZF. The merger will have the effects set forth in the merger agreement and the applicable provisions of the DGCL.

Closing and the Effective Time of the Merger

The closing will occur at 9:00 a.m., Eastern time, on the fifth business day following the day on which the closing conditions set forth in the merger agreement (as described below under the section entitled “Terms of the Merger Agreement—Conditions to the Closing” beginning on page 80) (other than those conditions that by their nature are to be satisfied at the closing, but subject to the fulfillment or waiver of those conditions at the closing) have been satisfied or waived, to the extent permitted by law, in accordance with the merger agreement or at such other time and place as ZF and WABCO may agree in writing.

As soon as practicable following the closing, ZF and WABCO will file a certificate of merger with the Secretary of State of the State of Delaware in accordance with Section 251 of the DGCL. The merger will

 

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become effective at the time when the certificate of merger has been duly filed, or at such later time as is agreed in writing by ZF and WABCO and specified in the certificate of merger.

Directors and Officers; Certificate of Incorporation; Bylaws

The directors of Merger Sub at the effective time will be the initial directors of the surviving corporation until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation. The officers of WABCO at the effective time will be the officers of the surviving corporation until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation.

At the effective time, the certificate of incorporation of the surviving corporation will be amended in its entirety to read as set forth in Exhibit A to the merger agreement, until thereafter amended as provided therein or by applicable law, in each case, consistent with the obligations under the merger agreement relating to directors’ and officers’ indemnification and insurance.

At the effective time and without any further action on the part of WABCO and Merger Sub, the bylaws of Merger Sub in effect immediately prior to the effective time will be the bylaws of the surviving corporation, until thereafter amended as provided therein or by applicable law, in each case consistent with the obligations under the merger agreement relating to directors’ and officers’ indemnification and insurance.

Effect on Capital Stock; Merger Consideration

Common Stock

At the effective time and without any action on the part of the holder, each share of WABCO common stock issued and outstanding immediately prior to the effective time (other than cancelled shares and dissenting shares) will be converted into the right to receive $136.50 in cash, without interest, less any applicable withholding taxes. At the effective time, each share of WABCO common stock issued and outstanding immediately prior to the effective time (other than cancelled shares and dissenting shares) will cease to be outstanding, will automatically be cancelled and will cease to exist, and each certificate that immediately prior to the effective time represented any such shares, which we refer to as a certificate, other than cancelled shares and dissenting shares, or non-certificated shares in book-entry form other than cancelled shares and dissenting shares, which we refer to as book-entry shares, will thereafter represent only the right to receive the merger consideration in accordance with the terms of the merger agreement. Each cancelled share will cease to be outstanding (without payment of any other consideration) and will cease to exist. Each share of Merger Sub common stock issued and outstanding immediately prior to the effective time will be converted into one share of common stock of the surviving corporation and will constitute the only outstanding shares of capital stock of the surviving corporation.

If, during the period between the date of the merger agreement and the effective time, any change in the number of outstanding shares of WABCO common stock occurs as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, issuer tender or exchange offer, or other similar transaction, the merger consideration will be appropriately adjusted.

Treatment of Equity and Cash Incentive Compensation

WABCO executive officers and other employees hold various types of compensatory awards with respect to WABCO common stock, in addition to annual and long-term cash incentive awards granted under the company incentive plans. Our non-employee directors hold awards of DSUs. The merger agreement provides for the treatment set forth below with respect to these awards.

 

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Stock Options. Each stock option to purchase shares of WABCO common stock issued under a company incentive plan, which we refer to as a stock option, will be cancelled and converted into the right to receive an amount in cash equal to the product of (i) the number of shares of WABCO common stock subject to the stock option multiplied by (ii) the excess, if any, of $136.50 over the per share exercise price of the stock option.

Restricted Stock Units. Each RSU will be cancelled and converted into the right to receive a cash payment equal to $136.50 multiplied by the number of shares of WABCO common stock subject to the RSU.

Performance Stock Units. Each PSU will be cancelled and converted into the right to receive a cash payment equal to $136.50 multiplied by the number of shares of WABCO common stock underlying the PSU, with the number of shares determined based on (i) with respect to PSUs with a performance period ending on December 31, 2019, the actual achievement of performance at the effective time and (ii) with respect to all other PSUs, the target level of performance.

Deferred Stock Units. Each DSU will be cancelled and converted into the right to receive a cash payment equal to $136.50 multiplied by the number of shares of WABCO common stock subject to the DSU.

Cash Incentive Awards. Each cash incentive award, except as described below with respect to Mr. Esculier, including annual incentive plan and long-term incentive plan awards, granted pursuant to a company incentive plan will be cancelled and converted into the right to receive a cash payment based on the actual level of achievement of the applicable performance metrics, as determined by the Board or a committee thereof, pro-rated to reflect the period from and including the first day of the applicable performance period through and including the day on which the effective time occurs. Mr. Esculier’s 2018 long-term cash incentive award will vest at the target level of performance upon the occurrence of the effective time.

All amounts payable to the holders of the various equity and cash incentive awards will be paid through the payroll of the surviving corporation or its applicable affiliate. The parties will cooperate in good faith to minimize the tax impact of the treatment described above with respect to equity awards for individuals located outside the United States, provided that such actions do not result in any increased costs or liabilities to WABCO or its subsidiaries.

Exchange Procedures

Prior to the effective time, ZF or Merger Sub will enter into an agreement in form and substance reasonably acceptable to WABCO with a paying agent selected by ZF with WABCO’s prior approval (which approval must not be unreasonably conditioned, withheld or delayed) to act as agent for the payment of the merger consideration to stockholders of WABCO common stock entitled to receive the merger consideration, which we refer to as the paying agent. At the closing and concurrently with the effective time, ZF will deposit, or cause to be deposited, with the paying agent a cash amount in immediately available funds sufficient in the aggregate to provide all funds necessary for the paying agent to make payments under the merger agreement, which such cash we refer to as the exchange fund, in trust for the benefit of all holders of WABCO common stock.

Promptly after the effective time (and in any event within three business days after the effective time), the surviving corporation will cause the paying agent to mail or otherwise provide to each holder of record whose shares of WABCO common stock were converted into the right to receive the merger consideration:

 

   

transmittal materials, including a form of letter of transmittal with customary provisions regarding delivery of an “agent’s message” with respect to shares held in book-entry form; and

 

   

instructions for use in effecting the surrender of the certificates in exchange for the merger consideration.

 

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Upon surrender of a certificate for cancellation to the paying agent in accordance with the terms of the transmittal materials and instructions, the holder of such certificate will be entitled to receive in exchange therefor the amount of cash equal to the merger consideration that such holder has the right to receive, and the certificate so surrendered will be cancelled.

Holders of book-entry shares will not be required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the merger consideration. Instead, each holder of record of one or more book-entry shares entitled to receive the merger consideration will, upon receipt by the paying agent of an “agent’s message” or such other evidence as the paying agent may reasonably require, be entitled to receive a cash amount equal to the merger consideration that such holder has the right to receive.

In the event of a transfer of ownership of WABCO common stock that is not registered in the transfer records of WABCO or if payment of the applicable merger consideration is to be made to a person other than the person in whose name the surrendered certificate or book-entry share is registered, a check for any cash to be exchanged upon due surrender of the certificate or book-entry share may be issued to such transferee or other person if the certificate or book-entry shares formerly representing such shares is presented to the paying agent accompanied by all documents required to evidence the transfer and that any applicable transfer or similar taxes arising as a result of such unregistered have been paid or are not applicable.

No Transfers Following Effective Time

From and after the effective time, the stock transfer books of WABCO will be closed, and there will be no further registration of transfers on the stock transfer books of the surviving corporation of the shares that were outstanding immediately prior to the effective time. If, after the effective time, any certificate or acceptable evidence of a book-entry share is presented to the surviving corporation, ZF or the paying agent for transfer, it will be cancelled and exchanged for the cash amount the holder is entitled to receive.

Termination of Exchange Fund

Any portion of the exchange fund (including the proceeds of any investments thereof) that remains unclaimed by WABCO stockholders for one hundred eighty days after the effective time will be delivered to the surviving corporation. Any holder of shares of WABCO common stock (other than cancelled shares or dissenting shares) who has not complied with the terms and provisions of the merger agreement will thereafter be entitled to look to the surviving corporation for payment of the merger consideration (after giving effect to any required tax withholdings) upon due surrender of its certificates (if any), or affidavits of loss in lieu of the certificates or acceptable evidence of book-entry shares, without any interest thereon in accordance with the exchange procedures. ZF will remain liable for payment of such holders’ claim for the merger consideration payable upon due surrender of their certificates or book-entry shares. Notwithstanding the foregoing, none of the surviving corporation, ZF, WABCO, the paying agent or any other person will be liable to any former holder of shares of WABCO common stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

Lost, Stolen or Destroyed Certificates

If any certificate has been lost, stolen or destroyed, and the claimant makes an affidavit of that fact and, if required by ZF, posts a bond in a customary amount and upon such terms as may be reasonably required by ZF as indemnity against any claim that may be made against it or the surviving corporation, then the paying agent or the surviving corporation will issue a check (after giving effect to any required tax withholdings) for the merger consideration in respect of such lost, stolen or destroyed certificate.

Withholding Rights

Each of ZF, the surviving corporation and the paying agent will be entitled to deduct and withhold from the merger consideration and any other amounts payable pursuant to the merger agreement (including amounts

 

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payable to any holder of WABCO common stock, stock options, RSUs, PSUs or DSUs) such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code or any provision of state, local or foreign tax law.

Appraisal Rights

Any dissenting shares will not be converted into the right to receive the merger consideration. Instead, the holders of such dissenting shares will be entitled to such rights as are granted by Section 262 of the DGCL, unless and until any such holder fails to perfect, withdraws or otherwise loses such holder’s appraisal rights under the DGCL with respect to such shares or if a court of competent jurisdiction determines that such holder is not entitled to the relief provided by Section 262 of the DGCL, in which case, such shares of WABCO common stock will be treated as if they had been converted as of the effective time into the right to receive the merger consideration upon surrender of such certificates that formerly represented such shares of WABCO common stock. Each holder of dissenting shares will be entitled to receive only the payment provided by Section 262 of the DGCL with respect to the dissenting shares. WABCO has agreed to provide ZF prompt notice of any written demands received by WABCO for appraisal of shares of WABCO common stock, any attempted withdrawal of any such demand and any other instruments delivered to WABCO prior to the effective time pursuant to the laws of the State of Delaware that relates to such demand, and ZF will have the opportunity and right to participate in negotiations and proceedings with respect to any demand for appraisal under the DGCL. WABCO has agreed not to make any payment with respect to any demands for appraisal, or offer to settle or settle any such demands, in each case without the prior written consent of ZF, except as required under applicable law.

Representations and Warranties

The merger agreement contains a number of representations and warranties made by ZF, WABCO and Merger Sub that are subject in certain cases to exceptions and qualifications, including material adverse effect qualifications. Please see the definition of material adverse effect in this section beginning on page 69. The representations and warranties of WABCO in the merger agreement relate to, among other things:

 

   

due organization, valid existence, good standing and qualification to do business;

 

   

subsidiaries;

 

   

the capitalization, including the number of shares of WABCO common stock, options and other stock-based awards outstanding and ownership of subsidiaries;

 

   

the valid issuance and authorization of the capital stock of WABCO and its subsidiaries and the absence of restrictions with respect thereto;

 

   

corporate authorization of the merger agreement and the transactions contemplated by the merger agreement and the valid and binding nature of the merger agreement;

 

   

the approval and recommendation by the Board of the merger agreement and the transactions contemplated by the merger agreement;

 

   

the absence of any conflicts with or violations of organizational documents and other agreements or laws;

 

   

required filings with, and consents from, governmental entities in connection with the transactions contemplated by the merger agreement;

 

   

compliance with applicable laws, the possession of required permits necessary for the conduct of WABCO’s business and absence of governmental investigations;

 

   

compliance with SEC filing requirements, including the accuracy of the information contained in such documents and compliance with GAAP, and the rules and regulations of the SEC with respect to consolidated financial statements contained therein;

 

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absence of undisclosed liabilities;

 

   

internal controls and disclosure controls and procedures relating to financial reporting;

 

   

material contracts;

 

   

the absence of certain material changes or events in WABCO’s business, including that, from December 31, 2018 to the date of the merger agreement, there has not been a material adverse effect;

 

   

absence of litigation;

 

   

employee benefit plans;

 

   

labor and employment matters;

 

   

insurance matters;

 

   

real and personal properties;

 

   

tax matters;

 

   

intellectual property and information technology;

 

   

environmental matters;

 

   

regulatory matters, including compliance with (i) anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act of 1977 and the U.K. Bribery Act 2010 and (ii) economic sanctions and trade laws;

 

   

the delivery of Goldman Sachs’ opinion to the Board as to the fairness, from a financial point of view, of the merger consideration to be received by the holders of WABCO common stock pursuant to the merger agreement;

 

   

the absence of any undisclosed brokers’ fees;

 

   

inapplicability of anti-takeover statutes;

 

   

customer and supplier relationships;

 

   

the quality and safety of products; and

 

   

privacy and data protection matters.

