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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PSC INC.,
WEST ACQUISITION CORP.
AND
PERCON INCORPORATED
November 9, 1999
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
Article 1 The Merger.........................................................1
1.1. The Merger...........................................................1
1.2. Effective Time.......................................................2
1.3. Effects of the Merger................................................2
1.4. Conversion of Percon Common Stock; Treatment of Newco Common Stock...2
1.5. Stock Options........................................................3
1.6. Warrants.............................................................4
1.7. Articles of Incorporation............................................4
1.8. By-Laws..............................................................4
1.9. Board of Directors of the Surviving Corporation......................4
1.10. Closing..............................................................4
1.11. Dissenters'Rights....................................................5
Article 2 PAYMENT FOR SHARES.................................................5
2.1. Payment for Shares...................................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF Percon...........................7
3.1. Corporate............................................................7
3.2. Capitalization.......................................................8
3.3. Authorization........................................................8
3.4. No Violation.........................................................9
3.5. Filings with the SEC.................................................9
3.6. Financial Statements................................................10
3.7. Tax Matters.........................................................10
3.8. Absence of Certain Changes..........................................12
3.9. Undisclosed Liabilities.............................................13
3.10. No Litigation.......................................................13
3.11. Environmental Matters...............................................13
3.12. Title to Assets.....................................................15
3.13. Insurance...........................................................15
3.14. Material Contracts and Agreements...................................15
3.15. Intellectual Property...............................................16
3.16. Software; Protection................................................18
3.17. Labor Matters.......................................................19
3.18. ERISA Compliance....................................................20
3.19. Employment Compensation.............................................22
3.20. Percon Board of Directors Action....................................22
3.21. Proxy Statement.....................................................22
3.22. No Brokers or Finders...............................................22
3.23. Disclosure..........................................................23
3.24. Opinion of Financial Advisor........................................23
3.25. Year 2000 Compliance................................................23
Article 4 REPRESENTATIONS AND WARRANTIES OF PSC.............................24
4.1. Organization........................................................24
4.2. Authorization.......................................................24
4.3. No Violation........................................................24
4.4. Information.........................................................25
4.5. Interim Operations of Newco.........................................25
4.6. Capital Resources...................................................25
ARTICLE 5 COVENANTS.........................................................25
5.1. Interim Operations..................................................25
5.2. Access and Information..............................................27
5.3. Certain Filings, Consents and Arrangements..........................28
5.4. State Takeover Statutes.............................................28
5.5. Percon Special Meeting; Proxy Statement.............................28
5.6. Additional Agreements...............................................29
5.7. Certain Litigation..................................................30
5.8. Acquisition Proposals...............................................30
5.9. Confidentiality.....................................................32
5.10. Indemnification; Directors'and Officers'Insurance...................32
5.11. Percon Warrants.....................................................33
5.12. Voting Agreement Matters............................................33
ARTICLE 6 Conditions to Obligation to Close.................................34
6.1. Conditions to Obligation of PSC and Newco...........................34
6.2. Conditions to Obligations of Percon.................................35
ARTICLE 7 Termination.......................................................36
7.1. Termination by Mutual Consent.......................................36
7.2. Termination by Either PSC or Percon.................................36
7.3. Termination by Percon...............................................36
7.4. Termination by PSC..................................................37
7.5. Effect of Termination and Abandonment...............................37
ARTICLE 8 Miscellaneous.....................................................39
8.1. Survival............................................................39
8.2. Press Releases and Public Announcements.............................39
8.3. No Third Party Beneficiaries........................................39
8.4. Entire Agreement...................................................40
8.5. Succession and Assignment...........................................40
8.6. Counterparts........................................................40
8.7. Headings............................................................40
8.8. Notices.............................................................40
8.9. Governing Law.......................................................41
8.10. Amendments and Waivers..............................................41
8.11. Severability........................................................42
8.12. Expenses............................................................42
8.13. Construction........................................................42
8.14. Incorporation of Schedules..........................................43
INDEX OF DEFINED TERMS
A
Agreement...........................................1
Ancillary Instruments...............................8
B
Benefit Plans......................................19
Blue Sky Laws.......................................9
C
Closing.............................................4
Closing Agreement..................................12
Closing Date........................................4
Code...............................................10
Confidentiality Agreement..........................31
Contracts...........................................8
Costs..............................................31
D
Debt Consents......................................23
Dissenting Shares...................................5
E
Effective Time......................................2
Environmental Laws.................................13
ERISA..............................................19
ERISA Affiliate....................................20
Exchange Act........................................9
Excluded Percon Acquisition Proposal...............31
Existing Liens.....................................14
G
GAAP................................................7
H
Hazardous Substance................................14
HSR Act.............................................4
I
including..........................................41
Indemnified Parties................................31
Indemnified Party..................................31
L
Laws................................................1
Liens...............................................6
Litigation.........................................13
M
Material Adverse Change.............................7
Material Adverse Effect.............................7
Merger..............................................1
Merger Price........................................1
N
Newco...............................................1
O
Operations Software................................17
Option Exercise Period..............................3
Option Plan.........................................3
Options.............................................3
P
Paying Agent........................................5
Payment Fund........................................5
Pension Plans......................................19
Percon..............................................1
Percon Acquisition Proposal........................30
Percon Common Stock.................................1
Percon Common Stock Certificate.....................2
Percon Most Recent Fiscal Quarter End..............10
Percon Public Reports...............................9
Percon Representatives.............................29
Percon Requisite Shareholder Vote...................9
Percon Special Meeting.............................27
Percon Warrants.....................................4
Preliminary Filing.................................28
Product Software...................................17
Proxy Statement....................................22
PSC.................................................1
S
SEC................................................28
Securities Act......................................8
Securities Act Legend...............................8
Software...........................................17
Superior Percon Proposal...........................30
Surviving Corporation...............................1
T
Tax Return.........................................12
Tax Ruling.........................................12
Taxes..............................................11
Termination Date...................................35
Trade Rights.......................................17
V
Voting Agreement Shares.............................8
Voting Agreements...................................1
W
WBCA................................................1
WBCA Dissenters'Rights Provisions...................5
Y
Year 2000 Defect...................................23
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, constituting a plan of merger
under applicable law (this "Agreement"), dated as of November 9, 1999, by and
among PSC Inc., a New York corporation ("PSC"), West Acquisition Corp., a
Washington corporation ("Newco"), and Percon Incorporated, a Washington
corporation ("Percon").
WHEREAS, as a condition and inducement to PSC's willingness to
enter into this Agreement, certain holders of capital stock of Percon have
entered into Voting Agreements, dated the date hereof, with PSC (the "Voting
Agreements"); and
WHEREAS, the respective Boards of Directors of PSC, Newco and
Percon have approved the acquisition of Percon by Newco on the terms and subject
to the conditions set forth in this Agreement; and
WHEREAS, the respective Boards of Directors of PSC, Newco and
Percon have approved the merger of Newco with and into Percon (the "Merger") in
accordance with the Washington Business Corporation Act ("WBCA") and upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of the common stock, without par value, of Percon
(the "Percon Common Stock") not owned directly or indirectly by PSC or Percon
will be converted into the right to receive Fifteen Dollars ($15.00) in cash
(the "Merger Price"); and
WHEREAS, PSC, Newco and Percon desire to make certain
representations, warranties and agreements in connection with, and to prescribe
certain conditions to, the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Article 1
The Merger.
1.1. The Merger.
Subject to the terms and conditions of this Agreement, in
accordance with the WBCA, at the Effective Time, Newco shall merge with and into
Percon, and Percon shall survive the Merger and shall continue its corporate
existence under the applicable laws, ordinances, rules or regulations
(collectively, "Laws") of the State of Washington (the "Surviving Corporation").
Upon consummation of the Merger, the separate corporate existence of Newco shall
terminate.
1.2. Effective Time.
The Merger shall become effective upon the later of (a) the
time of filing of Articles of Merger with the Secretary of State of the State of
Washington and (b) the effective date and time of the Merger as set forth in the
Articles of Merger, which shall be the Closing Date (as defined in Section 1.10)
or the day after the Closing Date. The parties shall each use reasonable efforts
to cause the Articles of Merger to be filed on the Closing Date. The term
"Effective Time" shall be the date and time when the Merger becomes effective,
in accordance with this Section 1.2.
1.3. Effects of the Merger.
At and after the Effective Time, the Merger shall have the
effects set forth in Section 23B.11.060 of the WBCA.
1.4. Conversion of Percon Common Stock; Treatment of Newco Common Stock.
1.4.(a) At the Effective Time, subject to Section 1.11 and Section 2.1, by
virtue of the Merger and without any action on the part of Percon, or the holder
of any securities of Percon, each share of Percon Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares canceled
pursuant to Section 1.4(c)), shall be converted into the right to receive in
cash the Merger Price, payable to the holder thereof, without interest thereon,
in accordance with Article 2.
1.4.(b) All of the shares of Percon Common Stock converted into the right to
receive in cash the Merger Price pursuant to this Article 1 shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Effective Time, and each certificate (each a "Percon Common Stock
Certificate") that immediately prior to the Effective Time represented shares of
Percon Common Stock entitled to payment of the Merger Price pursuant to this
Section 1.4 shall thereafter represent only the right to receive the Merger
Price pursuant to this Section 1.4 and Section 2.1. Percon Common Stock
Certificates previously representing shares of Percon Common Stock shall be
exchanged for cash upon the surrender of such Percon Common Stock Certificates
in accordance with Section 2.1.
1.4.(c) At the Effective Time, all shares of Percon Common Stock that are owned
by Percon as treasury stock or owned by PSC or Newco, if any, shall be canceled
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
1.4.(d) At the Effective Time, each share of common stock, par value $.01 per
share, of Newco issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of common stock of the Surviving
Corporation. Each certificate evidencing ownership of any such shares shall,
following the Merger, evidence ownership of the same number of shares of common
stock of the Surviving Corporation.
1.5. Stock Options. Prior to the Effective Time, Percon shall take such actions
as are necessary such that all outstanding and unexercised options to purchase
shares of Percon Common Stock (the "Options"), including those outstanding under
the terms of the Percon Incorporated 1995 Stock Incentive Plan (the "Option
Plan"), shall be treated as follows:
1.5.(a) Percon shall provide a period of at least thirty (30) days ending
immediately prior to the Effective Time (the "Option Exercise Period ") during
which outstanding Options may be exercised to the extent then exercisable, and
upon the expiration of the Option Exercise Period, all Options shall immediately
terminate;
1.5.(b) At the Effective Time, each Option, to the extent exercisable
immediately prior to the expiration of the Option Exercise Period, shall
represent only the right to receive in cash, in lieu of any shares of Percon
Common Stock, the amount, if any, by which the Merger Price exceeds the required
exercise price of the Option multiplied by the number of shares of Percon Common
Stock for which the Option was exercisable immediately prior to the expiration
of the Option Exercise Period which amount the Surviving Corporation shall pay
as soon as practicable after the Effective Time, subject to reduction only for
any applicable withholding taxes; and
1.5.(c) To the extent an Option was not exercisable immediately prior to the
expiration of the Option Exercise Period,
(i) if the holder of the Option executes, within five (5) business days after
it is presented, a confidentiality, inventions and noncompetition agreement
in the form that PSC generally requires its employees to sign (which the
Surviving Corporation shall present as soon as possible after the Effective
Time), then such holder shall have the right to receive in cash, in lieu of
any shares of Percon Common Stock and only if and when the Option would
have become exercisable in accordance with its terms, the amount, if any,
by which the Merger Price exceeds the required exercise price of the Option
multiplied by the number of shares of Percon Common Stock for which the
Option would have become exercisable, which amount shall be payable by the
Surviving Corporation from time to time as soon as practicable after the
Option otherwise would have become exercisable, subject to reduction only
for any applicable withholding taxes; or
(ii) if the holder of the Option does not execute such agreement in a timely
manner, then such holder shall not have any rights in respect of the Option
after the Effective Time.
1.6. Warrants. At the Effective Time, each warrant to purchase shares of Percon
Common Stock (the "Percon Warrants") that is outstanding and unexercised
immediately prior to the Effective Time shall be adjusted to provide that each
Percon Warrant will thereafter be a right to receive the Merger Price in lieu of
any shares of Percon Common Stock upon the exercise of the Percon Warrant and
payment of the required exercise price of the Percon Warrant. No other terms of
the Percon Warrants shall be affected by the foregoing adjustment.
