Exhibit 2.1
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 12, 2000
AMONG
ADAPTIVE BROADBAND CORPORATION,
WESTERN MULTIPLEX CORPORATION
AND
WA MERGER SUB, INC.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER; CERTAIN RELATED MATTERS................................................2
1.1 The Merger.................................................................2
----------
1.2 Closing....................................................................2
-------
1.3 Effective Time.............................................................3
--------------
1.4 Effects of the Merger......................................................3
---------------------
1.5 Charter and Bylaws.........................................................3
------------------
1.6 Officers and Directors.....................................................3
----------------------
1.7 Effect on Common Stock.....................................................4
----------------------
1.8 Treatment of Stock Options and Other Equity-Based Awards...................4
--------------------------------------------------------
1.9 Certain Adjustments........................................................5
-------------------
ARTICLE II EXCHANGE OF CERTIFICATES..........................................................5
2.1 Exchange Fund..............................................................5
-------------
2.2 Exchange Procedures........................................................6
-------------------
2.3 Distributions with Respect to Unexchanged Shares...........................6
------------------------------------------------
2.4 No Further Ownership Rights in Adaptive Common Stock.......................7
----------------------------------------------------
2.5 No Fractional Shares of Western Common Stock...............................7
--------------------------------------------
2.6 Termination of Exchange Fund...............................................7
----------------------------
2.7 No Liability...............................................................7
------------
2.8 Investment of the Exchange Fund............................................8
-------------------------------
2.9 Lost Certificates..........................................................8
-----------------
2.10 Withholding Rights.........................................................8
------------------
2.11 Further Assurances.........................................................8
------------------
2.12 Stock Transfer Books.......................................................8
--------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES...................................................9
3.1 Representations and Warranties of Western and Merger Sub...................9
--------------------------------------------------------
3.2 Representations and Warranties of Adaptive................................19
------------------------------------------
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS........................................30
4.1 Covenants of Western......................................................30
--------------------
4.2 Covenants of Adaptive.....................................................33
---------------------
4.3 Governmental Filings......................................................37
--------------------
ARTICLE V ADDITIONAL AGREEMENTS.............................................................37
5.1 Preparation of Proxy Statement; Stockholders Meetings.....................37
-----------------------------------------------------
5.2 Access to Information.....................................................39
---------------------
i
5.3 Reasonable Best Efforts...................................................40
-----------------------
5.4 Non-Solicitation..........................................................41
----------------
5.5 Fees and Expenses.........................................................44
-----------------
5.6 Directors' and Officers' Indemnification and Insurance....................44
------------------------------------------------------
5.7 Board of Directors and Officers...........................................45
-------------------------------
5.8 Public Announcements......................................................45
--------------------
5.9 Accountant's Letters......................................................45
--------------------
5.10 Listing of Shares of Western Common Stock.................................45
-----------------------------------------
5.11 Affiliates................................................................46
----------
5.12 Benefits Maintenance......................................................46
--------------------
5.13 Agreement to Consult on Certain Matters...................................46
---------------------------------------
5.14 Adaptive Rights Agreement.................................................46
-------------------------
ARTICLE VI CONDITIONS PRECEDENT.............................................................47
6.1 Conditions to Each Party's Obligation to Effect Merger....................47
------------------------------------------------------
6.2 Additional Conditions to Obligations of Western...........................47
-----------------------------------------------
6.3 Additional Conditions to Obligations of Adaptive..........................48
------------------------------------------------
ARTICLE VII TERMINATION AND AMENDMENT.......................................................49
7.1 Termination...............................................................49
-----------
7.2 Effect of Termination.....................................................50
---------------------
7.3 Amendment.................................................................52
---------
7.4 Extension; Waiver.........................................................53
-----------------
ARTICLE VIII GENERAL PROVISIONS.............................................................53
8.1 Non-Survival of Representations, Warranties and Agreements................53
----------------------------------------------------------
8.2 Notices...................................................................53
-------
8.3 Interpretation............................................................54
--------------
8.4 Counterparts..............................................................54
------------
8.6 Governing Law.............................................................55
-------------
8.7 Severability..............................................................55
------------
8.8 Assignment................................................................55
----------
8.9 Submission to Jurisdiction; Waivers.......................................55
-----------------------------------
8.10 Enforcement...............................................................56
-----------
8.11 Definitions...............................................................56
-----------
ii
LIST OF EXHIBITS
Exhibit Title
------- -----
Exhibit A Adaptive Stock Option Agreement
Exhibit B Western Stock Option Agreement
Exhibit C Form of Voting Agreement of WMC Holding
Exhibit 6.2(c)(1) Form of Representations Letter of Western
Exhibit 6.2(c)(2) Form of Representations Letter of Adaptive
AGREEMENT AND PLAN OF MERGER, dated as of November 12, 2000 (this
"Agreement"), among Adaptive Broadband Corporation, a Delaware corporation
---------
("Adaptive"), Western Multiplex Corporation, a Delaware corporation ("Western"),
-------- -------
and WA Merger Sub, Inc., a Delaware corporation ("Merger Sub").
----------
RECITALS
--------
Merger Sub is a wholly owned direct subsidiary of Western that was
organized by Western solely as a vehicle to effect the Merger (as defined below)
and has engaged in no other business activities and has conducted its business
activities and operations only as contemplated hereby;
The Boards of Directors of Adaptive, Western and Merger Sub deem it
advisable and in the best interests of each corporation and its respective
stockholders that Merger Sub merge into Adaptive, upon the terms and subject to
the conditions of this Agreement;
Approval of the Merger and this Agreement requires a vote for (x) adoption
of this Agreement by the holders of shares of Common Stock, par value $.10 per
share, of Adaptive (the "Adaptive Common Stock") at a meeting at which a quorum
---------------------
is present, in the manner specified in the certificate of incorporation of
Adaptive and otherwise in accordance with the law of the State of Delaware (the
"Adaptive Stockholder Approval"), and (y) the approval of the issuance of Class
-----------------------------
A Common Stock, par value $0.01 per share, of Western (the "Western Common
--------------
Stock") pursuant to this Agreement, by the holders of a majority of the shares
-----
of Western Common Stock entitled to vote thereon represented, in person or by
proxy, at a meeting at which a quorum is present, in accordance with the rules
of the NASDAQ Stock Market (the "Western Stockholder Approval");
----------------------------
In furtherance thereof, the Board of Directors of each of Adaptive, Western
and Merger Sub have approved the Merger, upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which each share of Adaptive
Common Stock will be converted into the right to receive the Merger
Consideration (as defined below);
As a condition and inducement to Western's willingness to enter into this
Agreement and the Western Stock Option Agreement referred to below, Western and
Adaptive are entering into a Stock Option Agreement dated as of the date hereof
in the form of Exhibit A (the "Adaptive Stock Option Agreement") pursuant to
-------------------------------
which Adaptive is granting to Western an option to purchase shares of Adaptive
Common Stock;
As a condition and inducement to Adaptive's willingness to enter into this
Agreement and the Adaptive Stock Option Agreement, Western and Adaptive are
entering into a Stock Option Agreement dated as of the date hereof in the form
of Exhibit B (the "Western Stock Option Agreement" and, together with the
------------------------------
Adaptive Stock Option Agreement, the "Stock Option Agreements"), pursuant to
-----------------------
which Western is granting to Adaptive an option to purchase shares of Western
Common Stock;
As a condition and inducement to Adaptive's willingness to enter into this
Agreement, WMC Holding LLC ("WMC Holding"), the owner of a majority of the
-----------
Western Common Stock as of the date of this Agreement, is entering into an
agreement dated as of the
date hereof substantially in the form of Exhibit C (the "WMC Holding Voting
------------------
Agreement") pursuant to which WMC Holding has agreed, among other things, to
---------
vote all shares of Western Common Stock owned or acquired by it in favor of the
adoption of this Agreement and the transactions contemplated hereby;
Certain key employees of Adaptive and Western have entered into agreements
with respect to their employment in connection with this Agreement, effective as
of the Effective Time; and
For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and this Agreement will
----
constitute a "plan of reorganization" for purposes of Section 368 of the Code.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby and thereby, the parties
hereto agree as follows:
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
1.1 The Merger.
----------
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time:
----
(a) The Surviving Corporation. Upon the terms and subject to the
-------------------------
conditions of this Agreement, Merger Sub shall merge with and into Adaptive (the
"Merger"), the separate existence of Merger Sub shall cease and Adaptive
------
(sometimes hereinafter referred to as the "Surviving Corporation") shall survive
---------------------
the Merger. The name of the Surviving Corporation shall be "Adaptive Broadband
Corporation". The Surviving Corporation shall continue to be governed by the
laws of the State of Delaware, and the separate corporate existence of the
Surviving Corporation with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger.
1.2 Closing.
-------
Upon the terms and subject to the conditions set forth in Article VI
and the termination rights set forth in Article VII, the closing of the Merger
(the "Closing") will take place on the third Business Day after the satisfaction
-------
or waiver (subject to applicable law) of the conditions (excluding conditions
that, by their nature, cannot be satisfied until the Closing Date (as defined
below)) set forth in Article VI, unless this Agreement has been theretofore
terminated pursuant to its terms or unless another time or date is agreed to in
writing by the parties hereto (the actual time and date of the Closing being
referred to herein as the "Closing Date"). The
------------
2
Closing shall be held at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 0000
Xxxxxxxx Xxxxxx, Xxxx Xxxx, XX 00000, unless another place is agreed to in
writing by the parties hereto.
1.3 Effective Time.
--------------
As soon as practicable following the satisfaction or waiver (subject to
applicable law) of the conditions set forth in Article VI, at the Closing the
parties shall file a certificate of merger (the "Certificate of Merger") with
---------------------
the Secretary of State of the State of Delaware in such form as is required by
and executed and acknowledged in accordance with the relevant provisions of the
DGCL and make all other filings or recordings required under the DGCL. The
Merger shall become effective at (i) the date and time the Certificate of Merger
is duly filed with the Secretary of State of the State of Delaware or (ii) such
subsequent time as Western, Merger Sub and Adaptive shall agree and as shall be
specified in the Certificate of Merger (such time as the Merger becomes
effective being the "Effective Time").
--------------
1.4 Effects of the Merger.
---------------------
At and after the Effective Time, the Merger will have the effects set
forth in the applicable provisions of the DGCL.
1.5 Charter and Bylaws.
------------------
(a) Certificate of Incorporation. At the Effective Time, and without
----------------------------
any further action on the part of Western or Merger Sub, the certificate of
incorporation of Adaptive, as amended and restated prior to the Effective Time,
shall be the certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(b) Bylaws. At the Effective Time, and without any further action on
------
the part of Western or Merger Sub, the bylaws of Merger Sub as in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
1.6 Officers and Directors.
----------------------
The officers of Merger Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of their
death, resignation or removal or until their respective successors are duly
elected and qualified, as the case may be, except that Xxxxxx Xxxxxxx and Xxxxx
Xxxxx shall be President and Chief Operating Officer and Chief Financial
Officer, respectively, of Western. The directors of Merger Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their death, resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
3
1.7 Effect on Common Stock.
----------------------
As of the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Adaptive Common Stock or of
any shares of Merger Sub Common Stock (as defined below):
(a) Common Stock of Merger Sub. Each issued and outstanding share of
--------------------------
common stock, par value $0.01 per share, of Merger Sub (the "Merger Sub Common
-----------------
Stock") shall, by virtue of the Merger, be converted into one share of common
-----
stock, par value $0.10 per share, of the Surviving Corporation.
(b) Cancellation of Merger Sub-Owned Adaptive Common Stock. Each share
------------------------------------------------------
of Adaptive Common Stock that is owned by Western or Merger Sub shall
automatically be canceled and retired and shall cease to exist, and no cash,
Western Common Stock or other consideration shall be delivered or deliverable in
exchange therefore.
(c) Conversion of Adaptive Common Stock. Subject to Section 2.5, each
-----------------------------------
issued and outstanding share of Adaptive Common Stock (other than shares
canceled pursuant to Section 1.7(b)), shall be converted into the right to
receive a number of shares of Western Common Stock equal to the Exchange Ratio.
The "Exchange Ratio" means 1.345. The amount of Western Common Stock into which
--------------
each such share of Adaptive Common Stock (plus cash in lieu of a fractional
share) is converted is referred to herein as the "Merger Consideration".
--------------------
(d) Cancellation and Retirement of Adaptive Common Stock. As a result
----------------------------------------------------
of the Merger and without any action on the part of the holders thereof, at the
Effective Time, all shares of Adaptive Common Stock shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of a certificate which immediately prior to the Effective Time
represented any such shares of Adaptive Common Stock (such certificate or other
evidence of ownership, a "Certificate") shall thereafter cease to have any
-----------
rights with respect to such shares of Adaptive Common Stock, except the right
(subject to Section 1.7(c)) to receive the applicable Merger Consideration (and
cash in lieu of fractional shares of Western Common Stock) to be issued or paid
in consideration therefor upon surrender of such Certificate in accordance with
Article II.
1.8 Treatment of Stock Options and Other Equity-Based Awards.
--------------------------------------------------------
Each outstanding option to purchase Adaptive Common Stock (a "Adaptive Common
---------------
Stock Option") granted prior to the Effective Time and which remains outstanding
------------
immediately prior to the Effective Time shall cease to represent a right to
acquire shares of Adaptive Common Stock and shall be converted (each, as so
converted, a "Adaptive Converted Option"), at the Effective Time, into an option
-------------------------
to acquire, on the same terms and conditions as were applicable under the
Adaptive Common Stock Option, that number of shares of Western Common Stock
determined by multiplying the number of shares of Adaptive Common Stock subject
to such Adaptive Common Stock Option by the Adaptive Exchange Ratio, rounded
down, if necessary, to the nearest whole share of Western Common Stock, at a
price per share (rounded up to the nearest one-hundredth of a cent) equal to the
per share exercise price specified in such Adaptive Common Stock Option divided
by the Exchange Ratio; provided, however, that in the case of
-------- -------
4
any Adaptive Common Stock Option to which Section 421 of the Code applies by
reason of its qualification under Section 422 of the Code, the option price, the
number of shares subject to such option and the terms and conditions of exercise
of such option shall be determined in a manner consistent with the requirements
of Section 424(a) of the Code. The terms, exercisability, vesting schedule and
other provisions of such Adaptive Common Stock Options shall otherwise remain
unchanged. Western shall file with the Securities and Exchange Commission,
within fifteen (15) days after the Effective Time, a Registration Statement on
Form S-8 relating to the shares of Western Common Stock issuable with respect to
the Adaptive Common Stock Options assumed by Western in accordance with this
Section 1.8. In addition to the foregoing, Adaptive shall take all actions
necessary to provide that, with respect to its Supplemental Executive Deferred
Compensation Plan and its Phantom Stock Plan thereunder, all common and phantom
stock accounts shall be converted into common and phantom stock accounts, as
applicable, relating to shares of Western Common Stock and all such stock
accounts, when and to the extent payable in stock, shall be paid in shares of
Western Common Stock.
1.9 Certain Adjustments.
-------------------
If, between the date of this Agreement and the Effective Time (and as
permitted by Sections 4.1 and 4.2), the outstanding shares of Western Common
Stock or the outstanding shares of Adaptive Common Stock shall have been
increased, decreased, changed into or exchanged for a different number of shares
or different class, in each case, by reason of any reclassification,
recapitalization, stock split, reverse stock split, split-up, combination or
exchange of shares or a stock dividend or dividend payable in any other
securities shall be declared with a record date within such period, or any
similar event shall have occurred, the Merger Consideration (as defined in
Section 1.7(c)) shall be appropriately adjusted to provide to the holders of
Adaptive Common Stock, Adaptive Common Stock Options and Western Common Stock
the same economic effect as contemplated by this Agreement prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund.
-------------
Prior to the Effective Time, Western shall appoint a commercial bank or
trust company reasonably acceptable to Adaptive, or a subsidiary thereof, to act
as exchange agent hereunder for the purpose of exchanging Certificates for the
applicable Merger Consideration (the "Exchange Agent"). At or prior to the
--------------
Effective Time, Western shall deposit with the Exchange Agent, in trust for the
benefit of holders of shares of Adaptive Common Stock, certificates representing
the shares of Western Common Stock issuable pursuant to Section 1.7 in exchange
for Certificates. Western agrees to make available to the Exchange Agent from
time to time, as needed, cash sufficient to pay cash in lieu of fractional
shares pursuant to Section 2.5 and any dividends and other distributions
pursuant to Section 2.3. Any cash and certificates representing Western Common
Stock deposited with the Exchange Agent shall hereinafter be referred to as the
"Exchange Fund".
-------------
5
2.2 Exchange Procedures.
-------------------
Promptly after the Effective Time, Western shall cause the Exchange
Agent to mail to each holder of a Certificate (i) a letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent, and which letter shall be in customary form and have such other
provisions as Adaptive may reasonably specify (such letter to be reasonably
acceptable to Adaptive prior to the Effective Time) and (ii) instructions for
effecting the surrender of such Certificates in exchange for the applicable
Merger Consideration, together with any dividends and other distributions with
respect thereto and any cash in lieu of fractional shares. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefore (A) one
or more shares of Western Common Stock representing, in the aggregate, the whole
number of shares that such holder has the right to receive pursuant to Section
1.7 (after taking into account all shares of Adaptive Common Stock then held by
such holder) and (B) a check in the amount equal to the cash that such holder
has the right to receive pursuant to the provisions of this Article II,
including cash in lieu of any fractional shares of Western Common Stock pursuant
to Section 2.5 and dividends and other distributions pursuant to Section 2.3. No
interest will be paid or will accrue on any cash payable pursuant to Section 2.3
or Section 2.5. In the event of a transfer of ownership of Adaptive Common Stock
that is not registered in the transfer records of Adaptive a certificate
evidencing, in the aggregate, the proper number of shares of Western Common
Stock, a check in the proper amount of cash in lieu of any fractional shares of
Western Common Stock pursuant to Section 2.5 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.3, may be
issued with respect to such Adaptive Common Stock to such a transferee if the
Certificate representing such shares of Adaptive Common Stock is presented to
the Exchange Agent, accompanied by all documents reasonably required to evidence
and effect such transfer and to evidence that any applicable stock transfer
taxes have been paid.
2.3 Distributions with Respect to Unexchanged Shares.
------------------------------------------------
No dividends or other distributions with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Western Common Stock that such holder would be entitled
to receive upon surrender of such Certificate and no cash payment in lieu of
fractional shares of Western Common Stock shall be paid to any such holder
pursuant to Section 2.5 until such holder shall surrender such Certificate in
accordance with Section 2.2. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the record holder
thereof without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional shares of Western Common Stock
to which such holder is entitled pursuant to Section 2.5 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Western Common Stock, and
(b) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and a payment date
subsequent to such surrender payable with respect to such shares of Western
Common Stock.
6
2.4 No Further Ownership Rights in Adaptive Common Stock.
----------------------------------------------------
All shares of Western Common Stock issued and cash paid upon conversion
of shares of Adaptive Common Stock in accordance with the terms of Article I and
this Article II (including any cash paid pursuant to Sections 2.3 or 2.5) shall
be deemed to have been issued or paid in full satisfaction of all rights
pertaining to the shares of Adaptive Common Stock.
2.5 No Fractional Shares of Western Common Stock.
--------------------------------------------
(a) No certificates or scrip or shares of Western Common Stock
representing fractional shares of Western Common Stock or book-entry credit of
the same shall be issued upon the surrender for exchange of Certificates and
such fractional share interests will not entitle the owner thereof to vote or to
have any rights of a stockholder of Western or a holder of shares of Western
Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder
of shares of Adaptive Common Stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Western Common
Stock (determined after aggregating all fractional shares of Western Common
Stock to such holder) shall receive, in lieu thereof, cash (without interest) in
an amount equal to the product of (i) such fractional part of a share of Western
Common Stock multiplied by (ii) the closing price for a share of Western Common
Stock as reported on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") on the first trading day following the date on which
------
the Effective Time occurs. As promptly as practicable after the determination of
the amount of cash, if any, to be paid to holders of fractional interests, the
Exchange Agent shall so notify Western, and Western shall deposit such amount
with the Exchange Agent and shall cause the Exchange Agent to forward payments
to such holders of fractional interests subject to and in accordance with the
terms hereof.
2.6 Termination of Exchange Fund.
----------------------------
Any portion of the Exchange Fund which remains undistributed to the
holders of Certificates for six months after the Effective Time shall, at
Western's request, be delivered to Western or otherwise on the instruction of
Western, and any holders of the Certificates who have not theretofore complied
with this Article II shall after such delivery look only to Western for the
Merger Consideration with respect to the shares of Adaptive Common Stock
formerly represented thereby to which such holders are entitled pursuant to
Sections 1.7 and 2.2, any cash in lieu of fractional shares of Western Common
Stock to which such holders are entitled pursuant to Section 2.5 and any
dividends or distributions with respect to shares of Western Common Stock to
which such holders are entitled pursuant to Section 2.3. Any such portion of the
Exchange Fund remaining unclaimed by holders of shares of Adaptive Common Stock
immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Entity (as defined in Section 3.1(c)(iii))
shall, to the extent permitted by law, become the property of Western free and
clear of any claims or interest of any Person previously entitled thereto.