The representations and warranties of ZF and Merger Sub in the merger agreement relate to, among other things:

 

   

due organization, valid existence, good standing and qualification to do business;

 

   

corporate authorization of the merger agreement and the transactions contemplated by the merger agreement and the valid and binding nature of the merger agreement;

 

   

the absence of any conflicts with or violations of organizational documents and other agreements or laws;

 

   

required filings with, and consents from, governmental entities in connection with the transactions contemplated by the merger agreement;

 

   

absence of litigation;

 

   

operations and ownership of Merger Sub;

 

   

the absence of any undisclosed brokers’ fees;

 

   

financing;

 

   

no ownership of WABCO shares;

 

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solvency; and

 

   

access to information.

Certain of the representations and warranties made by ZF, WABCO and Merger Sub are qualified as to knowledge, materiality or a material adverse effect, as applicable. For purposes of the merger agreement, a material adverse effect means any event, development, change, effect or occurrence that, individually or in the aggregate with all other events, developments, changes, effects or occurrences, has a material adverse effect on or with respect to the business, results of operations or financial condition of WABCO and its subsidiaries taken as a whole. However, certain events, developments, changes, effects or occurrences are excluded from the determination of whether or not a material adverse effect has occurred, including:

(i) general changes or developments in the economy or the financial, debt, capital, credit or securities markets (including any disruption thereof and any decline in the price of any security or any market index) in the United States or elsewhere in the world, including as a result of changes in geopolitical conditions;

(ii) general changes or developments in the industries in which WABCO or its subsidiaries operate, including changes in relevant commodity pricing;

(iii) the execution and delivery of the merger agreement or the public announcement or pendency of the merger or other transactions contemplated by the merger, including any impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, lenders, partners or employees of WABCO and its subsidiaries, or the performance of the merger agreement and the transactions contemplated thereby, including compliance with the covenants set forth herein and any action taken or omitted to be taken by WABCO at the request of or with the consent of ZF or Merger Sub;

(iv) any actions required under the merger agreement to obtain any approval or authorization under applicable antitrust or competition or other laws, including CFIUS clearance, for the consummation of the merger;

(v) changes or prospective changes in any applicable laws or regulations or applicable accounting regulations or principles or interpretation thereof;

(vi) any hurricane, tornado, earthquake, flood, tsunami or other natural disaster or outbreak or escalation of hostilities or war (whether or not declared), military actions or any act of sabotage, terrorism or any change in general national or international political or social conditions;

(vii) any change in the price or trading volume of common shares or the credit rating of WABCO;

(viii) changes required by GAAP or other accounting standards (or interpretations thereof);

(ix) any legal proceeding arising from or relating to the merger agreement, the merger or any strategic alternatives considered by WABCO; or

(x) any failure by WABCO to meet any published analyst estimates or expectations of WABCO’s revenue, earnings or other financial performance or results of operations for any period, or any failure by WABCO to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations.

However, any exception described in the first, second, fifth or sixth clause above will not apply to the extent that WABCO and its subsidiaries, taken as a whole, are materially and disproportionately affected as compared with other participants in the industries in which WABCO and its subsidiaries operate (in which case solely the incremental disproportionate impact or impacts may be taken into account in determining whether there has been a material adverse effect).

In addition, the exceptions described in the seventh and tenth clauses above will not affect a determination that any events, developments, changes, effects or occurrences underlying such changes or failures constitute or contribute to a material adverse effect.

 

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In addition, the exception described in the third clause above will not apply with respect to references to material adverse effect in those portions of the representations and warranties contained in the absence of conflicts or violations representation.

None of the representations and warranties contained in the merger agreement survive the consummation of the merger.

Conduct of Business Pending the Merger

WABCO is subject to customary interim operating covenants between the date of the merger agreement until the earlier of the effective time and the termination of the merger agreement, subject to certain exceptions and limitations. WABCO and its subsidiaries have agreed to use commercially reasonable efforts to conduct the business of WABCO and its subsidiaries in the ordinary course of business consistent with past practice and WABCO will use its commercially reasonable efforts, and will cause its subsidiaries to use their respective commercially reasonable efforts, to preserve substantially intact their respective existing relations and goodwill with governmental entities, customers, suppliers, distributors, creditors, lessors and employees.

In addition, subject to the exceptions in the merger agreement or unless consented to in writing by ZF (such consent not to be unreasonably withheld, conditioned or delayed), neither WABCO nor any of its subsidiaries will:

 

   

amend or otherwise change its certificate of incorporation or bylaws or other applicable governing instruments, in the case of subsidiaries, in any material respect;

 

   

make any acquisition of (whether by merger, consolidation, acquisition of stock or assets or otherwise), or make any investment in any interest in, any assets or any person (other than wholly owned subsidiaries of WABCO or pro rata investments in the ordinary course of business in non-wholly owned subsidiaries or joint ventures of WABCO), in each case, except for (i) purchases of inventory and other assets in the ordinary course of business or pursuant to an existing contract or (ii) acquisitions of or investments in suppliers that do not exceed $10,000,000 in the aggregate in purchase price and assumed indebtedness in the case of any individual supplier;

 

   

issue, sell, or dispose of (or authorize the issuance, sale or disposition of), any shares of capital stock, ownership interests or voting securities, or any options, warrants, convertible securities or other rights of any kind to acquire or receive any shares of capital stock, any other ownership interests or any voting securities (including stock appreciation rights, phantom stock or similar instruments), of WABCO or any of its subsidiaries (except for (i) awards under the company incentive plans, as permitted by the merger agreement, (ii) issuances of shares as required to be issued upon exercise or settlement of company equity awards under any company incentive plan which are outstanding as of the date of the merger agreement and (iii) any issuance, sale or disposition to WABCO or a wholly owned subsidiary of WABCO by any subsidiary of WABCO);

 

   

reclassify, combine, split, subdivide, redeem, purchase or otherwise acquire any shares of capital stock of WABCO (except (i) for the exercise and settlement of outstanding company equity awards under any company incentive plan or (ii) in connection with the final settlement of a share repurchase program in effect as of the date of the merger agreement), or reclassify, combine, split or subdivide any capital stock or other ownership interests of any of WABCO’s subsidiaries;

 

   

create or incur any lien, other than liens permitted under the merger agreement, liens securing indebtedness permitted pursuant to the merger agreement, or other liens on any assets of WABCO or its subsidiaries which other liens, in the aggregate, would be immaterial in scope and amount;

 

   

make any loans or advances to any person (other than wholly owned subsidiaries of WABCO or pro rata loans or pro rata advances in the ordinary course of business to non-wholly owned subsidiaries and joint ventures of WABCO) other than to suppliers in the ordinary course of business not in excess of $10,000,000 in the case of any individual supplier;

 

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sell or otherwise dispose of (whether by merger, consolidation or disposition of stock or assets or otherwise) any assets or any corporation, partnership or other business organization or division thereof or otherwise sell, assign, exclusively license, allow to expire, or abandon or dispose of any assets, rights or properties other than (i) sales, dispositions or licensing of equipment, tooling and/or inventory and other assets in the ordinary course of business or pursuant to an existing contract or (ii) other sales, assignments, non-exclusive licenses, expirations or dispositions of assets, rights or properties of WABCO or any subsidiary of WABCO with a value of less than $25,000,000 in the aggregate;

 

   

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 any dividend or distribution (i) by a subsidiary of WABCO to WABCO or a wholly owned subsidiary of WABCO or (ii) in the ordinary course, by a joint venture governed by a contract listed on the confidential disclosure schedule to a subsidiary of WABCO and the relevant third-party partner in such joint venture; provided that such distribution or dividend is paid pro rata based on each such person’s ownership interest in such joint venture) or otherwise pursuant to the joint venture contract governing the terms of such distributions;

 

   

commit, make or authorize any capital expenditures in excess of $50,000,000 in the aggregate during any 12-month period, except as set forth in the budget set forth in the confidential disclosure schedule; provided that any expenditures individually in excess of $5,000,000 and not set forth on such budget may be committed, made or authorized only after reasonable consultation with ZF;

 

   

other than in the ordinary course of business or as required by law, extend, modify or fail to perform the terms of any material contract in any material respect or terminate any material contract;

 

   

enter into any contract that would have been a material contract had it been entered into prior to the date of the merger agreement, other than contracts with customers or suppliers in the ordinary course of business or contracts the subject matter of which is expressly permitted pursuant to another exception or qualification to the merger agreement;

 

   

except for (i) borrowings under WABCO’s and its subsidiaries’ existing credit facilities and (ii) borrowings under new credit facilities (so long as the aggregate amount of indebtedness described in the foregoing clause (i) and this clause (ii) does not at any time exceed $1,500,000,000); provided that, such new credit facilities will be on terms no less favorable to WABCO and its subsidiaries in the aggregate than the existing credit facilities and will not include any premium or penalty upon repayment thereof (other than customary interest breakage costs for prepayments during an interest period) and (iii) intercompany loans between WABCO and any of its wholly owned subsidiaries or between any wholly owned subsidiaries, incur indebtedness for borrowed money in excess of $25,000,000, or modify in any material respect in a manner adverse to WABCO the terms of any such indebtedness for borrowed money, or assume, guarantee or endorse the obligations of any person (other than a subsidiary of WABCO), in each case, in excess of $25,000,000, other than (a) in replacement of existing indebtedness for borrowed money on terms substantially consistent with or more beneficial than the indebtedness being replaced and not in an aggregate principal amount of the indebtedness being refinanced, (b) guarantees by WABCO of indebtedness of subsidiaries of WABCO incurred in compliance with the merger agreement by WABCO or (c) any commodity, currency, sale or hedging agreements which can be terminated on or sold with ninety days’ or less notice, without penalty (which, for the avoidance of doubt, will not include customary settlement costs), entered into in the ordinary course of business for bona fide risk mitigation purposes and not for speculative purposes;

 

   

adopt, amend, modify or terminate any material company plan except as required by the terms of a contract or company plan disclosed on the confidential disclosure schedule;

 

   

increase the compensation and benefits payable or to become payable to any current or former employee of WABCO or its subsidiaries (other than officers or directors), provided, however, that for each calendar year WABCO will be permitted to increase compensation and benefits for such employees, subject to certain exceptions;

 

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increase the compensation or benefits payable or to become payable to any current or former director, officer or employee of WABCO or its subsidiaries, except for (i) grants of equity awards, subject to certain exceptions, and (ii) merit or promotion-based increases in base salary or grants or payments of bonus awards in the ordinary course of business consistent with past practice except as required by the terms of a contract or company plan disclosed on the confidential disclosure schedule;

 

   

grant or increase any severance or termination pay not provided for under any company plan (except in the ordinary course of business consistent with past practice with respect to employees who are not directors or executive officers) except as required by the terms of a contract or company plan disclosed on the confidential disclosure schedule;

 

   

terminate (other than for cause) any individual who is a participant in the change of control severance plan;

 

   

enter into any employment, consulting or individual severance agreement or arrangement with any of its present or former directors, officers or other employees, except for offers of employment or new consulting arrangements (and severance agreements or arrangements with such newly hired individuals) (i) with employees or consultants who are not directors or officers or (ii) in connection with a replacement hiring or promotion of an employee, in each case in the ordinary course of business consistent with past practices, except as required by the terms of a contract or company plan disclosed on the confidential disclosure schedule;

 

   

enter into any pension indemnification agreement related to certain pension plans;

 

   

other than in the ordinary course of business or as required by applicable law, enter into or amend in any material respect any material collective bargaining agreement with any labor organization or other representative of any WABCO employees;

 

   

other than litigation related to the merger agreement, settle or compromise any material litigation, other than settlements or compromises of litigation where the amount paid does not exceed $10,000,000 individually or $20,000,000 in the aggregate;

 

   

make any material change to any method of financial or tax accounting (other than as required by applicable law or GAAP, or as required to conform to any changes in statutory or regulatory accounting rules);

 

   

surrender any material claim for a refund of taxes, amend any material tax return or enter into any agreement (including a settlement agreement with a tax authority) materially affecting taxes; or

 

   

agree, authorize or commit to do any of the foregoing actions described above.

