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AGREEMENT AND PLAN OF MERGER
AMONG:
ACCRUE SOFTWARE, INC.,
PILOT ACQUISITION CORP.,
AVIATOR HOLDING CORPORATION,
PILOT SOFTWARE, INC.
AND
PLATINUM EQUITY HOLDINGS, LLC
DATED AS OF AUGUST 24, 2000
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TABLE OF CONTENTS
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PAGE
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SECTION ONE........................................................................... 1
1. The Merger............................................................. 1
1.1 The Merger...................................................... 1
1.2 Closing; Effective Time......................................... 1
1.3 Effect of the Merger............................................ 2
1.4 Certificate of Incorporation; Bylaws............................ 2
1.5 Directors and Officers.......................................... 2
1.6 Effect on Capital Stock......................................... 2
1.7 Surrender of Certificates; Issuance of Merger Consideration..... 3
1.8 Distributions With Respect to Unexchanged Shares................ 4
1.9 No Further Ownership Rights in Target Common Stock.............. 4
1.10 Tax Consequences................................................ 4
1.11 Taking of Necessary Action; Further Action...................... 4
1.12 Withholding..................................................... 4
SECTION TWO........................................................................... 4
2. Representations and Warranties of Target, Pilot and Platinum........... 5
2.1 Organization.................................................... 5
2.2 Certificate of Incorporation and Bylaws......................... 6
2.3 Capital Structure............................................... 6
2.4 Authority....................................................... 7
2.5 No Conflicts; Required Filings and Consents..................... 7
2.6 Financial Statements............................................ 8
2.7 Absence of Undisclosed Liabilities.............................. 8
2.8 Absence of Certain Changes...................................... 8
2.9 Litigation...................................................... 10
2.10 Restrictions on Business Activities............................. 11
2.11 Permits; Company Products; Regulation........................... 11
2.12 Title to Property............................................... 12
2.13 Intellectual Property........................................... 12
2.14 Environmental Matters........................................... 14
2.15 Taxes........................................................... 16
2.16 Employee Benefit Plans.......................................... 18
2.17 Certain Agreements Affected by the Merger....................... 20
2.18 Employee Matters................................................ 20
2.19 Material Contracts.............................................. 21
2.20 Interested Party Transactions................................... 22
2.21 Insurance....................................................... 22
2.22 Compliance With Laws............................................ 23
2.23 Minute Books.................................................... 23
2.24 Brokers' and Finders' Fees...................................... 23
2.25 Vote Required................................................... 23
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2.26 Accounts Receivable............................................. 23
2.27 Customers....................................................... 23
2.28 Third Party Consents............................................ 23
2.29 No Commitments Regarding Future Products........................ 24
2.30 Representations Complete........................................ 24
2.31 Platinum Agreements............................................. 24
SECTION THREE......................................................................... 24
3. Representations and Warranties of Acquiror and Merger Sub.............. 24
3.1 Organization, Standing and Power................................ 24
3.2 Acquiror Common Stock........................................... 24
3.3 Authority....................................................... 25
3.4 No Conflict; Required Filings and Consents...................... 25
3.5 SEC Filings; Financial Statements............................... 25
3.6 Absence of Undisclosed Liabilities.............................. 26
3.7 Absence of Certain Changes...................................... 26
3.8 Litigation...................................................... 26
3.9 Broker's and Finders' Fees...................................... 27
3.10 Tax Matters..................................................... 27
SECTION FOUR.......................................................................... 27
4. Conduct Prior to the Effective Time.................................... 27
4.1 Conduct of Business of Target and Acquiror...................... 27
4.2 Conduct of Business of Target and Pilot......................... 28
4.3 No Solicitation................................................. 30
SECTION FIVE.......................................................................... 31
5. Additional Agreements.................................................. 31
5.1 Commercially Reasonable Efforts and Further Assurances.......... 31
5.2 Consents; Cooperation........................................... 31
5.3 Access to Information........................................... 33
5.4 Confidentiality................................................. 34
5.5 Public Disclosure............................................... 34
5.6 FIRPTA.......................................................... 34
5.7 State Statutes.................................................. 34
5.8 Blue Sky Laws................................................... 34
5.9 Nasdaq National Market.......................................... 35
5.10 Key Employees................................................... 35
5.11 Registration Rights............................................. 35
5.12 Additional Agreements of Platinum............................... 35
5.13 Termination of Pilot Stock Options.............................. 37
5.14 Bonus Programs.................................................. 37
5.15 Tax Items....................................................... 38
5.16 Platinum Agreements............................................. 40
5.17 Cognizant Agreements............................................ 40
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5.18 Pilot Credit Line............................................... 40
5.19 Litigation...................................................... 40
SECTION SIX........................................................................... 41
6. Conditions to the Merger............................................... 41
6.1 Conditions to Obligations of Each Party to Effect the Merger.... 41
6.2 Additional Conditions to Obligations of Platinum, Target
and Pilot....................................................... 41
6.3 Additional Conditions to the Obligations of Acquiror and
Merger Sub...................................................... 43
SECTION SEVEN......................................................................... 45
7. Termination, Amendment and Waiver...................................... 45
7.1 Termination..................................................... 45
7.2 Effect of Termination........................................... 46
7.3 Expenses and Termination Fees................................... 47
7.4 Amendment....................................................... 47
7.5 Extension; Waiver............................................... 47
SECTION EIGHT......................................................................... 47
8. Indemnification........................................................ 47
8.1 Survival of Representations and Warranties...................... 47
8.2 Indemnification................................................. 48
8.3 Damages Threshold............................................... 48
8.4 Indemnification Claims.......................................... 48
8.5 Employee Retention Payments..................................... 50
8.6 Interest Penalty................................................ 52
SECTION NINE.......................................................................... 52
9. General Provisions..................................................... 52
9.1 Notices......................................................... 52
9.2 Interpretation.................................................. 53
9.3 Counterparts.................................................... 53
9.4 Entire Agreement; Nonassignability; Parties in Interest......... 53
9.5 Severability.................................................... 53
9.6 Remedies Cumulative............................................. 54
9.7 Governing Law................................................... 54
9.8 Rules of Construction........................................... 54
9.9 Amendments and Waivers.......................................... 54
9.10 Definition of Knowledge......................................... 54
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of August 24, 2000 by and among Accrue Software, Inc., a Delaware
corporation ("Acquiror"), Aviator Acquisition Corp., a Delaware corporation and
a wholly owned subsidiary of Acquiror ("Merger Sub"), Aviator Holding
Corporation, a Delaware corporation ("Target"), Pilot Software, Inc., a Delaware
corporation and wholly owned subsidiary of Target ("Pilot"), and Platinum Equity
Holdings, LLC., a Delaware limited liability company and the sole stockholder of
Target ("Platinum").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub believe it
is in the best interests of their respective companies and the stockholders of
their respective companies that Target and Merger Sub combine into a single
company through the merger of Merger Sub with and into Target (the "Merger")
and, in furtherance thereof, have approved the Merger. Pursuant to the Merger,
among other things, the outstanding shares of capital stock of Target shall be
converted into shares of the voting Common Stock, par value $0.001 per share, of
Acquiror ( "Acquiror Common Stock"), as set forth herein.
B. Target, Acquiror, Merger Sub, Pilot and Platinum desire to make
certain representations and warranties and other agreements in connection with
the Merger.
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
AGREEMENT
The parties hereby agree as follows:
SECTION ONE
1. THE MERGER.
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Merger Sub shall be merged with and into Target, the separate corporate
existence of Merger Sub shall cease and Target shall continue as the surviving
corporation of the Merger. Target as the surviving corporation after the Merger
is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place as soon as
practicable (and in no event later than
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5 business days) after the satisfaction or waiver of each of the conditions set
forth in Section 4 below or at such other time as the parties agree (the
"Closing Date"). In connection with the Closing, the parties shall cause the
Merger to be consummated by filing the Certificate of Merger, together with the
required officers' certificates, with the Secretary of State of the State of
Delaware, in accordance with the relevant provisions of Delaware Law (the time
of such filing being the "Effective Time"). The Closing shall take place at the
offices of Venture Law Group, 2775 Sand Hill Road, Menlo Park, California, or at
such other location as the parties agree.
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. At the Effective Time, all the property,
rights, privileges, powers and franchises of Target and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation.
(b) At the Effective time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, and the officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any
action on the part of Merger Sub, Target or any of their respective
stockholders, the following shall occur at the Effective Time:
(a) CONVERSION OF TARGET COMMON STOCK. The shares of Common
Stock, par value $0.01 per share, of Target ("Target Common Stock") issued and
outstanding immediately prior to the Effective Time, shall be converted and
exchanged, in the aggregate, for 940,000 shares of Acquiror Common Stock;
provided, however, that in the event that the average of the last reported per
share sale prices of Acquiror Common Stock (as quoted on The Nasdaq National
Market and reported in The Wall Street Journal) over the period of 10 trading
days up to and including the second trading day preceding the Closing Date (the
"Acquiror Average Price") is greater than $30.64, then the number of shares of
Acquiror Common Stock into which the issued and outstanding shares of Target
Common Stock shall be converted shall be reduced
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to be equal to (a) $28,800,000 divided by (b) the Acquiror Average Price; and,
provided further, that in the event that the Acquiror Average Price is less than
$21.28, then the number of shares of Acquiror Common Stock into which the issued
and outstanding shares of Target Common Stock shall be converted shall be
increased to be equal to (x) $20,000,000 divided by (y) the Acquiror Average
Price. (The shares of Acquiror Common Stock into which the issued and
outstanding shares of Target Common Stock are converted as a result of the
Merger are sometimes referred to herein as the "Merger Consideration.") The
issued and outstanding shares of Target Common Stock, when so converted, shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and Platinum, as the holder of all of the issued and
outstanding shares of Target Common Stock prior to the Effective Time, shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration upon the surrender of the certificate evidencing such
shares of Target Common Stock in accordance with Section 1.7, without interest.
