WBC Wabco Holdings Inc

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 — Opinion of WABCO Financial Advisor” and “The Merger — Background of the Merger” beginning on pages [●] and [●], 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.

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”, “Where You Can Find More Information” and “The Merger — Recommendation of the WABCO Board and Reasons for the Merger” beginning on pages [●], [●] and [●], 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.

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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, 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.

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“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.

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.

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”, “Where You Can Find More Information” and “The Merger — Recommendation of the WABCO Board and Reasons for the Merger” beginning on pages [●], [●] and [●], 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.

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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 [•] and [•], respectively. These interests are described in more detail below.

The amounts shown are estimates based on multiple assumptions and do not reflect compensation actions that could occur after April 12, 2019 and before the effective time.

As of April 12, 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 — Merger Consideration — Treatment of Equity and Cash Incentive Compensation” beginning on page [•].

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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 [•]. 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 April 12, 2019; (ii) salary and target bonus levels are those in effect as of April 12, 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 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

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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 or 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.

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).

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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.

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:

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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 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 [•].

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.

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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 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.

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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 [•].

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 [•]) (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 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.

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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.

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.

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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:

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.

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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 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

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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 [•]. The representations and warranties of WABCO in the merger agreement relate to, among other things:

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

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

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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:

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.

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.

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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:

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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:

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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:

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 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

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thereof or (ii) within twenty-four hours of 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 [•], 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.

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:

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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:

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”), 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.

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

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.

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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, as amended), the EU, Brazil, China, India, Japan, Russia, Serbia, South Africa, South Korea and Turkey as described under “The Merger — Regulatory Approvals” beginning on page [•].

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.

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:

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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 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.

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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 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 — Merger Consideration — Treatment of Equity and Cash Incentive Compensation” beginning on page [•]) 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.

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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 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:

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