Additional Agreements

No Solicitation

As of the date of the merger agreement, WABCO agreed to, and to cause its subsidiaries and its and their representatives, to, immediately cease and cause to be terminated any solicitations, discussions or negotiations or other activities with any person (other than ZF or Merger Sub) in connection with an acquisition proposal. WABCO has also agreed to promptly request that each person (other than ZF or Merger Sub) that, prior to the execution of the merger agreement, executed a confidentiality agreement in connection with its consideration of an acquisition proposal promptly return or destroy all confidential information that was furnished to such person.

WABCO has also agreed that it will not, and will cause its subsidiaries, directors, officers and employees not to, and will direct and use its reasonable best efforts to cause the representatives of WABCO and its subsidiaries, not to, directly or indirectly:

 

   

initiate, solicit or knowingly encourage or otherwise knowingly facilitate any inquiries with respect to, or the making of, any acquisition proposal or any offer or proposal that could reasonably be expected to lead to an acquisition proposal;

 

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engage, continue or otherwise participate in any negotiations or discussions concerning, or provide access to properties, books and records or any confidential information or data to, any person relating to an acquisition proposal or any offer or proposal that could reasonably be expected to lead to an acquisition proposal;

 

   

approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any acquisition proposal;

 

   

execute or enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement or other similar agreement relating to any acquisition proposal or enter into any agreement or agreement in principle requiring WABCO to abandon, terminate or fail to consummate the transactions contemplated by the merger agreement or breach its obligations under the merger agreement;

 

   

amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of WABCO or any of its subsidiaries;

 

   

approve any transaction under, or any third party becoming an “interested stockholder” under, Section 203 of the DGCL other than in connection with a change of recommendation (see the section entitled “Terms of the Merger Agreement—Additional Agreements—Change of Recommendation” beginning on page 74) or termination of the merger agreement permitted pursuant to the merger agreement; or

 

   

resolve or agree to do any of the foregoing actions.

An “acquisition proposal” means any proposal or offer from any person or group of persons (other than ZF, Merger Sub or their respective affiliates) relating to:

 

   

any merger, consolidation, dissolution, liquidation, recapitalization, reorganization, spin off, share exchange, business combination, purchase, or similar transaction involving WABCO that would result in any person or “group” beneficially owning 20% or more of the outstanding equity interests of WABCO or any successor or parent company thereto;

 

   

any sale, contribution or other disposition, directly or indirectly (including by way of merger, consolidation, share exchange, other business combination, partnership, joint venture, sale of capital stock of or other equity interests in a WABCO subsidiary or otherwise) of any business or assets of WABCO or the subsidiaries of WABCO representing 20% or more of the consolidated revenues, net income or assets of WABCO and its subsidiaries, taken as a whole;

 

   

any issuance, sale or other disposition, directly or indirectly, to any person (or the stockholders of any person) or “group” of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing 20% or more of the voting power of WABCO;

 

   

any transaction in which any person (or the stockholders of any person) will acquire, directly or indirectly, beneficial ownership, or the right to acquire beneficial ownership, or formation of any group which beneficially owns or has the right to acquire beneficial ownership of, 20% or more of the common stock or securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing 20% or more of the voting power of WABCO; or

 

   

any combination of the foregoing (in each case, other than the merger or the other transactions contemplated by the merger agreement).

Notwithstanding the restrictions described above, under certain circumstances prior to obtaining the stockholder approval at the special meeting, WABCO is permitted to furnish information with respect to WABCO and its subsidiaries subject to a confidentiality agreement and engage in negotiations or discussions with a person and its respective representatives that has made a bona fide acquisition proposal that was not initiated, solicited, encouraged or facilitated in violation of the merger agreement in any material respect (including the non-solicitation restrictions described above) if the Board determines in good faith, after

 

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consultation with its outside legal counsel and financial advisor, that such acquisition proposal could reasonably be expected to constitute, result in or lead to a superior proposal, and which acquisition proposal did not result from a breach of the merger agreement.

In response to any inquiries, proposals or offers, any requests for information or any requests for discussions or negotiations with WABCO or any of its representatives with respect to an acquisition proposal (or any offer or proposal that could reasonably be expected to lead to an acquisition proposal), WABCO must promptly (and in any event within twenty-four hours of (i) WABCO (or any of its directors or officers) obtaining knowledge thereof or (ii) WABCO obtaining knowledge of such receipt by any other representative) notify ZF orally and in writing, and include a summary of the material terms of and the identity of the person making such acquisition proposal (including, if applicable, copies of any such written requests, proposals or offers, including proposed agreements) and keep ZF informed, on a reasonably current basis, of any material developments related to the terms, conditions and process associated with such proposals and offers.

A “superior proposal” means an acquisition proposal (with all of the percentages included in the definition of acquisition proposal increased to 50%) that the Board in good faith determines (after consultation with its outside legal counsel and financial advisor) to be more favorable from a financial point of view to WABCO stockholders than the transactions contemplated by the merger agreement, in each case after taking into account all such factors and matters deemed relevant in good faith by the Board, including legal, financial (including the financing terms of any such proposal), regulatory, timing or other aspects of such proposal and the transactions contemplated by the merger agreement and after taking into account any changes to the terms of the merger agreement irrevocably proposed in writing by ZF in response to such superior proposal pursuant to, and in accordance with, the terms and provisions of the merger agreement.

Change of Recommendation

As described under the section entitled “The Special Meeting—Board of Directors’ Recommendation” beginning on page 27, the Board has recommended that the holders of WABCO common stock vote “FOR” the merger proposal. WABCO has agreed that the Board will not withdraw, modify or change its recommendation (or formally resolve to effect or publicly propose to effect any of the foregoing), subject to certain exceptions. If the Board withdraws, modifies or changes its recommendation (or formally resolves to effect or publicly proposes to effect any of the foregoing), it constitutes a change of recommendation, and following such change of recommendation, WABCO will no longer be obligated to use its reasonable best efforts to obtain the stockholder approval (including no longer being obligated to actively solicit proxies necessary to obtain the stockholder approval provided that WABCO must provide ZF with information about cooperation to permit ZF to solicit such proxies). Notwithstanding the foregoing, unless the merger agreement is terminated, WABCO must take all reasonable action necessary to duly call, give notice of, convene and hold the special meeting following a change of recommendation by the Board.

The Board may effect a change of recommendation only if either (i) an unsolicited bona fide acquisition proposal, subject to meeting the additional requirements and following the procedures described below, that did not arise out of or result from a breach of the non-solicitation obligations described above, is made to WABCO and the Board determines in good faith, after consultation with its outside legal counsel and financial advisor, that such acquisition proposal constitutes a “superior proposal” or (ii) there exists an intervening event that was not known by the Board (or, if known, the consequences of which were not known or reasonably foreseeable) as of the date of the merger agreement and, in each case of clauses (i) and (ii) above, the Board determines in good faith after consultation with its outside legal counsel that the failure of the Board to effect a change of recommendation would be inconsistent with its fiduciary duties.

 

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However, at any time prior to obtaining the stockholder approval at the special meeting, the Board may, in response to a superior proposal described in clause (i) above, effect a change of recommendation or terminate the merger agreement to enter into an acquisition proposal that constitutes a superior proposal, provided that the following actions are taken:

 

   

the Board determines in good faith after consultation with its outside legal counsel and financial advisor that such acquisition proposal constitutes a superior proposal and with outside legal counsel that the failure of the Board to effect a change of recommendation would be inconsistent with its fiduciary duties;

 

   

WABCO delivers written notice to ZF advising ZF that WABCO proposes to take such action, which notice must include the material terms and conditions of the superior proposal (including the identity of the third party making such superior proposal and copies of any written proposals or offers, including proposed agreements);

 

   

at or after 5:00 p.m., New York City time, on the fifth business day immediately following the date WABCO provided notice to ZF, which we refer to as the notice period, the Board (or a committee thereof) reaffirms in good faith after consultation with its outside counsel and financial advisor that such acquisition proposal continues to constitute a superior proposal;

 

   

if requested by ZF, during the notice period, WABCO engages, and causes its representatives to engage, in good faith negotiations with ZF and its representatives to make adjustments in the terms of the merger agreement such that the superior proposal would no longer constitute a superior proposal; and

 

   

WABCO also agrees to promptly notify ZF if it determines during the notice period not to terminate the merger agreement and enter into a definitive agreement regarding such superior proposal.

Notwithstanding the foregoing, any material amendment to the terms of a proposed agreement relating to a superior proposal is considered a new proposal, including with respect to the notice period, and WABCO must follow the above requirements set forth above with respect to such new proposal, except that the five business day notice period will be reduced to a three business day period (but will, in no event, shorten the original notice period).

At any time prior to obtaining the stockholder approval at the special meeting, the Board may, in response to an intervening event described in clause (ii) above, propose to change its recommendation based on such intervening event, provided that:

 

   

the Board determines in good faith after consultation with its outside legal counsel that the failure of the Board to effect a change of recommendation would be inconsistent with its fiduciary duties; and

 

   

WABCO delivers written notice to ZF informing ZF that WABCO proposes to take such action and the basis of the proposed action no less than three business days before taking such action.

Efforts to Obtain Required Stockholder Approvals

Unless the merger agreement has been earlier terminated, including pursuant to WABCO’s right to terminate the merger agreement to enter into an agreement with respect to a superior proposal (see the section entitled “Terms of the Merger Agreement—Additional Agreements—Change of Recommendation” beginning on page 74), WABCO, acting through the Board (or a committee thereof), has agreed to, as soon as reasonably practicable, following confirmation by the SEC that the SEC has no further comments on this proxy statement, take all reasonable action necessary to duly call, give notice of, convene and hold the special meeting for the purpose of adopting the merger agreement and will not postpone, recess or adjourn such meeting; however, in no event is WABCO required to give notice of the special meeting prior to May 23, 2019 or hold the special meeting prior to June 27, 2019.

 

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However, WABCO may postpone, recess or adjourn the special meeting:

 

   

to the extent required by applicable law;

 

   

to allow reasonable additional time to solicit additional proxies to the extent WABCO reasonably believes necessary in order to obtain the stockholder approval;

 

   

if as of the time for which the special meeting is originally scheduled (as set forth in this proxy statement), there are insufficient shares of WABCO common stock present (either in person or by proxy) and voting to constitute a quorum necessary to conduct the business of the special meeting; or

 

   

to allow reasonable additional time for the filing and dissemination of any supplemental or amended disclosure which the Board has determined in good faith after consultation with outside counsel is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by WABCO stockholders prior to the special meeting to the extent so determined to be necessary.

However, the special meeting may not be postponed, recessed or adjourned to a date that is more than forty-five days after the date on which the special meeting was originally scheduled without the prior written consent of ZF.

Unless the Board has made a change of recommendation, the Board is required to recommend in this proxy statement that WABCO stockholders vote in favor of the adoption of the merger agreement.

Efforts to Complete the Merger

General

WABCO and ZF have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the merger and the other transactions contemplated by the merger agreement, including effecting (within the time limits set forth in the merger agreement) the regulatory filings and obtaining clearances in the U.S. (including pursuant to the HSR Act and Section 721 of Title VII of the DPA), the EU, Brazil, China, India, Japan, Russia, Serbia, South Africa, South Korea and Turkey as described under “The Merger—Regulatory Approvals” beginning on page 60.

Subject to the terms and conditions of the merger agreement, each party has agreed to use its reasonable best efforts to (and, in the case of ZF, cause each of its subsidiaries to) take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the merger and the other transactions contemplated by the merger agreement. In furtherance and not in limitation of the foregoing, each party agrees to (i) make an appropriate filing of a notification and report form pursuant to the HSR Act with respect to the merger and the other transactions contemplated by the merger agreement as promptly as practicable and to supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to take all other actions necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under the HSR Act as promptly as reasonably practicable, (ii) perform certain actions with respect to CFIUS and (iii) make any filings, notifications or reports required, or where reasonably practicable informal pre-notification contacts, in connection with the applicable non-U.S. antitrust laws with respect to the merger and the other transactions contemplated by the merger agreement as promptly as reasonably practicable after the date of the merger agreement and take all other actions necessary, proper or advisable to cause the expiration or termination of any applicable waiting periods or the receipt, issuance or publication of any decision, decree, order, ruling, judgment or notice required under such non-U.S. antitrust laws to permit consummation of the merger and the other transactions contemplated by the merger agreement as promptly as reasonably practicable after the date of the merger agreement.

 

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Each party to the merger agreement will (and will cause its subsidiaries to) (i) reasonably cooperate with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (ii) keep the other parties reasonably informed of any communication received by such party from, or given by such party to, the FTC, the DOJ or any other U.S. or non-U.S. governmental entity and of any communication received or given in connection with any proceeding by a private party, in each case, regarding any of the transactions contemplated by the merger agreement and (iii) permit the other party to review any communication given by it to, and reasonably consult with each other in advance of any communication, meeting or conference with, the FTC, the DOJ or any other governmental entity or, in connection with any proceeding by a private party, with any other person, and to the extent permitted by the FTC, the DOJ or such other applicable governmental entity or other person, give the other party the opportunity (including by providing reasonable advance notice) to attend and participate in such meetings, conferences and other communications (including, to the extent reasonably practicable, substantive telephone calls and video conferences).