1.7. Articles of Incorporation. The Articles of Incorporation of Percon in
effect as of the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation after the Merger until thereafter amended in accordance
with applicable law.
1.8. By-Laws. The By-Laws of Percon in effect as of the Effective Time shall be
the By-Laws of the Surviving Corporation after the Merger until thereafter
amended in accordance with applicable law.
1.9. Board of Directors of the Surviving Corporation. The directors of Newco
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation at the Effective Time, each to hold office in accordance with the
Articles of Incorporation and By-Laws of the Surviving Corporation.
1.10. Closing. Subject to the terms and conditions of this Agreement, including
but not limited to the provisions of Article 6, the closing of the Merger (the
"Closing") will take place at 1:00 p.m. Eastern Time at the offices of PSC, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on a date to be specified by PSC by notice
to Percon, which shall be no later than two (2) business days after the later of
(a) the expiration of the applicable waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and (b) the Percon Special
Meeting (as defined in Section 5.5), unless the parties agree in writing to
another date. Notwithstanding the foregoing, if the Closing does not take place
on the date referred to in the preceding sentence because any condition to the
obligations of Percon or PSC is not met on that date, then any party may
postpone the Closing from time to time to any designated subsequent business day
not more than ten business days after the original or postponed date on which
the Closing was to occur by delivering notice of such postponement on the date
the Closing was to occur. The date on which the Closing occurs is referred to
herein as the "Closing Date."
1.11. Dissenters' Rights. In accordance with Sections 23B.13.010 through
23B.13.310 of the WBCA, dissenters' rights shall be available to holders of
Percon Common Stock in connection with the Merger. Notwithstanding anything to
the contrary herein, any Percon Common Stock held of record by persons who,
prior to the Effective Time, have objected to the Merger and complied with all
applicable provisions of Sections 23B.13.010 through 23B.13.310 of the WBCA (the
"WBCA Dissenters' Rights Provisions") necessary to perfect and maintain their
dissenters' rights thereunder (any such Percon Common Stock, "Dissenting
Shares") shall not be converted as of the Effective Time into a right to receive
the Merger Price as provided in Section 1.4, but, instead, shall entitle the
holder of such shares to such rights as may be available under the WBCA
Dissenters' Rights Provisions; provided, however, that if after the Effective
Time such holder fails to perfect or withdraws or otherwise loses his rights
under the WBCA Dissenters' Rights Provisions, then the shares of Percon Common
Stock owned by such holder immediately prior to the Effective Time shall be
treated as if they had been converted as of the Effective Time into a right to
receive the Merger Price as provided in Section 1.4, without interest. Prior to
the Effective Time, Percon shall give PSC prompt notice of its receipt of each
notification from a shareholder stating such shareholder's intent to demand
payment for his or her shares if the Merger is effectuated, and PSC shall have
the right to participate in all negotiations and proceedings with respect to
such demands. Prior to the Effective Time, Percon shall not, except with the
prior written consent of PSC, make any payment with respect to, or settle, or
offer to settle, any such demands. After the Effective Time, PSC shall pay, or
shall cause the Surviving Corporation to pay, any amounts that may become
payable in respect of Dissenting Shares under the WBCA Dissenters' Rights
Provisions.
Article 2
PAYMENT FOR SHARES
2.1. Payment for Shares.
2.1.(a) Prior to the Effective Time, Newco shall appoint a United States bank,
company or other entity mutually acceptable to Percon and PSC to act as payment
agent (the "Paying Agent") for the payment of the Merger Price. Prior to the
payment time thereof, PSC shall deposit or shall cause to be deposited with the
Paying Agent in a separate fund established for the benefit of the holders of
shares of Percon Common Stock, for payment upon surrender of the certificates
for exchange in accordance with this Article 2, through the Paying Agent (the
"Payment Fund"), immediately available funds in amounts necessary to make the
payments pursuant to this Section 2.1 to holders of shares of Percon Common
Stock (other than shares of Percon Common Stock held by Percon or any subsidiary
of Percon or PSC, Newco or any other subsidiary of PSC, or holders of Dissenting
Shares). The Paying Agent shall pay the Merger Price out of the Payment Fund.
2.1.(b) The Paying Agent shall invest the Payment Fund as directed by PSC or
Newco. All earnings on the Payment Fund shall inure to the benefit of PSC. If
for any reason the Payment Fund is inadequate to pay the amounts to which
holders of shares of Percon Common Stock shall be entitled under Section 1.4 and
this Section 2.1, then PSC shall in any event be liable for payment thereof. The
Payment Fund shall not be used for any purpose except as expressly provided in
this Agreement.
2.1.(c) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of Percon Common Stock Certificates entitled to payment of the
Merger Price pursuant to Section 1.4 (i) a form of letter of transmittal that
shall (x) specify that delivery shall be effected, and risk of loss and title to
the Percon Common Stock Certificates shall pass, only upon proper delivery of
the Percon Common Stock Certificates to the Paying Agent; (y) contain a
representation in a form reasonably satisfactory to PSC as to the good and
marketable title of the shares of Percon Common Stock held by such holder free
and clear of liens, claims, options, charges, security interests, limitations,
encumbrances and restrictions of any kind ("Liens"); and (z) contain such other
customary provisions as Percon and PSC may reasonably specify; and (ii)
instructions for use in surrendering such Percon Common Stock Certificates and
receiving the aggregate Merger Price in respect thereof. Upon proper surrender
of a Percon Common Stock Certificate for exchange and cancellation to the Paying
Agent, together with such properly completed letter of transmittal, duly
executed, and subject to applicable withholding, the Paying Agent shall (subject
to applicable abandoned property, escheat and similar laws) pay the holder of
such Percon Common Stock Certificate, in respect of shares of Percon Common
Stock, the Merger Price multiplied by the number of shares of Percon Common
Stock formerly represented by such Percon Common Stock Certificate, and such
Percon Common Stock Certificate shall forthwith be canceled. Until so
surrendered, each such Percon Common Stock Certificate shall represent solely
the right to receive the aggregate Merger Price relating thereto. No interest or
dividends shall be paid or accrued on the Merger Price. If the Merger Price (or
any portion thereof) is to be delivered to any person other than the person in
whose name the Percon Common Stock Certificate is registered, then it shall be a
condition to such right to receive such Merger Price, as applicable, that the
Percon Common Stock Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person surrendering such
Percon Common Stock Certificates shall pay to the Paying Agent any transfer or
other taxes required by reason of the payment of the Merger Price to a person
other than the registered holder of the Percon Common Stock Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
2.1.(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Percon of the shares of Percon Common Stock that were issued
and outstanding immediately prior to the Effective Time. If, after the Effective
Time, Percon Common Stock Certificates are presented for transfer to the Paying
Agent, then they shall be canceled and exchanged for the Merger Price as
provided in this Article 2.
2.1.(e) Promptly following the first anniversary of the Effective Time, the
Paying Agent shall deliver to the Surviving Corporation all cash, Percon Common
Stock Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Percon Common Stock Certificate may
surrender such Percon Common Stock Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price, without any interest or
dividends thereon. Notwithstanding the foregoing, none of PSC, Percon, the
Paying Agent or any other person shall be liable to any former holder of shares
of Percon Common Stock for any amount delivered in good faith to a public
official pursuant to applicable abandoned property, escheat or similar laws.
2.1.(f) In the event any Percon Common Stock Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Percon Common Stock Certificate to be lost, stolen or destroyed
and, if reasonably required by the Surviving Corporation, the posting by such
person of a bond in such amount as the Paying Agent may determine is reasonably
necessary as indemnity against any claim that may be made against it with
respect to such Percon Common Stock Certificate, the Paying Agent will deliver
in exchange for such lost, stolen or destroyed Percon Common Stock Certificate
the Merger Price deliverable in respect thereof pursuant to this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF Percon
For purposes of this Agreement, "Material Adverse Effect" or "Material
Adverse Change" means any effect, change, event, circumstance or condition that
when considered with all other effects, changes, events, circumstances or
conditions would reasonably be expected to adversely affect the business,
financial condition, results of operations or financial prospects of the
relevant party, in each case including its subsidiaries together with it taken
as a whole, so that the benefits reasonably expected to be obtained by the other
party more likely than not would be jeopardized. In no event shall any of the
following constitute a Material Adverse Effect or a Material Adverse Change: (a)
effects, changes, events, circumstances or conditions generally affecting the
industry in which either PSC or Percon operates or arising from changes in
general business or economic conditions that have a substantially similar effect
on participants in the industry in which either PSC or Percon operates; (b) any
effects, changes, circumstances or conditions resulting from any change in law
or generally accepted accounting principles ("GAAP") that affect generally
entities such as PSC and Percon; and (c) any effect that occurs as a direct
consequence of any action that the relevant party is expressly obligated to take
under this Agreement.
Percon hereby represents and warrants to PSC and Newco as follows:
3.1. Corporate.
Each of Percon and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each of Percon and its subsidiaries has full
corporate power and authority to own, operate and lease its properties and to
carry on its business as and where such is now being conducted and to own and
use the properties owned and used by it. Each of Percon and its subsidiaries is
duly licensed or qualified to do business as a foreign corporation, and is in
good standing, in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such licensing or
qualification necessary, except where the failure to so qualify would not have a
Material Adverse Effect. The copies of the Articles of Incorporation and By-Laws
of Percon and each of its subsidiaries, including any amendments thereto, that
have been delivered to PSC are true, correct and complete copies of such
instruments as presently in effect. The corporate minute book and stock records
of Percon and each of its subsidiaries that have been furnished to PSC for
inspection are true, correct and complete and accurately reflect all material
corporate action taken by Percon and each of its subsidiaries.
3.2. Capitalization.
The authorized capital stock of Percon consists entirely of
25,000,000 shares consisting of 20,000,000 shares of Percon Common Stock, of
which 3,807,711 shares are issued and outstanding and 210,000 shares are held in
treasury, and 5,000,000 shares of preferred stock of which no shares are issued
and outstanding or held in treasury. All such issued shares of Percon Common
Stock and all issued shares of capital stock of Percon's subsidiaries are
validly issued, fully paid and nonassessable. Except as set forth on Schedule
3.2, there are no (a) securities convertible into or exchangeable for any of
Percon's or any of its subsidiary's capital stock or other securities, (b)
options, warrants or other rights to purchase or subscribe to capital stock or
other securities of Percon or any of its subsidiaries or securities that are
convertible into or exchangeable for capital stock or other securities of Percon
or any of its subsidiaries, or (c) commitments, understandings, arrangements,
agreements, licenses, leases or other contracts ("Contracts") of any kind
relating to the issuance, sale or transfer of any capital stock or other equity
securities of Percon or any of its subsidiaries, any such convertible or
exchangeable securities or any such options, warrants or other rights. Except as
set forth on Schedule 3.2, Percon owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of its subsidiaries, free and
clear of any liens, pledges, charges, encumbrances and interests whatever. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Percon or any of its
subsidiaries. No shares of Percon Common Stock or the capital stock of any of
its subsidiaries have been reserved for issuance, other than the shares of
Percon Common Stock reserved for issuance under the Option Plan or the warrants
set forth on Schedule 3.2. Except as set forth on Schedule 3.2, neither Percon
nor any of its subsidiaries has redeemed or repurchased, directly or indirectly,
any of its capital stock since January 1, 1997. The persons executing the Voting
Agreements own of record the shares of Percon Common Stock subject to the Voting
Agreements ("Voting Agreement Shares"), and the certificates representing such
shares include a restrictive legend to the effect that the shares may not be
transferred unless the transfer is registered under the Securities Act of 1933,
as amended (the "Securities Act"), or Percon is satisfied that an exemption from
registration under the Securities Act is available (the "Securities Act
Legend").
3.3. Authorization.
Percon has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and the other
agreements, instruments and documents contemplated hereby (the "Ancillary
Instruments") and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Ancillary Instruments and the
consummation of the transactions contemplated hereby and thereby have been duly
and unanimously approved by the Board of Directors of Percon, and no other
corporate proceedings on the part of Percon or its shareholders are necessary to
authorize this Agreement and to consummate the transactions so contemplated
other than the approval of this Agreement and the Merger by the affirmative vote
of the holders of a majority of the outstanding shares of Percon Common Stock
(the "Percon Requisite Shareholder Vote"). This Agreement has been duly executed
and delivered and constitutes, and the Ancillary Instruments when executed and
delivered by Percon will constitute, the valid and legally binding obligation of
Percon enforceable in accordance with their respective terms and conditions. In
light of the nature of this Agreement and the transactions contemplated hereby
and the approval thereof by the Board of Directors of Percon, no so-called
"supermajority vote," "fair price," "business combination" or "control share
acquisition" provisions are applicable to the transactions contemplated by this
Agreement under applicable law or the Articles of Incorporation or By-Laws of
Percon or any of its subsidiaries.