2.7 No Liability.
------------
7
To the fullest extent permitted by law, none of Western, Merger Sub,
Adaptive, Western Majority Shareholder or the Exchange Agent shall be liable to
any Person in respect of any Merger Consideration from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
2.8 Investment of the Exchange Fund.
-------------------------------
The Exchange Agent shall invest any cash included in the Exchange Fund
as directed by Western on a daily basis; provided that no such investment or
--------
loss thereon shall affect the amounts payable to Adaptive stockholders pursuant
to Article I and the other provisions of this Article II. Any interest and other
income resulting from such investments shall promptly be paid to Western.
2.9 Lost Certificates.
-----------------
If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if reasonably required by Western, the posting
by such Person of a bond in such reasonable amount as Western may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will deliver in exchange for such lost, stolen
or destroyed Certificate the applicable Merger Consideration with respect to the
shares of Adaptive Common Stock formerly represented thereby, any cash in lieu
of fractional shares of Western Common Stock, and unpaid dividends and
distributions on shares of Western Common Stock deliverable in respect thereof,
pursuant to this Agreement.
2.10 Withholding Rights.
------------------
Western shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Adaptive Common Stock such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code and the rules
and regulations promulgated thereunder, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Western, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Adaptive Common Stock in respect of
which such deduction and withholding was made by Western.
2.11 Further Assurances.
------------------
At and after the Effective Time, the officers and directors of Western
will be authorized to execute and deliver, in the name and on behalf of Merger
Sub or Adaptive, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of Merger Sub or Adaptive, any other actions
and things to vest, perfect or confirm of record or otherwise in Western any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by Western as a result of, or in connection
with, the Merger.
2.12 Stock Transfer Books.
--------------------
8
The stock transfer books of Adaptive shall be closed immediately upon
the Effective Time and there shall be no further registration of transfers of
shares of Adaptive Common Stock thereafter on the records of Adaptive. On or
after the Effective Time, any Certificates presented to the Exchange Agent or
Western for any reason shall be exchanged for the applicable Merger
Consideration with respect to the shares of Adaptive Common Stock formerly
represented thereby (including any cash in lieu of fractional shares of Western
Common Stock to which the holders thereof are entitled pursuant to Section 2.5
and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.3).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Western and Merger Sub.
--------------------------------------------------------
Except as disclosed in the Western Filed SEC Reports (as defined in
Section 3.1(d)(ii)) or as set forth in the Western Disclosure Schedule delivered
by Western to Adaptive prior to the execution of this Agreement (the "Western
-------
Disclosure Schedule"), Western and Merger Sub jointly and severally represent
-------------------
and warrant to Adaptive as follows:
(a) Organization, Standing and Power; Subsidiaries.
----------------------------------------------
(i) Western and each of its Subsidiaries (as defined in Section 8.11),
including Merger Sub, is a corporation or other organization duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify or to be in good standing,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Western or Merger Sub. The copies of the certificate
of incorporation and bylaws of Western and Merger Sub that were previously
furnished or made available to Adaptive are true, complete and correct copies of
such documents as in effect on the date of this Agreement.
(ii) Western has no Subsidiaries that as of the date of this Agreement
are Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the
Securities and Exchange Commission (the "SEC")). All the outstanding shares of
---
capital stock of, or other equity interests in, each such Significant Subsidiary
have been duly authorized, validly issued and are fully paid and nonassessable
and are, except as set forth in such Registration Statement, owned directly or
indirectly by Western, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively "Liens") and free of any other restriction (including any
-----
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests), except for restrictions imposed by
applicable securities laws.
(b) Capital Structure.
-----------------
9
(i) As of October 31, 2000, the authorized capital stock of Western
consists of (A) 200,000,000 shares of Western Common Stock, of which (v)
55,564,419 shares were issued and outstanding, (w) 42,000,000 shares were held
in treasury, (x) 12,137,728 shares were reserved for future issuance pursuant to
outstanding stock options and reserved for future grant under stock option
plans, (y) 1,000,000 shares were reserved for issuance pursuant to an employee
stock purchase plan; (B) 100,000,000 shares of Western Class B Common Stock, par
value $0.01 per share, of which no shares were issued and outstanding and (C)
25,000,000 shares of preferred stock, par value $0.01 per share, of which no
shares were issued and outstanding. From October 31, 2000 to the date of this
Agreement, there have been no issuances of shares of the capital stock of
Western or any other securities of Western other than issuances of shares
pursuant to options or rights outstanding as of October 31, 2000. Except as
described in this Section 3.1(b) and except as set forth in Section 3.1(b) of
the Western Disclosure Schedule, as of the date of this Agreement, no shares of
capital stock of Western are reserved for any purpose. All issued and
outstanding shares of capital stock of Western are duly authorized, validly
issued, fully paid and nonassessable, and have not been issued in violation of
(nor are any of the authorized shares of capital stock of Western subject to)
any preemptive or similar rights created by statute, the certificate of
incorporation or bylaws of Western, or any agreement to which Western is a party
or bound.
(ii) No bonds, debentures, notes or other indebtedness of Western
having the right to vote on any matters on which holders of capital stock of
Western may vote are issued or outstanding.
(iii) Except as set forth in this Section 3.1(b) and except as set
forth in Section 3.1(b) of the Western Disclosure Schedule, as of the date of
this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which Western or any of its
Significant Subsidiaries is a party relating to the issued or unissued capital
stock of Western or any of its Significant Subsidiaries or obligating Western or
any of its Significant Subsidiaries to grant, issue or sell any shares of the
capital stock of Western or any of its Significant Subsidiaries, by sale, lease,
license or otherwise. As of the date of this Agreement, there are no
obligations, contingent or otherwise, of Western or any of its Significant
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Western
Common Stock or other capital stock of Western or any of its Significant
Subsidiaries. Section 3.1(b)(iii) of the Western Disclosure Schedule sets forth
a complete and correct list, as of October 31, 2000, of the number of shares of
Western Common Stock subject to Western Stock Options and the exercise price of
the outstanding Western Stock Options referenced therein.
(iv) Shareholders of Western Common Stock have the right to vote on
all matters put forth to the shareholders of Western.
(v) The authorized capital stock of Merger Sub consists of 1,000
shares of Merger Sub Common Stock. As of the date of this Agreement, 100 shares
of Merger Sub Common Stock were issued and outstanding and held by Western, all
of which are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights created by statute, Merger Sub's certificate of
incorporation or bylaws or any agreement to which Merger Sub is a party or is
bound.
10
(vi) The shares of Western Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights created by statute, Western's certificate of
incorporation or bylaws or any agreement to which Western is a party or is
bound.
(c) Authority; No Conflicts.
-----------------------
(i) Western and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject, in the case of the consummation of the Merger, to
the Western Stockholder Approval. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Western and Merger
Sub and no other corporate proceedings on the part of Western or Merger Sub are
necessary to authorize the execution and delivery of this Agreement or to
consummate the Merger and the other transactions contemplated hereby, subject in
the case of the shares of Western common stock to be issued upon consummation of
the Merger, to the Western Stockholder Approval. This Agreement has been duly
executed and delivered by Western and Merger Sub and constitutes a valid and
binding agreement of Western and Merger Sub, enforceable against each of Western
and Merger Sub in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws relating to or affecting creditors generally or by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Western has all requisite
corporate power and authority to enter into the Stock Option Agreements and to
consummate the transactions contemplated thereby. The execution and delivery of
the Stock Option Agreements and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of Western and no other corporate proceedings on the part of Western
are necessary to authorize the execution and delivery of the Stock Option
Agreements or to consummate the transactions contemplated thereby. The Stock
Option Agreements have been duly executed and delivered by Western and each
constitutes a valid and binding agreement of Western, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by Western and
Merger Sub and the Stock Option Agreements by Western do not, and the
consummation by Western and Merger Sub of the Merger and the other transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of, or result by its terms in the
termination, amendment, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a Lien, charge, "put" or
"call" right or other encumbrance on, or the loss of, any assets, including
Intellectual Property (any such conflict, violation, default, right of
termination, amendment, cancellation or acceleration, loss or creation, a
"Violation") pursuant to: (A) any provision of the certificate of incorporation
---------
or bylaws or similar organizational document of Western, Merger Sub or any
Significant Subsidiary of Western, or (B) except as (1) individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
11
Effect on Western or Merger Sub or (2) would not prevent or materially delay the
consummation of the Merger, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, and except with respect to employee stock
options and other awards, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Western, Merger Sub or any
Subsidiary of Western or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal, local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any quasi-
governmental or private body exercising any regulatory, taxing, importing or
other governmental or quasi-governmental authority (a "Governmental Entity") or
-------------------
any other Person, is required by or with respect to Western, Merger Sub or any
Subsidiary of Western in connection with the execution and delivery of this
Agreement by Western or Merger Sub and the Stock Option Agreements by Western,
as applicable, or the consummation by Western and Merger Sub of the Merger and
the other transactions contemplated hereby and thereby, except for those
required under or in relation to (A) the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) state securities or
-------
"blue sky" laws (the "Blue Sky Laws"), (C) the Securities Act of 1933, as
-------------
amended (the "Securities Act"), (D) the Securities Exchange Act of 1934, as
--------------
amended (the "Exchange Act"), (E) the DGCL with respect to the filing of the
------------
Certificate of Merger, (F) the rules and regulations of the NASDAQ, (G)
antitrust or other competition laws of other jurisdictions and (H) such
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to make or obtain, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Western. Consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to any of the foregoing
clauses (A) through (G) are hereinafter referred to as "Necessary Consents".
------------------
(d) Reports and Financial Statements of Western.
-------------------------------------------
(i) Western has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents required
to be filed by it with the SEC since August 1, 2000 (collectively, the "Western
-------
SEC Reports"). No Subsidiary of Western is required to file any form, report,
-----------
registration statement, prospectus or other document with the SEC. None of the
Western SEC Reports, as of their respective dates (and, if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
filing), contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the financial statements
(including the related notes) included or incorporated by reference in the
Western SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
Western and its consolidated Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with United States
generally accepted accounting principles ("GAAP") consistently applied during
----
the periods involved except as otherwise noted therein, and subject, in the case
of the unaudited interim financial statements of Western, to the absence of
notes and normal year-end adjustments
12
that have not been and are not expected to be material in amount. All of such
Western SEC Reports, as of their respective dates (and as of the date of any
amendment to the respective Western SEC Report), complied as to form in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
(ii) Except as disclosed in the Western SEC Reports filed and
publicly available prior to the date hereof (the "Western Filed SEC Reports")
-------------------------
and except as set forth in Section 3.1(d)(ii) of the Western Disclosure
Schedule, Western and its Subsidiaries have not incurred any liabilities that
are of a nature that would be required to be disclosed on a balance sheet of
Western and its Subsidiaries or the footnotes thereto prepared in conformity
with GAAP, other than (A) liabilities incurred in the ordinary course of
business, (B) liabilities incurred in accordance with Section 4.1, (C)
liabilities for Taxes (as defined in Section 8.11(k) or (D) liabilities that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Western.
(e) Information Supplied.
--------------------
(i) None of the information supplied or to be supplied by Western
for inclusion or incorporation by reference in (A) the Form S-4 (as defined in
Section 5.1) will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (B) the Joint Proxy Statement/Prospectus (as defined in
Section 5.1) will, on the date it is first mailed to Adaptive stockholders or
Western stockholders or at the time of the Adaptive Stockholders Meeting or the
Western Stockholders Meeting (each as defined in Section 5.1), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Form
S-4 and the Joint Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by Western with respect to
statements made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Adaptive for inclusion or
incorporation by reference therein.
(f) Board Approvals.
--------------
(i) Western Board Approval. The Board of Directors of Western, by
----------------------
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way (the
"Western Board Approval"), has duly (A) determined that this Agreement and the
----------------------
Merger and the Western Stock Option Agreement are fair to and in the best
interests of Western and its stockholders and declared this Agreement and the
Merger to be advisable, (B) approved this Agreement, the Western Stock Option
Agreement, the WMC Holding Voting Agreement and the Merger and the consummation
13
of the transactions contemplated hereby and (C) declared it advisable that the
stockholders of Western approve the issuance of Western Common Stock pursuant to
this Agreement and directed that such matter be submitted for consideration by
Western's stockholders at the Western Stockholders Meeting. The Western Board
Approval constitutes approval of this Agreement, the Western Stock Option
Agreement, the WMC Holding Voting Agreement and the Merger for purposes of
Section 203 of the DGCL. To the knowledge of Western, except for Section 203 of
the DGCL (the prohibitions on "business combinations" of which have been
rendered inapplicable by the approval described in clause (B) above), no state
takeover statute is applicable to this Agreement, the Western Stock Option
Agreement, the WMC Holding Voting Agreement or the Merger or the other
transactions contemplated hereby.
(ii) Merger Sub Board Approvals. The Board of Directors of Merger
--------------------------
Sub, by resolutions duly adopted by unanimous vote of those voting at a meeting
duly called and held and not subsequently rescinded or modified in any way (the
"Merger Sub Board Approval"), has duly (A)? determined that this Agreement and
-------------------------
the Merger are fair to and in the best interests of Merger Sub and its
stockholders and declared the Agreement and the Merger to be advisable, and??
(B)? approved this Agreement and the Merger by the approval described in clause
(C) above. The Merger Sub Board Approval constitutes approval of this Agreement
and the Merger for purposes of Section 203 of the DGCL. To the knowledge of
Merger Sub, no state takeover statute is applicable to this Agreement or the
Merger or the other transactions contemplated hereby.
(g) Votes Required. The Western Stockholder Approval as required by
--------------
the rules of the NASDAQ is the only vote of the holders of any class or series
of Western capital stock necessary to approve or adopt this Agreement and the
Merger and to consummate the Merger and the other transactions contemplated
hereby. The vote of Western is the only vote of the holders of any class or
series of Merger Sub capital stock necessary to approve or adopt this Agreement
and the Merger and to consummate the Merger and the other transactions
contemplated hereby.
(h) Litigation; Compliance with Laws.
--------------------------------
(i) There are no suits, actions, judgments or proceedings
(collectively, "Actions") pending or, to the knowledge of Western, threatened,
-------
against or affecting Western or any Subsidiary of Western or any property or
asset of Western or any Subsidiary of Western which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Western, nor are there any judgments, decrees, injunctions, rules or orders of
any Governmental Entity or arbitrator outstanding against Western or any
Subsidiary of Western which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on Western.
(ii) Except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Western, Western and
its Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
orders and approvals of all Governmental Entities which are necessary for the
operation of the businesses as now being conducted of Western and its
Subsidiaries, taken as a whole (the "Western Permits"), and no suspension or
---------------
cancellation of any of the Western Permits is pending or, to the knowledge of
Western,
14
threatened. Western and its Subsidiaries are in compliance with the terms of the
Western Permits, except where the failure to so comply, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Western. Neither Western nor its Subsidiaries is in violation of, and Western
and its Subsidiaries have not received any notices of violations with respect
to, any laws, statutes, ordinances, rules or regulations of any Governmental
Entity, except for violations that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Western.
(i) Absence of Certain Changes or Events. Except for liabilities
------------------------------------
permitted to be incurred in accordance with this Agreement or the transactions
contemplated hereby, since December 31, 1999, Western and its Subsidiaries
(including Merger Sub) have conducted their business only in the ordinary course
and in a manner consistent with past practice and, since June 30, 2000, there
have not been any changes, circumstances or events which, individually or in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on Western.
(j) Intellectual Property. Section 3.1(j) of the Western Disclosure
---------------------
Schedule sets forth, with respect to the Intellectual Property (as defined
below) owned, held or used by Western or its Subsidiaries ("Western IP"), all
----------
patents, registrations and applications relating thereto, all material
unregistered Western IP and each and every material license, sublicense,
consent-to-use agreement and other agreement concerning Western IP to which
Western and/or any of its Subsidiaries is a party ("Western IP Licenses").
-------------------
Except as disclosed in Section 3.1(j) of the Western Disclosure Schedule, (i)
Western and/or any of its Subsidiaries owns or has the right to use all the
material Intellectual Property necessary or desirable for Western and its
subsidiaries to conduct their business as is currently conducted and consistent
with past practice; (ii) all of the Western IP is valid, enforceable and
unexpired, is free of Liens, and has not been abandoned; (iii) to Western's
knowledge, the Western IP does not infringe or otherwise impair the Intellectual
Property of any third party and is not being infringed or impaired by any third
party; (iv) no action, suit, proceeding, arbitration, judgment, decree,
settlement, injunction, rule or order is pending or has been rendered or, to the
best knowledge of Western, is threatened by any Governmental Entity which would
limit, cancel or question the validity, enforceability, ownership or use of any
Western IP; (v) Western takes all reasonable steps to protect, maintain and
safeguard the Western IP, including executing all appropriate confidentiality
agreements, and has made all filings and executed all agreements necessary or
desirable in connection therewith; (vi) no party to a Western IP License is, or
is alleged to be, in breach or default thereunder; (vii) the transactions
contemplated by this Agreement shall in no way impair or limit the rights of
Western or any of its subsidiaries under any Western IP License, or cause any
payments to be due thereunder. For the purposes of this Agreement, "Intellectual
------------
Property" shall mean all U.S., state and foreign intellectual property,
--------
including without limitation all (i) (a) inventions, discoveries, processes,
designs, techniques, developments, technology, and related improvements and
know-how, whether or not patented or patentable; (b) copyrights and works of
authorship in any media, including computer programs, software, databases and
related items, graphics, artwork, photography, advertising and promotional
materials (including graphics and text), designs, proprietary or copyrightable
elements of pictorial, graphic or sculptural works, functional or utilitarian
objects or items of clothing, Internet site content, and all other authors'
rights, including "moral rights"; (c) trademarks, service marks, trade names,
brand names, corporate names, domain names, logos, trade dress and all elements
thereof, the goodwill of any
15
business symbolized thereby, and all common-law rights relating thereto; (d)
trade secrets and other confidential information; (ii) all registrations,
applications, recordings, and licenses or other agreements related thereto;
(iii) all rights to obtain renewals, extensions, continuations,
continuations-in-part, reissues, divisions or similar legal protections related
thereto; and rights to bring an action at law or in equity for the infringement
or other impairment of the foregoing before the Closing Date, including the
right to receive all proceeds and damages therefrom.
(k) Opinion of Western Financial Advisor. Western has received the
------------------------------------
opinion of Credit Suisse First Boston Corporation, dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is fair to
Western, from a financial point of view. A copy of such opinion will be made
available to Adaptive promptly after the date of this Agreement.
(l) Taxes. Each of Western and its Subsidiaries has filed all material
-----
Tax Returns required to have been filed (or extensions have been duly obtained),
has paid all material Taxes required to have been paid by it (whether or not
shown as due on any Tax Return), and has established an adequate accrual for all
material Taxes not yet due or payable; (ii) all material Tax Returns filed by
Western and its Subsidiaries are true, complete and correct in all material
respects; (iii) no material claim for unpaid Taxes has become a lien against the
property of Western or any of its Subsidiaries or is being asserted against
Western or any of its Subsidiaries; (iv) no audit or other proceeding with
respect to any material Taxes due from Western or any of its Subsidiaries or any
Tax Return of Western or any of its Subsidiaries is pending or threatened in
writing, or being conducted by a Tax authority; (v) no consent under Section
341(f) of the Code has been filed with respect to the Western or any of its
Subsidiaries; (vi) all material Taxes required to be withheld, collected or
deposited by or with respect to Western and each of its Subsidiaries have been
timely withheld, collected or deposited, as the case may be, and, to the extent
required, have been paid to the relevant taxing authority; (vii) none of Western
or any of its Subsidiaries has been a party to any distribution occurring during
the last two years in which the parties to such distribution treated the
distribution as one to which section 355 of the Code is applicable; (viii) none
of Western or any of its Subsidiaries has agreed to make or is required to make
any adjustment under section 481(a) of the Code by reason of a change in
accounting method or otherwise; (ix) none of Western or any of its Subsidiaries
is a party to, is bound by or has any obligation under, any Tax sharing
agreement or similar contract or arrangement; (x) no closing agreement pursuant
to section 7121 of the Code (or any similar provision of state, local or foreign
law) has been entered into by or with respect to Western or any of its
Subsidiaries; (xi) neither Western nor any of its Subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes; (xii) neither
Western nor its Subsidiaries has any liability for Taxes of any Person (other
than a liability of Western for Taxes of any of its Subsidiaries or a liability
of any of Western's. Subsidiaries for Taxes of Western under Regulation 1.1502-6
(or similar provisions of state, local or foreign law), as a transferee or
successor, by contract or otherwise; and (xiii) neither Western nor any of its
Subsidiaries has made any payment or may be obligated to make any payment (by
contract or otherwise) which will not be deductible by reason of Section 162(m)
of the Code.