(b) CANCELLATION OF TARGET COMMON STOCK OWNED BY TARGET. At the
Effective Time, any shares of Target Common Stock owned by Target as treasury
stock immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
(c) CAPITAL STOCK OF MERGER SUB. At the Effective Time, each
share of Common Stock of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(d) ADJUSTMENTS; MAXIMUM ISSUANCE. The computation of the Merger
Consideration pursuant to Section 1.6(a) shall be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into Acquiror Common Stock),
reorganization, recapitalization or other like change with respect to Acquiror
Common Stock occurring after the date of this Agreement and prior to the
Effective Time. Except as set forth in Section 1.6(a), no other adjustment shall
be made in the number of shares of Acquiror Common Stock issued in the Merger as
a result of any increase or decrease in the market price of the Acquiror Common
Stock prior to the Effective Time.
(e) DISSENTERS' RIGHTS. Platinum hereby agrees not to exercise
and waives any appraisal or dissenters' rights with respect to the Target Common
Stock held by it.
(f) FRACTIONAL SHARES. No fraction of a share of Acquiror Common
Stock will be issued, but in lieu thereof, if Platinum would otherwise be
entitled to a fraction of a share of Acquiror Common Stock, Platinum shall
receive from Acquiror an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the Acquiror
Average Price.
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1.7 SURRENDER OF CERTIFICATES; ISSUANCE OF MERGER CONSIDERATION. As
soon as practicable after the Effective Time, Acquiror shall cause the shares of
Acquiror Common Stock constituting the Merger Consideration to be issued and
shall, upon delivery to Acquiror of the certificate or certificates evidencing
the issued and outstanding shares of Target Common Stock (the "Target
Certificates"), deliver certificates representing such shares of Acquiror Common
Stock to Platinum. The Target Certificates so surrendered shall forthwith be
cancelled and, until so surrendered, the Target Certificates will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends, to evidence the ownership of the Merger Consideration and the
right to receive an amount in cash in lieu of the issuance of any fractional
share in accordance with Section 1.6(f).
1.8 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time will be paid to Platinum with respect to
the shares of Acquiror Common Stock represented thereby until Platinum
surrenders the Target Certificates. Subject to applicable law, following
surrender of the Target Certificates, there shall be paid to Platinum, at the
time of such surrender, without interest the amount of any such dividends or
other distributions with a record date after the Effective Time payable (but for
the provisions of this Section 1.8) with respect to such shares of Acquiror
Common Stock.
1.9 NO FURTHER OWNERSHIP RIGHTS IN TARGET COMMON STOCK. The
shares of Acquiror Common Stock issued upon the surrender for exchange of shares
of Target Common Stock in accordance with the terms hereof (including any cash
paid in lieu of any fractional share) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Target Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Target Common Stock which were
outstanding immediately prior to the Effective Time.
1.10 TAX CONSEQUENCES. It is intended by the parties that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Target and Merger Sub, the officers and directors of
Target and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
1.12 WITHHOLDING. Each of Acquiror and the Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement to Platinum such
amounts as may be required to be deducted or withheld therefrom under the Code
or any provision of state, local or foreign tax law or under any other
applicable legal requirement. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to Platinum.
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SECTION TWO
2. REPRESENTATIONS AND WARRANTIES OF TARGET, PILOT AND PLATINUM. Except
as disclosed in a letter dated as of the date of this Agreement and delivered by
Target to Acquiror prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Target
Disclosure Letter"), Target, Pilot and Platinum jointly and severally represent
and warrant to Acquiror and Merger Sub as follows:
2.1 ORGANIZATION.
(a) Target and Pilot are corporations, duly organized, validly
existing and in good standing under the laws of the State of Delaware. Target is
a holding corporation which conducts no business activities and has no material
assets, other than its ownership interest in Pilot, and no material liabilities.
Pilot has the requisite corporate power and authority and all necessary
government approvals to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to have such
power, authority and governmental approvals would not, individually or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), properties, assets, liabilities, business, operations or results of
operations (a "Material Adverse Effect") of Target, Pilot and the Subsidiaries
(as defined in Section 2.1(c) below), taken as a whole.
(b) Target and Pilot are each duly qualified or licensed as a
foreign corporation to do business, and are each in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
them or the nature of their business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect on Target, Pilot and the Subsidiaries, taken as a whole.
(c) Except for its ownership of all of the outstanding shares of
capital stock of Pilot, Target does not, directly or indirectly, own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity. A true and complete list of all of the direct and
indirect subsidiaries of Pilot (collectively, the "Subsidiaries" and each,
individually, a "Subsidiary"), indicating in each case the jurisdiction of
incorporation of each Subsidiary, and a list of the holder of the outstanding
shares of capital stock (or other ownership interests, including all
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities thereof) of
each such Subsidiary, is set forth in Section 2.1 of the Target Disclosure
Letter and, except as set forth in such Section 2.1 of the Target Disclosure
Letter, neither Pilot nor any Subsidiary, directly or indirectly, owns any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity. All of the outstanding shares of capital stock (or other
ownership interests, including all subscriptions, options, warrants, puts,
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calls, rights, exchangeable or convertible securities or other commitments or
agreements of any character relating to the issued or unissued capital stock or
other securities thereof) of each Subsidiary are duly authorized, validly
issued, fully paid and nonassessable, and free and clear of all liens, charges,
claims, encumbrances or rights of others. Pilot Software Limited is duly
organized and validly existing in good standing under the laws of the United
Kingdom, and Pilot Software GmbH is duly organized and validly existing in good
standing under the laws of Germany. (Pilot Software Limited and Pilot Software
GmbH are collectively referred to herein as the "Material Subsidiaries"). Each
of the Material Subsidiaries has the requisite power and authority and all
necessary government approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Material Adverse Effect on Target, Pilot and the
Subsidiaries, taken as a whole. The Subsidiaries other than the Material
Subsidiaries have no employees and conduct no business operations except as
described in Section 2.1 of the Target Disclosure Letter.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Target and Pilot have
delivered a true and correct copy of the Certificate of Incorporation and Bylaws
or other charter documents, as applicable, of Target, Pilot and each Subsidiary,
each as amended to date, to Acquiror. Neither Target, Pilot, nor any Subsidiary
is in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or substantially equivalent organizational documents.
2.3 CAPITAL STRUCTURE.
(a) The authorized capital stock of Target consists of 1,000
shares of Common Stock, of which 800 are issued and outstanding, all of which
are held beneficially and of record by Platinum free and clear of any liens,
claims, options charges or other encumbrances. There are no other outstanding
shares of capital stock or voting securities of Target and no outstanding
commitments to issue any shares of capital stock or voting securities of Target,
including all subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements of any
character relating to the issued or unissued capital stock or other securities
thereof. All outstanding shares of Target Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holder thereof, and are not subject to preemptive rights or rights of first
refusal created by statute, the Certificate of Incorporation or Bylaws of Target
or any agreement to which Target is a party or by which it is bound. All
outstanding shares of Target Common Stock were issued in compliance with all
applicable federal and state securities laws.
(b) The authorized capital stock of Pilot consists of 28,844,720
shares of Common Stock, of which 20,000,000 shares are issued and outstanding,
all of which are held beneficially and of record by Target. Except for the stock
options granted to employees under Pilot's stock option plan (the "Pilot Stock
Options"), there are no other outstanding shares of capital stock or voting
securities of Pilot and no outstanding commitments to issue any shares of
capital stock or voting securities of Pilot, including all subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any
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<PAGE> 11
character relating to the issued or unissued capital stock or other securities
thereof. All outstanding shares of Pilot capital stock are duly authorized,
validly issued, fully paid and non-assessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holder thereof, and are not subject to preemptive rights or rights of first
refusal created by statute, the Certificate of Incorporation or Bylaws of Pilot
or any agreement to which Pilot is a party or by which it is bound. All
outstanding shares of Pilot Common Stock were issued in compliance with all
applicable federal and state securities laws.
(c) Except for (i) the Pilot Stock Options and (ii) the rights
created pursuant to this Agreement, there are no subscriptions options,
warrants, puts, calls, rights, exchangeable or convertible securities or other
commitments, agreements or arrangements of any character to which Target, Pilot
or any Subsidiary is a party or by which Target, Pilot or any Subsidiary is
bound relating to the issued or unissued capital stock of Target, Pilot or any
Subsidiary or obligating Target, Pilot or any Subsidiary to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of capital stock of Target, Pilot or any Subsidiary or
obligating Target, Pilot or any Subsidiary to grant or enter into any such
option, warrant, call, right, commitment or agreement. There are no contracts,
commitments or agreements relating to voting, purchase or sale of Target's,
Pilot's or any Subsidiary's capital stock between or among Target, Pilot or any
Subsidiary.