3.4. No Violation.
Except as set forth on Schedule 3.4, neither the execution and
delivery of this Agreement or the Ancillary Instruments nor the consummation by
Percon of the transactions contemplated hereby and thereby (a) will violate any
constitution, statute, law, ordinance, rule, regulation, order, writ,
injunction, judgment, plan, decree, or other restriction of any government,
governmental agency or court to which any of Percon and its subsidiaries is
subject or any provision of the charter or bylaws of any of Percon and its
subsidiaries, (b) except for (i) applicable requirements of (A) the HSR Act, (B)
other state and foreign antitrust laws, (C) the Securities Exchange Act of 1934,
as amended, (D) the Securities Act, and (E) state securities or "blue sky laws"
("Blue Sky Laws"), and (ii) the filing of Articles of Merger pursuant to the
WBCA, will require any authorization, consent, approval, exemption or other
action by, notice to or filing with any government or governmental agency, or
(c) subject to obtaining the consents referred to in Schedule 3.4, will violate
or conflict with, or constitute a default (or an event that, with notice or
lapse of time, or both, would constitute a default) under, or will result in the
termination of, or accelerate the performance required by, or result in the
creation of any lien or security interest upon any of the assets of Percon or
any of its subsidiaries under any term or provision of the Articles of
Incorporation or By-Laws of Percon or any of its subsidiaries or of any Contract
or restriction of any kind or character to which any of Percon or any of its
subsidiaries is a party or by which Percon or any of its subsidiaries is bound
or to which the assets or properties of Percon or any of its subsidiaries may be
bound or affected.
3.5. Filings with the SEC.
Percon has made all filings with the SEC that it has been
required to make under the Securities Act, or the Exchange Act (collectively,
the "Percon Public Reports"). Each of the Percon Public Reports has complied
with the Securities Act and/or the Exchange Act, as the case may be, in all
material respects. None of the Percon Public Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Percon has made
available to PSC a correct and complete copy of each Percon Public Report and
each SEC comment letter with respect to such report, if applicable, filed within
the five (5) years prior to the date of this Agreement (together with all
exhibits and schedules thereto and as amended to date).
3.6. Financial Statements.
Percon has filed with the SEC a Quarterly Report on Form 10-Q
for the fiscal quarters ended March 31, 1999 and June 30, 1999 (the "Percon Most
Recent Fiscal Quarter End") and an Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998. The financial statements included in or
incorporated by reference into these Percon Public Reports (including the
related notes and schedules) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, present fairly the
financial condition of Percon and its subsidiaries as of the indicated dates and
the results of operations of Percon and its subsidiaries for the indicated
periods and are consistent with the books and records of Percon and its
subsidiaries; provided, however, that the interim statements are subject to
normal year-end adjustments that individually or in the aggregate would not have
a Material Adverse Effect.
3.7. Tax Matters
3.7.(a) Percon and each of its subsidiaries have filed (or there has been filed
on its behalf) all Tax Returns (as hereinafter defined) required to be filed by
each of them under applicable law except where failure to file such Tax Returns
would not have a Material Adverse Effect. All such Tax Returns were and are in
all material respects true, complete and correct and filed on a timely basis.
Percon has delivered to PSC complete copies of all such Tax Returns, all
examination reports delivered to Percon or its subsidiaries and all statements
of deficiencies assessed against or agreed to by any of Percon and its
subsidiaries (as hereinafter defined) since January 1, 1995 and all Tax Rulings
(as hereinafter defined) and Closing Agreements (as hereinafter defined) with
respect to Percon or its subsidiaries since January 1, 1995.
3.7.(b) Percon and each of its subsidiaries have, within the time and in the
manner prescribed by law, paid all Taxes (as hereinafter defined) that are
currently due and payable except for those contested in good faith and for which
adequate reserves have been taken and except those as to which the failure to
pay would not have a Material Adverse Effect.
3.7.(c) Percon and its subsidiaries have established on their books and records
reserves adequate to pay all Taxes and reserves for deferred income taxes in
accordance with GAAP.
3.7.(d) There are no Tax liens upon the assets of Percon or any of its
subsidiaries except liens for Taxes not yet due.
3.7.(e) Percon and each of its subsidiaries have complied in all material
respects with the provisions of the Internal Revenue Code of 1986, as amended
(the "Code") relating to the withholding of Taxes, as well as similar provisions
under any other law, with respect to any employee wages and any amounts owed to
any independent contractor, creditor, shareholder, or other third party and have
paid over to the proper governmental authorities all such amounts required to be
withheld and paid over.
3.7.(f) Except as set forth on Schedule 3.7, neither Percon nor any of its
subsidiaries has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been timely filed (taking into account
such extensions).
3.7.(g) Neither Percon nor any of its subsidiaries has executed any outstanding
waivers or comparable consents extending the statute of limitations with respect
to any Taxes or Tax Returns.
3.7.(h) To the actual knowledge of Percon, no deficiency for any Taxes has been
proposed, asserted or assessed against Percon or any of its subsidiaries in
writing that has not been resolved and paid in full.
3.7.(i) To the actual knowledge of Percon, no audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of Percon or any of its subsidiaries.
3.7.(j) No power of attorney currently in force has been granted by Percon or
any of its subsidiaries concerning any tax matter.
3.7.(k) Neither Percon nor any of its subsidiaries has requested or received a
Tax Ruling (as hereinafter defined) or entered into a Closing Agreement with any
taxing authority that would have a continuing material effect on the Surviving
Corporation after the Closing Date.
3.7.(l) Neither Percon nor any of its subsidiaries is a party to any Contract
that could result, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code or nondeductible
compensation under Code Section 162(m).
3.7.(m) None of Percon or any of its subsidiaries (A) has any liability for
Taxes of any person other than Percon and its subsidiaries (i) under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law) as a transferee or successor, (ii) by Contract, or (iii) otherwise,
(B) is a party to any Tax allocation or sharing agreement, (C) has adopted a
plan of liquidation or (D) has made any election under Code Section 338 (or any
similar provision of state, local or foreign law).
3.7.(n) As used in this Agreement:
(i) "Taxes" means any federal, state, county, local or foreign taxes, charges,
fees, levies, or other assessments, including all net income, gross income,
sales and use, ad valorem, transfer, gains, profits, excise, franchise,
real and personal property, gross receipts, capital stock, production,
business and occupation, disability, employment, payroll, license,
estimated, stamp, custom duties, severance or withholding taxes or charges
imposed by any governmental entity, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes;
(ii) "Tax Return" means a report, return or other information required to be
supplied to a governmental entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for a group of
entities;
(iii)"Tax Ruling" means a written ruling of a taxing authority relating to
Taxes; and
(iv) "Closing Agreement" means a written and legally binding agreement with a
taxing authority relating to Taxes.
3.8. Absence of Certain Changes.
Except as and to the extent set forth in Schedule 3.8, since
December 31, 1998, there has not been (a) any Material Adverse Change in the
business, results of operations, financial condition, properties, assets or
prospects of Percon, (b) in the case of Percon or any of its subsidiaries, any
declaration, setting aside or payment of any dividend or any other distribution
with respect to its capital stock, (c) any damage, destruction, or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by Percon or any of its subsidiaries, (d) any conduct of business that is
outside the ordinary course of business or not substantially in the manner that
Percon previously conducted its business, except for transactions contemplated
by this Agreement, (e) any change by Percon in accounting principles or methods,
(f) any issuance or sale of capital stock or other securities of Percon or any
of its subsidiaries or grant of options to purchase any shares of capital stock
or any other securities of any of them or adjustment, split, combination or
reclassification of their capital stock or other securities or changes in their
capital structures, (g) any material commitment or obligation by Percon or any
of its subsidiaries, other than trade or business obligations or liabilities
incurred in the ordinary course of business; (h) any amendment to any Benefit
Plan (as defined in Section 3.18) or the adoption of any arrangement that would
be a Benefit Plan, increase in the compensation or fringe benefits of any
director, officer or employee or execution of any Contract to do any of the
foregoing, or (i) any sale, lease or other transfer or disposition of any
properties or assets of Percon or any of its subsidiaries, other than for a fair
consideration in the ordinary course of business. Schedule 3.8 contains a list
of the ten (10) largest customers, including distributors, of Percon and its
subsidiaries for each of the two (2) most recent fiscal years (determined on the
basis of the total dollar amount of net sales) showing the total dollar amount
of net sales to each such customer during each such year. Percon has received no
notice (written or oral) of any facts indicating that any of the customers
listed on Schedule 3.8 will not continue to be customers of Percon and its
subsidiaries after the Closing at substantially the same level of purchases as
heretofore. Schedule 3.8 contains a list of the ten (10) largest suppliers to
Percon and its subsidiaries for each of the two (2) most recent fiscal years
(determined on the basis of the total dollar amount of purchases) showing the
total dollar amount of purchases from each such supplier during each such year.
Percon has received no notice (written or oral) of any facts indicating that any
of the suppliers listed on Schedule 3.8 will not continue to be suppliers to the
business of Percon and its subsidiaries after the Closing and will not continue
to supply Percon and its subsidiaries with substantially the same quantity and
quality of goods at competitive prices.
3.9. Undisclosed Liabilities.
Except as set forth in Schedule 3.9, and except for
liabilities or obligations that were incurred after December 31, 1998 in the
ordinary course of business and of a type and in an amount consistent with past
practices (none of which results from, arises out of, relates to, is in the
nature of, or was caused by, any breach of Contract, breach of warranty, tort,
infringement or violation of Law), neither Percon nor any of its subsidiaries
has any material liability or obligation (whether absolute, accrued, contingent
or otherwise, and whether due or to become due) that is not accrued, reserved
against or identified in the financial statements dated as of the Percon Most
Recent Fiscal Quarter End. There are no rights of return or other agreements
between Percon or any of its subsidiaries and any customer that would cause any
sales reflected in the financial statements included in the Percon Public
Reports to fail to qualify as sales in accordance with GAAP and Percon's revenue
recognition policy as reflected in the financial statements included in the
Percon Public Reports.
3.10. No Litigation.
Except as set forth in Schedule 3.10, there is no claim,
action, suit, arbitration, proceeding, investigation or inquiry, whether civil,
criminal or administrative ("Litigation"), pending or, to Percon's knowledge,
threatened against Percon or any of its subsidiaries or any of their officers or
directors (in such capacity), their business or any of their assets, at law of
in equity, before or by any federal, state, foreign, municipal or other
governmental agency or authority, or before any arbitration board or panel.
Schedule 3.10 also identifies all Litigation to which Percon or any of its
subsidiaries or any of their officers or directors (in such capacity) have been
parties since January 1, 1996, where the damage sought exceeded Twenty-Five
Thousand Dollars ($25,000) or where the remedy sought was equitable relief the
granting of which would have had a material effect. Except as set forth in
Schedule 3.10, neither Percon nor any of its subsidiaries nor their business or
assets is subject to any order of any federal, state, foreign, municipal or
other governmental agency or authority.
3.11. Environmental Matters.
3.11.(a) Except as set forth on Schedule 3.11, Percon and each of its
subsidiaries are in compliance with all applicable federal, state, foreign,
regional and local laws, statutes, ordinances, judgments, rulings and
regulations and applicable common law principles relating to any matters of
pollution, protection of the environment or environmental regulation or control
(collectively, "Environmental Laws") except for instances of noncompliance where
neither the costs and penalties associated with noncompliance nor the costs
associated with rectifying the noncompliance, individually or in the aggregate
with those associated with other instances of noncompliance subject to this and
similar exceptions, would be material. Neither Percon nor any of its
subsidiaries has received any written notice (i) of any violation of an
Environmental Law or (ii) of the institution of any Litigation by any
governmental agency or authority or any third party alleging that Percon or any
of its subsidiaries may be in violation of or liable under any Environmental
Law.
