**Exhibit 10.47**

 

 

**AGREEMENT AND PLAN OF REORGANIZATION**

 

**BY ANDAMONG**

 

**SAWTEKINC.,**

 

**TFRACQUISITION, INC.,**

 

**AND**

 

**TFRTECHNOLOGIES INC.**

 

**Dated asof December 14, 2004**

 

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**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*                                         | * *   |
|                     |                                                                            |            |  |  |

 

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| *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*              | *Brokers’ or Finders’  Fees*                        | * *   |
| * *            | * *                                                      | * *   |
| *4.27*              | *Material  Customers and Suppliers*                           | * *   |
| * *            | * *                                                      | * *   |
| *4.28*              | *Bank Accounts;  Powers of Attorney*                          | * *   |
| * *            | * *                                                      | * *   |
| *4.29*              | *Books and Records*                                           | * *   |
| * *            | * *                                                      | * *   |
| *4.30*              | *Intellectual Property  Rights*                               | * *   |
| * *            | * *                                                      | * *   |
| *4.31*              | *Information Furnished*                                       | * *   |
| * *            | * *                                                      | * *   |
| **ARTICLE 5.** | **Covenants  Related to Conduct of the Business**             | ** ** |
| ** **          | ** **                                                    | ** ** |
| *5.1*               | *Inspection*                                                  | * *   |
| * *            | * *                                                      | * *   |
| *5.2*               | *Financial Statements*                                        | * *   |
| * *            | * *                                                      | * *   |
| *5.3*               | *Interim  Operations of the Company and its Subsidiaries*     | * *   |
| * *            | * *                                                      | * *   |
| **ARTICLE 6.** | **Additional  Agreements**                                    | ** ** |
|                     |                                                               |            |  |

 

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| *6.1*                 | *Company Shareholder  Meeting*                                                            | * *   |
|-----------------------|-------------------------------------------------------------------------------------------|------------|
| * *              | * *                                                                                  | * *   |
| *6.2*                 | *Satisfaction  of All Conditions Precedent*                                               | * *   |
| * *              | * *                                                                                  | * *   |
| *6.3*                 | *Acquisition Proposals*                                                                   | * *   |
| * *              | * *                                                                                  | * *   |
| *6.4*                 | *Notice of Developments*                                                                  | * *   |
| * *              | * *                                                                                  | * *   |
| *6.5*                 | *Public Announcements*                                                                    | * *   |
| * *              | * *                                                                                  | * *   |
| *6.6*                 | *Notice of Breach*                                                                        | * *   |
| * *              | * *                                                                                  | * *   |
| *6.7*                 | *Continuation of  Insurance Coverage*                                                     | * *   |
| * *              | * *                                                                                  | * *   |
| *6.8*                 | *Maintenance of Credit  Terms*                                                            | * *   |
| * *              | * *                                                                                  | * *   |
| *6.9*                 | *Updating Schedules*                                                                      | * *   |
| * *              | * *                                                                                  | * *   |
| *6.10*                | *Third Party Consents*                                                                    | * *   |
| * *              | * *                                                                                  | * *   |
| *6.11*                | *Commercially  Reasonable Efforts and Certain Filings*                                    | * *   |
| * *              | * *                                                                                  | * *   |
| *6.12*                | *Confidentiality*                                                                         | * *   |
| * *              | * *                                                                                  | * *   |
| *6.13*                | *FIRPTA*                                                                                  | * *   |
| * *              | * *                                                                                  | * *   |
| *6.14*                | *Contingent Earn-Out  Payment*                                                            | * *   |
| * *              | * *                                                                                  | * *   |
| *6.15*                | *Benefits for  Retained Employees*                                                        | * *   |
| * *              | * *                                                                                  | * *   |
| ***ARTICLE 7.*** | ***Conditions  to Consummation of the Merger***                                           | * *   |
| * *              | * *                                                                                  | * *   |
| *7.1*                 | *Conditions  to Each Party’s Obligation to Effect the Merger*                        | * *   |
| * *              | * *                                                                                  | * *   |
| *7.2*                 | *Conditions  to the Obligations of Parent and MergerSub*                                  | * *   |
| * *              | * *                                                                                  | * *   |
| *7.3*                 | *Conditions  to Obligations of the Company*                                               | * *   |
| * *              | * *                                                                                  | * *   |
| **ARTICLE 8.**   | **Termination**                                                                           | ** ** |
| ** **            | ** **                                                                                | ** ** |
| *8.1*                 | *Termination by  Mutual Agreement*                                                        | * *   |
| * *              | * *                                                                                  | * *   |
| *8.2*                 | *Termination  by Either Parent or the Company*                                            | * *   |
| * *              | * *                                                                                  | * *   |
| *8.3*                 | *Termination by the  Company*                                                             | * *   |
| * *              | * *                                                                                  | * *   |
| *8.4*                 | *Termination by Parent*                                                                   | * *   |
| * *              | * *                                                                                  | * *   |
| *8.5*                 | *Effect of  Termination and Abandonment*                                                  | * *   |
| * *              | * *                                                                                  | * *   |
| *8.6*                 | *Amendment*                                                                               | * *   |
| * *              | * *                                                                                  | * *   |
| *8.7*                 | *Extension; Waiver*                                                                       | * *   |
| * *              | * *                                                                                  | * *   |
| **ARTICLE 9.**   | **Survival  of Representations, Warranties, Covenants, and Agreements; Warranty Reserve** | ** ** |
| ** **            | ** **                                                                                | ** ** |
| *9.1*                 | *Survival  of Representations, Warranties, Covenants and Agreements; Warranty Reserve*    | * *   |
| * *              | * *                                                                                  | * *   |
| *9.2*                 | *Warranty Reserve*                                                                        | * *   |
|                       |                                                                                           |            |  |

 

