<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
PERCON INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[x] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
PROXY STATEMENT
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The board of directors of Percon Incorporated has approved a cash merger
with a wholly owned subsidiary of PSC Inc. If the merger is completed, Percon
shareholders will receive $15 in cash for each share of Percon common stock they
own. After the merger, Percon will be a wholly owned subsidiary of PSC.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Percon common stock vote to approve it at the special
meeting of the shareholders that Percon has called to consider the merger to be
held January 17, 2000. Only shareholders who hold shares of Percon common stock
on December 13, 1999 will be entitled to vote at the special meeting. YOUR VOTE
IS VERY IMPORTANT.
This proxy statement gives you detailed information about the special
meeting of the shareholders and the merger, and includes a copy of the merger
agreement.
AFTER CAREFUL CONSIDERATION, PERCON'S BOARD OF DIRECTORS HAS UNANIMOUSLY
ADOPTED THE MERGER AGREEMENT AND APPROVED THE MERGER, AND UNANIMOUSLY RECOMMENDS
YOU VOTE IN FAVOR OF THE MERGER.
<TABLE>
<S> <C>
Arlen I. Prentice Michael P. Coughlin
Chairman of the Board President and Chief Executive Officer
</TABLE>
THIS PROXY STATEMENT IS DATED DECEMBER 13, 1999, AND WAS FIRST MAILED
TO SHAREHOLDERS ON OR ABOUT DECEMBER 16, 1999.
<PAGE> 3
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 17, 2000
To the Shareholders of Percon:
A special meeting of shareholders of Percon will be held on January 17,
2000, at 9:00 a.m., local time, at the Company's facilities at 1800 Millrace
Drive, Eugene, Oregon for the following purpose:
To consider and vote on a proposal to approve the merger agreement,
including the plan of merger, among PSC Inc., West Acquisition Corp., a
wholly owned subsidiary of PSC, and Percon. Under the terms of the merger
agreement, each share of common stock of Percon outstanding immediately
before the merger will be converted into the right to receive $15 in cash,
and Percon will become a wholly owned subsidiary of PSC.
You are entitled to assert dissenters' rights under chapter 23B.13 of the
Washington Business Corporation Act. A copy of chapter 23B.13 is attached as
Appendix C to the accompanying proxy statement.
A proxy card and a proxy statement containing more detailed information
about the special meeting of the shareholders and the merger, including a copy
of the merger agreement, accompany this notice.
By Order of the Board of Directors,
Michael P. Coughlin
President and
Chief Executive Officer
Eugene, Oregon
December 13, 1999
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
The companies............................................. 3
The merger................................................ 3
The special meeting....................................... 6
Fairness opinion.......................................... 6
Percon selected historical consolidated financial
information............................................ 7
MARKET PRICES AND DIVIDENDS................................. 8
THE SPECIAL MEETING......................................... 9
Recommendation of the board............................... 9
Votes required for approval of the merger agreement....... 9
Voting of proxies......................................... 10
How to revoke a proxy..................................... 10
Solicitation of proxies................................... 10
THE COMPANIES............................................... 11
Percon.................................................... 11
PSC....................................................... 11
PSC merger subsidiary..................................... 11
THE MERGER.................................................. 12
Background of the merger.................................. 12
Reasons for the merger.................................... 15
Opinion of financial advisor.............................. 16
Interests of members of the Percon board of directors and
management in the merger............................... 20
Accounting treatment...................................... 24
U.S. federal income tax consequences...................... 24
Regulatory matters........................................ 25
Dissenters' rights........................................ 25
THE MERGER AGREEMENT........................................ 28
The merger................................................ 28
Effective time of the merger.............................. 28
Treatment of stock options................................ 28
Payment for shares........................................ 29
Representations and warranties............................ 30
Covenants................................................. 31
No solicitation of transactions........................... 32
Conditions to the parties' obligations to complete the
merger................................................. 33
Termination of the merger agreement....................... 34
Termination fees.......................................... 35
Amendment of the merger agreement......................... 35
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VOTING AGREEMENTS........................................... 36
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT...... 37
INDEPENDENT ACCOUNTANTS..................................... 38
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING............... 38
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION............................................... 38
WHERE YOU CAN FIND MORE INFORMATION......................... 39
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Opinion of McDonald Investments, Inc.......... B-1
APPENDIX C -- Chapter 23B.13 of the Washington Business
Corporation Act........................................... C-1
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL PERCON SHAREHOLDERS RECEIVE FOR THEIR PERCON SHARES IN THE MERGER?
A: If we complete the merger, Percon shareholders will receive the merger
consideration of $15 in cash, without interest, in exchange for each of their
shares of Percon common stock.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering this proxy statement, please
complete, sign and date your proxy card. Then mail the proxy card in the
enclosed return envelope as soon as possible so that your shares may be
represented at the special meeting and voted as you wish on whether to
approve the merger. If you sign and mail your proxy card but do not indicate
how you want your shares to be voted, your shares will be voted in favor of
approving the merger. If you do not vote or if you abstain, it will have the
effect of a vote against approving the merger.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote your shares. You should follow the directions your broker provides
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, which will have the effect of a
vote against the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy card. If you choose either of these two
methods, you must deliver your notice of revocation or your new proxy card to
the Secretary of Percon at the address on page 10 before the vote at the
special meeting. Third, you can attend the special meeting and vote in
person. Simply attending the meeting, however, will not revoke your proxy. If
you have instructed a broker to vote your shares, you must follow directions
received from your broker to change your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. After the merger is completed, PSC will send you written instructions
explaining how to exchange your shares for the merger consideration.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working toward completing the merger as quickly as possible. In
addition to obtaining shareholder approval, we must satisfy all other closing
conditions, including the expiration or termination of applicable regulatory
waiting periods. We expect to complete the merger by late January 2000.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT PERCON?
A: This document is accompanied by the latest annual report on Form 10-KSB for
Percon, as well as Percon's latest quarterly report on Form 10-Q. You may
obtain additional information about Percon as described under "Where You Can
Find More Information" on page 39.
1
<PAGE> 7
Q: WHOM DO I CONTACT IF I HAVE QUESTIONS ABOUT THE SPECIAL MEETING OR THE
MERGER?
A: If you have questions about the special meeting or the merger or if you need
additional copies of this proxy statement or the enclosed proxy card, you
should contact our proxy solicitor:
Allen Nelson & Company, Incorporated
1906 California Avenue, S.W.
Seattle, WA 98116
(800) 932-0181
2
<PAGE> 8
SUMMARY
This summary highlights selected information from this proxy statement and
may not contain all of the information that is important to you. To understand
the merger and related matters fully and for a more complete description of the
legal terms of the merger, you should read carefully this entire proxy statement
and the documents to which we have referred you. See "Where You Can Find More
Information" on page 39. Each item in this summary includes a page reference
directing you to a more complete description of that item.
THE COMPANIES (SEE PAGE 11)
PERCON INCORPORATED
Percon develops, assembles and markets data collection hardware and data
management software products. Percon's principal executive offices are located
at 1800 Millrace Drive, Eugene, Oregon 97403, and its telephone number is (541)
344-1189.
PSC INC.
PSC designs, manufactures and markets a broad line of laser and non-laser
based handheld and fixed position bar code scanners, bar code engines,
verifiers, integrated sortation and point-of-sale scanning and automated
dimensioning systems for the worldwide automatic identification and data capture
market. PSC's principal executive offices are located at 675 Basket Road,
Webster, New York, and its telephone number is (716) 265-1600.
WEST ACQUISITION CORP.
West Acquisition Corp. is a wholly owned subsidiary of PSC. West was
organized solely for the purpose of entering into the merger agreement with
Percon and completing the merger and has not conducted any business operations.
THE MERGER
WHAT YOU WILL RECEIVE (SEE PAGE 28)
In the merger you will receive, for each share of Percon common stock you
own, the merger consideration of $15 in cash, without interest.
After the merger is completed, you will have the right to receive the
merger consideration but you will no longer have any rights as Percon
shareholders. Percon shareholders will receive the merger consideration after
turning in their Percon stock certificates in accordance with the instructions
contained in the letter of transmittal that PSC will send to Percon shareholders
shortly after completion of the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 24)
The receipt of cash by Percon shareholders in the merger will be a taxable
transaction for federal income tax purposes. You should consult your own tax
advisor for a full understanding of the tax consequences of the merger to you.
DISSENTERS' RIGHTS OF PERCON SHAREHOLDERS (SEE PAGE 25)
Percon shareholders have the right to dissent from the merger under
Washington law and receive payment of the fair value of their shares if they
comply with the requirements of Washington law that are summarized in this proxy
statement.
VOTING AGREEMENTS (SEE PAGE 36)
Michael P. Coughlin, Andy J. Storment and Arlen I. Prentice, and entities
controlled by each of them, have each entered into voting agreements with PSC.
Under these agreements, they have agreed to vote all of their shares of Percon
common stock in favor of the merger. The voting agreements cover shares
representing approximately 42% of the total outstanding shares as of December
13, 1999.
3
<PAGE> 9
INTERESTS OF MEMBERS OF PERCON'S BOARD OF DIRECTORS AND MANAGEMENT IN THE
MERGER (SEE PAGE 20)
When you consider the recommendation of the Percon board of directors that
Percon shareholders vote in favor of the merger, you should be aware that
Percon's directors and officers may have interests in the merger that are
different from, or in addition to, yours. For example,
- - upon completion of the merger, options to purchase Percon common stock, to the
extent these options are exercisable immediately before the completion of the
merger, will represent the right to receive, upon completion of the merger, an
amount in cash equal to the positive difference, if any, between the per share
merger consideration and the exercise price of the option multiplied by the
number of shares for which the option was exercisable immediately before
completion of the merger;
- - upon completion of the merger, options to purchase Percon common stock, to the
extent these options are not exercisable immediately before the completion of
the merger and subject to various other conditions, including continued
employment or consulting services, will represent the right to receive, from
time to time after the option otherwise would have become exercisable, an
amount in cash equal to the positive difference, if any, between the per share
merger consideration and the exercise price of the option multiplied by the
number of shares for which the option would have otherwise become exercisable
following completion of the merger;
- - some officers of Percon will become eligible to receive severance payments
under employment agreements if their employment is terminated in specific
circumstances within a specified time after completion of the merger;
- - before completing the merger, one executive officer of Percon will enter into
a one year consulting agreement with PSC that will pay him $200 an hour for
consulting services and related travel time and another executive officer will
enter into an employment agreement with PSC under which this officer will
serve as a senior vice president of PSC and will receive $200,000 in annual
salary and will be eligible to receive an annual bonus and other benefits
under the agreement; and
- - before completing the merger, three shareholders of Percon, who own
approximately 45% of the outstanding common stock of Percon, will enter into
noncompetition agreements with PSC under which one of them will receive
$31,250 each quarter for eight quarters and one other will receive $18,750
each quarter in return for their agreement not to compete with Percon or PSC,
not to disclose Percon's confidential information and not to solicit PSC's or
Percon's customers or employees.
REGULATORY REQUIREMENTS WITH RESPECT TO THE MERGER (SEE PAGE 25)
Under the Hart-Scott-Rodino Antitrust Improvements Act, the parties cannot
complete the merger until after PSC and Percon have given specified information
and materials to the Department of Justice and the Federal Trade Commission and
a required waiting period has expired or terminated. The companies submitted the
required pre-merger notification and report forms on December 6, 1999 and the
waiting period with respect to these filings is expected to expire on January 5,
2000.
CONDITIONS TO THE MERGER (SEE PAGE 33)
Completion of the merger depends upon meeting a number of conditions,
including:
- - approval of the merger by the holders of a majority of the outstanding shares
of Percon common stock,
- - expiration or termination of all waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act,
4
<PAGE> 10
- - no ruling exists or is threatened that would, and no proceeding exists or is
threatened that seeks to:
- prevent the completion of the merger,
- cause the merger to be rescinded following its completion or
- adversely affect the contemplated ownership or operation of Percon or its
former subsidiaries following completion of the merger,
- - receipt of all approvals and authorizations from governmental entities that
are legally required, all other consents, approvals and authorizations from
third parties that are material to the operation of Percon's business and
certain specified consents, approvals and authorizations,
- - the execution and delivery to PSC by some shareholders and executive officers
of Percon of noncompetition, consulting and employment agreements, and
- - the accuracy of the representations and warranties and performance of the
obligations of PSC and Percon in all material respects.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 34)
1. Percon and PSC may agree to terminate the merger agreement without
completing the merger, even after the shareholders of Percon have approved the
merger.
2. PSC or Percon may terminate the merger agreement if:
- - the merger is not completed by May 10, 2000,
- - the holders of a majority of the outstanding shares of Percon common stock do
not approve the merger at the special meeting of shareholders, or
- - any ruling prohibiting the completion of the merger has become final and
cannot be appealed.
3. PSC may terminate the merger agreement if:
- - the Percon board of directors withdraws or modifies or fails to reconfirm its
recommendation that the Percon shareholders vote to approve the merger within
the required time period after a request by PSC to do so, or the Percon board
of directors fails to recommend against any tender offer or exchange offer for
Percon shares that is commenced before the completion of the merger,
- - an event occurs that would result in a failure of a condition to the merger
and the failure is not cured before May 10, 2000, or
- - the Percon board of directors approves or recommends, or Percon enters into an
agreement concerning, or Percon or its agents solicit or encourage, a proposal
from a third party regarding a transaction that would result in the
acquisition of 5% or more of Percon's common stock or material assets of
Percon, or replacement of more than one-third of the current directors of
Percon.
4. Percon may terminate the merger agreement if:
- - Percon receives an unsolicited proposal from a third party to acquire 5% or
more of Percon's common stock or material assets of Percon, or to replace more
than one-third of the current directors of Percon, in each case in a
transaction that is determined by the Percon board of directors to be more
favorable to the Percon shareholders than the merger, taking into account any
changes to the merger agreement made by PSC in response to such a proposal,
- - PSC does not make a competing offer to such a proposal that the Percon board
of directors determines in good faith to be at least as favorable to the
Percon shareholders as the proposal,
- - at the time of termination, Percon enters into a definitive agreement relating
to such a proposal, and
5
<PAGE> 11
- - Percon pays the termination fee described below under "-- Fee payable in
specified circumstances if the merger is not completed."