3.11.(b) Except as disclosed on Schedule 3.11, neither Percon nor any of its
subsidiaries has (i) placed, held, located, released, transported or disposed of
any Hazardous Substances (as hereinafter defined) on, under, from or at any of
the properties currently or previously owned or operated by Percon or any of its
subsidiaries, except in compliance with Environmental Laws or instances of
noncompliance where neither the costs and penalties associated with
noncompliance nor the costs associated with rectifying the noncompliance,
individually or in the aggregate with those associated with other instances of
noncompliance subject to this and similar exceptions, would be material, (ii)
been subject to liability for any Hazardous Substance disposal or contamination
on any of its property or any third party property, (iii) knowledge of the
presence of any Hazardous Substances on, under or at any of Percon's or any of
its subsidiaries' properties or any other property to the extent the presence of
Hazardous Substances on any other property was caused by the operations of
Percon or any of its subsidiaries, or (iv) received any written notice (x) of
any actual or potential liability for the response to or remediation of
Hazardous Substances at or arising from any of Percon's or any of its
subsidiaries' properties or any other properties, or (y) of any actual or
potential liability for the costs of response to or remediation of Hazardous
Substances at or arising from any of Percon's or any of its subsidiaries'
properties or any other properties. For purposes of this Agreement, the term
"Hazardous Substance" shall mean any toxic or hazardous materials or substances,
including asbestos, buried contaminants, chemicals, flammable explosives,
radioactive materials, petroleum and petroleum products and any substances
defined as, or included in the definition of, "hazardous substances", "hazardous
wastes", "hazardous materials" or "toxic substances" under any Environmental
Law. Percon has provided PSC with true and correct copies of all environmental
reports in the possession of Percon or any of its subsidiaries or their agents,
representatives or consultants relating to property owned or operated by Percon
or any of its subsidiaries.
3.11.(c) No Environmental Law imposes any obligation upon Percon or its
subsidiaries arising out of or as a condition to any transaction contemplated
hereby, including, without limitation, any requirement to modify or transfer any
permit or license, any requirement to file any notice or other submission with
any governmental agency or authority, the placement of any notice,
acknowledgement, or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order, or consent decree. No
lien has been placed upon any of Percon's properties or its subsidiaries'
properties under any Environmental Law.
3.12. Title to Assets.
Each of Percon and its subsidiaries owns good and valid title
to the assets and properties that it owns or purports to own, including the
assets reflected on its balance sheet as of the Percon Most Recent Fiscal
Quarter End, free and clear of any and all Liens, except those Liens identified
on Schedule 3.12 as "Existing Liens" and Liens for taxes not yet due and payable
and such other Liens or minor imperfections of title, if any, that do not
materially detract from the value or interfere with the present use of the
affected asset.
3.13. Insurance.
Percon has given PSC access to true and correct copies of all
policies of insurance in which Percon or any of its subsidiaries is named as an
insured party or that otherwise relate to or cover any assets or properties of
Percon or any of its subsidiaries. Each of such policies is in full force and
effect, and the coverage provided under such properties complies with the
requirements of any Contracts binding on Percon or any of its subsidiaries
relating to such assets or properties. Except as set forth in Schedule 3.13,
neither Percon nor any of its subsidiaries has received any notice of
cancellation or termination with respect to any material insurance policy of
Percon or any of its subsidiaries.
3.14. Material Contracts and Agreements.
3.14.(a) Schedule 3.14 includes the following Contracts to which Percon or any
of its subsidiaries is a party: (i) all Contracts with Symbol Technologies,
Inc.; (ii) contract manufacturing Contracts (whether Percon or its subsidiary is
the manufacturer or the party for whom products are manufactured); (iii) other
than nonexclusive software licenses to customers of Percon and its subsidiaries
in the ordinary course of its business, all Contracts in which it receives or
extends a license to use a Trade Right (as defined in Section 3.15) other than
Software (as defined in Section 3.15); (iv) any OEM or VAR sales Contract that
by its terms involves a commitment exceeding Two Hundred Fifty Thousand Dollars
($250,000) in amount or that involves a customer from which Percon and/or its
subsidiaries received revenues in excess of Two Hundred Fifty Thousand Dollars
($250,000) during the year ended December 31, 1998 or during the current fiscal
year; and (v) all Contracts to which an affiliate of Percon is a party that are
not listed as exhibits to Percon's most recent Annual Report on Form 10-K and
that by its terms involves a commitment in excess of Twenty Five Thousand
Dollars ($25,000). Except as listed on Schedule 3.14, there are no Contracts
that are material to the business, financial condition, properties, results of
operations or prospects of Percon and its subsidiaries taken as a whole.
3.14.(b) As of the date hereof and except as disclosed on Schedule 3.14, neither
Percon nor any of its subsidiaries has defaulted in its performance or failed to
perform under, and to the knowledge of Percon, no other party has defaulted in
its performance or failed to perform under, and there is no anticipatory breach
of, any of the Contracts listed or required to be listed on Schedule 3.14, and
none of the parties to any such Contract has alleged that the other has
defaulted in performance or failed to perform, other than (i) a default in
payment that shall not have continued more than thirty (30) days from the date
on which the payment was originally due pursuant to the terms of the applicable
Contracts, and (ii) a default or failure that is immaterial with respect to all
such Contracts (provided that all such immaterial defaults or failures in the
aggregate are immaterial with respect to all such Contracts when taken in the
aggregate). As of the date hereof and except as disclosed on Schedule 3.14,
neither Percon nor any of its subsidiaries has received notice of any
anticipatory breach, pending dispute or anticipated litigation arising from or
relating to any of such Contracts, or notice that any of such Contracts has been
or will be cancelled, revoked or otherwise terminated.
3.14.(c) Except as listed on Schedule 3.14, neither Percon nor any subsidiary is
subject to any agreement that restricts competition with any other person or
provides that Percon, any subsidiary or affiliate may not engage in any business
or sell or distribute any product or service.
3.14.(d) Except as disclosed on Schedule 3.14, neither Percon nor any of its
subsidiaries has any currency ▇▇▇▇▇▇, derivatives or any other similar type of
instrument intended to eliminate or diminish financial risk.
3.15. Intellectual Property.
3.15.(a) Schedule 3.15 lists (to the extent susceptible to listing) all Trade
Rights (as defined below) in which Percon or any of its subsidiaries now has any
interest, specifying whether such Trade Rights are owned, controlled, used or
held (under license or otherwise) by Percon and its subsidiaries, and also
indicating which of such Trade Rights are registered or for which applications
for registration are pending and the names of the jurisdictions covered by the
applicable registration or application. Except as set forth on Schedule 3.15,
all Trade Rights shown as registered in Schedule 3.15 have been properly
registered, all pending registrations and applications have been properly made
and filed and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current.
3.15.(b) Except as set forth on Schedule 3.15, to conduct the business of Percon
and its subsidiaries, as such is currently being conducted or proposed to be
conducted, Percon and its subsidiaries do not require any Trade Rights that they
do not already have. Except as set forth on Schedule 3.15, Percon and its
subsidiaries are not infringing and have not infringed any Trade Rights or any
proprietary rights in Software (as defined below) of another in the operation of
their business, nor is any other person infringing the Trade Rights of Percon
and its subsidiaries. Except as set forth on Schedule 3.15, to the extent any
product of Percon or any of its subsidiaries incorporates other Software, Percon
and its subsidiaries have all requisite rights to so incorporate the other
Software in its product and further to license its product to others. Except as
set forth on Schedule 3.15, to the knowledge of Percon, there are no pending
patent applications belonging to others that Percon or any of its subsidiaries
would infringe if a patent that included such claims were granted on such
pending applications. Neither Percon nor any of its subsidiaries has received
any notice from any third party asserting that Percon or any of its subsidiaries
is infringing any Trade Rights or any proprietary rights in Software, asserting
ownership of any Trade Rights or any proprietary rights in Software, seeking
damages arising from the use of any Trade Rights or any proprietary rights in
Software, offering to grant a license to use any Trade Rights or any proprietary
rights in Software or requesting indemnification from liability arising out of
the use of any Trade Rights or any proprietary rights in Software, and neither
Percon nor any of its subsidiaries has sent a notice to any such effect. The
matters set forth in the letter from Percon to PSC dated November 9, 1999, are
true, complete and correct.
3.15.(c) Other than the granting of nonexclusive software licenses to customers
of Percon and its subsidiaries in the ordinary course of its business, except as
listed on Schedule 3.15, Percon and its subsidiaries have not granted any
license or made any assignment of any Trade Right listed on Schedule 3.15, nor
does Percon or any of its subsidiaries pay any royalties or other consideration
for the right to use any Trade Rights of others. There is no Litigation pending
or threatened to challenge Percon's or its subsidiaries right, title and
interest with respect to their continued use and right to preclude others from
using any Trade Rights of Percon or its subsidiaries.
3.15.(d) Except as set forth on Schedule 3.15, all Trade Rights of Percon and
its subsidiaries are valid, enforceable and in good standing, and there are no
equitable defenses to enforcement based on any act or omission of Percon and its
subsidiaries. Except as set forth on Schedule 3.15, the consummation of the
transactions contemplated hereby will not alter or impair any Trade Rights owned
or used by Percon or any of its subsidiaries. Percon and its subsidiaries have
taken all reasonable actions to maintain the secrecy of their respective
material Trade Rights as confidential, trade secret and/or copyrighted material.
3.15.(e) As used herein, the term "Trade Rights" shall mean: (i) all trademark
rights business identifiers, trade dress, service marks, trade names and brand
names, all registrations thereof and applications therefor and all goodwill
associated with the foregoing; (ii) all copyrights, copyright registrations and
copyright applications, and all other rights associated with the foregoing and
the underlying works of authorship; (iii) all U.S. and foreign patents and
patent applications, including all abandoned patents and patent applications,
and all international proprietary rights associated therewith; (iv) all
Contracts granting any right, title, license or privilege under the intellectual
property rights of any third party; (v) all inventions, mask works and mask work
registrations, know-how, discoveries, improvements, designs, trade secrets, shop
and royalty rights, employee covenants and agreements respecting intellectual
property and non-competition and all other types of intellectual property; (vi)
all claims for infringement or breach of any of the foregoing; (vii) all
intellectual property relating to Software; (viii) all internet addresses, sites
and domain names; and (ix) all licenses and immunities under any of the rights
described in the foregoing clauses that arise by operation of Law, are implied
by Law or are otherwise created by means other than Contract. For purposes of
this Agreement, "Software" shall mean a computer program or any part of such
computer program, whether in source code, object code or any other form, in
whatever format recorded, and all modifications, enhancements or corrections
made to such program, and all documentation relating to such program, including
any flow charts, designs, instructions, job control procedures and manuals
relating to such program in printed or machine readable form.
3.16. Software; Protection.
3.16.(a) Software. Set forth on Schedule 3.16(a) is a list and description of
all (i) Software products currently offered or offered at any time since January
1, 1999, or incorporated in other products currently offered or offered at any
time since January 1, 1999, by Percon or any of its subsidiaries to its
customers ("Product Software") and (ii) department-wide or enterprise-wide
Software used in the day-to-day operation of departments of Percon or any of its
subsidiaries ("Operations Software"). Except for Software programs identified on
Schedule 3.16(a) as Software that Percon or any of its subsidiaries does not own
but which Percon or any of its subsidiaries has been duly authorized to use or
distribute by an instrument in writing, each Software program published or
distributed by Percon or any of its subsidiaries is a "work made for hire" as
defined by the Copyright Act of 1976, as amended, or is subject to a copyright
that has been assigned exclusively to Percon or any of its subsidiaries by an
instrument in writing. Except as set forth on Schedule 3.16(a), each past and
present employee and independent contractor participating in the development of
any such Software is bound by a confidentiality and nondisclosure agreement
executed by such employee or independent consultant and Percon or any of its
subsidiaries, which agreement prohibits the disclosure of any confidential
information of Percon or any of its subsidiaries for a defined period of time
following termination of employment with Percon or any of its subsidiaries.
Percon and its subsidiaries are not aware of any breach of any confidentiality
agreement in favor of Percon and its subsidiaries relating to such Software
owned by Percon and its subsidiaries either by its present or former employees
or third parties.
3.16.(b) Software Protection Policy. Set forth on Schedule 3.16(b) is a
description of the policy of Percon and its subsidiaries concerning the use and
protection of Software.
3.16.(c) Transferability of Software Rights. Percon and its subsidiaries owns or
has rights under license in the Software listed on Schedule 3.16(a), which
identifies whether Percon or any of its subsidiaries owns such Software or has
such rights under license and whether such rights under license are exclusive or
nonexclusive; and except as set forth on Schedule 3.16(c), the consummation of
the transactions contemplated by this Agreement shall not result in any
obligation to pay any additional licensing, transfer or other fee.