Each party will (and will cause its affiliates to) use its respective reasonable best efforts to obtain CFIUS clearance. Such reasonable best efforts include, without limitation:

 

   

within twenty-five business days after the date of the merger agreement, unless otherwise agreed by the parties, (i) engaging in the pre-notice consultation process with CFIUS and (ii) submitting a draft notice to CFIUS, in accordance with the DPA, of the transactions contemplated by the merger agreement;

 

   

as promptly as practicable and, in any event, within ten business days after receipt by the parties of CFIUS notification (including by telephone or by email) that CFIUS has no further comment on the draft notice, filing with CFIUS a final notice of the transactions contemplated by the merger agreement in accordance with the DPA;

 

   

promptly and, in all events, within the timeframes set forth in the DPA, providing any information requested by CFIUS or any other agency or branch of the U.S. government in connection with the CFIUS assessment, review or investigation of the transactions contemplated by the merger agreement;

 

   

cooperating with each other in connection with any filing or other information submitted to CFIUS (including, to the extent permitted by applicable law, providing copies, or portions thereof, of all such documents to the non-filing parties prior to filing and considering all reasonable additions, deletions or changes suggested in connection therewith);

 

   

furnishing to each other party all information required for any filing or other information submitted to CFIUS pursuant to the DPA and promptly informing the other parties of any oral communication with, and provide copies of written communications with, any governmental entity regarding any such filings, to the extent permitted by applicable law; and

 

   

taking such actions and agreeing to such conditions to mitigate any national security concerns as may be requested or required by CFIUS in connection with, or as a condition of, obtaining CFIUS clearance; provided, however that neither party shall be required to agree to any term or take any action in connection with obtaining the CFIUS clearance that (i) is not conditioned upon consummation of the merger or (ii) would reasonably be expected to have a material adverse effect on the business of WABCO and its subsidiaries, taken as a whole.

If any objections are asserted or any administrative or judicial action or proceeding is instituted (or threatened to be instituted) with respect to the merger or the transactions contemplated by the merger agreement in connection with any antitrust law or non-U.S. national security or foreign ownership laws or if any suit is instituted or a decision, order or injunction (whether preliminary, temporary or permanent) is issued (or threatened to be instituted or issued) by the FTC, the DOJ or any other applicable governmental entity or any private party challenging or objecting to any of the transactions contemplated by the merger agreement, each of the parties will cooperate reasonably with each other and use reasonable best efforts to contest, resist, defend and

 

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take any and all such further actions required to resolve any such objections or suits or prevent the issuance of any such decisions or orders so as to permit consummation of the transactions contemplated by the merger agreement as promptly as reasonably practicable, including by committing to or effecting, by consent decree, hold separate orders, trust, or otherwise, the sale or disposition of such assets or businesses as are required to be divested in order to avoid the entry of, or to effect the dissolution of or vacate or lift, any order that would otherwise have the effect of preventing or materially delaying the consummation of the transactions contemplated by the merger agreement as promptly as practicable. Notwithstanding the foregoing, neither party is required to commit, agree or submit to any action, term or condition that is not a closing condition and, except with respect to the divestiture of the specified business, neither ZF nor Merger Sub is required to take any action or consent to the taking of any action if such action would result in, or reasonably be expected to result in, individually or in the aggregate, a material adverse effect on ZF, WABCO and their respective subsidiaries, taken as a whole, after giving effect to the merger, nor will they or any of their affiliates be required to sell, transfer, license, hold separate or otherwise dispose or divest all or any portion of, or certain assets primarily related to, specific product lines or business divisions, which we refer to as the parent retained business.

Divestiture of the Specified Business

WABCO and ZF will work together and use their reasonable best efforts to cause WABCO to divest the specified business on terms and conditions that have been approved in advance and in writing by ZF. Both parties will use their reasonable best efforts to (i) propose, negotiate, commit to and effect, by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of the specified business and (ii) create or terminate relationships, ventures, contractual rights or obligations of WABCO or its subsidiaries related to the specified business, in each case, as may be required in order to obtain all required actions or nonactions, waivers, authorizations, expirations or terminations of waiting periods, clearances, consents and approvals for such divestiture. At ZF’s request, WABCO will, and will cause its subsidiaries and representatives to, reasonably cooperate with and assist ZF and its representatives in connection with the potential sale, divestiture or disposition of the specified business, including by taking certain specified actions with respect thereto.

Employee Matters

Continuing Employee Benefits. Employees of WABCO and its subsidiaries who continue employment with ZF after the effective time, who we refer to as continuing employees, will be provided with, for twenty-four months after the effective time, (i) at least the same base salary and wage rate as provided immediately prior to the effective time, (ii) incentive compensation opportunities (including annual and long-term incentive cash awards, but excluding equity awards) that are no less favorable in the aggregate than the incentive compensation opportunities (excluding equity awards) provided to each such continuing employee prior to the effective time and (iii) employee benefits which are no less favorable in the aggregate (including with respect to the proportion of employee cost) to the employee benefits provided to such continuing employee immediately prior to the effective time.

For twenty-four months after the effective time, ZF will provide continuing employees severance payments and benefits, upon a termination of employment, no less favorable than those that would be provided to such continuing employees immediately to the effective time or, if greater, the severance payments and benefits provided to similarly situated employees of ZF and its subsidiaries.

Employee Benefit Plan Participation. For all purposes (including eligibility, vesting and level of benefits, except for defined benefit plan pension accruals or other post-employment benefits) of the employee benefit plans of ZF and its subsidiaries that continuing employees become eligible to participate in after the effective time, which we refer to as new plans, each continuing employee will be credited for years of service with WABCO and its subsidiaries (and their respective predecessors) before the effective time, which we refer to as old plans, to the same extent such continuing employee was credited with such service under any employee benefit plan of WABCO or its subsidiaries, provided that such credit does not result in any duplication of

 

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benefits. In addition, each continuing employee will, upon the effective time, become immediately eligible to participate, without any waiting time, in any and all new plans to the extent coverage under a new plan is replacing comparable coverage under an old plan that the continuing employee participated in immediately prior to the effective time. For purposes of each new plan that provides medical, dental, pharmaceutical or vision benefits to any continuing employee, ZF will cause or use commercially reasonable efforts to cause all pre-existing condition exclusions and actively-at-work requirements to be waived for the continuing employee and their dependents, to the extent such conditions were inapplicable or waived under the comparable old plans the continuing employee participated in immediately prior to the effective time and, any eligible expenses under an applicable old plan to be taken into account for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such continuing employee and their dependents for the applicable plan year.

Non-Company Incentive Plan Cash Bonus Treatment. Unless otherwise provided in a collective bargaining agreement, WABCO may, prior to the effective time, pay annual cash bonuses (other than cash bonuses awarded under the company incentive plans, which will be treated upon the effective time as described in “Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Treatment of Equity and Cash Incentive Compensation” beginning on page 64) at the greater of the target or actual level of performance, pro-rated for the number of days in the applicable performance period that have elapsed up to and including the date on which the effective time occurs.

Collective Bargaining Agreements. ZF will cause the surviving corporation to honor the terms of each collective bargaining or other labor agreement to which WABCO or any of its subsidiaries is a party to as of the effective time, until such time that the applicable agreement expires or is otherwise modified by the parties thereto.

Equity Replacement Program with ZF. In addition to the benefits described in this section above, and in place of the equity-based component of compensation provided by WABCO immediately prior to the effective time, ZF has agreed to establish, promptly after the effective time, a cash-based retention program for the benefit of certain WABCO employees, including WABCO executive officers. Awards under the equity replacement program will consist of cash-based grants equal to two times the value of the target equity compensation award for the applicable employee for 2019, and, if the effective time has not occurred as of January 1, 2020, for 2020. Awards will vest in full on the second anniversary of the effective time, subject to continued service through that date, or, if earlier, upon a termination of employment by ZF, the surviving corporation or their respective subsidiaries without cause, resignation by the employee for good reason, or upon death or disability.

Directors’ and Officers’ Indemnification and Insurance

The merger agreement requires, from and after the effective time, each of ZF and the surviving corporation will indemnify and hold harmless each present and former director and officer of WABCO and its subsidiaries (in each case, when acting in such capacity), determined as of the effective time, against any costs or expenses (including reasonable attorneys’ fees and disbursements), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding, litigation, arbitration, hearing or investigation, whether civil, criminal, administrative or investigative and whether formal or informal, arising out of matters existing or occurring at or prior to the effective time, to the fullest extent that WABCO and its subsidiaries would have been permitted under Delaware law and its organizational documents in effect on the date of execution of the merger agreement, subject to certain limitations. In addition, from and after the effective time, the surviving corporation will maintain in effect provisions in the surviving corporation’s organizational documents related to indemnification, advancement of expenses and exculpation of former or present directors and officers that are no less favorable than those provisions set forth in WABCO’s organizational documents in effect on the date of the merger agreement.

The merger agreement also requires ZF to cause the surviving corporation to maintain in effect for six years from the effective time, WABCO’s current directors’ and officers’ liability insurance policies covering acts or

 

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omissions occurring prior to or at the effective time; provided however that in no event will ZF be required to expend more than an amount per year equal to 300% of current annual premiums paid by WABCO for such insurance.

Other Covenants and Agreements

The merger agreement contains certain other covenants and agreements, including covenants relating to, among other things:

 

   

preparation by WABCO of this proxy statement;

 

   

WABCO and ZF providing each other with certain notices received by either WABCO or ZF from any governmental entity or certain persons in connection with the merger, the merger agreement or the transactions contemplated by the merger agreement;

 

   

confidentiality of and access by ZF to certain information about WABCO;

 

   

WABCO’s cooperation with ZF and use of reasonable efforts to cause WABCO common stock to be delisted from the NYSE as promptly as practicable following the effective time;

 

   

consultation between ZF and WABCO in connection with public statements with respect to the transactions contemplated by the merger agreement, subject to certain exceptions and limitations;

 

   

the treatment of employee matters of WABCO, which is described in the section entitled “Terms of the Merger Agreement—Employee Matters” beginning on page 78;

 

   

ZF and Merger Sub using their respective reasonable best efforts to arrange the financing contemplated by the financing commitments;

 

   

WABCO providing notice to ZF of any stockholder litigation or dispute and keeping ZF reasonably informed with respect to the status thereof;

 

   

ZF causing Merger Sub to comply with all the Merger Sub’s obligations under the merger agreement;

 

   

WABCO taking all steps reasonably necessary to cause the dispositions of WABCO equity securities pursuant to the transactions contemplated by the merger agreement to be exempt under Section 16 of the Exchange Act;

 

   

ZF timely performing its obligations under the SEBI Takeover Code; and

 

   

WABCO using its reasonable best efforts to commence offers to purchase and/or consent solicitations related to any existing notes as promptly as practicable following receipt of a written request by ZF.

Conditions to the Closing

The respective obligations of ZF, WABCO and Merger Sub to effect the merger are subject to the satisfaction at or prior to the closing of the following conditions:

 

   

receipt of the stockholder approval;

 

   

the absence of a law, statute, rule, regulation, executive order or other order (whether temporary, preliminary or permanent) having been enacted, entered, promulgated or enforced by any governmental entity of competent jurisdiction which prohibits, restrains or enjoins the consummation of the merger;

 

   

the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the merger under the HSR Act and the receipt of any approvals required in connection with the merger by the competent authorities pursuant to the non-U.S. antitrust laws applicable in certain jurisdictions; and

 

   

the receipt of CFIUS clearance.