FEE PAYABLE IN SPECIFIED CIRCUMSTANCES IF THE MERGER IS NOT COMPLETED (SEE
PAGE 35)
The merger agreement requires Percon to pay PSC a termination fee of $2
million plus up to $400,000 of PSC's out-of-pocket expenses if:
- - Percon's shareholders fail to approve the merger and within 12 months of the
date of the merger agreement Percon enters into an agreement relating to or
completes an alternative transaction that would constitute a proposal
described in the third reason of paragraph 3 above under "-- Termination of
the merger agreement,"
- - Percon terminates the merger agreement for the reason described in paragraph 4
above under "-- Termination of the merger agreement,"
- - before the completion of the merger, any of the events described in paragraph
3 above under "-- Termination of the merger agreement" occurs, or
- - Percon willfully and intentionally breaches the merger agreement.
REASONS FOR THE MERGER (SEE PAGE 15)
The Percon board of directors believes, as a result of various factors
relating to, among other things, Percon and the data collection and management
industry generally, the value of Percon's common stock will be maximized by
converting those shares into the right to receive the merger consideration.
THE SPECIAL MEETING
RECORD DATE AND SHAREHOLDER VOTE REQUIRED TO APPROVE THE MERGER (SEE PAGE
9)
You are entitled to vote at the special meeting if you owned Percon common
stock at the close of business on December 13, 1999, which is the record date
that the Percon board of directors set to determine which shareholders are
entitled to vote at the special meeting. To approve the merger, the affirmative
vote of the holders of a majority of the shares of Percon common stock
outstanding as of the close of business on the record date must vote for the
merger.
If you do not vote your shares, it will have the effect of a vote against
the merger.
On the record date, 4,019,111 shares of Percon common stock were entitled
to vote at the special meeting. You will have one vote for each share of Percon
common stock that you owned on the record date.
RECOMMENDATIONS TO SHAREHOLDERS (SEE PAGE 9)
All the members of the Percon board of directors recommend that you vote
"FOR" the proposal to approve the merger.
FAIRNESS OPINION (SEE PAGE 16)
In deciding to approve the merger, the Percon board of directors considered
the opinion of McDonald Investments, Inc., its financial advisor, that as of
November 9, 1999 and subject to and based on the considerations in its opinion,
the merger consideration to be paid in the merger is fair to the Percon
shareholders from a financial point of view. This opinion is attached as
Appendix B to this proxy statement. We encourage you to read this opinion
carefully.
6
<PAGE> 12
PERCON SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The table below shows selected historical financial information about
Percon. This summary of financial information for Percon for 1994 through 1998
was taken from and should be read along with the audited financial statements
contained in Percon's annual reports on Form 10-KSB for the years ended December
31, 1996, 1997 and 1998. Information for the nine months ended September 30,
1998 and 1999 was taken from financial statements that have not been audited but
which, we believe, fairly present Percon's financial position and results of
operations and cash flows for the periods, and should be read along with
Percon's most recently filed quarterly report on Form 10-Q. See "Where You Can
Find More Information" on page 39.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ -----------------
1994 1995 1996 1997 1998 1998 1999
------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................... $9,362 $12,664 $22,128 $28,176 $31,071 $21,969 $25,710
Income before taxes................................. 1,505 2,354 1,484 5,240 4,347 2,847 3,707
Net income.......................................... 1,505 1,800 234 3,430 2,715 1,764 2,282
Net income per share -- basic....................... 0.35(1) 0.46(1) 0.06 0.87 0.68 0.44 0.59
Net income per share -- diluted..................... -- -- 0.06 0.83 0.67 0.43 0.59
BALANCE SHEET DATA:
Working capital..................................... 1,562 8,009 6,945 10,452 12,986 12,513 14,190
Total assets........................................ 2,555 11,454 14,513 17,354 20,402 20,531 21,319
Long-term debt, less current portion................ 267 -- 974 755 703 730 554
Total shareholders' equity.......................... 1,699 9,792 10,102 13,324 15,992 15,676 17,022
</TABLE>
- -------------------------
(1) Pro forma net income per share includes a pro forma income tax adjustment to
reflect Percon as a C corporation rather than an S corporation for federal
and state income tax purposes through July 1995.
7
<PAGE> 13
MARKET PRICES AND DIVIDENDS
Percon's common stock is listed on the Nasdaq National Market under the
symbol "PRCN." The following table shows, for the calendar quarters indicated,
the high and low sale prices of Percon common stock, as reported on the Nasdaq
National Market, based on published financial sources. We have not paid any cash
dividends on our common stock for the periods shown.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Calendar Year 1997
First Quarter............................................. $14 $ 9 1/4
Second Quarter............................................ 14 3/4 9 7/8
Third Quarter............................................. 16 3/4 13
Fourth Quarter............................................ 16 3/4 11 3/4
Calendar Year 1998
First Quarter............................................. $14 1/2 $11
Second Quarter............................................ 13 1/2 8
Third Quarter............................................. 10 1/2 5 1/2
Fourth Quarter............................................ 7 1/4 5 1/4
Calendar Year 1999
First Quarter............................................. $ 8 13/16 $ 6
Second Quarter............................................ 8 1/2 6
Third Quarter............................................. 10 8
Fourth Quarter (through December 10, 1999)................ 15 9 3/8
</TABLE>
The following table shows the high and low sale prices of Percon common
stock, as reported on the Nasdaq National Market, based on published financial
sources, for the dates indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
November 9, 1999, the last trading day before the
announcement of the merger................................ $15 $13 3/4
December 10, 1999, the last trading day before the date of
this proxy statement........................................ $14 1/2 $14 5/16
</TABLE>
8
<PAGE> 14
THE SPECIAL MEETING
This proxy statement is being furnished to shareholders of Percon as part
of the solicitation of proxies by the Percon board of directors for use at a
special meeting of shareholders to be held on January 17, 2000 at 9:00 a.m.
local time, at the Company's facilities at 1800 Millrace Drive, Eugene, Oregon.
This proxy statement and the enclosed proxy card are first being mailed to the
shareholders of Percon on or about December 16, 1999.
The purpose of the special meeting is to consider and vote on a proposal to
approve the merger agreement, including the plan of merger.
A proxy card for use at the special meeting accompanies each copy of this
proxy statement mailed to holders of Percon common stock.
As of December 13, 1999, directors and executive officers of Percon and
their affiliates beneficially owned approximately 1,817,700 shares of Percon
common stock, or approximately 43% of the shares of Percon common stock
outstanding on that date.
RECOMMENDATION OF THE BOARD
The Percon board of directors has unanimously adopted the merger agreement
and approved the merger. The Percon board of directors believes the transactions
the merger agreement contemplates are advisable and in the best interests of the
shareholders of Percon. Accordingly, the Percon board unanimously recommends
that the shareholders of Percon VOTE "FOR" approval of the merger agreement. In
making its determination to approve the merger, the Percon board considered,
among other things, the opinion of McDonald Investments that as of the date of
the merger agreement and, subject to and based on the considerations in its
opinion, the merger consideration was fair from a financial point of view to
Percon shareholders. See "The Merger -- Reasons for the merger."
VOTES REQUIRED FOR APPROVAL OF THE MERGER AGREEMENT
The affirmative vote of the holders of a majority of the shares of Percon
common stock outstanding on the record date is required to approve the merger.
Each holder of Percon common stock on the record date is entitled to one vote
per share held by him or her on the proposal to approve the merger agreement.
Simultaneously with the execution of the merger agreement, each of Michael
P. Coughlin, Andy J. Storment, Arlen I. Prentice and entities controlled by each
of them, who together own approximately 42% of the shares of Percon common stock
outstanding on the record date, entered into voting agreements with PSC. Under
the voting agreements, the shareholders agreed, among other things, to vote
their shares of Percon common stock in favor of the merger and the approval and
adoption of the merger agreement.
Only holders of record of Percon common stock at the close of business on
the record date will be entitled to receive notice of and vote at the special
meeting. As of the record date, 4,019,111 shares of Percon common stock were
outstanding. Holders of a majority of the outstanding shares of Percon common
stock entitled to vote, present in person or represented by proxy, will
constitute a quorum for the transaction of business at the special meeting.
A list of Percon shareholders entitled to vote at the Percon special
meeting will be available for inspection during normal business hours at the
corporate offices of Percon, 1800 Millrace Drive, Eugene, Oregon 97403.
9
<PAGE> 15
VOTING OF PROXIES
To submit a proxy, holders of shares of Percon common stock should
complete, sign, date and mail the enclosed proxy card in accordance with the
instructions set forth on the card.
All shares of Percon common stock represented at the special meeting by
properly executed proxy cards received before or at the special meeting, unless
those proxy cards previously have been revoked, will be voted at the special
meeting in the manner specified on the proxy card. Signed proxy cards that do
not contain voting instructions will be voted "FOR" the merger.
If a signed proxy card is returned and the shareholder has explicitly
abstained from voting on the merger, the shares represented by the proxy will be
considered present at the special meeting for purposes of determining whether a
quorum exists, but will not count as votes cast in favor of the merger and,
therefore, will have the same effect as a vote against the merger. Likewise,
broker non-votes will be counted for purposes of determining whether a quorum
exists at the special meeting but will not count as votes cast in favor of the
merger and, therefore, will have the same effect as a vote against the merger.
If the special meeting is adjourned for any reason, the approval of the
merger may be considered and voted upon by shareholders at the reconvened
meeting. All proxies will be voted in the same manner as they would have been
voted at the original meeting, except for any proxies that have been properly
withdrawn or revoked.
HOW TO REVOKE A PROXY
A proxy may be revoked by
- delivering to the Secretary of Percon, before the vote at the special
meeting, a written notice of revocation dated after the date of the proxy
card,
- signing a later proxy relating to the same shares and delivering it to
the Secretary of Percon before the vote at the special meeting, or
- attending the special meeting and voting in person, although merely
attending the special meeting will not revoke your proxy.
All written notices of revocation and other communications about revocation
of proxies should be addressed to Percon, 1800 Millrace Drive, Eugene, Oregon
97403, Attention: Mr. Andy J. Storment, Secretary, or hand delivered to the
Secretary before the vote at the special meeting.
SOLICITATION OF PROXIES
Percon will bear the cost of soliciting proxies. In addition to
solicitation by mail, our directors, officers and employees may solicit proxies
from holders of Percon common stock by telephone, in person or through other
means. We will not compensate these people for this solicitation, but we will
reimburse them for reasonable out-of-pocket expenses they incur in connection
with this solicitation. We will also arrange for brokerage firms, fiduciaries
and other custodians to send solicitation materials to the beneficial owners of
shares held of record by those persons. We will reimburse these brokerage firms,
fiduciaries and other custodians for reasonable out-of-pocket expenses they
incur in that connection. Allen Nelson & Company, Incorporated, our proxy
solicitor, will assist in the solicitation of proxies for a fee of $1,500, plus
reimbursement of reasonable out-of-pocket expenses. We will indemnify our proxy
solicitor against specific liabilities and expenses, including liabilities and
expenses under the federal securities laws.
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THE COMPANIES
PERCON
Percon was incorporated under Washington law in 1990 to acquire
substantially all the assets of a predecessor company that was formed in 1983.
Percon develops, assembles and markets data collection hardware and data
management software products. Percon's principal executive offices are located
at 1800 Millrace Drive, Eugene, Oregon 97403, and its telephone number is (541)
344-1189.
PSC
PSC, a New York corporation, designs, manufactures and markets a broad line
of laser and non-laser based handheld and fixed position bar code scanners, bar
code engines, verifiers, integrated sortation and point-of-sale scanning and
automated dimensioning systems for the worldwide automatic identification and
data capture market. PSC's principal executive offices are located at 675 Basket
Road, Webster, New York, and its telephone number is (716) 265-1600.
PSC MERGER SUBSIDIARY
West Acquisition Corp. is a Washington corporation and a wholly owned
subsidiary of PSC. West was organized solely for the purpose of entering into
the merger agreement with Percon and completing the merger and has not conducted
any business operations.
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THE MERGER
BACKGROUND OF THE MERGER
In early March 1999, Percon held discussions with McDonald Investments,
Inc. to explore strategic alternatives for Percon. On March 16, 1999, the Percon
board of directors met and discussed Percon's business strategies and issues
surrounding "micro cap" companies in general and the need to provide value for
Percon's shareholders. The board suggested that management prepare a list of
strategic candidates for Percon. The board also directed management to explore
engaging an investment banking firm to review various alternatives for Percon.
In early April 1999, management asked McDonald Investments to prepare a
proposal to provide general financial advisory services to Percon. McDonald
prepared a proposal and reviewed this proposal individually with each of the
board members during the week of April 26, 1999. Among other things, the
proposal contained a history of Percon's financial performance and stock prices,
a list of key issues facing Percon, and a preliminary valuation of Percon.
On May 3, 1999, the Percon board of directors held a telephonic meeting
with McDonald and Percon's legal advisers to review McDonald's proposal. The
board also reviewed prospective strategic and financial combination candidates,
including PSC. The board recommended exploration of a possible transaction with
PSC and investigation of other possible candidates for a transaction. The board
also recommended delaying the engagement of McDonald Investments for financial
advisory services.
On May 5, 1999, Michael Coughlin, president and chief executive officer of
Percon, called Robert Strandberg, president and chief executive officer of PSC,
and discussed the possibility of engaging in a transaction with PSC. Mr.
Strandberg indicated PSC was interested in pursuing a potential transaction. Mr.
Coughlin suggested that PSC present a combination proposal for Percon's review.
On May 6, 1999, Mr. Coughlin held discussions with a private equity
investment firm to inquire about a possible transaction.
The Percon board of directors met on May 27, 1999 and discussed, among
other things, the status of discussions with PSC. Following this discussion, the
board directed Mr. Coughlin to continue pursuing discussions with PSC.
On June 8, 1999, Mr. Coughlin and Andy Storment, Percon's executive vice
president of business development, met with Mr. Strandberg to discuss the
possible purchase of Percon by PSC.
