Exhibit 10.47

 

 

AGREEMENT AND PLAN OF REORGANIZATION

 

BY AND AMONG

 

SAWTEK INC.,

 

TFR ACQUISITION, INC.,

 

AND

 

TFR TECHNOLOGIES INC.

 

Dated as of December 14, 2004

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

 

TABLE OF CONTENTS

 

ARTICLE 1.

The Merger

 

 

 

 

1.1

The Merger

 

 

 

 

1.2

Effective Time

 

 

 

 

1.3

Closing of the Merger

 

 

 

 

1.4

Effects of the Merger

 

 

 

 

1.5

Articles of Incorporation and Bylaws

 

 

 

 

1.6

Directors and Officers

 

 

 

 

ARTICLE 2.

Effect of Merger on the Capital Stock of the Constituent Corporations

 

 

 

 

2.1

Conversion of Shares

 

 

 

 

2.2

Stock Options.

 

 

 

 

2.3

Payment Fund

 

 

 

 

2.4

Payment Procedures

 

 

 

 

2.5

No Further Ownership Rights in Company Common Stock

 

 

 

 

2.6

Termination of Payment Fund

 

 

 

 

2.7

No Liability

 

 

 

 

2.8

Investment of the Payment Fund

 

 

 

 

2.9

Lost, Stolen, or Destroyed Certificates

 

 

 

 

2.10

Withholding Rights

 

 

 

 

2.11

Stock Transfer Books

 

 

 

 

2.12

Dissenting Shares

 

 

 

 

ARTICLE 3.

Representations and Warranties of Parent and MergerSub

 

 

 

 

3.1

Due Organization

 

 

 

 

3.2

Authorization and Effect of Agreement

 

 

 

 

3.3

No Violations; Consents and Approvals

 

 

 

 

ARTICLE 4.

Representations and Warranties of the Company

 

 

 

 

4.1

Capitalization; Ownership of Shares; No Liens on Shares

 

 

 

 

4.2

Due Organization

 

 

 

 

4.3

Subsidiaries

 

 

 

 

4.4

Authority; Absence of Conflicts

 

 

2

--------------------------------------------------------------------------------

 

4.5

Financial Statements

 

 

 

 

4.6

Absence of Undisclosed Liabilities

 

 

 

 

4.7

Conduct of Business; Certain Actions

 

 

 

 

4.8

Real Property

 

 

 

 

4.9

Tangible Personal Property

 

 

 

 

4.10

Accounts Receivable

 

 

 

 

4.11

Accounts Payable

 

 

 

 

4.12

Sales Representatives and Other Sales Agents/Sales Offices

 

 

 

 

4.13

Inventory

 

 

 

 

4.14

Backlog

 

 

 

 

4.15

Material and Affiliated Contracts

 

 

 

 

4.16

Compliance with Laws

 

 

 

 

4.17

Legal Proceedings

 

 

 

 

4.18

Ability to Conduct the Business

 

 

 

 

4.19

Labor Matters

 

 

 

 

4.20

Employee Benefit Plans

 

 

 

 

4.21

Environmental Matters

 

 

 

 

4.22

Warranties; Products Claims

 

 

 

 

4.23

Tax Matters

 

 

 

 

4.24

Insurance

 

 

 

 

4.25

Minute Books; Stock Record Books

 

 

 

 

4.26 [a05-4783_1ex10d47.htm#a4_26BrokersOrFindersFees_212251]

Brokers’ or Finders’ Fees
[a05-4783_1ex10d47.htm#a4_26BrokersOrFindersFees_212251]

 

 

 

 

4.27 [a05-4783_1ex10d47.htm#a4_27MaterialCustomersAndSupplier_212257]

Material Customers and Suppliers
[a05-4783_1ex10d47.htm#a4_27MaterialCustomersAndSupplier_212257]

 

 

 

 

4.28 [a05-4783_1ex10d47.htm#a4_28BankAccountsPowersOfAttorney_212306]

Bank Accounts; Powers of Attorney
[a05-4783_1ex10d47.htm#a4_28BankAccountsPowersOfAttorney_212306]

 

 

 

 

4.29 [a05-4783_1ex10d47.htm#a4_29BooksAndRecords_212311]

Books and Records [a05-4783_1ex10d47.htm#a4_29BooksAndRecords_212311]

 

 

 

 

4.30 [a05-4783_1ex10d47.htm#a4_30IntellectualPropertyRights_212317]

Intellectual Property Rights
[a05-4783_1ex10d47.htm#a4_30IntellectualPropertyRights_212317]

 

 

 

 

4.31 [a05-4783_1ex10d47.htm#a4_31_221849]

Information Furnished [a05-4783_1ex10d47.htm#a4_31_221849]

 

 

 

 

ARTICLE 5. [a05-4783_1ex10d47.htm#Article5_CovenantsRelatedToConduc_212332]

Covenants Related to Conduct of the Business
[a05-4783_1ex10d47.htm#Article5_CovenantsRelatedToConduc_212332]

 

 

 

 

5.1 [a05-4783_1ex10d47.htm#a5_1Inspection_212338]

Inspection [a05-4783_1ex10d47.htm#a5_1Inspection_212338]

 

 

 

 

5.2 [a05-4783_1ex10d47.htm#a5_2FinancialStatements_212346]

Financial Statements [a05-4783_1ex10d47.htm#a5_2FinancialStatements_212346]

 

 

 

 

5.3 [a05-4783_1ex10d47.htm#a5_3InterimOperationsOfTheCompany_212350]

Interim Operations of the Company and its Subsidiaries
[a05-4783_1ex10d47.htm#a5_3InterimOperationsOfTheCompany_212350]

 

 

 

 

ARTICLE 6. [a05-4783_1ex10d47.htm#Article6_AdditionalAgreements_212405]

Additional Agreements
[a05-4783_1ex10d47.htm#Article6_AdditionalAgreements_212405]

 

 

3

--------------------------------------------------------------------------------

 

6.1 [a05-4783_1ex10d47.htm#a6_1CompanyShareholderMeeting_212417]

Company Shareholder Meeting
[a05-4783_1ex10d47.htm#a6_1CompanyShareholderMeeting_212417]

 

 

 

 

6.2 [a05-4783_1ex10d47.htm#a6_2SatisfactionOfAllConditionsPr_212423]

Satisfaction of All Conditions Precedent
[a05-4783_1ex10d47.htm#a6_2SatisfactionOfAllConditionsPr_212423]

 

 

 

 

6.3 [a05-4783_1ex10d47.htm#a6_3AcquisitionProposals_212428]

Acquisition Proposals [a05-4783_1ex10d47.htm#a6_3AcquisitionProposals_212428]

 

 

 

 

6.4 [a05-4783_1ex10d47.htm#a6_4NoticeOfDevelopments_212448]

Notice of Developments [a05-4783_1ex10d47.htm#a6_4NoticeOfDevelopments_212448]

 

 

 

 

6.5 [a05-4783_1ex10d47.htm#a6_5PublicAnnouncements_212452]

Public Announcements [a05-4783_1ex10d47.htm#a6_5PublicAnnouncements_212452]

 

 

 

 

6.6 [a05-4783_1ex10d47.htm#a6_6NoticeOfBreach_212457]

Notice of Breach [a05-4783_1ex10d47.htm#a6_6NoticeOfBreach_212457]

 

 

 

 

6.7 [a05-4783_1ex10d47.htm#a6_7ContinuationOfInsuranceCovera_212504]

Continuation of Insurance Coverage
[a05-4783_1ex10d47.htm#a6_7ContinuationOfInsuranceCovera_212504]

 

 

 

 

6.8 [a05-4783_1ex10d47.htm#a6_8MaintenanceOfCreditTerms_212509]

Maintenance of Credit Terms
[a05-4783_1ex10d47.htm#a6_8MaintenanceOfCreditTerms_212509]

 

 

 

 

6.9 [a05-4783_1ex10d47.htm#a6_9UpdatingSchedules_212513]

Updating Schedules [a05-4783_1ex10d47.htm#a6_9UpdatingSchedules_212513]

 

 

 

 

6.10 [a05-4783_1ex10d47.htm#a6_10ThirdPartyConsents_212522]

Third Party Consents [a05-4783_1ex10d47.htm#a6_10ThirdPartyConsents_212522]

 

 

 

 

6.11 [a05-4783_1ex10d47.htm#a6_11CommerciallyReasonableEffort_212528]

Commercially Reasonable Efforts and Certain Filings
[a05-4783_1ex10d47.htm#a6_11CommerciallyReasonableEffort_212528]

 

 

 

 

6.12 [a05-4783_1ex10d47.htm#a6_12Confidentiality_212532]

Confidentiality [a05-4783_1ex10d47.htm#a6_12Confidentiality_212532]

 

 

 

 

6.13 [a05-4783_1ex10d47.htm#a6_13Firpta_212536]

FIRPTA [a05-4783_1ex10d47.htm#a6_13Firpta_212536]

 

 

 

 

6.14 [a05-4783_1ex10d47.htm#a6_14ContingentEarnoutPayment_212541]

Contingent Earn-Out Payment
[a05-4783_1ex10d47.htm#a6_14ContingentEarnoutPayment_212541]

 

 

 

 

6.15 [a05-4783_1ex10d47.htm#a6_15BenefitsForRetainedEmployees_212550]

Benefits for Retained Employees
[a05-4783_1ex10d47.htm#a6_15BenefitsForRetainedEmployees_212550]

 

 

 

 

ARTICLE 7. [a05-4783_1ex10d47.htm#Article7_ConditionsToConsummation_212606]

Conditions to Consummation of the Merger
[a05-4783_1ex10d47.htm#Article7_ConditionsToConsummation_212606]

 

 

 

 

7.1 [a05-4783_1ex10d47.htm#a7_1ConditionsToEachPartysObligat_212616]

Conditions to Each Party’s Obligation to Effect the Merger
[a05-4783_1ex10d47.htm#a7_1ConditionsToEachPartysObligat_212616]

 

 

 

 

7.2 [a05-4783_1ex10d47.htm#a7_2ConditionsToTheObligationsOfP_212625]

Conditions to the Obligations of Parent and MergerSub
[a05-4783_1ex10d47.htm#a7_2ConditionsToTheObligationsOfP_212625]

 

 

 

 

7.3 [a05-4783_1ex10d47.htm#a7_3ConditionsToObligationsOfTheC_212644]

Conditions to Obligations of the Company
[a05-4783_1ex10d47.htm#a7_3ConditionsToObligationsOfTheC_212644]

 

 

 

 

ARTICLE 8. [a05-4783_1ex10d47.htm#Article8_Termination_212657]

Termination [a05-4783_1ex10d47.htm#Article8_Termination_212657]

 

 

 

 

8.1 [a05-4783_1ex10d47.htm#a8_1TerminationByMutualAgreement_212705]

Termination by Mutual Agreement
[a05-4783_1ex10d47.htm#a8_1TerminationByMutualAgreement_212705]

 

 

 

 

8.2 [a05-4783_1ex10d47.htm#a8_2TerminationByEitherParentOrTh_212710]

Termination by Either Parent or the Company
[a05-4783_1ex10d47.htm#a8_2TerminationByEitherParentOrTh_212710]

 

 

 

 

8.3 [a05-4783_1ex10d47.htm#a8_3TerminationByTheCompany_212720]

Termination by the Company
[a05-4783_1ex10d47.htm#a8_3TerminationByTheCompany_212720]

 

 

 

 

8.4 [a05-4783_1ex10d47.htm#a8_4TerminationByParent_212726]

Termination by Parent [a05-4783_1ex10d47.htm#a8_4TerminationByParent_212726]

 

 

 

 

8.5 [a05-4783_1ex10d47.htm#a8_5EffectOfTerminationAndAbandon_212734]

Effect of Termination and Abandonment
[a05-4783_1ex10d47.htm#a8_5EffectOfTerminationAndAbandon_212734]

 

 

 

 

8.6 [a05-4783_1ex10d47.htm#a8_6Amendment_212738]

Amendment [a05-4783_1ex10d47.htm#a8_6Amendment_212738]

 

 

 

 

8.7 [a05-4783_1ex10d47.htm#a8_7ExtensionWaiver_212744]

Extension; Waiver [a05-4783_1ex10d47.htm#a8_7ExtensionWaiver_212744]

 

 

 

 

ARTICLE 9. [a05-4783_1ex10d47.htm#Article9_SurvivalOfRepresentation_212751]

Survival of Representations, Warranties, Covenants, and Agreements; Warranty
Reserve [a05-4783_1ex10d47.htm#Article9_SurvivalOfRepresentation_212751]

 

 

 

 

9.1 [a05-4783_1ex10d47.htm#a9_1SurvivalOfRepresentationsWarr_212758]

Survival of Representations, Warranties, Covenants and Agreements; Warranty
Reserve [a05-4783_1ex10d47.htm#a9_1SurvivalOfRepresentationsWarr_212758]

 

 

 

 

9.2 [a05-4783_1ex10d47.htm#a9_2WarrantyReserve_212803]

Warranty Reserve [a05-4783_1ex10d47.htm#a9_2WarrantyReserve_212803]

 

 

4

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9.3 [a05-4783_1ex10d47.htm#a9_3ShareholderAgentOfTheSharehol_212823]

Shareholder Agent of the Shareholders; Power of Attorney
[a05-4783_1ex10d47.htm#a9_3ShareholderAgentOfTheSharehol_212823]

 

 

 

 

9.4 [a05-4783_1ex10d47.htm#a9_4ThirdpartyClaims_212829]

Third-Party Claims [a05-4783_1ex10d47.htm#a9_4ThirdpartyClaims_212829]

 

 

 

 

9.5 [a05-4783_1ex10d47.htm#a9_5_213927]

Remedies [a05-4783_1ex10d47.htm#a9_5_213927]

 

 

 

 

ARTICLE 10. [a05-4783_1ex10d47.htm#Article10__213929]

Miscellaneous [a05-4783_1ex10d47.htm#Article10__213929]

 

 

 

 

10.1 [a05-4783_1ex10d47.htm#a10_1_213932]

Collateral Agreements [a05-4783_1ex10d47.htm#a10_1_213932]

 

 

 

 

10.2 [a05-4783_1ex10d47.htm#a10_2_213934]

Successors and Assigns [a05-4783_1ex10d47.htm#a10_2_213934]

 

 

 

 

10.3 [a05-4783_1ex10d47.htm#a10_3_213942]

Guaranty [a05-4783_1ex10d47.htm#a10_3_213942]

 

 

 

 

10.4 [a05-4783_1ex10d47.htm#a10_4_213943]

Expenses [a05-4783_1ex10d47.htm#a10_4_213943]

 

 

 

 

10.5 [a05-4783_1ex10d47.htm#a10_5_214011]

Severability [a05-4783_1ex10d47.htm#a10_5_214011]

 

 

 

 

10.6 [a05-4783_1ex10d47.htm#a10_6_214012]

Notices [a05-4783_1ex10d47.htm#a10_6_214012]

 

 

 

 

10.7 [a05-4783_1ex10d47.htm#a10_7_214240]

Further Assurances [a05-4783_1ex10d47.htm#a10_7_214240]

 

 

 

 

10.8 [a05-4783_1ex10d47.htm#a10_8_214241]

Specific Performance [a05-4783_1ex10d47.htm#a10_8_214241]

 

 

 

 

10.9 [a05-4783_1ex10d47.htm#a10_9_214243]

Governing Law [a05-4783_1ex10d47.htm#a10_9_214243]

 

 

 

 

10.10 [a05-4783_1ex10d47.htm#a10_10_214245]

Remedies Not Exclusive [a05-4783_1ex10d47.htm#a10_10_214245]

 

 

 

 

10.11 [a05-4783_1ex10d47.htm#a10_11_214246]

Counterparts [a05-4783_1ex10d47.htm#a10_11_214246]

 

 

 

 

10.12 [a05-4783_1ex10d47.htm#a10_12_214248]

Titles and Headings [a05-4783_1ex10d47.htm#a10_12_214248]

 

 

 

 

10.13 [a05-4783_1ex10d47.htm#a10_13_214249]

Certain Interpretive Matters and Definitions
[a05-4783_1ex10d47.htm#a10_13_214249]

 

 

5

--------------------------------------------------------------------------------

 

AGREEMENT AND PLAN OF REORGANIZATION

 

THIS AGREEMENT AND PLAN OF REORGANIZATION (this “Agreement”) is by and among
Sawtek Inc., a Florida corporation (“Parent”), TFR Acquisition, Inc., an Oregon
corporation and direct wholly-owned subsidiary of Parent (“MergerSub”), and TFR
Technologies, Inc., an Oregon corporation (the “Company”).

 

This Agreement is executed and delivered, and is entered into and effective as
of December 14, 2004.

 

RECITALS:

 

WHEREAS, the Boards of Directors of Parent, MergerSub, and the Company have, in
light of and subject to the terms and conditions set forth herein, approved this
Agreement and the transactions contemplated hereby, including the Merger;

 

WHEREAS, the Board of Directors of the Company has resolved to recommend to its
shareholders the approval and adoption of this Agreement and the consummation of
the transactions contemplated hereby upon the terms and subject to the
conditions set forth herein;

 

WHEREAS, at the Effective Time, MergerSub will be merged with and into the
Company, the Company shall continue as the Surviving Corporation, and the
separate corporate existence of MergerSub shall cease;

 

WHEREAS, pursuant to the Merger and subject to the terms and conditions of this
Agreement, all of the issued and outstanding shares of common stock, without par
value, of the Company (“Company Common Stock”) shall be converted into the right
to receive payment from Parent in the amounts set forth below;

 

WHEREAS, a portion of payments by Parent in connection with the Merger shall be
made by Parent to a Paying Agent for the benefit of the shareholders of the
Company upon the occurrence of certain events and the satisfaction of certain
conditions;

 

WHEREAS, Parent, MergerSub, and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with the
Merger as set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants, and agreements contained herein, and
intending to be legally bound hereby, Parent, MergerSub, and the Company hereby
agree as follows:

 

ARTICLE 1.
The Merger

 

1.1           The Merger.  At the Effective Time and subject to and upon the
terms and conditions of this Agreement and in accordance with the applicable
provisions of the Oregon Business Corporation Act (the “Act”), MergerSub will be
merged with and into the Company

 

6

--------------------------------------------------------------------------------

 

(the “Merger”).  Following the Merger, the Company shall continue as the
surviving corporation (the “Surviving Corporation”) and the separate corporate
existence of MergerSub shall cease.