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| *9.3*                | *Shareholder  Agent of the Shareholders; Power of Attorney* | * *   |
|----------------------|-------------------------------------------------------------|------------|
| * *             | * *                                                    | * *   |
| *9.4*                | *Third-Party Claims*                                        | * *   |
| * *             | * *                                                    | * *   |
| *9.5*                | *Remedies*                                                  | * *   |
| * *             | * *                                                    | * *   |
| **ARTICLE 10.** | **Miscellaneous**                                           | ** ** |
| ** **           | ** **                                                  | ** ** |
| *10.1*               | *Collateral Agreements*                                     | * *   |
| * *             | * *                                                    | * *   |
| *10.2*               | *Successors and Assigns*                                    | * *   |
| * *             | * *                                                    | * *   |
| *10.3*               | *Guaranty*                                                  | * *   |
| * *             | * *                                                    | * *   |
| *10.4*               | *Expenses*                                                  | * *   |
| * *             | * *                                                    | * *   |
| *10.5*               | *Severability*                                              | * *   |
| * *             | * *                                                    | * *   |
| *10.6*               | *Notices*                                                   | * *   |
| * *             | * *                                                    | * *   |
| *10.7*               | *Further Assurances*                                        | * *   |
| * *             | * *                                                    | * *   |
| *10.8*               | *Specific Performance*                                      | * *   |
| * *             | * *                                                    | * *   |
| *10.9*               | *Governing Law*                                             | * *   |
| * *             | * *                                                    | * *   |
| *10.10*              | *Remedies Not Exclusive*                                    | * *   |
| * *             | * *                                                    | * *   |
| *10.11*              | *Counterparts*                                              | * *   |
| * *             | * *                                                    | * *   |
| *10.12*              | *Titles and Headings*                                       | * *   |
| * *             | * *                                                    | * *   |
| *10.13*              | *Certain Interpretive Matters and Definitions*              | * *   |
|                      |                                                             |            |  |

 

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**AGREEMENTAND PLAN OF REORGANIZATION**

 

THIS AGREEMENT AND PLANOF REORGANIZATION (this “**Agreement**”) isby and among Sawtek Inc., a Florida corporation (“**Parent**”),TFR Acquisition, Inc., an Oregon corporation and direct wholly-owned subsidiaryof Parent (“**MergerSub**”), and TFR Technologies,Inc., an Oregon corporation (the “**Company**”).

 

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

 

RECITALS:

 

WHEREAS, the Boards ofDirectors of Parent, MergerSub, and the Company have, in light of and subjectto the terms and conditions set forth herein, approved this Agreement and thetransactions contemplated hereby, including the Merger;

 

WHEREAS, the Board ofDirectors of the Company has resolved to recommend to its shareholders theapproval and adoption of this Agreement and the consummation of thetransactions contemplated hereby upon the terms and subject to the conditionsset forth herein;

 

WHEREAS, at the EffectiveTime, MergerSub will be merged with and into the Company, the Company shallcontinue as the Surviving Corporation, and the separate corporate existence ofMergerSub shall cease;

 

WHEREAS, pursuant to theMerger and subject to the terms and conditions of this Agreement, all of theissued and outstanding shares of common stock, without par value, of theCompany (“**Company Common Stock**”) shall beconverted into the right to receive payment from Parent in the amounts setforth below;

 

WHEREAS, a portion of paymentsby Parent in connection with the Merger shall be made by Parent to a PayingAgent for the benefit of the shareholders of the Company upon the occurrence ofcertain 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 thisAgreement.

 

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

 

ARTICLE 1.The Merger

 

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

 

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(the “**Merger**”).  Followingthe Merger, the Company shall continue as the surviving corporation (the “**Surviving Corporation**”) and the separate corporate existenceof MergerSub shall cease.

 

1.2           Effective Time.  Subject to the provisions ofthis Agreement, Parent, MergerSub, and the Company shall cause the Merger to beconsummated 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 soonas practicable on the Closing Date.  TheMerger shall become effective upon such filing or at such time thereafter as isprovided 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 andon a date to be specified by the parties (the “**Closing Date**”),which shall be no later than the second business day after satisfaction orwaiver of the conditions set forth in Article 7 (other than thoseconditions that by their nature are to be satisfied at the Closing, but subjectto the fulfillment or waiver of those conditions), at the offices of Ater WynneLLP, 222 SW Columbia Street, Suite 1800, Portland, Oregon 97201, or at suchtime, date, or place as agreed to in writing by the parties hereto.

 

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

 

1.5           Articles of Incorporation and Bylaws.  The name of the SurvivingCorporation will be “TFR Technologies Inc.” Subject to the foregoing, effectiveimmediately following the Merger: (a) the articles of incorporation of theSurviving Corporation shall be amended so that the articles of incorporation ofMergerSub, 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 ofMergerSub, in the form attached hereto as **Exhibit C**,shall be the bylaws of the Surviving Corporation.

 

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

 

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

 

2.1           Conversion of Shares.

 

(a)           At the Effective Time, each outstandingshare of common stock, par value $0.001 per share, of MergerSub shall, byvirtue 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 ofcommon stock of the Surviving Corporation.

 

(b)           At the Effective Time, each share ofCompany Common Stock issued and outstanding immediately prior to the EffectiveTime (including Outstanding Shares but subject to Section 2.12, notincluding Dissenting Shares) shall, by virtue of the Merger and without anyaction on the part of Parent, MergerSub, or the Company, be converted into andexchangeable for the right to receive the following payments:

 

(i)            an amount of cash determined inaccordance with the provisions of Section 2.1(c), payable at theEffective Time, provided, however, that for any Outstanding Share issuedpursuant 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 withrespect to such Outstanding Share shall be reduced by the Unpaid Exercise Pricerelating to such Outstanding Share, and such amount will be reallocated amongall the Outstanding Shares (the “**Tranche One Payment**”);

 

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

 

(iii)          an amount of cash determined inaccordance 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 collectivelyreferred to in this Agreement as the “**Merger Consideration**.”  The number of “**OutstandingShares**” is the aggregate number of shares of Company Common Stockoutstanding immediately prior to the Effective Time, including the shares ofCompany Common Stock issuable under stock options as described in Section 7.2(g).

 

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

 

“**InitialPayment**” means $3,000,000 minus the sum of all out-of-pocketexpenses incurred by the Company prior to the Effective Time in connection withthe Merger and the other transactions contemplated hereby (including withoutlimitation all legal, accounting, and other consulting fees, as described in Section 10.4).

 

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(d)           The per share Contingent Earn-Out Paymentis equal to the Distribution Amount divided by the number of OutstandingShares.

 

“**DistributionAmount**” means, for each of the first four years following theEffective Time, 2.5% of actual revenues realized by TriQuint, Parent, or their affiliatesfor sales of Qualifying Products or for the license of Company IntellectualProperty (to the extent, in the case of such licensing revenues, such revenuescan be traced and allocated specifically to Company Intellectual Property, andnot including in any event any revenues relating to any cross-licensingagreements) 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 DistributionAmounts: one for each of the four years following the Effective Time.  Notwithstanding the above, the aggregateDistribution Amounts paid under this Agreement will not exceed $3,000,000.