(m) Certain Contracts. All "material contracts" (as such term is defined
-----------------
in Item 601(b)(10) of Regulation S-K of the SEC) to which Western or any of its
Subsidiaries is a party to or bound by, including all written agreements with
customers providing for future sales in excess of $1,000,000, are valid and in
full force and effect except to the extent they have
16
previously expired in accordance with their terms or if the failure to be in
full force and effect, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Western. Neither Western nor any
of its Subsidiaries has violated any provision of, or committed or failed to
perform any act which, with or without notice, lapse of time or both, would
constitute a default under the provisions of, any contract described in the
first sentence of this paragraph, except in each case for those violations and
defaults which, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on Western. Schedule 3.1(m) of
the Western Disclosure Schedule sets forth the contracts described in the first
sentence of this paragraph that give rise to a right of the other parties
thereto to terminate such contract, to a right of first refusal or similar right
thereunder as a result of the execution and delivery of this Agreement and the
consummation by Western of the Merger and the other transactions contemplated
hereby, or that could, after the Effective Time, restrict Western or any of its
Affiliates or any successor thereto, from engaging or competing in any line of
business or in any geographic area.
(n) Employee Benefits.
-----------------
(i) Schedule 3.1(n) of the Western Disclosure Schedule contains a true
and complete list of each written, formal "employee benefit plan" (within the
meaning of section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), including, without limitation, multiemployer plans within
the meaning of ERISA section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, bonus, incentive, deferred
compensation and all other employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA (including any
funding mechanism therefor now in effect or required in the future as a result
of the transaction contemplated by this Agreement or otherwise), whether legally
binding or not, under which any employee or former employee of Western or any of
its Subsidiaries has any present or future right to benefits and under which
Western or any of its Subsidiaries has any present or future liability. All such
plans, agreements, programs, policies and arrangements shall be collectively
referred to as the "Western Benefit Plans". Schedule 3.1(n)(i) of the Western
---------------------
Disclosure Schedule lists each employment agreement in effect on the date of
this Agreement.
(ii) With respect to each Western Benefit Plan, Western has delivered or
made available to Adaptive a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (A) any related trust agreement or other funding instrument; (B) the
most recent determination letter, if applicable; (C) any current summary plan
description and other written communications (or a description of any oral
communications) by Western or any of its Subsidiaries within the last year to
their employees concerning the extent of the benefits provided under a Western
Benefit Plan; and (D) for the most recent available period, the Form 5500 and
attached schedules, audited financial statements, actuarial valuation reports
and attorney's response to an auditor's request for information.
(iii) (A) Each Western Benefit Plan has been established and administered
in accordance with its terms, and in substantial compliance with the applicable
provisions of ERISA, the Code and other applicable laws, rules and regulations;
(B) each Western Benefit
17
Plan which is intended to be qualified within the meaning of Code section 401(a)
is so qualified and has received a favorable determination letter as to its
qualification, and nothing has occurred, whether by action or failure to act,
that could reasonably be expected to cause the loss of such qualification; (C)
no event has occurred and no condition exists that would subject Western or
any of its Subsidiaries, either directly or by reason of their affiliation with
any member of their "Controlled Group" (defined as any organization which is a
----------------
member of a controlled group of organizations within the meaning of Code
sections 414(b), (c), (m) or (o)), to any material tax, fine, lien, penalty or
other liability imposed by ERISA, the Code or other applicable laws, rules and
regulations; (D) for each Western Benefit Plan with respect to which a Form
5500 has been filed, no material change has occurred with respect to the matters
covered by the most recent Form since the date thereof; (E) neither Western
nor any of its Subsidiaries has engaged in a transaction with respect to any
Western Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject the Company or any subsidiary to a
tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA in an amount which would be material; (F) no Western Benefit Plan provides
retiree welfare benefits and neither Western nor any of its Subsidiaries have
any obligation to provide any retiree welfare benefits other than as required by
Section 4980B of the Code; and (G) neither Western nor any member of its
Controlled Group has engaged in, or is a successor or parent corporation to an
entity that has engaged in, a transaction described in Sections 4069 or 4212(c)
of ERISA.
(iv) No Western Benefit Plan is subject to Title IV of ERISA.
(v) With respect to any Western Benefit Plan, (A) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of Western, threatened and (B) no facts or
circumstances exist to the knowledge of Western that could reasonably be
expected to give rise to any such actions, suits or claims.
(vi) Except as set forth on Schedule 3.1(n), no Western Benefit Plan
exists that could result in the payment to any present or former employee of
Western or any of its Subsidiaries of any money or other property or accelerate
or provide any other rights or benefits to any present or former employee of
Western or any of its Subsidiaries as a result of the transaction contemplated
by this Agreement. Except as set forth on Schedule 3.1(n), there is no contract,
plan or arrangement (written or otherwise) covering any employee or former
employee of Western or any of its Subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(o) Insurance. All primary, excess and umbrella policies, bonds and
---------
other forms of insurance currently owned or held by or on behalf of and/or
providing insurance coverage to Western and its Subsidiaries and their
respective directors, officers, agents and employees are in full force and
effect, except for any such forms of insurance the absence of which would not
likely have a Material Adverse Effect on Western. Western has not received a
notice of default under any such policy and has not received written notice of
any pending or threatened termination or cancellation, coverage limitation or
reduction, or material premium increase with respect to any such policy. No
letters of credit have been posted and no cash has been restricted to support
any reserves for insurance.
18
(p) Properties. Except for properties and assets disposed of in the
----------
ordinary course of business consistent with past practices since June 30, 2000,
Western and its Significant Subsidiaries have good and marketable title, free
and clear of all liabilities and liens, to all their material properties and
assets, whether tangible or intangible, real, personal or mixed. All material
buildings, fixtures, equipment and other property and assets held under leases
by Western or any of its Significant Subsidiaries are held under valid
instruments enforceable by Western or such Significant Subsidiary in accordance
with their respective terms. Substantially all of Western's and its Significant
Subsidiaries' equipment in regular use has been well maintained and is in good
and serviceable condition, reasonable wear and tear excepted.
(q) Customers and Suppliers. Except as set forth in Part II of
-----------------------
Section 3.1(q) of the Western Disclosure Schedule, Western reasonably believes
that its relationships with its suppliers and customers are satisfactory. Except
as set forth in Part II of Section 3.1(q) of the Western Disclosure Schedule, as
of the date of this Agreement, Western believes, based on its inquiry of the
Western Named Executives (defined below), that the estimates contained in Part I
of Schedule 3.1(q) for the customers named therein (the "Western Named
-------------
Customers") are reasonable under the circumstances. Except as set forth in Part
---------
II of Section 3.1(q) of the Western Disclosure Schedule, as of the date of this
Agreement, nothing has come to the attention of the Western Named Executives,
including any written or email correspondence from customers or from other
employees of Western, that, taken in the aggregate together with all other
available information relating to such Western Named Customers, causes such
Western Named Executives to believe that Part I of Schedule 3.1(q) is
unreasonable. For purposes of this paragraph 3.1(q), "Western Named Executives"
------------------------
means Xxxxxxxx Xxxxx, Xxxx Xxxxxxxxx and Xxxxx Xxxxx. As of the date of this
Agreement, none of the Western Named Customers has terminated or canceled its
agreement with Western.
(r) Brokers or Finders. No agent, broker, investment banker,
------------------
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Western, except for (x) Credit Suisse First Boston Corporation,
(y) Ripplewood Holdings LLC and (z) Leeward Technology Partners, whose fees and
expenses in each case will be paid by Western.
3.2 Representations and Warranties of Adaptive.
------------------------------------------
Except as disclosed in the Adaptive Filed SEC Reports (as defined in
Section 3.2(d)(ii)) or as set forth in the Adaptive Disclosure Schedule
delivered by Adaptive to Western prior to the execution of this Agreement (the
"Adaptive Disclosure Schedule"), Adaptive represents and warrants to Western as
----------------------------
follows:
(a) Organization, Standing and Power; Subsidiaries.
----------------------------------------------
(i) Adaptive is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each Subsidiary of Adaptive is a corporation or
other organization duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, has the
19
requisite power and authority to own, lease and operate its properties and to
carry on its business as is now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power and authority,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Adaptive, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary other
than in such jurisdictions where the failure so to qualify or to be in good
standing, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Adaptive. The copies of the certificate of
incorporation and bylaws of Adaptive, which were previously furnished or made
available to Western, are true, complete and correct copies of such documents as
in effect on the date of this Agreement.
(ii) Section 3.2(a)(ii) of the Adaptive Disclosure Schedule lists
----
all the Significant Subsidiaries of Adaptive as of the date of this Agreement.
All the outstanding shares of capital stock of, or other equity interests in,
each such Significant Subsidiary have been duly authorized, validly issued and
are fully paid and nonassessable and are owned directly or indirectly by
Adaptive, free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests), except for restrictions
imposed by applicable securities laws.
(b) Capital Structure.
-----------------
(i) As of October 31, 2000, the authorized capital stock of
Adaptive consists of (A) 250,000,000 shares of Adaptive Common Stock of which
249,200,000 have been designated Adaptive Common Stock and 800,000 have been
designated Adaptive Series A Junior Common Stock; as of November 9, 2000,
37,698,603 shares of Adaptive Common Stock were issued and outstanding and no
shares of Adaptive Series A Junior Common Stock were issued and outstanding; and
(B) 5,000,000 shares of preferred stock, par value $0.10 per share, none of
which are issued or outstanding and all of which have been reserved for issuance
upon exercise of rights (the "Adaptive Rights") distributed to holders of
---------------
Adaptive Common Stock pursuant to a Rights Agreement, dated as of June 17, 1999,
between Adaptive and Bank Boston, N.A., as Rights Agent, as amended (the
"Adaptive Rights Agreement"). From October 31, 2000 to the date of this
-------------------------
Agreement, there have been no issuances of shares of the capital stock of
Adaptive or any other securities of Adaptive other than issuances of shares
pursuant to options or rights outstanding as of October 31, 2000. All issued and
outstanding shares of the capital stock of Adaptive are duly authorized, validly
issued, fully paid and nonassessable, and free of any preemptive rights. None of
the Subsidiaries of Adaptive own any shares of Adaptive capital stock.
(ii) No bonds, debentures, notes or other indebtedness of Adaptive
having the right to vote on any matters on which holders of capital stock of
Adaptive may vote ("Adaptive Voting Debt") are issued or outstanding.
--------------------
(iii) Except as set forth in this Section 3.2(b), as of the date of
this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which Adaptive or any of its
Significant Subsidiaries is a party relating to the issued or unissued capital
stock of Adaptive or any of its Significant Subsidiaries or obligating Adaptive
20
or any of its Significant Subsidiaries to grant, issue or sell any shares of the
capital stock of Adaptive or any of its Significant Subsidiaries, by sale,
lease, license or otherwise. As of the date of this Agreement, there are no
obligations, contingent or otherwise, of Adaptive or any of its Significant
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Adaptive
Common Stock or other capital stock of Adaptive or any of its Significant
Subsidiaries. The options and other rights to acquire Adaptive Common Stock from
Adaptive representing the right to purchase shares of Adaptive Common Stock,
together with other employee stock options issued by Adaptive after the date
hereof in accordance with the Adaptive Stock Option Plans (as defined in the
next sentence) and Section 4.2, are referred to herein collectively as the
"Adaptive Stock Options"). The Adaptive Stock Options have been granted under
----------------------
the 1992 Stock Option Plan of Adaptive Broadband Corporation and the California
Microwave, Inc. 1986 Stock Option Plan (collectively, the "Adaptive Stock Option
---------------------
Plans"). Section 3.2(b)(iii) of the Adaptive Disclosure Schedule sets forth a
-----
complete and correct list, as of the dates set forth therein, of the number of
shares of Adaptive Common Stock subject to Adaptive Stock Options and the
exercise price of the outstanding Adaptive Stock Options referenced therein.
(c) Authority; No Conflicts.
-----------------------
(i) Adaptive has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby,
subject, in the case of the consummation of the Merger, to the Adaptive
Stockholder Approval. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Adaptive and no other corporate
proceedings on the part of Adaptive are necessary to authorize the execution and
delivery of the Agreement or to consummate the Merger and the other transactions
contemplated hereby, subject in the case of the consummation of the Merger, to
the Adaptive Stockholder Approval. This Agreement has been duly executed and
delivered by Adaptive and constitutes a valid and binding agreement of Adaptive,
enforceable against Adaptive in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Adaptive has
all requisite corporate power and authority to enter into the Stock Option
Agreements and to consummate the transactions contemplated thereby. The
execution and delivery of the Stock Option Agreements and the consummation of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of Adaptive and no other corporate proceedings on
the part of Adaptive are necessary to authorize the execution and delivery of
the Stock Option Agreements or to consummate the transactions contemplated
thereby. The Stock Option Agreements have been duly executed and delivered by
Adaptive and each constitutes a valid and binding agreement of Adaptive,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by Adaptive does
not, and the consummation by Adaptive of the Merger and the other transactions
contemplated hereby will not, conflict with, or result in a Violation pursuant
to: (A) any provision of the certificate of
21
incorporation or bylaws or similar organizational document of Adaptive or any
Significant Subsidiary of Adaptive or (B) except as (1) individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Adaptive or (2) would not prevent or materially delay the consummation of the
Merger, subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in paragraph
(iii) below and except with respect to employee stock options and other awards,
any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Adaptive or any Subsidiary of Adaptive or their respective
properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any other
Person is required by or with respect to Adaptive or any Subsidiary of Adaptive
in connection with the execution and delivery of this Agreement or the Stock
Option Agreements by Adaptive or the consummation of the Merger and the other
transactions contemplated hereby and thereby, except the Necessary Consents and
such consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to make or obtain, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Adaptive.
(d) Reports and Financial Statements.
--------------------------------
(i) Adaptive has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents required
to be filed by it with the SEC since December 31, 1997 (collectively, the
"Adaptive SEC Reports"). No Subsidiary of Adaptive is required to file any form,
--------------------
report, registration statement, prospectus or other document with the SEC. None
of the Adaptive SEC Reports, as of their respective dates (and, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), contained or will contain any untrue statement of a material fact
or omitted or will omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the financial statements
(including the related notes) included or incorporated by reference in the
Adaptive SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
Adaptive and its consolidated Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements of Adaptive,
to the absence of notes and normal year-end adjustments that have not been and
are not expected to be material in amount. All of such Adaptive SEC Reports, as
of their respective dates (and as of the date of any amendment to the respective
Adaptive SEC Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder.
(ii) Except as disclosed in the Adaptive SEC Reports filed and
publicly available prior to the date hereof (the "Adaptive Filed SEC Reports")
--------------------------
and except as set forth in Section 3.2(d)(ii) of the Adaptive Disclosure
Schedule, Adaptive and its Subsidiaries have not incurred any liabilities that
are of a nature that would be required to be disclosed on a balance
22
sheet of Adaptive and its Subsidiaries or the footnotes thereto prepared in
conformity with GAAP, other than (A) liabilities incurred in the ordinary course
of business, (B) liabilities incurred in accordance with Section 4.2, or (C)
liabilities for Taxes or (D) liabilities that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Adaptive.
(e) Information Supplied.
--------------------
(i) None of the information supplied or to be supplied by Adaptive
for inclusion or incorporation by reference in (A) the Form S-4 will, at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(B) the Joint Proxy Statement/Prospectus will, on the date it is first mailed to
Adaptive stockholders or Western stockholders or at the time of the Adaptive
Stockholders Meeting or the Western Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(ii) Notwithstanding the foregoing provisions of this Section 3.2(e),
no representation or warranty is made by Adaptive with respect to statements
made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Western for inclusion or
incorporation by reference therein.
(f) Board Approval. The Board of Directors of Adaptive, by
--------------
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way (the
"Adaptive Board Approval"), has duly (i) determined that this Agreement and the
-----------------------
Merger and the Adaptive Stock Option Agreement are fair to and in the best
interests of Adaptive and the holders of Adaptive Common Stock and declared the
Agreement and the Merger to be advisable, (ii) approved this Agreement, the
Adaptive Stock Option Agreement, the Merger and the consummation of the
transactions contemplated hereby and (iii) declared it advisable that the
stockholders of Adaptive adopt this Agreement and directed that such matter be
submitted for consideration by Adaptive's stockholders at the Adaptive
Stockholders Meeting. The Adaptive Board Approval constitutes approval of this
Agreement, the Adaptive Stock Option Agreement and the Merger for purposes of
Section 203 of the DGCL. To the knowledge of Adaptive, except for Section 203 of
the DGCL (the prohibitions on "business combinations" of which have been
rendered inapplicable by the approval in clause (ii) above), no state takeover
statute is applicable to this Agreement or the Merger or the other transactions
contemplated hereby or thereby. The Adaptive Board Approval constitutes the
approval of the "Disinterested Directors" of Adaptive (as such term is defined
in the Amended and Restated Certificate of Incorporation of Adaptive) for
purposes of Article IX of the Amended and Restated Certificate of Incorporation
of Adaptive.
(g) Vote Required. The Adaptive Stockholder Approval is the only vote
-------------
of the holders of any class or series of Adaptive capital stock necessary to
approve or adopt this
23
Agreement and the Merger and to consummate the Merger and the other transactions
contemplated hereby (the "Required Adaptive Vote)".
----------------------
(h) Litigation; Compliance with Laws.
--------------------------------
(i) There are no Actions pending or, to the knowledge of Adaptive,
threatened, against or affecting Adaptive or any Subsidiary of Adaptive or any
property or asset of Adaptive or any Subsidiary of Adaptive which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on Adaptive, nor are there any judgments, decrees, injunctions, rules or
orders of any Governmental Entity or arbitrator outstanding against Adaptive or
any Subsidiary of Adaptive which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Adaptive.
(ii) Except as, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Adaptive, Adaptive and its
Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
orders and approvals of all Governmental Entities which are necessary for the
operation of the businesses as now being conducted of Adaptive and its
Subsidiaries, taken as a whole (the "Adaptive Permits"), and no suspension or
----------------
cancellation of any of the Adaptive Permits is pending or, to the knowledge of
Adaptive, threatened. Adaptive and its Subsidiaries are in compliance with the
terms of the Adaptive Permits, except where the failure to so comply,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Adaptive. Neither Adaptive nor its Subsidiaries is in
violation of, and Adaptive and its Subsidiaries have not received any notices of
violations with respect to, any laws, statutes, ordinances, rules or regulations
of any Governmental Entity, except for violations that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Adaptive.
(i) Absence of Certain Changes or Events. Except for liabilities
------------------------------------
permitted to be incurred in accordance with this Agreement or the transactions
contemplated hereby and except as described in the Adaptive SEC Reports, since
June 30, 2000, Adaptive and its Subsidiaries have conducted their business only
in the ordinary course and in a manner consistent with past practice and, since
June 30, 2000, there have not been any changes, circumstances or events which,
individually or in the aggregate, have had, or would reasonably be expected to
have, a Material Adverse Effect on Adaptive.
(j) Intellectual Property. Section 3.2(j) of the Adaptive Disclosure
---------------------
Schedule sets forth, with respect to the Intellectual Property (as defined in
Section 3.1(j)) owned, held or used by Adaptive or its Subsidiaries ("Adaptive
--------
IP"), all patents, registrations and applications relating thereto, all material
--
unregistered Adaptive IP and each and every material license, sublicense,
consent-to-use agreement and other agreement concerning Adaptive IP to which
Adaptive and/or any of its Subsidiaries is a party ("Adaptive IP Licenses").
--------------------
Except as disclosed in Section 3.2(j) of the Adaptive Disclosure Schedule, (i)
Adaptive and/or any of its Subsidiaries owns or has the right to use all the
material Intellectual Property necessary or desirable for Adaptive and its
subsidiaries to conduct their business as is currently conducted and consistent
with past practice; (ii) all of the Adaptive IP is valid, enforceable and
unexpired, is free of Liens, and has not been abandoned; (iii) to Adaptive's
knowledge, the Adaptive IP does not infringe or otherwise impair the
Intellectual Property of any third party and is not being
24
infringed or impaired by any third party; (iv) no action, suit, proceeding,
arbitration, judgment, decree, settlement, injunction, rule or order is pending
or has been rendered or, to the best knowledge of Adaptive, is threatened by any
Governmental Entity which would limit, cancel or question the validity,
enforceability, ownership or use of any Adaptive IP; (v) Adaptive takes all
reasonable steps to protect, maintain and safeguard the Adaptive IP, including
executing all appropriate confidentiality agreements, and has made all filings
and executed all agreements necessary or desirable in connection therewith; (vi)
no party to a Adaptive IP License is, or is alleged to be, in breach or default
thereunder; and (vii) the transactions contemplated by this Agreement shall in
no way impair or limit the rights of Adaptive or any of its subsidiaries under
any Adaptive IP License, or cause any payments to be due thereunder.
(k) Opinion of Adaptive Financial Advisor. Adaptive has received the
-------------------------------------
opinion of Xxxx Xxxxxxxx Xxxxxxx, dated the date of this Agreement, to the
effect that, as of such date, the Exchange Ratio is fair, from a financial point
of view, to the holders of Adaptive Common Stock. A copy of such opinion will be
made available to Western promptly after the date of this Agreement.