2.4 AUTHORITY. Each of Target, Pilot and Platinum has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. 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 Target, Pilot and
Platinum. Target's Board of Directors and Platinum's Board of Managers have
unanimously approved the Merger and this Agreement. Platinum, in its capacity as
the sole stockholder of Target, has irrevocably adopted and approved this
Agreement, the Certificate of Merger and the transactions contemplated hereby
and thereby. This Agreement has been duly executed and delivered by each of
Target, Pilot and Platinum and, assuming due authorization, execution and
delivery by Acquiror and Merger Sub, constitutes the valid and binding
obligation of Target, Pilot and Platinum, enforceable against such party in
accordance with its terms.
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2.5 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Target,
Pilot and Platinum does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (i) any provision of the Certificate of Incorporation,
Bylaws or Operating Agreement of Target, Pilot, Platinum or any Subsidiary, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Target,
Pilot, Platinum or any Subsidiary or any of their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Target, Pilot, Platinum or any
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing of the Certificate of Merger, together with the required officers'
certificates, as provided in Section 1.2, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933, as amended (the "Securities Act"), applicable state
securities laws and the securities laws of any foreign country; (iii) such
filings as may be required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR"); and (iv) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Target, Pilot or any Subsidiary, taken as a
whole, and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
2.6 FINANCIAL STATEMENTS. Section 2.6 of the Target Disclosure
Letter includes a true, correct and complete copy of Pilot's financial
statements on a consolidated basis as of and for the period from August 12, 1997
through December 31, 1997 and as of and for each of the fiscal years ended
December 31, 1998 and 1999, respectively, which financial statements have been
reviewed and certified by independent auditors, and Pilot's unaudited financial
statements (balance sheet, statement of operations and statement of cash flows)
on a consolidated basis as of, and for the six-month period ended, June 30, 2000
(collectively, the "Pilot Financial Statements"). The only material asset of
Target is the shares of capital stock of Pilot held by Target, and Target has no
material liabilities. Accordingly, the financial statements of Target on a
consolidated basis as of and for the fiscal years ended December 31, 1997, 1998
and 1999, and as of and for the six-month period ended June 30, 2000, are
identical to the financial statements of Pilot in all material respects (such
financial statements of Target referred to herein collectively with the Pilot
Financial Statements as the "Financial Statements"). The Financial Statements
have been prepared in accordance with U.S. generally accepted accounting
principles ("GAAP"), applied on a consistent basis throughout the periods
indicated and with each other, except that the unaudited financial statements
may not have all required notes thereto. The Financial Statements accurately set
out and describe the financial condition and operating results of Target and its
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consolidated Subsidiaries as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments. Pilot maintains and will
continue to maintain through the Effective Time a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Target, Pilot nor
any Subsidiary has material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (a) those set forth or adequately
provided for in the Balance Sheet reflected in the Financial Statements for the
period ended June 30, 2000 (the "Target Balance Sheet"), (b) those not required
to be set forth in the Target Balance Sheet under GAAP, (c) those incurred in
the ordinary course of business and consistent with past practice since the date
of the Target Balance Sheet, and (d) those incurred in connection with the
execution of this Agreement.
2.8 ABSENCE OF CERTAIN CHANGES. Except for the transactions
contemplated by this Agreement, since June 30, 2000 ( the "Target Balance Sheet
Date") there has not been, occurred or arisen any:
(a) transaction by Target, Pilot or any Subsidiary except in the
ordinary course of business and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation,
Bylaws, Operating Agreement or other substantially equivalent charter document
(collectively, "Charter Documents") of Target, Pilot or any Subsidiary, other
than non-substantive amendments or changes to the Charter Documents of a
Subsidiary relating to routine matters such as election of directors that are
reflected in such Charter Documents pursuant to local law and which will not
have a Material Adverse Effect on such Subsidiary;
(c) capital expenditure or commitment by Target, Pilot or any
Subsidiary, in any individual amount exceeding $50,000, or in the aggregate,
exceeding $100,000;
(d) destruction of, damage to, or loss of any assets (including,
without limitation, intangible assets), of Target, Pilot or any Subsidiary
(whether or not covered by insurance) which would have a Material Adverse Effect
on Target, Pilot and the Subsidiaries, taken as a whole;
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action which would have a Material Adverse Effect on
Target, Pilot and the Subsidiaries, taken as a whole;
(f) material change in accounting methods or practices
(including any change in depreciation or amortization policies or rates, any
change in policies in making or reversing accruals, or any change in
capitalization of software development costs) by Pilot;
(g) revaluation by the Target, Pilot or any Subsidiary of any of
their respective assets having a value prior to such revaluation in excess of
$50,000;
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(h) declaration, setting aside, or payment of a dividend or
other distribution in respect to the capital stock of Target, or any direct or
indirect redemption, purchase or other acquisition by Target of any of its
capital stock;
(i) increase in the salary or other compensation payable or to
become payable by Target, Pilot or any Subsidiary to any officers, directors,
employees or advisors of Target, Pilot or any Subsidiary, except in the ordinary
course of business consistent with past practice, or the declaration, payment,
or commitment or obligation of any kind for the payment by Target, Pilot or any
Subsidiary of a bonus or other additional salary or compensation to any such
person except as otherwise contemplated by this Agreement, or other than as set
forth in Section 2.16 below, the establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit sharing, stock option (including
without limitation, the granting of stock options, stock appreciation rights,
performance awards), stock purchase or other employee benefit plan;
(j) sale, lease, license of other disposition of any of the
assets or properties of Target, Pilot or any Subsidiary, except in the ordinary
course of business;
(k) termination or material amendment of any Material Contract
(as defined in Section 2.19 below);
(l) loan by Target, Pilot or any Subsidiary to any person or
entity, or guaranty by Target, Pilot or any Subsidiary of any loan, except for
(x) travel or similar advances made to employees in connection with their
employment duties in the ordinary course of business, consistent with past
practices and (y) trade payables to non-affiliates and in the ordinary course of
business, consistent with past practices;
(m) waiver or release of any right or claim of Target, Pilot or
any Subsidiary, including any write-off or other compromise of any account
receivable of Target, Pilot or any Subsidiary, except in the ordinary course of
business and consistent with past practice;
(n) the commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of Target, Pilot or any
Subsidiary or their respective affairs;
(o) written notice of any claim of ownership by a third party of
any Intellectual Property (as such term is defined in Section 2.13 below) that
is owned by Pilot, or of infringement by Target, Pilot or any Subsidiary of any
third party's intellectual property rights;
(p) issuance or sale by Target, Pilot or any Subsidiary of any
of its shares of capital stock, or securities exchangeable, convertible or
exercisable therefor, or of any other of its securities;
(q) change in pricing or royalties set or charged by Target,
Pilot or any Subsidiary to its customers or licensees or in pricing or royalties
set or charged by persons who
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have licensed Intellectual Property to Target, Pilot or any Subsidiary, except
in the ordinary course of business and consistent with past practice;
(r) payment, discharge or satisfaction of any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than to non-affiliated third parties in the ordinary course of
business; or
(s) agreement by Target, Pilot or any Subsidiary, or any of
their respective officers or employees of either on behalf of such entity to do
any of the things described in the preceding clauses (a) through (r).
2.9 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Platinum, Target and
Pilot, threatened against Target, Pilot or any Subsidiary or any of their
respective properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Target, Pilot and the
Subsidiaries, taken as a whole. There is no judgment, decree or order against
Target, Pilot, any Subsidiary or Platinum or any of their respective directors
or officers (in their capacities as such), that could prevent, enjoin, or
materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Target, Pilot and the Subsidiaries, taken as a whole. All litigation
to which Target, Pilot or any Subsidiary is a party (or threatened in writing to
become a party) is disclosed in the Target Disclosure Letter.
2.10 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon Target, Pilot or any
Subsidiary which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any current or currently proposed business
practice of Target, Pilot or any Subsidiary, any acquisition of property by
Target, Pilot or any Subsidiary or the overall conduct of business by Target,
Pilot or any Subsidiary as currently conducted or as currently proposed to be
conducted by Target, Pilot or any Subsidiary. Neither Target, Pilot nor any
Subsidiary has entered into any agreement under which Target, Pilot or any
Subsidiary is restricted from competing in any line of business or selling,
licensing or otherwise distributing any of its products to any customers or
class of customers, in any geographic area, during any period of time or in any
segment of the market.
2.11 PERMITS; COMPANY PRODUCTS; REGULATION.
(a) Target, Pilot and each Subsidiary are in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders necessary for Target,
Pilot and the Subsidiaries to own, lease and operate their respective properties
and to carry on their respective businesses as they are now being conducted (the
"Target Authorizations"), and no suspension or cancellation of any Target
Authorization is pending or threatened, except where the failure to have, or the
suspension or cancellation of, any Target Authorization would not have a
Material Adverse Effect on Target, Pilot and the Subsidiaries, taken as a whole,
or prevent Target or Pilot from performing their respective obligations under
this Agreement. None of Target, Pilot or any Subsidiary is in
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<PAGE> 16
conflict with, or in default or violation of, (i) any Target Authorization, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which it is a party or by
which it or any its property or assets is bound or affected, except for any such
conflict, default or violation that would not, individually or in the aggregate,
have a Material Adverse Effect on Target, Pilot and the Subsidiaries, taken as a
whole, or prevent Target or Pilot from performing their respective obligations
under this Agreement.