On June 9, 1999, Mr. Coughlin, Mr. Storment and Percon's legal advisers met
with the private equity investment firm to discuss a possible transaction. From
June 9 through June 18, 1999, Percon and the investment firm negotiated a
confidentiality agreement, which was signed on June 19, 1999. Following the
signing of the confidentiality agreement, Percon and the investment firm
commenced discussing due diligence matters, which continued over the next two
weeks. On July 1, 1999, the investment firm notified Percon that the investment
firm was prepared to enter into a going private transaction with Percon that
would value Percon's common stock at $10.00 per share subject to a satisfactory
due diligence review.
On June 28 and 29, 1999, PSC and Percon held meetings in Eugene, Oregon to
continue discussing a possible business transaction. Mr. Strandberg and other
representatives of PSC, and Mr. Coughlin, Mr. Storment and Arlen Prentice,
Percon's chairman, participated in these meetings. Because these meetings were
productive, the parties agreed to enter into confidentiality agreements to
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facilitate an exchange of more information. From June 29 through June 30, 1999,
the parties negotiated confidentiality agreements, which they signed as of July
1 and July 9, 1999, respectively.
From July 1 through July 20, 1999, PSC and Percon exchanged information and
discussed due diligence matters, internally reviewed the potential benefits of a
transaction and the possible structure of a transaction, and negotiated a term
sheet for a possible transaction.
On July 20, 1999, PSC and Percon signed a term sheet, which provided for a
merger of Percon with PSC or a subsidiary of PSC. The term sheet provided that,
in the proposed merger, each share of Percon common stock would be exchanged for
1.3 shares of PSC common stock. On July 20, 1999, the closing price per share of
PSC common stock was $9.875 and the closing price per share of Percon common
stock was $8.25. The term sheet also provided for a non-solicitation period
ending on September 18, 1999 and payment of a termination fee in certain
circumstances. The non-solicitation period and related terms subsequently were
extended through October 7, 1999. On July 21 and 22, 1999, representatives of
PSC conducted further due diligence at Percon's offices in Eugene, Oregon.
On August 4 and 5, 1999, PSC and Percon held meetings at the offices of
PSC's legal advisers to continue discussing due diligence matters and to
negotiate the terms of a merger agreement. Members of the management of PSC and
Percon, representatives of PSC's financial advisers and PSC's and Percon's
respective legal advisers participated in these meetings. At these meetings,
Percon suggested modifying the merger consideration proposed in the term sheet.
Rather than a fixed exchange ratio, Percon proposed that the exchange ratio be
adjustable and subject to possible collars. The parties also discussed the terms
of Mr. Coughlin's and Mr. Storment's relationship with PSC following the
proposed merger and whether there were any issues that would prevent the parties
from entering into a transaction.
The Percon board met on August 6, 1999 and was updated on the status of the
discussions between Percon and PSC regarding a possible business combination and
other pending strategic initiatives. After this meeting, the parties continued
discussing open issues, including the proposed merger consideration. On August
31, 1999, Mr. Strandberg, Mr. Coughlin and Mr. Storment discussed changing the
transaction from stock consideration to cash consideration for the sale.
On September 3, 1999, representatives of PSC proposed modifying the form of
the proposed transaction to guarantee Percon a $13 per share price based on a
variable exchange ratio for PSC stock. On September 9, 1999, PSC proposed that
in the merger each share of Percon common stock would be exchanged for a number
of shares equal to an amount calculated by dividing $13.00 by the average
closing sale price of PSC common stock for the preceding 30 trading days,
subject to specified adjustments and conditions.
On September 28, 1999, Mr. Coughlin and Mr. Storment met with Mr.
Strandberg in Portland, Oregon and informed Mr. Strandberg that Percon was not
willing to continue merger discussions under the proposed terms. Mr. Strandberg
indicated that PSC might be willing to consider merger consideration of $13.00
cash per share. On September 30, 1999, Mr. Strandberg notified Percon that PSC
would modify the form of the proposed merger consideration so that each share of
Percon common stock would be converted into the right to receive $13.00 cash
upon completion of the merger. On that date, the closing price per share of
Percon common stock was $9.75. During the week of October 4, 1999, the parties
renewed negotiations concerning a possible business combination.
On October 13, 1999, the Percon board met to discuss the modified terms of
the potential combination with PSC. The Percon board directed management to
proceed with negotiations with PSC.
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On November 4, 1999, Mr. Prentice informed Robert Ehrlich, PSC's chairman,
that Percon would not continue with the merger discussions unless the merger
consideration was increased to $15 cash per share.
On November 5, 1999, representatives of PSC proposed further modifying the
proposed merger agreement. Under the terms of this proposal, each share of
Percon common stock would be converted into the right to receive $15.00 cash
upon completion of the proposed merger. On that date, the closing price per
share of Percon common stock was $12.9375. Management of PSC and Percon and
their respective legal advisers continued negotiating the terms of the proposed
merger agreement and related agreements and providing additional due diligence
materials through November 9, 1999.
The Percon board of directors met on November 9, 1999. At the meeting
- Percon's legal advisers and management updated the Percon board on the
status of negotiations with PSC, including the proposed terms of Mr.
Coughlin's and Mr. Storment's arrangements with PSC following the
proposed merger, and informed the board that all substantive issues had
been resolved,
- Percon's legal advisers made a presentation to the Percon board regarding
the fiduciary duties of the Percon board,
- Percon's legal advisers reviewed with the Percon board the terms of the
proposed merger agreement with PSC and the regulatory filings and
approvals that would be required in connection with the proposed
transaction,
- McDonald Investments made a financial presentation to the Percon board
and
- McDonald Investments rendered its opinion to the effect that, as of that
date, the merger consideration was fair to Percon shareholders from a
financial point of view.
Afterwards, the Percon board by unanimous vote determined the merger was
fair to, and in the best interests of, Percon and its shareholders and
- unanimously approved the terms of the merger agreement and the
transactions contemplated by the merger agreement and
- authorized the execution of the merger agreement and recommended approval
by Percon shareholders at a special meeting to be held to vote on the
transaction.
On November 9, 1999, the closing price of Percon common stock was $14.1875
per share. Later that evening, all documentation, including the disclosure
schedules of Percon, were finalized to the satisfaction of the designated
officers, and all conditions with respect to the execution of the merger
agreement were satisfied. Late that night
- PSC and Percon executed and delivered the merger agreement and
- specified shareholders of Percon executed and delivered voting agreements
agreeing to vote their shares in favor of the merger.
On November 10, 1999, PSC and Percon publicly announced the signing of the
merger agreement.
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REASONS FOR THE MERGER
In arriving at its determination to approve the merger, the Percon board
considered the opportunity the merger would provide to secure a premium for
shareholders over recent market prices of Percon common stock. In comparing this
premium with the return on shareholder investment believed to be achievable
through future appreciation of Percon common stock if Percon remained an
independent company, the Percon board considered various factors affecting
Percon's future financial performance and prospects. These factors included:
- increasing consolidation in the industry and Percon's ability to compete
with larger companies with substantially greater resources and name
recognition than Percon,
- Percon's ability to continue to motivate value added resellers, or VARS,
and systems integrators to use and sell Percon products, and
- Percon's ability to continue to attract experienced and qualified
engineers and other personnel in a highly competitive marketplace.
In the course of its deliberations, the Percon board considered, among
other things:
- historical information concerning Percon's business, prospects, financial
performance and condition, operations, technology, management and
competitive position,
- current financial market conditions and historical market prices,
volatility and trading information with respect to Percon's common stock,
- the merger consideration to be received by the holders of shares of
Percon common stock in the merger and a comparison of comparable merger
transactions,
- the reputation and financial condition of PSC,
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants and the conditions to their
respective obligations, are reasonable,
- the fact that the merger agreement permits the Percon board to furnish
information to, or to engage in negotiations with, third parties and to
terminate the merger agreement, in each case only in response to an
unsolicited superior proposal in accordance with the terms described
below under "The Merger Agreement -- No solicitation of transactions" and
the belief of the Percon board that the payment by Percon of a
termination fee of $2 million plus up to $400,000 in out-of-pocket
expenses to PSC in the event of such a termination would not unreasonably
discourage third parties from making a superior proposal,
- the business and financial prospects of Percon as an independent company,
- the potential for other third parties to enter into strategic
relationships with or to acquire Percon if Percon did not enter into the
merger agreement,
- the fact that Percon contacted a private equity investment firm to
discuss a possible acquisition and that firm offered to enter into a
going private transaction that would value Percon at $10 per share,
- the possibility that the merger might not be consummated and the effect
of public announcement of the merger on (a) Percon's sales, operating
results and stock price and (b) Percon's ability to attract and retain
key management, marketing and technical personnel,
- the financial effect of the merger, and
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- the opinion of McDonald Investments that, as of November 9, 1999 and
subject to and based on the matters described in its opinion, the merger
consideration to be received by the holders of shares of Percon common
stock in the merger was fair from a financial point of view to the Percon
shareholders.
The Percon board concluded that the benefits of the merger outweigh any of the
potentially negative factors it considered.
The discussion above sets forth the material information and factors our
board considered in its consideration of the merger agreement. In view of the
wide variety of factors considered, the Percon board did not find it practicable
to, and did not, make specific assessments of, quantify or otherwise attempt to
assign relative weights to the specific factors considered in reaching its
determination. The determination to approve the merger was made after
consideration of all of the factors as a whole. In addition, individual members
of our board may have given different weights to different factors.
OPINION OF FINANCIAL ADVISOR
On October 18, 1999, Percon retained McDonald Investments Inc., a KeyCorp
company, to deliver an opinion to Percon's board of directors as to the
fairness, from a financial point of view, of the merger consideration to
Percon's shareholders. As set forth in its opinion, McDonald assumed and relied
on, without independent verification, the accuracy and completeness of the
information it reviewed for the purposes of its opinion. McDonald did not make
or obtain an independent evaluation or appraisal of Percon's assets or
liabilities. McDonald's engagement was limited to the rendering of the opinion
described below. Accordingly, it was not authorized to, and did not, solicit
from other parties indications of interest with respect to combining with or
acquiring Percon or any of its assets. McDonald was not involved in the
negotiation of the merger agreement or the determination of the amount of the
merger consideration.
Representatives of McDonald attended the November 9, 1999 meeting of the
Percon board at which the directors considered the merger proposal and approved
the merger agreement. At that meeting, representatives of McDonald made
presentations and reviewed various aspects of the merger, including the
financial terms and conditions of the merger. At that meeting, McDonald rendered
its oral opinion to the Percon board that, as of that date, the merger
consideration was fair, from a financial point of view, to the shareholders of
Percon. That opinion was subsequently confirmed in writing. McDonald's written
opinion is attached as APPENDIX B to this proxy statement and is incorporated by
reference in this proxy statement. We encourage you to read the opinion in its
entirety because it contains a full description of the procedures followed,
assumptions and qualifications made, matters considered and limitations
undertaken by McDonald.
MCDONALD'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF PERCON AND
ADDRESSES ONLY THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO THE PERCON
SHAREHOLDERS OF THE MERGER CONSIDERATION. THE OPINION WAS PROVIDED SOLELY FOR
THE INFORMATION OF THE BOARD OF DIRECTORS TO ASSIST IT IN ITS CONSIDERATION OF
THE TRANSACTION CONTEMPLATED BY THE MERGER AGREEMENT. THE OPINION DOES NOT
CONSTITUTE A RECOMMENDATION ABOUT HOW PERCON'S SHAREHOLDERS SHOULD VOTE ON THE
MERGER.
In connection with the opinion, McDonald reviewed a variety of materials,
including the following:
- The merger agreement, including the exhibits and schedules to the merger
agreement;
- Publicly available information about Percon, including its annual reports
to shareholders and Form 10-Ks for each of the last five fiscal years and
Percon's Form 10-Qs for the past two years;
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- Other internal information, primarily financial in nature, including
management's projections, concerning Percon's business and operations;
- Publicly available information about the trading of, and the trading
markets for, Percon's common stock;
- Publicly available information about some other companies that McDonald
believes to be comparable to Percon and the trading markets for those
companies' securities; and
- Publicly available information about the nature and terms of some other
transactions that McDonald considered relevant to its inquiry.
McDonald also held discussions with Percon's officers and employees about
the rationale for the merger and Percon's past and current business operations,
financial condition and future prospects. In preparing its opinion, McDonald
performed a variety of financial and comparative analyses and, together with
Percon, made assumptions about Percon's assets, financial conditions and other
matters, many of which are beyond Percon's control. McDonald's estimates of
value are based on these analyses. The valuation results determined from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, and are inherently uncertain.
The following paragraphs summarize the analyses that McDonald performed in
arriving at its opinion and these summaries have been reviewed by the board of
directors.
Comparable Merger and Acquisition Analysis. McDonald analyzed information
related to 15 selected acquisition transactions for which public information was
available. This analysis was conducted to determine relevant valuation multiples
for transactions considered similar to the proposed merger. No transaction used
as a comparison in this analysis is identical to the merger. McDonald identified
transactions of companies and industries similar to Percon and its industry,
including producers of barcode printers and readers, mobile computer systems,
label printers and printer ribbons, automated testing equipment and thermal
imaging camera systems. After review of transactions where financial information
was available, McDonald applied a range of the transactions' multiples to
Percon's latest 12 months sales and EBIT figures to derive a valuation for
Percon. A range of 0.9x to 1.1x latest twelve months sales and 8.0x to 10.0x
latest twelve months EBIT was used to calculate an implied value for Percon.
This methodology implied a valuation of between $10.84 and $13.68 per Percon
share, as compared to the merger consideration of $15.00 per share.
Selected Comparable Public Company Analysis. The comparable public company
analysis involves an analysis of publicly traded companies that McDonald
considered to be comparable to Percon in the areas of industry, operations,
performance and markets served. This analysis is predicated on the theory that
the market value of a company can be estimated by deriving market multiples from
publicly traded companies that relate their stock prices to their earnings, cash
flows or other measures. No company used as a comparison in this analysis is
identical to Percon.
After screening applicable standard industrial classification codes and
other relevant criteria, McDonald selected public companies that in its
estimation were reasonably similar in scope of operations to Percon. These
comparable companies included:
- Checkpoint Systems, Inc.,
- EMS Technologies, Inc.,
- Hypercom Corporation,
- Metrologic Instruments, Inc.,
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- PSC,
- Paxar Corporation,
- Symbol Technologies, Inc.,
- Telxon Corporation,
- WPI Group, Inc.,
- Zebra Technologies Corporation,
- Teklogix International, Inc., and
- Unova, Inc.