25
(l) Taxes. Each of Adaptive and its Subsidiaries has filed all
-----
material Tax Returns required to have been filed (or extensions have been duly
obtained), has paid all material Taxes required to have been paid by it (whether
or not shown as due on any Tax Return), and has established an adequate accrual
for all material Taxes not yet due or payable; (ii) all material Tax Returns
filed by Adaptive and its Subsidiaries are true, complete and correct in all
material respects; (iii) no material claim for unpaid Taxes has become a lien
against the property of Adaptive or any of its Subsidiaries or is being asserted
against Adaptive or any of its Subsidiaries; (iv) no audit or other proceeding
with respect to any material Taxes due from Adaptive or any of its Subsidiaries
or any Tax Return of Adaptive or any of its Subsidiaries is pending or
threatened in writing, or being conducted by a Tax authority; (v) no consent
under Section 341(f) of the Code has been filed with respect to Adaptive or any
of its Subsidiaries; (vi) all material Taxes required to be withheld, collected
or deposited by or with respect to Adaptive and each of its Subsidiaries have
been timely withheld, collected or deposited, as the case may be, and, to the
extent required, have been paid to the relevant taxing authority; (vii) none of
Adaptive or any of its Subsidiaries has been a party to any distribution
occurring during the last two years in which the parties to such distribution
treated the distribution as one to which section 355 of the Code is applicable;
(viii) none of Adaptive or any of its Subsidiaries has agreed to make or is
required to make any adjustment under section 481(a) of the Code by reason of a
change in accounting method or otherwise; (ix) none of Adaptive or any of its
Subsidiaries is a party to, is bound by or has any obligation under, any Tax
sharing agreement or similar contract or arrangement; (x) no closing agreement
pursuant to section 7121 of the Code (or any similar provision of state, local
or foreign law) has been entered into by or with respect to Adaptive or any of
its Subsidiaries; (xi) neither Adaptive nor any of its Subsidiaries is a party
to any agreement providing for the allocation or sharing of Taxes; (xii) neither
Adaptive nor its Subsidiaries has any liability for Taxes of any Person (other
than a liability of Adaptive for Taxes of any of its Subsidiaries or a liability
of any of Adaptive's. Subsidiaries for Taxes of Adaptive under Regulation
1.1502-6 (or similar provisions of state, local or foreign law), as a transferee
or successor, by contract or otherwise; and (xiii) neither Adaptive nor any of
its Subsidiaries has made any payment or may be obligated to make any payment
(by contract or otherwise) which will not be deductible by reason of Section
162(m) of the Code.
(m) Certain Contracts. All "material contracts" (as such term is
-----------------
defined in Item 601(b)(10) of Regulation S-K of the SEC) to which Adaptive or
any of its Subsidiaries is a party to or bound by, including all written
agreements with customers providing for future sales in excess of $1,000,000,
are valid and in full force and effect except to the extent they have previously
expired in accordance with their terms or if the failure to be in full force and
effect, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Adaptive. Neither Adaptive nor any of its
Subsidiaries has violated any provision of, or committed or failed to perform
any act which, with or without notice, lapse of time or both, would constitute a
default under the provisions of, any contract described in the first sentence of
this paragraph, except in each case for those violations and defaults which,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on Adaptive. Schedule 3.2(m) of the Adaptive
Disclosure Schedule sets forth the contracts described in the first sentence of
this paragraph that give rise to a right of the other parties thereto to
terminate such contract, to a right of first refusal or similar right thereunder
as a result of the execution and delivery of this Agreement and the consummation
by Adaptive of the Merger and the other transactions contemplated hereby, or
that could, after the Effective Time, restrict Western or any
26
of its Affiliates or any successor thereto, from engaging or competing in any
line of business or in any geographic area.
(n) Employee Benefits.
-----------------
(i) Schedule 3.2(n) of the Adaptive Disclosure Schedule contains a
true and complete list of each written, formal "employee benefit plan" (within
the meaning of section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including, without limitation, multiemployer plans
within the meaning of ERISA section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this Agreement or
otherwise), whether legally binding or not, under which any employee or former
employee of Adaptive or any of its Subsidiaries has any present or future right
to benefits and under which Adaptive or any of its Subsidiaries has any present
or future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Adaptive Benefit Plans".
----------------------
Schedule 3.2(n)(i) of the Adaptive Disclosure Schedule lists each employment
agreement in effect on the date of this Agreement.
(ii) With respect to each Adaptive Benefit Plan, Adaptive has
delivered or made available to Western a current, accurate and complete copy
(or, to the extent no such copy exists, an accurate description) thereof and, to
the extent applicable: (A) any related trust agreement or other funding
instrument; (B) the most recent determination letter, if applicable; (C) any
current summary plan description and other written communications (or a
description of any oral communications) by Adaptive or any of its Subsidiaries
within the last year to their employees concerning the extent of the benefits
provided under a Adaptive Benefit Plan; and (D) for the two most recent years
the Form 5500 and attached schedules, audited financial statements, actuarial
valuation reports and attorney's response to an auditor's request for
information.
(iii) (A) Each Adaptive Benefit Plan has been established and
administered in accordance with its terms, and in substantial compliance with
the applicable provisions of ERISA, the Code and other applicable laws, rules
and regulations; (B) each Adaptive Benefit Plan which is intended to be
qualified within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification, and nothing
has occurred, whether by action or failure to act, that could reasonably be
expected to cause the loss of such qualification; (C) no event has occurred and
no condition exists that would subject Adaptive or any of its Subsidiaries,
either directly or by reason of their affiliation with any member of their
"Controlled Group" (defined as any organization which is a member of a
----------------
controlled group of organizations within the meaning of Code sections 414(b),
(c), (m) or (o)), to any material tax, fine, lien, penalty or other liability
imposed by ERISA, the Code or other applicable laws, rules and regulations;
(D) for each Adaptive Benefit Plan with respect to which a Form 5500 has been
filed, no material change has occurred with respect to the matters covered by
the most recent Form since the date thereof; (E) no "reportable event" (as such
term is defined in ERISA section 4043), or "accumulated funding deficiency" (as
such term is defined in ERISA section 302 and Code section 412 (whether or not
waived)) has occurred with respect
27
to any Adaptive Benefit Plan; (F) neither Adaptive nor any of its Subsidiaries
has engaged in a transaction with respect to any Adaptive Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
could subject the Company or any subsidiary to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an amount which
would be material; (G) no Adaptive Benefit Plan provides retiree welfare
benefits and neither Adaptive nor any of its Subsidiaries have any obligation to
provide any retiree welfare benefits other than as required by Section 4980B of
the Code; and (H) neither Adaptive nor any member of its Controlled Group has
engaged in, or is a successor or parent corporation to an entity that has
engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA.
(iv) No Adaptive Benefit Plan is subject to Title IV of ERISA.
(v) With respect to any Adaptive Benefit Plan, (A) no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or, to the knowledge of Adaptive, threatened and (B) no facts or
circumstances exist to the knowledge of Adaptive that could reasonably be
expected to give rise to any such actions, suits or claims.
(vi) Except as set forth on Schedule 3.2(n), no Adaptive Benefit Plan
exists that could result in the payment to any present or former employee of
Adaptive or any of its Subsidiaries of any money or other property or accelerate
or provide any other rights or benefits to any present or former employee of
Adaptive or any of its Subsidiaries as a result of the transaction contemplated
by this Agreement. Except as set forth on Schedule 3.2(n), there is no contract,
plan or arrangement (written or otherwise) covering any employee or former
employee of Adaptive or any of its Subsidiaries that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(o) Insurance. All primary, excess and umbrella policies, bonds and
---------
other forms of insurance currently owned or held by or on behalf of and/or
providing insurance coverage to Adaptive and its Subsidiaries and their
respective directors, officers, agents and employees are in full force and
effect, except for any such forms of insurance the absence of which would not
likely have a Material Adverse Effect on Adaptive. Adaptive has not received a
notice of default under any such policy and has not received written notice of
any pending or threatened termination or cancellation, coverage limitation or
reduction, or material premium increase with respect to any such policy. No
letters of credit have been posted and no cash has been restricted to support
any reserves for insurance.
(p) Customers and Suppliers. Except as set forth in Part II of
-----------------------
Section 3.2(p) of the Adaptive Disclosure Schedule, Adaptive reasonably believes
that its relationships with its suppliers and customers are satisfactory. Except
as set forth in Part II of Section 3.2(p) of the Adaptive Disclosure Schedule,
as of the date of this Agreement, Adaptive believes, based on its inquiry of the
Adaptive Named Executives (defined below), that the estimates contained in Part
I of Schedule 3.2(p) for the customers named therein (the "Adaptive Named
--------------
Customers") are reasonable under the circumstances. Except as set forth in Part
---------
II of Section 3.2(p) of the Adaptive Disclosure Schedule, as of the date of this
Agreement, nothing has come to the attention of the Adaptive Named Executives,
including any written or email correspondence from customers or from other
employees of Adaptive, that, taken in the aggregate together with
28
all other available information relating to such Adaptive Named Customers,
causes such Adaptive Named Executives to believe that Part I of Schedule 3.2(p)
is unreasonable. For purposes of this paragraph 3.2(p), "Adaptive Named
--------------
Executives" means Xxxx Xxxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxx and Xxx Xxxx. As of
----------
the date of this Agreement, none of the Adaptive Named Customers has terminated
or canceled its agreement with Adaptive.
(q) Properties. Except for properties and assets disposed of in the
----------
ordinary course of business consistent with past practices since June 30, 2000,
Adaptive and its Significant Subsidiaries have good and marketable title, free
and clear of all liabilities and liens, to all their material properties and
assets, whether tangible or intangible, real, personal or mixed. All material
buildings, fixtures, equipment and other property and assets held under leases
by Adaptive or any of its Significant Subsidiaries are held under valid
instruments enforceable by Adaptive or such Significant Subsidiary in accordance
with their respective terms. Substantially all of Adaptive's and its Significant
Subsidiaries' equipment in regular use has been well maintained and is in good
and serviceable condition, reasonable wear and tear excepted.
(r) Environmental Matters. Except as would not reasonably be
---------------------
expected, individually or in the aggregate, to have a Material Adverse Effect:
(i) Adaptive and its Subsidiaries hold, and are in compliance with
and have been in continuous compliance with all Environmental Permits, and are,
and have been, otherwise in compliance with all Environmental Laws;
(ii) None of Adaptive and its Subsidiaries has received any
Environmental Claim, and none of Adaptive and its Subsidiaries is aware of any
threatened Environmental Claim;
(iii) None of Adaptive and its Subsidiaries has entered into, has
agreed to, or is subject to any judgment, decree, order or other similar
requirement of any governmental authority under any Environmental Laws;
(iv) To the knowledge of Adaptive, Hazardous Materials have not been
generated, transported, treated, stored, disposed of, arranged to be disposed
of, released or threatened to be released at, on, from or under any of the
properties or facilities currently or formerly owned, leased or otherwise used
by Adaptive or its Subsidiaries, in violation of, or in a manner or to a
location that would reasonably be expected to give rise to liability to Adaptive
or any of its Subsidiaries under any Environmental Laws; and
(v) None of Adaptive and its Subsidiaries has assumed, contractually
or by operation of law, any liabilities or obligations under any Environmental
Laws.
(s) Certain Divestitures. Since January 1, 1998, Adaptive has sold
--------------------
all of the businesses and other assets listed on Schedule 3.2(q) of the Adaptive
Disclosure Schedule (the "Divested Businesses"). Set forth on Section 3.2(q) of
-------------------
the Adaptive Disclosure Schedule is a list of all material agreements,
arrangements and understandings to which Adaptive or any of its Subsidiaries is
a party or pursuant to which they may have any obligations or liabilities
(whether absolute, contingent or otherwise and whether or not required to be set
forth or reflected in a consolidated balance sheet of Adaptive prepared in
accordance with GAAP) relating to the
29
Divested Businesses or the sale thereof other than obligations or liabilities
against which Adaptive is indemnified by the acquiror thereof (the "Divestiture
-----------
Agreements"). Adaptive has provided to Western true and correct copies of the
----------
Divestiture Agreements. All of the Divestiture Agreements are in full force and
effect and are unmodified. Except for obligations and liabilities arising under
the Divestiture Agreements, neither Adaptive nor any of its Subsidiaries has any
material liabilities or obligations of any nature (whether absolute, contingent
or otherwise and whether or not required to be set forth or reflected in a
consolidated balance sheet of Adaptive prepared in accordance with GAAP) arising
out of or relating to the Divested Businesses or their respective businesses,
assets, liabilities or obligations or the sale thereof other than obligations or
liabilities against which Adaptive is indemnified by the acquiror thereof.
Except as set forth on Schedule 3.2(q) of the Adaptive Disclosure Schedule, no
material claims have been asserted or threatened against Adaptive or any of its
Subsidiaries under any of the Divestiture Agreements (including, without
limitation, any claims in respect of a breach of any term of any such agreement
or for any indemnification provided by Adaptive or any of its Subsidiaries in
any Divestiture Agreement) nor to the knowledge of Adaptive is there any basis
for any such claim.
(t) Adaptive Rights Agreement. The Adaptive Board has amended
-------------------------
(substantially in the form provided to Western) the Adaptive Rights Agreement to
the effect that none of Western, Merger Sub, WMC Holding or any of their
respective affiliates shall become an "Acquiring Person", and that no
"Distribution Date" or "Triggering Event" (as such terms are defined in the
Adaptive Rights Agreement) will occur as a result of the approval, execution or
delivery of this Agreement, the Adaptive Stock Option Agreement or the Voting
Agreement of WMC Holding or the consummation of the transactions contemplated
hereby or thereby. The Adaptive Rights Agreement shall terminate and be of no
further immediately prior to the Effective Time, without any consideration being
payable with respect to the outstanding Adaptive Rights thereunder.
(u) Brokers or Finders. No agent, broker, investment banker,
------------------
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based upon arrangements made by
or on behalf of Adaptive, except Xxxx Xxxxxxxx Xxxxxxx, whose fees and expenses
will be paid by Adaptive.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Western.
--------------------
During the period from the date of this Agreement and continuing until
the Effective Time, Western agrees as to itself and its Subsidiaries that
(except as expressly contemplated or permitted by this Agreement or Section 4.1
(including its subsections) of the Western Disclosure Schedule or to the extent
that Adaptive shall otherwise consent in writing):
(a) Ordinary Course.
---------------
30
Western and its Subsidiaries shall carry on their respective businesses
in the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use its
reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them and retain
the services of their respective officers, key employees and consultants to the
end that their ongoing businesses shall not be impaired in any material respect
at the Effective Time.
(b) Dividends; Changes of Share Capital.
-----------------------------------
Western shall not, and shall not permit any of its Subsidiaries to, and
shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its outstanding shares of capital stock; (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock; or (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock.
(c) Issuance of Securities.
----------------------
Western shall not, and shall not permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of any shares of its capital stock of any class or any securities convertible
into or exercisable for, or any rights, warrants, calls or options to acquire,
any such shares, or enter into any commitment, arrangement, undertaking or
agreement with respect to any of the foregoing, other than (i) the issuance of
Western Common Stock upon the exercise of Western Stock Options in accordance
with their present terms or pursuant to Western Stock Options or other stock
based awards granted pursuant to clause (ii) below, (ii) the granting of up to
2,500,000 Western Stock Options or other stock based awards of or to acquire
shares of Western Common Stock granted under Western Stock Option Plans
outstanding on the date hereof in the ordinary course of business consistent
with past practice, (iii) issuances by a wholly owned Subsidiary of Western of
capital stock to such Subsidiary's parent or another wholly owned Subsidiary of
Western, (iv) pursuant to acquisitions and investments or the financings
therefore, or (v) issuances disclosed in Section 4.1(c) of the Western
Disclosure Schedule.
(d) Governing Documents.
-------------------
Except to the extent required to comply with their respective
obligations under this Agreement or with applicable law, Western and Merger Sub
shall not amend or propose to so amend their respective certificates of
incorporation or bylaws.
(e) No Acquisitions.
---------------
Western shall not acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association, joint venture or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (excluding the acquisition of assets used in the operations of the
business of Western and its Subsidiaries in
31
the ordinary course, which assets do not constitute a business unit, division or
all or substantially all of the assets of the transferor) to the extent such
acquisition could reasonably be expected to materially delay or interfere with
the consummation of the Merger; provided, however, that the foregoing shall not
-------- -------
prohibit (x) internal reorganizations or consolidations involving existing
Subsidiaries of Western or (y) the creation of new Subsidiaries of Western
organized to conduct or continue activities otherwise permitted by this
Agreement. For the avoidance of doubt and as an example only, the parties agree
that an acquisition would "materially delay" consummation of the Merger if pro
forma financial statements would be required to be included in the relevant
disclosure document relating to such acquisition and complying with such a
requirement would delay clearance of the Form S-4 (as defined below) by the SEC.
Western shall give reasonable advance notice of any such acquisition to
Adaptive, provided that Adaptive shall have agreed in writing to keep such
information confidential.
(f) No Dispositions.
---------------
Western shall not, and shall not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of, or agree to sell, lease or otherwise
dispose of, any of its assets (including capital stock of Subsidiaries of
Western) except in the ordinary course of business.
(g) Investments; Indebtedness.
-------------------------
Western shall not, and shall not permit any of its Subsidiaries to,
other than as disclosed in Section 4.1(g) of the Western Disclosure Schedule,
make any loans, advances or capital contributions to, or investments in, any
Person, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of Western or any of its
Subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another Person (other than any wholly owned Subsidiary) or enter into any
arrangement having the economic effect of any of the foregoing (collectively,
"Western Indebtedness"), except in the ordinary course of business consistent
--------------------
with past practice and in any event not in excess of $1,000,000.
(h) Tax-Free Qualification.
----------------------
Western shall use its reasonable best efforts not to, and shall use its
reasonable best efforts not to permit any of its Subsidiaries to, take any
action (including any action otherwise permitted by this Section 4.1) that would
prevent or impede the Merger from qualifying as a reorganization under Section
368(a) of the Code.
(i) Compensation.
------------
Except as required by law or by the terms of any collective bargaining
agreement or other agreement currently in effect between Western or any
Subsidiary of Western and any officer or employee thereof, Western shall not
enter into or amend any employment, or severance or similar arrangement with any
officer (with a title of vice president or above) whose salary and bonus is
greater than $100,000 or increase the salary of any director, officer or
employee of Western or any material Subsidiary of Western (except that Western
may make reasonable salary increases in connection with Western customary
employee review processes and market
32
adjustments), or make any increase in or commitment to increase any employee
benefits or bonuses (except that Western may pay reasonable bonuses in
accordance with the bonus plans listed in Section 3.1(i) of the Western
Disclosure Schedule), other than pursuant to the terms of Western Stock Option
Plans, accelerate the exercisability of any Western Stock Options, make any
severance payments (except for payments to employees terminated without cause
consistent with past practice), adopt or amend or make any commitment to adopt
or amend any Western Benefit Plan or any plan, program or arrangement that would
be a Western Benefit Plan if in effect as of the date hereof or make any
contribution, other than regularly scheduled contributions, to any Western
Benefit Plan (except for nonmaterial changes to be implemented in connection
with the Western open enrollment period).
(j) Accounting Methods; Income Tax Elections.
----------------------------------------
Except as disclosed in the Western SEC Reports filed prior to the date
of this Agreement, or as required by a Governmental Entity, Western shall not
change its methods of accounting in effect at December 31, 1999, except as
required by changes in GAAP as concurred in by Western's independent public
accountants. Western shall not (i) change its fiscal year, (ii) make or change
any Tax Election, (iii) change any annual Tax accounting period, (iv) change any
method of Tax accounting, (v) file any amended Tax Return, (vi) enter into any
closing agreement relating to any Tax, (vii) settle any Tax claim or assessment,
or (viii) surrender any right to claim a Tax Refund, that, individually or in
the aggregate, in the United States or elsewhere, would be material to Western.
(k) No Related Actions.
------------------
Western will not, and will not permit any of its Subsidiaries to, agree
or commit to do any of the foregoing.
4.2 Covenants of Adaptive.
---------------------
During the period from the date of this Agreement and continuing until
the Effective Time, Adaptive agrees as to itself and its Subsidiaries that
(except as expressly contemplated or permitted by this Agreement or Section 4.2
(including its subsections) of the Adaptive Disclosure Schedule or to the extent
that Western shall otherwise consent in writing):
(a) Ordinary Course.
---------------
(i) Adaptive and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all material respects,
in substantially the same manner as heretofore conducted, and shall use its
reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them and retain
the services of their respective officers and key employees and consultants, to
the end that their ongoing businesses shall not be impaired in any material
respect at the Effective Time.
(ii) Other than in connection with acquisitions permitted by Section
4.2(e) or investments permitted by Section 4.2(g), Adaptive shall not, and shall
not permit any of its Subsidiaries to, (A) enter into any new material line of
business or (B) incur or commit to any
33
capital expenditures or any obligations or liabilities other than capital
expenditures and obligations or liabilities in non-material amounts incurred or
committed to in the ordinary course of business consistent with past practice.
(b) Dividends; Changes in Share Capital.
-----------------------------------
Adaptive shall not, and shall not permit any of its Subsidiaries to,
and shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock; (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned Subsidiary of Adaptive which remains a wholly owned Subsidiary after
consummation of such transaction, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except for the purchase from
time to time by Adaptive of Adaptive Common Stock in connection with the
Adaptive Benefit Plans in the ordinary course of business consistent with past
practice.
(c) Issuance of Securities.