 

“**QualifyingProducts**” means all products sold by TriQuint, Parent, or theiraffiliates that incorporate Company Intellectual Property relating to bulkacoustic wave filters except Company Products sold under U.S. Governmentcontract number H98230-04-C-0724/0000 on Standard Form 28, between the Companyand the Maryland Procurement Office, dated February 27, 2004, as amended.

 

Parent shall accuratelyreport to the Shareholder Agent sales activity for Qualifying Products and thecalculation of amounts owing to the shareholders therefor on an annualbasis.  Such reports shall be deliveredwithin 45 days of the end of each year following the Effective Time.  Parent shall also provide sale activityupdates to the Shareholder Agent upon the Shareholder Agent’s reasonablerequest.

 

Parent shall keep recordsin sufficient detail to permit the determination of Contingent Earn-OutPayments payable under this Agreement for at least two years after eachapplicable period.  The Shareholder Agentmay have a certified independent auditor perform an audit of Parent’s financialrecords and other records relevant to Contingent Earn-Out Payments under thisAgreement upon reasonable advance written notice to assess the accuracy ofParent’s payments, at the Shareholder Agent’s expense, subject to the lastsentence of this paragraph.  The auditshall be conducted during normal business hours no more than once per year, andshall be subject to a confidentiality agreement reasonably acceptable toParent.  The auditor shall report to onlythe 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, Parentshall promptly pay the outstanding amounts to the Paying Agent on behalf of theshareholders, plus interest from the time such payment was due until paid tothe Paying Agent at the rate of eight percent (8%) per annum.  In the case the audit establishes anunderpayment greater than ten percent (10%) of the correct total for any periodaudited, 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 purchaseshares of Company Common Stock (each a “**Company Stock Option**”)under Company’s stock option plans or arrangements (the “**CompanyStock**

 

9

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**Option Plans**”), whether or not exercisable andwhether or not vested, shall have been exercised for shares of Company CommonStock.

 

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

 

2.3           Payment Fund.

 

(a)           As of the Effective Time, Parent shalldeposit, or shall cause to be deposited, with or for the account of KennethLakin or such other third party as may be designated by the holders of amajority in interest of the Company Common Stock, which shall be reasonablysatisfactory to Parent (the “**Paying Agent**”),for the benefit of the holders of the shares of Company Common Stock, an amountof cash sufficient to pay the Tranche One Payment.  Any cash deposited with the Paying Agent is referredto as the “**Payment Fund**.”

 

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

 

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

 

2.4           Payment Procedures.

 

(a)           Tranche One Payment.  Assoon as reasonably practicable after the Effective Time (and in any event withinfive business days after the Effective Time), the Paying Agent shall mail toeach record holder of a certificate or certificates that immediately prior tothe Effective Time represented outstanding shares of Company Common Stock(including certificates representing shares of Company Common Stock issued uponexercise of Company Stock Options as described in Section 7.2(g)) (the “**Certificates**”) (i) a letter of transmittal which shallspecify that delivery shall be effective and risk of loss and title to theCertificates shall pass only upon delivery of the Certificates to the PayingAgent, and which letter shall be in customary form and have such otherprovisions as Parent may reasonably specify; and (ii) instructions foreffecting the surrender of such Certificates in exchange for the MergerConsideration.  Upon surrender of aCertificate to the Paying Agent together with such letter of transmittal, dulyexecuted and completed in accordance with the instructions thereto, and suchother documents as may reasonably be required by the Paying Agent, the holderof such Certificate shall be entitled to receive in exchange therefor a checkin the amount equal to the cash that such holder has the right to receivepursuant to this Article 2 (after taking into account all shares ofCompany Common Stock then held by such holder).

 

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

 

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Consideration (takinginto account all shares of Company Common Stock previously held by suchholder).

 

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

 

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

 

2.5           No Further Ownership Rights in CompanyCommon Stock.  Allcash paid upon conversion of the shares of Company Common Stock in accordancewith this Article 2 shall be deemed to have been issued or paid infull satisfaction of all rights pertaining to the shares of Company CommonStock.

 

2.6           Termination of Payment Fund.  Any portion of the PaymentFund that remains undistributed to the holders of Certificates after the secondanniversary of the date such funds were originally delivered to the PayingAgent shall be delivered to the Surviving Corporation or otherwise on theinstruction of the Surviving Corporation, and any holders of the Certificateswho have not theretofore complied with this Article 2 shallthereafter look only to the Surviving Corporation and Parent and only asgeneral creditors thereof for the Merger Consideration to which such holdersare entitled pursuant to Section 2.1.  Any such portion of the Payment Fundremaining unclaimed by holders of shares of Company Common Stock five yearsafter the date such funds were originally delivered to the Paying Agent (orsuch earlier date immediately prior to such time as such amounts wouldotherwise escheat to or become property of any Governmental Entity) shall, tothe extent permitted by applicable law, become the property of the SurvivingCorporation free and clear of any claims or interest of any person previouslyentitled thereto.

 

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

 

2.8           Investment of the Payment Fund.  The Paying Agent shallinvest any cash included in the Payment Fund in such investments, if any, asthe Paying Agent shall determine, subject to the consent of Parent, which shallnot be unreasonably withheld.  Anyinterest and

 

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

 

2.9           Lost, Stolen, or Destroyed Certificates.  If any Certificate shallhave been lost, stolen, or destroyed, upon the making of an affidavit of thatfact by the person claiming such Certificate to be lost, stolen, or destroyedand, if required by the Surviving Corporation, the posting by such person of abond in such reasonable amount as the Surviving Corporation may direct asindemnity by such person against any claim that may be made against theSurviving Corporation in respect of such Certificate, the Paying Agent willdeliver in exchange for such lost, stolen, or destroyed Certificate the MergerConsideration in respect of the shares of Company Common Stock formerlyrepresented thereby.

 

2.10         Withholding Rights.  Each of the SurvivingCorporation and Parent shall be entitled to deduct and withhold from the MergerConsideration otherwise payable pursuant to this Agreement to any holder ofshares of Company Common Stock such amounts as it is required to deduct andwithhold in respect of the making of such payment under the IRC, the rules andregulations thereunder, or any provision of a Tax law, provided that no suchwithholding shall be made without the Shareholder Agent’s consent, which shallnot be unreasonably withheld.  To theextent that amounts are so withheld by the Surviving Corporation or Parent, asthe case may be, such withheld amounts shall be treated for all purposes ashaving been paid to the holder of Company Common Stock in respect of which suchdeduction and withholding was made by the Surviving Corporation or Parent, asthe case may be.