(b) Except as would not have a Material Adverse Effect on
Target, Pilot and the Subsidiaries, taken as a whole, there have been no written
notices, citations or decisions by any governmental or regulatory body that any
product produced, manufactured, marketed or distributed at any time by Target,
Pilot or any Subsidiary (the "Products") is defective or fails to meet any
applicable standards promulgated by any such governmental or regulatory body. To
the knowledge of Platinum, Target and Pilot, Target, Pilot and each Material
Subsidiary has complied in all material respects with the laws, regulations,
policies, procedures and specifications with respect to the design, manufacture,
labeling, testing and inspection of the Products. There have been no recalls,
field notifications or seizures ordered or threatened by any such governmental
or regulatory body with respect to any of the Products.
(c) Target, Pilot or a Material Subsidiary has obtained, in all
countries where any of them is marketing or has marketed any Products, all
applicable licenses, registrations, approvals, clearances and authorizations
required by local, state or federal agencies in such countries regulating the
safety, effectiveness and market clearance of the Products currently or
previously marketed in such countries, except for any such failures as would
not, individually or in the aggregate, have a Material Adverse Effect on Target,
Pilot and the Subsidiaries, taken as a whole, or prevent Target or Pilot from
performing their respective obligations under this Agreement.
2.12 TITLE TO PROPERTY.
(a) Target, Pilot and each Subsidiary has good and marketable
title to all of its respective properties, interests in properties and assets,
real and personal, reflected in the Target Balance Sheet or acquired after the
Target Balance Sheet Date (except properties, interests in properties and assets
sold or otherwise disposed of since the Target Balance Sheet Date in the
ordinary course of business), or with respect to leased properties and assets,
valid leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, and (iii) liens
securing debt which is reflected on the Target Balance Sheet. The plant,
property and equipment of Target, Pilot and the Material Subsidiaries that are
used in the operations of their respective businesses are in good operating
condition and repair (except for ordinary wear and tear). All properties used in
the operations of Target, Pilot and the Subsidiaries are reflected in the Target
Balance Sheet to the extent GAAP requires the same to be reflected. Section
2.12(a) of the Target Disclosure Letter sets forth a true, correct and complete
list of all real property owned or leased by Target, Pilot or any Subsidiary,
the name of
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the lessor, the date of the lease and each amendment thereto. All amendments to
such leases were entered into in the ordinary course of business and do not
change the material terms of such leases, other than extensions, renewals and
reasonable pricing adjustments. To the knowledge of Platinum, Target and Pilot,
such leases are valid and effective in accordance with their respective terms,
and there is not under any such leases any existing material default or material
event of default (or event which with notice or lapse of time, or both, would
constitute such a default).
(b) Prior to the execution of this Agreement, Target has
provided to Acquiror a letter, dated as of the date of this Agreement, which
sets forth a true, correct and complete list of all equipment with a value in
excess of $1,000 (the "Equipment") owned or leased by Target, Pilot and the
Subsidiaries as of July 31, 2000, and such Equipment is, taken as a whole, (i)
adequate for the conduct of the business of Target, Pilot and the Subsidiaries,
consistent with past practice, and (ii) in good operating condition (except for
ordinary wear and tear).
2.13 INTELLECTUAL PROPERTY.
(a) Target, Pilot and each of the Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, copyrights, and any applications for any of the foregoing, net
lists, schematics, industrial models, inventions, technology, know-how, trade
secrets, inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material that are used or currently
proposed to be used in the business of Target, Pilot or any Subsidiary as
currently conducted or as currently proposed to be conducted ("Intellectual
Property").
(b) Section 2.13 of the Target Disclosure Letter lists (i) all
patents and patent applications and all registered trademarks, trade names and
service marks and registered copyrights included in the Intellectual Property
that is owned by Target, Pilot or any Subsidiary, including the jurisdictions
in which each such Intellectual Property right has been issued or registered or
in which any application for such issuance and registration has been filed, (ii)
all material licenses, sublicenses and other agreements as to which Pilot,
Target or any Subsidiary is a party and pursuant to which any third party is
authorized to use any Intellectual Property, other than non-exclusive licenses
to use Products in object code format only entered into with end users in the
ordinary course of business, and (iii) all licenses, sublicenses and other
agreements as to which Target, Pilot or any Subsidiary is authorized to use any
third party patents, trademarks or copyrights, including software ("Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part of
any Product. None of Target, Pilot or any Subsidiary is in violation of any
license, sublicense or agreement described in Section 2.13 of the Target
Disclosure Letter. The execution and delivery of this Agreement by Target and
Pilot and the consummation of the transactions contemplated hereby, will neither
cause Target, Pilot or any Subsidiary to be in violation or default under any
such license, sublicense or agreement, nor entitle any other party to any such
license, sublicense or agreement to terminate or modify such license, sublicense
or agreement. Target, Pilot or a Material Subsidiary is the sole and exclusive
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<PAGE> 18
owner, with all right, title and interest in and to (free and clear of any
liens), the Intellectual Property that is owned by Target Pilot or a Subsidiary.
Target, Pilot or a Material Subsidiary has a valid license to all Intellectual
Property that is licensed or otherwise used or currently proposed to be used by
Target, Pilot or a Subsidiary. None of Target, Pilot or any Subsidiary is
contractually obligated to pay any compensation to any third party with respect
to the use of such third party's Intellectual Property or the material covered
thereby by Target, Pilot or any Subsidiary in connection with the services or
products in respect of which such third party's Intellectual Property is being
used.
(c) To the knowledge of Platinum, Target and Pilot, there is no
material unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights, any trade secret material to Target, Pilot or any
Subsidiary or any Third Party Intellectual Property Rights, including any
employee or former employee of Target, Pilot or any Subsidiary. Neither Target,
Pilot nor any Subsidiary has entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property, other
than indemnification provisions contained in agreements arising in the ordinary
course of business and other than the indemnification of officers, directors and
agents provided for in their respective charters or bylaws.
(d) Neither Target, Pilot nor any Subsidiary is or will be as a
result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights, the breach of which would have a Material Adverse Effect on
Target, Pilot and the Subsidiaries, taken as a whole.
(e) As of the date hereof, none of Target, Pilot and the
Subsidiaries has received any written assertion of any claim challenging the
validity of any Intellectual Property. None of Target, Pilot and the
Subsidiaries has been sued in any suit, action or proceeding which involves a
claim of infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party. To
the knowledge of Platinum, Target and Pilot, neither the conduct of the business
of Target, Pilot and each Subsidiary as currently conducted nor the manufacture,
sale, licensing or use of any of the Products as now manufactured, sold or
licensed or used, nor the use in any way of the Intellectual Property in the
manufacture, use, sale or licensing by Target, Pilot or any Subsidiary of any
Products currently proposed, infringes or conflicts with, in any way, any
license, trademark, trademark right, trade name, trade name right, patent,
patent right, industrial model, invention, service mark or copyright of any
third party. Neither Target, Pilot nor any Subsidiary has brought any action,
suit or proceeding against any third party for infringement of Intellectual
Property or breach of provisions in any license or agreement relating to
Intellectual Property rights. There are no pending, or, to the knowledge of
Platinum, Target and Pilot, threatened, interference, re-examinations,
oppositions or nullities involving any patents, patent rights or applications
therefor of Target, Pilot or any Subsidiary.
(f) Target, Pilot and the Subsidiaries have secured valid
written assignments from all consultants and employees who contributed to the
creation or development
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of the Intellectual Property of the rights to such contributions that Pilot does
not already own by operation of law.
(g) Each of Target, Pilot and the Material Subsidiaries has a
policy requiring each employee, consultant and independent contractor to execute
proprietary information and confidentiality agreements substantially in Pilot's
standard forms and all current and former employees, consultant and independent
contractors of Target, Pilot and each Material Subsidiary have executed such an
agreement. All use, disclosure or appropriation of Intellectual Property not
otherwise protected by patents, patent applications or copyright ("Confidential
Information") owned by Target, Pilot and the Subsidiaries by or to a third party
has been pursuant to the terms of a written agreement between Target, Pilot or
the applicable Subsidiary and such third party. All use, disclosure or
appropriation by Target, Pilot or a Subsidiary of Confidential Information not
owned by Target, Pilot or a Subsidiary has been pursuant to the terms of a
written agreement between Target, Pilot or a Subsidiary and the owner of such
Confidential Information, or is otherwise lawful.