----------------------
Adaptive shall not, and shall not permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock of any class, any Adaptive Voting Debt or
any securities convertible into or exercisable for, or any rights, warrants,
calls or options to acquire, any such shares or Adaptive Voting Debt, or enter
into any commitment, arrangement, undertaking or agreement with respect to any
of the foregoing, other than (i) the issuance of Adaptive Common Stock upon the
exercise of Adaptive Stock Options in accordance with their present terms or
pursuant to Adaptive Stock Options or other stock-based awards granted pursuant
to clause (ii) below, (ii) the granting of up to 1,000,000 Adaptive Stock
Options or other stock based awards of or to acquire shares of Adaptive Common
Stock granted under Adaptive Stock Option Plans outstanding on the date hereof
in the ordinary course of business consistent with past practice, (iii)
issuances by a wholly owned Subsidiary of Adaptive of capital stock to such
Subsidiary's parent or another wholly owned Subsidiary of Adaptive, or (iv)
issuances disclosed in Section 4.2(c) of the Adaptive Disclosure Schedule.
(d) Governing Documents.
-------------------
Except as set forth in Section 4.2(d) of the Adaptive Disclosure
Schedule or to the extent required to comply with their respective obligations
hereunder or with applicable law, Adaptive and its Subsidiaries shall not amend
or propose to amend their respective certificates of incorporation or bylaws.
(e) No Acquisitions.
---------------
Adaptive shall not, and shall not permit any of its Subsidiaries to,
acquire or agree to acquire by merger or consolidation, or by purchasing an
equity interest in or the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (excluding the acquisition of assets used in the operations of the
business of Adaptive and its
34
Subsidiaries in the ordinary course, which assets do not constitute a business
unit, division or all or substantially all of the assets of the transferor).
Without limiting the foregoing, Adaptive shall not, and shall not permit any of
its Subsidiaries to, engage in (x) internal reorganizations or consolidations
involving existing Subsidiaries of Adaptive or (y) the creation of new
Subsidiaries of Adaptive organized to conduct or continue activities otherwise
permitted by this Agreement.
(f) No Dispositions.
---------------
Adaptive shall not, and shall not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of, or agree to sell, lease or otherwise
dispose of, any of its assets (including capital stock of Subsidiaries of
Adaptive) except in the ordinary course of business.
(g) Investments; Indebtedness.
-------------------------
Adaptive shall not, and shall not permit any of its Subsidiaries to,
other than as disclosed in Section 4.2(g) of the Adaptive Disclosure Schedule,
make any loans, advances or capital contributions to, or investments in, any
Person, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of Adaptive or any of its
Subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another Person (other than any wholly owned Subsidiary) or enter into any
arrangement having the economic effect of any of the foregoing (collectively,
"Adaptive Indebtedness"), except in the ordinary course of business consistent
---------------------
with past practice and in any event not in excess of $1,000,000.
(h) Tax-Free Qualification.
----------------------
Adaptive shall use its reasonable best efforts not to, and shall use
its reasonable best efforts not to permit any of its Subsidiaries to, take any
action (including any action otherwise permitted by this Section 4.2) that would
prevent or impede the Merger from qualifying as a reorganization under Section
368(a) of the Code.
(i) Compensation.
------------
Except as required by law or by the terms of any collective bargaining
agreement or other agreement currently in effect between Adaptive or any
Subsidiary of Adaptive and any officer or employee thereof, Adaptive shall not
enter into or amend any employment, or severance or similar arrangement with any
officer (with a title of vice president or above) whose salary and bonus is
greater than $100,000 or increase the salary of any director, officer or
employee of Adaptive or any material Subsidiary of Adaptive (except that
Adaptive may make reasonable salary increases in connection with Adaptive
customary employee review processes, the planned focal review in February 2001
and market adjustments), or make any increase in or commitment to increase any
employee benefits or bonuses (except that Adaptive may pay reasonable bonuses in
accordance with the bonus plans listed in Section 3.2(n) of the Adaptive
Disclosure Schedule), other than pursuant to the terms of the Adaptive Stock
Option Plans, accelerate the exercisability of any Adaptive Stock Options, make
any severance payments (except for payments to employees terminated without
cause consistent with past practice), adopt or amend or make any commitment to
adopt or amend any Adaptive Benefit Plan or any plan,
35
program or arrangement that would be a Adaptive Benefit Plan if in effect as of
the date hereof or make any contribution, other than regularly scheduled
contributions, to any Adaptive Benefit Plan (except for nonmaterial changes to
be implemented in connection with the Adaptive open enrollment period).
(j) Accounting Methods; Income Tax Elections.
----------------------------------------
Except as disclosed in the Adaptive SEC Reports filed prior to the date
of this Agreement, or as required by a Governmental Entity, Adaptive shall not
change its methods of accounting in effect at December 31, 1999, except as
required by changes in GAAP as concurred in by Adaptive's independent public
accountants. Adaptive shall not (i) change its fiscal year, (ii) make or change
any Tax Election, (iii) change any annual Tax accounting period, (iv) change any
method of Tax accounting, (v) file any amended Tax Return, (vi) enter into any
closing agreement relating to any Tax, (vii) settle any Tax claim or assessment,
or (viii) surrender any right to claim a Tax Refund, that, individually or in
the aggregate, in the United States or elsewhere, would be material to Adaptive
or the Surviving Corporation.
(k) Material Contracts and Arrangements.
-----------------------------------
Adaptive shall not, and shall not permit any of its Subsidiaries to,
(i) other than customer contracts entered into, renewed or amended in the
ordinary course of business with existing customers or contracts entered into,
renewed, amended or terminated with the express approval of Xxxxxx Xxxxxxx after
consultation with Western in accordance with Section 5.13, enter into, renew,
amend any material term of or terminate any contract or agreement that calls for
aggregate payments of $100,000 or more and which is not either (x) terminable at
will on 60 days or less notice without payment of a penalty or (y) of a term of
less than one year; or (ii) enter into or amend any agreements or arrangements
that could, after the Effective Time, limit or restrict Western or any of its
Affiliates (including Western) or any successor thereto, from engaging or
competing in any line of business or in any geographic area.
(l) Settlements.
-----------
Adaptive shall not, and shall not permit any of its Subsidiaries to,
settle or compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit, controversy or similar dispute or proceeding.
(m) Intellectual Property.
---------------------
Adaptive shall not amend, modify or terminate any existing Adaptive IP
License, execute any new Adaptive IP License, sell, license or otherwise dispose
of, in whole or in part, any Adaptive IP, and/or subject any Adaptive IP to any
Lien, other than pursuant to contracts or agreements entered into in the
ordinary course of business consistent with past practice.
(n) No Related Actions.
------------------
Adaptive will not, and will not permit any of its Subsidiaries to,
agree or commit to do any of the foregoing.
36
4.3 Governmental Filings.
--------------------
Each party shall (a) confer on a reasonable basis with the other and
(b) report to the other (to the extent permitted by law or regulation or any
applicable confidentiality agreement) on operational matters. Adaptive and
Western shall file all reports required to be filed by each of them with the SEC
(and all other Governmental Entities) between the date of this Agreement and the
Effective Time and shall, if requested by the other party and to the extent
permitted by law or regulation or any applicable confidentiality agreement,
deliver to the other party copies of all such reports, announcements and
publications promptly after such request.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; Stockholders Meetings.
-----------------------------------------------------
(a) As promptly as reasonably practicable following the date
hereof, Western and Adaptive shall cooperate in preparing and each shall cause
to be filed with the SEC mutually acceptable proxy materials which shall
constitute the joint proxy statement/prospectus relating to the matters to be
submitted to the Western stockholders at the Western Stockholders Meeting (as
defined in Section 5.1(c)) and the matters to be submitted to the Adaptive
stockholders at the Adaptive Stockholders Meeting (defined in Section 5.1(b))
(such proxy statement/prospectus, and any amendments or supplements thereto, the
"Joint Proxy Statement/Prospectus") and Western shall prepare and file with the
--------------------------------
SEC a registration statement on Form S-4 with respect to the issuance of Western
Common Stock in the Merger (such Form S-4, and any amendments or supplements
thereto, the "Form S-4"). Each of Western and Adaptive shall use its reasonable
--------
efforts to cause Xxxxxxx Xxxxxxx & Xxxxxxxx and Xxxxxx Godward LLP,
respectively, to deliver to it a tax opinion satisfying the requirements of Item
601 of Regulation S-K promulgated under the Securities Act, which tax opinion
shall be included as an exhibit to the Form S-4. The Joint Proxy
Statement/Prospectus will be included as a prospectus in and will constitute a
part of the Form S-4 as Western's prospectus. Each of Western and Adaptive shall
use reasonable best efforts to have the Joint Proxy Statement/Prospectus cleared
by the SEC and the Form S-4 declared effective by the SEC and to keep the
Form S-4 effective as long as is necessary to consummate the Merger and the
transactions contemplated hereby and thereby. Western and Adaptive shall, as
promptly as practicable after receipt thereof, provide the other party copies of
any written comments and advise the other party of any oral comments, with
respect to the Joint Proxy Statement/Prospectus or Form S-4 received from the
SEC. The parties shall cooperate and provide the other with a reasonable
opportunity to review and comment on any amendment or supplement to the Joint
Proxy Statement/Prospectus and the Form S-4 prior to filing such with the SEC,
and will provide each other with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment or
supplement (including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Form S-4 shall be made without the approval of both
parties, which approval shall not be unreasonably withheld or delayed; provided
--------
that with respect to documents filed by a party that are incorporated by
reference in the Form S-4 or Joint Proxy Statement/Prospectus, this right of
approval shall apply only with respect to information relating to the other
party or its business, financial condition or results of operations. Western
will use reasonable best efforts to cause the Joint Proxy Statement/Prospectus
to be mailed to Western stockholders, and Adaptive will use reasonable best
efforts to cause the
37
Joint Proxy Statement/Prospectus to be mailed to Adaptive's stockholders, in
each case as promptly as practicable after the Form S-4 is declared effective
under the Securities Act. Western shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the Merger
and each of Adaptive and Western shall furnish all information concerning it and
the holders of its capital stock as may be reasonably requested in connection
with any such action. Each party will advise the other party, promptly after it
receives notice thereof, of the time when the Form S-4 has become effective, the
issuance of any stop order, the suspension of the qualification of the Western
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Joint Proxy
Statement/Prospectus or the Form S-4. If at any time prior to the Effective Time
any information relating to Western or Adaptive, or any of their respective
affiliates, officers or directors, should be discovered by Western or Adaptive,
which information should be set forth in an amendment or supplement to either
the Form S-4 or the Joint Proxy Statement/Prospectus so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party that
discovers such information shall promptly notify the other party hereto and, to
the extent required by law, rules or regulations, an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and
disseminated to the stockholders of Western and Adaptive.
(b) Adaptive shall duly take all lawful action to call, give notice
of, convene and hold a meeting of its stockholders on a date determined in
accordance with the mutual agreement of Adaptive and Western (the "Adaptive
--------
Stockholders Meeting") for the purpose of obtaining the Adaptive Stockholder
--------------------
Approval and shall take all lawful action to solicit the Adaptive Stockholder
Vote; and the Board of Directors of Adaptive shall recommend adoption of this
Agreement and the transactions contemplated hereby by the stockholders of
Adaptive (the "Adaptive Recommendation"), and shall not, unless Western makes a
-----------------------
change in the Western Recommendation, (x) withdraw, modify or qualify (or
propose to withdraw, modify or qualify) in any manner adverse to Western such
recommendation or (y) take any action or make any statement (other than any
action described in the foregoing clause (x)) in connection with the Adaptive
Stockholders Meeting inconsistent with such recommendation (collectively, a
"Change in the Adaptive Recommendation"); provided, however, any action or
------------------------------------- -------- -------
statement under clause (y) will not be deemed a Change in the Adaptive
Recommendation provided (I) such action or statement is taken or made pursuant
to advice from Xxxxxx Godward LLP, counsel to Adaptive, to the effect that such
action or statement is required by applicable law, (II) if a Adaptive Public
Proposal has been made and not rescinded, such action or statement shall not
relate to such Adaptive Public Proposal other than any factual statement
required by any regulatory authority (including the SEC) and shall in any event
include a rejection of such Adaptive Public Proposal and (III) such action or
statement also includes a reaffirmation of the Adaptive Board of Directors
approval of the Merger and the other transactions contemplated hereby and
recommendation to the Adaptive stockholders to adopt this Agreement; provided,
--------
further, however, that the Board of Directors of Adaptive may make a Change in
------- -------
the Adaptive Recommendation pursuant to Section 5.4 hereof. Notwithstanding any
Change in the Adaptive Recommendation, this Agreement shall be submitted to the
stockholders of Adaptive at the
38
Adaptive Stockholders Meeting for the purpose of voting upon this Agreement and
nothing contained herein shall be deemed to relieve Adaptive of such obligation.
(c) Western shall duly take all lawful action to call, give notice
of, convene and hold a meeting of its stockholders on a date determined in
accordance with the mutual agreement of Western and Adaptive (the "Western
-------
Stockholders Meeting") for the purpose of obtaining the Western Stockholder
--------------------
Approval with respect to the transactions contemplated by this Agreement and
shall take all lawful action to solicit the Western Stockholder Vote, and the
Board of Directors of Western shall recommend approval of the issuance of
Western Common Stock pursuant to this Agreement by the stockholders of Western
(the "Western Recommendation"), and shall not, unless Adaptive makes a Change in
----------------------
the Adaptive Recommendation, (x) withdraw, modify or qualify (or propose to
withdraw, modify or qualify) in any manner adverse to Adaptive such
recommendation or (y) take any action or make any statement (other than any
action described in the foregoing clause (x)) in connection with the Western
Stockholders Meeting inconsistent with such recommendation (collectively, a
"Change in the Western Recommendation"); provided, however, any action or
------------------------------------ -------- -------
statement under clause (y) will not be deemed a Change in the Western
Recommendation provided (I) such action or statement is taken or made pursuant
to advice from Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to Western, to the effect
that such action or statement is required by applicable law, (II) if a Western
Public Proposal has been made and not rescinded, such action or statement shall
not relate to such Western Public Proposal other than any factual statement
required by any regulatory authority (including the SEC) and shall in any event
include a rejection of such Western Public Proposal and (III) such action or
statement also includes a reaffirmation of the Western Board of Directors'
approval of the Merger and the other transactions contemplated hereby and
recommendation to the Western stockholders to approve the issuance of Western
Common Stock pursuant to this Agreement; provided, further, however, that the
-------- ------- -------
Board of Directors of Western may make a Change in the Western Recommendation
pursuant to Section 5.4 hereof. Notwithstanding any Change in the Western
Recommendation, this Agreement shall be submitted to the stockholders of Western
at the Western Stockholders Meeting for the purpose of approving the issuance of
Western Common Stock pursuant to this Agreement and nothing contained herein
shall be deemed to relieve Western of such obligation.
5.2 Access to Information.
---------------------
Upon reasonable notice, each party shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of the other party reasonable
access during normal business hours, during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, records, officers
and employees and, during such period, such party shall (and shall cause its
Subsidiaries to) furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed, published, announced
or received by it during such period pursuant to the requirements of Federal or
state securities laws and the HSR Act and (b) all other information concerning
it and its business, properties and personnel as such other party may reasonably
request. The parties will hold any such information obtained pursuant to this
Section 5.2 in confidence in accordance with, and shall otherwise be subject to,
the provisions of the confidentiality letter dated September 6, 2000, between
Adaptive and Western (the "Confidentiality Agreement"), which Confidentiality
-------------------------
Agreement shall continue in full force and
39
effect. Any investigation by either of Western or Adaptive shall not affect the
representations and warranties of the other.
5.3 Reasonable Best Efforts.
-----------------------
(a) Subject to the terms and conditions of this Agreement, each party
will use its 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
this Agreement and applicable laws and regulations to consummate the Merger and
the other transactions contemplated by this Agreement as soon as practicable
after the date hereof, including (i) preparing and filing as promptly as
practicable all documentation to effect all necessary applications, notices,
petitions, filings, tax ruling requests and other documents and to obtain as
promptly as practicable all Necessary Consents and all other consents, waivers,
licenses, orders, registrations, approvals, permits, rulings, authorizations and
clearances necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement (collectively, the "Required
--------
Approvals") and (ii) taking all reasonable steps as may be necessary to obtain
---------
all such Necessary Consents and the Required Approvals. In furtherance and not
in limitation of the foregoing, each party hereto agrees to make, as promptly as
practicable, (i) an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby
(which filing shall be made in any event within 10 Business Days of the date
hereof), (ii) all appropriate and necessary filings with the European Commission
in accordance with applicable competition, merger control, antitrust, investment
or similar laws and any necessary filings under the Canadian Investment
Regulations within the time periods specified thereunder, and (iii) all other
necessary filings with other Governmental Entities relating to the Merger, and,
in each case, to supply as promptly as practicable any additional information
and documentary material that may be requested pursuant to such laws or by such
authorities and to use reasonable best efforts to cause the expiration or
termination of the applicable waiting periods under the HSR Act and the receipt
of Required Approvals under such other laws or from such authorities as soon as
practicable. Notwithstanding the foregoing, nothing in this Section 5.3 or the
other provisions of this Agreement shall require, or be deemed to require, (x)
Western or Adaptive or any of their respective Subsidiaries to agree to divest
or hold separate any material business or assets or to effect any such
divestiture or action, (y) Western or Adaptive or any of their Subsidiaries to
agree to any material restrictions or conditions on the conduct of their or
their Subsidiaries' businesses or (z) Western or Adaptive to take any other
action if doing so would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on Western after the Merger.
(b) Each of Adaptive and Western shall, in connection with the efforts
referenced in Section 5.3(a) to obtain all Required Approvals, use its
reasonable best efforts to (i) cooperate in all respects 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) promptly inform the other party of any communication received by
such party from, or given by such party to, the Antitrust Division of the
Department of Justice (the "DOJ"), the Federal Trade Commission (the "FTC") or
--- ---
any other Governmental Entity and of any material communication received or
given in connection with any proceeding by a private party, in each case
regarding any of the transactions contemplated hereby; and (iii) consult with
each
40
other in advance to the extent practicable of any meeting or conference with,
the DOJ, the FTC or any such other Governmental Entity or, in connection with
any proceeding by a private party, with any other Person, and to the extent
permitted by the DOJ, the FTC or such other applicable Governmental Entity or
other Person, give the other party the opportunity to attend and participate in
such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Section 5.3(a) and (b), if any administrative or judicial
action or proceeding, including any proceeding by a private party, is instituted
(or threatened to be instituted) challenging any transaction contemplated by
this Agreement as violative of any Regulatory Law (as defined below), or if any
statute, rule, regulation, executive order, decree, injunction or administrative
order is enacted, entered, promulgated or enforced by a Governmental Entity
which would make the Merger or the other transactions contemplated hereby
illegal or would otherwise prohibit or materially impair or delay the
consummation of the Merger or the other transactions contemplated hereby, each
of Adaptive and Western shall cooperate in all reasonable respects with each
other and, subject to Section 5.3(a), seek to contest and resist any such action
or proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the Merger or the other transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable so
as to permit consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.3 shall limit a party's right to terminate this Agreement
pursuant to Section 7.1(b) or 7.1(c) so long as such party has up to then
complied with its obligations under this Section 5.3. For purposes of this
Agreement, "Regulatory Law" means the Xxxxxxx Act, as amended, the Xxxxxxx Act,
--------------
as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to prohibit, restrict or regulate (i) mergers, acquisitions or other
business combinations, (ii) foreign investment or (iii) actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition.
(d) Each of Adaptive and Western and its respective Board of Directors
shall, if any state takeover statute or similar statute becomes applicable to
this Agreement, the Merger or any other transactions contemplated hereby or
thereby, take all action reasonably necessary to ensure that the Merger and the
other transactions contemplated by this Agreement may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on this Agreement, the Merger and the other
transactions contemplated hereby.
5.4 Non-Solicitation.
----------------
(a) Without limitation on any of such party's other obligations under
this Agreement (including under Article IV hereof), each of Western and Adaptive
agrees that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and use its
reasonable best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
41
retained by it or any of its Subsidiaries) not to, directly or indirectly, (i)
initiate, solicit, encourage or knowingly facilitate any inquiries or the making
of any proposal or offer with respect to, or a transaction to effect, a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving it
or any of its Significant Subsidiaries, or any purchase or sale of 10% or more
of the consolidated assets (including without limitation stock of its
Subsidiaries) of such party and its Subsidiaries, taken as a whole, or any
purchase or sale of, or tender or exchange offer for, the equity securities of
such party that, if consummated, would result in any Person (or the stockholders
of such Person) beneficially owning securities representing 20% or more of the
total voting power of such party (or of the surviving parent entity in such
transaction) or any of its Significant Subsidiaries (any such proposal, offer or
transaction (other than a proposal or offer made by the other party or an
Affiliate thereof) being hereinafter referred to as an "Acquisition Proposal"),
--------------------
(ii) have any discussion with or provide any confidential information or data to
any Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal, (iii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition Proposal
or (iv) approve or recommend, or propose publicly to approve or recommend, or
execute or enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other similar agreement.