 

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

 

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

 

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

 

ARTICLE 3.Representations and Warranties of Parent and MergerSub

 

Parent and MergerSub eachrepresent and warrant to the Company as follows (with the understanding thatthe Company is relying materially on such representations and warranties inentering into and performing this Agreement):

 

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

 

3.2           Authorization and Effect of Agreement.  Each of Parent and MergerSubhas the requisite corporate power to execute and deliver this Agreement and toperform the transactions contemplated hereby to be performed by it.  The execution and delivery of this Agreementby each of Parent and MergerSub and the performance by Parent and MergerSub oftheir respective obligations hereunder have been duly authorized by allnecessary corporate action on the part of Parent and MergerSub and by the soleshareholder of MergerSub.  This Agreementhas 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 generaland subject to general principles of equity (regardless of whether suchenforceability is considered in a proceeding at law or in equity).

 

3.3           No Violations; Consents and Approvals.  The execution and deliveryof this Agreement by each of Parent and MergerSub does not, and the performanceby each of Parent and MergerSub of the transactions contemplated hereby to beperformed by it will not (i) conflict with or violate the certificate orarticles of incorporation or bylaws of Parent or MergerSub, (ii) conflictwith or violate, or constitute a default (with or without notice, lapse oftime, 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 bywhich 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 toParent.  Except for any filings, permits,authorizations, consents, and approvals required under the Securities Act of1933, 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 Mergerwith the Secretary of State of the State of Oregon, no consent, approval,order, or authorization of, or registration, declaration, or filing with anydomestic 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 byor in respect of Parent or MergerSub in connection with the execution anddelivery of this Agreement by each of Parent

 

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

 

ARTICLE 4.Representations and Warranties of the Company

 

The Company herebyrepresents and warrants to Parent and MergerSub, subject to such exceptions asare specifically disclosed in the disclosure schedules delivered by the Companyto Parent with this Agreement, the matters set forth in this Article 4(with the understanding that Parent and MergerSub are relying materially oneach such representation and warranty in entering into and performing thisAgreement).  Parent and MergerSub agreethat any exception or limitation set forth in one disclosure schedule or section ofthis Article 4 shall be deemed an exception or limitation to anyother Section of this Article 4 if the relevance of suchdisclosure to such other section is reasonably apparent.

 

4.1           Capitalization; Ownership of Shares; NoLiens on Shares.  Theauthorized capital stock of the Company consists of 10,000,000 shares ofCompany Common Stock, of which 5,499,334 shares are issued and outstanding asof the close of business on the date hereof. All of such issued and outstanding shares of Company Common Stock areduly authorized, validly issued, fully paid, and nonassessable.  All of such shares of Company Common Stockare owned of record by the holders as set forth on Schedule 4.1.  None of such shares of Company Common Stockwere issued or will be transferred under this Agreement in violation of anypreemptive or preferential rights of any person of which the Company has actualnotice.  As of the date of this Agreement,600,666 shares of Company Common Stock are reserved for issuance and issuableor otherwise deliverable in connection with the exercise of outstanding CompanyStock Options issued pursuant to the Company Stock Option Plan, and no sharesof Company Common Stock are issuable upon exercise of options issued outsidethe Company Stock Option Plan.  As of thedate of this Agreement, the Company has issued no warrants to purchase sharesof Company Common Stock.  Except as setforth in the preceding sentences, as of the date hereof, there are nooutstanding options, warrants, calls, subscriptions, conversion, exchange, orother similar rights, agreements, or commitments to acquire from the Companyany shares of capital stock or any other securities convertible into,exercisable or exchangeable for, or evidencing the right to subscribe for, anyshares of capital stock of the Company. There are no shareholder agreements, voting trusts, or other agreementsto which the Company is a party or to which it is bound relating to the votingof any shares of capital stock of the Company (other than the Voting Agreementbetween Parent and certain shareholders of the Company).  The Company has not issued any stockappreciation rights or other rights related to equity participation, and theCompany has no debt instruments outstanding that have any voting rights.  Schedule 4.1 sets forth true andcomplete information regarding the name of the holder, the term, the currentexercise price, the date of grant, the type of option (incentive ornonqualified), and the number of Company Stock Options granted to each holderof Company Stock Options.

 

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

 

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

 

4.3           Subsidiaries.

 

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

 

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

 

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

 

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

 

4.4           Authority; Absence of Conflicts.

 

(a)           The Company has full corporate power andauthority to execute, deliver, and perform this Agreement and to consummate thetransactions contemplated hereby.  Theexecution and delivery of this Agreement and the consummation of thetransactions contemplated hereby have been duly approved by the Board ofDirectors of the Company, and no other corporate action on the part of theCompany is necessary to authorize and approve the execution and delivery ofthis Agreement or the consummation of the transactions contemplated hereby(other than, in respect of the Merger and this Agreement, the Company RequisiteVote).  This Agreement has been duly andvalidly executed and delivered by the Company and, assuming the due executionand delivery of this Agreement by each of Parent and MergerSub, constitutes thevalid and binding obligation of the Company, enforceable against it inaccordance

 

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with its terms, except asmay be limited by bankruptcy, insolvency, reorganization, moratorium, or othersimilar laws affecting the enforcement of creditors’ rights in general andsubject to general principles of equity (regardless of whether suchenforceability is considered in a proceeding at law or in equity).

 

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

 

(c)           Neither the execution and delivery of thisAgreement nor the consummation of the transactions contemplated hereby, norcompliance with the terms hereof, will (i) materially conflict with orviolate or result in a material breach of the articles of incorporation orbylaws of the Company, nor (ii) materially conflict with or violate or resultin a material breach of or material default (with or without notice, lapse oftime, or both) under, or give rise to a right of termination, amendment,cancellation, or acceleration of any material obligation or to loss of a materialbenefit under any material agreement, understanding, arrangement, commitment,indenture, contract, lease, sublease, loan agreement, note, or other materialdocument or instrument to which the Company or any of its Subsidiaries is a partyor by which it or any of its Subsidiaries is bound or to which it, any of itsSubsidiaries or its or any of its Subsidiaries assets are subject, nor(iii) result in the creation of any Liens on the assets, capital stock, orproperties of the Company or any of its Subsidiaries other than Permitted Liens,nor (iv) materially conflict with, violate or result in a material breachof or constitute a material default under any Law or Order to which theCompany, any of its Subsidiaries or any of the Company’s or any of itsSubsidiaries’ assets or properties are subject, nor (v) require theCompany or any of its Subsidiaries to give notice to, or obtain anauthorization, approval, order, license, franchise, declaration, or consent of,or make a filing with, any third person, including, without limitation, anyGovernmental Entity, other than such filings as may be required under theSecurities Act, state securities or blue sky laws, the filing of the Articlesof Merger with the Secretary of State of the State of Oregon, and the consentsand approvals identified on Schedule 4.4(c) and such otherauthorizations, approvals, orders, licenses, franchises, declarations,consents, or filings, the failure to obtain or make which could not reasonablybe expected to result in a Material Adverse Effect on the Company.