3.16.(d) Documentation, Security and Ownership of Software. Except as set forth
on Schedule 3.16(d), Percon and its subsidiaries have user installation and
operation manuals for all Software used in the development of or incorporated in
Product Software that is critical to the development of products offered by
Percon and its subsidiaries and for all Operations Software. Except as set forth
on Schedule 3.16(d), all Product Software is documented through flow charts,
designs, database models, entity relationship diagrams or business processes and
user installation and procedure manuals that are sufficient to enable Percon and
its subsidiaries to offer such Software to its customers and support such
Software. Except as set forth on Schedule 3.16(d), neither Percon nor any of its
subsidiaries has disclosed or delivered to any person, or permitted the
disclosure or delivery to any escrow agent or other person, of the source code,
or any portion or aspect of the source code, or any proprietary information or
algorithm contained in any source code, of any Software. Except for Software
that Percon and its subsidiaries license on a nonexclusive basis to its
customers in the ordinary course of business and except as set forth on Schedule
3.16, Percon and its subsidiaries have not conveyed or granted any other rights
to such Software, nor are Percon and its subsidiaries obligated to convey or
grant any rights to license, market, incorporate in other Software, sell or
otherwise use such Software to third parties, and to the knowledge of Percon, no
third party has unauthorized access to such Software. Percon and its
subsidiaries possess the original of all documentation, including without
limitation all source codes, for all Software owned outright by it. Except as
disclosed on Schedule 3.16(d), upon consummation of the transactions
contemplated hereby, Percon and its subsidiaries or Surviving Corporation will
continue to own all of the Software owned outright by Percon and its
subsidiaries prior to the Closing, free and clear of all claims, liens,
encumbrances, obligations and liabilities except for such claims, liens,
encumbrances, obligations and liabilities of Percon and its subsidiaries (A)
applicable to Software licensed to third parties and (B) as may be granted by
Percon and its subsidiaries or Surviving Corporation after the Closing Date.
Percon and its subsidiaries have provided to PSC or Newco access to or copies of
Percon and its subsidiaries' customer support log and trouble shooting tools and
solutions relating to their Software products covering at least the two years
preceding the date hereof.
3.17. Labor Matters.
Except as set forth in Schedule 3.17, within the last five (5)
years Percon and its subsidiaries have not experienced any labor disputes, union
organization attempts or any work stoppage due to labor disagreements in
connection with its business. Except to the extent set forth in Schedule 3.17,
(a) Percon and its subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice;
(b) there are no unfair labor practice charges or complaints against Percon and
its subsidiaries pending or, to Percon's knowledge, threatened that would have a
Material Adverse Effect; (c) there is no labor strike, slowdown or stoppage
actually pending or, to Percon's knowledge, threatened against or affecting
Percon and its subsidiaries nor, to Percon's knowledge, any secondary boycott
with respect to products of Percon and its subsidiaries; (d) Percon is not aware
of any question concerning representation or, to Percon's knowledge, threats
respecting the employees of Percon and its subsidiaries; (e) no grievance that
may reasonably be expected to have a Material Adverse Effect, nor any
arbitration proceeding arising out of or under collective bargaining agreement
that may reasonably be expected to have a Material Adverse Effect, is pending
and no such claim therefor exists; and (f) there are no administrative charges
or court complaints against Percon and its subsidiaries concerning alleged
employment discrimination or other employment related matters pending or
threatened before the U.S. Equal Employment Opportunity Commission or any other
governmental entity. Except as set forth on Schedule 3.17, neither Percon nor
any of its subsidiaries is a party to any labor agreement, collective bargaining
agreement, union contract or other similar agreement.
3.18. ERISA Compliance.
3.18.(a) Schedule 3.18 contains a list (including a brief description where the
listing of the item does not indicate the subject matter) of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employment Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
as "Pension Plans"), "employee welfare benefit plans" (as defined in Section
3(1) of ERISA) and all other bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, Christmas bonus, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee or director of Percon or any of its subsidiaries
(collectively, "Benefit Plans") maintained, or contributed to, by Percon or any
of its subsidiaries for the benefit of any officers or employees of Percon or
any of its subsidiaries currently or within the last five years. Percon has
delivered to PSC true, complete and correct copies of (1) each Benefit Plan (or,
in the case of any unwritten Benefit Plans, descriptions thereof), (2) the most
recent annual report on Form 5500 filed with the Internal Revenue Service with
respect to each Benefit Plan (if any such report was required), (3) the most
recent summary plan description for each Benefit Plan for which such summary
plan description is required, (4) each trust agreement and group annuity
contract relating to any Benefit Plan, and (5) the most recent actuarial report
relating to any Benefit Plan.
3.18.(b) Except as disclosed in Schedule 3.18, all Pension Plans have been the
subject of determination letters from the Internal Revenue Service to the effect
that such Pension Plans are qualified and exempt from federal income taxes under
Section 401(a) and 501(a), respectively, of the Code, and no such determination
letter has been revoked nor, to the knowledge of Percon, has revocation been
threatened, nor has any such Pension Plan been amended since the date of its
most recent determination letter or application therefore in any respect that
would adversely affect its qualification or materially increase its costs.
3.18.(c) No Pension Plan that Percon or any of its ERISA Affiliates (as
hereinafter defined) maintains, or to which Percon or any of its ERISA
Affiliates contributed or is or was previously obligated to contribute, is or
was subject to Section 412 of the Code or Section 302 or Title IV of ERISA. An
"ERISA Affiliate" means any entity that, along with Percon, ever formed a
controlled group of corporations, group of trades or businesses under common
control, or affiliated service group, within the meaning of Code Sections
414(b), (c), (m) or (o). To the best knowledge of Percon, none of Percon, any of
its subsidiaries, any officer of Percon or any of its subsidiaries or any of the
Benefit Plans, or any trusts created thereunder, or any trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject Percon, any of its subsidiaries or
any officer of Percon or any of its subsidiaries to the tax or penalty on
prohibited transactions imposed by such Section 4975 or to any liability under
Section 502(i) or (1) of ERISA.
3.18.(d) With respect to any Benefit Plan that is an employee welfare benefit
plan, except as disclosed in Schedule 3.18, (i) no such benefit plan is unfunded
or funded through a welfare benefits fund, as such term is defined in Section
419(e) of the Code, (ii) each such Benefit Plan that is a group health plan, as
such term is defined in Section 5000(b)(1) of the Code, complies in all material
respects with the applicable requirements of Section 4980(B)(f) of the Code and
Section 186z(b)(1) of the Social Security Act and (iii) each such Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to Percon or any of its
subsidiaries on or at any time after the Effective Time.
3.18.(e) Except as disclosed on Schedule 3.18, each Benefit Plan conforms in all
material respects in form and operation to all applicable laws and regulations,
and all reports or information relating to such Benefit Plan required to be
filed with any governmental entity or disclosed to participants have been timely
filed and disclosed. Except as disclosed on Schedule 3.18, no Benefit Plan holds
any employer security or employer real property within the meaning of Section
407 of ERISA.
3.18.(f) Except as disclosed on Schedule 3.18, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of Percon or any subsidiary thereof to severance pay,
unemployment compensation or any other payment or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to any such
employee or former employee, except as required under Section 411 of the Code.
3.18.(g) Except as disclosed on Schedule 3.18, neither Percon nor any of its
subsidiaries has announced a plan to create or a legally binding commitment to
amend any Benefit Plan or to create any new arrangement that would be a Benefit
Plan.
3.18.(h) All insurance premiums with respect to any Benefit Plan (including
premiums to the Pension Benefit Guaranty Corporation) have been paid in full.
Except as disclosed on Schedule 3.18, there are no retrospective adjustments
provided for under any insurance contracts maintained pursuant to any Benefit
Plan with regard to policy years or other periods ending on or before the
Effective Time.
3.18.(i) No Benefit Plan or the deduction of any contributions thereto by Percon
or any of its subsidiaries has been the subject of audit by the Internal Revenue
Service or the Department of Labor, and no litigation or asserted claims exist
against Percon or any of its subsidiaries or any Benefit Plan or fiduciary with
respect thereto (other than such benefit claims as are made in the normal
operation of a Benefit Plan). To the knowledge of Percon, there are no facts
that would give rise to or could give rise to any action, suit, grievance,
arbitration or other claim.
3.18.(j) With respect to any Benefit Plan that covers current or former
employees or directors who are not residents of the United States of America,
any references in this Section 3.18 to ERISA, the Code, or any other applicable
law shall be read to include any applicable law of similar import for the
jurisdiction in which such individuals reside.
3.19. Employment Compensation.
Schedule 3.19 contains a true and correct list of all
employees to whom Percon or any of its subsidiaries is paying compensation,
including bonuses and incentives at an annual rate in excess of One Hundred
Thousand Dollars ($100,000) for services rendered or otherwise, and in the case
of salaried employees, such list identifies the current annual rate of
compensation for each employee and in the case of hourly or commission employees
identifies certain reasonable ranges of rates and the number of employees
falling within each such range.
3.20. Percon Board of Directors Action.
The Board of Directors of Percon (at a meeting duly called and
held) has by the unanimous vote of all directors (a) determined that the Merger
is advisable and in the best interests of Percon and its shareholders, (b)
resolved to recommend the approval of this Agreement and the Merger by the
holders of Percon Common Stock and directed that the Merger be submitted for
consideration by the holders of Percon Common Stock at a special meeting of
shareholders and (c) adopted a resolution to elect not to be subject, to the
extent permitted by applicable law, to any state takeover law that may purport
to be applicable to the Merger and the transactions contemplated by this
Agreement.
3.21. Proxy Statement.
3.21.(a) None of the information supplied or to be supplied by or on behalf of
Percon for inclusion or incorporation by reference in the proxy statement, in
definitive form, relating to the Percon Special Meeting (the "Proxy Statement")
will, at the date filed with the SEC , at the date it or any amendment or
supplement is mailed to the shareholders of Percon or at the time of the Percon
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
3.21.(b) Information provided by and relating to Percon and its subsidiaries in
the Proxy Statement will comply as to form in all material respects with the
provisions of the the Exchange Act.
3.22. No Brokers or Finders.
With the exception of the engagement of McDonald Investments,
Inc., by Percon, none of Percon and its subsidiaries has any liability or
obligation to pay any fees or commissions to any financial advisor, broker,
finder, or agent with respect to the transactions contemplated by this
Agreement. Percon has provided PSC with a true and correct copy of the
engagement letter by and among Percon and McDonald Investments, Inc.
3.23. Disclosure.
All statements and information contained in any certificate or
Disclosure Schedule delivered by or on behalf of Percon shall be deemed
representations and warranties by Percon.
3.24. Opinion of Financial Advisor.
Percon has received the opinion of McDonald Investments, Inc.,
dated the date of this Agreement, to the effect that the aggregate Merger Price
is fair to the Percon shareholders from a financial point of view, and a copy of
such opinion has been delivered to PSC.
3.25. Year 2000 Compliance.
3.25.(a) Except as identified on Schedule 3.25, none of the personal property,
equipment or assets owned or utilized by Percon and its subsidiaries relating to
their business, including but not limited to computer software, databases,
hardware, controls and peripherals, has characteristics or qualities that may
cause it to fail to (i) operate and produce data on and after January 1, 2000
(including taking into effect that such year is a leap year), or use data based
on time periods on or after January 1, 2000 (including taking into effect that
such year is a leap year), or use data based on time periods on or after January
1, 2000 (including taking into effect that such year is a leap year) accurately
and without delay, interruption or error relating to the fact that the time at
which and the date on which such software is operating is on or after 12:00 a.m.
on January 1, 2000 (including taking into effect that such year is a leap year)
and (ii) accept, calculate, process, maintain, store and output, accurately and
without delay, interruption or error, all times or dates, or both, whether
before, on or after 12:00 a.m. January 1, 2000 (including taking into effect
that such year is a leap year), and any time periods determined or to be
determined based on such times or date or both (a "Year 2000 Defect"). Except as
identified on Schedule 3.25, none of the property or assets owned or utilized by
Percon and its subsidiaries relating to their business will fail to perform in
any material respect or require any repair, rewrite, conversion or other
adaptation because of, or due in any way to, a Year 2000 Defect. Percon and its
subsidiaries have no obligations under warranty agreements, service agreements
or otherwise with respect to their business to rectify a Year 2000 Defect of any
person or to indemnify any person in the event Percon and its subsidiaries
experience a Year 2000 Defect. To the knowledge of Percon, no vendors or
suppliers of Percon or its subsidiaries may experience a Year 2000 Defect that
could cause a Material Adverse Effect.