This group includes companies with market capitalizations of $16.0 million to
$3.6 billion.
The data and ratios McDonald compared included:
- enterprise value to latest twelve months sales;
- enterprise value to latest twelve months earnings before interest, taxes,
depreciation and appreciation, or EBITDA;
- enterprise value to latest twelve months earnings before interest and
taxes, or EBIT;
- equity market value to latest twelve months earnings per share;
- equity market value to estimated fiscal year 1999 earnings per share; and
- equity market value to estimated fiscal year 2000 earnings per share.
Enterprise value is defined as current stock price multiplied by shares
outstanding, plus debt and preferred securities, minus cash. Equity market value
is defined as current stock price multiplied by shares outstanding.
An analysis of enterprise value to latest twelve months sales yielded a
range of 0.5x to 3.4x with a mean, excluding the high and low, of 1.1x and a
median of 0.9x. An analysis of enterprise value to latest twelve months EBITDA
yielded a range of 3.6x to 17.9x with a mean, excluding the high and low, of
8.4x and a median of 7.8x. An analysis of enterprise value to latest twelve
months EBIT yielded a range of 5.4x to 25.4x with a mean, excluding the high and
low, of 13.2x and a median of 12.7x. An analysis of equity market value to
latest twelve months earnings per share yielded a range of 7.0x to 34.6x with a
mean, excluding the high and low, of 19.3x and a median of 16.9x. An analysis of
equity market value to estimated fiscal year 1999 earnings per share yielded a
range of 7.4x to 34.1x with a mean, excluding the high and low, of 17.4x and a
median of 15.6x. An analysis of equity market value to estimated fiscal year
2000 earnings per share yielded a range of 6.3x to 28.5x with a mean, excluding
the high and low, of 12.3x and a median of 10.8x. McDonald applied the valuation
multiples, using the comparable companies' mean, excluding the high and low, and
median multiples. This method, after appropriate premiums and discounts, implied
a valuation of between $12.37 and $15.00 per Percon share, as compared to the
merger consideration of $15.00 per share.
Discounted Cash Flow Analysis. McDonald performed a discounted cash flow
analysis to calculate Percon's implied present value per share based on
management's projections through December 31, 2004. Using this information,
McDonald calculated the free cash flows Percon could generate through December
31, 2004. McDonald also calculated an estimated terminal value of
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Percon at the end of year 2004 based on a 9.0x EBIT multiple. These future cash
flows and terminal value were discounted using discount rates ranging from 14.0%
to 18.0%. In deriving the range of discount rates, McDonald calculated a
weighted average cost of capital for Percon using the Capital Asset Pricing
Model. McDonald also reviewed management's projections and the assumptions on
which they were based and analyzed future cash flows that reflected management's
downside, base case and optimistic projections and the risks associated with the
achievement of these future cash flows. The sum of the present value of the free
cash flows and terminal values minus outstanding debt plus existing cash as of
September 30, 1999 yielded implied prices per share ranging from $13.94 per
share to $16.08 per share, as compared to the merger consideration of $15.00 per
share.
Inherent in any discounted cash flow valuation is the use of a number of
assumptions, including the accuracy of management's projections, and the
subjective determination of an appropriate terminal value and discount rate to
apply to the projected cash flows of the entity under examination. Variations in
any of these assumptions or judgments could significantly alter the results of a
discounted cash flow analysis.
Premium Analysis. McDonald reviewed publicly available information
concerning premiums paid in 21 publicly announced acquisition transactions
involving companies in the computer hardware, office equipment, electronics and
electrical equipment industries completed between October 1993 and July 1999.
McDonald analyzed the median premiums paid in these transactions over the market
price of the securities 30 days, five days and one day before the public
announcement of the proposed transaction. The median premiums represented by the
purchase prices paid in the acquisitions involving consideration of between $100
million and $250 million reviewed by McDonald were 48.0% at 30 days before
announcement, 41.9% at five days before announcement and 33.8% at one day before
announcement. For transactions involving consideration of less than $100
million, the median premiums represented by the purchase prices paid were 30.2%
at 30 days before announcement, 24.1% at five days before announcement and 18.0%
at one day before announcement. The merger consideration represents a premium of
56.9% over the market price of Percon's shares 30 days before the announcement,
17.6% over the market price of Percon's shares five days before announcement,
and 15.9% over the market price of Percon's shares one day before announcement.
Leveraged Buyout Analysis. McDonald analyzed a leveraged buyout transaction
to determine the price a typical leveraged buyer could afford to pay under
prevailing market conditions. For purposes of this analysis, McDonald used
management's financial projections for fiscal years 1999 through 2004 and
McDonald's judgment about capitalization. The analysis was based on the
following assumptions:
- market rates of interest on senior debt of 10.0% and subordinated debt of
13.0%;
- senior debt of approximately 4.0 times latest twelve months EBITDA;
- expected internal rates of return of approximately 35% to 40% or greater
for equity investors; and
- expected internal rates of return of approximately 18.0% to 21.0% for
subordinated debt investors.
This methodology implied a valuation of between $10.90 and $12.00 per
share, as compared to the $15.00 per share merger consideration.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary, without considering the whole
analysis, could create an incomplete view of the processes underlying the
opinion. In arriving at its fairness determination, McDonald considered the
results of all of these
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analyses and did not attribute particular weight to any analysis or factor
considered by it. Rather, McDonald made its determination about the fairness on
the basis of its experience and professional judgment after considering the
results of all of the analyses.
No company or transaction used in the above analyses as a comparison is
identical to Percon or the contemplated transaction. The analyses were prepared
solely for the purposes of McDonald providing its opinion to the board of
directors about the fairness of the merger consideration, from a financial point
of view, to Percon's shareholders. As such, these analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based on forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently uncertain, being based on numerous factors or events beyond the
control of the parties or their respective advisors, neither Percon nor McDonald
nor any other person assumes responsibility if future results are materially
different from those forecasted. The opinion was one of many factors taken into
consideration by the board of directors in making its determination to adopt the
merger agreement.
McDonald, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Percon selected McDonald as
its financial advisor because McDonald is a nationally recognized investment
banking firm that has substantial experience in transactions similar to the
merger.
McDonald provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities of Percon or PSC
for its own account or for the accounts of customers.
Percon is a party to a business loan agreement with Key Bank of Oregon, an
affiliate of McDonald Investments Inc. That agreement permits Percon to borrow
up to 80% of eligible accounts receivable and 25% of eligible inventory, as
defined in the loan agreement, to a maximum of $1.0 million. Outstanding
principal amounts under the loan agreement bear interest at the bank's prime
rate.
Under a letter agreement dated October 8, 1999, Percon's board of directors
engaged McDonald to undertake a study to enable it to render its opinion to
Percon's board of directors about the fairness, from a financial point of view,
of the consideration to be received by Percon's shareholders under the merger
agreement. As consideration for its services, Percon agreed to pay McDonald a
fee of $200,000, which was to be paid at the time McDonald rendered its opinion.
Percon also has agreed to indemnify McDonald against some expenses and
liabilities, including liabilities under the federal securities laws, connected
with or resulting from services performed by McDonald as financial advisor to
Percon.
INTERESTS OF MEMBERS OF THE PERCON BOARD OF DIRECTORS AND MANAGEMENT IN THE
MERGER
When you consider the recommendations of our board of directors, you should
be aware that the officers and directors of Percon may have interests in the
merger that are different from, or in addition to, your interests. These
interests may create potential conflicts of interest. Our board of directors was
aware of these interests when it approved the merger.
Employment agreements. Percon has entered into employment agreements with
five of its officers. With respect to the agreements, with three of these
officers, generally if any of these officers is terminated, suffers a material
reduction in the officer's pay, benefits, duties or responsibilities, or is
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required to relocate within two years after completion of the merger, the
officer will receive a severance payment equal to six months of salary, and all
options to purchase Percon common stock held by the officer will become
immediately exercisable.
Conversion of unexercisable options. Upon completion of the merger, each
outstanding option to purchase Percon common stock, to the extent the option is
exercisable immediately before the completion of the merger, will represent the
right to receive, upon completion of the merger, an amount in cash equal to the
positive difference, if any, between the per share merger consideration and the
exercise price of the option multiplied by the number of shares for which the
option was exercisable immediately before completion of the merger. Furthermore,
upon completion of the merger, each outstanding option to purchase Percon common
stock, to the extent the option is not exercisable immediately before the
completion of the merger and subject to various other conditions, including
continued employment with the surviving corporation or an affiliate, will
represent the right to receive, from time to time after the option otherwise
would have become exercisable, an amount in cash equal to the positive
difference, if any, between the per share merger consideration and the exercise
price of the option multiplied by the number of shares for which the option
would have otherwise become exercisable following completion of the merger.
The following table indicates the options held by the executive officers
and directors of Percon that will convert into the right to receive cash as
described in the immediately preceding paragraph:
<TABLE>
<CAPTION>
APPROXIMATE SPREAD APPROXIMATE SPREAD
VALUE OF VALUE OF
EXERCISABLE UNEXERCISABLE
OPTIONS(1) OPTIONS (1)
------------------ ------------------
<S> <C> <C>
Michael P. Coughlin.......................... $136,395 $105,030
Andy J. Storment............................. 136,395 63,100
J. Brad West................................. 44,000 42,250
Arlen I. Prentice............................ 208,750 0
Donald K. Skinner............................ 208,750 0
Dana E. Siebert.............................. 71,250 0
Five remaining executive officers as a
group...................................... 107,437 374,675
</TABLE>
- -------------------------
(1) The amounts in this column have been determined by multiplying (a) the
number of shares of Percon common stock subject to the respective options by
(b) the excess of $15.00 over the exercise price of each option.
Indemnification of directors and officers. Following the merger, PSC will
indemnify each present and former director and officer of Percon from
liabilities incurred in connection with any claims or proceedings arising at or
before the completion of the merger to the fullest extent provided under
Washington law and Percon's articles of incorporation and bylaws.
Directors' and officers' insurance. For six years after the completion of
the merger, the surviving corporation of the merger will maintain Percon's
existing policy of directors' and officers' liability insurance for acts and
omissions occurring before the merger. If the existing directors' and officers'
liability insurance expires or terminates, the surviving corporation must obtain
directors' and officers' liability insurance of at least the same coverage and
amounts for the remainder of the six-year period.
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<PAGE> 27
Noncompetition Agreements. As a condition to completing the merger, Michael
P. Coughlin, Andy J. Storment and Arlen I. Prentice each must execute a
noncompetition agreement with PSC. Under the agreement, Messrs. Coughlin,
Storment and Prentice will agree that, for a period of two years after the
completion of the merger, they will not
- engage in any business that competes with the businesses of Percon and
PSC at the time the noncompetition agreement becomes effective;
- own or control any entity engaged in, or planning to engage in, the
businesses of Percon and PSC at the time the noncompetition agreement
becomes effective;
- assist or engage in any business transaction, other than transactions
entered into on an arm's-length basis, with any entity engaged in, or
planning to engage in, the businesses of Percon and PSC at the time the
noncompetition agreement becomes effective; or
- engage in any transactions that would result in an evasion of these
agreements.
Messrs Coughlin, Storment and Prentice have also agreed
- not to disclose any of Percon's confidential information without PSC's
consent;
- to comply with PSC's policies regulating the nondisclosure of
confidential information; and
- to exercise due care in safeguarding Percon's confidential information
from disclosure.
Nor will Messrs Coughlin, Storment and Prentice solicit, on behalf of any entity
engaged in, or planning to engage in, the businesses of Percon and PSC at the
time the noncompetition agreement becomes effective, any of Percon's customers
for two years after completion of the merger. Finally, Messrs Coughlin, Storment
and Prentice have agreed, for a period of two years following the completion of
the merger, not to employ an employee of Percon or its affiliates, or a person
who has been an employee of Percon or its affiliates during the year preceding
and the year following the completion of the merger. They have also agreed not
to induce these people to leave their employment with Percon or its affiliates.
In return for these agreements, Mr. Coughlin will receive $31,250 per calendar
quarter over the eight calendar quarters during which the noncompetition
agreement is in effect and Mr. Storment will receive $18,750 per calendar
quarter.
Consulting Agreement. As a condition to completing the merger, Michael P.
Coughlin must execute a consulting agreement with PSC. Under the consulting
agreement, Mr. Coughlin will agree to provide up to 120 hours a month of
consulting services to PSC upon the request of PSC's chief executive officer.
Mr. Coughlin will provide these consulting services for one year after the
consulting agreement becomes effective. In return for his services, Mr. Coughlin
will receive $200 for each hour Mr. Coughlin provides consulting services and
for reasonable travel time for trips outside of Eugene, Oregon. In addition, he
will be reimbursed for travel and other business expenses that he incurs in
fulfilling his duties under the consulting agreement. Mr. Coughlin will also
receive during the term of the consulting agreement the same health and medical
benefits that senior executives of PSC receive. His options to purchase Percon
common stock will also continue to vest during the term of the agreement. The
agreement contains confidentiality, noncompetition and nonsolicitation terms
similar to the terms described above under "-- Noncompetition Agreements." PSC
will be able to terminate the agreement at any time if it gives 90 days written
notice. Mr. Coughlin will be able to terminate after six months after the
effective date of the agreement if he gives 90 days written notice. PSC will be
able to terminate Mr. Coughlin at any time if he
- fails to perform his duties as reasonably requested;
- is grossly negligent in performing his duties;
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<PAGE> 28
- commits acts involving dishonesty, wilful misconduct, breach of fiduciary
duty, fraud or other similar offenses;
- is convicted of a felony; or
- willfully causes PSC or any of its affiliates to violate a material law.
On termination, Mr. Coughlin will be entitled to any payments due to him as of
the date of termination.
Employment Agreement. As a condition to completing the merger, Andy J.
Storment must execute an employment agreement with PSC. Under the agreement, Mr.