2.14 ENVIRONMENTAL MATTERS.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal,
state or local laws, ordinances, codes, regulations, rules, policies and orders,
as each may be amended from time to time, that are intended to assure the
protection of the environment, or that classify, regulate, call for the
remediation of, require reporting with respect to, or list or define air, water,
groundwater, solid waste, hazardous or toxic substances, materials, wastes,
pollutants or contaminants; which regulate the manufacture, handling, transport,
use, treatment, storage or disposal of Hazardous Materials or materials
containing Hazardous Materials; or which are intended to assure the protection,
safety and good health of employees, workers or other persons, including the
public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any Environmental
and Safety Laws; petroleum and petroleum products including crude oil and any
fractions thereof; natural gas, synthetic gas, and any mixtures thereof; radon;
asbestos; and any other pollutant or contaminant
(iii) "Property" shall mean all real property leased or
owned by Target, Pilot or the Subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements
on the Property of Target, Pilot or the Subsidiaries.
(b) (i) To the knowledge of Platinum, Target and Pilot, no
methylene chloride or asbestos is contained in or has been used at or released
from the Facilities; (ii) all Hazardous Materials and wastes have been disposed
of in accordance with all Environmental and
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Safety Laws; (iii) neither Target, Pilot nor any Subsidiary has received any
written notice of any noncompliance of the Facilities or of its past or present
operations with Environmental and Safety Laws; (iv) no notices, administrative
actions or suits are pending or threatened relating to Hazardous Materials or a
violation of any Environmental and Safety Laws; (v) neither Target, Pilot nor
any Subsidiary is a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
or any state analog statute, arising out of events occurring prior to the
Closing Date; (vi) there has not been in the past, and are not now, any
contamination, disposal, spilling, dumping, incineration, discharge, storage,
treatment or handling of Hazardous Materials on, under or migrating to or from
the Facilities or Property (including without limitation, soils and surface and
ground waters); (vii) there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil wells; (viii) there are no polychlorinated biphenyls ("PCBs") deposited,
stored, disposed of or located on the Property or Facilities or any equipment on
the Property containing PCBs at levels in excess of 50 parts per million; (ix)
there is no formaldehyde on the Property or in the Facilities, nor any
insulating material containing urea formaldehyde in the Facilities; (x) the
Facilities and Target's, Pilot's and each Subsidiary's uses and activities
therein have at all times complied with all Environmental and Safety Laws; (xi)
Target, Pilot and the Subsidiaries have all the permits and licenses required to
be issued and are in full compliance with the terms and conditions of those
permits; and (xii) neither Target, Pilot nor any Subsidiary is liable for any
off-site contamination nor under any Environmental and Safety Laws.
2.15 TAXES.
(a) For purposes of this Section 2.15 and other provisions of
this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal, state and foreign income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, withholding taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which are required to be paid, withheld or collected,
(B) any liability for the payment of amounts referred to in (A) as a result of
being a member of any affiliated, consolidated, combined or unitary group, or
(C) any liability for amounts referred to in (A) or (B) as a result of any
obligations to indemnify another person.
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(ii) The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns required to be
filed in connection with any Taxes, including information returns with respect
to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of Target,
Pilot or any Subsidiary have been duly filed on a timely basis and such Returns
are true, complete and correct. All Taxes shown to be payable on such Returns or
on subsequent assessments with respect thereto, and all payments of estimated
Taxes required to be made by or on behalf of Target, Pilot or any Subsidiary
under Section 6655 of the Code or comparable provisions of state, local or
foreign law, have been paid in full on a timely basis, and no other Taxes are
payable by Target, Pilot or any Subsidiary with respect to items or periods
covered by such Returns (whether or not shown on or reportable on such Returns).
Target, Pilot and each Subsidiary have withheld and paid over all Taxes required
to have been withheld and paid over, and complied with all information reporting
and backup withholding in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. There are no liens on
any of the assets of Target, Pilot or any Subsidiary with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that Target,
Pilot or such Subsidiary is contesting in good faith through appropriate
proceedings. Neither Target, Pilot nor any Subsidiary has been at any time a
member of an affiliated group of corporations filing consolidated, combined or
unitary income or franchise tax returns for a period for which the statute of
limitations for any Tax potentially applicable as a result of such membership
has not expired. Target has been since January 1, 1999, and will continue
through the Effective Time to be, an S corporation within the meaning of Section
1361(a) of the Code and all applicable state tax laws, and Pilot has been since
January 1, 1999, and will continue through the Effective Time to be, a qualified
subchapter S subsidiary within the meaning of Section 1361(b)(3) of the Code and
all applicable state tax laws. Each Subsidiary is treated as an association
taxable as a corporation for U.S. federal income tax purposes pursuant to
Treasury Regulation Section 301.7701-3.
(c) The amount of Target's, Pilot's and any Subsidiary's
liabilities for unpaid Taxes for all periods through the date of the Financial
Statements do not, in the aggregate, exceed the amount of the current liability
accruals for Taxes reflected on the Financial Statements, and the Financial
Statements properly accrue in accordance with GAAP all liabilities for Taxes of
Target, Pilot and the Subsidiaries payable after the date of the Financial
Statements attributable to transactions and events occurring prior to such date.
No liability for Taxes of Target, Pilot or any Subsidiary has been incurred or
material amount of taxable income has been realized (or prior to and including
the Effective Time will be incurred or realized) since such date other than in
the ordinary course of business.
(d) Acquiror has been furnished with true and complete copies of
(i) relevant portions of income tax audit reports, statements of deficiencies,
closing or other agreements received by or on behalf of Target, Pilot or any
Subsidiary relating to Taxes, (ii) all federal, state and foreign income or
franchise tax returns and state sales and use tax Returns for or including
Target, Pilot and the Subsidiaries filed since August 12, 1997 and (iii) S
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Corporation and qualified subchapter S subsidiary election forms for Target and
Pilot, respectively, filed with the Internal Revenue Service and applicable
state tax authorities and, if any, documents from such Tax authorities
acknowledging receipt of and acceptance of such forms.
(e) No audit of the Returns of or including Target, Pilot and
the Subsidiaries by a government or taxing authority is in process, threatened
or pending. No deficiencies exist or, to the knowledge of Platinum, Target and
Pilot, have been asserted with respect to Taxes of Target, Pilot or any
Subsidiary, and neither Target, Pilot nor any Subsidiary has received any notice
that Target, Pilot or any Subsidiary has not filed a Return or paid Taxes
required to be filed or paid. Neither Target, Pilot nor any Subsidiary is a
party to any action or proceeding for assessment or collection of Taxes, nor has
such event been asserted or threatened in writing against Target, Pilot, any
Subsidiary or any of their respective assets. No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Returns of Target,
Pilot or any Subsidiary. Target, Pilot and each Subsidiary have disclosed on
their federal and state income and franchise tax returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Code Section 6662 or comparable provisions of applicable state tax
laws.
(f) Target, Pilot and the Subsidiaries are not (nor have they
ever been) parties to any tax sharing agreement other than among Pilot and the
Subsidiaries. Since August 12, 1997, neither Target, Pilot nor any Subsidiary
has been a distributing corporation or a controlled corporation in a transaction
described in Section 355(a) of the Code.
(g) Target is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Target is not a "consenting corporation" under Section 341(f) of the Code.
Neither Target, Pilot nor any Subsidiary has entered into any compensatory
agreements with respect to the performance of services which payment thereunder
would result in a nondeductible expense to Target, Pilot or such Subsidiary
pursuant to Section 280G or 162(m) of the Code or an excise tax to the recipient
of such payment pursuant to Section 4999 of the Code. Neither Target, Pilot nor
any Subsidiary has agreed to make, and, to the knowledge of Platinum, Target and
Pilot, none of Target, Pilot or any Subsidiary is required to make, other than
by reason of the Merger, any adjustment under Code Section 481(a) by reason of,
a change in accounting method, and Target, Pilot and each Subsidiary will not
otherwise have any income reportable for a period ending after the Closing Date
attributable to a transaction or other event (e.g., an installment sale)
occurring prior to the Closing Date with respect to which Target, Pilot or such
Subsidiary received the economic benefit prior to the Closing Date. Neither
Target, Pilot nor any Subsidiary is, nor has it been, a "reporting corporation"
subject to the information reporting and record maintenance requirements of
Section 6038A and the regulations thereunder.
2.16 EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.16 lists, with respect to Target, Pilot, each
Subsidiary,
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(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) each loan to
a non-officer employee in excess of $10,000, loans to officers and directors and
any stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code Section 125) or
dependent care (Code Section 129), life insurance or accident insurance plans,
programs or arrangements, (iii) all contracts and agreements relating to
employment that provide for annual compensation in excess of $100,000 and all
severance agreements, with any of the directors, officers or employees (other
than, in each case, any such contract or agreement that is terminable by Target
or Pilot at will or without penalty or other adverse consequence), (iv) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (v) other fringe or employee benefit plans,
programs or arrangements that apply to senior management and that do not
generally apply to all employees, and (vi) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of greater than $25,000 remain for the benefit of,
or relating to, any present or former employee, consultant or director
(together, the "Target Employee Plans").