 

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The respective obligations of ZF and Merger Sub to effect the merger are subject to the satisfaction or waiver by ZF (to the extent permitted by applicable law) at or prior to the effective time of the following conditions:

 

   

the representations and warranties of WABCO relating to the absence of certain changes and events being true and correct as of the date of the merger agreement and as of the closing date as though made on and as of such date and time (except to the extent expressly made as of any earlier date, in which case as of such earlier date);

 

   

the representations and warranties of WABCO relating to capitalization being true and correct as of the date of the merger agreement and as of the closing date as though made on and as of such date and time (except to the extent expressly made as of any earlier date, in which case as of such earlier date), except for any failures to be so true correct that, individually or in the aggregate, are de minimis in nature and amount;

 

   

certain representations and warranties of WABCO relating to (i) due incorporation and valid existence of WABCO, (ii) capital structure, (iii) authority of WABCO to enter into the merger agreement and (iv) brokers being true and correct in all material respects as of the date of the merger agreement and as of the closing date as though made on and as of such date and time (without giving effect to any material adverse effect, materiality or similar qualifications contained in the merger agreement and except to the extent expressly made as of any earlier date, in which case as of such earlier date);

 

   

all other representations and warranties of WABCO set forth in the merger agreement being true and correct as of the date of the merger agreement and as of the closing date as though made on and as of such date and time (except to the extent expressly made as of any earlier date, in which case as of such earlier date); except where the conditions described have been satisfied unless the failure of such representations and warranties of WABCO to be so true and correct, individually or in the aggregate, have or would reasonably be expected to have a material adverse effect (without giving effect to any material adverse effect, materiality or similar qualification contained in the merger agreement);

 

   

WABCO having performed in all material respects the obligations, and complied in all material respects with the agreements and covenants, required to be performed by, or complied with by, it under the merger agreement at or prior to the closing;

 

   

ZF having received a certificate of the chief executive officer or the chief financial officer of WABCO, certifying that the conditions described above have been satisfied; and

 

   

since the date of the merger agreement, no events, developments, changes, effects or occurrences having occurred that, individually or in the aggregate, have had, or would reasonably be expected to have, a material adverse effect.

The obligations of WABCO to effect the merger are subject to the satisfaction or waiver by WABCO (to the extent permitted by applicable law) at or prior to the effective time of the following conditions:

 

   

the representations and warranties of ZF and Merger Sub set forth in the merger agreement being true and correct, in each case as of the closing date as though made on and as of such date (except to the extent expressly made as of any earlier date, in which case as of such earlier date); except where the failure of any such representations and warranties to be true and correct, in the aggregate, would have a material adverse effect on the ability of ZF and Merger Sub to consummate the transactions contemplated by the merger agreement;

 

   

ZF and Merger Sub having performed in all material respects the obligations, and complied in all material respects with the agreements and covenants, required to be performed by, or complied with by, them under the merger agreement at or prior to the closing; and

 

   

WABCO having received a certificate of the chief executive officer or the chief financial officer of ZF, certifying that the conditions set forth above have been satisfied.

 

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Termination of the Merger Agreement

Termination

The merger agreement may be terminated, and the merger may be abandoned, at any time prior to the effective time by the mutual written consent of ZF and WABCO, or as follows:

 

   

by either ZF or WABCO, if:

 

   

(i) any court of competent jurisdiction or other governmental entity has issued a final order or taken any other final action permanently restraining, enjoining or otherwise prohibiting the merger and such order or other action is or has become final and nonappealable or (ii) in the event of a CFIUS turndown; provided that the party seeking to terminate the merger agreement did not breach in any material respect any provision of the merger agreement which breach was the primary cause of the issuance of such final nonappealable order or the taking of any such other final action;

 

   

the effective time has not occurred on or before the end date; provided, however, that if, as of such date, all the conditions to the closing have been satisfied or, if permissible, waived other than the obligations to closing for ZF and Merger Sub relating to the absence of any prohibiting orders (to the extent relating to any antitrust or CFIUS), receipt of antitrust approvals or receipt of CFIUS clearance and those conditions that by their nature are to be satisfied at the closing, then the end date will be extended to September 28, 2020; provided, further, that the party seeking to terminate the merger agreement did not breach in any material respect any provision of the merger agreement which breach was the primary cause of the effective time not occurring on or before the end date;

 

   

the stockholder approval has not been obtained at the special meeting or at any adjournment or postponement thereof, in each case, at which a vote on the adoption of the merger agreement was taken;

 

   

by WABCO:

 

   

if there has been a breach of any representation, warranty, covenant or agreement on the part of ZF or Merger Sub contained in the merger agreement, or any such representation or warranty will be untrue, such that the conditions set forth in the closing conditions relating to representations and warranties and performance of obligations of ZF and Merger Sub would not be satisfied and, in either such case, such breach or condition is not curable; provided that WABCO will not have the right to terminate the merger agreement if WABCO is then in material breach of any of its covenants or agreements contained in the merger agreement;

 

   

prior to, but not after, obtaining the stockholder approval, in order to enter into a definitive written agreement providing for a superior proposal, in accordance with, and subject to the terms and conditions of the merger agreement;

 

   

by ZF:

 

   

if there has been a breach of any representation, warranty, covenant or agreement on the part of WABCO contained in the merger agreement, or any such representation or warranty will be untrue, such that the closing conditions relating to representations and warranties and performance of obligations of WABCO would not be satisfied and, in either such case, such breach or condition is not curable; provided that ZF will not have the right to terminate the merger agreement if ZF or Merger Sub is then in material breach of any of its covenants or agreements contained in the merger agreement;

 

   

prior to, but not after, obtaining the stockholder approval, a change of recommendation has occurred;

 

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the Board has recommended, approved or otherwise declared advisable, prior to obtaining the stockholder approval, to WABCO stockholders an acquisition proposal other than the merger;

 

   

the Board has formally resolved to effect or publicly announced an intention to effect a change of recommendation or entry into an acquisition proposal other than the merger, prior to obtaining the stockholder approval; or

 

   

WABCO has willfully breached the non-solicitation covenants described above or its obligation to hold the special meeting in accordance with the timeframe set forth in the merger agreement and, in such case, such breach is not curable or such breach has not been cured within three business days’ notice thereof by ZF to WABCO.

“CFIUS turndown” means CFIUS notifies the parties that CFIUS (i) has completed its review or investigation of the transactions contemplated by the merger agreement pursuant to the DPA and (ii) intends to send a report to the President of the United States requesting the President’s decision because CFIUS either (A) recommends that the President act to suspend or prohibit the transactions contemplated by the merger agreement, (B) is unable to reach a decision on whether to recommend that the President suspend or prohibit the transactions contemplated by the merger agreement or (C) requests that the President make a determination with regard to the transactions contemplated by the merger agreement.

Effect of Termination

In the event of termination of the merger agreement by either WABCO or ZF as described above under the section entitled “Terms of the Merger Agreement—Termination of the Merger Agreement—Termination” beginning on page 82, the merger agreement will become void and there will be no liability or obligation on the part of any party, except that:

 

   

no termination will affect the obligations of the parties contained in the confidentiality agreement executed by WABCO and ZF;

 

   

no termination will affect the obligations of the parties with respect to public announcements;

 

   

no termination will relieve ZF of its indemnification obligations for financing costs;

 

   

no termination will relieve any party from liability for damages in case of any willful breach (described below) prior to such termination; and

 

   

certain other provisions of the merger agreement, including provisions with respect to the allocation of fees and expenses, including, if applicable, the termination fees described in the section entitled “Terms of the Merger Agreement—Termination of the Merger Agreement—Termination Fees” beginning on page 83, will survive such termination.

“willful breach” means, with respect to any breaches or failures to perform any of the covenants or other agreements contained in the merger agreement, a material breach that is a consequence of an act or failure to act undertaken by the breaching party with actual knowledge, or knowledge that a person acting reasonably under the circumstances should have, that such party’s act or failure to act would, or would be reasonably expected to, result in or constitute a breach of the merger agreement.

Termination Fees

Under the merger agreement, WABCO will be required to pay the termination fee in connection with a termination of the merger agreement under the following circumstances:

 

   

if the merger agreement is terminated by WABCO (prior to obtaining the stockholder approval) to accept a superior proposal and enter into a definitive agreement with respect thereto;

 

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if the merger agreement is terminated by ZF due to (i) prior to obtaining the stockholder approval, a change of recommendation by the Board, (ii) prior to obtaining the stockholder approval, the Board’s recommendation or approval of an acquisition other than the merger, (iii) prior to obtaining the stockholder approval, the Board’s formal resolution to effect or publicly announce an intention to effect an event described in the preceding two clauses or (iv) WABCO has willfully breached the non-solicitation covenants or its obligation to hold the special meeting in accordance with the timeframe set forth in the merger agreement;

 

   

if all of the following events occur:

 

   

ZF or WABCO terminates due to the failure to obtain the stockholder approval, or ZF terminates due to WABCO’s breach of the agreement;

 

   

prior to the special meeting or termination in the event of a breach, an acquisition proposal is publicly announced or becomes publicly known, and is not withdrawn without qualification; and

 

   

within twelve months after termination, WABCO enters into an agreement or consummates a transaction for any acquisition proposal.

Under the merger agreement, ZF will be required to pay the reverse termination fee in connection with a termination of the merger agreement under the following circumstances:

 

   

if the merger agreement is terminated by ZF or WABCO due to (i) a governmental entity issuing a final order or taking any other final action that permanently restrains, enjoins or otherwise prohibits the merger (and such order or other action is or will become final and nonappealable) pursuant to antitrust law, (ii) all other mutual conditions and conditions to ZF and Merger Sub’s obligations to closing would be satisfied and (iii) the order or action was issued or taken following (A) the applicable governmental entity requiring that WABCO divest some or all of the specified business or ZF divest some or all of the parent retained business as a condition to closing, (B) the parties’ failure to divest some or all of the specified business following the parties’ compliance with the covenant to work together and use their respective reasonable best efforts to cause WABCO to divest the specified business and (C) ZF’s refusal to divest some or all of the parent retained business; or

 

   

if the merger agreement is terminated by WABCO or ZF due to (i) the consummation of the merger not occurring by the end date, (ii) at the time of such termination, a pending proceeding under any antitrust law that cannot be closed or settled until the divestiture of some or all of the specified business or some or all of the parent retained business is effectuated, (iii) all other mutual conditions and conditions to ZF and Merger Sub’s obligations to closing would be satisfied, (iv) WABCO has complied with its covenants to cooperate to divest the specified business, (v) at the time of such termination, neither the specified business nor the parent retained business (or such portion as required by the applicable governmental entity) has been divested and (vi) the failure to divest the parent retained business or applicable portion thereof is the result of ZF’s refusal to divest some or all of the parent retained business following WABCO’s inability to divest the specified business.

In no event will either WABCO or ZF be required to pay the termination fee or the reverse termination fee, as applicable, on more than one occasion.

Expenses

Except as otherwise specifically provided in the merger agreement, each party to the merger agreement will bear its own expenses in connection with the merger agreement and the transactions contemplated thereby.

 

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Amendment and Waiver

Amendment

Subject to the provisions of applicable law, at any time prior to the effective time, the parties to the merger agreement (in the case of WABCO or Merger Sub, by action of their respective boards of directors) may modify or amend the merger agreement by written agreement, executed and delivered by duly authorized officers of the respective parties.

Waiver; Extension

At any time prior to the effective time, the parties to the merger agreement may:

 

   

extend the time period for the performance of any of the obligations or other acts of the other parties;

 

   

waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; and

 

   

subject to the requirements of applicable laws, waive compliance with any of the agreements or conditions contained in the merger agreement.

Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby and specifically referencing the merger agreement. The failure of any party to assert any rights or remedies will not constitute a waiver of such rights or remedies.

Governing Law

Except for disputes involving the financing related parties (which will be governed by the laws of the state of New York), the merger agreement is governed by, and construed in accordance with, the laws of the state of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

Specific Performance

The parties will be entitled to an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement, this being in addition to any other remedy to which they are entitled at law or equity. WABCO is entitled to seek specific performance in connection with regulatory efforts and ZF and Merger Sub’s financing obligations. Each of the parties to the merger agreement has agreed that it will not oppose the granting of an injunction, specific performance and other equitable relief as provided herein on the basis that (i) either party has an adequate remedy at law, (ii) an award of specific performance is not an appropriate remedy for any reason at law or equity or (iii) a remedy of specific performance is unenforceable, invalid, contrary to law or inequitable for any reason.

 

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PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED  COMPENSATION FOR WABCO’S

NAMED EXECUTIVE OFFICERS

The following table, “Golden Parachute Compensation,” along with its footnotes, shows the information required by Item 402(t) of Regulation S-K under the Exchange Act promulgated under the Exchange Act regarding estimated amounts that each WABCO named executive officer would receive upon a qualifying termination of employment without cause or a resignation by the executive officer for good reason immediately following the effective time, based on the assumptions set forth below. Further details of these potential payments and benefits, including applicable vesting terms and conditions, are provided in the footnotes to the table below and in the section entitled “Proposal 1: Adoption of the Merger Agreement—The Merger—Interests of WABCO Non-Employee Directors and Executive Officers in the Merger” beginning on page 55.

For purposes of quantifying these potential payments and benefits for the table below, the following assumptions were used:

 

   

the closing occurs on May 13, 2019 (the latest practicable date before the date of this proxy statement);

 

   

a WABCO common stock price of $136.50;

 

   

salary and target bonus levels are those in effect as of May 13, 2019;

 

   

the number of unvested WABCO equity awards held by WABCO named executive officers were determined as of May 13, 2019; and

 

   

a qualifying termination of each named executive officer’s employment occurs immediately following the effective time.