(b) Notwithstanding anything in this Agreement to the contrary but
subject to clause (c) below, (i) each of Western and Adaptive or its respective
Board of Directors shall be permitted to, to the extent applicable, comply with
Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal, and (ii) each of Western and Adaptive or its respective
Board of Directors shall be permitted to engage in the matters set forth in
clauses (a) (ii) to (iv) above (other than executing or entering into, any
letter of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement) and to make a Change in
the Western Recommendation or a Change in the Adaptive Recommendation, as the
case may be, in connection with an unsolicited bona fide written Acquisition
Proposal by any third party, if and only to the extent that: (w) its
Stockholders Meeting shall not have occurred, (x) its Board of Directors
concludes in good faith that such Acquisition Proposal constitutes a Superior
Proposal (as defined below), (y) its Board of Directors, after consultation with
outside counsel, determines in good faith that the failure to take such action
would be inconsistent with its fiduciary duties under applicable law; and (z)
the Board of Directors of the subject party shall have received from such Person
a confidentiality agreement substantially in the form of the Confidentiality
Agreement; provided that if such confidentiality agreement contains provisions
--------
that are less restrictive than the comparable provision, or omits restrictive
provisions, contained in the Confidentiality Agreement, then the Confidentiality
Agreement will be deemed to be amended to contain only such less restrictive
provisions or to omit such restrictive provisions, as the case may be. "Superior
--------
Proposal" means with respect to Adaptive or Western, as the case may be, a bona
--------
fide written proposal made by a Person other than either such party which is (I)
for a merger, reorganization, consolidation, share exchange, business
combination, recapitalization or similar transaction involving such party as a
result of which the other party thereto or its stockholders will own 40% or more
of the combined voting power of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof) and (II) is on terms which
the Board of Directors of such party in good faith concludes (following receipt
of the advice of its financial advisors and outside counsel), taking
42
into account, among other things, all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal (x) would, if
consummated, result in a transaction that is more favorable to the stockholders
(in their capacities as stockholders), from a financial point of view, than the
transactions contemplated by this Agreement and (y) is reasonably capable of
being completed.
(c) Each of Adaptive and Western agrees that it will (i) promptly (and
in any event not later than the day following receipt of any proposal or offer)
advise the other orally and in writing of the status and terms (including the
identity of the Person making the such inquiry or proposal and the nature and
amount of consideration offered) of any such proposals or offers and the status
and terms of any such discussions or negotiations, (ii) continuously keep the
other party informed of developments relating to such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with, any of its
representatives and (iii) other than as contemplated by this Agreement, not sign
any agreement inconsistent with the consummation of the Merger prior to the time
that this Agreement is terminated in accordance with its terms. Each of Western
and Adaptive agrees that it will, and will cause its officers, directors and
representatives to, immediately cease and cause to be terminated any activities,
discussions or negotiations existing as of the date of this Agreement with any
parties conducted heretofore with respect to any Acquisition Proposal. Each of
Western and Adaptive agrees that it will use reasonable best efforts to promptly
inform its directors, officers, key employees, agents and representatives of the
obligations undertaken in this Section 5.4. Nothing in this Section 5.4 shall
permit Western or Adaptive to terminate this Agreement (except as specifically
provided in Article VII hereof) or affect any other obligation of Western or
Adaptive under this Agreement. Neither Western nor Adaptive shall submit to the
vote of its stockholders any Acquisition Proposal other than the Merger.
43
5.5 Fees and Expenses.
-----------------
Subject to Section 7.2, whether or not the Merger is consummated, all
Expenses (as defined below) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) if the Merger is consummated, the Surviving Corporation
shall pay, or cause to be paid, any and all property or transfer taxes imposed
in connection with the Merger and (b) Expenses incurred in connection with the
filing, printing and mailing of the Joint Proxy Statement/Prospectus and Form
S-4, which shall be shared equally by Western and Adaptive. As used in this
Agreement, "Expenses" includes all out-of-pocket expenses (including, without
--------
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the WMC
Holding Voting Agreement, the Stock Option Agreements and the transactions
contemplated hereby and thereby, including the preparation, printing, filing and
mailing of the Joint Proxy Statement/Prospectus and Form S-4 and the
solicitation of stockholder approvals and all other matters related to the
transactions contemplated hereby and thereby.
5.6 Directors' and Officers' Indemnification and Insurance.
------------------------------------------------------
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain provisions no less favorable with respect to
exculpation and indemnification than are set forth in Article XII of the
certificate of incorporation and Article VII of the bylaws of Adaptive, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were directors,
officers or employees of Adaptive.
(b) Western shall cause to be maintained in effect for six years from
the Effective Time the current policies of the directors' and officers'
liability insurance maintained by Adaptive (provided that Western may substitute
therefore policies of at least the same coverage containing terms and conditions
which are not materially less advantageous) with respect to matters or events
occurring prior to the Effective Time to the extent available; provided,
however, that in no event shall Western be required to expend more than an
amount per year equal to 200 percent of Adaptive's current premiums to maintain
or procure insurance coverage pursuant hereto; and, provided, further that if
the annual premiums of such insurance coverage exceed such amount, Western shall
be obligated to obtain a policy with the greatest coverage available for a cost
not exceeding such amount.
(c) After the Effective Time, Western agrees that it will indemnify and
hold harmless each present and former director and officer of Adaptive,
determined as of the Effective Time (the "Indemnified Parties"), against any
-------------------
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
-----
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters relating to their duties or actions in their capacity as officers and
directors and existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
44
extent permitted under applicable law (and Western shall also advance fees and
expenses (including reasonable attorneys' fees) as incurred to the fullest
extent permitted under applicable law provided the person to whom expenses are
advanced provides a customary undertaking complying with applicable law to repay
such advances if it is ultimately determined that such person is not entitled to
indemnification).
(d) Nothing in this Agreement is intended to, shall be construed to or
shall release, waive or impair any rights to directors' and officers' insurance
claims under any policy that is or has been in existence with respect to
Adaptive or any of its officers, directors or employees, it being understood and
agreed that the indemnification provided for this Section 5.6 is not prior to or
in substitution for any such claims under such policies.
5.7 Board of Directors and Officers.
-------------------------------
Prior to the Effective Time, Western shall take all actions necessary
to appoint Xxxxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxx to the Board of Directors of
Western and to elect Xxxxxx Xxxxxxx and Xxxxx Xxxxx as President and Chief
Operating Officer and Chief Financial Officer, respectively, of Western, in each
case effective at the Effective Time.
5.8 Public Announcements.
--------------------
The initial press release pertaining to the transactions contemplated
by this Agreement shall be a joint press release and thereafter Western and
Adaptive shall consult with each other before issuing communications to
employees regarding the transactions contemplated by this Agreement or any press
release or otherwise making any public statements with respect to this Agreement
or the Merger and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with its securities exchange; provided that either party may
publicly file this Agreement promptly following the date hereof. Adaptive and
Western shall each provide to the other a copy of each press release or other
public statement relating to its business reasonably in advance of making such
release or statement.
5.9 Accountant's Letters.
--------------------
Each of Adaptive and Western shall use its reasonable best efforts to
cause to be delivered to the other party a letter of its independent public
accountants, dated a date within two business days before the date on which the
S-4 shall become effective and addressed to the other, in form and substance
reasonably satisfactory to the other and customary in scope and substance for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.10 Listing of Shares of Western Common Stock.
-----------------------------------------
Western shall use its reasonable best efforts to cause the shares of
Western Common Stock to be issued in the Merger and the shares of Western Common
Stock to be reserved for issuance upon exercise of the Adaptive Stock Options to
be approved for listing on the NASDAQ, subject to official notice of issuance,
prior to the Closing Date.
45
5.11 Affiliates.
----------
Not less than 45 days prior to the date of the Adaptive Stockholders
Meeting, Adaptive shall deliver to Western a letter identifying all persons who,
in the judgment of Adaptive, may be deemed at the time this Agreement is
submitted for adoption by the stockholders of Adaptive, "affiliates" of Adaptive
for purposes of Rule 145 under the Securities Act and applicable SEC rules and
regulations, and such list shall be updated as necessary to reflect changes from
the date thereof. Adaptive shall use its reasonable best efforts to cause each
person identified on such list to deliver to Western not less than 30 days prior
to the Effective Time a written agreement in form and substance reasonably
satisfactory to Adaptive and Western.
5.12 Benefits Maintenance.
--------------------
Western shall maintain for a period of three (3) years after the
Effective Time, without interruption, employee compensation and benefit plans,
programs and policies and fringe benefits (including post-employment welfare
benefits) that will provide benefits to each employee of Adaptive who continues
employment with Western or any of its Affiliates (including Adaptive) after the
Effective Time that are, in the aggregate, no less favorable than those provided
pursuant to similar employee compensation and benefit plans, programs and
policies, and fringe benefits, of Western as in effect on the Effective Time.
Employees of Adaptive who continue employment with Western shall be given credit
for all service with Adaptive (or service credited by Adaptive for similar
plans, programs or policies) under all employee compensation and benefit plans,
programs and policies and fringe benefits of Western in which they become
participants for purposes of eligibility, vesting and benefit accrual (other
than benefit accrual under tax qualified defined benefit plans which would
provide a duplication of benefits to employees of Adaptive).
5.13 Agreement to Consult on Certain Matters.
---------------------------------------
Between the date hereof and the Effective Time, Adaptive and Western
will confer on a regular basis with one or more representatives of the other
party to report on operational matters and any proposals to engage in new
contracts and transactions. In addition, (i) Adaptive shall promptly notify
Western of the occurrence any Material Adverse Effect on Adaptive or of any
change or event that would have caused a representation and warranty made by
Adaptive pursuant to Section 3.2 of this Agreement to be untrue in any material
respect if it were made as of such date, and (ii) Western shall promptly notify
Adaptive of the occurrence any Material Adverse Effect on Western or of any
change or event that would have caused a representation and warranty made by
Western pursuant to Section 3.1 of this Agreement to be untrue in any material
respect if it were made as of such date.
5.14 Adaptive Rights Agreement.
-------------------------
The Adaptive Board shall take all action (in addition to that referred
to in Section 3.2(s)) necessary or desirable (including redeeming the Adaptive
Rights immediately prior to the Effective Time or amending the Adaptive Rights
Agreement) in order to render the Adaptive Rights inapplicable to the Merger and
the other transactions contemplated by this Agreement and
46
the Stock Option Agreements. Except in connection with the foregoing sentence,
the Board of Directors of Adaptive shall not, without the prior written consent
of Western, (i) amend the Adaptive Rights Agreement or (ii) take any action with
respect to, or make any determination under, the Adaptive Rights Agreement, in
each case in order to facilitate any Acquisition Proposal with respect to
Adaptive.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect Merger.
------------------------------------------------------
The respective obligations of Adaptive and Western to effect the Merger
and the transactions contemplated hereby are subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. (i) Adaptive shall have obtained the Adaptive
--------------------
Stockholder Approval and (ii) Western shall have obtained the Western
Stockholder Approval.
(b) No Injunctions or Restraints; Illegality. No laws shall have been
----------------------------------------
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger.
(c) HSR Act. The waiting period (and any extension thereof) applicable
-------
to the Merger under the HSR Act shall have been terminated or shall have
expired.
(d) NASDAQ. The shares of Western Common Stock to be issued in the
------
Merger and such other shares of Western Common Stock to be reserved for issuance
in connection with the Merger shall have been approved for listing on the
NASDAQ, subject to official notice of issuance.
(e) Effectiveness of the Form S-4. The Form S-4 shall have been
-----------------------------
declared effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Form S-4 shall have been issued by the SEC
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
6.2 Additional Conditions to Obligations of Western.
-----------------------------------------------
The obligation of Western to effect the Merger and the transactions
contemplated hereby is subject to the satisfaction, or waiver by Western, on or
prior to the Closing Date of the following conditions:
(a) Representations and Warranties. (i) The representations and
------------------------------
warranties of Adaptive set forth in this Agreement that are qualified as to
Material Adverse Effect shall be true and correct as of the date of this
Agreement and as of immediately prior to the Effective Time (except to the
extent such representations and warranties shall refer to a specific date, in
which
47
case such representations and warranties shall have been so true and correct as
of such date) with the same force and effect as if then made and (ii) the
representations and warranties of Adaptive set forth in this Agreement that are
not qualified as to Material Adverse Effect shall be true and correct in all
material respects as of the date of this Agreement and immediately prior to the
Effective Time (except to the extent such representations and warranties shall
have been made as of an earlier date, in which case such representations and
warranties shall have been true and correct in all material respects as of such
earlier date) with the same force and effect as if then made, except that this
clause (ii) shall be deemed to be satisfied so long as any failures of such
representations and warranties to be true and correct, taken together, have not
had and will not have a Material Adverse Effect on Adaptive; and Western shall
have received a certificate of a senior executive officer and a senior financial
officer of Adaptive to such effect.
(b) Performance of Obligations of Adaptive. Adaptive shall have
--------------------------------------
performed or complied in all material respects with all agreements and covenants
required to be performed by it under this Agreement at or prior to the Closing
Date, and Western shall have received a certificate of a senior executive
officer and a senior financial officer of Adaptive to such effect.
(c) Tax Opinion. Western shall have received from Xxxxxxx Xxxxxxx &
-----------
Xxxxxxxx, counsel to Western, on the Closing Date, a written opinion to the
effect that for federal income tax purposes (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and (ii) each of
Adaptive and Western will be a party to the reorganization within the meaning of
Section 368(b) of the Code. In rendering such opinion, counsel to Western shall
be entitled to rely upon information, representations and assumptions provided
by Western and Adaptive substantially in the form of Exhibits 6.2(c)(1), and
6.2(c)(2) (allowing for such amendments to the representations as counsel to
Western deems reasonably necessary).
6.3 Additional Conditions to Obligations of Adaptive.
------------------------------------------------
The obligations of Adaptive to effect the Merger and the transactions
contemplated hereby is subject to the satisfaction, or waiver by Adaptive, on or
prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties. (i) The representations and
------------------------------
warranties of Western and Merger Sub, as applicable, set forth in this Agreement
that are qualified as to Material Adverse Effect shall be true and correct as of
the date of this Agreement and as of immediately prior to the Effective Time
(except to the extent such representations and warranties shall refer to a
specific date, in which case such representations and warranties shall have been
so true and correct as of such date) with the same force and effect as if then
made and (ii) the representations and warranties of Western and Merger Sub, as
applicable, set forth in this Agreement that are not qualified as to Material
Adverse Effect shall be true and correct in all material respects the date of
this Agreement and immediately prior to the Effective Time (except to the extent
such representations and warranties shall have been made as of an earlier date,
in which case such representations and warranties shall have been true and
correct in all material respects as of such earlier date) with the same force
and effect as if then made, except that this clause (ii) shall be deemed to be
satisfied so long as any failures of such representations and warranties to be
true and correct, taken together, have not had and will not have a Material
48
Adverse Effect on Western; and Adaptive shall have received a certificate of a
senior executive officer and a senior financial officer of each of Western and
Merger Sub to such effect.
(b) Performance of Obligations of Western and Merger Sub. Each of
----------------------------------------------------
Western and Merger Sub shall have performed or complied in all material respects
with all agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Dates, and Adaptive shall have received a
certificate of a senior executive officer and a senior financial officer of each
of Western and Merger Sub to such effect.
(c) Tax Opinion. Adaptive shall have received from Cooley Godward LLP,
-----------
counsel to Adaptive, on the Closing Date, a written opinion to the effect that
for federal income tax purposes (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, (ii) each of Adaptive and
Western will be a party to the reorganization within the meaning of Section
368(b) of the Code. In rendering such opinion, counsel to Adaptive shall be
entitled to rely upon information, representations and assumptions provided by
Western, Merger Sub and Adaptive substantially in the form of Exhibits 6.2(c)(1)
and 6.2(c)(2) (allowing for such amendments to the representations as counsel to
Adaptive deems reasonably necessary).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination.
-----------
This Agreement may be terminated at any time prior to the Effective
Time by action taken or authorized by the Board of Directors of the terminating
party or parties and, except as provided below, whether before or after approval
of the matters presented in connection with the Merger by the stockholders of
Adaptive or Western:
(a) By mutual written consent of Western and Adaptive;
(b) By either Adaptive or Western, if the Effective Time shall not have
occurred on or before June 30, 2001 (the "Termination Date"); provided, however,
---------------- -------- -------
that the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement (including without limitation such party's obligations set forth in
Section 5.3) has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before the Termination Date;
(c) By either Adaptive or Western, if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which the
terminating party shall have used its reasonable best efforts to resist, resolve
or lift, as applicable, in accordance with and subject to Section 5.3)
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action
shall have become final and nonappealable or (ii) shall have failed to issue an
order, decree or ruling or to take any other action, and such denial of a
request to issue such order, decree, ruling or take such other action shall have
become final and nonappealable (which order, decree, ruling or other action the
terminating party shall have used its reasonable best efforts to obtain, in
accordance with and subject to Section 5.3), in the case of each of (i) and (ii)
which is necessary
49
to fulfill the conditions set forth in Sections 6.1(c), (d) or (e), as
applicable; provided, however, that the right to terminate this Agreement under
-------- -------
this Section 7.1(c) shall not be available to any party whose failure to comply
with Section 5.3 has been the cause of such action or inaction;
(d) By either Adaptive or Western, if the approvals of the stockholders
of either Western or Adaptive contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of stockholders or of any adjournment thereof at which the vote was
taken;
(e) By Western, if Adaptive shall have (i) failed to make the Adaptive
Recommendation or (ii) materially breached its obligations under this Agreement
by reason of: a failure to call the Adaptive Stockholders Meeting in accordance
with Section 5.1(b); a Change in the Adaptive Recommendation; approval or
recommendation of (or any proposal to publicly approve or recommend) any
Acquisition Proposal; or a failure by Adaptive to prepare and mail to its
stockholders the Joint Proxy Statement/Prospectus in accordance with Section
5.1(a);
(f) By Adaptive, if Western shall have (i) failed to make the Western
Recommendation or (ii) materially breached its obligations under this Agreement
by reason of: a failure to call the Western Stockholders Meeting in accordance
with Section 5.1(c); a Change in the Western Recommendation; approval or
recommendation of (or any proposal to publicly approve or recommend) any
Acquisition Proposal; or a failure by Western to prepare and mail to its
stockholders the Joint Proxy Statement/Prospectus in accordance with Section
5.1(a);
(g) By Western, if Adaptive shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, such that the conditions set forth in Section 6.2(a) or (b)
are not capable of being satisfied on or before the Termination Date;
(h) By Adaptive, if Western shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, such that the conditions set forth in Section 6.3(a) or (b)
are not capable of being satisfied on or before the Termination Date; or
(i) By either Adaptive or Western, on the business day immediately
preceding the date scheduled for the Closing pursuant to Section 1.2, if either
of the following conditions are satisfied:
(A) the Average Western Closing Price shall be less than or equal to
$10.00; or
(B) the product of (x) 0.7 and (y) the ratio obtained by dividing the
Final Index Price by the Initial Index Price, shall be greater than (z) the
ratio obtained by dividing the Average Western Closing Price by the Average
Western Starting Price;
provided, however, that the right to terminate this Agreement under this Section
-------- -------
7.1(i) shall not be available to any party that has incurred a Section 7.1(i)
Event.
7.2 Effect of Termination.
---------------------
50
(a) In the event of termination of this Agreement by either Adaptive or
Western as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Western or Adaptive
or their respective officers or directors except with respect to the second
sentence of Section 5.2, Section 5.5, this Section 7.2 and Article VIII, which
provisions shall survive such termination, and except that, notwithstanding
anything to the contrary contained in this Agreement, neither Western nor
Adaptive shall be relieved or released from any liabilities or damages arising
out of its willful breach of this Agreement.
(b) If (A) (I) either party shall terminate this Agreement pursuant to
Section 7.1(d) (provided that the basis for such termination is the failure to
obtain the Adaptive Stockholder Approval) or pursuant to Section 7.1(b) without
the Adaptive Stockholder Meeting having occurred, (II) at any time after the
date of this Agreement and before such termination an Acquisition Proposal with
respect to Adaptive shall have been publicly announced or otherwise communicated
to the Board of Directors and stockholders of Adaptive and not withdrawn prior
to the Adaptive Stockholder Meeting having occurred, in the case of a
termination pursuant to Section 7.1(d) (a "Adaptive Public Proposal") and (III)
------------------------
within nine months of such termination Adaptive or any of its Subsidiaries
enters into a definitive agreement with respect to, or consummates, any
Acquisition Proposal or (B) Western shall terminate this Agreement pursuant to
Section 7.1(e); then Adaptive shall promptly, but in no event later than the
date of such termination (or in the case of clause (A), if later, the date
Adaptive or its Subsidiary enters into such agreement with respect to, or
consummates, such Acquisition Proposal), pay Western an amount equal to
$27,500,000 by wire transfer of immediately available funds (less any amounts
previously paid to Western pursuant to Section 7.2(d)).