(b) Target has furnished to Acquiror a copy of each of the
Target Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Target Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any Target
Employee Plan intended to be qualified under Section 401(a) of the Code (i) has
obtained from the Internal Revenue Service an opinion letter or favorable
determination letter as to its initial qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, (ii) may rely on an opinion letter issued to a prototype
plan sponsor with respect to a standardized plan adopted in accordance with the
requirements for such reliance, or (iii) has applied to the Internal Revenue
Service for such a determination letter (or has time remaining to apply for such
a determination letter) prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination with respect to all periods since
the date of adoption of such Target Employee Plan. Target has also furnished
Acquiror with the most recent Internal Revenue Service determination letter
issued with respect to each such Target Employee Plan, and nothing has occurred
since the issuance of each such letter which could reasonably be expected to
cause the loss of the tax-qualified status of any Target Employee Plan subject
to Code Section 401(a).
(c) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare or life insurance benefits to any
person. There has been no "prohibited transaction," as such term is defined in
Section 406 of ERISA and Section 4975 of the Code, and not exempt under Section
408 of ERISA or Section 4975 of the Code, with respect to any Target Employee
Plan, which could reasonably be expected to have, in the aggregate, a Material
Adverse Effect on Target, Pilot and the Subsidiaries, taken as a whole. Each
Target Employee
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Plan has been administered in accordance with its terms and in compliance with
the requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect on Target, Pilot and the Subsidiaries, taken as a whole.
Neither Target, Pilot nor any Subsidiary is subject to any liability or penalty
under Sections 4976 through 4980D of the Code or Title I of ERISA with respect
to any of the Target Employee Plans. All contributions required to be made to
any Target Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Target Employee
Plan for the current plan years. With respect to each Target Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063, 4064 or 4041 or ERISA has occurred. Neither any Target
Employee Plan nor any plan maintained, sponsored or contributed to by any trade
or business (whether or not incorporated) which is treated as a single employer
with Target (an "ERISA Affiliate") within the meaning of Section 414(b), (c),
(m) or (o) of the Code is covered by Title IV of ERISA, and no fact or event
exists that could give rise to any liability under Title IV of ERISA or under
Section 412 of the Code. No suit, administrative proceeding, action or other
litigation has been brought, or, to the knowledge of Platinum, Target and Pilot,
is threatened, against or with respect to any such Target Employee Plan,
including any audit or inquiry by the IRS or United States Department of Labor.
None of Target, Pilot, any Subsidiary is a party to, or has made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA or any single employer plan under
multiple controlled groups within the meaning of Section 4063 or 4064 of ERISA.
Target and Pilot have prepared in good faith and timely filed all requisite
government reports (which were true and correct as of the date filed) with
respect to each Target Employee Plan sponsored by Target, Pilot or any
Subsidiary.
(d) With respect to each Target Employee Plan, Target and Pilot
have complied with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the regulations thereunder or any similar applicable state law,
(ii) the applicable requirements of the Health Insurance Portability Amendments
Act ("HIPAA") and the regulations thereunder and (iii) the applicable
requirements of the Family Medical Leave Act of 1993 and the regulations
thereunder or any similar applicable state law, except to the extent, in each of
the foregoing cases, that such failure to comply would not, in the aggregate,
have a Material Adverse Effect on Target, Pilot and the Subsidiaries, taken as a
whole.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target, Pilot or any Subsidiary
relating to, or change in participation or coverage under, any Target Employee
Plan which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to such Target Employee Plan for the
most recent fiscal year included in the Financial Statements.
2.17 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation,
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golden parachute, bonus or otherwise) becoming due to any director or employee
of Target, Pilot or any Subsidiary, (ii) materially increase any benefits
otherwise payable by Target, Pilot or any Subsidiary, (iii) result in the
acceleration of the time of payment or vesting of any such benefits or (iv)
except as set forth in Section 2.17 of the Target Disclosure Letter, result in
any payment to any employee or consultant of Target, Pilot or any Subsidiary
that is nondeductible under Section 280G or Section 162(m) of the Code.
2.18 EMPLOYEE MATTERS. To the knowledge of Platinum, Target and
Pilot, Target, Pilot and each Subsidiary are in compliance in all material
respects with all currently applicable federal, state, local and foreign laws
and regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice. There are
no pending claims against Target, Pilot or any Subsidiary under any workers
compensation plan or policy, state disability insurance policy or other short or
long-term disability plan or policy or any other program for continuation of
salary in the event of disability. None of Target, Pilot or any Subsidiary has
any material obligations resulting from any failure to comply with or violation
of COBRA or any similar state law with respect to any former employees. There
are no controversies pending, or, the knowledge of Platinum, Target and Pilot,
threatened, between Target, Pilot or any Subsidiary and any of their respective
employees or former employees. Neither Target, Pilot nor any Subsidiary is a
party to any collective bargaining agreement or other labor union contract, and,
to the knowledge of Platinum, Target and Pilot, there have been no activities or
proceedings of any labor union or other group to organize any employees of
Target, Pilot or any Subsidiary. None of Target, Pilot or any Subsidiary has
incurred any liability under or failed to comply with the Worker Adjustment
Retraining Notification Act (the "WARN Act"). Section 2.18 of the Target
Disclosure Letter contains a list of all employees who are currently on a leave
of absence (whether paid or unpaid), the reasons therefor, the expected return
date (if known), and whether reemployment of such employee is guaranteed by
contract or statute, and a list of all employees who have requested a leave of
absence to commence at any time after the date of this Agreement, the reason
therefor, the expected length of such leave (if known), and whether reemployment
of such employee is guaranteed by contract or statute.
2.19 MATERIAL CONTRACTS.
(a) Subsections (i) through (ix) of Section 2.19(a) of the
Target Disclosure Letter contain a list of all contracts and agreements to which
Target, Pilot or any Subsidiary is a party that are material to the business,
results of operations, or condition (financial or otherwise), of Target, Pilot
and the Subsidiaries taken as a whole (such contracts, agreements and
arrangements as are required to be set forth in Section 2.19(a) of the Target
Disclosure Letter being referred to herein collectively as the "Material
Contracts"). Material Contracts shall include, without limitation, the following
and shall be categorized in the Target Disclosure Letter as follows:
(i) each contract and agreement (other than routine purchase
orders and pricing quotes in the ordinary course of business covering a period
of less than 1 year)
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for the purchase of inventory, spare parts, other materials
or personal property with any supplier or for the furnishing of services to
Target, Pilot or any Subsidiary under the terms of which Target, Pilot or any
Subsidiary: (A) paid or otherwise gave consideration of more than $100,000 in
the aggregate during the calendar year ended December 31, 1999, (B) is likely to
pay or otherwise give consideration of more than $100,000 in the aggregate
during the calendar year ended December 31, 2000, (C) is likely to pay or
otherwise give consideration of more than $100,000 in the aggregate over the
remaining term of such contract, or (D) cannot be cancelled by Target, Pilot or
such Subsidiary without penalty or further payment of less than $50,000;
(ii) each customer contract and agreement (other than
routine purchase orders, pricing quotes with open acceptance and other tender
bids, in each case, entered into in the ordinary course of business and covering
a period of less than one year) to which Target, Pilot or any Subsidiary is a
party which (A) involved consideration of more than $100,000 in the aggregate
during the calendar year ended December 31, 1999, (B) is likely to involve
consideration of more than $100,000 in the aggregate during the calendar year
ended December 31, 2000 or (C) pursuant to its terms, is likely to involve
consideration of more than $100,000 in the aggregate over the remaining term of
the contract;
(iii) (A) all distributor, manufacturer's representative,
broker, franchise, agency and dealer contracts and agreements to which Target,
Pilot or any Subsidiary is a party which involved consideration of more than
$50,000 during the calendar year ended December 31, 1999 or is likely to involve
consideration of at least $50,000 during the calendar year ended December 31,
2000, and (B) all sales promotion, market research, marketing and advertising
contracts and agreements to which Target, Pilot or any Subsidiary is a party
which: (1) involved consideration of more than $100,000 in the aggregate during
the calendar year ended December 31 1999, (2) are likely to involve
consideration of more than $100,000 in the aggregate during the calendar year
ended December 31, 2000, or (3) pursuant to their terms, are likely to involve
consideration of more than $100,000 in the aggregate over the remaining term of
the contract;
(iv) all management contracts with independent contractors
or consultants (or similar arrangements) to which Target, Pilot or any
Subsidiary is a party and which (A) involved consideration or more than $100,000
in the aggregate during the calendar year ended December 31, 1999, (B) are
likely to involve consideration of more than $100,000 in the aggregate during
the calendar year ended December 31, 2000, or (C) pursuant to their terms, are
likely to involve consideration of more than $100,000 in the aggregate over the
remaining term of the contract;
(v) all contracts and agreements (excluding routine checking
account overdraft agreements involving petty cash amounts) under which Target,
Pilot or any Subsidiary has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness in excess of $100,000 or under
which Target, Pilot or any Subsidiary has imposed (or may impose) a security
interest or lien on any of their respective assets, whether tangible or
intangible, to secure such indebtedness;
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(vi) all contracts and agreements between or among Target,
Pilot or any Subsidiary, on the one hand, and any affiliate of Target, Pilot or
any Subsidiary (other than a wholly owned direct or indirect subsidiary of
Target), on the other hand, including, but not limited to, Platinum; and
(vii) all contracts and agreements to which Target, Pilot or
any Subsidiary is a party under which it has agreed to supply products to a
customer at specified prices;
(b) Except as would not, individually or in the aggregate, have
a Material Adverse Effect on Target, Pilot and the Subsidiaries, taken as a
whole, each license or agreement listed in Section 2.13 of the Target Disclosure
Letter and each Material Contract is a legal, valid and binding agreement, and,
to the knowledge of Platinum, Target and Pilot, none of such licenses,
agreements or Material Contracts is in default by its terms or claimed in
writing to be in default or has been cancelled by the other party. Target has
furnished Acquiror with true and complete copies of all such licenses,
agreements and Material Contracts, together with all amendments, waivers or
other changes thereto.