The amounts shown are estimates based on multiple assumptions and do not reflect compensation actions that could occur after May 13, 2019 and before the effective time. In addition, the assumption that a named executive officer’s employment will be terminated may not be true. As a result, the actual amounts received by a named executive officer may differ materially from the amounts shown in the following table.

For purposes of this discussion, “double-trigger” refers to benefits that require two conditions, which are the occurrence of the closing as well as a qualifying termination occurring within twenty-four months following the effective time.

Golden Parachute Compensation

 

Name

   Cash
($)(1)
     Equity
($)(2)
     Cash Incentive
Awards

($)(3)
     Perquisites/
Benefits
($)(4)
     Total
($)
 

Jacques Esculier

     7,182,000        10,826,634        5,592,296        345,867        23,946,797  

Sean Deason(5)

     1,920,000        819,819        337,169        153,428        3,230,416  

Roberto Fioroni(6)

     —          —          —          —          —    

Nick Rens

     1,378,040        1,676,357        440,684        186,220        3,681,301  

Lisa Brown

     1,967,999        1,247,337        2,385,137        192,599        5,793,072  

Christian Brenneke

     1,176,000        1,270,133        320,655        126,719        2,893,507  

Alexander De Bock(7)

     945,000        557,193        274,382        127,270        1,903,845  

 

(1)

Represents a severance payment in an amount equal to three times (two times for Messrs. Rens, De Bock and Brenneke) the sum of the named executive officer’s annual base salary in effect immediately prior to the qualifying termination plus the named executive officer’s target annual incentive bonus in effect for the calendar year in which the qualifying termination occurs. All such payments are “double-trigger.”

 

(2)

Represents the following equity awards held by the named executive officer: (i) the value of unvested RSUs and (ii) the value of unvested PSUs based on the applicable achievement level of performance, as set forth

 

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  in the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Treatment of Equity and Cash Incentive Compensation” beginning on page 64, in each case of (i) and (ii), that will become vested and entitled to receive the merger consideration upon the effective time.

 

(3)

Represents annual and long-term cash incentive awards granted under the company incentive plans based on the applicable achievement level of performance, pro-rated for the portion of the performance period that has elapsed as of the closing date, as set forth in the section entitled “Proposal 1: Adoption of the Merger Agreement—Terms of the Merger Agreement—Effect on Capital Stock; Merger Consideration—Treatment of Equity and Cash Incentive Compensation” beginning on page 64, that will become vested upon the effective time. Also includes the 2018 cash long-term incentive plan award for Mr. Esculier reflected at the target level of performance and a cash retention award of $2 million for Ms. Brown that will vest and be paid at the effective time if not earlier vested and paid.

 

(4)

Represents the estimated value of the company-provided group insurance plan and group medical coverage for three years (two years for Messrs. Ren, De Bock and Brenneke) and reimbursement of financial planning services up to $5,000. All such payments are “double-trigger.”

 

(5)

Mr. Deason was appointed as WABCO’s chief financial officer & controller effective April 1, 2019.

 

(6)

Mr. Fioroni resigned as WABCO’s chief financial officer effective April 1, 2019 and will not be eligible to receive any compensation in connection with the transaction.

 

(7)

Mr. De Bock, WABCO’s vice president finance planning & analysis and treasurer, previously served as WABCO’s interim chief financial officer from September 2017 until June 2018.

The Merger-Related Compensation Proposal

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Rule 14a-21(c) under the Exchange Act require that we provide WABCO stockholders with the opportunity to vote to approve, on a non-binding advisory basis, the payment of certain compensation that may be paid or become payable to our named executive officers in connection with the merger, as disclosed above. The affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, and voting at the special meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the merger-related compensation proposal.

Accordingly, we are asking WABCO stockholders to vote in favor of the following resolution, on a non-binding, advisory basis:

“RESOLVED, that the compensation that may be paid or become payable to WABCO named executive officers in connection with the merger and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K under the Exchange Act in the section entitled ‘Proposal 2: Non-Binding Advisory Vote on Merger-Related Compensation for WABCO’s Named Executive Officers’ is hereby APPROVED.”

The Board unanimously recommends that you vote “FOR” the merger-related compensation proposal.

STOCKHOLDERS SHOULD NOTE THAT THIS PROPOSAL IS NOT A CONDITION TO THE CLOSING, AND AS AN ADVISORY VOTE, THE RESULT WILL NOT BE BINDING ON WABCO, THE BOARD OR ZF. FURTHER, THE UNDERLYING PLANS AND ARRANGEMENTS ARE CONTRACTUAL IN NATURE AND NOT, BY THEIR TERMS, SUBJECT TO STOCKHOLDER APPROVAL. ACCORDINGLY, REGARDLESS OF THE OUTCOME OF THE ADVISORY VOTE, IF THE MERGER IS CONSUMMATED, WABCO NAMED EXECUTIVE OFFICERS WILL BE ENTITLED TO RECEIVE THE COMPENSATION THAT IS BASED ON OR OTHERWISE RELATES TO THE MERGER IN ACCORDANCE WITH THE TERMS AND CONDITIONS APPLICABLE TO THAT COMPENSATION.

 

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PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

The Adjournment Proposal

We are asking you to approve a proposal to approve one or more adjournments or postponements of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the then-scheduled date and time of the special meeting. If WABCO stockholders approve the adjournment proposal, we could adjourn or postpone the special meeting and any adjourned or postponed session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from WABCO stockholders that have previously returned properly executed proxies voting against adoption of the merger agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the merger agreement such that the proposal to adopt the merger agreement would be defeated, we could adjourn or postpone the special meeting without a vote on the adoption of the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement. Additionally, we may seek to adjourn or postpone the special meeting if a quorum is not present at the special meeting, subject to the terms of the merger agreement.

WABCO does not intend to call a vote on this proposal if the merger proposal is approved by the requisite number of shares of WABCO common stock at the special meeting.

Vote Required and Board of Directors Recommendation

Approval of the proposal to approve one or more adjournments or postponements of the special meeting requires the affirmative vote of a majority of the voting power of the shares of WABCO common stock entitled to vote which are present, in person or by proxy, at the special meeting, whether or not a quorum is present.

The Board believes that it is in the best interests of WABCO and its stockholders to be able to adjourn or postpone the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies in respect of the merger agreement proposal if there are insufficient votes to adopt the merger agreement at the then-scheduled date and time of the special meeting.

The Board unanimously recommends that you vote “FOR” the adjournment proposal.

 

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MARKET PRICES AND DIVIDEND DATA

WABCO common stock is listed on the NYSE under the symbol “WBC.” As of the close of business on the record date, there were 51,234,022 shares of our common stock outstanding.

On May 17, 2019, the latest practicable trading day before the date of this proxy statement, the closing price of WABCO common stock was $130.67 per share and on February 26, 2019, the date prior to media reports that ZF was considering a transaction with WABCO, the closing price of WABCO common stock was $120.75 per share. You are encouraged to obtain current market quotations for WABCO common stock. No assurance can be given concerning the market price for WABCO common stock before the date on which the merger will be completed. The market price for WABCO common stock will fluctuate between the date of this proxy statement and the date on which the merger is completed.

Under the terms of the merger agreement, between the date of the merger agreement and the earlier of the effective time or the termination of the merger, neither WABCO nor any of its subsidiaries may declare, set aside, make or pay any dividends without the prior written consent of ZF.

Following the merger, there will be no further market for shares of WABCO common stock and we anticipate that our stock will be delisted from the NYSE and deregistered under the Exchange Act. As a result, following the merger and such deregistration, we would no longer file periodic reports with the SEC.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The tables below set forth, as of May 13, 2019 (unless otherwise indicated), certain information regarding beneficial ownership of our common stock. We determine beneficial ownership of our common stock in accordance with the rules of the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any shares of our common stock which the individual has the right to acquire on or before June 11, 2019 through payout of cash incentive awards, DSUs, PSUs, RSUs and stock options. As of May 13, 2019, we had 51,234,022 shares of WABCO common stock outstanding. For purposes of computing the percentage and amount of outstanding shares of common stock held by each individual or entity, any shares which that individual or entity has the right to acquire on or before June 11, 2019 are deemed to be outstanding for the individual or entity but such shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other individual or entity.

Ownership by Our Directors and Executive Officers

The following table includes information regarding the number of shares of our common stock beneficially owned by each of our directors and “Named Executive Officers” (as such term is defined in Item 402(a)(3) of Regulation S-K under the Exchange Act), as well as all of our current directors and executive officers as a group, as of May 13, 2019.

 

Name of Beneficial Owner

   Shares
Beneficially
Owned
    Shares that
May be
Acquired
Within
60 Days
    Total      Percent of
Class(1)
 

G. Peter D’Aloia

     17,746 (2)(3)      5,756 (4)      23,502        *  

Christian Brenneke

     4,565       —         4,565        *  

Lisa Brown

     4,251       —         4,251        *  

Alexander De Bock

     1,059       —         1,059        *  

Jacques Esculier

     210,381       —         210,381        *  

Juergen W. Gromer

     6,371 (2)       901       7,272        *  

Thomas S. Gross

     2,548       901       3,449        *  

Henry R. Keizer

     2,864       901       3,765        *  

Jean-Paul Montupet

     1,050       6,044       7,094        *  

D. Nick Reilly

     1,445       2,680       4,125        *  

Nick Rens

     6,727       —         6,727        *  

Michael T. Smith

     15,498 (2)      901       16,399        *  

All current directors and executive officers of the company as a group (15 persons)(5)

     280,737       18,084       298,821        *  

 

*

Less than 1%.

 

(1)

As of May 13, 2019, we had 51,234,022 shares of our common stock outstanding.

 

(2)

The number of shares shown for certain directors in the table above includes shares allocated to their accounts in the outside directors trust established by WABCO for the non-management directors. Under the outside directors’ trust, a trust account holds shares of common stock for each participating non-management director. The shares are voted by the trustee of the trust on behalf of each participating director in accordance with the director’s instructions. The trust shares do not vest to direct ownership while the director is in office. Shares held in this trust are as follows: Mr. D’Aloia: 5,405; Mr. Gromer: 5,402; and Mr. Smith: 5,402. In July 2009, the Board voted to discontinue the use of the outside directors’ trust.

 

(3)

The number of shares shown for Mr. D’Aloia in the table above includes 11,372 shares held by a charitable foundation controlled by Mr. D’Aloia.

 

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(4)

Includes 1,508 deferred shares allocated under WABCO’s deferred compensation plan.

 

(5)

The numbers of shares shown on this line do not include shares held by Mrs. Petrovich and Messrs. Fioroni and Solis who left WABCO, and Mr. De Bock who is no longer an executive officer of WABCO.

Ownership of More than 5% of Our Common Stock

The following table sets forth information on each person or entity who we believe, based on our review of public filings, or information provided, by such persons or entities, beneficially owns more than 5% of our common stock as of May 13, 2019.

 

Name and Address of Beneficial Owner

   Shares
Beneficially
Owned
     Percent of
Class(1)
 

EdgePoint Investment Group Inc.(2)

150 Bloor Street West, Suite 500

Toronto, Ontario M5S 2X9, Canada

     4,672,374        9.12

The Vanguard Group(3)

100 Vanguard Blvd.

Malvern, PA 19355

     4,497,949        8.78

FPR Partners, LLC(4)

199 Fremont Street, Suite 2500

San Francisco, CA 94105

     3,983,739        7.78

FMR LLC(5)

245 Summer Street

Boston, MA 02210

     3,874,508        7.56

Kayne Anderson Rudnick Investment Management LLC(6)

1800 Avenue of the Stars, 2nd Floor

Los Angeles, CA 90067

     2,882,524        5.63

BlackRock, Inc.(7)

55 East 52nd Street

New York, NY 10055

     2,647,232        5.17

 

(1)

As of May 13, 2019, we had 51,234,022 shares of our common stock outstanding.

 

(2)

Based on an amended Schedule 13G filed on February 13, 2019, in which EdgePoint Investment Group Inc. reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act to have shared voting power and shared dispositive power with respect to the 4,672,374 shares reported in the table above, by virtue of the fact that it is the investment manager to, and exercises investment discretion with respect to WABCO common stock directly owned by, a number of private investment funds and mutual fund trusts.

 

(3)

Based on an amended Schedule 13G filed on February 11, 2019, in which The Vanguard Group reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act to hold sole voting power with respect to 39,474 of the shares reported in the table above, shared voting power with respect to 9,355 of the shares reported in the table above, sole dispositive power with respect to 4,451,876 of the shares reported in the table above and shared dispositive power with respect to 46,073 of the shares reported in the table above, by virtue of the fact that it is the parent company of a group of investment companies.

