EXECUTION COPY
---------------------------------
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 Incorporationand 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, 675 Basket Road, Webster, New York 14580, 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 Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") 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 Payi ...