2.20 INTERESTED PARTY TRANSACTIONS. Neither Target, Pilot nor any
Subsidiary is indebted to any director, officer, employee, agent or stockholder
except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses and the bonuses described in Section 2.17 of the Target
Disclosure Letter, and no such person is indebted to Target, Pilot or any
Subsidiary.
2.21 INSURANCE. Section 2.21 of the Target Disclosure Letter
summarizes the policies of insurance covering Target, Pilot and the Subsidiaries
and indicates, in each case, the owner of such policy. There is no material
claim pending under any of such policies as to which coverage has been
questioned, denied or disputed. All premiums due and payable under all such
policies have been paid. Neither Platinum, Target, Pilot nor any Subsidiary has
received any written notice of termination of any of such policies.
2.22 COMPLIANCE WITH LAWS. To the knowledge of Platinum, Target and
Pilot, Target, Pilot and each Material Subsidiary operates its business in
compliance with all federal, state, local or foreign statute, law or regulation
with respect to the conduct of its business, or the ownership or operation of
its business, except for such failures to comply as could not reasonably be
expected to have a Material Adverse Effect on Target, Pilot and the
Subsidiaries, taken as a whole.
2.23 MINUTE BOOKS. The minute books of Target, Pilot and the
Subsidiaries made available to Acquiror contain a complete summary of all
meetings of directors and stockholders or actions by written consent since the
time of incorporation of Target, Pilot and the respective Subsidiaries through
the date of this Agreement, and reflect all transactions referred to in such
minutes accurately in all material respects.
2.24 BROKERS' AND FINDERS' FEES. Neither Target nor Pilot has
incurred, nor will either of them incur, directly or indirectly, any liability
for brokerage or finders' fees or
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agents' commissions or investment bankers' fees or any similar charges payable
by Target, Pilot or any Subsidiary in connection with this Agreement or any
transaction contemplated hereby.
2.25 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the shares of Target Common Stock outstanding is the only vote of
Target's stockholders necessary to approve this Agreement and the transactions
contemplated hereby. Prior to the execution of this Agreement, Platinum, the
sole stockholder of Target, has irrevocably adopted and approved this Agreement,
the Certificate of Merger and the transactions contemplated hereby and thereby.
2.26 ACCOUNTS RECEIVABLE. Target has made available to Acquiror a
list of all accounts receivable of Target, Pilot and each Subsidiary reflected
on the Financial Statements ("Accounts Receivable") along with a range of days
elapsed since invoice. All Accounts Receivable of Target, Pilot and the
Subsidiaries arose in the ordinary course of business, are carried at values
determined in accordance with GAAP consistently applied. No person has any lien
on any of such Accounts Receivable and no request or agreement for deduction or
discount has been made with respect to any of such Accounts Receivable.
2.27 CUSTOMERS. As of the date hereof, no customer which
individually accounted for more than 5% of Target's gross revenues on a
consolidated basis during the 12-month period preceding the date hereof has
cancelled or otherwise terminated, or made any written threat to Target, Pilot
or any of the Subsidiaries to cancel or otherwise terminate, its relationship
with Target, Pilot or any of the Subsidiaries, and, to the knowledge of
Platinum, Target and Pilot, no such customer intends to cancel or otherwise
terminate its relationship with Target, Pilot or any Subsidiary. Neither Target,
Pilot nor any Subsidiary has knowingly breached, so as to provide a benefit to
Target, Pilot or any Subsidiary that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer of Target, Pilot or any Subsidiary.
2.28 THIRD PARTY CONSENTS. Except as set forth in the Target
Disclosure Letter, no consent or approval is needed from any third party in
order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
2.29 NO COMMITMENTS REGARDING FUTURE PRODUCTS. Section 2.29 of the
Target Disclosure Letter describes all obligations of Target, Pilot or any
Subsidiary to provide future enhancements of existing products, to add features
not presently available on existing products or to otherwise enhance the
performance of its existing products (other than beta or similar arrangements
pursuant to which customers from time to time test or evaluate products). All
Products substantially comply with published specifications for such Products,
and neither Target, Pilot nor any Subsidiary has received material complaints
from customers about Products that remain unresolved. Section 2.29 of the Target
Disclosure Letter accurately sets forth a complete list of material products in
development (exclusive of mere enhancements to and additional features for
existing Products).
2.30 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Target, Pilot and Platinum herein or in any Schedule hereto,
including the Target Disclosure Letter, or certificate furnished by Target,
Pilot or Platinum pursuant to this
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Agreement, when all such documents are read together in their entirety, contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
2.31 PLATINUM AGREEMENTS. Section 2.31 of the Target Disclosure
Letter sets forth all agreements, obligations, instruments, commitments and
arrangements by and between Target, Pilot or any Subsidiary on the one hand and
Platinum or any of its affiliates on the other hand (a) in effect as of the date
of this Agreement and (b) to be in effect as of the Closing (the "Related Party
Agreements"). None of Target, Pilot or any Subsidiary have any obligation under
the Purchase Agreement dated August 7, 1997 by and among Target, Aviator
Acquisition Corp., Platinum and Cognizant Corporation or any agreements attached
as exhibits to or entered into in connection with such Purchase Agreement (the
"Cognizant Agreements").
SECTION THREE
3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB.
Except as disclosed in a letter dated as of the date of this
Agreement and delivered by Acquiror to Target prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Acquiror Disclosure Letter"), Acquiror and Merger Sub
hereby jointly and severally represent and warrant to Target as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of Acquiror and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. Each of Acquiror and Merger Sub
has the corporate power to own its properties and to carry on its business as
now being conducted and as proposed to be conducted.
3.2 ACQUIROR COMMON STOCK. The shares of Acquiror Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid, and non-assessable and are free of any liens or encumbrances other than
any liens or encumbrances created by or imposed upon the holder thereof, and are
not subject to preemptive rights or rights of first refusal created by statute,
the Certificate of Incorporation or Bylaws of Acquiror or any agreement to which
Acquiror is a party or by which it is bound. The shares of Acquiror Common Stock
to be issued pursuant to the Merger will be issued in compliance with all
applicable federal and state securities laws and in compliance with the rules
and regulations of the National Association of Securities Dealers (the "NASD").
3.3 AUTHORITY. Acquiror and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. 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 Acquiror and Merger
Sub (other than, with respect to the Merger, the filing and recordation of
appropriate merger documents as required by Delaware law). This Agreement has
been duly executed and delivered by Acquiror and Merger Sub and constitutes the
valid and binding
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obligations of Acquiror and Merger Sub. Acquiror is not required to obtain
stockholder approval of the Merger.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Acquiror or Merger Sub, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or Merger Sub or their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or Merger Sub in connection with the execution
and delivery of this Agreement by Acquiror and Merger Sub or the consummation by
Acquiror and Merger Sub of the transactions contemplated hereby, except for (i)
the filing of the Certificate of Merger, together with the required officers'
certificates, as provided in Section 1.2, (ii) such consents, approvals, order,
authorizations, registrations, declarations and filings as may be required under
the Exchange Act, including without limitation, the filing of a Form 8-K with
the SEC, the Securities Act, and rules and regulations of the NASD, (iii) any
filings as may be required under applicable state securities laws and the
securities laws of any foreign country, (iv) such filings as may be required
under HSR, and (v) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not, individually or in the
aggregate, have a Material Adverse Effect on Acquiror and its subsidiaries,
taken as a whole and would not prevent, materially alter or delay any the
transactions contemplated by this Agreement.
3.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) As of the time it was filed with the SEC, (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each report, registration statement and definitive proxy
statement filed by Acquiror with the SEC (the "Acquiror SEC Documents") complied
in all material respects with the applicable requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder; and (ii) none of Acquiror's SEC Documents
contained when made any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed SEC
document.
(b) The financial statements (including the notes thereto)
contained in the Acquiror SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with GAAP
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applied on a consistent basis throughout the periods covered, except as may be
indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end audit adjustments, and (iii) fairly present in all
material respects the financial position of Acquiror as of the respective dates
thereof and the results of operations, stockholders' equity and cash flows of
Acquiror for the periods covered thereby.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (a) those set forth or adequately provided for in the
balance sheet included in Acquiror's Annual Report on Form 10-K for the period
ended March 31, 2000 (the "Acquiror Balance Sheet"), (ii) those not required to
be set forth in the Buyer Balance Sheet under GAAP, and (iii) those incurred in
the ordinary course of business since the Buyer Balance Sheet Date and
consistent with past practice.