 

(4)

Based on a Schedule 13G filed on February 14, 2019, in which FPR Partners, LLC, on behalf of itself, Andrew Raab and Bob Peck (both Senior Managing Members of FPR Partners, LLC) reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act to have sole voting power and sole dispositive power with respect to the 3,983,739 shares reported in the table above, by virtue of the fact that it is the investment manager to, and exercises investment discretion with respect to WABCO common stock directly owned by, a number of investment funds.

 

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(5)

Based on an amended Schedule 13G filed on February 13, 2019, in which FMR LLC reported on behalf of itself and Abigail P. Johnson (who, along with members of the Johnson family, may be deemed a controlling group with respect to FMR LLC) that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act to have sole voting power with respect to the 246,873 of the shares reported in the table above, and sole dispositive power with respect to the 3,874,508 shares reported in the table above.

 

(6)

Based on a Schedule 13G filed on February 13, 2019, in which Kayne Anderson Rudnick Investment Management LLC reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act to hold sole voting power with respect to 1,898,548 of the shares reported in the table above, shared voting power with respect to 983,976 of the shares reported in the table above, sole dispositive power with respect to 1,898,548 of the shares reported in the table above and shared dispositive power with respect to 983,976 of the shares reported in the table above, by virtue of the fact that it is the parent company of a group of investment companies.

 

(7)

Based on a Schedule 13G filed on February 8, 2019, in which BlackRock, Inc. reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act to hold sole voting power with respect to 2,298,036 of the shares reported in the table above and sole dispositive power with respect to 2,647,232 of the shares reported in the table above.

 

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APPRAISAL RIGHTS

If the merger is completed, stockholders who do not vote (whether in person or by proxy) in favor of the adoption of the merger proposal and who properly exercise and perfect their demand for appraisal of their shares and who do not withdraw such demand or lose their right to appraisal will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL, which we refer to as Section 262.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex C and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Only a holder of record of shares of WABCO common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of WABCO common stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of WABCO common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Under Section 262, holders of WABCO common stock who (i) do not vote in favor of the merger proposal, (ii) continuously are the record holders of such shares through the effective time and (iii) otherwise follow the procedures set forth in Section 262 will be entitled to have their shares appraised by the Court of Chancery of the State of Delaware and to receive in lieu of the merger consideration payment in cash of the amount determined by the Court of Chancery to be the “fair value” of the shares of WABCO common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest to be paid on the amount determined to be fair value as determined by the court (subject, in the case of interest payments, to any voluntary cash payments made by the surviving corporation pursuant to subsection (h) of Section 262 of the DGCL). Unless the Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the effective time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period; provided that if at any time before the Court of Chancery of the State of Delaware enters judgment in the appraisal proceeding, the surviving corporation pays to each stockholder entitled to appraisal an amount in cash, interest will accrue after the time of such payment only on the amount that equals the sum of (i) the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Court of Chancery of the State of Delaware and (ii) any interest accrued prior to the time of such voluntary payment, unless paid at such time. The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 could be more than, the same as or less than the $136.50 per share merger consideration payable pursuant to the merger agreement if they did not seek appraisal of their shares.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than twenty days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes WABCO’s notice to WABCO stockholders that appraisal rights are available in connection with the merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection with the merger, any holder of shares of WABCO’s common stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so should review Annex C carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner will result in the loss of appraisal rights under the DGCL. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings as to all WABCO stockholders who assert appraisal rights unless (i) the total number of shares of WABCO common stock for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of

 

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WABCO common stock measured in accordance with subsection (g) of Section 262 of the DGCL or (ii) the value of the aggregate merger consideration in respect of the shares of WABCO common stock for which appraisal rights have been pursued and perfected exceeds $1 million. Because of the complexity of the procedures for exercising the right to seek appraisal of shares of WABCO common stock, WABCO believes that if a WABCO stockholder is considering exercising appraisal rights, that stockholder should seek the advice of legal counsel. A stockholder who loses his, her or its appraisal rights will be entitled to receive the merger consideration as described in the merger agreement upon surrender of the certificates that formerly represented such shares of WABCO common stock.

Stockholders wishing to exercise the right to seek an appraisal of their shares of WABCO common stock must fully comply with Section 262, which means doing, among other things, ALL of the following:

 

   

the stockholder must not vote in favor of the merger proposal;

 

   

the stockholder must deliver to WABCO a written demand for appraisal before the vote on the merger proposal at the special meeting;

 

   

the stockholder must continuously hold the shares from the date of making the demand through the effective time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the effective time); and

 

   

the stockholder or the surviving corporation must file a petition in the Court of Chancery of the State of Delaware requesting a determination of the fair value of the shares within one hundred twenty days after the effective time. The surviving corporation is under no obligation to file any petition and has no intention of doing so.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the merger agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights should not return a blank proxy, but rather must vote against the merger proposal, abstain or not vote its shares.

Filing Written Demand

Any holder of shares of WABCO common stock wishing to exercise appraisal rights must deliver to WABCO, before the vote on the merger proposal at the special meeting, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the merger proposal either in person or by proxy. A holder of shares of WABCO common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the effective time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the merger proposal, and it will cause a stockholder to lose the stockholder’s right to appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the merger proposal or abstain from voting on the merger proposal. However, neither voting against the merger proposal nor abstaining from voting or failing to vote on the merger proposal will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the merger proposal. A proxy or vote against the merger proposal will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the merger proposal at the special meeting will cause the stockholder to lose its appraisal rights in connection with the merger.

Only a holder of record of shares of WABCO common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of WABCO common stock should be executed by or on behalf of the holder of record and must reasonably inform WABCO of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of

 

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record by more than one person, such as in a joint tenancy or a tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS, AND WHO WISH TO EXERCISE APPRAISAL RIGHTS, SHOULD CONSULT WITH THEIR BROKERS, BANKS AND OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BROKER, BANK OR OTHER NOMINEE HOLDER TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER, BANK OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

WABCO Holdings Inc.

1220 Pacific Drive

Auburn Hills, Michigan 48326

Any holder of shares of WABCO common stock may withdraw his, her or its demand for appraisal and accept the merger consideration by delivering to WABCO a written withdrawal of the demand for appraisal within sixty days after the effective date of the merger. However, any such attempt to withdraw the demand made more than sixty days after the effective time will require written approval of the surviving corporation. No appraisal proceeding in the Court of Chancery of the State of Delaware will be dismissed without the approval of such court and such approval may be conditioned upon such terms as the court deems just.

Notice by the Surviving Corporation

If the merger is completed, within ten days after the effective time, the surviving corporation will notify each holder of shares of WABCO common stock who has made a written demand for appraisal pursuant to Section 262 and who has not voted in favor of the merger proposal of the date that the merger has become effective.

Filing a Petition for Appraisal

Within one hundred twenty days after the effective time, but not thereafter, the surviving corporation or any holder of shares of WABCO common stock who has complied with Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Court of Chancery of the State of Delaware, with a copy served on the surviving corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. A beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal. If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The surviving corporation is under no obligation, and has no present intention, to file such a petition, and holders should not assume that the surviving corporation will file a petition or initiate any negotiations with respect to the fair values of shares of WABCO common stock. Accordingly, any holders of WABCO common stock who desire to have their shares appraised by the Court of Chancery of the State of Delaware should assume that they will be responsible for filing a petition for appraisal with the Court of Chancery of the State of Delaware in the manner prescribed in Section 262. The failure of a holder of WABCO common stock to file such a petition for appraisal within the period specified in Section 262 will nullify the stockholder’s previous written demand for appraisal.

 

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Within one hundred twenty days after the effective time, any holder of shares of WABCO common stock who has complied with the requirements for the exercise of appraisal rights, or a beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person, will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the merger proposal and with respect to which WABCO received demands for appraisal, and the aggregate number of holders of such common stock. The surviving corporation must mail this statement to the requesting stockholder within ten days after receipt of the written request for such a statement or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later.

If a petition for an appraisal is duly filed by a holder of shares of WABCO common stock and a copy thereof is served upon the surviving corporation, the surviving corporation will then be obligated within twenty days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the court, the Court of Chancery of the State of Delaware is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded appraisal of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Court of Chancery may dismiss that stockholder from the proceedings.

Determination of Fair Value

After determining the holders of WABCO common stock entitled to appraisal, the Court of Chancery of the State of Delaware will appraise the “fair value” of the shares of WABCO common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Court of Chancery of the State of Delaware will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Supreme Court of Delaware stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Court of Chancery of the State of Delaware could be more than, the same as or less than the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and does not in any manner address, fair value under Section 262 of the DGCL. Although WABCO believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court of Chancery of the State of Delaware, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the merger consideration. Neither WABCO nor ZF anticipates offering more than the $136.50 per share merger consideration to any WABCO stockholder exercising appraisal rights. Each of WABCO and ZF reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of WABCO common stock is less than the $136.50 per share merger consideration.

 

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Unless the Court of Chancery of the State of Delaware in its discretion determines otherwise for good cause shown, interest from the effective time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time and the date of payment of the judgment; provided that if at any time before the Court of Chancery of the State of Delaware enters judgment in the appraisal proceeding, the surviving corporation pays to each stockholder entitled to appraisal an amount in cash, interest will accrue after the time of such payment only on the amount that equals the sum of (i) the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Court of Chancery of the State of Delaware and (ii) any interest accrued prior to the time of such voluntary payment, unless paid at such time. The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court of Chancery of the State of Delaware and taxed upon the parties as the Court of Chancery of the State of Delaware deems equitable under the circumstances. Upon application of a stockholder, the Court of Chancery of the State of Delaware may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised.

If any stockholder who demands appraisal of his, her or its shares of WABCO common stock under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s right to appraisal, the stockholder’s shares of WABCO common stock will be deemed to have been converted at the effective time into the right to receive the merger consideration, less applicable withholding taxes. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within one hundred twenty days after the effective time or if the stockholder delivers to the surviving corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the merger consideration in accordance with Section 262.

From and after the effective time, no stockholder who has demanded appraisal rights will be entitled to vote WABCO common stock for any purpose, or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of WABCO common stock, if any, payable to WABCO stockholders of record as of a time prior to the effective time; provided, however, that if no petition for an appraisal is filed, or if the stockholder delivers to the surviving corporation a written withdrawal of the demand for an appraisal and an acceptance of the merger, either within sixty days after the effective time or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Court of Chancery of the State of Delaware, however, the appraisal proceeding may not be dismissed as to any WABCO stockholder without the approval of the court.

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any WABCO stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

 

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FUTURE STOCKHOLDER PROPOSALS

If the merger is completed, we will have no public stockholders and there will be no public participation in any of our future stockholder meetings. However, if the merger is not completed, WABCO stockholders will continue to be entitled to attend and participate in future annual meetings of stockholders when held. WABCO will hold an annual meeting of stockholders in 2020 only if the merger has not already been completed, which we refer to as the 2020 annual meeting.

If the 2020 annual meeting is held, stockholders may submit proposals for consideration at our 2020 annual meeting of stockholders. To be considered for inclusion in next year’s proxy statement, your proposal must be submitted in accordance with the SEC’s Rule 14a-8 and must be received by our Chief Legal Officer at our principal executive offices located at 1220 Pacific Drive, Auburn Hills, Michigan 48326 no later than December 20, 2019.

Under our bylaws, and as permitted by the rules of the SEC, certain procedures are provided which a stockholder must follow to nominate persons for election as directors or to introduce an item of business at an annual meeting if such matter is not intended to be considered for inclusion in the proxy statement. These procedures provide that director nominations and/or proposals relating to another item of business to be introduced at an annual meeting of stockholders must be submitted in writing by certified mail to the Chief Legal Officer of WABCO at our principal executive offices located at 1220 Pacific Drive, Auburn Hills, Michigan 48326. We must receive the notice of your intention to introduce a nomination or proposed item of business at the 2020 annual meeting no later than February 28, 2020 and no earlier than January 29, 2020. In addition, nominations for a non-incumbent director must be accompanied by information concerning the proposed nominee, including such information as is required by WABCO’s bylaws and the proxy rules of the SEC.

All matters submitted must comply with the applicable requirements or conditions established by the SEC and our bylaws. Any proposals of business or nominations should be addressed to: WABCO Holdings Inc., 1220 Pacific Drive, Auburn Hills, Michigan 48326.

 

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HOUSEHOLDING INFORMATION

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. As permitted by the Exchange Act, only one copy of this proxy statement is being delivered to stockholders residing at the same address, unless stockholders have notified the company whose shares they hold of their desire to receive multiple copies of this proxy statement. This process, which is commonly referred to as “householding” potentially provides extra convenience for stockholders and cost savings for companies. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of this proxy statement and wish to receive only one, please contact WABCO at the address identified below. WABCO will promptly deliver, upon oral or written request, a separate copy of this proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies should be directed to WABCO at its address below, or call +1 (248) 270-9287 and ask to speak to Sean Deason.