 

1.2           Effective Time.  Subject to the provisions of this Agreement,
Parent, MergerSub, and the Company shall cause the Merger to be consummated by
filing Articles of Merger as set forth on Exhibit A or other appropriate
documents (the “Articles of Merger”) with the Secretary of State of the State of
Oregon in such form as required by, and executed in accordance with, the
applicable provisions of the Act, as soon as practicable on the Closing Date. 
The Merger shall become effective upon such filing or at such time thereafter as
is provided in the Articles of Merger (the “Effective Time”).

 

1.3           Closing of the Merger.  The closing of the Merger (the “Closing”)
will take place at a time and on a date to be specified by the parties (the
“Closing Date”), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article 7 (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions), at the offices of
Ater Wynne LLP, 222 SW Columbia Street, Suite 1800, Portland, Oregon 97201, or
at such time, date, or place as agreed to in writing by the parties hereto.

 

1.4           Effects of the Merger.  At the Effective Time, the Merger shall
have the effects set forth in this Agreement, the Articles of Merger, and the
applicable provisions of the Act.  Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all of the properties,
rights, privileges, powers, and franchises of the Company and MergerSub shall
vest in the Surviving Corporation, and all debts, liabilities, and duties of the
Company and MergerSub shall become the debts, liabilities, and duties of the
Surviving Corporation.

 

1.5           Articles of Incorporation and Bylaws.  The name of the Surviving
Corporation will be “TFR Technologies Inc.” Subject to the foregoing, effective
immediately following the Merger: (a) the articles of incorporation of the
Surviving Corporation shall be amended so that the articles of incorporation of
MergerSub, in the form attached hereto as Exhibit B, shall be the articles of
incorporation of the Surviving Corporation; and (b) the bylaws of the Surviving
Corporation shall be amended so that the bylaws of MergerSub, in the form
attached hereto as Exhibit C, shall be the bylaws of the Surviving Corporation.

 

1.6           Directors and Officers.  The directors of MergerSub at the
Effective Time shall become the directors of the Surviving Corporation and shall
hold office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation until their successors are duly elected or appointed and
qualified or until their earlier resignation or removal.  The officers of
MergerSub at the Effective Time shall become the officers of the Surviving
Corporation and shall hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation until their successors are
duly elected or appointed and qualified or until their earlier resignation or
removal.

 

7

--------------------------------------------------------------------------------

 

ARTICLE 2.
Effect of Merger on the Capital Stock of the Constituent Corporations

 

2.1           Conversion of Shares.

 

(a)           At the Effective Time, each outstanding share of common stock, par
value $0.001 per share, of MergerSub shall, by virtue of the Merger and without
any action on the part of Parent, MergerSub, or the Company, be converted into
one fully paid and nonassessable share of common stock of the Surviving
Corporation.

 

(b)           At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (including Outstanding
Shares but subject to Section 2.12, not including Dissenting Shares) shall, by
virtue of the Merger and without any action on the part of Parent, MergerSub, or
the Company, be converted into and exchangeable for the right to receive the
following payments:

 

(i)            an amount of cash determined in accordance with the provisions of
Section 2.1(c), payable at the Effective Time, provided, however, that for any
Outstanding Share issued pursuant to the exercise of Company Stock Options
pursuant to Section 7.2(g) for which there is an Unpaid Exercise Price, the
amount otherwise payable with respect to such Outstanding Share shall be reduced
by the Unpaid Exercise Price relating to such Outstanding Share, and such amount
will be reallocated among all the Outstanding Shares (the “Tranche One
Payment”);

 

(ii)           subject to Section 9.2(c), an amount of cash equal to the
quotient of $3,750,000 divided by the number of Outstanding Shares, payable on
the first anniversary of the Effective Time (the “Tranche Two Payment”); and

 

(iii)          an amount of cash determined in accordance with the provisions of
Section 2.1(d) (the “Contingent Earn-Out Payment”).

 

The Tranche One Payment, the Tranche Two Payment, and the Contingent Earn-Out
Payment are collectively referred to in this Agreement as the “Merger
Consideration.”  The number of “Outstanding Shares” is the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time, including the shares of Company Common Stock issuable under stock options
as described in Section 7.2(g).

 

(c)           The per share Tranche One Payment is equal to the Initial Payment
divided by the number of Outstanding Shares.

 

“Initial Payment” means $3,000,000 minus the sum of all out-of-pocket expenses
incurred by the Company prior to the Effective Time in connection with the
Merger and the other transactions contemplated hereby (including without
limitation all legal, accounting, and other consulting fees, as described in
Section 10.4).

 

8

--------------------------------------------------------------------------------

 

(d)           The per share Contingent Earn-Out Payment is equal to the
Distribution Amount divided by the number of Outstanding Shares.

 

“Distribution Amount” means, for each of the first four years following the
Effective Time, 2.5% of actual revenues realized by TriQuint, Parent, or their
affiliates for sales of Qualifying Products or for the license of Company
Intellectual Property (to the extent, in the case of such licensing revenues,
such revenues can be traced and allocated specifically to Company Intellectual
Property, and not including in any event any revenues relating to any
cross-licensing agreements) during such year, taking into account discounts,
credits, offsets, and the like made in the ordinary course of business,
including such discounts, credits, and offsets made on account of revenues
realized in a prior year.  That is, there may be up to four Distribution
Amounts: one for each of the four years following the Effective Time. 
Notwithstanding the above, the aggregate Distribution Amounts paid under this
Agreement will not exceed $3,000,000.

 

“Qualifying Products” means all products sold by TriQuint, Parent, or their
affiliates that incorporate Company Intellectual Property relating to bulk
acoustic wave filters except Company Products sold under U.S. Government
contract number H98230-04-C-0724/0000 on Standard Form 28, between the Company
and the Maryland Procurement Office, dated February 27, 2004, as amended.

 

Parent shall accurately report to the Shareholder Agent sales activity for
Qualifying Products and the calculation of amounts owing to the shareholders
therefor on an annual basis.  Such reports shall be delivered within 45 days of
the end of each year following the Effective Time.  Parent shall also provide
sale activity updates to the Shareholder Agent upon the Shareholder Agent’s
reasonable request.

 

Parent shall keep records in sufficient detail to permit the determination of
Contingent Earn-Out Payments payable under this Agreement for at least two years
after each applicable period.  The Shareholder Agent may have a certified
independent auditor perform an audit of Parent’s financial records and other
records relevant to Contingent Earn-Out Payments under this Agreement upon
reasonable advance written notice to assess the accuracy of Parent’s payments,
at the Shareholder Agent’s expense, subject to the last sentence of this
paragraph.  The audit shall be conducted during normal business hours no more
than once per year, and shall be subject to a confidentiality agreement
reasonably acceptable to Parent.  The auditor shall report to only the
Shareholder Agent the amount of any underpayment and the basis therefor, and
shall provide a copy of the report to Parent.  If the audit shows any
underpayment, Parent shall promptly pay the outstanding amounts to the Paying
Agent on behalf of the shareholders, plus interest from the time such payment
was due until paid to the Paying Agent at the rate of eight percent (8%) per
annum.  In the case the audit establishes an underpayment greater than ten
percent (10%) of the correct total for any period audited, Parent shall
reimburse the Shareholder Agent’s expenses for the audit.

 

2.2           Stock Options.

 

(a)           As described in Section 7.2(g), immediately prior to the Effective
Time, each outstanding option to purchase shares of Company Common Stock (each a
“Company Stock Option”) under Company’s stock option plans or arrangements (the
“Company Stock

 

9

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Option Plans”), whether or not exercisable and whether or not vested, shall have
been exercised for shares of Company Common Stock.

 

(b)           Following the Effective Time, no holder of a Company Stock Option
will have any right to receive shares of common stock of the Surviving
Corporation upon exercise of the Company Stock Option.

 

2.3           Payment Fund.

 

(a)           As of the Effective Time, Parent shall deposit, or shall cause to
be deposited, with or for the account of Kenneth Lakin or such other third party
as may be designated by the holders of a majority in interest of the Company
Common Stock, which shall be reasonably satisfactory to Parent (the “Paying
Agent”), for the benefit of the holders of the shares of Company Common Stock,
an amount of cash sufficient to pay the Tranche One Payment.  Any cash deposited
with the Paying Agent is referred to as the “Payment Fund.”

 

(b)           As of the first anniversary of the Effective Time, Parent shall
deposit, or shall cause to be deposited, with or for the account of the Paying
Agent, for the benefit of the holders of the Outstanding Shares, an amount of
cash sufficient to pay the applicable Tranche Two Payment.

 

(c)           No later than the 45th day following each of the first four
anniversaries of the Effective Time, Parent shall deposit, or shall cause to be
deposited, with or for the account of the Paying Agent, for the benefit of the
holders of the Outstanding Shares, an amount of cash sufficient to pay the
applicable Contingent Earn-Out Payment.

 

2.4           Payment Procedures.

 

(a)           Tranche One Payment.  As soon as reasonably practicable after the
Effective Time (and in any event within five business days after the Effective
Time), the Paying Agent shall mail to each record holder of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (including certificates representing
shares of Company Common Stock issued upon exercise of Company Stock Options as
described in Section 7.2(g)) (the “Certificates”) (i) a letter of transmittal
which shall specify that delivery shall be effective and risk of loss and title
to the Certificates shall pass only upon delivery of the Certificates to the
Paying Agent, and which letter shall be in customary form and have such other
provisions as Parent may reasonably specify; and (ii) instructions for effecting
the surrender of such Certificates in exchange for the Merger Consideration. 
Upon surrender of a Certificate to the Paying Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Paying
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor a check in the amount equal to the cash that such holder has the right
to receive pursuant to this Article 2 (after taking into account all shares of
Company Common Stock then held by such holder).

 

(b)           Tranche Two Payment.  Within five business days after the Paying
Agent receives funds for the Tranche Two Payment, the Paying Agent shall deliver
appropriate checks in the amount equal to the cash each person who held
Certificates is entitled to receive as Merger

 

10

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Consideration (taking into account all shares of Company Common Stock previously
held by such holder).

 

(c)           Contingent Earn-Out Payment.  Within five business days after the
Paying Agent receives funds for each applicable Contingent Earn-Out Payment, the
Paying Agent shall deliver appropriate checks in the amount equal to the cash
each person who held Certificates is entitled to receive as Merger Consideration
(taking into account all shares of Company Common Stock previously held by such
holder).

 

(d)           General Provisions.  Interest shall accrue on any payments of
Merger Consideration from Parent to the Paying Agent at the rate of 8% per annum
from the date such payment is due until the date paid to the Paying Agent.  If
the Merger Consideration (or any portion thereof) is to be delivered to any
person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to such exchange that
the Certificate so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such exchange shall pay
to the Paying Agent any transfer or other Taxes required by reason of the
payment of such consideration to a person other than the registered holder of
the Certificate surrendered, or shall establish to the satisfaction of the
Paying Agent that such Tax has been paid or is not applicable.

 

2.5           No Further Ownership Rights in Company Common Stock.  All cash
paid upon conversion of the shares of Company Common Stock in accordance with
this Article 2 shall be deemed to have been issued or paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock.

 

2.6           Termination of Payment Fund.  Any portion of the Payment Fund that
remains undistributed to the holders of Certificates after the second
anniversary of the date such funds were originally delivered to the Paying Agent
shall be delivered to the Surviving Corporation or otherwise on the instruction
of the Surviving Corporation, and any holders of the Certificates who have not
theretofore complied with this Article 2 shall thereafter look only to the
Surviving Corporation and Parent and only as general creditors thereof for the
Merger Consideration to which such holders are entitled pursuant to
Section 2.1.  Any such portion of the Payment Fund remaining unclaimed by
holders of shares of Company Common Stock five years after the date such funds
were originally delivered to the Paying Agent (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to or become property
of any Governmental Entity) shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation free and clear of any claims or
interest of any person previously entitled thereto.

 

2.7           No Liability.  None of Parent, MergerSub, the Company, the
Surviving Corporation, or the Paying Agent shall be liable to any person in
respect of any Merger Consideration delivered, in good faith, to a public
official pursuant to any applicable abandoned property, escheat, or similar law.

 

2.8           Investment of the Payment Fund.  The Paying Agent shall invest any
cash included in the Payment Fund in such investments, if any, as the Paying
Agent shall determine, subject to the consent of Parent, which shall not be
unreasonably withheld.  Any interest and

 

11

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other income resulting from such investments shall be paid to the holders of the
Outstanding Shares on a pro rata basis, based on the number of Outstanding
Shares owned immediately prior to the Effective Time; provided, however, that
any such interest or other income remaining in the Payment Fund when it is
terminated pursuant to Section 2.6 shall be paid to Parent.

 

2.9           Lost, Stolen, or Destroyed Certificates.  If any Certificate shall
have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen, or destroyed
and, if required by the Surviving Corporation, the posting by such person of a
bond in such reasonable amount as the Surviving Corporation may direct as
indemnity by such person against any claim that may be made against the
Surviving Corporation in respect of such Certificate, the Paying Agent will
deliver in exchange for such lost, stolen, or destroyed Certificate the Merger
Consideration in respect of the shares of Company Common Stock formerly
represented thereby.

 

2.10         Withholding Rights.  Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold in respect of the
making of such payment under the IRC, the rules and regulations thereunder, or
any provision of a Tax law, provided that no such withholding shall be made
without the Shareholder Agent’s consent, which shall not be unreasonably
withheld.  To the extent that amounts are so withheld by the Surviving
Corporation or Parent, as the case may be, such withheld amounts shall be
treated for all purposes as having been paid to the holder of Company Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.

 

2.11         Stock Transfer Books.  The stock transfer books of the Company
shall be closed immediately upon the Effective Time, and there shall be no
further registration of transfers of shares of Company Common Stock thereafter
on the records of the Company.  On or after the Effective Time, any Certificates
presented to the Paying Agent or Parent for any reason shall be converted into
the right to receive the Merger Consideration to which the holders thereof are
entitled pursuant to Section 2.1.

 

2.12         Dissenting Shares.  Notwithstanding any other provision of this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by
shareholders who did not vote in favor of the Merger (the “Dissenting Shares”),
and the holders of which comply with all of the applicable provisions of the Act
relating to dissenters’ rights (the “Dissenting Shareholders”), shall not be
converted into or be exchangeable for the right to receive the Merger
Consideration, unless and until such holders shall have failed to perfect or
shall have effectively withdrawn or lost their dissenters’ rights under the
Act.  If any Dissenting Shareholder shall have failed to perfect or shall have
effectively withdrawn or lost the right to dissent, such holder’s shares of
Company Common Stock shall thereupon be treated as though such shares of Company
Common Stock had been converted, as of the Effective Time, into the right to
receive the Merger Consideration pursuant to this Article 2.  The Company shall
give Parent (i) prompt notice of any written demands for appraisal of any shares
of Company Common Stock, attempted withdrawals of such demands, and any other
instruments served pursuant to the Act and received by the Company relating to
shareholders’ rights of appraisal, and (ii) the opportunity to direct all
negotiations and

 

12

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proceedings in respect of demands for appraisal under the Act.  Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment in respect of, or settle or
offer to settle, any such demand for payment.

 

ARTICLE 3.
Representations and Warranties of Parent and MergerSub

 

Parent and MergerSub each represent and warrant to the Company as follows (with
the understanding that the Company is relying materially on such representations
and warranties in entering into and performing this Agreement):

 

3.1           Due Organization.  Each of Parent and MergerSub is a corporation,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own,
lease, or otherwise hold its assets and properties and to carry on its business
as presently conducted.

 

3.2           Authorization and Effect of Agreement.  Each of Parent and
MergerSub has the requisite corporate power to execute and deliver this
Agreement and to perform the transactions contemplated hereby to be performed by
it.  The execution and delivery of this Agreement by each of Parent and
MergerSub and the performance by Parent and MergerSub of their respective
obligations hereunder have been duly authorized by all necessary corporate
action on the part of Parent and MergerSub and by the sole shareholder of
MergerSub.  This Agreement has been duly executed and delivered by each of
Parent and MergerSub and, assuming the due execution and delivery of this
Agreement by the Company, constitutes a valid and binding obligation of each of
Parent and MergerSub, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors’ rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).

 

3.3           No Violations; Consents and Approvals.  The execution and delivery
of this Agreement by each of Parent and MergerSub does not, and the performance
by each of Parent and MergerSub of the transactions contemplated hereby to be
performed by it will not (i) conflict with or violate the certificate or
articles of incorporation or bylaws of Parent or MergerSub, (ii) conflict with
or violate, or constitute a default (with or without notice, lapse of time, or
both) under, or give rise to a right of termination, amendment, cancellation, or
acceleration of any obligation or to loss of a benefit under, any material
contract or permit to which Parent or MergerSub is a party or by which it is
bound, or (iii) conflict with or violate any federal, state, local, or foreign
law, rule, or regulation (“Law”) applicable to Parent or any order, judgment,
decree, writ, or injunction (“Order”) of any Governmental Entity applicable to
Parent.  Except for any filings, permits, authorizations, consents, and
approvals required under the Securities Act of 1933, as amended (the “Securities
Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
state securities or blue sky laws, and the filing of the Articles of Merger with
the Secretary of State of the State of Oregon, no consent, approval, order, or
authorization of, or registration, declaration, or filing with any domestic or
foreign court, government, governmental or regulatory agency, authority, entity,
or instrumentality or subdivision thereof (each, a “Governmental Entity”) is
required to be obtained or made by or in respect of Parent or MergerSub in
connection with the execution and delivery of this Agreement by each of Parent

 

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and MergerSub or the performance by it of the transactions contemplated hereby
to be performed by it.

 

ARTICLE 4.
Representations and Warranties of the Company

 

The Company hereby represents and warrants to Parent and MergerSub, subject to
such exceptions as are specifically disclosed in the disclosure schedules
delivered by the Company to Parent with this Agreement, the matters set forth in
this Article 4 (with the understanding that Parent and MergerSub are relying
materially on each such representation and warranty in entering into and
performing this Agreement).  Parent and MergerSub agree that any exception or
limitation set forth in one disclosure schedule or section of this Article 4
shall be deemed an exception or limitation to any other Section of this
Article 4 if the relevance of such disclosure to such other section is
reasonably apparent.