(c) If (A) (I) either party shall terminate this Agreement pursuant to
Section 7.1(d) (provided that the basis for such termination is the failure to
obtain the Western Stockholder Approval) or pursuant to Section 7.1(b) without
the Western Stockholder Meeting having occurred, (II) at any time after the date
of this Agreement and before such termination an Acquisition Proposal with
respect to Western shall have been publicly announced or otherwise communicated
to the Board of Directors and stockholders of Western and not withdrawn prior to
the Western Stockholder Meeting having occurred, in the case of a termination
pursuant to Section 7.1(d) (a "Western Public Proposal") and (III) within nine
-----------------------
months of such termination Western or any of its Subsidiaries enters into a
definitive agreement with respect to, or consummates, any Acquisition Proposal
or (B) Adaptive shall terminate this Agreement pursuant to Section 7.1(f); then
Western shall promptly, but in no event later than the date of such termination
(or in the case of clause (A), if later, the date Western or its Subsidiary
enters into such agreement with respect to, or consummates, such Acquisition
Proposal), pay Adaptive an amount equal to $27,500,000 by wire transfer of
immediately available funds.
(d) If either party shall terminate this Agreement pursuant to Section
7.1(d) (provided that the basis for such termination is the failure to obtain
the Adaptive Stockholder Approval), then Adaptive shall promptly, but in no
event later than the date of such termination, reimburse Western for all
out-of-pocket fees and expenses incurred by Western relating to the transactions
contemplated by this Agreement, up to a maximum of $6,000,000, by wire transfer
of immediately available funds; provided, that no payment shall be made pursuant
--------
to this sentence if a termination fee has been paid to Western pursuant to
Section 7.2(b).
51
(e) If (I) Western shall terminate this Agreement pursuant to Section
7.1(i) and (II) within nine months of such termination Western or any of its
Subsidiaries enters into a definitive agreement with respect to, or consummates,
any Acquisition Proposal (for purposes of this clause (II), the term
"Acquisition Proposal" shall have the meaning assigned to such term in Section
--------------------
5.4(a) except that references to "10%" and "20%" therein shall be deemed to be
references to "50%"), then Western shall promptly, but in no event later than
the date Western or its Subsidiary enters into such agreement with respect to,
or consummates, such Acquisition Proposal, pay Adaptive an amount equal to
$27,500,000 by wire transfer of immediately available funds (less any amounts
previously paid to Adaptive pursuant to Section 7.2(g)).
(f) If (I) Adaptive shall terminate this Agreement pursuant to Section
7.1(i) and (II) within nine months of such termination Adaptive or any of its
Subsidiaries enters into a definitive agreement with respect to, or consummates,
any Acquisition Proposal (for purposes of this clause (II), the term
"Acquisition Proposal" shall have the meaning assigned to such term in Section
--------------------
5.4(a) except that references to "10%" and "20%" therein shall be deemed to be
references to "50%"), then Adaptive shall promptly, but in no event later than
the date Adaptive or its Subsidiary enters into such agreement with respect to,
or consummates, such Acquisition Proposal, pay Western an amount equal to
$27,500,000 by wire transfer of immediately available funds (less any amounts
previously paid to Western pursuant to Section 7.2(g)).
(g) If either party shall terminate this Agreement pursuant to Section
7.1(i), then the party exercising such termination right shall promptly, but in
no event later than the date of such termination, reimburse the other party for
all out-of-pocket fees and expenses incurred by such other party relating to the
transactions contemplated by this Agreement, up to a maximum of $6,000,000, by
wire transfer of immediately available funds.
(h) The parties acknowledge that the agreements contained in this
Section 7.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither party would enter into
this Agreement; accordingly, if either party fails promptly to pay any amount
due pursuant to this Section 7.2, and, in order to obtain such payment, the
other party commences a suit which results in a judgment against such party for
the fee set forth in this Section 7.2, such party shall pay to the other party
its costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee at the prime
rate of Citibank, N.A. in effect on the date such payment was required to be
made notwithstanding the provisions of Section 5.5. The parties agree that any
remedy or amount payable pursuant to this Section 7.2 shall not preclude any
other remedy or amount payable hereunder and shall not be an exclusive remedy
for any breach of any representation, warranty, covenant or agreement contained
in this Agreement.
7.3 Amendment.
---------
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the
stockholders of Adaptive and Western, but, after any such approval, no amendment
shall be made which by law or in accordance with the rules of any relevant stock
exchange requires further approval by such stockholders without
52
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver.
-----------------
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements.
----------------------------------------------------------
None of the representations, warranties, covenants and other agreements
in this Agreement or in any instrument delivered pursuant to this Agreement,
including any rights arising out of any breach of such representations,
warranties, covenants, agreements and other provisions, shall survive the
Effective Time, except for those covenants, agreements and other provisions
contained herein (including Section 5.6 and Section 5.9) that by their terms
apply or are to be performed in whole or in part after the Effective Time and
this Article VIII.
8.2 Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed duly given (a) on the date of delivery if delivered personally,
or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the tenth Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) if to Western to:
Western Multiplex Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
53
Xxxxxxx Xxxxxxx & Xxxxxxxx
00 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxxxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
(b) if to Adaptive to:
Adaptive Broadband Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxx, Esq.
8.3 Interpretation.
--------------
When a reference is made in this Agreement to Articles, Sections,
Exhibits or Schedules, such reference shall be to an Article or Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." In addition, each Section of this Agreement is qualified by the
matters set forth with respect to such Section on the Western Disclosure
Schedule, the Adaptive Disclosure Schedule and the Schedules to this Agreement,
as applicable, to the extent specified therein and such other Sections of this
Agreement to the extent a matter in such Section is disclosed in such a way as
to make its relevance called for by such other Section readily apparent.
8.4 Counterparts.
------------
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries.
----------------------------------------------
(a) This Agreement, the Confidentiality Agreement and the exhibits and
schedules hereto and the other agreements and instruments of the parties
delivered in connection
54
herewith constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
Section 5.6 (which is intended to be for the benefit of the Persons covered
thereby).
8.6 Governing Law.
-------------
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware applicable to contracts executed and to be
performed entirely within that state.
8.7 Severability.
------------
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
8.8 Assignment.
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto, in whole or in part
(whether by operation of law or otherwise), without the prior written consent of
the other party, and any attempt to make any such assignment without such
consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.9 Submission to Jurisdiction; Waivers.
-----------------------------------
Each of Western and Adaptive irrevocably agrees that any legal action
or proceeding with respect to this Agreement or for recognition and enforcement
of any judgment in respect hereof brought by the other party hereto or its
successors or assigns may be brought and determined in the Chancery or other
Courts of the State of Delaware, and each of Western and Adaptive hereby
irrevocably submits with regard to any such action or proceeding for itself and
in respect to its property, generally and unconditionally, to the nonexclusive
jurisdiction of the aforesaid courts. Each of Western and Adaptive hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject to the jurisdiction
of the above-named courts for any reason other than the failure to lawfully
serve process, (b) that it
55
or its property is exempt or immune from jurisdiction of any such court or from
any legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), (c) to the fullest extent permitted by
applicable law, that (i) the suit, action or proceeding in any such court is
brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper and (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts and (d) any right to a trial by jury.
8.10 Enforcement.
-----------
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms. It is accordingly agreed that the parties shall be
entitled to specific performance of the terms hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
8.11 Definitions.
-----------
As used in this Agreement:
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
----------
rules and regulations promulgated under the Exchange Act.
(b) "Average Western Closing Price" shall mean the average closing
-----------------------------
prices of Western Common Stock as reported on the NASDAQ for the 10 consecutive
Trading Days ending on the Determination Date, rounded to four decimal places.
In the event Western pays, declares or otherwise effects a stock split, reverse
stock split, reclassification or stock dividend or stock distribution with
respect to the Western Common Stock between the date hereof and the Effective
Time, appropriate adjustments will be made to the Average Western Closing Price.
(c) "Average Western Starting Price" shall mean the average closing
------------------------------
prices of Western Common Stock on the NASDAQ for the 10 consecutive Trading Days
beginning on the second Trading Day following the public announcement of this
Agreement.
(d) "Beneficial ownership" or "Beneficially own" shall have the
-------------------- ----------------
meaning under Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
(e) "Board of Directors" means the Board of Directors of any specified
------------------
Person and any committees thereof.
(f) "Business Day" means any day on which banks are not required or
------------
authorized to close in the City of New York.
(g) "Determination Date" means the second business day prior to the
------------------
date scheduled for the Closing pursuant to Section 1.2.
(h) "Environmental Claim" means any written or oral notice, claim,
-------------------
demand, action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability under or relating to any Environmental
Laws.
56
(i) "Environmental Laws" means all applicable foreign, federal, state
------------------
and local statutes, rules, regulations, ordinances, orders, decrees and common
law relating in any manner to contamination, pollution or protection of human
health or the environment.
(j) "Environmental Permits" means all permits, licenses, registrations
---------------------
and other governmental authorizations required under Environmental Laws for
Adaptive and its subsidiaries to conduct their operations.
(k) "Hazardous Materials" means all hazardous, dangerous or toxic
-------------------
substances, including without limitation, petroleum (including without
limitation crude oil or any fraction thereof), asbestos and asbestos-containing
materials, and polychlorinated biphenyls, and any other material that is
regulated pursuant to any Environmental Laws or that could result in liability
under any Environmental Laws.
(l) "Index Group" shall mean Airspan Networks, Inc; Breezecom Ltd;
-----------
Ceragon Networks Ltd; DMC Stratex Networks, Inc; Floware Wireless Systems Ltd;
Xxxxx Corporation; P-Com Inc; Telaxis Communications Corporation; Triton
Networks Systems, Inc.; and Vyyo, Inc. In the event that the common stock of any
such company ceases to be publicly traded or a proposal shall be announced for
such company to be acquired or for such company to acquire another company or
companies in transactions with a value exceeding 25% of the acquirer's market
capitalization as of the first full trading day following the date of this
Agreement, such company will be removed from the Index Group.
(m) "Initial Index Price" shall mean the average closing prices of the
-------------------
companies in the Index Group (which average shall not be weighted in accordance
with the market capitalization of such companies), subject to adjustment as set
forth in the definition of Index Group) for the 10 consecutive Trading Day
period referred to in the definition of Average Western Starting Price.
(n) "Final Index Price" shall mean the weighted average closing prices
-----------------
of the companies in the Index Group (which average shall not be weighted in
accordance with the market capitalization of such companies) for the 10
consecutive Trading Day period referred to in the definition of Average Western
Closing Price. If between the date of this Agreement and the Determination Date,
the outstanding shares of any stock in the Index Group shall have been changed
into a different number of shares or a different class by reason of any
reclassification, recapitalization, stock split, split-up, combination or
exchange of shares or a stock dividend or dividend payable in any other
securities or extraordinary cash dividend shall be declared with a record date
within such period, or any similar event shall have occurred, appropriate
adjustments shall be made to the Initial Index Price and the Final Index Price,
as the case may be, for purposes of this Agreement.
(o) "Known" or "Knowledge" means, with respect to any party, the
----- ---------
knowledge of such party's executive officers after reasonable inquiry.
(p) "Material Adverse Effect" means, with respect to any entity any
-----------------------
event, change, circumstance or effect that is or is reasonably likely to be
materially adverse to (i) the business, assets, liabilities, prospects,
financial condition or results of operations of such entity
57
and its Subsidiaries taken as a whole or (ii) the ability of such entity to
consummate the transactions contemplated by this Agreement; provided, however,
-------- -------
that, for purposes of clause (i), a Material Adverse Effect shall not include
any event, change, circumstance or effect relating (w) to any employee attrition
caused by the announcement of this Agreement and the transactions contemplated
hereby, (x) to the economy or financial markets in general or (y) in general to
the industries in which such entity operates (e.g., fixed wireless
communications equipment) and not specifically relating to (or having the effect
of specifically relating to or having a materially disproportionate effect
(relative to most other industry participants) on) such entity or (z) solely to
any reduction in the trading price of Western Common Stock or Adaptive Common
Stock on the NASDAQ prior to the Effective Time that is not in connection with
any other event, change, circumstance or effect that would otherwise constitute
a Material Adverse Effect; provided that it is acknowledged and agreed that this
clause (z) shall not affect either party's rights to terminate this Agreement
pursuant to Section 7.1(i).
(q) "The other party" means, with respect to Adaptive, Western and, with
---------------
respect to Western, Adaptive.
(r) "Person" means an individual, corporation, limited liability company,
------
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(s) "Section 7.1(i) Event", with respect to a party seeking to terminate
--------------------
this Agreement pursuant to Section 7.1(i) hereof, means any news release, public
announcement (other than an announcement of the transaction contemplated by this
Agreement) or filing, or any other statement or communication that is required
to be publicly disseminated pursuant to the federal securities laws, made by the
party seeking to terminate this Agreement pursuant to Section 7.1(i) hereof,
following which there occurs a decline of 20 percent or more in the average of
the closing prices of either party's common stock on the NASDAQ for five
consecutive trading days following such news release, public announcement,
filing, statement or other communication, as compared to the average of the
closing prices of the same party's common stock on the NASDAQ for the five
trading days prior to such news release, public announcement, filing, statement
or other communication.
(t) "Subsidiary" when used with respect to any party means any corporation
----------
or other organization, whether incorporated or unincorporated, at least a
majority of the securities or other interests of which having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(u) "Tax" (and, with correlative meaning, "Taxes") means any federal,
--- -----
state, local or foreign income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add on
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any taxing authority or any
obligation to pay Taxes imposed on any entity for which a party to this
Agreement is liable as a result of any indemnification provision or other
contractual obligation.
58
(v) "Tax Return" means any return, report or similar statement required to
----------
be filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(w) "Trading Day" shall mean a day on which trading generally takes place
-----------
on the NASDAQ and on which trading in Western Common Stock has not been halted
or suspended.
59
IN WITNESS WHEREOF, Western, Adaptive and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
WESTERN MULTIPLEX CORPORATION
By: /s/ Xxxxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
ADAPTIVE BROADBAND CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
WA MERGER SUB, INC.
By: /s/ Xxxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President
60
--------------------------------------------------------------------------------
Exhibit A
(please see exhibit 10.2)
Exhibit B
(please see exhibit 10.1)
Exhibit C
(please see exhibit 99.1)
EXHIBIT 6.2(c)(1)
Western Multiplex Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
______, 2000
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger, dated as of November 12, 2000
(the "Agreement") among Western Multiplex Corporation, a Delaware corporation
("Western"), WA Merger Sub, Inc., a Delaware corporation and a direct
wholly-owned subsidiary of Western ("Merger Sub"), and Adaptive Broadband
Corporation, a Delaware corporation ("Adaptive") which provides for the merger
(the "Merger") of Merger Sub with and into Adaptive on the terms and conditions
set forth, the time at which the Merger becomes effective being hereafter
referred to as the "Effective Time." It is a condition to the consummation of
the Merger that Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to Western, and Xxxxxx
Godward LLP, counsel to Adaptive, render opinions regarding certain United
States federal income tax consequences of the Merger. Capitalized terms not
defined herein have the meanings specified in the Agreement.
In connection with such opinions to be rendered by each of you, and
acknowledging that each of you will rely, with Western's consent, upon the
statements and representations made in this letter in rendering such opinions,
the undersigned certifies and represents to each of you on behalf of Western,
after due investigation and inquiry that the statements and representations
stated herein are true, correct and complete in all respects at the date hereof
and except to the extent written notification to the contrary is received by you
before the Effective Time will be true, correct and complete in all respects as
of the Effective Time (as if made as of the Effective Time and thereafter, where
relevant):
1. The facts, representations and covenants relating to the Merger of
Merger Sub with and into Adaptive, as reflected in the Merger Agreement and the
ancillary agreement, thereto, and the Joint Proxy Prospectus prepared by
Adaptive and Western are, insofar as such facts, pertain to Western and Merger
Sub, true, accurate and complete in all material respects. The Merger will be
carried out in accordance with the Merger Agreement, and none of the material
terms and conditions therein have been or will be materially modified by
Western, or to the knowledge of the management of Western, by Adaptive.
61
2. Pursuant to the Merger, Merger Sub will merger with and into Adaptive,
and Adaptive will acquire all of the assets and liabilities of Merger Sub. At
least ninety percent (90%) of the fair market value of the net assets and at
least seventy percent (70%) of the fair market value of the gross assets held by
Adaptive immediately prior to the Merger and at least ninety percent (90%) of
the fair market value of the net assets and at least seventy percent (70%) of
the fair market value of the gross assets held by Merger Sub immediately prior
to the Merger will be held by Adaptive after the Merger. For the purpose of
determining the percentage of Adaptive's and Merger Sub's net and gross assets
held by Adaptive immediately following the Merger, the following assets will be
treated as property held by Adaptive or Merger Sub, as the case may be,
immediately prior to the Merger but not by Adaptive subsequent to the Merger:
(i) assets disposed of by Adaptive or Merger Sub (other than assets transferred
by Merger Sub to Adaptive in the Merger) prior to or subsequent to the Merger
and in contemplation thereof (including without limitation any asset disposed of
by Adaptive or Merger Sub, other than in the ordinary course of business,
pursuant to a plan or intent existing during the period ending at the Effective
Time and beginning with the commencement of negotiations (whether formal or
informal) with Adaptive regarding the Merger (the "Pre-Merger Period")), (ii)
assets used by Adaptive or Merger Sub to pay expenses or liabilities incurred in
connection with the Merger, (iii) assets used by Adaptive or Merger Sub to make
payments to Adaptive stockholders in lieu of fractional shares of Western Common
Stock and (iv) assets used by Adaptive or Merger Sub to make distribution,
redemption or other payments in respect of Adaptive stock or rights to acquire
such stock (including payments treated as such for tax purposes) that are made
in contemplation of the Merger or related thereto.
3. The Merger is being undertaken for business reasons and not for the
purpose of tax avoidance.
4. The Adaptive Common Stock will be surrendered pursuant to the Merger in
an arm's-length exchange, and the fair market value of Western Common Stock and
cash in lieu of a fractional share of Western Common Stock received by each
Adaptive stockholder will be approximately equal to the fair market value of
Adaptive Common Stock surrendered by such stockholder in the Merger. In
connection with the Merger, no holder of Adaptive Common Stock will receive in
exchange for Adaptive Common Stock, directly or indirectly, any consideration
other than Western Common Stock and cash in lieu of a fractional share thereof.
5. As of the Effective Time, neither Western nor any corporation related to
Western will, in connection with the Merger, (i) be under any obligation, or
will have entered into any agreement or understanding, directly or indirectly,
to redeem or repurchase any of the Western Common Stock issued to stockholders
of Adaptive in the Merger or to make any extraordinary distribution in respect
of such Western Common Stock or (ii) have any plan or intention, directly or
indirectly, to reacquire any of the Western Common Stock issued in the Merger;
provided, however, that Western may adopt an open market stock repurchase
program that satisfies the requirements of Revenue Ruling 99-58. After the
Merger, no dividends or distributions will be made to the former Adaptive
stockholders by Western other than regular, normal dividends or distributions
made to all holders of Western Common Stock. Additionally, prior to and in
connection with the Merger, neither Western nor any corporation related to
Western will have acquired Adaptive stock, directly or indirectly, with
consideration other than stock of Western. For purposes of this representation
letter, two corporations shall be treated as
62
related to one another if immediately prior to or immediately after the Merger,
(a) the corporations are members of the same affiliated group (within the
meaning of section 1504 of the Code, but determined without regard to section
1504(b) of the Code) or (b) one corporation owns 50% or more of the total
combined voting power of all classes of stock of the other corporation that are
entitled to vote or 50% or more of the total value of all classes of stock of
the other corporation (applying the attribution rules of Section 318 of the Code
as modified pursuant to section 304(c)(3)(B) of the Code). For purposes of this
representation, a corporation that is a partner in a partnership will be treated
as owning or acquiring any stock owned or acquired, as the case may be, by the
partnership and as having furnished its share of any consideration furnished by
the partnership to acquire the stock, in each case, in accordance with its
interest in the partnership.
6. Neither Western nor any corporation related to Western has any plan or
intention, following the Merger: (i) to liquidate Adaptive; (ii) to merge
Adaptive with or into another corporation (except pursuant to the Merger); (iii)
to sell or otherwise dispose of shares of the stock of Adaptive, except for
transfers (including successive transfers) of such stock to corporations
controlled by the transferor corporation at the time of such transfer, within
the meaning of Treasury Regulation section 1.368-2(k) or (iv) to cause Adaptive
to sell, distribute, transfer or otherwise dispose of any of its assets, or any
of the assets it acquired from Merger Sub, except for dispositions made in the
ordinary course of business or transfers (including successive transfers) of
assets to one or more corporations controlled, in the case of each transfer, by
the transferor corporation, within the meaning of Treasury Regulation section
1.368-2(k). Western has no plan or intention to (i) cause Adaptive, after the
Effective Time, to issue additional shares of stock that would result in Western
losing control of Adaptive or (ii) otherwise take any action that could result
in Western losing control of Adaptive following the Merger. For purposes of this
representation letter, "control" with respect to a corporation shall mean
ownership of at least (i) 80% of the total combined voting power of all classes
of stock entitled to vote and (ii) 80% of the total number of shares of each
other class of stock of the corporation.