 

4.5           Financial Statements.

 

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

 

(i)            The “**Interim FinancialStatements**,” defined as the unaudited consolidated balance sheet andrelated statement of income, shareholders’ equity, and cash flows of theCompany and its Subsidiaries as of and for the period beginning on the firstday of the current fiscal year, and ending

 

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on the Statement Date (the “**InterimStatement Period**”).  The “**Statement Date**” means the last day of the calendar monthpreceding the date of this Agreement.

 

(ii)           The audited consolidated balance sheetand related statements of income, shareholders’ equity, and cash flows of theCompany 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 respectthereof (the “**Annual Financial Statements**,” andtogether with the Interim Financial Statements, the “**FinancialStatements**”).

 

(b)           Except for, in respect of the InterimFinancial Statements, normally recurring year-end audit adjustments that in theaggregate are immaterial and the omission of footnote disclosures, theFinancial Statements (i) fairly present in all material respects thefinancial position, results of operations, and cash flows of the Company andits Subsidiaries for the respective periods stated therein, (ii) have beenprepared from and are consistent with the books and records of the Company andits Subsidiaries, and (iii) have been prepared in accordance with GAAPconsistently 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 orobligations of any nature, whether accrued, absolute, contingent, unliquidated,or otherwise, whether due or to become due and whether arising out oftransactions entered into or any condition or state of facts existing on orprior to the date hereof, that would in accordance with GAAP be required to bereflected 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 ofthe Interim Financial Statements in the ordinary course of business andconsistent with past practices, all of which are properly reflected in thebooks and records of the Company and its Subsidiaries.

 

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

 

(a)           paid or declared any dividend ordistribution or purchased or retired any indebtedness from any shareholderthereof, or directly or indirectly purchased, retired, or redeemed any capitalstock from any shareholder;

 

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

 

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

 

(d)           sold any asset (or any group of relatedassets) 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 adirector, officer, or employee of the Company or any Subsidiary, in anytransaction (or series of related transactions) in which the purchase price forsuch asset (or group of related assets) exceeded $25,000, except for sales ofinventory in the ordinary course of business and consistent with pastpractices;

 

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

 

(g)           revalued any of its assets;

 

(h)           discharged or satisfied any Lien or paidany obligation or liability, absolute or contingent, other than currentliabilities incurred and paid in the ordinary course of business and consistentwith past practices;

 

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

 

(j)            accelerated the collection of, or sold orotherwise transferred, any accounts receivable of the Company or any of itsSubsidiaries;

 

(k)           made or guaranteed any loans or advancesto any person whatsoever;

 

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

 

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

 

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

 

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

 

(p)           made any investment in any person;

 

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

 

(r)            amended or experienced a termination ofany 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 theforegoing 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 materialassets of the Company or any of its Subsidiaries;

 

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

 

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

 

(w)          experienced any event or condition thathas 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 summarydescription of all real property leased by the Company or any of itsSubsidiaries (the “**Leased Real Property**”).  The Company owns no real property.  Each of the Company and its Subsidiaries hasdelivered or made available to Parent and MergerSub true and correct copies ofall leases, subleases, abstracts of title, surveys, title opinions, and titleinsurance 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 allLeased Real Property, free and clear of any Lien (other than Permitted Liens).  Each of the Company and its Subsidiaries hasgood and marketable title to all structures, plants, leasehold improvements,systems, fixtures, and other property located on or about any of the LeasedReal Property that is owned by the Company and its Subsidiaries, as reflectedin the Interim Financial Statements, free and clear of any Lien except for PermittedLiens.  None of the Leased Real Propertyor other such assets is subject to any agreement, arrangement, or understandingfor 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 notyet due and payable, (ii) covenants, conditions, and restrictions ofrecord, none of which materially impairs the use of such property in the mannercurrently used or impairs the ability of the Company or any of its Subsidiariesto 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 isnot yet due on the underlying obligation, (iv) Liens in respect of pledges ordeposits under workers’ compensation laws or similar legislation, (v) allbuilding 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 hereafterenacted, 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 relatingto the Leased Real Property is in full force and effect, there is no materialdefault 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 andsublease will remain in full force and effect immediately following the Closingwithout any modification in the rights or obligations of the parties under anysuch 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 Subsidiarieshas good and marketable title to all machinery and equipment, tools, spare andmaintenance parts, furniture, vehicles, and all other tangible personalproperty (collectively, the “**Tangible Personal Property**”)owned by the Company and its Subsidiaries, free and clear of any Liens, exceptfor Permitted Liens, and/or pursuant to applicable leases.  All items of Tangible Personal Propertycurrently owned or used by the Company and its Subsidiaries as of the datehereof are in good operating condition and repair in all material respects inlight of their respective ages, ordinary wear and tear excepted, are physicallylocated at or about the Company’s place of business and are owned outright bythe Company and its Subsidiaries or, to the Company’s knowledge, validlyleased.  None of the Tangible PersonalProperty is subject to any agreement, arrangement, or understanding for its useby any person other than the Company or its Subsidiaries.  The maintenance and operation of the TangiblePersonal Property complies in all material respects with all applicable Laws,ordinances, contractual commitments, and obligations.  Schedule 4.9(a) sets forth abrief description of all Tangible Personal Property subject to any conditionalsale agreement, installment sale agreement, or title retention or securityagreement or arrangement of any kind, and the amount and repayment terms of theunderlying obligation.  Schedule 4.9(a)sets forth a complete and correct fixed asset list of the Company and itsSubsidiaries dated as of the Statement Date.