Article 4
REPRESENTATIONS AND WARRANTIES OF PSC
PSC makes the following representations and warranties to Percon:
4.1. Organization.
Each of PSC and Newco is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of PSC and Newco has full corporate power and authority to
own, operate and lease its properties and to carry on its business as and where
such is now being conducted and to own and use the properties owned and used by
it.
4.2. Authorization.
PSC and Newco each has full corporate power and authority to
execute and deliver this Agreement and the Ancillary Instruments and to perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Ancillary Instruments and the consummation of the transactions
contemplated hereby and thereby have been duly approved by the Boards of
Directors of PSC and Newco and by the sole shareholder of Newco, and no other
corporate proceedings on the part of PSC or its shareholders are necessary to
authorize this Agreement and to consummate the transactions so contemplated.
This Agreement has been duly executed and delivered and constitutes, and the
Ancillary Instruments when executed and delivered by PSC will constitute, the
valid and legally binding obligation of PSC enforceable in accordance with their
respective terms and conditions.
4.3. No Violation.
Except for such consents as are required under the terms of
indebtedness of PSC outstanding on the date hereof ("Debt Consents"), neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby (a) will violate any constitution, statute,
law, ordinance, rule, regulation, order, writ, injunction, judgment, plan,
decree, or other restriction of any government, governmental agency or court to
which any of PSC and its subsidiaries is subject or any provision of the charter
or bylaws of any of PSC and its subsidiaries, (b) except for (i) applicable
requirements of (A) the HSR Act, (B) other state and foreign antitrust laws, (C)
the Exchange Act, (D) the Securities Act, and (E) Blue Sky Laws, and (ii) the
filing of Articles of Merger pursuant to the WBCA, will require any
authorization, consent, approval, exemption or other action by, notice to or
filing with any government or governmental agency, or (c) subject to obtaining
the Debt Consents, will violate or conflict with, or constitute a default (or an
event that, with notice or lapse of time, or both, would constitute a default)
under, or will result in the termination of, or accelerate the performance
required by, or result in the creation of any lien or security interest upon any
of the assets of PSC or its subsidiaries under any term or provision of the
Articles of Incorporation or By-Laws of PSC or any of its subsidiaries, or of
any Contract or restriction of any kind or character to which any of PSC or any
of its subsidiaries is a party or by which PSC or any of its subsidiaries is
bound or to which the assets or properties of PSC or any of its subsidiaries may
be bound or affected.
4.4. Information.
None of the information supplied or to be supplied by PSC and
Newco in writing specifically for inclusion in the Proxy Statement will, at the
time filed with the SEC, at the date it or any amendment or supplement is mailed
to shareholders of Percon or at the time of the Percon Special Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Information provided by and relating to PSC and its subsidiaries in
the Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act.
4.5. Interim Operations of Newco.
Newco was formed solely for the purpose of engaging in the
transactions contemplated hereby and has engaged in no business other than in
connection with such transactions.
4.6. Capital Resources.
PSC has sufficient cash, or access to cash, to pay the
aggregate Merger Price.
ARTICLE 5
COVENANTS
5.1. Interim Operations.
During the period from the date of this Agreement to the
Effective Time, except as specifically contemplated by this Agreement, or as
otherwise approved in advance by PSC in writing:
5.1.(a) Percon will, and will cause each of its subsidiaries to, conduct their
respective businesses only in, and not take any action except in, the ordinary
and usual course of business and consistent with past practice. Percon will use
reasonable efforts to preserve intact the business organization of Percon and
each of its subsidiaries, to keep available the service of its and their present
officers and key employees and to preserve the goodwill of those having business
relationships with it or its subsidiaries.
5.1.(b) Percon will not, and will not permit any of its subsidiaries to, make
any change or amendment to their respective articles of incorporation or by-laws
(or comparable governing instruments).
5.1.(c) Except for the issuance of Percon Common Stock upon the exercise of
Options and warrants outstanding on the date hereof, Percon will not, and will
not permit any of its subsidiaries to, (i) issue or sell any shares of capital
stock or any other securities of any of them, (ii) issue any securities
convertible into or exchangeable for, or options, warrants to purchase, scrip,
rights to subscribe for, calls or commitments of any character whatsoever
relating to, or enter into any Contract with respect to the issuance of, any
shares of capital stock or any other securities of any of them, (iii) adjust,
split, combine or reclassify any of their capital stock or other securities or
make any other changes in their capital structures, (iv) take any action to
accelerate the vesting of any Options or (v) take any other action under the
terms of the Option Plan or otherwise with respect to Options that is
inconsistent with the treatment that Section 1.5 contemplates.
5.1.(d) Percon will not and will not permit any of its subsidiaries to, declare,
set aside, pay or make any dividend or other distribution or payment (whether in
cash, stock or property) with respect to, or purchase or redeem, any shares of
the capital stock of any of them.
5.1.(e) Percon will not, and will not permit any of its subsidiaries to, amend
any Benefit Plan or to adopt any arrangement that would be a Benefit Plan or,
except pursuant to collective bargaining agreements as presently in effect,
increase materially the compensation or fringe benefits of any director, officer
or employee or pay any benefit not required by any existing plan or arrangement
or take any action or grant any benefit not required under the terms of any
existing agreements, trusts, plans, funds or other such arrangements, but Percon
may take any such action as Percon deems reasonably necessary to respond to
competitive situations if Percon obtains the prior written consent of PSC, which
consent will not be unreasonably withheld.
5.1.(f) Percon will not, and will not permit any of its subsidiaries to, (a)
assume any indebtedness or, except in the ordinary course of business for
working capital purposes under facilities existing on the date hereof, incur any
indebtedness or (b) except in the ordinary course of business consistent with
past practice, make any loans, advances or capital contributions to, or
investments (other than short-term investments pursuant to customary cash
management systems of Percon) in, any other person other than such of the
foregoing as are made by Percon to, in or from a wholly owned subsidiary of
Percon. Percon will not, and will not permit any of its subsidiaries to, enter
into any new credit agreements or enter into any amendments or modifications of
any existing credit agreements.
5.1.(g) Percon will not, and will not permit any of its subsidiaries to, acquire
(i) by merging or consolidating with, or by purchasing a substantial portion of
the stock or assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
(ii) any assets, except purchases of inventory items or supplies in the ordinary
course of business consistent with past practice and capital expenditures in
compliance with Section 5.1.(k).
5.1.(h) Percon will not, and will not permit any of its subsidiaries to, lease,
mortgage or otherwise encumber or otherwise dispose of any of its properties or
assets, except sales of inventory in the ordinary course of business consistent
with past practice.
5.1.(i) Percon will not, and will not permit any of its subsidiaries to, make
any tax election or settle or compromise any income tax or other tax liability
or refund, but Percon may take any such action as Percon deems reasonably
necessary in the ordinary course of business if Percon obtains the prior written
consent of PSC, which consent will not be unreasonably withheld.
5.1.(j) Percon will not, and will not permit any of its subsidiaries to, pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted, unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business consistent with
past practice or in accordance with their terms, or settle any material claim,
action or proceeding except in the ordinary course of business consistent with
past practice.
5.1.(k) Percon will not, and will not permit any of its subsidiaries to, make
any capital expenditures from the date of this Agreement to the Effective Time
in an aggregate amount in excess of twenty-five percent (25%) of the aggregate
amount reflected in Percon's capital expenditure budget, a copy of which has
been provided to PSC.
5.1.(l) Percon will not, and will not permit any of its subsidiaries to, enter
into or terminate any material Contract, or make any change in any material
Contract, other than renewals of Contracts without material adverse changes in
terms.
5.1.(m) Percon will not, and will not permit any of its subsidiaries to,
implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by GAAP.
5.1.(n) Percon will not, and will not permit any of its subsidiaries to,
authorize or enter into any agreement to do any of the foregoing.
5.2. Access and Information.
5.2.(a) Prior to the Closing, Percon will (and will cause each of its
subsidiaries to) afford to PSC and its representatives (including directors,
officers and employees of PSC and its affiliates, and counsel, accountants and
other professionals retained by PSC) such access throughout the period prior to
the Effective Time to its books, records (including tax returns), agreements,
properties (including for purposes of making any reasonable environmental
investigation), personnel and suppliers as PSC reasonably requests. Percon will,
as part of PSC's due diligence review, cause its independent certified public
accountants (existing and prior) to make available to PSC and its independent
certified public accountants the work papers relating to any audit of Percon's
financial statements in the last five years.
5.2.(b) Prior to the Closing, Percon will promptly furnish PSC with copies of
all monthly and other interim financial statements as the same become available
and shall cause one or more of its designated representatives to confer on a
regular and frequent basis with representatives of PSC.
5.2.(c) Prior to the Closing, Percon will promptly notify PSC of any material
change in its business or operations and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or, to its knowledge, the threat of material
Litigation and shall keep the PSC fully informed of such events. Prior to the
Closing, each party will promptly notify the other party of any information that
becomes known to it or any subsidiary that could reasonably be expected to make
any representation or warranty it has made herein not true or not correct in any
material respect.
5.3. Certain Filings, Consents and Arrangements.
PSC and Percon will (a) promptly make their respective
filings, and will thereafter use their best efforts to promptly make any
required submissions, under the HSR Act with respect to the Merger and the other
transactions contemplated by this Agreement and (b) cooperate with one another
(i) in promptly determining whether any filings are required to be made or
consents, approvals, permits or authorizations are required to be obtained under
any other federal, state or foreign law or regulation and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such consents, approvals, permits or
authorizations.
5.4. State Takeover Statutes.
Percon will, upon the request of PSC, take all reasonable
steps to exempt Percon and the Merger from the requirements of any state
takeover law by action of Percon's Board of Directors or otherwise.
5.5. Percon Special Meeting; Proxy Statement.
5.5.(a) Percon, acting through its Board of Directors, shall, in accordance with
applicable Law:
(i) Duly call, give notice of, convene and hold a special meeting of Percon's
shareholders (the "Percon Special Meeting") on the earlier of the date
proposed by PSC or the date proposed by Percon subject to the consent of
the other (which consent shall not be unreasonably withheld or delayed),
which date shall in no event be more than sixty (60) days after the date
hereof, for the purpose of considering and taking action upon this
Agreement; provided, however, that if the Securities and Exchange
Commission (the "SEC") reviews the Preliminary Filing (as defined below),
then such sixty (60) day period shall be extended by the number of days
during which Percon is awaiting receipt of SEC comments plus five (5)
business days to enable Percon to respond to the first set of SEC comments
and two (2) business days in each case to enable Percon to respond to each
subsequent set of SEC comments;
(ii) Promptly (x) prepare and file with the SEC a preliminary information or
proxy statement relating to the Merger and this Agreement that complies in
all material respects with the provisions of applicable federal securities
laws (the "Preliminary Filing"), (y) after consultation with PSC, respond
promptly to any comments made by the SEC with respect to the Preliminary
Filing, and (z) subject to compliance with SEC rules and regulations, cause
a notice of a special meeting and the Proxy Statement to be mailed to the
shareholders of Percon no later than the time required by applicable Law
and the articles of incorporation and the bylaws of Percon; and
(iii)Include in the Proxy Statement the unanimous recommendation of the Board
of Directors of Percon that the shareholders of Percon vote in favor of the
approval of the Merger and the adoption of this Agreement.
5.5.(b) PSC and Newco will furnish to Percon the information relating to PSC and
Newco required under the Exchange Act to be set forth in the Proxy Statement. No
representation, warranty or covenant is made or shall be made herein by PSC or
Newco with respect to information contained in the Proxy Statement other than
information supplied by PSC and/or Newco in writing expressly for inclusion in
the Proxy Statement.