 

4.1           Capitalization; Ownership of Shares; No Liens on Shares.  The
authorized capital stock of the Company consists of 10,000,000 shares of Company
Common Stock, of which 5,499,334 shares are issued and outstanding as of the
close of business on the date hereof.  All of such issued and outstanding shares
of Company Common Stock are duly authorized, validly issued, fully paid, and
nonassessable.  All of such shares of Company Common Stock are owned of record
by the holders as set forth on Schedule 4.1.  None of such shares of Company
Common Stock were issued or will be transferred under this Agreement in
violation of any preemptive or preferential rights of any person of which the
Company has actual notice.  As of the date of this Agreement, 600,666 shares of
Company Common Stock are reserved for issuance and issuable or otherwise
deliverable in connection with the exercise of outstanding Company Stock Options
issued pursuant to the Company Stock Option Plan, and no shares of Company
Common Stock are issuable upon exercise of options issued outside the Company
Stock Option Plan.  As of the date of this Agreement, the Company has issued no
warrants to purchase shares of Company Common Stock.  Except as set forth in the
preceding sentences, as of the date hereof, there are no outstanding options,
warrants, calls, subscriptions, conversion, exchange, or other similar rights,
agreements, or commitments to acquire from the Company any shares of capital
stock or any other securities convertible into, exercisable or exchangeable for,
or evidencing the right to subscribe for, any shares of capital stock of the
Company.  There are no shareholder agreements, voting trusts, or other
agreements to which the Company is a party or to which it is bound relating to
the voting of any shares of capital stock of the Company (other than the Voting
Agreement between Parent and certain shareholders of the Company).  The Company
has not issued any stock appreciation rights or other rights related to equity
participation, and the Company has no debt instruments outstanding that have any
voting rights.  Schedule 4.1 sets forth true and complete information regarding
the name of the holder, the term, the current exercise price, the date of grant,
the type of option (incentive or nonqualified), and the number of Company Stock
Options granted to each holder of Company Stock Options.

 

4.2           Due Organization.  The Company and each of its Subsidiaries is a
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease, or otherwise hold its assets and properties and to
carry on its business as presently conducted.  The Company and each Subsidiary
is qualified to do business and is in good standing in the jurisdictions set
forth on

 

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Schedule 4.2, which jurisdictions represent every jurisdiction where such
qualification is required, except where the failure to be so qualified would not
have a Material Adverse Effect.

 

4.3           Subsidiaries.

 

(a)           Schedule 4.3 sets forth (i) the name of each Subsidiary of the
Company, (ii) the name of each corporation, partnership, joint venture or other
entity (other than Subsidiaries of the Company) in which the Company has, or has
the right to acquire, an equity or other ownership interest and (iii) the
capitalization of the foregoing and the percentage of equity or other ownership
interests therein held by the Company or by any of its Subsidiaries.

 

(b)           All of the outstanding shares of capital stock of each corporate
Subsidiary of the Company have been duly authorized and validly issued, are
fully paid, and nonassessable, and have not been issued in violation of any
preemptive rights or federal or state securities law.  The stock or other
ownership interest of each Subsidiary of the Company shown to be owned by the
Company or a Subsidiary of the Company on Schedule 4.3 is owned by the Company
or such Subsidiary of record and beneficially free and clear of any liens,
restrictions, pledges, security interests, claims, rights of another, or
encumbrances of any nature whatsoever (“Liens”).

 

(c)           There are no options, warrants, calls, subscriptions, conversion,
exchange, or other similar rights, agreements, or commitments obligating any of
the Subsidiaries of the Company to issue any additional shares of capital stock
or other ownership interests of such Subsidiary or any other securities
convertible into or exchangeable for or evidencing the right to subscribe for
any shares of such capital stock or other ownership interests or obligating the
Company or any of its Subsidiaries to transfer any of their respective shares of
capital stock or other ownership interests of such Subsidiary.

 

(d)           “Subsidiary” means, when used with reference to any entity, any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other subsidiary of such party is a general or
managing partner or (ii) the outstanding voting securities or interests of which
having by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions in respect of such corporation
or other organization are directly or indirectly owned or controlled by such
party or by any one or more of its subsidiaries.

 

4.4           Authority; Absence of Conflicts.

 

(a)           The Company has full corporate power and authority to execute,
deliver, and perform this Agreement and to consummate the transactions
contemplated hereby.  The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors of the Company, and no other corporate action on the part
of the Company is necessary to authorize and approve the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby
(other than, in respect of the Merger and this Agreement, the Company Requisite
Vote).  This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due execution and delivery of this Agreement by each
of Parent and MergerSub, constitutes the valid and binding obligation of the
Company, enforceable against it in accordance

 

15

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with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors’ rights in general and subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).

 

(b)           The Board of Directors of the Company has taken all corporate
actions required to be taken by the Board of Directors of the Company for the
consummation of the transactions contemplated hereby (including the Merger). 
The affirmative approval of the holders of shares of Company Common Stock
representing a majority of the votes that may be cast by the holders of all
outstanding shares of Company Common Stock (the “Company Requisite Vote”) are
the only votes of the holders of any class or series of capital stock of the
Company necessary to adopt this Agreement and approve the transactions
contemplated hereby, including the Merger.

 

(c)           Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance with the
terms hereof, will (i) materially conflict with or violate or result in a
material breach of the articles of incorporation or bylaws of the Company, nor
(ii) materially conflict with or violate or result in a material breach of or
material default (with or without notice, lapse of time, or both) under, or give
rise to a right of termination, amendment, cancellation, or acceleration of any
material obligation or to loss of a material benefit under any material
agreement, understanding, arrangement, commitment, indenture, contract, lease,
sublease, loan agreement, note, or other material document or instrument to
which the Company or any of its Subsidiaries is a party or by which it or any of
its Subsidiaries is bound or to which it, any of its Subsidiaries or its or any
of its Subsidiaries assets are subject, nor (iii) result in the creation of any
Liens on the assets, capital stock, or properties of the Company or any of its
Subsidiaries other than Permitted Liens, nor (iv) materially conflict with,
violate or result in a material breach of or constitute a material default under
any Law or Order to which the Company, any of its Subsidiaries or any of the
Company’s or any of its Subsidiaries’ assets or properties are subject, nor
(v) require the Company or any of its Subsidiaries to give notice to, or obtain
an authorization, approval, order, license, franchise, declaration, or consent
of, or make a filing with, any third person, including, without limitation, any
Governmental Entity, other than such filings as may be required under the
Securities Act, state securities or blue sky laws, the filing of the Articles of
Merger with the Secretary of State of the State of Oregon, and the consents and
approvals identified on Schedule 4.4(c) and such other authorizations,
approvals, orders, licenses, franchises, declarations, consents, or filings, the
failure to obtain or make which could not reasonably be expected to result in a
Material Adverse Effect on the Company.

 

4.5           Financial Statements.

 

(a)           The following financial statements of the Company are attached
hereto as Schedule 4.5:

 

(i)            The “Interim Financial Statements,” defined as the unaudited
consolidated balance sheet and related statement of income, shareholders’
equity, and cash flows of the Company and its Subsidiaries as of and for the
period beginning on the first day of the current fiscal year, and ending

 

16

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on the Statement Date (the “Interim Statement Period”).  The “Statement Date”
means the last day of the calendar month preceding the date of this Agreement.

 

(ii)           The audited consolidated balance sheet and related statements of
income, shareholders’ equity, and cash flows of the Company and its
Subsidiaries, as of and for the three most recent fiscal years, together with
notes thereto and the report of the Company’s auditor in respect thereof (the
“Annual Financial Statements,” and together with the Interim Financial
Statements, the “Financial Statements”).

 

(b)           Except for, in respect of the Interim Financial Statements,
normally recurring year-end audit adjustments that in the aggregate are
immaterial and the omission of footnote disclosures, the Financial Statements
(i) fairly present in all material respects the financial position, results of
operations, and cash flows of the Company and its Subsidiaries for the
respective periods stated therein, (ii) have been prepared from and are
consistent with the books and records of the Company and its Subsidiaries, and
(iii) have been prepared in accordance with GAAP consistently applied throughout
the relevant periods.

 

4.6           Absence of Undisclosed Liabilities.  Except as set forth on
Schedule 4.6, neither the Company nor any of its Subsidiaries has any material
liabilities or obligations of any nature, whether accrued, absolute, contingent,
unliquidated, or otherwise, whether due or to become due and whether arising out
of transactions entered into or any condition or state of facts existing on or
prior to the date hereof, that would in accordance with GAAP be required to be
reflected on, or disclosed in the notes to, a balance sheet, other than
(i) liabilities and obligations set forth on the Interim Financial Statements,
and (ii) liabilities and obligations that have arisen after the date of the
Interim Financial Statements in the ordinary course of business and consistent
with past practices, all of which are properly reflected in the books and
records of the Company and its Subsidiaries.

 

4.7           Conduct of Business; Certain Actions.  Except as set forth on
Schedule 4.7 and for the transactions contemplated by this Agreement, since the
Statement Date, each of the Company and its Subsidiaries has conducted its
business and operations in the ordinary course and consistent with past
practices and neither the Company nor its Subsidiaries has:

 

(a)           paid or declared any dividend or distribution or purchased or
retired any indebtedness from any shareholder thereof, or directly or indirectly
purchased, retired, or redeemed any capital stock from any shareholder;

 

(b)           increased the compensation of any of the directors, officers, or
employees of, or consultants to, the Company or any Subsidiary or, except for
wage and salary increases made in the ordinary course of business and consistent
with past practices or as required by Law;

 

(c)           made any capital expenditures in excess of $25,000 in the
aggregate;

 

(d)           sold any asset (or any group of related assets) to any director,
officer, or employee of the Company or any Subsidiary;

 

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(e)           sold any asset to any person other than a director, officer, or
employee of the Company or any Subsidiary, in any transaction (or series of
related transactions) in which the purchase price for such asset (or group of
related assets) exceeded $25,000, except for sales of inventory in the ordinary
course of business and consistent with past practices;

 

(f)            leased, licensed, or granted to any third person any rights in
any of its assets or properties except in the ordinary course of business and
consistent with past practices;

 

(g)           revalued any of its assets;

 

(h)           discharged or satisfied any Lien or paid any obligation or
liability, absolute or contingent, other than current liabilities incurred and
paid in the ordinary course of business and consistent with past practices;

 

(i)            failed to pay any accounts payable of the Company or any of its
Subsidiaries in the ordinary course of business consistent with past practice
and in accordance with their terms;

 

(j)            accelerated the collection of, or sold or otherwise transferred,
any accounts receivable of the Company or any of its Subsidiaries;

 

(k)           made or guaranteed any loans or advances to any person whatsoever;

 

(l)            canceled, waived, released, or forgiven any debts or obligations
of, or rights or claims against, third persons;

 

(m)          amended the articles of incorporation or bylaws of the Company or
any of its Subsidiaries;

 

(n)           made or paid any severance or termination payment to any employee
or consultant of the Company or any of its Subsidiaries in excess of $5,000 in
the aggregate;

 

(o)           made any change in its financial or Tax accounting principles or
methods;

 

(p)           made any investment in any person;

 

(q)           made, entered into, amended, or terminated any written employment
or consulting contract, created, made, amended, or terminated any bonus, stock
option, pension, retirement, profit sharing, or other employee benefit plan or
arrangement, or withdrawn from any “multi-employer plan” (as defined in IRC
Section 414(f)), so as to create any liability under Article IV of ERISA to any
entity;

 

(r)            amended or experienced a termination of any contract, agreement,
lease, franchise, or license required to be listed on Schedule 4.15(a) or (b);

 

(s)           agreed to do any acts described in the foregoing clauses (a)-(r)
of this Section 4.7;

 

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(t)            suffered any material damage, destruction, or loss (whether or
not covered by insurance) to any material assets of the Company or any of its
Subsidiaries;

 

(u)           made or revoked any Tax election that could reasonably be expected
to have a Material Adverse Effect on the Company or any of its Subsidiaries, or
compromised or settled any material Tax liability;

 

(v)           experienced any strike, slowdown, or demand for recognition by a
labor organization by or in respect of any of the employees of the Company or
any of its Subsidiaries; or

 

(w)          experienced any event or condition that has had or could reasonably
be expected to result in a Material Adverse Effect.

 

4.8           Real Property.

 

(a)           Schedule 4.8(a) sets forth a complete list and summary description
of all real property leased by the Company or any of its Subsidiaries (the
“Leased Real Property”).  The Company owns no real property.  Each of the
Company and its Subsidiaries has delivered or made available to Parent and
MergerSub true and correct copies of all leases, subleases, abstracts of title,
surveys, title opinions, and title insurance policies in the Company’s and its
Subsidiaries’ possession, custody, or control relating to the Leased Real
Property.

 

(b)           Except as set forth on Schedule 4.8(b), each of the Company and
its Subsidiaries has a valid leasehold interest in all Leased Real Property,
free and clear of any Lien (other than Permitted Liens).  Each of the Company
and its Subsidiaries has good and marketable title to all structures, plants,
leasehold improvements, systems, fixtures, and other property located on or
about any of the Leased Real Property that is owned by the Company and its
Subsidiaries, as reflected in the Interim Financial Statements, free and clear
of any Lien except for Permitted Liens.  None of the Leased Real Property or
other such assets is subject to any agreement, arrangement, or understanding for
its use by any person other than the Company or its Subsidiaries.  As used in
this Agreement, the term “Permitted Liens” means (i) Liens for current Taxes not
yet due and payable, (ii) covenants, conditions, and restrictions of record,
none of which materially impairs the use of such property in the manner
currently used or impairs the ability of the Company or any of its Subsidiaries
to transfer a valid leasehold interest to such Leased Real Property, (iii) any
materialmen’s, mechanic’s, workmen’s, repairmen’s, contractor’s, warehousemen’s,
carrier’s, supplier’s, vendor’s or similar lien, if payment is not yet due on
the underlying obligation, (iv) Liens in respect of pledges or deposits under
workers’ compensation laws or similar legislation, (v) all building codes,
zoning ordinances, planning restrictions and other laws, ordinances,
regulations, rules, orders or determinations of any federal, state, county,
municipal or other governmental authority heretofore, now or hereafter enacted,
made or issued by any such authority affecting the property, and (vi) minor
defects in title, none of which, individually or in the aggregate, materially
interfere with the use of such property.

 

(c)           Each of the leases and subleases relating to the Leased Real
Property is in full force and effect, there is no material default by the
Company or any Subsidiary (or to the

 

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knowledge of the Company, by the lessor) under any such lease or sublease, and
each such lease and sublease will remain in full force and effect immediately
following the Closing without any modification in the rights or obligations of
the parties under any such lease or sublease agreed to by the Company or any of
its Subsidiaries.

 

4.9           Tangible Personal Property.

 

(a)           Each of the Company and its Subsidiaries has good and marketable
title to all machinery and equipment, tools, spare and maintenance parts,
furniture, vehicles, and all other tangible personal property (collectively, the
“Tangible Personal Property”) owned by the Company and its Subsidiaries, free
and clear of any Liens, except for Permitted Liens, and/or pursuant to
applicable leases.  All items of Tangible Personal Property currently owned or
used by the Company and its Subsidiaries as of the date hereof are in good
operating condition and repair in all material respects in light of their
respective ages, ordinary wear and tear excepted, are physically located at or
about the Company’s place of business and are owned outright by the Company and
its Subsidiaries or, to the Company’s knowledge, validly leased.  None of the
Tangible Personal Property is subject to any agreement, arrangement, or
understanding for its use by any person other than the Company or its
Subsidiaries.  The maintenance and operation of the Tangible Personal Property
complies in all material respects with all applicable Laws, ordinances,
contractual commitments, and obligations.  Schedule 4.9(a) sets forth a brief
description of all Tangible Personal Property subject to any conditional sale
agreement, installment sale agreement, or title retention or security agreement
or arrangement of any kind, and the amount and repayment terms of the underlying
obligation.  Schedule 4.9(a) sets forth a complete and correct fixed asset list
of the Company and its Subsidiaries dated as of the Statement Date.

 

(b)           Schedule 4.9(b) sets forth a complete and correct list of all
material Tangible Personal Property leases to which the Company or any of its
Subsidiaries is a party, together with a brief description of the property
leased.  Each of the Company and its Subsidiaries has made available to Parent
and MergerSub complete and correct copies of each lease (and any amendments
thereto) listed on Schedule 4.9(b).  Except as set forth on Schedule 4.9(b): 
(i) each such lease is in full force and effect; (ii) all lease payments due to
the date hereof on any such lease have been paid, and neither the Company, any
of its Subsidiaries, nor (to the knowledge of the Company) any other party is in
material default under any such lease, and no event has occurred that
constitutes, or with or without notice, lapse of time, or both would constitute,
a material default by the Company or any of its Subsidiaries or (to the
knowledge of the Company) any other party under such lease; and (iii) there are
no disputes or disagreements between the Company or any of its Subsidiaries and
any other party in respect of any such lease.

 

4.10         Accounts Receivable.  The accounts receivable and notes receivable
(collectively, the “Accounts Receivable”) reflected on the Interim Financial
Statements are, and the Accounts Receivable of the Company created from and
after the date of the Interim Financial Statements to the Closing Date will be,
free and clear of any Liens, other than write-offs, discounts or credits made in
the ordinary course of business consistent with past practice.  All Accounts
Receivable of the Company and its Subsidiaries (i) arose from bona fide sales of
goods or services in the ordinary course of business consistent with past
practices, (ii) subject to any reserves for

 

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doubtful accounts, are accurately and fairly reflected on the Interim Financial
Statements or, in respect of Accounts Receivable of the Company and its
Subsidiaries created after the date thereof, are accurately and fairly reflected
in the books and records of the Company, and (iii) except as set forth on
Schedule 4.10, are valid obligations of the makers thereof, and there is no
pending or, to the knowledge of the Company, threatened contest, claim, or right
of set-off contained in any agreement with any maker of any such Account
Receivable relating to the amount or validity thereof.