WABCO Holdings Inc.

1220 Pacific Drive

Auburn Hills, Michigan 48326

 

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WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Exchange Act. Our SEC filings are available to the public over the Internet at the SEC’s website at https://www.sec.gov. In addition, stockholders may obtain free copies of the documents filed with the SEC by WABCO through the Investor Relations section of our website at https://ir.wabco-auto.com. The information on our website is not, and will not be deemed to be, a part hereof or incorporated into this or any other filings with the SEC.

The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated by reference into this proxy statement.

The following WABCO filings with the SEC are incorporated by reference:

 

   

WABCO’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 15, 2019;

 

   

WABCO’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019, filed with the SEC on April 26, 2019;

 

   

WABCO’s Definitive Proxy Statement on Schedule 14A, as supplemented, filed with the SEC on April 18, 2019; and

 

   

WABCO’s Current Reports on Form 8-K filed with the SEC on February 28, 2019, March 28, 2019 (both filings), April 2, 2019, April 12, 2019 and May 7, 2019 (other than the portions of such documents not deemed to be filed).

We also incorporate by reference into this proxy statement each additional document we may file under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this proxy statement and the earlier of the date of the special meeting or the termination of the merger agreement. These documents include periodic reports, such as Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as Current Reports on Form 8-K (other than current reports on Form 8-K furnished pursuant to Item 2.02 or Item 7.01 of Form 8-K, including any exhibits included with such information, unless otherwise indicated therein) and proxy solicitation materials. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference herein.

You may obtain any of the documents we file with the SEC, by requesting them in writing or by telephone from us at the following address:

WABCO Holdings Inc.

1220 Pacific Drive

Auburn Hills, Michigan 48326

If you would like to request documents from us, please do so by June 17, 2019 to receive them before the special meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt method, within one business day after we receive your request.

If you have any questions about this proxy statement, the special meeting or the merger or need assistance with voting procedures, you should contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Toll-free: +1 (888) 750-5834

Banks & Brokers may call collect: +1 (212) 750-5833

 

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MISCELLANEOUS

ZF has supplied, and WABCO has not independently verified, all of the information relating to ZF and Merger Sub in this proxy statement exclusively concerning ZF and Merger Sub.

You should rely only on the information contained in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement to vote on the merger proposal. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated May 20, 2019. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement) and the mailing of this proxy statement to stockholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

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ANNEX A

AGREEMENT AND PLAN OF MERGER

Among

WABCO HOLDINGS INC.,

ZF FRIEDRICHSHAFEN AG

and

VERONA MERGER SUB CORP.

Dated as of March 28, 2019


Table of Contents

TABLE OF CONTENTS

 

         Page  
Article I

 

THE MERGER

 

Section 1.1

 

The Merger

     A-1  

Section 1.2

 

Closing

     A-2  

Section 1.3

 

Effective Time

     A-2  

Section 1.4

 

Certificate of Incorporation; Bylaws

     A-2  

Section 1.5

 

Directors and Officers

     A-2  
Article II

 

EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS

 

Section 2.1

 

Effect on Capital Stock

     A-3  

Section 2.2

 

Treatment of Company Equity and Cash Incentive Awards

     A-3  

Section 2.3

 

Surrender of Shares

     A-5  

Section 2.4

 

Appraisal Rights

     A-7  

Section 2.5

 

Adjustments

     A-8  
Article III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Section 3.1

 

Organization and Qualification; Subsidiaries

     A-9  

Section 3.2

 

Certificate of Incorporation and Bylaws

     A-9  

Section 3.3

 

Capitalization

     A-9  

Section 3.4

 

Authority

     A-10  

Section 3.5

 

No Conflict; Required Filings and Consents

     A-11  

Section 3.6

 

Compliance

     A-11  

Section 3.7

 

SEC Filings; Financial Statements; Undisclosed Liabilities

     A-13  

Section 3.8

 

Contracts

     A-14  

Section 3.9

 

Absence of Certain Changes and Events

     A-16  

Section 3.10

 

Absence of Litigation

     A-16  

Section 3.11

 

Employee Benefit Plans

     A-16  

Section 3.12

 

Labor and Employment Matters

     A-18  

Section 3.13

 

Insurance

     A-18  

Section 3.14

 

Properties

     A-18  

Section 3.15

 

Tax Matters

     A-19  

Section 3.16

 

Intellectual Property and Information Technology

     A-20  

Section 3.17

 

Environmental Matters

     A-20  

Section 3.18

 

Opinion of Financial Advisor

     A-21  

Section 3.19

 

Brokers

     A-21  

Section 3.20

 

Takeover Statutes

     A-21  

Section 3.21

 

Customers and Suppliers

     A-21  

Section 3.22

 

Quality and Safety of Products

     A-22  

Section 3.23

 

Privacy and Data Protection

     A-22  

Section 3.24

 

No Other Representations or Warranties

     A-22  

 

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         Page  
Article IV

 

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

Section 4.1

 

Organization

     A-23  

Section 4.2

 

Authority

     A-23  

Section 4.3

 

No Conflict; Required Filings and Consents

     A-23  

Section 4.4

 

Absence of Litigation

     A-24  

Section 4.5

 

Operations and Ownership of Merger Sub

     A-24  

Section 4.6

 

Brokers

     A-24  

Section 4.7

 

Financing

     A-25  

Section 4.8

 

Ownership of Shares

     A-25  

Section 4.9

 

Solvency

     A-26  

Section 4.10

 

Access to Information

     A-26  

Section 4.11

 

Parent and Merger Sub Acknowledgements

     A-26  

Section 4.12

 

No Other Representations or Warranties

     A-27  
Article V

 

CONDUCT OF BUSINESS PENDING THE MERGER

 

Section 5.1

 

Conduct of Business of the Company Pending the Merger

     A-28  

Section 5.2

 

Conduct of Business of Parent and Merger Sub Pending the Merger

     A-30  

Section 5.3

 

No Control of Other Party’s Business

     A-31  
Article VI

 

ADDITIONAL AGREEMENTS

 

Section 6.1

 

Acquisition Proposals; Change of Recommendation

     A-32  

Section 6.2

 

Proxy Statement

     A-34  

Section 6.3

 

Stockholders Meeting

     A-35  

Section 6.4

 

Further Action; Efforts

     A-36  

Section 6.5

 

Notification of Certain Matters

     A-40  

Section 6.6

 

Access to Information; Confidentiality

     A-40  

Section 6.7

 

Stock Exchange Delisting

     A-41  

Section 6.8

 

Publicity

     A-41  

Section 6.9

 

Employee Matters

     A-41  

Section 6.10

 

Directors’ and Officers’ Indemnification and Insurance

     A-43  

Section 6.11

 

Parent Financing

     A-45  

Section 6.12

 

Transaction Litigation

     A-48  

Section 6.13

 

Obligations of Merger Sub

     A-48  

Section 6.14

 

Rule 16b-3

     A-48  

Section 6.15

 

Indian Offer

     A-48  

Section 6.16

 

Liability Management Transactions

     A-48  
Article VII

 

CONDITIONS OF MERGER

 

Section 7.1

 

Conditions to Obligation of Each Party to Effect the Merger

     A-50  

Section 7.2

 

Conditions to Obligations of Parent and Merger Sub

     A-50  

Section 7.3

 

Conditions to Obligations of the Company

     A-51  

Section 7.4

 

Frustration of Closing Conditions

     A-51  

 

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         Page  
Article VIII

 

TERMINATION, AMENDMENT AND WAIVER

 

Section 8.1

 

Termination

     A-52  

Section 8.2

 

Effect of Termination

     A-53  

Section 8.3

 

Expenses

     A-55  
Article IX

 

GENERAL PROVISIONS

 

Section 9.1

 

Non-Survival of Representations, Warranties, Covenants and Agreements

     A-56  

Section 9.2

 

Modification or Amendment

     A-56  

Section 9.3

 

Waiver

     A-56  

Section 9.4

 

Notices

     A-56  

Section 9.5

 

Certain Definitions

     A-57  

Section 9.6

 

Severability

     A-61  

Section 9.7

 

Entire Agreement; Assignment

     A-61  

Section 9.8

 

Parties in Interest

     A-62  

Section 9.9

 

Governing Law

     A-62  

Section 9.10

 

Headings

     A-62  

Section 9.11

 

Counterparts

     A-62  

Section 9.12

 

Specific Performance

     A-62  

Section 9.13

 

Jurisdiction

     A-63  

Section 9.14

 

WAIVER OF JURY TRIAL

     A-64  

Section 9.15

 

Transfer Taxes

     A-64  

Section 9.16

 

Interpretation

     A-64  

Section 9.17

 

Construction

     A-65  

Section 9.18

 

Representations and Warranties; Covenants for Non-Wholly Owned Subsidiaries

     A-65  

EXHIBITS

 

Exhibit A    Certificate of Incorporation of the Surviving Corporation

 

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INDEX OF DEFINED TERMS

 

     Page  

Acceptable Confidentiality Agreement

     A-57  

Acquisition Proposal

     A-34  

Affiliate

     A-58  

Agreement

     A-1  

Alternative Financing

     A-45  

Antitrust Division

     A-38  

Antitrust Law

     A-37  

Applicable Date

     A-13  

Available Financing

     A-47  

Bankruptcy and Equity Exception

     A-10  

Book-Entry Share

     A-3  

Business Day

     A-58  

Bylaws

     A-9  

Cancelled Shares

     A-3  

Capitalization Date

     A-9  

Certificate

     A-3  

Certificate of Incorporation

     A-9  

Certificate of Merger

     A-2  

CFIUS

     A-58  

CFIUS Clearance

     A-58  

CFIUS Turndown

     A-58  

Change of Control Severance Plan

     A-58  

Change of Recommendation

     A-36  

Charter

     A-2  

Closing

     A-2  

Closing Date

     A-2  

Code

     A-58  

Common Stock

     A-3  

Company

     A-1  

Company Board

     A-1  

Company Cash Incentive Award

     A-4  

Company Cash Incentive Award Consideration

     A-4  

Company Deferred Stock Unit

     A-4  

Company Disclosure Schedule

     A-9  

Company DSU Consideration

     A-4  

Company Employees

     A-41  

Company Equity Awards

     A-4  

Company Notice

     A-33  

Company Omnibus Incentive Plans

     A-10  

Company Performance Stock Unit

     A-4  

Company Plan

     A-16  

Company PSU Consideration

     A-4  

Company Related Party

     A-54  

Company Requisite Vote

     A-10  

Company Restricted Stock Unit

     A-3  

Company RSU Consideration

     A-3  

Company Securities

     A-10  

Company Stock Option

     A-3  

Company Stock Option Consideration

     A-3  

 

A-iv


Table of Contents
     Page  

Confidentiality Agreement

     A-40  

Contract

     A-58  

control

     A-58  

D&O Insurance

     A-44  

Data Room

     A-58  

DGCL

     A-1  

Dissenting Shares

     A-8  

DOJ

     A-37  

Effective Time

     A-2  

End Date

     A-52  

Environmental Laws

     A-21  

ERISA

     A-17  

ERISA Affiliate

     A-17  

Exchange Act

     A-11  

Exchange Fund

     A-5  

Existing Facilities

     A-29  

Existing Notes

     A-48  

FCPA

     A-12  

Financial Advisor

     A-21  

Financing

     A-25  

Financing Commitments

     A-25  

Financing Related Parties

     A-58  

Financing Sources

     A-25  

FTC

     A-37  

GAAP

     A-59  

Governmental Entity

     A-11  

Hazardous Materials

     A-21  

HSR Act

     A-59  

Indemnified Parties

     A-43  

Indian Offer

     A-59  

Intellectual Property

     A-20  

International Benefit Plan

     A-17  

IT Assets

     A-20  

knowledge

     A-59  

Law

     A-59  

Liability Management Transaction

     A-49  

Liability Management Transactions

     A-49  

Liens

     A-18  

Material Adverse Effect

     A-59  

Material Company Plan

     A-16  

Material Contract

     A-16  

Merger

     A-1  

Merger Sub

     A-1  

New Plans

     A-42  

Non-U.S. Antitrust Laws

     A-11  

Notice Period

     A-34  

Old Plans

     A-42  

Order

     A-60  

Parent

     A-1  

Parent Disclosure Schedule

     A-23  

Parent Group

     A-36  

 

A-v


Table of Contents
     Page  

Parent Plan

     A-43  

Parties

     A-1  

Party

     A-1  

Paying Agent

     A-5  

Pension Commitments

     A-17