5.5.(c) Percon shall consult with PSC and Newco with respect to the Proxy
Statement (and any amendments or supplements thereto) and shall afford PSC and
Newco reasonable opportunity to comment thereon prior to its finalization. If,
at any time prior to the Percon Special Meeting, any event shall occur relating
to Percon or the transactions contemplated by this Agreement that should be set
forth in an amendment or a supplement to the Proxy Statement, then Percon will
promptly notify PSC and Newco of such event in writing. If, at any time prior to
the Percon Special Meeting, any event shall occur relating to PSC, Newco or the
transactions contemplated by this Agreement that should be set forth in an
amendment or a supplement to the Proxy Statement, then PSC and Newco will
promptly notify Percon of such event in writing. In any such case, Percon, with
the cooperation of PSC and Newco, will promptly prepare and mail such amendment
or supplement, and Percon shall consult with PSC and Newco with respect to such
amendment or supplement and shall afford PSC and Newco reasonable opportunity to
comment thereon prior to such mailing. Percon shall notify PSC and Newco at
least three (3) days prior to the mailing of the Proxy Statement (or any
amendment or supplement thereto) to the shareholders of Percon.
5.6. Additional Agreements.
Subject to the terms and conditions herein provided, each of
the parties hereto agrees to use its best efforts to take promptly, or cause to
be taken, all actions and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its best efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable governmental
agencies or authorities, effect all necessary registrations and filings
(including filings under the HSR Act), lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby and obtain any required
contractual consents. If, at any time after the Effective Time, the Surviving
Corporation considers or is advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of Percon and its subsidiaries acquired or to be acquired by the Surviving
corporation as a result of, or in connection with the Merger or otherwise to
carry out the purposes of this Agreement, the officers and directors of the
Surviving Corporation will be authorized to execute and deliver, in the name and
on behalf of Percon and its subsidiaries or otherwise, as such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of Percon and its subsidiaries or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this Agreement.
5.7. Certain Litigation.
Percon shall give East the opportunity to participate in the
defense or settlement of any litigation against Percon or its officers or
directors relating to the transactions contemplated by this Agreement. No such
settlement shall be agreed to without East's consent which shall not be
unreasonably withheld.
5.8. Acquisition Proposals.
5.8.(a) Percon agrees that neither it nor any of its subsidiaries shall, and
that it shall direct and use its best efforts to cause its and its subsidiaries,
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its subsidiaries) (Percon, its
subsidiaries and their officers, directors, employees, agents and
representatives being the "Percon Representatives") not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any purchase
of, or tender offer for, any of the assets of it or any of its subsidiaries or
its voting securities if, as a result of such transaction, (i) the shareholders
of Percon would not hold more than ninety-five percent (95%) of the voting
securities of the surviving corporation or its ultimate parent, (ii) the
directors of Percon immediately prior to completion of such transaction would
not constitute at least two-thirds of the board of directors of the surviving
corporation or its ultimate parent immediately following the completion of such
transaction, or (iii) another person would acquire material assets of Percon
and/or its subsidiaries (any such proposal or offer being hereinafter referred
to as a "Percon Acquisition Proposal"). Neither Percon nor any of its
subsidiaries shall, and Percon shall direct and cause the Percon Representatives
not to, directly or indirectly, have any discussion with or provide any
confidential information or data to any person relating to a Percon Acquisition
Proposal or engage in any negotiations concerning a Percon Acquisition Proposal,
or otherwise facilitate any effort or attempt to make or implement a Percon
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent either Percon or the Percon Representatives from (A)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
Percon Acquisition Proposal; (B) engaging in any discussions or negotiations
with or providing any information to any person in response to an unsolicited
bona fide written Percon Acquisition Proposal by any such person; or (C)
recommending such an unsolicited bona fide written Percon Acquisition Proposal
to the shareholders if in such case referred to in clause (B) or (C), (1) the
Board of Directors of Percon at a meeting determines in good faith (upon the
advice of its financial advisor) that such Percon Acquisition Proposal is
reasonably likely to be completed taking into account all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal,
and would, if consummated, result in a transaction more favorable to Percon's
shareholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Percon Acquisition Proposal being
referred to in this Agreement as a "Superior Percon Proposal"), (2) the Board of
Directors of Percon at a meeting determines in good faith upon the advice of
outside legal counsel that such action is necessary for the Board of Directors
to comply with its fiduciary duty under applicable law and (3) Percon (I)
promptly advises PSC that it has received a Superior Percon Proposal, (II)
promptly discloses to PSC the material terms of the Superior Percon Proposal,
and (III) promptly (and in any event before providing information) causes the
offering party to enter into a confidentiality and standstill agreement
substantially in the form of the Confidentiality Agreement (as defined in
Section 5.9) (provided that such confidentiality agreement shall not contain
terms that prevent Percon from complying with its obligations under this Section
5.8), and (IV) promptly (and in any event upon the request of PSC) advises PSC
of any material developments with respect to the Superior Percon Proposal.
5.8.(b) Percon will (i) immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Percon Acquisition Proposal, (ii) take the
necessary steps to promptly inform the individuals or entities referred to in
the first sentence of Section 5.8(a) of the obligations undertaken in Section
5.8(a) and (iii) notify PSC immediately if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
discussions or negotiations are sought to be initiated or continued with, any of
its representatives indicating, in connection with such notice, the name of such
person and the terms and conditions of any proposals or offers, and thereafter
shall inform PSC of any material modification of the terms of any such proposal
or offer or the withdrawal thereof. Percon also agrees that it will promptly
request each person that has heretofore executed a confidentiality agreement in
connection with its consideration of any Percon Acquisition Proposal to return
all confidential information heretofore furnished to such person by or on behalf
of it or any of its subsidiaries, but the obligation in this sentence shall not
extend to any Percon Acquisition Proposal if it is an Excluded Percon
Acquisition Proposal (as hereinafter defined). As used herein, an "Excluded
Percon Acquisition Proposal" means a Percon Acquisition Proposal if (A) it is a
Percon Acquisition Proposal only by virtue of clause (i) of subsection 5.8.(a),
(B) as a result of the transaction that the Percon Acquisition Proposal
contemplates, the shareholders of Percon would hold more than seventy-five
percent (75%) of the voting securities of the surviving corporation or its
ultimate parent and (C) the Percon Acquisition Proposal was initiated before
July 1, 1999 or after the termination of this Agreement.
5.9. Confidentiality.
Percon and PSC each acknowledges and confirms that it has
entered into Confidentiality Agreements, dated July 9, 1999 and July 1, 1999,
respectively (the "Confidentiality Agreement"), that information provided by
each party hereto to the other party hereto pursuant to this Agreement is
subject to the terms of the Confidentiality Agreement and the Confidentiality
Agreement shall remain in full force and effect in accordance with its terms.
5.10. Indemnification; Directors' and Officers' Insurance
5.10.(a) From and after the Effective Time, PSC agrees that it will indemnify
and hold harmless each present and former director and officer of Percon (when
acting in such capacity) (each, an "Indemnified Party" and, collectively, the
"Indemnified Parties") against any costs or expenses (including, without
limitation, reasonable attorneys' fees, costs of investigation and fees of other
advisers and experts), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, including, without limitation, claims, actions, suits,
proceedings or investigations by or on behalf of any present or former
shareholder of Percon, arising out of matters existing or occurring at or before
the Effective Time, whether asserted or claimed before, at or after the
Effective Time, to the fullest extent that Percon would have been permitted
under the WBCA and its Articles of Incorporation or Bylaws in effect on the date
hereof to indemnify such person (and PSC shall also advance expenses as incurred
to the fullest extent permitted under applicable law; provided that the person
to whom expenses are advanced provides a written affirmation of his or her good
faith belief that the standard of conduct necessary for indemnification has been
met, and an undertaking to repay the advances if it is ultimately determined
that the person is not entitled to indemnification).
5.10.(b) Any Indemnified Party wishing to claim indemnification under subsection
(a) of this Section 5.10, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify PSC thereof, but the failure
to so notify shall not relieve PSC of any liability it may have to the
Indemnified Party if the failure does not materially prejudice the indemnifying
party. In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) PSC or the Surviving
Corporation shall have the right to assume the defense thereof and PSC shall not
be liable to the Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by the Indemnified Parties in
connection with the defense thereof, except that if PSC or the Surviving
Corporation elects not to assume the defense or counsel for the Indemnified
Parties advises that there are issues that raise conflicts of interest between
PSC or the Surviving Corporation and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and PSC or the Surviving
Corporation shall pay all reasonable fees and expenses of the counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that PSC shall be obligated pursuant to this subsection (b) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction unless
the use of one counsel for the Indemnified Parties would present the counsel
with a conflict of interest, (ii) the Indemnified Parties will cooperate in the
defense of any such matter and (iii) PSC shall not be liable for any settlement
effected without its prior written consent; and provided, further, that PSC
shall not have any obligation hereunder to any indemnified Party if and when a
court of competent jurisdiction shall ultimately determine, and the
determination shall have become final and non-appealable, that the
indemnification of the Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
5.10.(c) The Surviving Corporation shall maintain Percon's existing officers'
and directors' liability insurance for a period of six (6) years after the
Effective Time; provided, however, that if the existing officers' and directors'
insurance expires, is terminated or canceled during such six-year period, then
the Surviving Corporation will obtain officers' and directors' liability
insurance for the remainder of such period of at least the same coverage and
amounts, containing terms and conditions that are not less advantageous to the
Indemnified Parties and that is issued by an insurer having a claims-paying
rating at least as good as the rating of the issuer of Percon's existing policy.
5.10.(d) The provisions of this Section 5.10 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
5.11. Percon Warrants.
As soon as practicable after the date hereof and prior to the
Effective Time, and in compliance with its obligations pursuant to the terms of
the Percon Warrants, Percon shall provide each holder of Percon Warrants
appropriate notice so that each holder shall have a reasonable opportunity to
exercise such holder's Percon Warrants and receive the Merger Price for each
Percon Warrant. To the extent required by the Percon Warrants, Newco agrees to
assume the obligations of Percon under the Warrants as contemplated by Section 4
of the Percon Warrants.
5.12. Voting Agreement Matters.
If Percon receives any request on behalf of any party to a
Voting Agreement to allow a transfer of any Voting Agreement Shares (other than
transfers by gift as contemplated by the Voting Agreements), then Percon will
immediately, and in any event prior to allowing such transfer, notify PSC of
such request and all relevant details. Percon shall not consent to the removal
of the Securities Act Legend from any certificate representing Voting Agreement
Shares during the term of the respective Voting Agreements. Percon (i)
acknowledges the existence of the Voting Agreements, (ii) acknowledges that the
Voting Agreement Shares are subject to transfer restrictions under the Voting
Agreements and (iii) agrees that it will not hinder or impede in any way the
enforcement of the terms of the Voting Agreements. Without limitation, Percon
will not seek in any manner to invalidate any Voting Agreement, contest its
enforceability or contest the entry of any order requiring Percon to take any
action or cease taking any action to facilitate the enforcement of any Voting
Agreement against any holder of Voting Agreement Shares. However, the foregoing
shall not obligate Percon to initiate legal action to enforce the restrictions
on transfer or voting requirements set forth in any Voting Agreement.
ARTICLE 6
Conditions to Obligation to Close
6.1. Conditions to Obligation of PSC and Newco.
The obligations of PSC and Newco to consummate the
transactions to be performed by them in connection with the Closing are subject
to satisfaction or waiver of the following conditions:
6.1.(a) Representations True. The representations and warranties set forth in
Article 3 above shall be true and correct in all material respects when made and
at and as of the Closing Date (except to the extent such representations and
warranties speak as of an earlier date).
6.1.(b) Covenants. Percon shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing.
6.1.(c) No Proceedings. No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the
Surviving Corporation to own the former assets, to operate the former
businesses, and to control the former subsidiaries of Percon, or (iv) affect
adversely the right of any of the former subsidiaries of Percon to own its
assets and to operate its businesses (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect).
6.1.(d) Shareholder Approval. This Agreement and the Merger shall have received
approval by the Percon Requisite Shareholder Vote.
6.1.(e) HSR Waiting Period. All applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been terminated and
the parties shall have received all other authorizations, consents, and
approvals of governments and governmental agencies referred to in Section 3.4
and Section 4.3.
6.1.(f) Consents. Percon and its subsidiaries shall have procured all of the
third party consents specified pursuant to Section 3.4 that are material to the
operation of the business of Percon and its subsidiaries.
6.1.(g) Material Adverse Change. There shall have been no material adverse
change from the date hereof in the business, condition (financial or otherwise),
operations or prospects of Percon, except changes contemplated, permitted or
required by this Agreement.