 

4.11         Accounts Payable.  All accounts payable of the Company and its
Subsidiaries (i) arose from bona fide purchases in the ordinary course of
business consistent with past practices, and (ii) are accurately and fairly
reflected on the Interim Financial Statements or, in respect of accounts payable
of the Company and its Subsidiaries created after the date thereof, are
accurately and fairly reflected in the books and records of the Company.

 

4.12         Sales Representatives and Other Sales Agents/Sales
Offices.  Schedule 4.12 sets forth a complete and correct list of the names and
addresses of each sales representative or other sales agent currently engaged by
the Company and its Subsidiaries who is not an employee of the Company or its
Subsidiaries, and a summary description of the territory assigned to each such
person (noting whether such territory is exclusive or non-exclusive). 
Schedule 4.12 also sets forth a complete and correct list of all agreements
between the Company, its Subsidiaries and any such person, complete and correct
copies of which agreements have been provided or made available to Parent and
MergerSub.

 

4.13         Inventory.  The inventory of the Company and its Subsidiaries,
including, without limitation, raw materials, work in progress, and finished
goods, consists only of items of a quality and quantity useful or saleable in
the ordinary course of business of the Company and its Subsidiaries and
consistent with past practices, other than immaterial portions thereof.  The
inventory of the Company and its Subsidiaries was purchased at prices and in
quantities consistent with the Company’s custom in the ordinary course of
business.  Schedule 4.13 sets forth a complete and correct list of the inventory
of the Company and its Subsidiaries as of the Statement Date.

 

4.14         Backlog.  All outstanding customer purchase orders for products of
the Company and its Subsidiaries have been entered at prices and upon terms and
conditions consistent with the normal practices of the Company and its
Subsidiaries, and the completion of such orders will not, to the knowledge of
the Company, have a Material Adverse Effect.  Neither the Company nor any of its
Subsidiaries has been informed by any customer that any material order included
in the Company’s or its Subsidiaries’ backlog is likely to be cancelled or
terminated prior to its completion.

 

4.15         Material and Affiliated Contracts.

 

(a)           Schedule 4.15(a) sets forth a complete and correct list of all of
the following agreements, to which the Company or any Subsidiary is a party,
copies of which the Company has delivered or made available to Parent:

 

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(i)            any agreement, arrangement, or understanding, or series of
related agreements, arrangements, or understandings, that involves annual
expenditures or receipts by the Company or any of its Subsidiaries of more than
$25,000 or that provides for performance, regardless of amounts, over a period
in excess of one (1) year after the date of such agreement, arrangement, or
understanding;

 

(ii)           any license agreement, whether as licensor or licensee, other
than licenses for generally available software used by the Company and its
Subsidiaries in the ordinary course of business;

 

(iii)          any agreement with suppliers or customers for discounts or
allowances;

 

(iv)          any note, bond, indenture, credit facility, mortgage, security
agreement, or other instrument or document relating to or evidencing
indebtedness for money borrowed or a security interest in or mortgage on the
assets of the Company and its Subsidiaries;

 

(v)           any express warranty, indemnity, or guaranty issued by the Company
or any of its Subsidiaries (other than customary product warranties provided by
the Company and its Subsidiaries in the ordinary course of business);

 

(vi)          any agreement, arrangement, or understanding granting to any
person the right to use any property or property right of the Company or any of
its Subsidiaries, including any lease;

 

(vii)         any agreement, arrangement, or understanding restricting the right
of the Company or any of its Subsidiaries to engage in any business activity or
to compete with any business;

 

(viii)        any joint venture agreement;

 

(ix)           any agreement granting to any person the right to manufacture or
distribute products of the Company or any of its Subsidiaries;

 

(x)            any other material agreement, arrangement, or understanding not
made in the ordinary course of business and consistent with past practices; or

 

(xi)           any outstanding offer or commitment to enter into any contract or
arrangement of the nature described in clauses (i) through (x) of this
Section 4.15(a).

 

(b)           Schedule 4.15(b) contains a complete and correct list and
description of all agreements, arrangements, and understandings (including
outstanding indebtedness) that are currently in effect between the Company or
its Subsidiaries and any of the following and that

 

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involve a value of $25,000 or more: (i) each director and officer of the Company
or any of its Subsidiaries; (ii) the spouses, children, grandchildren, siblings,
parents, grandparents, uncles, aunts, nieces, nephews, or first cousins of any
director or officer of the Company or any of its Subsidiaries or their
respective spouses (collectively, “near relatives”); (iii) any trust for the
benefit of any director or officer of the Company or any of its Subsidiaries or
any of their respective near relatives; and (iv) any person owned or controlled
by any director or officer of the Company or any of its Subsidiaries or any of
their respective near relatives.  The agreements, arrangements, and
understandings described in Schedules 4.15(a) and 4.15(b) are collectively
referred to herein as “Material Contracts.”

 

(c)           Each of the Company and its Subsidiaries has delivered or made
available to Parent and MergerSub complete and correct copies of each written
Material Contract (and all amendments thereto).  Except as set forth on
Schedule 4.15(c): (i) each Material Contract is in full force and effect;
(ii) neither the Company, any of its Subsidiaries, nor, to the knowledge of the
Company, any other party is in material default under any such Material
Contract, and no event has occurred that constitutes, or that with or without
notice, lapse of time, or both would constitute, a material default by the
Company or any Subsidiary or, to the knowledge of the Company, by any other
party under such Material Contract; and (iii) there are no disputes or
disagreements between the Company or any of its Subsidiaries and any other party
in respect of any such Material Contract.

 

4.16         Compliance with Laws.  Except as set forth on Schedule 4.16, each
of the Company and its Subsidiaries is complying and has complied in all
material respects with all Laws and ordinances applicable to its business,
properties, and operations, and has secured all necessary permits,
authorizations, and licenses issued by any Governmental Entity applicable to its
business, properties, and operations, other than such items the failure of which
to obtain would not result in a Material Adverse Effect on the Company.  Except
in respect of incidents of noncompliance that have been corrected, neither the
Company nor any Subsidiary has received any notice alleging a failure to so
comply or to secure such a permit, authorization, or license nor, to the
knowledge of the Company, is there any inquiry, investigation, or proceeding
relating thereto.

 

4.17         Legal Proceedings.  Except as set forth on Schedule 4.17, there are
no actions, suits, proceedings (including, without limitation, arbitral and
administrative proceedings), claims, or governmental or regulatory
investigations or audits pending or, to the knowledge of the Company,
threatened, against the Company, any of its Subsidiaries, or its or its
Subsidiaries’ properties, assets, or business, or to the knowledge of the
Company, pending or threatened against, relating to, or involving any of the
officers, directors, employees, or agents of the Company or any of its
Subsidiaries in connection with the business of the Company or any of its
Subsidiaries.  There are no such actions, suits, proceedings, claims, or
investigations pending or, to the knowledge of the Company, threatened,
challenging the validity or propriety of, or otherwise relating to or involving,
this Agreement or the transactions contemplated hereby.  Except as set forth on
Schedule 4.17, there is no Order or award (whether issued by an arbitrator, a
Governmental Entity, or otherwise) to which the Company or any of its
Subsidiaries is a party, or involving the property, assets, or business of the
Company or its Subsidiaries, that is unsatisfied or that requires continuing
compliance therewith by the Company or any of its Subsidiaries.  For the
purposes of this Agreement, an action, suit, proceeding, claim,

 

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investigation, dispute, or other matter will be deemed to have been “threatened”
if any demand or statement has been made in writing or any notice has been given
in writing that such action, suit, proceeding, claim, investigation, dispute, or
other matter is likely to be asserted, commenced, taken, or otherwise pursued in
the future.

 

4.18         Ability to Conduct the Business.  Except as set forth on
Schedule 4.18, there is no agreement, arrangement, or understanding to which the
Company or any of its Subsidiaries is a party, nor any Order of any Governmental
Entity directed at the Company or any of its Subsidiaries or in which the
Company or any of its Subsidiaries is named nor, to the knowledge of the
Company, any other Order that could in any such case materially prevent the use
by the Company or any of its Subsidiaries of its or its Subsidiaries’ assets and
properties or the conduct by the Company or its Subsidiaries of its or its
Subsidiaries business as of the date hereof.  Each of the Company and its
Subsidiaries has in force, and has complied in all material respects with, all
of the conditions and requirements imposed by, all material permits, licenses,
exemptions, consents, authorizations, and approvals used in or required for the
conduct of its business as presently conducted.  Neither the Company nor any
Subsidiary has received any notice of, and to the knowledge of the Company,
there is no intention on the part of any Governmental Entity to cancel, revoke,
or modify, or any inquiries, proceedings, or investigations the purpose or
possible outcome of which is the cancellation, revocation, or modification of,
any such permit, license, exemption, consent, authorization, or approval.  Such
permits, licenses, exemptions, consents, authorizations, and approvals will not
be adversely affected by the consummation of the transactions contemplated
hereby.

 

4.19         Labor Matters.

 

(a)           Neither the Company nor any of its Subsidiaries is a party to any
labor or collective bargaining agreement, and no employees of the Company or any
of its Subsidiaries are represented by any labor organization.  Within the
preceding three years, there have been no representation or certification
proceedings, or petitions seeking a representation proceeding, pending or, to
the knowledge of the Company, threatened to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority.  Within the preceding three years, to the knowledge of the Company,
there have been no organizing activities involving Company or any of its
Subsidiaries in respect of any group of employees of Company or any of its
Subsidiaries.

 

(b)           There are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations, or material grievances or other material labor disputes
pending or, to the knowledge of the Company, threatened against or involving the
Company or any of its Subsidiaries.  There are no unfair labor practice charges,
grievances, or complaints pending or, to the knowledge of the Company,
threatened by or on behalf of any employee or group of employees of the Company
or its Subsidiaries that, if individually or collectively resolved against the
Company or its Subsidiaries, would have a Material Adverse Effect.

 

(c)           Each of the Company and its Subsidiaries is in material compliance
with all Laws and Orders relating to the employment of labor, including all such
Laws and Orders relating to wages, hours, the Worker Adjustment and Retraining
Notification Act, as amended (“WARN”), collective bargaining, discrimination,
civil rights, safety and health, workers’

 

24

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compensation, and the collection and payment of withholding and/or social
security Taxes and any similar Tax.

 

(d)           There has been no “mass layoff” or “plant closing” as defined by
WARN in respect of the Company or its Subsidiaries within the six months prior
to Closing.

 

(e)           Schedule 4.19(e) sets forth the names of all directors and
officers of the Company and its Subsidiaries, together with the respective term
of office and titles for each such person and all remuneration payable to any
such officers and directors.  Schedule 4.19(e) includes, in respect of each
employee, director and officer of the Company and its Subsidiaries, such
person’s date of employment, the current salary and commission terms of such
person, the amount of any bonuses or other cash compensation (other than regular
salary or commissions) paid during and since the end of the Company’s most
recent fiscal year to such person and a description of all compensation
arrangements currently applicable to such person.

 

4.20         Employee Benefit Plans.

 

(a)           List of Benefit Plans and Employee Arrangements.  Schedule 4.20(a)
sets forth a complete and correct list of:

 

(i)            all “employee benefit plans,” as defined in Section 3(3) of
ERISA, pursuant to which the Company or its Subsidiaries has any obligation or
liability, contingent or otherwise (“Benefit Plans”); and

 

(ii)           all employment or consulting agreements, bonus or other incentive
compensation, deferred compensation, salary continuation during any absence from
active employment for disability or other reasons, severance, supplemental
retirement, cafeteria benefits or dependent care, sick days, stock award, stock
option, stock purchase, tuition assistance, club membership, employee discount,
employee loan, or vacation pay agreements, policies, or arrangements that the
Company or any of its Subsidiaries maintains or has any obligation or liability
(contingent or otherwise) in respect of any current officer, director, or
employee of the Company or its Subsidiaries (the “Employee Arrangements”).

 

(b)           Documents.  In respect of each Benefit Plan and Employee
Arrangement, the Company has provided or made available to Parent a complete and
correct copy of each of the documents requested.

 

(c)           Multiemployer Plans.  Neither the Company nor any entity under
“common control” with the Company (within the meaning of Section 4001 of ERISA)
has maintained, contributed to or otherwise had any obligation with respect to
any “multiemployer plan” (as defined in Section 3(37) of ERISA).

 

(d)           Tax Qualification.  Each Benefit Plan and its related trust that
is intended to be qualified under IRC Sections 401(a) and 501(a) either; (i) is
the subject of an unrevoked favorable determination letter from the IRS with
respect to such Benefit Plan’s qualified status under the IRC, as amended by the
Tax Reform Act of 1986 and all subsequent legislation

 

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through what is commonly referred to as “GUST,” (ii) has remaining a period of
time under the IRC or IRS pronouncements in which to request, and to make any
amendments necessary to obtain, such a letter from the IRS, or (iii) if reliance
is permitted under IRS Announcement 2001-77, relies on the favorable opinion or
advisory letter of the master and prototype or volume submitter plan sponsor of
the Benefit Plan.

 

(e)           Contributions.  All contributions or other payments required to
have been made by the Company or its Subsidiaries to or under any Benefit Plan
or Employee Arrangement by applicable Law or the terms of such Benefit Plan or
Employee Arrangement (or any agreement relating thereto) have been timely and
properly made or properly accounted for on the Financial Statements.

 

(f)            Compliance with Laws.  The Benefit Plans and Employee
Arrangements have been maintained and administered in all material respects in
accordance with their terms and all applicable Laws.

 

(g)           Claims.  There are no pending or, to the knowledge of the Company,
threatened actions, suits, proceedings, or claims against or relating to any
Benefit Plan or Employee Arrangement other than routine benefit claims by
persons entitled to benefits thereunder.

 

(h)           Retiree Medical.  Neither the Company nor its Subsidiaries has any
obligation or liability under any retiree life or retiree health plans that
provide for continuing coverage for current or former officers, directors, or
employees of the Company or its Subsidiaries except (i) as may be required under
Part 6 of Title I of ERISA and at the sole expense of the participant or the
participant’s beneficiary or (ii) a medical expense flexible spending account
plan pursuant to IRC Section 125.

 

(i)            Employer Securities.  None of the assets of any Benefit Plan is
stock of the Company, its Subsidiaries, or any of their respective affiliates,
or property leased to or jointly owned by the Company, its Subsidiaries, or any
of their respective affiliates.

 

(j)            Change in Control.  Except in connection with equity
compensation, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment becoming due to any employee (current, former, or retired) of
the Company or its Subsidiaries, (ii) materially increase any benefits under any
Benefit Plan or Employee Arrangement, or (iii) result in the acceleration of the
time of payment of, vesting of or other rights in respect of any such benefits.

 

(k)           Underfunded Pension Plans.  Neither the Company nor any Subsidiary
has liability (contingent or otherwise) by reason of a transfer of an
underfunded pension plan.

 

4.21         Environmental Matters.

 

(a)           Environmental Compliance.  Except as set forth on
Schedule 4.21(a), the Company (i) is not aware of any Hazardous Materials that
are present in, on, or under any properties owned, leased or used at any time
(including both land and improvements thereon) by the Company; (ii) has obtained
all applicable and material permits, licenses and other

 

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authorizations that are required under Environmental Laws (as defined below) for
the conduct of its business as currently conducted (“Environmental Permits”) and
all such Environmental Permits are valid and in full force and effect; (iii) is
in compliance with all material terms and conditions of such Environmental
Permits; (iv) is not aware of any event, condition, circumstance, activity,
practice, incident, action or plan which constitutes a material violation of any
Environmental Law applicable to the Company, any person or entity for which the
Company is legally liable or any of the Company’s current or past locations or
assets or which could reasonably be expected to form the basis of any material
Environmental Claim (as defined below) with respect to the Company or any person
or entity whose liability for any Environmental Claim the Company has retained
or assumed either contractually or by operation of law; (v) has not disposed of,
released, discharged or emitted any Hazardous Materials (as defined below) into
the soil, air, surface water, building materials or groundwater at any
properties owned or leased at any time by the Company, or at any other property,
or exposed any employee or other individual to any Hazardous Materials or
condition, in such a manner as would reasonably be expected to result in any
material liability to the Company or result in any material Company corrective
or remedial action obligation; and (vi) has taken all actions reasonably
necessary under Environmental Laws to register any products or materials
required to be registered by the Company (or any person for whom Company has
legal responsibility) thereunder.  For the purposes of this Section 4.21,
“Environmental Claim” means any notice, claim, act, cause of action or
investigation by any person alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (a) the presence, or release into the
environment, of any Hazardous Materials (b) any violation, or alleged violation,
of any Environmental Laws, (c) the exposure of any person to any Hazardous
Materials or (d) the use, storage, disposal, discharge, transportation,
emission, destruction, remediation or investigation of any Hazardous Materials. 
“Environmental Laws” means all federal, state, local and foreign laws and
regulations relating to pollution or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) or the
protection of human health and worker safety, including, without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.  “Hazardous Materials” means chemicals,
pollutants, contaminants, wastes, toxic substances, radioactive and biological
materials, asbestos-containing materials (ACM), hazardous substances, petroleum
and petroleum products or any fraction thereof or other substance which is or
has been designated as a danger or threat to health, reproduction or the
environment, excluding, however, Hazardous Materials contained in products
typically used for office and janitorial purposes properly, safely and legally
maintained in accordance with Environmental Laws.

 

(b)           Hazardous Materials Activities.  The Hazardous Materials
Activities (as defined below) of the Company (i) have been conducted in
compliance in all material respects with applicable Environmental Laws and
(ii) have not resulted in the exposure of any person to any Hazardous Materials
in a manner which has caused or could reasonably be expected to cause a material
adverse health effect to said person.  For the purpose of the foregoing,
“Hazardous Materials Activity” is the transportation, transfer, recycling,
storage, use, treatment, manufacture, investigation, removal, remediation,
release, exposure of others to, sale or distribution of any Hazardous Materials
or any product containing Hazardous Materials.