Storment will become a senior vice president of PSC for a term that will end on
December 31, 2001. Mr. Storment will receive a salary of $200,000 a year and
will be eligible to receive a yearly bonus based on gross profit for each year
during the term of the agreement. Mr. Storment will also receive the same
health, medical and dental benefits that other executive officers of PSC
receive, be eligible to participate in PSC's 401(k) plan and receive an
automobile allowance. After one year of employment, Mr. Storment will be
eligible to participate in PSC's stock option plan. He will also be reimbursed
for travel and other business related expenses that he incurs in performing his
duties under the employment agreement. The agreement contains confidentiality,
noncompetition and nonsolicitation terms similar to the terms described above
under "-- Noncompetition Agreements." If PSC terminates Mr. Storment's
employment without cause, or Mr. Storment terminates his employment under
circumstances specified in the agreement, Mr. Storment will be entitled to
receive
- his base salary until the end of the agreement's term or until the first
anniversary of his termination, whichever is later;
- reimbursement for all expenses incurred by Mr. Storment before the
termination date;
- the pro rata amount of Mr. Storment's annual bonus for the year of
termination based on the number of days worked by Mr. Storment during
that year;
- medical and other benefits until the end of the agreement's term or until
the first anniversary of his termination, whichever is later; and
- all other payments due to Mr. Storment under the terms of the agreement.
PSC will have cause to terminate Mr. Storment if he
- fails to perform his duties as reasonably requested;
- is grossly negligent in performing his duties;
- commits acts involving dishonesty, wilful misconduct, breach of fiduciary
duty, fraud or other similar offenses;
- is convicted of a felony; or
- wilfully causes PSC or any of its affiliates to violate a material law.
If PSC terminates Mr. Storment for cause, or Mr. Storment resigns for reasons
other than as specified in the agreement, Mr. Storment will be entitled to
salary and reimbursement for expenses due to him as of the date of termination.
Mr. Storment and PSC will enter into a change-in-control agreement at the same
time they enter into the employment agreement.
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<PAGE> 29
ACCOUNTING TREATMENT
The merger will be treated as a purchase for accounting purposes.
U.S. FEDERAL INCOME TAX CONSEQUENCES
This section discusses the material United States federal income tax
consequences pursuant to the merger to Percon shareholders, including
shareholders whose shares of Percon common stock are surrendered in the merger
in exchange for the right to receive cash consideration of $15 per share and
shareholders receiving cash as a result of perfecting their dissenters' rights.
The discussion below applies only to Percon shareholders that hold Percon common
stock as capital assets at the time of the merger, and the discussion may not
apply to shareholders that are subject to special tax rules, such as financial
institutions, insurance companies, dealers in securities, persons that
mark-to-market their securities, persons that hold common stock as part of a
"straddle," "hedge" or "synthetic security transaction," including a
"conversion" transaction, persons with a "functional currency" other than the
U.S. dollar, retirement plans and tax-exempt organizations, shareholders who
acquired Percon common stock pursuant to the exercise of stock options, pursuant
to participation in an employee stock purchase plan or otherwise as
compensation, or shareholders that are nonresident alien individuals, foreign
corporations, foreign partnerships, foreign trusts or foreign estates. The
discussion below is based upon federal income tax laws as now in effect and
interpreted and does not take into account possible changes in these tax laws or
interpretations, any of which may be applied retroactively. The discussion does
not include any description of the tax laws of any state, local or foreign
government that may be applicable to Percon shareholders.
THIS SECTION DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO A PARTICULAR PERCON SHAREHOLDER IN LIGHT OF THE SHAREHOLDER'S
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH SHAREHOLDER SHOULD
CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS OR CHANGES TO THOSE LAWS.
For federal income tax purposes, a Percon shareholder generally will
recognize capital gain or capital loss equal to the difference between the cash
received by the shareholder pursuant to the merger and the shareholder's
adjusted tax basis in the shares of Percon common stock surrendered pursuant to
the merger. If at the time of the merger a noncorporate shareholder's holding
period for the shares of Percon common stock is more than one year, any gain or
loss recognized generally will be long term capital gain or loss. Net long term
capital gains are subject to federal income tax at a maximum stated rate of 20%.
If a shareholder's holding period for the shares of common stock is one year or
less at the time of the merger, any gain or loss recognized generally will be
short term capital gain or loss. Net short term capital gains are subject to
federal income tax at the same rate as ordinary income. For noncorporate
shareholders, any amount of capital losses in excess of capital gains in any
taxable year generally are deductible against ordinary income only to the extent
of $3,000, or $1,500 in the case of a married individual filing a separate
return, and any net capital loss in excess of $3,000, or $1,500 in the case of a
married individual filing a separate return, may be carried forward to
subsequent taxable years.
For corporations, net capital gains are taxed at the same rate as ordinary
income, and capital losses in excess of capital gains are not deductible.
Corporations, however, generally may carry back capital losses up to three
taxable years and carry forward capital losses up to five taxable years.
The cash received by Percon shareholders pursuant to the merger may be
subject to backup withholding at a 31% rate. Backup withholding generally will
apply only if the shareholder fails to furnish a correct social security number
or other taxpayer identification number or otherwise fails to comply with
applicable backup withholding rules and certification requirements. Corporations
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<PAGE> 30
generally are exempt from backup withholding. Any amounts withheld under the
backup withholding rules will be treated as a federal income tax payment and may
entitle the shareholder to a refund, provided the shareholder timely furnishes
specified required information to the Internal Revenue Service.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act, the Antitrust
Division of the U.S. Department of Justice and the U.S. Federal Trade Commission
must review transactions such as the merger. The merger may also be reviewed by
state antitrust authorities. The government agencies conducting these reviews
determine whether there is reason for them to believe the merger violates
antitrust laws. The Hart-Scott-Rodino Antitrust Improvements Act requires Percon
and PSC to notify these federal agencies of the merger. Percon and PSC filed the
notification reports with the Antitrust Division and the Federal Trade
Commission on December 6, 1999 and the waiting period with respect to these
filings is expected to expire on January 5, 2000.
At any time before or after the merger becomes effective, the Antitrust
Division, the Federal Trade Commission, state antitrust authorities or a private
person or entity could seek to enjoin the merger or to cause Percon or PSC to
divest various assets. Under the merger agreement, the obligation of Percon and
PSC to complete the merger is conditioned on
- the termination or expiration of the waiting periods, and
- the absence of any injunction against the merger on antitrust or other
grounds.
Other than the matters described in this document, we are not aware of any
significant government or regulatory approvals that we need to obtain, or
waiting periods with which we need to comply, to complete the merger. If we
discover that other approvals or waiting periods are required, we will seek to
obtain or comply with them. If any approval or action is needed, however, we may
not be able to obtain it. Even if we could obtain the approval, conditions may
be placed on it that would cause us to abandon the merger.
DISSENTERS' RIGHTS
Under the Washington Business Corporation Act, holders of Percon common
stock have the right to dissent from the merger and to receive payment in cash
of the fair value of their shares of Percon common stock instead of the $15.00
per share merger price. To preserve their rights, shareholders who wish to
exercise their statutory dissenters' rights must
(1) deliver to Percon before the special meeting written notice of
their intent to demand payment for their shares of Percon common
stock if the merger is effected; and
(2) not vote their shares in favor of the merger.
Chapter 13 of the Washington Business Corporation Act is reprinted in
APPENDIX C to this proxy statement. The following discussion is a summary of the
law relating to dissenters' rights, and we encourage you to read Chapter 13 of
the WBCA in APPENDIX C because it contains the legal terms that govern
dissenters' rights. This discussion and APPENDIX C should be reviewed carefully
by any shareholder who wishes to exercise statutory dissenters' rights, or who
wishes to preserve the right to do so, as failure to comply with the procedures
set forth in Chapter 13 of the WBCA will result in the loss of dissenters'
rights.
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<PAGE> 31
A shareholder who wishes to exercise dissenters' rights generally must
dissent with respect to all the shares the shareholder owns or over which the
shareholder has power to direct the vote. However, if a record shareholder is a
nominee for several beneficial shareholders, some of whom wish to dissent and
some of whom do not, then the record shareholder may dissent with respect to all
the shares beneficially owned by any one person by notifying Percon in writing
of the name and address of each person on whose behalf the record shareholder
asserts dissenters' rights. A beneficial shareholder may assert dissenters'
rights directly by submitting to Percon the record shareholder's written consent
to the dissent and by dissenting with respect to all the shares of which the
shareholder is the beneficial shareholder or over which the shareholder has
power to direct the vote.
A shareholder who does not deliver to Percon before the vote being taken at
the special meeting a written notice of the shareholder's intent to demand
payment for the fair value of the shares will lose the right to exercise
dissenters' rights. Notice must be sent to Percon Incorporated, 1800 Millrace
Drive, Eugene, Oregon 97403, Attention: Andy J. Storment, Secretary. In
addition, any shareholder electing to exercise dissenters' rights must not vote
in favor of the merger.
If the merger is effected, Percon will, within 10 days after the effective
time of the merger, deliver a written notice to all shareholders who properly
perfected their dissenters' rights. This notice will, among other things,
(1) state where the payment demand must be sent and where and when
certificates must be deposited;
(2) supply a form for demanding payment, which requires shareholders
to certify as to whether they acquired beneficial ownership of the
shares before the date on which the merger was first announced;
and
(3) set a date by which Percon must receive the payment demand, which
date will be between 30 and 60 days after Percon delivers the
notice to dissenting shareholders.
A shareholder wishing to exercise dissenters' rights must file the payment
demand, certify that beneficial ownership of the shares was acquired before the
merger was announced and deliver share certificates, in the manner and by the
time set forth in the notice. Failure to do so will cause the shareholder to
lose his or her dissenters' rights.
Within 30 days after the later of the effective time of the merger and the
date the payment demand is received by Percon, Percon shall pay each dissenter
with properly perfected dissenters' rights Percon's estimate of the fair value
of the shareholder's shares, plus accrued interest from the effective time of
the merger. Percon will provide, along with such payment,
- specified financial information about Percon, including Percon's balance
sheet, income statement and statement of changes in shareholders' equity
for or as of a fiscal year ending not more than 16 months before the date
of payment and our latest available interim financial statements, if any;
- an explanation of how Percon estimated the fair value of the shares;
- an explanation of how the accrued interest was calculated; and
- other specified information.
With respect to a dissenter who did not beneficially own Percon shares before
the public announcement of the merger, Percon is required to send an offer to
make payment to the dissenter, conditioned upon the dissenter's agreement to
accept the payment in full satisfaction of the dissenter's demands.
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<PAGE> 32
A dissenter dissatisfied with Percon's estimate of the fair value may,
within 30 days of payment or offer for payment by Percon of Percon's estimate of
the fair value of the shareholder's shares, notify Percon in writing of the
shareholder's estimate of fair value of his or her shares and the amount of
interest due, and demand payment of those amounts. If Percon does not accept the
dissenter's estimate and the parties do not otherwise settle on a fair value,
the Washington Business Corporation Act requires that the corporation commence a
proceeding within 60 days after receiving the payment demand in King County
Superior Court, and petition the court to determine the fair value of the shares
and accrued interest, naming all the Percon dissenting shareholders whose
demands remain unsettled as parties to the proceeding. The court may appoint one
or more appraisers to receive evidence and recommend the fair value of the
Percon shares. The dissenters will be entitled to the same discovery rights as
parties in other civil actions. Each dissenter made a party to the proceeding
will be entitled to judgment for the amount, if any, by which the court finds
the fair value of his or her shares, plus accrued interest, exceeds the amount,
if any, previously paid to the dissenter by Percon. Shareholders should
recognize that such a determination of fair value could result in a price higher
than, lower than or equal to the price available to Percon shareholders pursuant
to the merger.
Court costs and appraisers' fees will be assessed against Percon, except
that the court may assess these costs against some or all of the dissenters to
the extent that the court finds the dissenters acted arbitrarily, vexatiously or
not in good faith in demanding payment. The court may also assess the fees and
expenses of counsel and experts of the respective parties in amounts that the
court finds equitable
(1) against Percon, if the court finds that Percon did not
substantially comply with provisions of the WBCA concerning
dissenters' rights and
(2) against either the dissenter or Percon, if the court finds that
the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith.
If the court finds that services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
should not be assessed against Percon, the court may award to that counsel
reasonable fees to be paid out of the amounts awarded to all dissenters who
benefitted from the proceedings.
A shareholder entitled to dissent and obtain payment for the shareholder's
shares of Percon common stock under Chapter 13 of the Washington Business
Corporation Act may not challenge the merger unless Percon fails to comply with
the procedural requirements imposed by the WBCA, the Percon articles of
incorporation or the Percon bylaws or the merger is fraudulent with respect to
the shareholder or Percon.
Percon shareholders who dissent from the merger will generally recognize
taxable gain or loss for federal income tax purposes. See "-- U.S. Federal
Income Tax Consequences."
In view of the complexity of Chapter 13 of the Washington Business
Corporation Act, Percon shareholders who may wish to dissent from the merger and
pursue dissenters' rights should consult their legal advisors.
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<PAGE> 33
THE MERGER AGREEMENT
This is a summary of the material provisions of the merger agreement, a
copy of which is attached as APPENDIX A to this proxy statement. You should
refer to the full text of the merger agreement for details of the merger and the
terms and conditions of the merger agreement.
THE MERGER
When the merger occurs, West Acquisition Corp., a wholly owned subsidiary
of PSC, will be merged with and into Percon. Percon will survive the merger as a
wholly owned subsidiary of PSC.
In the merger, each share of Percon common stock outstanding immediately
before the merger will be converted into the right to receive $15 in cash,
without interest. At that time, all shares of Percon common stock will be
canceled and will cease to exist. Each holder of a certificate representing any
shares of Percon common stock will no longer have any rights with respect to the
shares of Percon common stock, except for the right to receive the merger
consideration. Each share of Percon common stock held by Percon as treasury
stock, PSC or West Acquisition Corp. at the time of the merger will be canceled
and will cease to exist without any payment.