7. To the best knowledge of the management of Western, there is no plan or
intention on the part of stockholders of Adaptive to sell, exchange or otherwise
transfer ownership of (including by derivative transactions such as an equity
swap which would have the economic effect of a transfer of ownership) any share
of Western Common Stock (other than fractional shares of Western Common Stock
for which holders of Western Common Stock receive cash in the Merger) to
Western, Adaptive or any person related to Western or Adaptive, directly or
indirectly (including through partnerships or through third parties in
connection with a plan to so transfer ownership).
8. Following the Merger, Western will cause Adaptive or another member of
Adaptive' "qualified group" to continue the "historic business" of Adaptive or
use a "significant portion" of Adaptive's "historic business assets" in a
business, as such terms are used in Treasury Regulation section 1.368-1(d). For
purposes of this representation, Adaptive' "qualified group" means, pursuant to
Treasury Regulation section 1.368-1(d)(4)(ii), one or more chains of
corporations connected through stock ownership with Adaptive, but only if
Adaptive owns directly stock representing control in at least one other
corporation, and stock representing control in each of the corporations (except
Adaptive) is owned directly by one of the other
63
corporations. In addition, Adaptive will be treated as owning its proportionate
share of Adaptive' business assets used in a business of any partnership in
which members of Adaptive' qualified group either own a significant interest or
have active and substantial management functions as a partner with respect to
that partnership business.
9. Each of Western and its stockholders has paid and will pay their
respective expenses, if any, incurred in connection with the Merger, and Western
has not agreed to assume, nor will it assume, directly or indirectly, any
expense or other liability, whether fixed or contingent, of any holder of
Adaptive Common Stock in connection with or as part of the Merger or any related
transaction. Notwithstanding the foregoing, (i) any liability for transfer taxes
incurred by a holder of Adaptive Common Stock will be paid by Adaptive, and in
no event by Western, and (ii) expenses incurred in connection with the filing,
printing and mailing of the Joint Proxy Statement/Prospectus and Form S-4 will
be borne equally by Adaptive and Western.
10. There is, and at the Effective Time will be, no intercorporate
indebtedness existing between Western and Adaptive or between Merger Sub and
Adaptive that was issued, acquired or will be settled at a discount.
11. Neither Western nor Merger Sub, as the case may be, will (i) elect, or
have in effect an election, to be treated as a "regulated investment company" or
as a "real estate investment trust" or file any tax return consistent with such
treatment or (ii) be a corporation 50% or more of the fair market value of whose
total assets are stock or securities and 80% or more of the fair market value of
whose total assets are assets held for investment. In making the determinations
described in (ii) above, (x) the stock and securities of any subsidiary of
Western shall be disregarded and Western shall be deemed to own its ratable
share of such subsidiary's assets and (y) a corporation shall be considered to
be a subsidiary of Western if Western owns 50% or more of the combined voting
power of all classes of the stock of such subsidiary that are entitled to vote,
or 50% or more of the total value of all classes of the outstanding stock of
such subsidiary. In addition, in determining the fair market value of Western's
total assets for the purposes of making this representation, Western shall
exclude any cash and cash items (such as receivables), government securities
and, to the extent provided in the applicable Treasury regulations, any assets
acquired (through incurring indebtedness or otherwise) for the purposes of
causing Western to not be characterized as an entity described in (i) or (ii) of
the first sentence of this paragraph or causing Western to meet the requirements
of section 368(a)(2)(F)(ii) of the Code.
12. None of the compensation to be received by any stockholder-employees
of Adaptive for services rendered after the Effective Time, and none of the
compensation to be received by any stockholder-employees or stockholder-
independent contractors of Adaptive from Western for services rendered either
before or after the Effective Time, will be separate consideration for, or
allocable to, any of such stockholder-employee's or stockholder-independent
contractor's shares of Adaptive stock; none of the shares of Western Common
Stock to be received by any stockholder-employees or stockholder-independent
contractors of Adaptive in connection with the Merger will be separate
consideration for, or allocable to, any employment, consulting or similar
agreement or arrangement or any covenant not to compete or release with respect
to services rendered after the Effective Time; and the compensation paid to any
stockholder-employees or stockholder-independent contractors of Adaptive for
services
64
rendered will be for services actually rendered (or to be rendered) and
will be commensurate with amounts paid to third parties bargaining at arm's-
length for similar services.
13. Merger Sub is being formed solely to effect the Merger and it will not
conduct any business or other activities other than the issuance of its stock to
Western prior to the Merger. Merger Sub will not have any liabilities that will
be assumed by Adaptive, and will not transfer to Adaptive in the Merger any
assets subject to liabilities.
14. Pursuant to the Merger, all shares of Adaptive Common Stock will be
exchanged solely for Western Common Stock or for cash in lieu of fractional
shares of Western Common Stock that would otherwise be issued to stockholders of
Adaptive. For purposes of this representation, shares of Adaptive Common Stock
exchanged for cash or other property originating with Western or a party related
to Western will be treated as outstanding Adaptive Common Stock at the Effective
Time.
15. Prior to the Merger and through the Effective Time, Western will be in
control of Merger Sub.
16. As of the Effective Time neither Western nor any corporation related to
Western will own beneficially or of record, or will have owned beneficially or
of record during the five years preceding the Effective Time, any shares of
Adaptive Common Stock or other securities, options, warrants or instruments
giving the holder thereof the right to acquire Adaptive Common Stock or other
securities issued by Adaptive.
17. The Western Common Stock into which Adaptive Common Stock will be
converted in the Merger is stock entitled to vote for the directors of Western
and on all other matters put forth to the shareholders of Western.
18. The payment of cash in lieu of fractional shares of Western Common
Stock that would otherwise be issued to stockholders of Adaptive in the Merger
is solely for the purpose of avoiding the expense and inconvenience to Western
of issuing and transferring fractional shares of Western Common Stock and does
not represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to stockholders of Adaptive
instead of issuing fractional shares of Western Common Stock will not exceed one
percent of the total consideration that will be issued in the Merger to
stockholders of Adaptive in exchange for their shares of Adaptive Common Stock.
19. With respect to each instance, if any, in which shares of Adaptive
stock have been purchased by a stockholder of Western (a "Stockholder") during
the Pre-Merger Period (a "Stock Purchase"): (i) the Stock Purchase was not made
by such Stockholder as a representative, or for the benefit, of Western; (ii)
the purchase price paid by such Stockholder pursuant to the Stock Purchase was
not and will not be advanced, and was not and will not be reimbursed, either
directly or indirectly, by Western; (iii) at no time was such Stockholder or any
other party required or obligated to surrender to Western Adaptive stock
acquired in the Stock Purchase, and neither such Stockholder nor any other party
will be required to surrender to Western the Western Common Stock for which such
shares of Adaptive stock will be exchanged
65
in the Merger; and (iv) the Stock Purchase was not a formal or informal
condition to consummation of the Merger.
20. Following the Merger, Western, Merger Sub and Adaptive will comply with
the record-keeping and information filing requirements of Treasury Regulations
Section 1.368-3.
21. The Merger will be reported by Western and Adaptive on their respective
federal income tax returns as a reorganization within the meaning of Section
368(a) of the Code.
22. The undersigned is authorized to make all of the statements and
representations set forth herein on behalf of Western and Merger Sub.
Very truly yours,
Western Multiplex Corporation
By:
---------------------------
Name:
Title:
66
EXHIBIT 6.2(c)(2)
Adaptive Broadband Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
_____, 2000
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger, dated as of November 12, 2000
(the "Agreement") among Western Multiplex Corporation, a Delaware corporation
("Western"), WA Merger Sub, Inc., a Delaware corporation and a direct
wholly-owned subsidiary of Western ("Merger Sub"), and Adaptive Broadband
Corporation, a Delaware corporation ("Adaptive"), which provides for the merger
(the "Merger") of Merger Sub with and into Adaptive on the terms and conditions
set forth, the time at which the Merger becomes effective being hereafter
referred to as the "Effective Time." It is a condition to the consummation of
the Merger that Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to Western, and Xxxxxx
Godward LLP, counsel to Adaptive, render opinions regarding certain United
States federal income tax consequences of the Merger. Capitalized terms not
defined herein have the meanings specified in the Agreement.
In connection with such opinions to be rendered by each of you, and
acknowledging that each of you will rely, with Adaptive' consent, upon the
statements and representations made in this letter in rendering such opinions,
the undersigned hereby certifies and represents to each of you on behalf of
Adaptive, after due investigation and inquiry that the statements and
representations stated herein are true, correct and complete in all respects at
the date hereof and except to the extent written notification to the contrary is
received by you before the Effective Time will be true, correct and complete in
all respects as of the Effective Time (as if made as of the Effective Time and
thereafter, where relevant):
1. The facts, representations and covenants relating to the Merger of
Merger Sub with and into Adaptive, as reflected in the Merger Agreement and the
ancillary agreement, thereto, and the Joint Proxy Prospectus prepared by
Adaptive and Western are, insofar as such fact, pertain to Adaptive, true,
accurate and complete in all material respects. The Merger will be carried out
in accordance with the Merger Agreement, and none of the material term and
conditions therein have been or will be materially or modified by Adaptive, or
to the knowledge of the management of Adaptive, by Western.
2. Pursuant to the Merger, Merger Sub will merger with and into Adaptive,
and Adaptive will acquire all of the assets and liabilities of Merger Sub. At
least ninety percent
67
(90%) of the fair market value of the net assets and at least seventy percent
(70%) of the fair market value of the gross assets held by Adaptive immediately
prior to the Merger and at least ninety percent (90%) of the fair market value
of the net assets and at least seventy percent (70%) of the fair market value of
the gross assets held by Merger Sub immediately prior to the Merger will be held
by Adaptive after the Merger. For the purpose of determining the percentage of
Adaptive's and Merger Sub's net and gross assets held by Adaptive immediately
following the Merger, the following assets will be treated as property held by
Adaptive or Merger Sub, as the case may be, immediately prior to the Merger but
not by Adaptive subsequent to the Merger: (i) assets disposed of by Adaptive or
Merger Sub (other than assets transferred by Merger Sub to Adaptive in the
Merger) prior to or subsequent to the Merger and in contemplation thereof
(including without limitation any asset disposed of by Adaptive or Merger Sub,
other than in the ordinary course of business, pursuant to a plan or intent
existing during the period ending at the Effective Time and beginning with the
commencement of negotiations (whether formal or informal) with Adaptive
regarding the Merger (the "Pre-Merger Period")), (ii) assets used by Adaptive or
Merger Sub to pay expenses or liabilities incurred in connection with the
Merger, (iii) assets used by Adaptive or Merger Sub to make payments to Adaptive
stockholders in lieu of fractional shares of Western Common Stock and (iv)
assets used by Adaptive or Merger Sub to make distribution, redemption or other
payments in respect of Adaptive stock or rights to acquire such stock (including
payments treated as such for tax purposes) that are made in contemplation of the
Merger or related thereto.
3. The Merger is being undertaken for business reasons and not for the
purpose of tax avoidance.
4. The Adaptive Common Stock will be surrendered pursuant to the Merger in
an arm's-length exchange, and the fair market value of Western Common Stock and
cash in lieu of a fractional share of Western Common Stock received by each
Adaptive stockholder will be approximately equal to the fair market value of
Adaptive Common Stock surrendered by such stockholder in the Merger. In
connection with the Merger, no holder of Adaptive Common Stock will receive in
exchange for their Adaptive Common Stock, directly or indirectly, any
consideration other than Western Common Stock and cash in lieu of a fractional
share thereof.
5. Adaptive, prior to and in connection with the Merger, has neither (i)
redeemed, directly or indirectly, any of its stock, nor (ii) made any
distributions with respect to its stock, in either case, where the consideration
received by a stockholder of Adaptive could be treated as received in the
Merger, or for purposes of Section 356 of the Internal Revenue Code of 1986, as
amended, (the "Code"), would be so treated if the stockholder of Adaptive had
received stock of Western in the Merger.
6. To the best knowledge of the management of Adaptive, there is no plan or
intention on the part of stockholders of Adaptive to sell, exchange or otherwise
transfer ownership of (including by derivative transactions such as an equity
swap which would have the economic effect of a transfer of ownership) any share
of Western Common Stock (other than fractional shares of Western Common Stock
for which holders of Western Common Stock receive cash in the Merger) to
Western, Adaptive or any corporation related to Western or Adaptive, directly or
indirectly (including through partnerships or through third parties in
connection with a plan to so transfer ownership). For purposes of this
representation letter, two
68
corporations shall be treated as related to one another if immediately prior to
or immediately after the Merger, (a) the corporations are members of the same
affiliated group (within the meaning of section 1504 of the Code, but determined
without regard to section 1504(b) of the Code) or (b) one corporation owns 50%
or more of the total combined voting power of all classes of stock of the other
corporation that are entitled to vote or 50% or more of the total value of
shares of all classes of stock of the other corporation (applying the
attribution rules of section 318 of the Code as modified pursuant to section
304(c)(3)(B) of the Code). For purposes of this representation, a corporation
that is a partner in a partnership will be treated as owning or acquiring any
stock owned or acquired, as the case may be, by the partnership and as having
furnished its share of any consideration furnished by the partnership to acquire
the stock, in each case, in accordance with its interest in the partnership.
7. No assets of Adaptive have been sold, transferred or otherwise disposed
of so as to prevent Adaptive from continuing the "historic business" of Adaptive
or from using a "significant portion" of Adaptive' "historic business assets" in
a business following the Merger, as such terms are used in Treasury Regulation
section 1.368-1(d). For purposes of this representation, Adaptive' "qualified
group" means, pursuant to Treasury Regulation section 1.368-1(d)(4)(ii), one or
more chains of corporations connected through stock ownership with Adaptive, but
only if Adaptive owns directly stock representing control in at least one other
corporation, and stock representing control in each of the corporations (except
Adaptive) is owned directly by one of the other corporations. In addition,
Adaptive will be treated as owning its proportionate share of Adaptive' business
assets used in a business of any partnership in which members of Adaptive'
qualified group either own a significant interest or have active and substantial
management functions as a partner with respect to that partnership business. For
purposes of this representation letter, "control" with respect to a corporation
shall mean ownership of at least (i) 80% of the total combined voting power of
all classes of stock entitled to vote and (ii) 80% of the total number of shares
of each other class of stock of the corporation
8. Each of Adaptive and its stockholders has paid and will pay their
respective expenses, if any, incurred in connection with the Merger, and Western
has not agreed to assume, nor will it assume, directly or indirectly, any
expense or other liability, whether fixed or contingent, of any holder of
Adaptive Common Stock in connection with or as part of the Merger or any related
transaction. Notwithstanding the foregoing, (i) any liability for transfer taxes
incurred by a holder of Adaptive Common Stock will be paid by Adaptive, and in
no event by Western, and (ii) Expenses incurred in connection with the filing,
printing and mailing of the Joint Proxy Statement/Prospectus and Form S-4 will
be borne equally by Adaptive and Western.
9. There is, and at the Effective Time will be, no intercorporate
indebtedness existing between Western and Adaptive or between Merger Sub and
Adaptive that was issued, acquired or will be settled at a discount.
10. Adaptive will not (i) elect, or have in effect an election, to be
treated as a "regulated investment company" or as a "real estate investment
trust" or file any tax return consistent with such treatment or (ii) be a
corporation 50% or more of the fair market value of whose total assets are stock
or securities and 80% or more of the fair market value of whose total assets are
assets held for investment. In making the determinations described in (ii)
above, (x) the stock and securities of any subsidiary of Adaptive shall be
disregarded and Adaptive shall be
69
deemed to own its ratable share of such subsidiary's assets and (y) a
corporation shall be considered to be a subsidiary of Adaptive if Adaptive owns
50% or more of the combined voting power of all classes of the stock of such
subsidiary that are entitled to vote, or 50% or more of the total value of all
classes of the outstanding stock of such subsidiary. In addition, in determining
the fair market value of Adaptive' total assets for the purposes of making this
representation, Adaptive shall exclude any cash and cash items (such as
receivables), government securities and, to the extent provided in the
applicable Treasury regulations, any assets acquired (through incurring
indebtedness or otherwise) for the purposes of causing Adaptive to not be
characterized as an entity described in (i) or (ii) of the first sentence of
this paragraph or causing Adaptive to meet the requirements of section
368(a)(2)(F)(ii) of the Code.
11. Adaptive is not, and at the Effective Time will not be, a debtor under
the jurisdiction of a court in a Title 11 or similar case. For purposes of the
foregoing, a "Title 11 or similar case" means a case under Title 11 of the
United States Code or a receivership, foreclosure or similar proceeding in a
federal or state court.
12. At the Effective Time, the fair market value of the assets of Adaptive
will equal or exceed the sum of the Adaptive' liabilities plus (without
duplication) the amount of liabilities, if any, to which its assets are or will
be subject.
13. None of the compensation to be received by any stockholder-employees or
stockholder-independent contractors of Adaptive for services rendered prior to
the Effective Time was, or will be, separate consideration for, or allocable to,
any of such stockholder-employee's or stockholder-independent contractor's
shares of Adaptive Common Stock; none of the shares of Western Common Stock to
be received by any stockholder-employees or stockholder-independent contractors
of Adaptive in connection with the Merger will be separate consideration for, or
allocable to, any employment, consulting or similar agreement or arrangement or
any covenant not to compete or release with respect to services rendered prior
to the Effective Time; and the compensation paid to any stockholder-employees or
stockholder-independent contractors of Adaptive for services rendered prior to
the Effective Time will be for services actually rendered (or to be rendered)
and was, or will be, commensurate with amounts paid to third parties bargaining
at arm's-length for similar services.
14. Adaptive is not currently, and during the five years preceding the
Effective Time will not have been, a "United States real property holding
corporation." For purposes of the foregoing, a United States real property
holding corporation means a corporation in which the fair market value of its
United States real property interests equals or exceeds fifty percent of the
fair market value of (i) its United States real property interests, (ii) its
interests in real property located outside the United States and (iii) any other
of its assets which are used or held for use in a trade or business.
15. Pursuant to the Merger, all shares of Adaptive Common Stock will be
exchanged solely for Western Common Stock or for cash in lieu of fractional
shares of Western Common Stock that would otherwise be issued to stockholders of
Adaptive. For purposes of this representation, shares of Adaptive Common Stock
exchanged for cash or other property originating with Western or a party related
to Western will be treated as outstanding Adaptive Common Stock at the Effective
Time.
70
16. Adaptive has no plan or intention to issue any additional shares of its
stock that would cause Western to own less than (i) 80% of the total combined
voting power of all classes of Adaptive stock entitled to vote and (ii) 80% of
the total number of shares of each other class of stock of Adaptive.
17. At the Effective Time, Adaptive will not have outstanding any warrants,
options, convertible securities, or any other type of right pursuant to which
any person could acquire stock in Adaptive that, if exercised or converted,
would affect Western's acquisition or retention of control of Adaptive.
18. To the knowledge of Adaptive, as of the Effective Time neither Western
nor any corporation related to Western will own beneficially or of record, or
will have owned beneficially or of record during the five years preceding the
Effective Time, any shares of Adaptive Common Stock, or other securities,
options, warrants or instruments giving the holder thereof the right to acquire
Adaptive Common Stock or other securities issued by Adaptive.
19. There will be no dissenters to the Merger.
20. The payment of cash in lieu of fractional shares of Western Common
Stock that would otherwise be issued to stockholders of Adaptive in the Merger
is solely for the purpose of avoiding the expense and inconvenience to Western
of issuing and transferring fractional shares of Western Common Stock and does
not represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to stockholders of Adaptive
instead of issuing fractional shares of Western Common Stock will not exceed one
percent of the total consideration that will be issued in the Merger to
stockholders of Adaptive in exchange for their shares of Adaptive Common Stock.
21. With respect to each instance, if any, in which shares of Adaptive
stock have been purchased by a stockholder of Western (a "Stockholder") during
the Pre-Merger Period (a "Stock Purchase"): (i) the Stock Purchase was not made
by such Stockholder as a representative, or for the benefit, of Western; (ii)
the purchase price paid by such Stockholder pursuant to the Stock Purchase was
not and will not be advanced, and was not and will not be reimbursed, either
directly or indirectly, by Western; (iii) at no time was such Stockholder or any
other party required or obligated to surrender to Western Adaptive stock
acquired in the Stock Purchase, and neither such Stockholder nor any other party
will be required to surrender to Western the Western Common Stock for which such
shares of Adaptive stock will be exchanged in the Merger; and (iv) the Stock
Purchase was not a formal or informal condition to consummation of the Merger.
22. Following the Merger, Western, Merger Sub and Adaptive will comply with
the record-keeping and information filing requirements of Treasury Regulations
Section 1.368-3.
23. The Merger will be reported by Western and Adaptive on their respective
federal income tax returns as a reorganization within the meaning of Section
368(a) of the Code.
71
24. The undersigned is authorized to make all of the statements and
representations set forth herein on behalf of Adaptive.
25. No adaptive stockholder has guaranteed any Adaptive indebtedness that
is currently outstanding or will be outstanding at the Effective Time.
Notwithstanding anything herein to the contrary, the undersigned makes no
representations regarding any actions or conduct of Adaptive pursuant to
Western's exercise of control over Adaptive after the Merger.
Very truly yours,
Adaptive Broadband Corporation
By:
---------------------------
Name:
Title:
72