 

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(c)           Effect of Transaction.  To the knowledge of the Company, no
circumstances exist which could cause any Environmental Permit to be revoked,
modified, or rendered nonrenewable upon payment of the permit fee or which could
impose upon the Company the obligation to obtain any additional Environmental
Permit.  All Environmental Permits and all other consents and clearances
required by any Environmental Law or any agreement to which the Company is bound
as a condition to the performance and enforcement of this Agreement (including
without limitation, all so called “ECRA” environmental clearances) which are
required by any Governmental Entity in connection with the transactions
contemplated by this Agreement have been obtained or will be obtained prior to
the Closing at no cost to Parent or the Company.  Schedule 4.21(c) accurately
describes all Company Environmental Permits.

 

(d)           Offsite Hazardous Material Disposal.  To the knowledge of the
Company, no action, proceeding, liability or claim exists or is threatened,
against any disposal site, transporter, recycler or handler used by the Company
(“Disposal Site”) or against the Company or any person or entity for which the
Company is legally responsible with respect to any transfer or release of
Hazardous Materials to a Disposal Site.

 

(e)           Environmental Liabilities.  The Company is not aware of any fact
or circumstance which could involve the Company or any person or entity for
which the Company is legally responsible in any material environmental
litigation or impose upon the Company or any such person or entity any material
environmental liability.

 

(f)            Disclosure of Environmental Matters.  The Company has delivered
or made available to Parent or made available for inspections by Parent and its
agents and employees all records concerning the Hazardous Materials Activities
of the Company and all environmental audits and environmental assessments of any
current or past Company facility conducted at the request of, or otherwise
reasonably available to the Company.  The Company has complied in all material
respects with all material environmental disclosure, facility closure and
clearance obligations imposed upon the Company with respect to this transaction
or otherwise by applicable law.

 

4.22         Warranties; Products Claims.  During the one-year period prior to
the date hereof, neither the Company nor its Subsidiaries has experienced any
material return or warranty claims, nor are there any pending or, to the
knowledge of the Company, threatened, any return or warranty claims in respect
of products sold by the Company or its Subsidiaries.

 

4.23         Tax Matters.

 

(a)           Definition of Taxes.  For the purposes of this Agreement, “Tax” or
“Taxes” refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to

 

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such amounts and including any liability for taxes of a predecessor entity. 
“IRC” means the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations thereunder.

 

(b)           Tax Returns and Audits; Taxes.

 

(i)            The Company and each of its Subsidiaries have timely filed
(taking into account applicable extensions) all federal and state, local and
foreign returns, estimates, information statements and reports (“Returns”)
relating to Taxes required to be filed by the Company and each of its
Subsidiaries with any Tax authority and such Returns were true and correct in
all material respects when filed. All Taxes shown on such Returns as owing by
Company or any of its Subsidiaries have been paid.  There are no liens for Taxes
(other than Taxes not yet due and payable) upon any of the assets of the Company
or any of its Subsidiaries.

 

(ii)           The Company and each of its Subsidiaries as of the Effective Time
will have withheld with respect to its employees all federal and state income
taxes, Taxes pursuant to the Federal Insurance Contribution Act (“FICA”) and
other Taxes required to be withheld.

 

(iii)          There is no Tax deficiency outstanding which has been proposed or
assessed in writing against the Company or any of its Subsidiaries, nor has the
Company or any of its Subsidiaries executed any unexpired waiver of any statute
of limitations on or extending the period for the assessment or collection of
any Tax.

 

(iv)          To the Company’s knowledge, no audit or other examination of any
Return of the Company or any of its Subsidiaries by any Tax authority is
presently in progress.  Neither the Company nor any of its Subsidiaries has been
notified of any request for such an audit or other examination.

 

(v)           Neither the Company nor any of its Subsidiaries has any liability
for unpaid Taxes which has not been accrued for or reserved on the Financial
Statements, whether asserted or unasserted, contingent or otherwise, which is
material to the Company, other than any liability for unpaid Taxes that may have
accrued since the date of the Financial Statements in connection with the
operation of the business of the Company and its Subsidiaries in the ordinary
course of business.

 

(vi)          [Reserved.]

 

(vii)         Neither the Company nor any of its Subsidiaries has filed any
consent agreement under former IRC Section 341(f) or agreed to have former IRC
Section 341(f)(2) apply to any disposition of a subsection (f) asset (as defined
in former IRC Section 341(f)(4)) owned by the Company.

 

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(viii)        Neither the Company nor any of its Subsidiaries is party to or has
any obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement.

 

(ix)           The Company and its Subsidiaries have not been and will not be
required to include any material adjustment in taxable income for any Tax period
(or portion thereof) pursuant to IRC Section 481 or Section 263A or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Closing.

 

(x)            None of the Company’s or its Subsidiaries’ assets are tax exempt
use property within the meaning of IRC Section 168(h).

 

(xi)           Schedule 4.23 lists (A) any foreign Tax holidays, (B) any
intercompany transfer pricing agreements, or other arrangements that have been
established by the Company or any of its Subsidiaries with any Tax authority and
(C) any expatriate programs or policies affecting the Company or any of its
Subsidiaries.

 

(xii)          Neither Company, nor any of its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Company), or (B) has any
liability for the Taxes of any Person (other than Company or any of its
Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any comparable
provision under state, local or foreign Tax laws), as a transferee or successor,
by contract, or otherwise.

 

(xiii)         Neither Company, nor any of its Subsidiaries, was either a
“distributing corporation” or a “controlled corporation” in a distribution of
stock qualifying for tax-free treatment under IRC Section 355.

 

(xiv)        Company has delivered or made available to Parent correct and
complete copies of all federal income Tax Returns of Company and its
Subsidiaries for periods ending after December 31, 2000.

 

4.24         Insurance.  Schedule 4.24 sets forth a complete and correct list
and brief summary description of all insurance policies carried by, or covering,
the Company and its Subsidiaries in respect of their respective businesses. 
Complete and correct copies of each such policy have been made available to
Parent and MergerSub, all such policies are in full force and effect, and no
notice of cancellation has been given in respect of any such policy.  All
premiums due thereon have been paid.  Except as set forth on Schedule 4.24,
there are no pending claims or, to the knowledge of the Company, threatened
claims under any of the Company’s or its Subsidiaries’ insurance policies.

 

4.25         Minute Books; Stock Record Books.  Complete and correct copies of
the Company’s and its Subsidiaries’ minute books and stock record books have
been provided to Parent and MergerSub.  The minute books of the Company and its
Subsidiaries contain true and complete originals or copies of all minutes of
meetings of and actions by the shareholders, Board

 

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of Directors, and all committees of the Board of Directors of the Company and
its Subsidiaries.  The stock record books accurately reflect all transactions in
shares of the Company’s and its Subsidiaries’ capital stock.

 

4.26         Brokers’ or Finders’ Fees.  No agent, broker, investment banker, or
other person or firm acting on behalf of the Company and its Subsidiaries is or
will be entitled to any broker’s or finder’s fee or any other commission or
similar fee directly or indirectly from the Company or its Subsidiaries in
connection with any of the transactions contemplated by this Agreement.

 

4.27         Material Customers and Suppliers.

 

(a)           Each of the ten largest customers of the Company and its
Subsidiaries in terms of amounts invoiced to such customers during the most
recent fiscal year, and during the Interim Statement Period, respectively is a
“Material Customer.”  No Material Customer has given the Company or its
Subsidiaries any notice terminating, suspending, or reducing in any material
respect, or specifying an intention to terminate, suspend, or reduce in any
material respect in the future, the business relationship between such customer
and the Company or its Subsidiaries and, to the Company’s knowledge, there has
not been any Material Adverse Effect on the business relationship of the Company
or its Subsidiaries with any such customer since the end of the most recent
fiscal year.

 

(b)           Each of the ten largest suppliers of the Company and its
Subsidiaries in terms of amounts purchased from such suppliers during the most
recent fiscal year, and during the Interim Statement Period, respectively is a
“Material Supplier.”  No Material Supplier has given the Company or its
Subsidiaries any notice terminating, suspending, or reducing in any material
respect, or specifying an intention to terminate, suspend, or reduce in any
material respect in the future, the business relationship between such supplier
and the Company or its Subsidiaries and to the Company’s knowledge, there has
not been any Material Adverse Effect on the business relationship of the Company
or its Subsidiaries with any such supplier since the end of the most recent
fiscal year.

 

4.28         Bank Accounts; Powers of Attorney.  Schedule 4.28 sets forth a
complete and correct list showing:  (i) all banks in which the Company and its
Subsidiaries maintain a bank account or safe deposit box (collectively, “Bank
Accounts”), together with, as to each such Bank Account, the account number, the
names of all signatories thereof, and the authorized powers of each such
signatory and, in respect of each such safe deposit box, the number thereof and
the names of all persons having access thereto; and (ii) the names of all
persons holding powers of attorney from the Company or its Subsidiaries, true
and correct copies of which have been provided or made available to Parent and
MergerSub.

 

4.29         Books and Records.  All of the records, data, information,
databases, systems, and controls maintained, operated, or used by the Company
and its Subsidiaries in connection with the conduct or administration of their
respective businesses (including all means of access thereto and therefrom) are
located on the premises of the Company and are under the exclusive ownership or
direct control of the Company.

 

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4.30         Intellectual Property Rights.

 

(a)           For the purposes of this Agreement, the following terms have the
following definitions:

 

(i)            “Intellectual Property” shall mean any or all of the following
and all rights in, arising out of, or associated therewith:  (i) all United
States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisional, continuations and
continuations-in-part thereof (“Patents”); (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii) all works
of authorship, copyrights, copyright registrations and applications therefor and
all other rights corresponding thereto throughout the world; (iv) all
semiconductor circuit designs; (v) all rights to all mask works and reticules,
mask work registrations and applications therefor; (vi) all industrial designs
and any registrations and applications therefor throughout the world; (vii) all
trade names, logos, common law trademarks and service marks; trademark and
service mark registrations and applications therefor and all goodwill associated
therewith throughout the world; (viii) all databases and data collections and
all rights therein throughout the world; (ix) all computer software including
all source code, object code, firmware, development tools, files, records and
data, all media on which any of the foregoing is recorded, all Web addresses,
sites and domain names; (x) any similar, corresponding or equivalent rights to
any of the foregoing; and (xi) all technical, design, end-user and other
documentation related to any of the foregoing.

 

(ii)           “Company Intellectual Property” shall mean any Intellectual
Property that is owned by, subject to an agreement to assign to, or exclusively
licensed to the Company or any of its Subsidiaries.  Without in any way limiting
the generality of the foregoing, Company Intellectual Property includes all
Intellectual Property owned or exclusively licensed by the Company related to
the Company’s products, including without limitation all rights in any design
code, documentation, and tooling for packaging of semiconductors in connection
with all current products and products in design and development.

 

(iii)          “Registered Intellectual Property” shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks, and any domain name registrations; (iii) registered
copyrights and applications for copyright registration; (iv) any mask work
registrations and applications to register mask works; and (v) any other
Intellectual Property that is the subject of an application,

 

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certificate, filing, registration or other document issued by, filed with, or
recorded by, any state, government or other public legal authority.

 

(iv)          “Company Registered Intellectual Property” means all of the
Registered Intellectual Property owned by, or filed in the name of, the Company
or any of its Subsidiaries.

 

(b)           Schedule 4.30(b) is a complete and accurate list of all Company
Registered Intellectual Property and specifies, where applicable, the
jurisdictions in which each such item of Company Registered Intellectual
Property has been issued or registered and lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office or equivalent authority anywhere in the world) related to any of the
Company Registered Intellectual Property.

 

(c)           Schedule 4.30(c) is a complete and accurate list (by name and
version number) of all products and service offerings of the Company or any of
its Subsidiaries that have been distributed or provided in the one-year period
preceding the date hereof or which the Company or any of its Subsidiaries
currently is developing or has developed (“Company Products”).

 

(d)           No Company Intellectual Property or Company Product is subject to
any proceeding or outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any material manner the use, transfer,
or licensing thereof by the Company or any of its Subsidiaries, or which may
affect the validity, use or enforceability of such Company Intellectual Property
or Company Product.

 

(e)           Each item of Company Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees currently
due in connection with such Company Registered Intellectual Property have been
made and all necessary documents, recordations and certificates in connection
with such Company Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Company Registered Intellectual Property.

 

(f)            The Company owns and has good and exclusive title (or an
exclusive license from a third party) to, each item of Company Intellectual
Property free and clear of any material lien or encumbrance (excluding
non-exclusive licenses and related restrictions granted in the ordinary
course).  Without limiting the foregoing: (i) the Company is the exclusive owner
in the relevant markets of all trademarks and trade names used in connection
with the operation or conduct of the business of the Company and its
Subsidiaries, including the sale, distribution or provision of any Company
Products by the Company or its Subsidiaries; (ii) the Company owns exclusively,
and has good title to, all copyrighted works that are Company Products or which
the Company or any of its Subsidiaries otherwise purports to own; and (iii)
except as set forth in Schedule 4.30(f), the Company Products do not infringe
any U.S. Patents, or to the Company’s knowledge, any non-U.S. Patents.

 

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(g)           To the extent that any Intellectual Property has been developed or
created independently or jointly by a third party for the Company or any of its
Subsidiaries or is incorporated into any of the Company Products, the Company
has a written agreement with such third party with respect thereto and the
Company thereby either (i) has obtained ownership of, and is the exclusive owner
of, or (ii) has obtained a perpetual, non-terminable license (sufficient for the
conduct of its business as currently conducted, and to the Company’s knowledge,
sufficient for the conduct of its business as currently proposed to be
conducted) to all such third party’s Intellectual Property in such work,
material or invention by operation of law or by valid assignment, to the fullest
extent it is legally possible to do so.

 

(h)           Neither the Company nor any of its Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was Company Intellectual Property, to any third party.  To
the Company’s knowledge, neither the Company nor any of its Subsidiaries has
permitted its rights in any material portion of such Company Intellectual
Property to lapse or enter the public domain.

 

(i)            Schedule 4.30(i) lists all contracts, licenses and agreements to
which the Company or any of its Subsidiaries is a party: (i) with respect to
Company Intellectual Property licensed or transferred to any third party (other
than end-user licenses in the ordinary course); or (ii) pursuant to which a
third party has licensed or transferred any Intellectual Property to the
Company.

 

(j)            All contracts, licenses and agreements relating to either (i)
Company Intellectual Property or (ii) Intellectual Property of a third party
used in the business of the Company or any of its Subsidiaries, are in full
force and effect.  The consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of such contracts, licenses and
agreements.  Each of the Company and its Subsidiaries is in compliance in all
material respects with, and has not materially breached any term of any such
contracts, licenses and agreements and, to the knowledge of the Company, all
other parties to such contracts, licenses and agreements are in compliance in
all material respects with, and have not materially breached any term of, such
contracts, licenses and agreements.  To the Company’s knowledge, immediately
following the Closing, the Surviving Corporation will be permitted to exercise
all of the Company’s rights under such contracts, licenses and agreements to the
same extent the Company and its Subsidiaries would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay.  Neither this
Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent or MergerSub by operation of law or otherwise of any
contracts or agreements to which the Company is a party, will result in (i)
either Parent’s or the MergerSub’s granting to any third party any right to or
with respect to any Intellectual Property right owned by, or licensed to, either
of them, (ii) either the Parent’s or the Merger Sub’s being bound by, or subject
to, any non-compete or other restriction on the operation or scope of their
respective businesses, or (iii) either the Parent’s or the Merger Sub’s being
obligated to pay any royalties or other amounts to any third party in excess of
those payable by Parent or Merger Sub, respectively, prior to the Closing.

 

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(k)           The operation of the business of the Company and its Subsidiaries
as such business currently is conducted, including (i) the Company’s and its
Subsidiaries’ design, development, manufacture, distribution, reproduction,
marketing or sale of the products or services of the Company and its
Subsidiaries (including Company Products) and (ii) to the knowledge of the
Company, the Company’s use of any product, device or process for the purpose set
forth in clause (i) of this Section 4.30(k), has not and does not infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any jurisdiction applicable to
the Company’s business.

 

(l)            Neither the Company nor any of its Subsidiaries has received
notice from any third party that the operation of the business of the Company or
any of its Subsidiaries or any act, product or service of the Company or any of
its Subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.

 

(m)          To the knowledge of the Company, no person has or is infringing or
misappropriating any Company Intellectual Property.

 

(n)           The Company and each of its Subsidiaries has taken reasonable
steps to protect the Company’s and its Subsidiaries’ rights in the Company’s
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to the
Company or any of its Subsidiaries, and, without limiting the foregoing, each of
the Company and its Subsidiaries has and enforces a policy requiring each
employee and contractor to execute a proprietary information/confidentiality
agreement substantially in the form provided to Parent and all current and
former employees and contractors of the Company and any of its Subsidiaries have
executed such an agreement.

 

4.31         Information Furnished.  Neither this Agreement nor the Schedules
attached hereto, taken as a whole, contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements herein
or therein not misleading.

 

ARTICLE 5.
Covenants Related to Conduct of the Business

 

5.1           Inspection.  From and after the date hereof and until the Closing,
the Company shall, and shall cause its Subsidiaries to: (i) give to each of
Parent and MergerSub and its officers, directors, employees, agents, financial,
advisors, attorneys, accountants, environmental professionals and other
representatives (collectively, “Representatives”) free, full, and complete
access on reasonable notice during normal business hours to all books, records,
Tax Returns, files, correspondence, personnel, facilities, and properties of the
Company and its Subsidiaries; (ii) provide each of Parent and MergerSub and its
Representatives all information and material pertaining to the business and
affairs of the Company and its Subsidiaries as Parent and MergerSub may deem
reasonably necessary or appropriate; (iii) without limiting the generality of
the foregoing, permit Parent’s and MergerSub’s accountants to examine the
Company’s and its Subsidiaries’ financial statements for any fiscal period; and
(iv) use its reasonable efforts to afford each of Parent and MergerSub and its
Representatives the opportunity to meet, at mutually agreed times and, at the
election of the Company, with a Company representative in attendance,

 

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with the customers, employees, and vendors of the Company and its Subsidiaries
to discuss the business, condition (financial or otherwise), operations, and
prospects of the Company and its Subsidiaries, including the status of customer
programs and customer relationships.