 

(b)           Schedule 4.9(b) sets forth a complete and correct listof all material Tangible Personal Property leases to which the Company or anyof its Subsidiaries is a party, together with a brief description of theproperty leased.  Each of the Company andits Subsidiaries has made available to Parent and MergerSub complete andcorrect 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 andeffect; (ii) all lease payments due to the date hereof on any such leasehave been paid, and neither the Company, any of its Subsidiaries, nor (to theknowledge of the Company) any other party is in material default under any suchlease, 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 orany of its Subsidiaries or (to the knowledge of the Company) any other partyunder such lease; and (iii) there are no disputes or disagreements betweenthe Company or any of its Subsidiaries and any other party in respect of anysuch lease.

 

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

 

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doubtful accounts, areaccurately and fairly reflected on the Interim Financial Statements or, inrespect of Accounts Receivable of the Company and its Subsidiaries createdafter the date thereof, are accurately and fairly reflected in the books andrecords 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 theknowledge of the Company, threatened contest, claim, or right of set-offcontained in any agreement with any maker of any such Account Receivablerelating to the amount or validity thereof.

 

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

 

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

 

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

 

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

 

4.15         Material and Affiliated Contracts.

 

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

 

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(i)            any agreement, arrangement, orunderstanding, or series of related agreements, arrangements, orunderstandings, that involves annual expenditures or receipts by the Company orany 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 dateof such agreement, arrangement, or understanding;

 

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

 

(iii)          any agreement with suppliers or customersfor discounts or allowances;

 

(iv)          any note, bond, indenture, creditfacility, mortgage, security agreement, or other instrument or documentrelating to or evidencing indebtedness for money borrowed or a securityinterest in or mortgage on the assets of the Company and its Subsidiaries;

 

(v)           any express warranty, indemnity, orguaranty issued by the Company or any of its Subsidiaries (other than customaryproduct warranties provided by the Company and its Subsidiaries in the ordinarycourse of business);

 

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

 

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

 

(viii)        any joint venture agreement;

 

(ix)           any agreement granting to any person theright to manufacture or distribute products of the Company or any of itsSubsidiaries;

 

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

 

(xi)           any outstanding offer or commitment toenter into any contract or arrangement of the nature described inclauses (i) through (x) of this Section 4.15(a).

 

(b)           Schedule 4.15(b) contains a complete and correct list anddescription of all agreements, arrangements, and understandings (includingoutstanding indebtedness) that are currently in effect between the Company orits 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 ofits Subsidiaries; (ii) the spouses, children, grandchildren, siblings,parents, grandparents, uncles, aunts, nieces, nephews, or first cousins of anydirector or officer of the Company or any of its Subsidiaries or theirrespective spouses (collectively, “**near relatives**”);(iii) any trust for the benefit of any director or officer of the Companyor any of its Subsidiaries or any of their respective near relatives; and(iv) any person owned or controlled by any director or officer of theCompany or any of its Subsidiaries or any of their respective near relatives.  The agreements, arrangements, andunderstandings 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 Subsidiarieshas delivered or made available to Parent and MergerSub complete and correct copiesof 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) neitherthe Company, any of its Subsidiaries, nor, to the knowledge of the Company, anyother party is in material default under any such Material Contract, and noevent has occurred that constitutes, or that with or without notice, lapse oftime, or both would constitute, a material default by the Company or anySubsidiary or, to the knowledge of the Company, by any other party under suchMaterial Contract; and (iii) there are no disputes or disagreementsbetween the Company or any of its Subsidiaries and any other party in respectof 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 allmaterial 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 toits business, properties, and operations, other than such items the failure ofwhich to obtain would not result in a Material Adverse Effect on the Company.  Except in respect of incidents ofnoncompliance that have been corrected, neither the Company nor any Subsidiaryhas received any notice alleging a failure to so comply or to secure such apermit, authorization, or license nor, to the knowledge of the Company, isthere 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 regulatoryinvestigations or audits pending or, to the knowledge of the Company,threatened, against the Company, any of its Subsidiaries, or its or itsSubsidiaries’ properties, assets, or business, or to the knowledge of theCompany, pending or threatened against, relating to, or involving any of theofficers, directors, employees, or agents of the Company or any of itsSubsidiaries in connection with the business of the Company or any of itsSubsidiaries.  There are no such actions,suits, proceedings, claims, or investigations pending or, to the knowledge ofthe Company, threatened, challenging the validity or propriety of, or otherwiserelating to or involving, this Agreement or the transactions contemplatedhereby.  Except as set forth on Schedule 4.17,there is no Order or award (whether issued by an arbitrator, a GovernmentalEntity, or otherwise) to which the Company or any of its Subsidiaries is aparty, or involving the property, assets, or business of the Company or itsSubsidiaries, that is unsatisfied or that requires continuing compliancetherewith by the Company or any of its Subsidiaries.  For the purposes of this Agreement, anaction, 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 beengiven in writing that such action, suit, proceeding, claim, investigation,dispute, or other matter is likely to be asserted, commenced, taken, orotherwise 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 orany of its Subsidiaries is a party, nor any Order of any Governmental Entitydirected at the Company or any of its Subsidiaries or in which the Company orany of its Subsidiaries is named nor, to the knowledge of the Company, anyother Order that could in any such case materially prevent the use by theCompany or any of its Subsidiaries of its or its Subsidiaries’ assets andproperties or the conduct by the Company or its Subsidiaries of its or itsSubsidiaries business as of the date hereof. Each of the Company and its Subsidiaries has in force, and has compliedin all material respects with, all of the conditions and requirements imposedby, all material permits, licenses, exemptions, consents, authorizations, andapprovals used in or required for the conduct of its business as presentlyconducted.  Neither the Company nor anySubsidiary 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 orpossible 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 theconsummation of the transactions contemplated hereby.

 

4.19         Labor Matters.

 

(a)           Neither the Company nor any of its Subsidiaries is aparty to any labor or collective bargaining agreement, and no employees of theCompany or any of its Subsidiaries are represented by any labororganization.  Within the preceding threeyears, there have been no representation or certification proceedings, orpetitions seeking a representation proceeding, pending or, to the knowledge ofthe Company, threatened to be brought or filed with the National LaborRelations Board or any other labor relations tribunal or authority.  Within the preceding three years, to theknowledge of the Company, there have been no organizing activities involvingCompany or any of its Subsidiaries in respect of any group of employees ofCompany or any of its Subsidiaries.