3.7 ABSENCE OF CERTAIN CHANGES. Since March 31, 2000 (the "Acquiror
Balance Sheet Date"), Acquiror has conducted its business in the ordinary course
in a manner consistent with past practice and there has not occurred: (a) any
change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect on Acquiror and its subsidiaries, taken as a whole, other than Acquiror's
acquisition of the Infocharger division of Tantau Software, Inc., as disclosed
in the Acquiror SEC Documents; (b) any declaration, setting aside, or payment of
a dividend or other distribution with respect to the shares of Acquiror, or any
direct or indirect redemption, purchase or other acquisition by Acquiror of any
of its shares of capital stock; other than the repurchase of unvested shares
from employees, consultants and directors pursuant to contractual arrangements;
(c) any material amendment or change to Acquiror's Certificate of Incorporation
or Bylaws; or (d) any negotiation or agreement by Acquiror to do any of the
things described in the preceding clauses (a) through (c) (other than
negotiations with Target and its representatives regarding the transactions
contemplated by this Agreement).
3.8 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Acquiror, threatened
against Acquiror or any of its subsidiaries or any of their respective
properties or any of their respective officers or directors (in their capacities
as such) that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on Acquiror and its subsidiaries, taken as a
whole. There is no judgment, decree or order against Acquiror or any of its
subsidiaries or, to the knowledge of Acquiror, any of their respective directors
or officers (in their capacities as such) that could prevent, enjoin, or
materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Acquiror and its subsidiaries, taken as a whole.
3.9 BROKER'S AND FINDERS' FEES. Acquiror has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or
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investment bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
3.10 TAX MATTERS. Neither Acquiror nor any of its subsidiaries nor,
to the knowledge of Acquiror, any of their respective affiliates or agents is
aware of any agreement, plan or other circumstance that would prevent the Merger
from constituting a transaction under Section 368(a) of the Code.
SECTION FOUR
4. CONDUCT PRIOR TO THE EFFECTIVE TIME.
4.1 CONDUCT OF BUSINESS OF TARGET AND ACQUIROR. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of Target and Acquiror
agrees (except to the extent expressly contemplated by this Agreement or as
consented to in writing by the other), to carry on its and its subsidiaries'
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay and to cause its subsidiaries to pay
debts and Taxes when due (subject to good faith disputes over such debts or
Taxes and in the case of Taxes of Target, Pilot or any of the Subsidiaries, to
Acquiror's consent to the filing of material Tax Returns if applicable), to pay
or perform other obligations when due, and to use commercially reasonable
efforts consistent with past practice and policies to preserve intact its and
its subsidiaries' present business organization, keep available the services of
its and its subsidiaries' present officers and key employees and preserve its
and its subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it or its
subsidiaries, to the end that its and its subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time. The foregoing
notwithstanding, Acquiror acknowledges and agrees that the four employees of
Pilot listed in Section 4.1 of Target's Disclosure Letter will terminate their
employment with Pilot prior to the Effective Time to accept employment with
Platinum or an affiliate of Platinum. Each of Target and Acquiror agrees to
promptly notify the other of any event or occurrence not in the ordinary course
of its or its subsidiaries' businesses, and of any event which could have a
Material Adverse Effect on it and its subsidiaries, taken as a whole. Without
limiting the foregoing, except as expressly contemplated by this Agreement,
neither Target nor Acquiror shall do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of the other:
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements
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providing for the repurchase of shares in connection with any termination of
service to it or its subsidiaries;
(c) OTHER. Take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) or (b) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.2 CONDUCT OF BUSINESS OF TARGET AND PILOT. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, except as expressly contemplated by
this Agreement, neither Target nor Pilot shall, or shall cause or permit any of
the following, or shall allow, cause or permit any of the Subsidiaries to, or to
cause or permit any of the following, without the prior written consent of
Acquiror:
(a) MATERIAL CONTRACTS. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Material Contracts, other than in the ordinary course of business
consistent with past practice;
(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize
or propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its or the Subsidiaries' capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities;
(c) INTELLECTUAL PROPERTY. Transfer or grant to any person or
entity any rights to its Intellectual Property, other than non-exclusive
licenses of object code to customers entered into in the ordinary course of
business and consistent with past practice;
(d) EXCLUSIVE RIGHTS. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any Products or technology
of Target, Pilot or any Subsidiary;
(e) DISPOSITIONS. Sell, lease, license or otherwise dispose of
or encumber any of its properties or assets which are material, individually or
in the aggregate, to Target, Pilot and the Subsidiaries, taken as a whole,
except in the ordinary course of business consistent with past practice;
(f) INDEBTEDNESS. Incur any indebtedness for borrowed money,
including under existing credit lines, or guarantee any such indebtedness or
issue or sell any debt securities or guarantee any debt securities of others;
(g) LEASES. Enter into operating leases providing for annual
payments in excess of $50,000;
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(h) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), including, but not limited to, pursuant to the Related Party
Agreements, other than (i) to non-affiliated third parties in the ordinary
course of business and not in excess of $50,000 in any one case or $100,000 in
the aggregate, and (ii) the payment, discharge or satisfaction of liabilities to
non-affiliated third parties reflected or reserved against in the Financial
Statements;
(i) CAPITAL EXPENDITURES. Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice and not in excess of $50,000 in any one case or
$100,000 in the aggregate;
(j) INSURANCE. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(k) TERMINATION OR WAIVER. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(l) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Except for
the transactions contemplated by Section 5.13 and Section 5.14, adopt or amend
any employee benefit (including commissions) or stock purchase or option plan,
or hire any new director level or officer level employee (except that it may
hire a replacement for any current director level or officer level employee if
it first provides Acquiror advance notice regarding such hiring decision), pay
any special bonus or special remuneration to any employee or director, or
increase the salaries or wage rates of its employees, or pay commissions to
employees except for commissions reflected or reserved against in the Financial
Statements or incurred in the ordinary course of business since the Target
Balance Sheet Date;
(m) SEVERANCE ARRANGEMENT. Except for the transactions
contemplated by Section 5.13, grant or enter into any agreement providing for
any severance or termination pay to any employee, director or officer.
(n) LAWSUITS. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Acquiror prior to the
filing of such a suit, or (iii) for a breach of this Agreement;
(o) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to Target, Pilot and the Subsidiaries, taken as a whole;
(p) TAXES. Other than in the ordinary course of business, make
or change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any
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extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) NOTICES. Fail to give any notices and other information
required to be given to the employees of Target, Pilot or any Subsidiary, any
collective bargaining unit representing any group of employees of Target, Pilot
or any Subsidiary and any applicable government authority under the WARN Act,
the National Labor Relations Act, the Internal Revenue Code, COBRA, and other
applicable law in connection with the transactions provided for in this
Agreement;
(r) REVALUATION. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(s) OTHER. Take or agree in writing or otherwise to take, any of
the actions described in Sections 4.2(a) through (r) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.3 NO SOLICITATION. Platinum, Target and Pilot will not, and will
not permit any of their respective officers, directors, employees or other
agents or the Subsidiaries or any of their respective officers, directors,
employees or other agents to, directly or indirectly, (a) take any action to
solicit, initiate, entertain or encourage any Takeover Proposal (as defined
below) or (b) engage in negotiations with, or disclose any nonpublic information
relating to Target, Pilot or any of the Subsidiaries to, or afford access to the
properties, books or records of Target, Pilot or any of the Subsidiaries to, any
person that has advised Target that it may be considering making, or that has
made, a Takeover Proposal or (c) agree to or endorse any Takeover Proposal.
Target will promptly notify Acquiror after receipt of any Takeover Proposal or
any notice that any person is considering making a Takeover Proposal or any
request for nonpublic information relating to Target, Pilot or any of the
Subsidiaries or for access to the properties, books or records of Target, Pilot
or any of the Subsidiaries by any person that has advised Target that it may be
considering making, or that has made, a Takeover Proposal. For purposes of this
Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving
Target, Pilot or any Subsidiary or the acquisition of any significant equity
interest in, or a significant portion of the assets of, Target, Pilot or any
Subsidiary, other than the transactions contemplated by this Agreement.
SECTION FIVE
5. ADDITIONAL AGREEMENTS.
5.1 COMMERCIALLY REASONABLE EFFORTS AND FURTHER ASSURANCES. Each of
the parties to this Agreement shall use commercially reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement. Each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may
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be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.2 CONSENTS; COOPERATION.
(a) Each of Acquiror and Target shall use its commercially
reasonable efforts to promptly (i) obtain from any Governmental Entity any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Acquiror or Target or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereunder,
including those required under HSR, and (ii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
and the Merger required under the Securities Act and the Exchange Act and any
other applicable federal, state or foreign securities laws.
(b) Each of Acquiror and Target shall use commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under the HSR, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Acquiror and Target shall cooperate and use commercially reasonable efforts 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 (each an "Order"), that is in effect and
that prohibits, prevents, or restricts consummation of the Merger or any such
other transactions, unless by mutual agreement Acquiror and Target decide that
litigation is not in their respective best interests. The parties hereto will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of any party hereto in connection with proceedings under or relating to
any Antitrust Laws. Notwithstanding the provisions of the immediately preceding
sentence, it is expressly understood and agreed that Acquiror shall have no
obligation to litigate or contest any administrative or judicial action or
proceeding or any Order beyond September 30, 2000. Each of Acquiror and Target
shall use commercially reasonable efforts to take such acti