6.1.(h) Officer's Certificate. Percon shall have delivered to PSC a
certification of one of its executive officers to the effect that each of the
conditions specified in Section 6.1(a)-(d) and (g) is satisfied in all respects.
6.1.(i) Noncompetition Agreements. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have executed and delivered Noncompetition Agreements in
substantially the form that PSC has presented to them on the date hereof.
6.1.(j) Employment/Consulting Agreements. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have
executed and delivered a Consulting Agreement and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have
executed and delivered an Employment Agreement, in each case in substantially
the form that PSC has presented to them on the date hereof.
6.1.(k) Consents. PSC shall have obtained all of the Debt Consents.
6.1.(l) Other Matters. All actions to be taken by Percon in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby shall be satisfactory in form and substance to PSC.
6.2. Conditions to Obligations of Percon.
The obligation of Percon to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction or
waiver of the following conditions:
6.2.(a) Representations True. The representations and warranties set forth in
Article 4 above shall be true and correct in all material respects when made and
at and as of the Closing Date (except to the extent such representations and
warranties speak as of an earlier date).
6.2.(b) Covenants. PSC shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing.
6.2.(c) No Proceedings. No injunction, judgment, order, decree, ruling, or
charge shall be in effect under any action, suit, or proceeding before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator that (i) prevents consummation of
any of the transactions contemplated by this Agreement or (ii) would cause any
of the transactions contemplated by this Agreement to be rescinded following
consummation.
6.2.(d) Shareholder Approval. This Agreement and the Merger shall have received
approval by the Percon Requisite Shareholder Vote.
6.2.(e) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. All applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise been
terminated and the parties hereto shall have received all other authorizations,
consents, and approvals of governments and governmental agencies.
6.2.(f) Officer's Certificate. PSC shall have delivered to Percon a
certification of one of its executive officers to the effect that each of the
conditions specified above in Section 6.2(a)-(c) is satisfied in all respects.
6.2.(g) Other Matters. All actions to be taken by PSC in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Percon.
ARTICLE 7
Termination
7.1. Termination by Mutual Consent.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
receipt of approval by the Percon Requisite Shareholder Vote, by mutual written
consent of Percon and PSC following action of their respective Boards of
Directors.
7.2. Termination by Either PSC or Percon.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, by action of the Board of
Directors of either PSC or Percon, if (a) the Merger shall not have been
consummated by May 10, 2000 (the "Termination Date"), whether such date is
before or after the date of approval by the shareholders of Percon, (b) at a
meeting of the shareholders of Percon duly convened therefor and at any
adjournment or postponement thereof, this Agreement shall have failed to obtain
approval by the Percon Requisite Shareholder Vote, or (c) any order permanently
restraining, enjoining, or otherwise prohibiting consummation of the Merger
shall become final and non-appealable (whether before or after the adoption or
approval by the shareholders of Percon); provided, that the right to terminate
this Agreement pursuant to clause (a) or (b) above shall not be available to any
party that has breached in any material respect its obligations under this
Agreement in any manner that shall have contributed proximately to the failure
of the Merger to be consummated.
7.3. Termination by Percon.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
receipt of approval by the Percon Requisite Shareholder Vote, by action of the
Board of Directors of Percon:
7.3.(a) So long as Percon has not breached this Agreement in any material
respect, if (i) the Board of Directors of Percon, acting in good faith and upon
the advice of its financial advisor, determines that a transaction constitutes a
Superior Percon Proposal and Percon desires to enter into a binding agreement
with respect thereto, (ii) PSC does not, within seven (7) business days after
receipt of Percon's written notification of its desire to enter into a binding
agreement for a Superior Percon Proposal, the terms of which are specified in
such notice, make a competing offer other than an offer that the Board of
Directors of Percon determines, in good faith after consultation with its
financial advisors, is not at least as favorable, from a financial point of
view, to the shareholders of Percon as the Superior Percon Proposal, (iii) upon
such date of termination Percon enters into a binding agreement with respect to
such Superior Percon Proposal, and (iv) Percon pays to PSC the termination fee
set forth in Section 7.5(b). Percon shall notify PSC promptly if its desire to
enter into a written agreement referred to in its notification shall change at
any time after giving such notification; or
7.3.(b) If (i) there has been a change, event, development or combination of
changes, events or developments that would result in a failure of a condition
set forth in Section 6.2 and (ii) such failure cannot be or is not cured prior
to the Termination Date.
7.4. Termination by PSC.
This Agreement may be terminated and the Merger may be
abandoned at the time prior to the Effective Time, whether before or after
receipt of approval by the Percon Requisite Shareholder Vote, by action of the
Board of Directors of PSC if (a) the Board of Directors of Percon shall have
withdrawn or adversely modified its approval or recommendation to Percon's
shareholders of this Agreement, failed to include such recommendation in the
Proxy Statement or failed to reconfirm such recommendation within five (5)
business days after a written request by PSC to do so, (b) (i) there has been a
change, event, development or combination of changes, events or developments
that would result in a failure of a condition set forth in Section 6.1 and (ii)
such failure cannot be or is not cured prior to the Termination Date, (c)
Percon's board of directors shall have approved or publicly recommended any
Percon Acquisition Proposal, (d) Percon shall have entered into any letter of
intent or any Contract accepting a Percon Acquisition Proposal, (e) Percon or
any Percon Representative shall violate Section 5.8(b) or shall take any of the
actions that would be proscribed by Section 5.8(a) or (f) a tender offer or
exchange offer for outstanding shares of capital stock of Percon is commenced
prior to the Effective Time and the Board of Directors of Percon fails to
recommend against acceptance of such tender offer or exchange offer by Percon's
shareholders.
7.5. Effect of Termination and Abandonment.
7.5.(a) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article 7, this Agreement (other than as set forth in
this Section 7.5 and Section 8.1) shall become void and of no effect with no
liability on the part of any party hereto (or of any of its directors, officers,
employees, agents, legal or financial advisors or other representatives);
provided, however, no such termination shall relieve any party hereto from any
obligation to pay, if applicable, the termination fee pursuant to Section 7.5(b)
or 7.5(c).
7.5.(b) If the Merger is not consummated and
(i) at a meeting of the shareholders of Percon duly convened therefor and at
any adjournment or postponement thereof, this Agreement shall have failed
to receive the Percon Requisite Shareholder Vote and within twelve (12)
months after the date hereof Percon shall have entered into an agreement to
consummate or has consummated a transaction that would constitute a Percon
Acquisition Proposal if it were the subject of a proposal (other than an
Excluded Percon Acquisition Proposal), or
(ii) this Agreement is terminated by Percon pursuant to Section 7.3(a), or
(iii)prior to the termination of this Agreement, (A) the Board of Directors of
Percon shall have withdrawn or adversely modified its approval or
recommendation to Percon's shareholders of this Agreement, failed to
include such recommendation in the Proxy Statement or failed to reconfirm
such recommendation within five (5) business days after a written request
by PSC to do so, (B) Percon's board of directors shall have approved or
publicly recommended any Percon Acquisition Proposal, (C) Percon shall have
entered into any letter of intent or any Contract accepting a Percon
Acquisition Proposal, (D) if Percon or any Percon Representative shall
violate Section 5.8(b) or shall take any of the actions that would be
proscribed by Section 5.8(a), or (E) a tender offer or exchange offer for
outstanding shares of capital stock of Percon is commenced prior to the
Effective Time and the Board of Directors of Percon fails to recommend
against acceptance of such tender offer or exchange offer by Percon's
shareholders, or
(iv) there has been a willful and intentional breach of this Agreement on the
part of Percon,
then Percon shall promptly, but in no event later than (I) if the fee is payable
other than pursuant to clause (i) to this Section 7.5(b), two (2) days after the
date of termination of this Agreement or (II) if the fee is payable pursuant to
clause (i) to this Section 7.5(b), the earlier of the date Percon enters into an
agreement to consummate or the date Percon consummates a transaction that would
constitute a Percon Acquisition Proposal, pay PSC Two Million Dollars
($2,000,000) plus the out-of-pocket expenses PSC has incurred in connection with
the transactions contemplated hereby (not to exceed Four Hundred Thousand
Dollars ($400,000)), payable by wire transfer of immediately available funds.
Notwithstanding the foregoing, no such fee shall be payable if PSC has breached
this Agreement in any material respect. Percon acknowledges that the agreements
contained in this Section 7.5(b) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, PSC and Newco
would not enter into this Agreement; accordingly, if Percon fails to pay
promptly the amount due pursuant to this Section 7.5(b) and, in order to obtain
such payment, PSC or Newco commences a suit that results in a judgment against
Percon for the fee set forth in this subsection (b), then Percon shall pay to
PSC and Newco their costs and expenses (including attorneys' fees) in connection
with such suit, together with interest on the amount of the fee at the prime
rate of Chase in effect on the date such payment was required to be made.
7.5.(c) If the Merger is not consummated and there has been a willful and
intentional breach of this Agreement on the part of PSC, then PSC shall
promptly, but in no event later than two (2) days after the date of termination
of this Agreement, pay Percon One Million Dollars ($1,000,000) plus the
out-of-pocket expenses Percon has incurred in connection with the transactions
contemplated hereby (not to exceed Four Hundred Thousand Dollars ($400,000)),
payable by wire transfer of immediately available funds. Notwithstanding the
foregoing, no such fee shall be payable if Percon has breached this Agreement in
any material respect or if any other condition to the obligations of PSC and
Newco set forth in Section 6.1 has not been satisfied. PSC acknowledges that the
agreements contained in this Section 7.5(c) are an integral part of the
transactions contemplated by this Agreement and that, without these agreements,
Percon would not enter into this Agreement; accordingly, if PSC fails to pay
promptly the amount due pursuant to this Section 7.5(c) and, in order to obtain
such payment, Percon commences a suit that results in a judgment against PSC for
the fee set forth in this subsection (c), then PSC shall pay to Percon its costs
and expenses (including attorneys' fees) in connection with such suit, together
with interest on the amount of the fee at the prime rate of Chase in effect on
the date such payment was required to be made.
ARTICLE 8
Miscellaneous
8.1. Survival.
This Article 8 and the agreements of PSC, Newco and Percon
contained in Sections 5.9 shall survive the consummation of the Merger. All
other representations, warranties, covenants and agreements in this Agreement
shall not survive the consummation of the Merger.
8.2. Press Releases and Public Announcements.
Upon execution of this Agreement, Percon and PSC will issue a
joint press release. Neither Percon nor PSC will issue or approve any other news
release or other announcement concerning the transaction without the prior
approval of the other as to the contents of the announcement and its release,
which approval will not be unreasonably withheld, unless and only to the extent
that a party makes such disclosure (after making reasonable efforts to avoid
such disclosure and after advising and consulting with the other party about its
intent to make, and the proposed contents of, such disclosure) that is, in such
party's reasonable judgment, required by applicable United States securities
laws.
8.3. No Third Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon
any person other than the parties and their respective successors and permitted
assigns and the holders of Options as described in Section 1.5.
8.4. Entire Agreement.
This Agreement (including the Ancillary Instruments and the
other documents referred to herein) constitutes the entire agreement between the
parties and supersedes and prior understandings, agreements, or representations
by or between the parties, written or oral, to the extent they related in any
way to the subject matter hereof.
8.5. Succession and Assignment.
This Agreement shall be binding upon and inure to the benefit
of the parties named herein and their respective successors and permitted
assigns. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other party.
8.6. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
8.7. Headings.
The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.8. Notices.
All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed :o the intended recipient as set forth
below:
If to Percon:
Percon Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
If to PSC or Newco:
PSC Inc.
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Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
8.9. Governing Law.
This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York; provided, however, that the
WBCA shall apply to the extent required.
8.10. Amendments and Waivers.
The parties may mutually amend any provision of this Agreement
at any time prior to the Effective Time with the prior authorization of their
respective boards of directors; provided, however, that any amendment effected
subsequent to shareholder approval will be subject to the restrictions contained
in the WBCA. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by both of the parties. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or effect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
8.11. Severability.
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
8.12. Expenses.
Each of the parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby, except as otherwise contemplated by
Section 7.5.
8.13. Construction.
The parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or
interpretation arises, then this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
8.14. Incorporation of Schedules.
The Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written. This Agreement may be executed in counterparts.
PERCON INCORPORATED
By: __________________________________________
Title: _______________________________________
PSC INC.
By: __________________________________________
Title: _______________________________________
WEST ACQUISITION CORP.
By: ____________________________________________
Title: _________________________________________