 

5.2           Financial Statements.  From and after the date hereof and
continuing until the Closing, as soon as available, and in any event within
20 days after the end of each calendar month, the Company shall, and shall cause
its Subsidiaries to, furnish to Parent and MergerSub an unaudited balance sheet
as of the last day of the month during such period and the related statements of
income and cash flows of the Company and its Subsidiaries for such month.  Such
monthly financial statements shall fairly present in all material respects the
financial position, results of operations, and changes in financial position of
the Company and its Subsidiaries as of the indicated dates and for the indicated
periods and shall be prepared in accordance with GAAP, consistently applied,
except as otherwise stated therein, and the omission of footnote disclosure and
any year-end adjustment consistent with past practice.

 

5.3           Interim Operations of the Company and its Subsidiaries.

 

(a)           Other than for the transactions contemplated by this Agreement,
from the date hereof to the Closing, the Company shall, and shall cause its
Subsidiaries to, conduct their respective businesses only in the ordinary course
consistent with past practices, and the Company shall not, and shall cause its
Subsidiaries not to, unless Parent or MergerSub gives its prior written
approval:

 

(i)            amend or otherwise change their articles of incorporation or
bylaws, as each such document is in effect on the date hereof;

 

(ii)           issue or sell, or authorize for issuance or sale, additional
shares of any class of capital stock or issue, grant, or enter into any
subscription, option, warrant, right, convertible or exchangeable security, or
other agreement or commitment of any character obligating the Company or its
Subsidiaries to issue securities, other than shares issued pursuant to the
exercise of Company Stock Options outstanding as of the date hereof;

 

(iii)          declare, set aside, make, or pay any dividend or other
distribution in respect of their capital stock;

 

(iv)          redeem, purchase, or otherwise acquire, directly or indirectly,
any of their capital stock (other than repurchases of unvested shares in the
ordinary course consistent with past practices);

 

(v)           authorize any capital expenditures or sell, pledge, dispose of, or
encumber, or agree to sell, pledge, dispose of, or encumber, any assets of the
Company or its Subsidiaries except for sales of inventory in the ordinary course
of business consistent with past practices;

 

(vi)          acquire (by merger, share exchange, consolidation, combination, or
acquisition of stock or assets) any corporation, partnership, or other business
organization or division thereof or enter into any contract,

 

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agreement, commitment, or arrangement in respect of any of the foregoing;

 

(vii)         incur any indebtedness for borrowed money, issue any debt
securities, or enter into or modify any contract, agreement, lease, commitment,
or arrangement in respect thereof;

 

(viii)        enter into any new material contract, agreement, lease, or
commitment, or amend or terminate any existing material contract, agreement,
lease, or commitment;

 

(ix)           enter into, amend, or terminate any employment or consulting
agreement with any director, officer, consultant, or employee of the Company or
its Subsidiaries, enter into, amend, or terminate any employment or consulting
agreement or arrangement with any other person or take any action in respect of
the grant or payment of any severance or termination pay other than pursuant to
policies or agreements of the Company or its Subsidiaries in effect on the date
hereof;

 

(x)            enter into, extend, or renew any lease for equipment, office
space, or other space;

 

(xi)           fail to pay any accounts payable of the Company or its
Subsidiaries in the ordinary course of business consistent with past practice
and in accordance with their terms consistent with past practices (although the
Company may accelerate the payment of bank loans in order to obtain Lien
releases relating to the Company’s assets);

 

(xii)          accelerate the collection of, or sell or otherwise transfer, any
accounts receivable of the Company or its Subsidiaries;

 

(xiii)         except as required by applicable Law, adopt, amend, or terminate
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund, or arrangement for the benefit or welfare of any officer or
employee of the Company or its Subsidiaries, or withdraw from any multi-employer
plan so as to create any liability under Article IV of ERISA to any entity;

 

(xiv)        pay (except for compensation under existing employment
arrangements, advances to salesmen in the ordinary course of business, and
directors’ fees under standard terms in effect prior to the date hereof), loan,
or advance any amount to, or sell, transfer, or lease any assets or properties
to, or enter into any agreement or arrangement with, any of their officers or
directors or any affiliate, associate, or near relative of any of their officers
or directors;

 

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(xv)         write down (or write up) the value of any inventory or write off as
uncollectible any Accounts Receivable other than in the ordinary course of
business consistent with past practice;

 

(xvi)        cancel any debts or waive any claims or rights of substantial
value;

 

(xvii)       dispose of or permit to lapse any rights to the use of any patent,
trademark, trade name, copyright, or other intangible asset, or dispose of or
disclose to any person any trade secret, formula, process, or know-how not
theretofore a matter of public knowledge;

 

(xviii)      change any of the banking or safe deposit arrangements described in
Schedule 4.28, except in the ordinary course of business (although the Company
may request that the Company’s bank lenders remove Kenneth Lakin as a personal
guarantor of the Company’s bank loans);

 

(xix)         grant or extend any power of attorney or act as guarantor, surety,
co-signer, endorser, co-maker, indemnitor, or otherwise, in respect of the
obligation of any person;

 

(xx)          make any change in financial or Tax accounting methods,
principles, or practices or make or cause to be made any elections on Tax
Returns of the Company and its Subsidiaries, unless required by GAAP or
applicable law;

 

(xxi)         extend credit in the sale of products, collection of receivables,
or otherwise, other than in the ordinary course of business consistent with past
practice;

 

(xxii)        fail to maintain its books, accounts, and records in the usual,
regular, and ordinary manner on a basis consistent with prior years;

 

(xxiii)       adopt or amend in any material respect any collective bargaining
agreement, Benefit Plan, or Employee Arrangement other than as required by
applicable Law;

 

(xxiv)       grant any increase in compensation, or grant or make any bonus or
other compensatory payments, to any director, officer, consultant, or employee
of the Company or its Subsidiaries;

 

(xxv)        make or revoke any Tax election that could reasonably be expected
to have a Material Adverse Effect on the Company and its Subsidiaries, or
compromise or settle any material Tax liability; or

 

(xxvi)       agree, whether in writing or otherwise, to do any of the foregoing.

 

(b)           From the date hereof to the Closing, the Company shall, and shall
cause its Subsidiaries to, use their respective commercially reasonable efforts
to preserve intact the

 

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business organization of the Company and its Subsidiaries, to keep available in
all material respects the services of their present officers and employees, to
preserve intact their banking relationships and credit facilities, to preserve
intact in all material respects their relationships with their customers and
vendors, to preserve in all material respects the goodwill of those having
business relationships with them, and to comply with all applicable laws in all
material respects.

 

ARTICLE 6.
Additional Agreements

 

6.1           Company Shareholder Meeting.  Unless this Agreement has been
terminated pursuant to the provisions of Article 8, the Company shall take all
lawful action to (i) cause a special meeting of its shareholders (the “Company
Shareholder Meeting”) to be duly called and held as soon as practicable after
the date of this Agreement for the purpose of voting on the approval and
adoption of this Agreement and (ii) solicit proxies from its shareholders to
obtain the Company Requisite Vote for the approval and adoption of this
Agreement, or alternatively shall obtain the written consent of the holders of
outstanding shares of the Company’s stock having not less than the minimum
number of votes that would be necessary to approve and adopt this Agreement at a
meeting at which all shares entitled to vote thereon were present and voted, in
accordance with the Act (the “Shareholder Consent”).

 

6.2           Satisfaction of All Conditions Precedent.  From the date hereof to
the Closing, each of the Company, Parent, and MergerSub shall use its
commercially reasonable efforts to cause all conditions precedent to the
obligations of Parent and MergerSub, in the case of the Company, and the
Company, in the case of Parent and MergerSub, hereunder to be satisfied.

 

6.3           Acquisition Proposals. Until the termination of this Agreement,
the Company will not, nor will it authorize or permit any Representative of the
Company to, directly or indirectly, (i) solicit, initiate, or encourage the
submission of any Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information in respect of,
or knowingly take any other action to facilitate, any Acquisition Proposal or
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal.  The Company shall notify
Parent of any Acquisition Proposal (including the material terms and conditions
thereof, any subsequent modifications thereto, and the identity of the person
making it) as promptly as practicable after its receipt thereof, and shall
provide Parent with a copy of any written Acquisition Proposal or amendments or
supplements thereto.  Immediately after the execution and delivery of this
Agreement, the Company will, and will use its commercially reasonable efforts to
cause its affiliates, and their respective Representatives to, cease and
terminate any existing activities, discussions, or negotiations with any parties
conducted heretofore in respect of any possible Acquisition Proposal.  The
Company shall take all necessary steps to promptly inform the persons referred
to in the first sentence of this Section 6.5 of the obligations undertaken in
this Section 6.5.  “Acquisition Proposal” means an inquiry, offer, or proposal
regarding any of the following (other than the transactions contemplated by this
Agreement) involving the Company: (w) any merger, consolidation, share exchange,
recapitalization, business combination, or other similar transaction; (x) any
sale, lease, exchange, mortgage, pledge, transfer, or other disposition of all
or substantially all the assets of the Company in a single transaction or series
of related transactions; (y) any tender offer or

 

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exchange offer for 20% or more of the outstanding shares of Company Common
Stock; or (z) any public announcement of a proposal, plan, or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.

 

6.4           Notice of Developments.  From the date hereof to the Closing, the
Company shall notify Parent and MergerSub of any changes or developments in
respect of the business, operations, or prospects of the Company that has had,
or could reasonably be expected to result in, a Material Adverse Effect.

 

6.5           Public Announcements.  Each of Parent, MergerSub, and the Company
will consult with one another before issuing any press release or otherwise
making any statement to any other person in respect of the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such statement prior to such consultation, except
as may be required by applicable law or by obligations pursuant to any listing
agreement with Nasdaq, as determined by Parent, MergerSub, or the Company, as
the case may be.

 

6.6           Notice of Breach.  From the date hereof to the Closing, each party
hereto shall, promptly upon becoming aware thereof, give detailed written notice
to the other parties hereto of the occurrence of, or the impending or threatened
occurrence of, any event that would cause or constitute a breach, or would have
caused or constituted a breach had such event occurred or been known to such
party prior to the date of this Agreement, of any of such party’s covenants,
agreements, representations, or warranties contained or referred to herein or in
any document delivered in accordance with the terms hereof.

 

6.7           Continuation of Insurance Coverage.  From the date hereof to the
Closing, the Company shall keep in full force and effect insurance coverage for
the Company and its assets and operations comparable in amount and scope to the
coverage now maintained covering the Company and its assets and operations.

 

6.8           Maintenance of Credit Terms.  From the date hereof to the Closing,
the Company shall continue to effect sales of its products and services only on
the terms that have historically been offered by the Company or on such other
terms as market conditions may dictate consistent with commercially reasonable
practices.

 

6.9           Updating Schedules.  From the date hereof until the Closing, the
Company shall disclose to Parent and MergerSub any material variances from the
representations and warranties contained in Article 4 (which are based on the
most recent Schedules as delivered by the Company to Parent on or prior to the
date of this Agreement) promptly upon discovery thereof.  The Company shall
promptly provide Parent and MergerSub with any additional information regarding
such disclosure that is reasonably requested.  The applicable Schedule(s) shall
be deemed supplemented by (i) any such disclosures that relate to occurrences
subsequent to the date of this Agreement and (ii) any such disclosures that
relate to occurrences prior to the date of this Agreement but subsequent to the
date of the most recent Schedules as delivered by the Company to Parent. In the
event the Closing condition in Section 7.2 is satisfied or waived by Parent and
MergerSub, the right of Parent or MergerSub to recover under the indemnity
provisions of Article 9 shall be determined based upon the Schedules as
supplemented as

 

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provided above, which supplements shall be deemed to cure and correct any breach
of the representations and warranties contained in Article 4 that would have
existed in the absence thereof.

 

6.10         Third Party Consents.  The Company shall use its commercially
reasonable efforts to obtain at the earliest practicable date all consents,
waivers and approvals of third persons (including, without limitation, such as
are listed on Schedule 4.4(c)) necessary to the consummation of the transactions
contemplated hereby (the “Company Consents”) and will provide to Parent and
MergerSub copies of each such Company Consent promptly after it is obtained.
Parent and MergerSub shall cooperate fully with the Company in connection with
the obtaining of the Company Consents; provided, however, that Parent and
MergerSub shall not be required to pay any additional sums to secure such
Company Consents.

 

6.11         Commercially Reasonable Efforts and Certain Filings.  Subject to
the terms and conditions of this Agreement, each of the Company, Parent and
MergerSub will use its respective commercially reasonable efforts to maintain
the accuracy of its representations and warranties hereunder and to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to consummate the transactions contemplated by this
Agreement.  None of the Company or its Subsidiaries, Parent, or MergerSub will
take, agree to take, or knowingly permit to be taken any action or do or
knowingly permit to be done anything in the conduct of its business, or
otherwise, that would be contrary to or in breach of any of the terms or
provisions of this Agreement.

 

6.12         Confidentiality.  Each of the parties hereby agrees to and
reaffirms the terms and conditions of the Mutual Nondisclosure Agreement by and
between Parent and the Company effective as of November 12, 2003.

 

6.13         FIRPTA. Company shall, prior to the Closing Date, provide Parent
with a properly executed Foreign Investment and Real Property Tax Act of 1980
(“FIRPTA) Notification Letter which states that shares of capital stock of
Company do not constitute “United States real property interests” under IRC
Section 897(c), for purposes of satisfying Parent’s obligations under Treasury
Regulations Section 1.1445-2(c)(3).  In addition, simultaneously with delivery
of such FIRPTA Notification Letter, Company shall provide to Parent a form of
notice to the Internal Revenue Service in accordance with the requirements of
Treasury Regulations Section 1.897-2(h)(2), along with written authorization for
Parent to deliver such notice form to the Internal Revenue Service on behalf of
Company upon the Closing of the Merger.

 

6.14         Contingent Earn-Out Payment. TriQuint and Parent shall use
commercially reasonable efforts to maximize the amount of the Contingent
Earn-Out Payment.  For the avoidance of doubt, none of TriQuint, Parent, or
their affiliates are required to continue operating the Company’s business after
the Effective Time or sell any products that incorporate the Company
Intellectual Property if such operations or sales are not profitable,
cost-effective, or otherwise consistent with TriQuint’s business needs, goals,
or strategies.  If TriQuint or Parent sell or otherwise transfer the Surviving
Corporation or the Company Intellectual Property to a third party, then TriQuint
or Parent (as the case may be) shall ensure that the Contingent Earn-Out Payment
obligations set forth in this Agreement are appropriately binding on the third
party.

 

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6.15         Benefits for Retained Employees.  To the extent that service is
relevant for purposes of eligibility, vesting, allowances, benefit accrual or
any other purpose under any employee benefit plan, program, arrangement, policy
or practice of Parent or any of its subsidiaries or affiliates extended to
Retained Employees (as defined below), Retained Employees shall receive full
credit for their service with the Company prior to the Closing with the
exceptions outlined below.

 

To the extent Parent does not maintain or cause the Surviving Corporation to
maintain medical and dental Benefit Plans in place at the Company prior to the
Closing, Parent shall waive or shall cause to be waived pre-existing condition
limitations and waiting periods with respect to each of the Retained Employees
and their spouses and dependents under the Parent’s self-insured medical and
dental plans.

 

For purposes of Parent’s service awards, only service under the Parent is
counted.  For purposes of sabbatical, the Parent’s sabbatical policy will remain
in effect including past service and pro-ration for service with the Parent of
less than 5 years at qualifying Service Anniversaries.

 

Nothing in this Section 6.15 shall be deemed to limit or otherwise affect the
right of Parent and its subsidiaries and affiliates to terminate the employment
or change the place of work, responsibilities, status or description of any
employee or group of employees.  Parent has the right to amend, modify,
terminate, Benefits Plans, programs, arrangements, practices and policies of
Retained Employees so long as any amendment, modification or termination applies
to other employees of the Parent.  For purposes of this Section 6.15 “Retained
Employees” means individuals who were employees of the Company immediately prior
to the Closing and who remain employed by the Surviving Corporation, or become
employed by Parent of any of its subsidiaries or Affiliates, immediately after
the Closing.

 

ARTICLE 7.
Conditions to Consummation of the Merger

 

7.1           Conditions to Each Party’s Obligation to Effect the Merger.  The
respective obligations of each party to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or prior to the Effective
Time of each of the following conditions, any or all of which may be waived in
whole or in part by the party being benefited thereby, to the extent permitted
by applicable law:

 

(a)           The Agreement shall have been approved and adopted by the Company
Requisite Vote.

 

(b)           The Company, Parent, and MergerSub shall have timely obtained from
each Governmental Entity all approvals, waivers, and consents, if any, necessary
for consummation of or in connection with the transactions contemplated hereby.

 

(c)           There shall not be in effect any Law or Order of any Governmental
Entity of competent jurisdiction restraining, enjoining, or otherwise preventing
consummation of the transactions contemplated by this Agreement.

 

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7.2           Conditions to the Obligations of Parent and MergerSub.  The
respective obligations of Parent and MergerSub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following additional conditions, any or all of
which may be waived in whole or part by Parent and MergerSub, as the case may
be, to the extent permitted by applicable law:

 

(a)           The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except to the extent
that such representations and warranties speak as of an earlier date (in which
case they shall be true and correct as of such earlier date); the Company shall
have performed and complied in all material respects with all agreements
required by this Agreement to be performed or complied with by the Company at or
prior to the Closing Date; and Parent, and MergerSub, shall have received a
certificate, dated as of the Closing Date, signed by a duly elected officer of
the Company to the foregoing effects;

 

(b)           Prior to the Closing, there shall not have occurred any Material
Adverse Effect or any material casualty or damage (whether or not insured) to
any facility, property, or equipment owned or used by the Company.

 

(c)           The Company shall have delivered to Parent the minute books and
stock transfer records of the Company.

 

(d)           All material consents, waivers, and approvals of any Governmental
Entity or third person required in connection with the execution, delivery, and
performance of this Agreement (including, without limitation, all consents
listed on Schedule 4.4(c)) shall have been obtained.

 

(e)           The Company shall have delivered to Parent and MergerSub such good
standing certificates and officers’ certificates and similar documents as
counsel for Parent and MergerSub shall have reasonably requested prior to the
Closing Date.

 

(f)            Holders of no more than 5% of the outstanding shares of Company
Common Stock shall have exercised and not withdrawn, forfeited, or otherwise
permitted to lapse dissenter’s or similar rights under applicable Law with
respect to their shares of Company Common Stock in connection with the Merger.