 

(b)           There are no strikes, work stoppages,slowdowns, lockouts, material arbitrations, or material grievances or othermaterial labor disputes pending or, to the knowledge of the Company, threatenedagainst 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, threatenedby or on behalf of any employee or group of employees of the Company or itsSubsidiaries that, if individually or collectively resolved against the Companyor its Subsidiaries, would have a Material Adverse Effect.

 

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

 

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compensation, and thecollection and payment of withholding and/or social security Taxes and anysimilar Tax.

 

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

 

(e)           Schedule 4.19(e) sets forth the names of all directorsand officers of the Company and its Subsidiaries, together with the respectiveterm of office and titles for each such person and all remuneration payable toany such officers and directors.  Schedule 4.19(e)includes, in respect of each employee, director and officer of the Company andits Subsidiaries, such person’s date of employment, the current salary and commissionterms 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 theCompany’s most recent fiscal year to such person and a description of allcompensation arrangements currently applicable to such person.

 

4.20         Employee Benefit Plans.

 

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

 

(i)            all “employee benefit plans,” as definedin Section 3(3) of ERISA, pursuant to which the Company or itsSubsidiaries 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 continuationduring any absence from active employment for disability or other reasons,severance, supplemental retirement, cafeteria benefits or dependent care, sickdays, stock award, stock option, stock purchase, tuition assistance, clubmembership, employee discount, employee loan, or vacation pay agreements,policies, or arrangements that the Company or any of its Subsidiaries maintainsor has any obligation or liability (contingent or otherwise) in respect of anycurrent officer, director, or employee of the Company or its Subsidiaries (the “**Employee Arrangements**”).

 

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

 

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

 

(d)           Tax Qualification.  Each Benefit Plan and itsrelated trust that is intended to be qualified under IRC Sections 401(a) and501(a) either; (i) is the subject of an unrevoked favorable determinationletter from the IRS with respect to such Benefit Plan’s qualified status underthe IRC, as amended by the Tax Reform Act of 1986 and all subsequentlegislation

 

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

 

(e)           Contributions.  All contributions or otherpayments required to have been made by the Company or its Subsidiaries to orunder any Benefit Plan or Employee Arrangement by applicable Law or the termsof such Benefit Plan or Employee Arrangement (or any agreement relatingthereto) have been timely and properly made or properly accounted for on theFinancial Statements.

 

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

 

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

 

(h)           Retiree Medical.  Neither the Company nor itsSubsidiaries has any obligation or liability under any retiree life or retireehealth plans that provide for continuing coverage for current or formerofficers, directors, or employees of the Company or its Subsidiaries except(i) as may be required under Part 6 of Title I of ERISA and atthe 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 anyBenefit Plan is stock of the Company, its Subsidiaries, or any of theirrespective 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 withequity compensation, neither the execution and delivery of this Agreement northe consummation of the transactions contemplated hereby will (i) resultin any material payment becoming due to any employee (current, former, orretired) of the Company or its Subsidiaries, (ii) materially increase anybenefits under any Benefit Plan or Employee Arrangement, or (iii) resultin the acceleration of the time of payment of, vesting of or other rights inrespect of any such benefits.

 

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

 

4.21         Environmental Matters.

 

(a)           Environmental Compliance. Except as set forth on Schedule 4.21(a), the Company (i) isnot aware of any Hazardous Materials that are present in, on, or under anyproperties owned, leased or used at any time (including both land andimprovements thereon) by the Company; (ii) has obtained all applicable andmaterial permits, licenses and other

 

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authorizations that arerequired under Environmental Laws (as defined below) for the conduct of itsbusiness 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 suchEnvironmental Permits; (iv) is not aware of any event, condition,circumstance, activity, practice, incident, action or plan which constitutes a materialviolation of any Environmental Law applicable to the Company, any person orentity for which the Company is legally liable or any of the Company’s currentor past locations or assets or which could reasonably be expected to form thebasis of any material Environmental Claim (as defined below) with respect tothe Company or any person or entity whose liability for any Environmental Claimthe Company has retained or assumed either contractually or by operation oflaw; (v) has not disposed of, released, discharged or emitted any HazardousMaterials (as defined below) into the soil, air, surface water, buildingmaterials or groundwater at any properties owned or leased at any time by theCompany, or at any other property, or exposed any employee or other individualto any Hazardous Materials or condition, in such a manner as would reasonablybe expected to result in any material liability to the Company or result in anymaterial Company corrective or remedial action obligation; and (vi) has takenall actions reasonably necessary under Environmental Laws to register any productsor materials required to be registered by the Company (or any person for whomCompany has legal responsibility) thereunder. For the purposes of this Section 4.21, “**EnvironmentalClaim**” means any notice, claim, act, cause of action or investigationby any person alleging potential liability (including potential liability forinvestigatory costs, cleanup costs, governmental response costs, naturalresources damages, property damages, personal injuries or penalties) arisingout of, based on or resulting from (a) the presence, or release into theenvironment, of any Hazardous Materials (b) any violation, or allegedviolation, of any Environmental Laws, (c) the exposure of any person to anyHazardous Materials or (d) the use, storage, disposal, discharge,transportation, emission, destruction, remediation or investigation of anyHazardous Materials.  “**Environmental Laws**” means all federal, state, local andforeign laws and regulations relating to pollution or the environment(including ambient air, surface water, ground water, land surface or subsurfacestrata) or the protection of human health and worker safety, including, withoutlimitation, laws and regulations relating to emissions, discharges, releases orthreatened releases of Hazardous Materials, or otherwise relating to themanufacture, processing, distribution, use, treatment, storage, disposal,transport or handling of Hazardous Materials. “**Hazardous Materials**” means chemicals,pollutants, contaminants, wastes, toxic substances, radioactive and biologicalmaterials, asbestos-containing materials (ACM), hazardous substances, petroleumand petroleum products or any fraction thereof or other substance which is orhas been designated as a danger or threat to health, reproduction or theenvironment, excluding, however, Hazardous Materials contained in productstypically used for office and janitorial purposes properly, safely and legallymaintained 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 withapplicable Environmental Laws and (ii) have not resulted in the exposureof any person to any Hazardous Materials in a manner which has caused or couldreasonably be expected to cause a material adverse health effect to saidperson.  For the purpose of theforegoing, “**Hazardous Materials Activity**” isthe transportation, transfer, recycling, storage, use, treatment, manufacture,investigation, removal, remediation, release, exposure of others to, sale ordistribution of any Hazardous Materials or any product containing HazardousMaterials.