EFFECTIVE TIME OF THE MERGER
The completion of the merger will take place no later than the second
business day following the date of Percon's special meeting of shareholders or,
if later, the expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act, unless Percon and PSC mutually
agree to another date or any other conditions to the merger have not been
fulfilled or waived. If any of the conditions to the merger has not been
fulfilled or waived, either Percon or PSC may postpone the completion of the
merger to a later business day that is within 10 business days after the
original date set for completing the merger. Percon and PSC will cause articles
of merger, which will include the plan of merger, to be filed with the Secretary
of State of the state of Washington either on the date of the closing of the
merger or on the day following the closing. At that time, or at any later time
that is set forth in the articles of merger, the merger will become effective.
TREATMENT OF STOCK OPTIONS
Under the terms of Percon's stock incentive plan, the board of directors
may provide a period of at least 30 days before the completion of the merger
during which outstanding options may be exercised to the extent exercisable. On
the expiration of that 30 day period, all options under the plan will terminate.
The merger agreement provides that Percon will provide for the 30 day
period described above. On the expiration of that period, all Percon options
will terminate. At the effective time of the merger, each option holder who had
exercisable options at the expiration of the 30 day period shall have the right
to receive a cash payment equal to
(1) the positive difference between $15 and the exercise price of the
terminated option multiplied by
(2) the number of shares for which the option was exercisable
immediately before the expiration of the 30 day period.
Percon is required to pay this amount, minus any applicable withholding taxes,
as soon as practicable after the effective time of the merger.
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<PAGE> 34
If an option holder executes a confidentiality, inventions and
noncompetition agreement with PSC within five business days after it is
presented to the option holder, when options held immediately prior to the 30
day period would have become exercisable in accordance with their terms, the
option holder will also have the right to receive
(1) the positive difference between $15 and the exercise price of the
terminated option multiplied by
(2) the number of shares for which the option would have become
exercisable.
Percon is required to pay this amount, minus any applicable withholding taxes,
as soon as practicable after the date on which the option would have become
exercisable. As would be required by the option, the option holder must continue
his employment to receive this payment.
PAYMENT FOR SHARES
Before the merger, West Acquisition Corp. will appoint a bank, company or
other entity that is mutually acceptable to Percon and PSC to act as paying
agent for the payment of the merger consideration. PSC will make available to
the paying agent funds necessary to make such payments.
After the merger, the paying agent will mail a letter of transmittal and
instructions for the surrender of Percon stock certificates to the paying agent
to each person who held shares of Percon common stock at the time of the merger.
The holder should use this letter of transmittal in sending Percon stock
certificates to the paying agent. After surrendering to the paying agent for
cancellation a Percon stock certificate together with a properly completed
letter of transmittal, the holder of the Percon stock certificate will be
entitled to receive a cash payment in an amount equal to the product of the
number of shares represented by such stock certificate and the merger
consideration of $15. Each surrendered share will be canceled.
If a transfer of ownership of Percon common stock is not registered in
Percon's stock transfer books, payment of the merger consideration may be made
to a person other than the person in whose name the certificate so surrendered
is registered if:
- the certificate is properly endorsed or otherwise in proper form for
transfer and
- the person requesting the payment pays any transfer or other taxes
resulting from the payment of the merger consideration to a person other
than the registered holder of that certificate or establishes to the
surviving corporation that the taxes have been paid or are not
applicable.
PERCON SHAREHOLDERS SHOULD NOT SEND IN THEIR PERCON STOCK CERTIFICATES
UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
All cash paid upon the surrender of certificates of Percon common stock in
accordance with the merger agreement will be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Percon common stock.
After the merger, no transfers of shares of Percon common stock that were
outstanding immediately before the merger will be made on the transfer books of
Percon.
If your Percon stock certificate has been lost, stolen or destroyed, you
will be entitled to obtain payment only by signing an affidavit and, if required
by the surviving corporation, posting a bond in an amount sufficient to protect
the surviving corporation against claims related to your Percon stock
certificate.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties by
us relating to
- our corporate organization and the corporate organization of our
subsidiaries and similar corporate matters,
- our capital structure and the share ownership of our subsidiaries,
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters,
- required consents, approvals and authorizations relating to the merger
agreement and related matters,
- the absence of any violation of, or conflict with, any applicable laws or
orders, our articles of incorporation or bylaws or any contract to which
we are a party as a result of entering into, and required consents,
approvals and authorizations relating to, the merger agreement and
related matters,
- the accuracy of our reports and financial statements filed with the SEC,
- tax matters,
- the absence of material changes to our business or material events since
December 31, 1998,
- the absence of any undisclosed liabilities,
- litigation in which we are involved,
- our compliance with environmental laws,
- title to real and personal property we own and lease,
- insurance matters,
- our contracts,
- intellectual property we own and lease and software protection matters,
- our labor relations,
- our compliance with the Employment Retirement Income Security Act of
1974,
- our employment compensation,
- board of directors approval and recommendation of the merger agreement,
- the accuracy of this proxy statement,
- brokers and finders fees relating to the merger,
- the accuracy of our disclosures in certificates and schedules,
- the delivery of a fairness opinion by our financial advisor and
- our year 2000 compliance.
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The merger agreement also contains customary representations and warranties
by PSC relating to
- PSC's corporate organization, the corporate organization of West
Acquisition Corp. and similar corporate matters,
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters with respect to PSC and West,
- the absence of any violation of, or conflict with, PSC's or its
subsidiaries' articles of incorporation or bylaws or any contract to
which PSC or any of its subsidiaries is a party as a result of entering
into, and required consents, approvals and authorizations relating to,
the merger agreement and related matters,
- information PSC supplied for this proxy statement,
- the interim operations of West Acquisition Corp. and
- resources to pay the total merger consideration.
COVENANTS
We have agreed that during the period from the date of the merger agreement
until the closing of the merger, we will, and will cause our subsidiaries to,
- carry on our respective businesses in the ordinary course of business
consistent with past practice,
- provide PSC and its advisors reasonable access to the properties, records
and advisors of Percon as well as all information about Percon's business
that PSC reasonably requests,
- provide copies of monthly financial statements, and
- notify PSC of any material change in the business.
We have also agreed that during the period from the date of the merger
agreement until the closing of the merger, we will not, and will not allow our
subsidiaries to
- amend our charter documents,
- issue or sell any capital stock or rights to acquire capital stock, other
than issuances of common stock upon exercise of outstanding stock options
and warrants or take any action to accelerate options,
- declare or pay any dividend or other distribution or purchase or redeem
any of our capital stock or other securities,
- amend any benefit plan, adopt a new benefit plan or materially increase
compensation or fringe benefits of directors, officers or employees,
- assume any indebtedness, make any loans or capital contributions to, or
investment in, any person other than our wholly owned subsidiaries or
enter into any new credit agreements or modify existing credit
agreements,
- acquire any business or assets other than inventory, raw materials and
other specified assets in the ordinary course of business consistent with
past practice,
31
<PAGE> 37
- lease, mortgage, encumber or dispose of any of our assets other than
inventory in the ordinary course of our business consistent with past
practice,
- make any tax election or settle or compromise any tax liability or
refund,
- pay, discharge, settle or satisfy any claims other than in the ordinary
course of business consistent with past practice,
- make capital expenditures in excess of 25% our capital expenditure budget
for fiscal 1999,
- enter into any new material contracts or modify existing material
contracts other than renewals of contracts that do not materially and
adversely change the terms of the contract,
- implement or adopt any changes in its accounting principles, other than
as required by GAAP or
- enter into any agreement to do any of the actions described above.
NO SOLICITATION OF TRANSACTIONS
We have agreed not to, and not to permit or authorize our subsidiaries or
any of our or our subsidiaries' directors, officers or employees or
representatives to, solicit, initiate or encourage, or take any action to
knowingly facilitate, any acquisition proposal or enter into, continue or
otherwise participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, any acquisition proposal. We and
our board may, however, before the date of the special meeting
- provide information to anyone who has made an unsolicited superior
proposal pursuant to a customary confidentiality agreement that contains
terms that are substantially the same as the terms of the confidentiality
agreement between Percon and PSC, and
- engage in any discussions or negotiations with anyone who has made an
unsolicited superior proposal,
in each case only if our board determines in good faith, after consultation with
outside counsel, that it is required to do so in order to comply with its
fiduciary duties to our shareholders under applicable law.
Our board of directors may, in response to an unsolicited superior
proposal, terminate the merger agreement before the date of the special meeting
if
- it determines in good faith, after consultation with outside counsel,
that the action is required to do so to comply with its fiduciary duties
to our shareholders under applicable law,
- it delivers written notice to PSC, within the time required by the merger
agreement, advising PSC that it has received an unsolicited superior
proposal, including the terms, conditions and identity of the person
making the superior proposal, and that, subject to any action PSC may
take to match the superior proposal, it intends to accept the superior
proposal,
- simultaneously with the termination, it causes Percon to enter into a
definitive agreement containing the terms of the superior proposal, and
- Percon has previously paid to PSC a $2 million termination fee plus up to
$400,000 of PSC's out-of-pocket expenses.
32
<PAGE> 38
Nothing described above will limit our ability to take actions to comply
with specified rules under the Securities Exchange Act of 1934 and provide
disclosure to Percon's shareholders as otherwise required by applicable law.
We have agreed to notify PSC promptly of any acquisition proposal we may
receive or any inquiry we think may lead to an acquisition proposal, including
the terms and conditions of any proposal, and to keep PSC informed of all
developments relating to any acquisition proposal.
Under the merger agreement, the term acquisition proposal means any
inquiry, proposal or offer that relates to or is likely to lead to
- any direct or indirect acquisition or purchase of material assets of
Percon and its subsidiaries, or 5% or more of the outstanding voting
securities of Percon, or
- any transaction that results in the directors of Percon immediately
before the transaction not constituting at least two-thirds of the board
of directors of the surviving corporation.
Under the merger agreement, the term superior proposal means any
unsolicited acquisition proposal that the Percon board determines in good faith
to be
- likely to be completed and
- more favorable to Percon's shareholders from a financial point of view
than the merger.
CONDITIONS TO THE PARTIES' OBLIGATIONS TO COMPLETE THE MERGER
PSC's and our obligations to complete the merger are subject to the
following conditions:
- approval of the merger by the holders of a majority of the outstanding
shares of Percon common stock,
- expiration or termination of the Hart-Scott-Rodino Act waiting period and
any other applicable antitrust law waiting period,
- no action or proceeding exists or is threatened that prevents or may
prevent the completion of the merger,
- the representations and warranties of the other party are true and
correct in all material respects as of the date of the merger agreement
and as of the merger closing date, and the other party has performed and
complied with all of its agreements in all material respects through the
merger closing date, and
- receipt of all approvals and authorizations from governmental entities
that are legally required and certain specified third party consents that
are material to the operation of Percon's business.
PSC's obligations to complete the merger are subject to the following
additional conditions:
- Percon shall have procured all third party consents specified in the
merger agreement that are material to the operation of its business,
- PSC shall have obtained the consents of its debt holders specified in the
merger agreement,
- no material adverse change in the business, condition, operations or
prospects of Percon other than those contemplated by the merger agreement
shall have occurred since the date of the merger agreement, and
33
<PAGE> 39
- the noncompetition, employment and consulting agreement shall have been
executed and delivered by the parties entering into those agreements.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated and the merger may be abandoned at
any time by
1. mutual consent of PSC and Percon;
2. either PSC or Percon if
- the merger is not completed by May 10, 2000,
- the holders of a majority of the outstanding shares of Percon common
stock do not approve the merger at the special meeting, or
- any order prohibiting the completion of the merger has become final
and cannot be appealed;
3. Percon if
- the Percon board authorizes Percon to enter into an agreement
concerning a superior proposal,
- Percon gives PSC at least seven business days' notice of the terms
of, and its intention to accept, the superior proposal and the
proposal continues to be a superior proposal at the end of such
period taking into account any changes to the merger agreement made
by PSC in response to the proposal,
- simultaneously with the termination Percon enters into a definitive
agreement containing the terms of the superior proposal, and
- Percon pays to PSC the $2 million termination fee, plus up to
$400,000 of PSC's out-of-pocket expenses, or
- a Percon condition to closing cannot be met and the failure of the
condition cannot be cured before May 10, 2000;
4. PSC if
- the Percon board fails to reaffirm its recommendation in favor of the
merger within five business days following a request by PSC to do so
or withdraws or adversely modifies its recommendation,
- the Percon board approves or recommends another acquisition proposal,
- Percon enters into an agreement or letter of intent concerning another
acquisition proposal,
- Percon or any of its representatives violate the non-solicitation
provisions of the merger agreement, or
- the Percon board fails to recommend against any tender offer or
exchange offer for Percon shares that is commenced before the
completion of the merger, or
- a PSC condition to closing cannot be met and the failure of the
condition cannot be cured before May 10, 2000.
34
<PAGE> 40
TERMINATION FEES
Percon has agreed to pay PSC a termination fee of $2 million, plus up to
$400,000 of PSC's out-of-pocket expenses, if the merger agreement is terminated
under any of the following circumstances:
- Percon's shareholders fail to approve the merger and within 12 months of
the date of the merger agreement Percon enters into an agreement relating
to, or completes an alternative transactions that would constitute,
another acquisition proposal (excluding specifically designated
acquisition proposals),
- Percon terminates the agreement for the first reason described in
paragraph 3 above under "-- Termination of the merger agreement,"
- before the termination of the merger agreement, any of the events
described in the first reason described in paragraph 4 above under
"-- Termination of the merger agreement" occurs or
- Percon has willfully and intentionally breached the merger agreement.
PSC has agreed to pay Percon a termination fee of $1 million, plus up to
$400,000 of Percon's out-of-pocket expenses, if the merger agreement is
terminated and PSC has willfully and intentionally breached the merger
agreement. This termination fee will not be payable, however, if Percon has also
materially breached the merger agreement or if any of PSC's conditions to
closing the merger have not been satisfied.
AMENDMENT OF THE MERGER AGREEMENT
The merger agreement may be modified or amended only by written agreement
of the parties. Any such amendment or waiver may be made at any time before the
completion of the merger. After the Percon shareholders approve the plan of
merger, however, no amendment or waiver that requires further approval of the
shareholders may be made without the further approval of the shareholders.