 

(g)           The Company shall have entered into appropriate agreements with
each holder of outstanding Company Stock Options, in form and substance
acceptable to Parent, providing that:  subject to the consummation of the Merger
and effective immediately prior to the Effective Time, (A) the Company Stock
Option shall be exercised in full for shares of Company Common Stock, whether or
not exercisable, and whether or not vested, and (B) the holder of the Company
Stock Option may elect to pay the exercise price by means of a promissory note
that will be repaid by a corresponding deduction as an offset from the payment
that would otherwise be made to such holder on account of the Tranche One
Payment as set forth in Article 2.  Any per share exercise price that is unpaid
upon the exercise of a Company Stock Option is referred to as the “Unpaid
Exercise Price.”

 

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(h)           Parent shall have obtained a “key man” life insurance policy
covering Kenneth Lakin in the amount of $4,000,000 for up to two years following
the Effective Time, on terms and conditions that are reasonable and acceptable
to Parent.

 

(i)            The Executive Employment Agreement between the Surviving
Corporation and Kenneth Lakin shall have been executed and delivered by Mr.
Lakin.

 

(j)            Each of the Stay Bonus Agreements between the Surviving
Corporation and each of the employees listed on Schedule 7.2(j) shall have been
executed and delivered by such employees.

 

The decision of Parent and MergerSub to consummate the transactions contemplated
by this Agreement without the satisfaction of any of the preceding conditions
shall not constitute a waiver of any of the Company’s representations,
warranties, covenants, or indemnities herein, except as otherwise provided in
Section 6.10.

 

7.3           Conditions to Obligations of the Company.  The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following additional conditions, any or all of which may be waived in whole or
part by the Company, to the extent permitted by applicable law:

 

(a)           The representations and warranties of Parent and MergerSub
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date; all
agreements to be performed hereunder by Parent and MergerSub at or prior to the
Closing Date shall have been performed in all material respects; and the Company
shall have received a certificate, dated as of the Closing Date, signed by an
officer of Parent to the foregoing effects.

 

(b)           This Agreement and the Merger shall have been approved by the
Company Requisite Vote.

 

(c)           The Executive Employment Agreement between the Surviving
Corporation and Kenneth Lakin shall have been executed and delivered by the
Surviving Corporation.

 

(d)           Each of the Stay Bonus Agreements between the Surviving
Corporation and each of the employees listed on Schedule 7.2(j) shall have been
executed and delivered by the Surviving Corporation.

 

The decision of Company to consummate the transactions contemplated by this
Agreement without the satisfaction of any of the preceding conditions shall not
constitute a waiver of any of the representations, warranties, covenants, or
indemnities of Parent or MergerSub set forth herein.

 

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ARTICLE 8.
Termination

 

8.1           Termination by Mutual Agreement.  This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval of the Merger by the Company Requisite Vote, by
mutual written consent of the Company and Parent by action of their respective
Boards of Directors.

 

8.2           Termination by Either Parent or the Company.  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 Parent or the Company upon
the occurrence of a Termination Event; provided, however, that the right to
terminate this Agreement pursuant to this Section 8.2 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 proximately contributed to the
occurrence of the failure of the Merger to be consummated.  For the purposes of
this Agreement, a “Termination Event” is deemed to occur if:

 

(a)           the Company Requisite Vote shall not have been obtained at the
Company Shareholder Meeting or at any adjournment or postponement thereof (and
the Shareholder Consent shall not have been obtained); or

 

(b)           any Law or Order permanently restraining, enjoining, or otherwise
prohibiting consummation of the Merger shall become final and non-appealable
(whether before or after the approval of the Merger by the Company Requisite
Vote); or

 

(c)           the Closing shall not have occurred prior to January 31, 2005;
provided, however, that the right to terminate this Agreement under this
Section 8.2(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of or shall have
resulted in the failure of the Closing to occur prior to such date.

 

8.3           Termination by the Company.  This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval of the Merger by the Company Requisite Vote, by
action of the Board of Directors of the Company if:

 

(a)           there is a breach by Parent or MergerSub of any representation,
warranty, covenant, or agreement contained in this Agreement that cannot be
cured and would cause a condition set forth in Section 7.3(a) to be incapable of
being satisfied as of 120 days following the date of this Agreement (the
“Termination Date”); or

 

(b)           the Board of Directors of Parent shall have withdrawn its
recommendation of this Agreement in a manner adverse to the Company or shall
have resolved to do the foregoing.

 

8.4           Termination by Parent.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval of the Merger by the Company Requisite Vote, by action of
the Board of Directors of Parent if:

 

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(a)           there is a breach by the Company of any representation, warranty,
covenant, or agreement contained in this Agreement that cannot be cured and
would cause a condition set forth in Section 7.2(a) to be incapable of being
satisfied as of the Termination Date; or

 

(b)           the Board of Directors of the Company shall have withdrawn its
recommendation of this Agreement in a manner adverse to Parent or shall have
resolved to do the foregoing.

 

8.5           Effect of Termination and Abandonment.  In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article 8, this Agreement (other than this Section 8.5, Section 6.12, and
Article 10) shall become void and of no effect with no liability on the part of
any party hereto (or of any of its Representatives); provided, however, that
except as otherwise provided herein, no such termination shall relieve any party
hereto of any liability or damages resulting from any willful breach of this
Agreement.

 

8.6           Amendment.

 

(a)           Before the Effective Time, this Agreement may be amended by action
taken by the Company, Parent, and MergerSub at any time before or after approval
of the Merger by the Company Requisite Vote but, after any such approval, no
material amendment shall be made that changes any of the terms of this
Agreement.  Before the Effective Time, this Agreement may not be amended except
by an instrument in writing signed on behalf of Parent, Company, and MergerSub.

 

(b)           After the Effective Time, this Agreement may be amended by action
taken by the Surviving Corporation, Parent, and the holders of a majority in
interest of the Outstanding Shares outstanding immediately before the Effective
Time; provided, however, that any amendment that would adversely affect the
amount of Merger Consideration payable to the holders of Company Common Stock
immediately prior to the Effective Time will require the consent of the holders
in interest of at least 95% of the Outstanding Shares.  After the Effective
Time, this Agreement may not be amended except by an instrument in writing
signed on behalf of such persons.

 

8.7           Extension; Waiver.  At any time prior to the Effective Time, each
party hereto (for these purposes, Parent and MergerSub shall together be deemed
one party and the Company shall be deemed the other party) may (i) extend the
time for the performance of any of the obligations or other acts of the other
party, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document, certificate, or writing
delivered pursuant hereto, or (iii) waive compliance by the other party with any
of the agreements or conditions contained herein.  Any agreement on the part of
either party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.  The failure
of any party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.

 

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ARTICLE 9.
Survival of Representations, Warranties, Covenants, and Agreements; Warranty
Reserve

 

9.1           Survival of Representations, Warranties, Covenants and Agreements;
Warranty Reserve.  Notwithstanding any right of Parent, MergerSub, or the
Company (whether or not exercised) to investigate the affairs of Parent,
MergerSub, or the Company, each party shall have the right, subject to
Section 6.10, to rely fully upon the representations, warranties, covenants, and
agreements of the other party contained in this Agreement or in any instrument
required to be delivered pursuant to Article 7.  The covenants and agreements of
the Company, Parent, and MergerSub contained in this Agreement or in any
instrument delivered pursuant to this Agreement that by their terms apply or are
to be performed in whole or in part after the Effective Time shall survive the
Effective Time.  The representations and warranties of the Company, Parent, and
MergerSub contained in this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Merger and continue until the first anniversary
of the Closing Date, provided, however, that the representations and warranties
of Company contained in Section 4.23 shall survive the Merger and shall continue
in full force and effect until 30 days following the expiration of the
applicable statutes of limitations (including any extensions thereof) (the
“Expiration Date”).  Except for the representations and warranties contained in
this Agreement, none of Parent, MergerSub, or the Company has made any
representations or warranties and, except for the representations and warranties
contained in this Agreement, each of Parent, MergerSub, and the Company
acknowledges that no representations or warranties have been made by, and it has
not relied upon any representations or warranties made by, any of the parties
hereto or any of their respective Representatives in respect of this Agreement
and the transactions contemplated hereby, and the documents and instruments
referred to herein, notwithstanding the delivery or disclosure to such party or
its Representatives of any documentation or other information in respect of any
one or more of the foregoing.  The inclusion of any entry on the Schedules
attached hereto shall not constitute an admission by, or agreement of, the
Company that such matter is material to the Company.  Without limiting the
generality of the foregoing, the Company makes no representation or warranty to
Parent or MergerSub with respect to any projections, estimates, plans, or
budgets delivered to or made available to Parent or any Representative thereof
of future revenues, expenses or expenditures, or future results of operations or
performance of the Company or its business.

 

9.2           Warranty Reserve.

 

(a)           Establishment of the Warranty Reserve.  ”Warranty Reserve” means
$700,000 to be reserved by Parent from the Tranche Two Payment pool.

 

(b)           Recourse to the Warranty Reserve.  The Warranty Reserve shall be
available (and except only for claims relating to the representations and
warranties of Company contained in Section 4.23, to the extent made after the
first anniversary of the Effective Time, shall be the sole and exclusive remedy
of Parent and MergerSub after the Effective Time) to compensate Parent for any
and all Losses (whether or not involving a Third Party Claim) incurred or
sustained by Parent as a result of any inaccuracy or breach of any
representation, warranty, covenant, or agreement of the Company contained in
this Agreement or any instrument required to be delivered pursuant to Article 7
that survives the Effective Time in accordance with this Agreement; provided,
however, that Parent may not make any claims against the Warranty

 

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Reserve unless and until the aggregate Losses incurred or sustained by Parent
exceed $50,000 (the “Threshold Amount”), in which event Parent may make claims
against the Warranty Reserve only for Losses in excess of the Threshold Amount
(thus excluding the Threshold Amount as a deductible).  No shareholder of the
Company will be liable to Parent with respect to any such Losses beyond such
shareholder’s respective pro rata share (based on the number of shares of
Company Common Stock held thereby prior to the Effective Time) of the Warranty
Reserve.

 

(c)           Reserve Period; Distribution of Warranty Reserve upon Termination
of Reserve Period.  Subject to the following requirements, the Warranty Reserve
shall be in existence immediately following the Effective Time and shall
terminate at 5:00 P.M., Portland, Oregon time, on the Expiration Date (the
period from the Effective Time through and including the Expiration Date is
referred to as the “Reserve Period”); and subject to Section 2.1(b)(ii), the
Warranty Reserve shall be distributed by Parent to the Paying Agent for the
holders of the Company’s Common Stock immediately prior to the Effective Time in
proportion to each shareholders’ respective contributions to the Warranty
Reserve; provided, however, that the Reserve Period shall not terminate in
respect of such amount (or some portion thereof) that is necessary in the
reasonable judgment of Parent, subject to the objection of the Shareholder Agent
and the subsequent resolution of the matter in the manner as provided in
Section 9.2(e), to satisfy any unsatisfied written claims under this Section 9.2
concerning facts and circumstances existing prior to the termination of such
Reserve Period which claims are specified in any Officer’s Certificate delivered
to the Shareholder Agent prior to termination of such Reserve Period.  Upon
resolution of each individual claim described above and subject to
Section 2.1(b)(ii), Parent shall deliver the remaining amount, if any, of the
portion of the Warranty Reserve designated for such individual claim after the
resolution of such claim to the Paying Agent for the holders of the Company’s
Common Stock immediately prior to the Effective Time as part of the Tranche Two
Payment.

 

(d)           Claims Upon Warranty Reserve.

 

(i)            Upon delivery by Parent to the Shareholder Agent, at any time on
or before the last day of the Reserve Period of a certificate signed by any
officer of Parent (an “Officer’s Certificate”): (A) stating that Parent has paid
or properly accrued or, with respect to a Third Party Claim, reasonably
anticipates that it will have to pay or accrue Losses as a result of any
inaccuracy or breach of any representation, warranty, covenant, or agreement of
the Company contained herein, and (B) specifying in reasonable detail the
individual items of Losses included in the amount so stated, the date each such
item was paid or properly accrued or the basis for such anticipated liability,
and the nature of the misrepresentation or breach of warranty, agreement, or
covenant to which such item is related (including the specific provision
breached), Parent shall, subject to the provisions of Section 9.2(e) and the
Threshold Amount, reduce the amount of the Warranty Reserve in an amount equal
to such Losses.

 

(ii)           For purposes of this Agreement, “Losses” means all losses,
expenses (including reasonable attorneys’ fees and expenses), damages,

 

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liabilities, fines, penalties, judgments, actions, claims, and costs. In no
event shall Losses include special, indirect, incidental, or consequential
damages.

 

(iii)          Payments pursuant to this Article 9 shall be limited to the
amount of any Loss that remains after deducting therefrom (A) any indemnity,
contribution, or other similar payment recoverable by Parent or any affiliates
thereof from any person with respect thereto, any other savings that would
reduce the impact of the Losses upon Parent or any such affiliates and (B) any
reserve provided for the item in question in the Financial Statements.

 

(iv)          Notwithstanding anything contained herein to the contrary, Parent
shall not be entitled to make any claim against the Warranty Reserve to the
extent (but only to the extent) that Parent fails to take commercially
reasonable action to mitigate any such Loss reasonably promptly after obtaining
knowledge thereof.

 

(e)           Objections to Claims.  For a period of 30 days after delivery of
such notice to the Shareholder Agent, Parent shall make no reduction to the
Warranty Reserve pursuant to Section 9.2(d) unless Parent shall have received
written authorization from the Shareholder Agent to make such reduction.  After
the expiration of such 30-day period, Parent shall make the reduction to the
Warranty Reserve pursuant to Section 9.2(d); provided, however, that no such
payment or delivery may be made if the Shareholder Agent shall object in a
written statement to the claim made in the Officer’s Certificate, and such
statement shall have been delivered to Parent prior to the expiration of such
30-day period.

 

(f)            Resolution of Conflicts.  In the event the Shareholder Agent
timely objects in writing to any claim or claims made in any Officer’s
Certificate, the Shareholder Agent and Parent shall attempt in good faith to
agree upon the rights of the respective parties in respect of each of such
claims.  If the Shareholder Agent and Parent are unable to reach agreement with
respect to any such contested claim within 45 days after the delivery of the
Shareholder Agent’s objection, the matter shall be settled by binding
arbitration in Portland, Oregon as set forth below.  All claims shall be settled
in accordance with the Commercial Arbitration Rules then in effect of the
American Arbitration Association (the “AAA Rules”), although the parties shall
not be required to use AAA arbitrators.  The Shareholder Agent and Parent shall
mutually appoint a single arbitrator within 15 days after the termination of
such 45 day period. The Shareholder Agent and Parent shall cause the arbitrator
to decide the matter to be arbitrated pursuant hereto within 60 days after the
arbitrator’s appointment.  The decision of the arbitrator shall relate to
whether Parent is entitled to reduce the Warranty Reserve for the disputed
claim, or the disputed portion thereof, pursuant to the applicable terms of this
Agreement.  The final decision of the arbitrator shall be furnished to the
Shareholder Agent and Parent in writing and shall constitute the conclusive
determination of the issue in question binding upon all parties hereto, and
shall not be contested by any of them.  Such decision may be used in a court of
law only for the purpose of seeking enforcement of the decision of the
arbitrator.  All the fees and expenses of the arbitrator shall be paid by the
party who does not prevail in the arbitration.

 

49

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9.3           Shareholder Agent of the Shareholders; Power of Attorney.

 

(a)           Shareholder Agent.  In the event that the Merger is approved by
the shareholders of the Company, effective upon such vote, and without further
act of any shareholder, Kenneth Lakin shall be appointed as the agent and
attorney-in-fact (the “Shareholder Agent”), for each shareholder of the Company,
including all persons receiving shares of Company Common Stock upon exercise of
Company Stock Options (except such shareholders, if any, as shall have perfected
their dissenters’ rights under the Act), for and on behalf of shareholders of
the Company, to give and receive notices and communications, to authorize
reductions of the Warranty Reserve in satisfaction of claims by Parent, to
object to such reductions, to agree to, negotiate, enter into settlements and
compromises of, and demand litigation or arbitration and comply with orders and
awards of courts and arbitrators in respect of such claims, and to take all
actions necessary or appropriate in the judgment of the Shareholder Agent for
the accomplishment of the foregoing.  Such agency may be changed by the
shareholders of the Company from time to time upon not less than 30 days’ prior
written notice to Parent; provided, however, that the Shareholder Agent may not
be removed unless the holders of at least a two-thirds’ interest in the Warranty
Reserve agree to such removal and to the identity of the substituted shareholder
agent.  Any vacancy in the position of Shareholder Agent may be filled by
approval of the holders of a majority in interest of the Warranty Reserve.  No
bond shall be required of the Shareholder Agent, and the Shareholder Agent shall
not receive compensation for his services.  Notices or communications to or from
the Shareholder Agent shall constitute notice to or from each of the
shareholders of the Company.

 

(b)           Exculpation.  The Shareholder Agent shall not be liable for any
act done or omitted hereunder as Shareholder Agent while acting in good faith
and in the exercise of reasonable judgment.

 

(c)           Actions of the Shareholder Agent.  A decision, act, consent, or
instruction of the Shareholder Agent shall constitute a decision for all of the
shareholders of the Company for whom a portion of the funds otherwise issuable
to them are deposited in the Warranty Reserve, and shall be final, binding, and
conclusive upon each of such shareholders, and the Depositary Agent and Parent
may rely upon any such decision, act, consent, or instruction of the Shareholder
Agent as being the decision, act, consent, or instruction of every such
shareholder of the Company.  Parent is hereby relieved from any liability to any
Person for any acts done by it in accordance with such decision, act, consent,
or instruction of the Shareholder Agent.