35
<PAGE> 41
VOTING AGREEMENTS
As an inducement and condition to the willingness of PSC to enter into the
merger agreement, Michael P. Coughlin, Andy J. Storment and Arlen I. Prentice,
and estate planning entities administered by each of them, entered into voting
agreements with PSC. Together, these shareholders held, at the record date,
approximately 42% of the outstanding voting power of Percon and, therefore, are
able to strongly influence the vote on the approval and adoption of the merger
agreement and the transactions contemplated by that agreement.
In the voting agreements, each shareholder has agreed, at any meeting of
shareholders of Percon or at any adjournment of a meeting, the shareholder shall
vote all of the shareholder's shares of Percon common stock in favor of the
merger and the approval and adoption of the merger agreement and against any
Percon Acquisition Proposal, as defined in the merger agreement. The shareholder
will also deliver an irrevocable proxy to PSC upon request.
Additionally in the voting agreements, each shareholder has agreed, subject
to specified limited exceptions, not to transfer, pledge, encumber or otherwise
dispose of shares of Percon common stock unless the transferee executes a voting
agreement in a form acceptable to PSC. In addition, each shareholder will not,
nor will he or it cause or permit any of his or its affiliates, directors,
officers, employees, investment bankers, attorneys and other advisers or
representatives to, directly or indirectly, take any action that, if taken by
Percon, would result in Percon breaching its covenants about alternative
acquisitions set forth in the merger agreement. Each of the voting agreements
will terminate upon the earlier of the effective time of the merger or the
termination of the merger agreement.
36
<PAGE> 42
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following table shows common stock ownership on December 13, 1999 by
(i) each person who, to our knowledge, beneficially owns more than 5% of the
common stock, (ii) our Chief Executive Officer, (iii) our other executive
officers whose total compensation was at least $100,000 at the end of our last
fiscal year, and (iv) all of our directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF SHARES
---------------- --------------------- ----------
<S> <C> <C>
Michael P. Coughlin(2)................................... 655,566 16.2%
1800 Millrace Drive
Eugene, OR 97403
Andy J. Storment(3)...................................... 655,891 16.2%
1800 Millrace Drive
Eugene, OR 97403
Arlen I. Prentice(4)..................................... 405,000 10.0%
6177 162nd Place SW
Bellevue, WA 98006
Donald K. Skinner(5)..................................... 35,000 *
Dana E. Siebert(6)....................................... 25,000 *
J. Brad West(7).......................................... 16,700 *
All directors and executive officers as a group (11
persons)(8)............................................ 1,817,657 43.3%
</TABLE>
- -------------------------
* Less than 1%
(1) Shares which the person or group has the right to acquire within 60 days
after December 13, 1999 are deemed to be outstanding in calculating the
percentage ownership of the person or group but are not deemed to be
outstanding as to any other person or group.
(2) Includes 629,075 shares held by the Coughlin Family Limited Partnership of
which Mr. Coughlin and his spouse are the general partners and also includes
21,600 shares subject to options exercisable within 60 days after December
13, 1999. All of the shares are subject to voting agreements. See "Voting
Agreements."
(3) Includes 200,000 shares held by Storment Investments LLC of which Mr.
Storment is the sole member and also includes 21,600 shares subject to
options exercisable with 60 days after December 13, 1999. All of the shares
are subject to voting agreements. See "Voting Agreements."
(4) Includes 15,500 shares held by the Prentice Family Partnership of which Mr.
Prentice and his spouse are the general partners and also includes 35,000
shares subject to options exercisable with 60 days after December 13, 1999.
All of the shares are subject to voting agreements. See "Voting Agreements."
(5) Consists of 35,000 shares subject to options exercisable with 60 days after
December 13, 1999.
(6) Consists of 25,000 shares subject to options exercisable with 60 days after
December 13, 1999.
(7) Includes 16,000 shares subject to options exercisable with 60 days after
December 13, 1999.
(8) Includes 178,700 shares subject to options exercisable with 60 days after
December 13, 1999. Excludes shares subject to options within 60 days after
that date.
37
<PAGE> 43
INDEPENDENT ACCOUNTANTS
Representatives of KPMG LLP, Percon's independent accountants, will be
present at the special meeting and will be available to respond to appropriate
questions. They do not plan to make any statement but they will have the
opportunity to make a statement if they wish.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
As described in our proxy statement on Schedule 14A relating to our 1999
annual meeting of shareholders, any shareholder proposal to be considered at our
2000 annual meeting of shareholders, which will only be held if the merger is
not completed before May 10, 2000, or to be considered for inclusion in proxy
materials for the 2000 annual meeting must be received at our principal
executive offices no later than December 24, 1999. For the 2000 annual meeting
of shareholders, if notice of a shareholder proposal to be raised at the meeting
is received at the principal executive offices of Percon after March 8, 2000,
proxy voting on that proposal when and if raised at the annual meeting will be
subject to the discretionary voting authority of the designated proxy holders.
Any shareholder proposal must include the information specified in our bylaws,
and a copy of the relevant provisions of the bylaws will be provided to any
shareholder upon written request to Andy J. Storment, Secretary of Percon.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This proxy statement includes "forward-looking statements" within the
meaning of various provisions of the Securities Act of 1933 and the Securities
Exchange Act of 1934. All statements, other than statements of historical facts,
included in this proxy statement that address activities, events or developments
that Percon expects or anticipates will or may occur in the future, including
such things as business strategy, competitive strengths, references to future
success and other such matters, are forward-looking statements. These statements
are based on various assumptions and analyses made by Percon in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual future results and
developments will conform with Percon's expectations and predictions is subject
to a number of risks and uncertainties, including the significant considerations
discussed in this proxy statement; general economic, market or business
conditions; the opportunities, or lack of opportunities, that may be presented
to and pursued by Percon and its subsidiaries; competitive actions by other data
input and management companies; changes in laws or regulations and other
factors, many of which are beyond the control of Percon and its subsidiaries.
Consequently, all of the forward-looking statements made in this proxy statement
are qualified by these cautionary statements and we do not assume that the
actual results or developments anticipated by Percon will be realized or, even
if substantially realized, that they will have the expected consequences to or
effects on Percon and its subsidiaries or their business or operations.
The cautionary statements contained or referred to in this section should
be considered in connection with any subsequent written or oral forward-looking
statements that may be issued by Percon or persons acting on our behalf. Percon
does not undertake any obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this proxy statement or to reflect the occurrence of unanticipated events.
38
<PAGE> 44
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC under
the Exchange Act. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. You may read and copy this information at the
following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet World Wide
Web site that contains reports, proxy statements and other information about
issuers, including Percon, who file electronically with the SEC. The address of
that site is http://www.sec.gov. You can also inspect reports, proxy statements
and other information about us at the offices of The Nasdaq Stock Market, 1735 K
Street, N.W., Washington, D.C. 20549.
The SEC allows us to "incorporate by reference" information into this
document. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this document, except
for any information that is superseded by information that is included directly
in this document.
This document incorporates by reference the documents listed below that we
have previously filed with the SEC. They contain important information about our
companies and their financial condition. We have included our Annual Report on
Form 10-KSB for the year ended December 31, 1998 and our Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999 with this proxy statement.
<TABLE>
<CAPTION>
PERCON SEC FILINGS (FILE NO. 0-26462) PERIOD/AS OF DATE
- --------------------------------------- -----------------
<S> <C>
Annual Report on Form 10-KSB Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarter ended March 31, 1999
Quarter ended June 30, 1999
Quarter ended September 30, 1999
</TABLE>
We incorporate by reference additional documents that Percon may file with
the SEC between the date of this document and the date of the special meeting.
These documents include periodic reports, including annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K, as well as proxy
statements.
You can obtain any of the documents incorporated by reference in this
document through Percon or from the SEC through the SEC's Web site at the
address provided above. Documents incorporated by reference are available from
Percon without charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference into those documents. You can
obtain documents incorporated by reference in this document by requesting them
in writing or by telephone at the following address:
1800 Millrace Drive
Eugene, OR 97403
(541) 344-1189
Attention Andy J. Storment
39
<PAGE> 45
If you would like to request documents, please do so by January 10, 2000 to
receive them before the special meeting. If you request any incorporated
documents from us, we will mail them to you by first class mail, or another
equally prompt means, within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or Percon that differs from, or adds to, the
information in this document or in our documents that are publicly filed with
the SEC. Therefore, if anyone does give you different or additional information,
you should not rely on it.
The information contained in this document speaks only as of its date
unless the information specifically indicates that another date applies.
40
<PAGE> 46
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PSC INC.,
WEST ACQUISITION CORP.
AND
PERCON INCORPORATED
NOVEMBER 9, 1999
<PAGE> 47
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 THE MERGER....................................... A-1
1.1. The Merger....................................... A-1
1.2. Effective Time................................... A-1
1.3. Effects of the Merger............................ A-1
1.4. Conversion of Percon Common Stock; Treatment of
Newco Common Stock.................................... A-2
1.5. Stock Options.................................... A-2
1.6. Warrants......................................... A-3
1.7. Articles of Incorporation........................ A-3
1.8. By-Laws.......................................... A-3
1.9. Board of Directors of the Surviving
Corporation........................................... A-3
1.10. Closing.......................................... A-3
1.11. Dissenters' Rights............................... A-3
ARTICLE 2 PAYMENT FOR SHARES............................... A-4
2.1. Payment for Shares............................... A-4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PERCON......... A-5
3.1. Corporate........................................ A-6
3.2. Capitalization................................... A-6
3.3. Authorization.................................... A-7
3.4. No Violation..................................... A-7
3.5. Filings with the SEC............................. A-7
3.6. Financial Statements............................. A-8
3.7. Tax Matters...................................... A-8
3.8. Absence of Certain Changes....................... A-9
3.9. Undisclosed Liabilities.......................... A-10
3.10. No Litigation.................................... A-10
3.11. Environmental Matters............................ A-11
3.12. Title to Assets.................................. A-12
3.13. Insurance........................................ A-12
3.14. Material Contracts and Agreements................ A-12
3.15. Intellectual Property............................ A-13
3.16. Software; Protection............................. A-14
3.17. Labor Matters.................................... A-15
3.18. ERISA Compliance................................. A-16
3.19. Employment Compensation.......................... A-17
3.20. Percon Board of Directors Action................. A-17
3.21. Proxy Statement.................................. A-18
3.22. No Brokers or Finders............................ A-18
3.23. Disclosure....................................... A-18
3.24. Opinion of Financial Advisor..................... A-18
3.25. Year 2000 Compliance............................. A-18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PSC............ A-19
4.1. Organization..................................... A-19
4.2. Authorization.................................... A-19
4.3. No Violation..................................... A-19
</TABLE>
i
<PAGE> 48
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.4. Information...................................... A-20
4.5. Interim Operations of Newco...................... A-20
4.6. Capital Resources................................ A-20
ARTICLE 5 COVENANTS........................................ A-20
5.1. Interim Operations............................... A-20
5.2. Access and Information........................... A-22
5.3. Certain Filings, Consents and Arrangements....... A-22
5.4. State Takeover Statutes.......................... A-22
5.5. Percon Special Meeting; Proxy Statement.......... A-22
5.6. Additional Agreements............................ A-23
5.7. Certain Litigation............................... A-24
5.8. Acquisition Proposals............................ A-24
5.9. Confidentiality.................................. A-25
5.10. Indemnification; Directors' and Officers'
Insurance............................................. A-25
5.11. Percon Warrants.................................. A-26
5.12. Voting Agreement Matters......................... A-27
ARTICLE 6 CONDITIONS TO OBLIGATION TO CLOSE................ A-27
6.1. Conditions to Obligation of PSC and Newco........ A-27
6.2. Conditions to Obligations of Percon.............. A-28
ARTICLE 7 TERMINATION...................................... A-29
7.1. Termination by Mutual Consent.................... A-29
7.2. Termination by Either PSC or Percon.............. A-29
7.3. Termination by Percon............................ A-29
7.4. Termination by PSC............................... A-30
7.5. Effect of Termination and Abandonment............ A-30
ARTICLE 8 MISCELLANEOUS.................................... A-31
8.1. Survival......................................... A-31
8.2. Press Releases and Public Announcements.......... A-32
8.3. No Third Party Beneficiaries..................... A-32
8.4. Entire Agreement................................. A-32
8.5. Succession and Assignment........................ A-32
8.6. Counterparts..................................... A-32
8.7. Headings......................................... A-32
8.8. Notices.......................................... A-32
8.9. Governing Law.................................... A-33
8.10. Amendments and Waivers........................... A-33
8.11. Severability..................................... A-33
8.12. Expenses......................................... A-34
8.13. Construction..................................... A-34
8.14. Incorporation of Schedules....................... A-34
</TABLE>
ii
<PAGE> 49
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
A
Agreement.......................... A-1
Ancillary Instruments.............. A-2
B
Benefit Plans...................... A-16
Blue Sky Laws...................... A-7
C
Closing............................ A-3
Closing Agreement.................. A-9
Closing Date....................... A-3
Code............................... A-8
Confidentiality Agreement.......... A-25
Contracts.......................... A-6
Costs.............................. A-25
D
Debt Consents...................... A-19
Dissenting Shares.................. A-3
E
Effective Time..................... A-1
Environmental Laws................. A-11
ERISA.............................. A-16
ERISA Affiliate.................... A-16
Exchange Act....................... A-7
Excluded Percon Acquisition
Proposal......................... A-25
Existing Liens..................... A-12
G
GAAP............................... A-6
H
Hazardous Substance................ A-11
HSR Act............................ A-3
I
including.......................... A-34
Indemnified Parties................ A-25
Indemnified Party.................. A-25
L
Laws............................... A-1
Liens.............................. A-4
Litigation......................... A-10
M
Material Adverse Change............ A-5
Material Adverse Effect............ A-5
Merger............................. A-1
Merger Price....................... A-1
N
Newco.............................. A-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
O
Operations Software................ A-14
Option Exercise Period............. A-2
Option Plan........................ A-2
Options............................ A-2
P
Paying Agent....................... A-4
Payment Fund....................... A-4
Pension Plans...................... A-16
Percon............................. A-1
Percon Acquisition Proposal........ A-24
Percon Common Stock................ A-1
Percon Common Stock Certificate.... A-2
Percon Most Recent Fiscal
Quarter End...................... A-8
Percon Public Reports.............. A-7
Percon Representatives............. A-24
Percon Requisite Shareholder
Vote............................. A-7
Percon Special Meeting............. A-22
Percon Warrants.................... A-3
Preliminary Filing................. A-23
Product Software................... A-14
Proxy Statement.................... A-18
PSC................................ A-1
S
SEC................................ A-23
Securities Act..................... A-7
Securities Act Legend.............. A-7
Software........................... A-14
Superior Percon Proposal........... A-24
Surviving Corporation.............. A-1
T
Tax Return......................... A-9
Tax Ruling......................... A-9
Taxes.............................. A-9
Termination Date................... A-29
Trade Rights....................... A-14
V
Voting Agreement Shares............ A-6
Voting Agreements.................. A-1
W
WBCA............................... A-1
WBCA Dissenters' Rights
Provisions....................... A-3
Y
Year 2000 Defect................... A-18
</TABLE>
iii
<PAGE> 50
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.