 

9.4           Third-Party Claims.  In the event Parent or the Surviving
Corporation receives written notice of a third-party claim (a “Third Party
Claim”) that Parent reasonably expects may result in a demand against the
Warranty Reserve, Parent shall provide the Shareholder Agent with prompt written
notice thereof.  The Shareholder Agent, as representative for the shareholders
of the Company, shall have the right to participate in or, by giving written
notice to Parent, to assume the defense of any Third Party Claim at the expense
of the Warranty Reserve and by counsel selected by the Shareholder Agent (which
counsel must be reasonably satisfactory to Parent), and Parent will cooperate in
good faith (and shall be permitted to participate at Parent’s expense) in such
defense; provided, however, that the Shareholder Agent shall not be entitled to
assume control of the defense of any Third Party Claim that (i) could reasonably
be expected to have any impact on the ongoing operations or goodwill of the

 

50

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Surviving Corporation or Parent or (ii) could reasonably be expected to result
in Losses in excess of the Warranty Reserve.  Parent shall have the right to
settle any Third Party Claim contemplated by clause (i) or (ii) above with
consent of the Shareholder Agent, which consent shall not be unreasonably
withheld.  In the event that the Shareholder Agent has consented to any such
settlement, the Shareholder Agent shall have no power or authority to object
under any provision of this Article 9 to the amount of any claim by Parent
against the Warranty Reserve with respect to the amount of Losses incurred by
Parent in such settlement as consented to by the Shareholder Agent.

 

9.5           Remedies.  Parent hereby acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the provisions set forth in this
Article 9.  In furtherance of the foregoing, Parent hereby waives, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action it may have against any other party hereto arising under or
based upon any federal, state or local statute, law, ordinance, rule or
regulation (including any such rights, claims or causes of action arising under
or based upon common law or otherwise).  Parent further acknowledges and agrees
that no breach of any representation, warranty, covenant or agreement contained
herein or in any instrument required to be delivered pursuant to Article 7 shall
give rise to any right on the part of Parent or MergerSub, after the Closing, to
rescind this Agreement or any of the transactions contemplated hereby.

 

ARTICLE 10.
Miscellaneous

 

10.1         Collateral Agreements.  This Agreement (together with the documents
delivered pursuant hereto) supersedes all prior documents, understandings, and
agreements, oral or written, relating to this transaction (other than the Mutual
Nondisclosure Agreement referenced in Section 6.12) and constitutes the entire
understanding among the parties hereto in respect of the subject matter hereof.

 

10.2         Successors and Assigns.  Neither the rights nor obligations of the
Company, Parent, or MergerSub under this Agreement may be assigned or delegated,
in whole or in part, without the written consent of the other parties hereto,
which will not be unreasonably withheld; provided, however, that the rights and
obligations of Parent, MergerSub, and the Surviving Corporation hereunder may be
assigned or delegated freely among TriQuint, Parent, and their affiliates; and
provided further that the holders of Company Common Stock immediately prior to
the Effective Time may assign their rights hereunder at any time following the
Closing to such holders’ near relatives or to a trust for the benefit of such
holders or any of their respective near relatives.  Any assignment in violation
of the preceding sentence shall be null and void.  Subject to the preceding
sentences of this Section 10.2, the provisions of this Agreement (and, unless
otherwise expressly provided therein, of any document delivered pursuant to this
Agreement) shall be binding upon and inure solely to the benefit of the parties
hereto and their respective legal representatives, successors, and permitted
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits, or remedies of any
nature whatsoever under or by reason of this Agreement; provided, however, that
the holders of the Company Common Stock immediately prior to the Effective Time
(and their respective successors, heirs, legal representatives, and permitted
assigns) shall, after the Closing,

 

51

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be deemed third party beneficiaries of this Agreement and shall be entitled to
enforce the terms of this Agreement as if parties hereto.

 

10.3         Guaranty. TriQuint Semiconductor, Inc. (“TriQuint”) hereby
guarantees absolutely and unconditionally the obligations of Parent to make
payment of the Merger Consideration pursuant to Article 2.  This is a continuing
guaranty and shall remain in force and effect until the Merger Consideration has
been paid pursuant to Article 2.

 

10.4         Expenses.  Except as otherwise expressly provided herein, the
Company shall be solely responsible for the broker or finder, legal, accounting,
and other fees and expenses incurred by the Company in connection with the
execution of this Agreement and the consummation of the transactions
contemplated hereby, and Parent and MergerSub shall be solely responsible for
the broker or finder, legal, accounting, and other fees and expenses incurred by
Parent and MergerSub in connection with execution of this Agreement and the
consummation of the transactions contemplated hereby.

 

10.5         Severability.  If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provision
shall be fully severable, this Agreement shall be construed and enforced as if
such illegal, invalid, or unenforceable provision had never comprised a part of
this Agreement, and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by such illegal, invalid, or
unenforceable provision or by its severance from this Agreement.

 

10.6         Notices.  Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered pursuant to this Agreement) shall be given in writing and shall be
deemed received (i) when personally delivered to the relevant party at such
party’s address as set forth below, (ii) if sent by mail (which must be
certified or registered mail, postage prepaid) or overnight courier, when
received or rejected by the relevant party at such party’s address indicated
below, or (iii) if sent by facsimile, when confirmation of delivery is received
by the sending party:

 

Parent/MergerSub:

 

Sawtek Inc.

 

 

c/o TriQuint Semiconductor, Inc.

 

 

2300 NE Brookwood Parkway

 

 

Hillsboro, Oregon 97124

 

 

Facsimile No.: (503) 615-8901

 

 

Attention: Chief Financial Officer

 

 

 

with a copy to:

 

Ater Wynne LLP

 

 

222 SW Columbia Street, Suite 1800

 

 

Portland, Oregon 97201

 

 

Facsimile No: (503) 226-0079

 

 

Attention: Bill Campbell

 

52

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The Company:

 

TFR Technologies, Inc.

 

 

63140 Britta Street, Suite C-106

 

 

Bend, Oregon 97701

 

 

Facsimile No.: (541) 382-7783

 

 

Attention: President

 

 

 

with a copy to:

 

Perkins Coie LLP

 

 

1120 N.W. Couch Street

 

 

Tenth Floor

 

 

Portland, Oregon 97209-4128

 

 

Facsimile No.: (503) 727-2222

 

 

Attention: David Matheson

 

 

 

 

 

 

Shareholder Agent:

 

Kenneth Lakin

 

 

[    ]

 

 

[    ]

 

Each party hereto may change its address or facsimile number for purposes of
this Section 10.6 by providing notice to the other parties in accordance with
this Section 10.6.

 

10.7         Further Assurances.  Each party to this Agreement shall (i) furnish
upon request to the other parties such further information, (ii) execute and
deliver to the other parties such other documents, and (iii) do such other acts
and things as the other parties reasonably request for the purpose of carrying
out the intent of this Agreement and the documents and instruments referred to
herein.

 

10.8         Specific Performance.  The parties recognize that if the Company
refuses to perform under the provisions of this Agreement, monetary damages
alone will not be adequate to compensate Parent for its injury.  Parent shall
therefore be entitled, in addition to any other remedies that may be available,
to obtain specific performance of the terms of this Agreement.  If any action is
brought by Parent to enforce this Agreement, the Company shall waive the defense
that there is an adequate remedy at law.  In the event of litigation pertaining
to any controversy, claim, or dispute between the parties hereto arising out of
or relating to this Agreement or the breach of any provision thereof, the
prevailing party shall be entitled to recover from the non-prevailing party
reasonable expenses, attorneys’ fees, and costs.

 

10.9         Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Oregon.

 

10.10       Remedies Not Exclusive.  Except to the extent otherwise expressly
provided herein with respect to Parent, the rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law
or equity.

 

53

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10.11       Counterparts.  This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.

 

10.12       Titles and Headings.  Titles and headings to articles and sections
herein are inserted for convenience of reference only, and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.

 

10.13       Certain Interpretive Matters and Definitions.

 

(a)           Unless the context otherwise requires, (i) all references to
Articles, Sections, Exhibits, or Schedules are to Articles, Sections, Exhibits,
or Schedules of or to this Agreement, (ii) each term defined in this Agreement
has the meaning assigned to it, (iii) “or” is disjunctive but not necessarily
exclusive, (iv) words in the singular include the plural and vice versa, and
(v) the term “affiliate” has the meaning given to it in Rule 12b-2 of
Regulation 12B under the Exchange Act.  All references to “$” or dollar amounts
will be to lawful currency of the United States of America.

 

(b)           No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.

 

(c)           “Material Adverse Effect” means, as to any person, any event,
circumstance, condition, fact, effect, or other matter that has had or would
reasonably be expected to have a material adverse effect (i) on the business,
assets, financial condition, or results of operations of such person, taken as a
whole, or (ii) on the ability of such person to perform on a timely basis any
material obligation under this Agreement or to consummate the transactions
contemplated hereby, excluding, in each of clauses (i) and (ii), the effects of
changes to the extent related to (x) conditions in the United States or global
economy or financial or capital markets generally, (y) general changes in
conditions (including changes in legal, regulatory or business conditions or
changes in GAAP) in or otherwise affecting the industries or businesses in which
the Company operates (except, in the case of (x) or (y), to the extent that such
changes materially disproportionately affect the Company compared to the manner
in which the changes affect the industries or businesses in which the Company
operates), or (z) this Agreement, the announcement or performance hereof and the
transactions and obligations contemplated hereby.

 

(d)           The phrase “to the knowledge of the Company” means the actual
knowledge of the officers, directors, and senior management of the Company.

 

(e)           “persons” means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).

 

(f)            The Exhibits and Schedules attached hereto are incorporated
herein by reference as though fully set forth herein.

 

54

--------------------------------------------------------------------------------

 

Parent, MergerSub, and the Company have executed and delivered this Agreement as
of the date set forth above.

 

 

SAWTEK INC.

 

 

 

By:

/s/ RALPH G. QUINSEY

 

 

Name:

Ralph G. Quinsey

 

 

Title:

President and CEO

 

 

 

 

 

 

TFR TECHNOLOGIES, INC.

 

 

 

 

 

By:

/s/ KENNETH LAKIN

 

 

Name:

Kenneth Lakin

 

 

Title:

President and CEO

 

 

 

 

 

 

TFR ACQUISITION, INC.

 

 

 

By:

/s/ RALPH G. QUINSEY

 

 

Name:

Ralph G. Quinsey

 

 

Title:

President and CEO

 

 

55

--------------------------------------------------------------------------------

 

By execution of this signature page, TriQuint confirms that it is bound by the
applicable provisions of this Agreement and Plan of Reorganization to which this
page is attached, effective as of the effective date of this Agreement.

 

 

TRIQUINT SEMICONDUCTOR, INC.

 

 

 

By:

/s/ RALPH G. QUINSEY

 

 

Name:

Ralph G. Quinsey

 

 

Title:

President and CEO

 

 

 

 

By execution of this signature page, Shareholder Agent confirms that it is bound
by the applicable provisions of this Agreement and Plan of Reorganization to
which this page is attached, effective as of the effective date of this
Agreement.

 

 

Shareholder Agent:

 

 

 

By:

/s/ KENNETH LAKIN

 

 

Name: Kenneth Lakin

 

 

By execution of this signature page, Paying Agent confirms that it is bound by
the applicable provisions of this Agreement and Plan of Reorganization to which
this page is attached, effective as of the effective date of this Agreement.

 

 

Paying Agent:

 

 

 

By:

/s/ KENNETH LAKIN

 

 

Name: Kenneth Lakin

 

56

--------------------------------------------------------------------------------

 

EXHIBITS

 

Exhibit A

Articles of Merger

Exhibit B

Articles of Incorporation of Surviving Corporation

Exhibit C

Bylaws of Surviving Corporation

 

--------------------------------------------------------------------------------

 

GLOSSARY OF DEFINED TERMS

 

Accounts Receivable

15

Acquisition Proposal

34

Act

1

affiliate

49

Agreement

1

Annual Financial Statements

12

Articles of Merger

2

Bank Accounts

26

Benefit Plans

20

Certificates

5

Closing

2

Closing Date

2

Company

1

Company Common Stock

1

Company Consents

36

Company Intellectual Property

27

Company Products

28

Company Registered Intellectual Property

28

Company Requisite Vote

11

Company Shareholder Meeting

34

Company Stock Option

4

Company Stock Option Plans

5

Contingent Earn-Out Payment

3

Disposal Site

23

Dissenting Shareholders

7

Dissenting Shares

7

Distribution Amount

4

Effective Time

2

Employee Arrangements

20

Environmental Claim

22

Environmental Laws

22

Environmental Permits

22

Exchange Act

8

Expiration Date

42

Financial Statements

12

Governmental Entity

8

Hazardous Materials

22

Hazardous Materials Activity

22

Initial Payment

3

Intellectual Property

27

Interim Financial Statements

11

Interim Statement Period

12

 

--------------------------------------------------------------------------------

 

IRC

24

Law

8

Leased Real Property

14

Liens

10

Losses

43

Material Adverse Effect

49

Material Contracts

18

Material Customer

26

Material Supplier

26

Merger

2

Merger Consideration

3

MergerSub

1

near relatives

18

Officer’s Certificate

43

Order

8

Outstanding Shares

3

Parent

1

Patents

27

Paying Agent

5

Payment Fund

5

Permitted Liens

14

persons

49

Qualifying Products

4

Registered Intellectual Property

27

Representatives

30

Reserve Period

43

Retained Employees

37

Returns

24

Securities Act

8

Shareholder Agent

45

Shareholder Consent

34

Statement Date

12

Subsidiary

10

Surviving Corporation

2

Tangible Personal Property

15

Tax

23

Termination Date

40

Termination Event

40

Third Party Claim

45

threatened

19

Threshold Amount

43

to the knowledge of the Company

49

Tranche One Payment

3

Tranche Two Payment

3

TriQuint

47

Unpaid Exercise Price

38

 

--------------------------------------------------------------------------------

 

WARN

19

Warranty Reserve

42

 

--------------------------------------------------------------------------------

 

EXHIBIT A

(Articles of Merger)

 

[g47832ko05image002.jpg]

Phone:

 

(503) 986-2200

 

 

Fax :

 

(503) 378-4381

 

Articles of Merger

 

 

Secretary of State

Check the appropriate box below:

Corporation Division

ý MULTI ENTITY MERGER

255 Capitol St. NE, Suite 151

(Complete only 1, 2, 3, 4, 10, 11)

Salem, OR 97310-1327

o FOR PARENT AND 90% OWNED SUBSIDIARY

FilingInOregon.com

WITHOUT SHAREHOLDER APPROVAL

 

 

(Complete only 5, 6, 7, 8, 9, 10, 11)

SURVIVOR

 

FILED

REGISTRY NUMBER:

258985-86

 

 

JAN 05 2004

 

 

OREGON

 

 

SECRETARY OF STATE

 

In accordance with Oregon Revised Statute 192.410-192.490, the information on
this application is public record.

We must release this information to all parties upon request and it will be
posted on our website.                     For office use only

 

Please Type or Print Legibly in Black Ink.  Attach Additional Sheet if
Necessary.

 

1) NAMES AND TYPES OF THE ENTITIES PROPOSING TO MERGE

 

NAME

 

TYPE

 

REGISTRY NUMBER

TFR Technologies, Inc.

 

OR Corp.

 

258985-86

TFR Acquisition, Inc.

 

OR Corp.

 

257071-91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2) NAME AND TYPE OF THE SURVIVING ENTITY

TFR Technologies, Inc., an Oregon corporation

o Check here if there is a name change in this plan of merger.

 

3) A COPY OF THE MERGER PLAN IS ATTACHED. See ORS 60.481(2)

THE PLAN OF MERGER WAS DULY AUTHORIZED AND APPROVED BY EACH ENTITY THAT IS A
PARTY TO THE MERGER.

ý A copy of the vote required by each entity is attached.

 

FOR PARENT AND 90% OWNED SUBSIDIARY WITHOUT SHAREHOLDER APPROVAL.

 

5) NAME OF PARENT CORPORATION

 

 

 

Oregon Registry Number

 

 

 

6) NAME OF SUBSIDIARY CORPORATION

 

 

 

Oregon Registry Number

 

 

7) NAME OF SURVIVING CORPORATION

 

 

8) COPY OF PLAN

o A copy of the plan of merger setting forth the manner and basis of converting
shares of the subsidiary into shares, obligations, or

other securities of the parent corporation or any other corporation or into cash
or other property is attached.

 

9) CHECK THE APPROPRIATE BOX

o A copy of the plan of merger or summary was mailed to each shareholder of
record of the subsidiary corporation
on or before                      

 

Date

 

 

 

 

o The mailing of a copy of the plan or summary was waived by all outstanding
shares.

 

10) EXECUTION

Signature

 

Printed Name

 

Title

 

 

 

 

 

/s/ Ralph Quinsey

 

Ralph Quinsey

 

President & CEO

 

11) CONTACT NAME (To resolve questions with the filing.)

 

Kelly Mecklem

 

FEES

 

 

 

DAYTIME PHONE NUMBER (Include area Code.)

 

Required Processing Fee $50 - Conformation Copy (Optional) $5

 

 

Processing Fees are nonrefundable.

(503) 226-1191

 

Please make check payable to “Corporation Division.”

 

 

NOTE:

 

 

Fees may be paid with VISA or MasterCard. The card number and expiration date
should be submitted on a seperate sheet for your protection.

137 (Rev. 1/04)

 

--------------------------------------------------------------------------------

 

Attachment to Articles of Merger

 

Shareholder Approval.   Shareholder approval of the Plan of Merger was required
as follows:

 

A.            TFR Acquisition, Inc.

 

(1)           100 shares of Common Stock were outstanding and entitled to vote
on the Plan of Merger, voting as a single class.

 

(2)           100 shares of Common Stock were voted FOR the Plan of Merger, and
0 shares of Common Stock were voted against the Plan of Merger.

 

B.            TFR Technologies, Inc.

 

(1)           5,499,334 shares of Common Stock were outstanding and entitled to
vote on the Plan of Merger, voting as a single class.

 

(2)           5,449,334 shares of Common Stock were voted for FOR the Plan of
Merger and 0 shares of Common Stock were voted against the Plan of Merger.

 

 

Attachment to Articles of Merger

 

--------------------------------------------------------------------------------

 

EXHIBIT B

(Articles of Incorporation of Surviving Corporation)

 

[Not Yet Drafted]

 

--------------------------------------------------------------------------------

 

EXHIBIT C

(Bylaws of Surviving Corporation)

 

[Not Yet Drafted]

 

--------------------------------------------------------------------------------