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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
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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, 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
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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
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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
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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
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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
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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).
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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
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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
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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.
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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.
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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 hedges, 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
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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
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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
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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
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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
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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 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,
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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.
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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.
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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.
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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
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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
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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
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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
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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.
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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.
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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. Michael P. Coughlin, Andy J.
Storment and Arlen I. Prentice 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. Michael P. Coughlin shall
have executed and delivered a Consulting Agreement and Andy J. Storment
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) Hart-Scott-Rodino 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.
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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
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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
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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.
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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 to the intended recipient as set forth below:
If to Percon:
Percon Incorporated
1800 Millrace Drive
Eugene, Oregon 97403
Attention: Chief Executive Officer
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Copy to:
John R. Thomas
Stoel Rives LLP
900 S.W. Fifth Avenue, Suite 2600
Portland, Oregon 97204
If to PSC or Newco:
PSC Inc.
675 Basket Road
Webster, New York 14580
Attention: Elizabeth J. McDonald
Copy to:
Patrick G. Quick
Foley & Lardner
777 East Wisconsin Ave.
Milwaukee, Wisconsin 53202
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
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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: MICHAEL P. COUGHLIN
Title: PRESIDENT
PSC INC.
By: ROBERT C. STRANDBERG
Title: CEO
WEST ACQUISITION CORP.
By: ROBERT C. STRANDBERG
Title: CEO
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APPENDIX B
McDonald
Investments
November 9, 1999
McDonald Investments, Inc.,
A KeyCorp Company
PERSONAL & CONFIDENTIAL 700 Fifth Avenue
Suite 4600
Board of Directors Seattle, WA 98104
Percon, Inc.
1800 Millrace Drive Tel: 206 684-6070
Eugene, OR 97403 Fax: 206 343-6877
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, of the consideration to be paid by PSC Inc. ("PSC") to the holders of
the issued and outstanding shares of Common Stock, without par value (the
"Common Stock") of Percon Incorporated (the "Company"), in connection with PSC's
proposed acquisition of the Company under the terms of an Agreement and Plan of
Merger (the "Agreement") by and among PSC, Newco, a wholly owned subsidiary of
PSC, and the Company.
You have advised us that, pursuant to the Agreement, Newco will be merged
with and into the Company (the "Merger"), all of the shares of Common Stock
issued and outstanding prior to the Merger (other than shares held in treasury
of those as to which dissenters' rights of appraisal have been perfected) will
be converted into the right to receive the consideration specified in the
Agreement, and the Company will become a wholly-owned subsidiary of PSC. Under
the terms of the Agreement, each issued and outstanding share of the Company's
Common Stock will be converted into the right to receive aggregate consideration
of $15.00 in cash (the "Consideration").
McDonald Investments Inc., A KeyCorp Company as part of its investment
banking business, is customarily engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. It is understood that this opinion letter provided by McDonald
was prepared for the confidential use of the Board of Directors and senior
management of the Company and may not be disclosed, summarized, excerpted from
or otherwise publicly referred to without our prior written consent, except that
this opinion letter may be included in its entirety in any filing made by the
Company with the Securities and Exchange Commission with respect to the
transactions contemplated by the Merger Agreement.
In connection with rendering this opinion, we have reviewed and analyzed,
among other things, the following: (i) a draft of the Agreement dated November
4, 1999, including the exhibits and schedules thereto; (ii) certain publicly
available information concerning the Company, including its Annual Reports to
Shareholders and Form 10-K's for each of the last five fiscal years and its
Quarterly Reports on Form 10-Q for the past two years; (iii) certain other
internal information, primarily financial in nature, including projections,
concerning the business and operations of the Company furnished to us by the
Company for purposes of our analysis; (v) certain publicly available information
concerning the trading of, and the trading markets for, the Company's Common
Stock (vi) certain publicly available information with respect to certain other
companies that we believe to be comparable to the Company and the trading
markets for certain of such other companies' securities; and (vii) certain
publicly available information concerning the nature and terms of certain
<PAGE> 85
other transactions that we consider relevant to our inquiry. We have also met
with certain officers and employees of the Company to discuss the business and
prospects of the Company and PSC, and considered such other matters as we
believed relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have assumed and relied upon
the representations and warranties of the Company contained in the Agreement. We
have not been engaged to, and have not independently attempted to, verify any of
such information. We have also relied upon the management of the Company as to
the reasonableness and achievability of the financial and operating projections
(and the assumptions and bases thereof) provided to us and, with your consent,
we have assumed that such projections were reasonably prepared on bases
reflecting the best currently available estimators and judgments of such
respective managements as to the matters covered thereby. We have not been
engaged to assess the achievability of such projections or the assumptions on
which they were based and express no view as to such projections or assumptions.
In addition, we have not conducted an appraisal of any of the assets, properties
or facilities of the Company nor have we been furnished with any such evaluation
or appraisal. We have also assumed that the conditions to the Merger as set
forth in the Agreement would be satisfied and that the Merger would be
consummated on a timely basis in the manner contemplated by the Agreement. Our
engagement was limited to rendering the opinion expressed herein. Accordingly,
we were to asked to, nor did we, solicit interest from other parties that may be
interested in contemplating a similar transaction.
It should be noted that this opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof and does not address any matters subsequent to such date.
In addition, our opinion is, in any event, limited to the fairness, as of the
date hereof, from a financial point of view, of the consideration to be paid
pursuant to the Merger and does not address the Company's underlying business
decision to effect the Merger or any other terms of the Merger.
We will receive a fee for rendering this opinion, and the Company has
agreed to indemnify us under certain circumstances.
In the ordinary course of our business, we may actively trade securities of
both the Company and PSC for our own account and for the accounts of customers,
and, accordingly, may at any time hold a long or short position in such
securities.
Our opinion is directed to the Board of Directors and does to constitute a
recommendation to any stockholder of the Company as to how such stockholder
should vote at the stockholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing and such other matters as we
consider relevant, it is our opinion that, as of the date hereof, the
Consideration to be paid pursuant to the Agreement is fair, from a financial
point of view, to the stock holders of the Company.
Very truly yours,
/s/ MCDONALD INVESTMENTS
McDONALD INVESTMENTS INC.
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APPENDIX C
CHAPTER 23B.13 RCW
DISSENTERS' RIGHTS
<TABLE>
<S> <C>
Sections
23B.13.010 Definitions.
23B.13.020 Right to dissent.
23B.13.030 Dissent by nominees and beneficial owners.
23B.13.200 Notice of intent to demand payment.
23B.13.210 Notice of intent to demand payment.
23B.13.220 Dissenters' notice.
23B.13.230 Duty to demand payment.
23B.13.240 Share restrictions.
23B.13.250 Payment.
23B.13.260 Failure to take action.
23B.13.270 After-acquired shares.
23B.13.280 Procedure if shareholder dissatisfied with payment or offer.
23B.13.300 Court action.
23B.13.310 Court costs and counsel fees.
</TABLE>
RCW 23B.13.010 DEFINITIONS.
As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and
in the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder. [1989 c 165 sec. 140.]
<PAGE> 87
RCW 23B.13.020 RIGHT TO DISSENT.
(1) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by RCW
23B.11.030, 23B.11.080, or the articles of incorporation and the
shareholder is entitled to vote on the merger, or (ii) if the corporation
is a subsidiary that is merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that materially
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any one
of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
(c) The shareholder's demand for payment is withdrawn with the written
consent of the corporation. [1991 c 269 sec. 37; 1989 c 165 sec. 141.]
RCW 23B.13.030 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the shareholder's name only if the shareholder dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which the dissenter
dissents and the dissenter's other shares were registered in the names of
different shareholders.
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(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote. [1989 c 165 sec. 142.]
RCW 23B.13.200 NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.
(2) If a corporate action creating dissenters' rights under RCW 23B.13.020
is taken without a vote of shareholders, the corporation, within ten days after
[the] effective date of such corporate action, shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken and
send them the dissenters' notice described in RCW 23B.13.220. [1989 c 165
sec. 143.]
RCW 23B.13.210 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must (a) deliver to the corporation before
the vote is taken written notice of the shareholder's intent to demand payment
for the shareholder's shares if the proposed action is effected, and (b) not
vote such shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter. [1989 c 165 sec. 144.]
RCW 23B.13.220 DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the effective
date of the corporation action, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;
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(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days
after the date the notice in subsection (1) of this section is delivered;
and
(e) Be accompanied by a copy of this chapter. [1989 c 165 sec. 145.]
RCW 23B.13.230 DUTY TO DEMAND PAYMENT.
(1) A shareholder sent a dissenters' notice described in RCW 23B.13.220
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to RCW 23B.13.220 (2)(c), and deposit the
shareholder's certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment or deposit the shareholder's share
certificates under subsection (1) of this section retains all other rights of a
shareholder until the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter. [1989 c 165 sec. 146.]
RCW 23B.13.240 SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertified shares from
the date the demand for their payment is received until the proposed corporate
action is effected or the restriction is released under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action. [1989 c 165 sec. 147.]
RCW 23B.13.250 PAYMENT.
(1) Except as provided in RCW 23B.13.270, within thirty days of the later
of the effective date of the proposed corporate action, or the date the payment
demand is received, the corporation shall pay each dissenter who complied with
RCW 23B.13.230 the amount the corporation estimates to be the fair value of the
shareholder's shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenters' right to demand payment under RCW
23B.13.280; and
(e) A copy of this chapter. [1989 c 165 sec. 148.]
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RCW 23B.13.260 FAILURE TO TAKE ACTION.
(1) If the corporation does not effect the proposed action within sixty
days after the date set forth demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release any transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand
procedure. [1989 c 165 sec. 149.]
RCW 23B.13.270 AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by RCW 23B.13.250
from a dissenter unless the dissenter was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under RCW 23B.13.280. [1989 c 65 sec. 150.]
RCW 23B.13.280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under RCW
2313.13.250, or reject the corporation's offer under RCW 23B.13.270 and demand
payment of the dissenter's estimate of the fair value of the dissenter's shares
and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250
or offered under RCW 2313.13.270 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250 within
sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does not
return the deposited certificates or release the transfer restrictions,
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares. [1989 c 165
sec. 151.]
RCW 23B.13.300 COURT ACTION.
(1) If a demand for payment under RCW 23B.13.280 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence
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the proceeding within the sixty-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The corporation may join as a party to the proceeding any shareholder
who claims to be a dissenter but who has not, in the opinion of the corporation,
complied with the provisions of this chapter. If the court determines that such
shareholder has not complied with the provisions of this chapter, the
shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(6) Each dissenter made a party to the proceeding is entitled to judgment
(a) for the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the corporation,
or (b) for the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under RCW 23B.13.270. [1989 c 165 sec. 152.]
RCW 23B.13.310 COURT COSTS AND COUNSEL FEES.
(1) The court in a proceeding commenced under RCW 23B.13.300 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess the costs against all
or some of the dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or not in good
faith in demanding payment under RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by chapter 23B.13 RCW.
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(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and
that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be
paid out of the amounts awarded the dissenters who were benefitted. [1989 c
165 sec. 153.]
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PERCON INCORPORATED
SPECIAL MEETING, JANUARY 17, 2000 PROXY
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned, revoking all prior proxies, hereby appoints Michael P.
Coughlin and Andy J. Storment, and each of them, proxies with power of
substitution to vote on behalf of the undersigned all shares that the
undersigned may be entitled to vote at the special meeting of shareholders of
Percon Incorporated ("Percon") on January 17, 2000 and any adjournments
thereof, with all powers that the undersigned would possess if personally
present with respect to the following.
The shares represented by this proxy will be voted as specified on the
reverse hereof, but if no specification is made, this proxy will be voted for
approval of the plan of merger and the transactions contemplated thereby. The
proxies may vote in their discretion as to other matters that may come before
this meeting.
Percon's board of directors unanimously recommends you vote in favor of
the merger.
(Continued and to be signed on the other side.)
Percon Incorporated
1800 Millrace Drive
Eugene, Oregon 97403
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FOLD AND DETACH HERE
<PAGE> 94
PERCON INCORPORATED
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
Proposal to approve the Agreement and Plan of Merger, dated November 9, 1999
among PSC Inc., West Acquisition Corp. and Percon and the transactions
contemplated thereby.
<TABLE>
<S> <C> <C>
For Against Abstain
[ ] [ ] [ ]
</TABLE>
Please Note: Any shares of stock of Percon held in the name of fiduciaries,
custodians or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian or brokerage house itself - the beneficial
owner may not directly vote or appoint a proxy to vote the shares and must
instruct the person or entity in whose name the shares are held how to vote the
shares held for the beneficial owner. Therefore, if any shares of stock of
Percon are held in "street name" by a brokerage house, only the brokerage
house, at the instructions of its client, may vote or appoint a proxy to vote
the shares.
The Special Meeting of Shareholders of Percon will be held on January 17, 2000
at 9:00 a.m., Pacific Time at 1800 Millrace Drive, Eugene, Oregon.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.
Please sign exactly as name(s) appear on the stock certificate, including
designation as executor, trustee, etc., if applicable. A corporation must sign
its name by the president or other authorized officer and a partnership must
sign its name by a partner or other authorized person.
- ------------------------------------------
Signature
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Signature (if held jointly)
Date:
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* FOLD AND DETACH HERE *