 

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

 

(d)           Offsite Hazardous Material Disposal.  Tothe knowledge of the Company, no action, proceeding, liability or claim existsor is threatened, against any disposal site, transporter, recycler or handlerused by the Company (“**Disposal Site**”)or against the Company or any person or entity for which the Company is legallyresponsible with respect to any transfer or release of Hazardous Materials to aDisposal Site.

 

(e)           Environmental Liabilities. The Company is not aware of any fact or circumstance which could involvethe Company or any person or entity for which the Company is legallyresponsible in any material environmental litigation or impose upon the Companyor 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 availablefor inspections by Parent and its agents and employees all records concerningthe Hazardous Materials Activities of the Company and all environmental auditsand environmental assessments of any current or past Company facility conductedat the request of, or otherwise reasonably available to the Company.  The Company has complied in all materialrespects with all material environmental disclosure, facility closure andclearance obligations imposed upon the Company with respect to this transactionor otherwise by applicable law.

 

4.22         Warranties; Products Claims.  During the one-year periodprior to the date hereof, neither the Company nor its Subsidiaries hasexperienced any material return or warranty claims, nor are there any pendingor, to the knowledge of the Company, threatened, any return or warranty claimsin 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 basedupon 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 anyobligations under any agreements or arrangements with any other person withrespect to 

 

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such amounts andincluding any liability for taxes of a predecessor entity.  “**IRC**” means theInternal Revenue Code of 1986, as amended, and the Treasury Regulationsthereunder.

 

(b)           Tax Returns and Audits; Taxes.

 

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

 

(ii)           The Company and each of its Subsidiariesas of the Effective Time will have withheld with respect to its employees allfederal and state income taxes, Taxes pursuant to the Federal InsuranceContribution Act (“FICA”) and other Taxes required to be withheld.

 

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

 

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

 

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

 

(vi)          [Reserved.]

 

(vii)         Neither the Company nor any of itsSubsidiaries 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 ofa subsection (f) asset (as defined in former IRC Section 341(f)(4))owned by the Company.

 

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

 

(ix)           The Company andits Subsidiaries have not been and will not be required to include any materialadjustment in taxable income for any Tax period (or portion thereof) pursuantto IRC Section 481 or Section 263A or any comparable provision understate or foreign Tax laws as a result of transactions, events or accountingmethods employed prior to the Closing.

 

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

 

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

 

(xii)          NeitherCompany, nor any of its Subsidiaries (A) has been a member of an affiliatedgroup filing a consolidated federal income Tax Return (other than a group thecommon parent of which was Company), or (B) has any liability for the Taxes ofany Person (other than Company or any of its Subsidiaries) under TreasuryRegulations Section 1.1502-6 (or any comparable provision under state,local or foreign Tax laws), as a transferee or successor, by contract, orotherwise.

 

(xiii)         NeitherCompany, nor any of its Subsidiaries, was either a “distributing corporation”or a “controlled corporation” in a distribution of stock qualifying fortax-free treatment under IRC Section 355.

 

(xiv)        Company hasdelivered or made available to Parent correct and complete copies of allfederal income Tax Returns of Company and its Subsidiaries for periods endingafter December 31, 2000.

 

4.24         Insurance.  Schedule 4.24sets forth a complete and correct list and brief summary description of allinsurance policies carried by, or covering, the Company and its Subsidiaries inrespect of their respective businesses. Complete and correct copies of each such policy have been made availableto Parent and MergerSub, all such policies are in full force and effect, and nonotice 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, threatenedclaims under any of the Company’s or its Subsidiaries’ insurance policies.

 

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

 

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of Directors, and allcommittees of the Board of Directors of the Company and its Subsidiaries.  The stock record books accurately reflect alltransactions 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 theCompany and its Subsidiaries is or will be entitled to any broker’s or finder’sfee or any other commission or similar fee directly or indirectly from theCompany or its Subsidiaries in connection with any of the transactionscontemplated by this Agreement.

 

4.27         Material Customers andSuppliers.

 

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

 

(b)           Each of the ten largestsuppliers of the Company and its Subsidiaries in terms of amounts purchasedfrom such suppliers during the most recent fiscal year, and during the InterimStatement Period, respectively is a “**Material Supplier**.”  No Material Supplier has given the Company orits Subsidiaries any notice terminating, suspending, or reducing in anymaterial respect, or specifying an intention to terminate, suspend, or reducein any material respect in the future, the business relationship between suchsupplier and the Company or its Subsidiaries and to the Company’s knowledge, therehas not been any Material Adverse Effect on the business relationship of theCompany or its Subsidiaries with any such supplier since the end of the mostrecent fiscal year.

 

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

 

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

 

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4.30         Intellectual Property Rights.

 

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

 

(i)            “**Intellectual Property**” shall mean any or all of thefollowing and all rights in, arising out of, or associated therewith:  (i) all United States and foreign patents andapplications 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 documentationrelating to any of the foregoing; (iii) all works of authorship, copyrights,copyright registrations and applications therefor and all other rightscorresponding thereto throughout the world; (iv) all semiconductor circuitdesigns; (v) all rights to all mask works and reticules, mask workregistrations and applications therefor; (vi) all industrial designs and anyregistrations and applications therefor throughout the world; (vii) all tradenames, logos, common law trademarks and service marks; trademark and servicemark registrations and applications therefor and all goodwill associated therewiththroughout the world; (viii) all databases and data collections and all rightstherein throughout the world; (ix) all computer software including all sourcecode, object code, firmware, development tools, files, records and data, allmedia on which any of the foregoing is recorded, all Web addresses, sites anddomain names; (x) any similar, corresponding or equivalent rights to any of theforegoing; and (xi) all technical, design, end-user and other documentationrelated to any of the foregoing.

 

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

 

(iii)          “**Registered Intellectual Property**” shall mean all UnitedStates, international and foreign: (i) patents, patent applications (includingprovisional applications); (ii) registered trademarks, applications to registertrademarks, intent-to-use applications, or other registrations or applicationsrelated to trademarks, and any domain name registrations; (iii) registeredcopyrights and applications for copyright registration; (iv) any mask workregistrations and applications to register mask works; and (v) any otherIntellectual 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, anystate, government or other public legal authority.

 

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

 

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

 

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

 

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

 

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

 

(f)            The Company owns and hasgood and exclusive title (or an exclusive license from a third party) to, eachitem of Company Intellectual Property free and clear of any material lien orencumbrance (excluding non-exclusive licenses and related restrictions grantedin the ordinary course).  Withoutlimiting the foregoing: (i) the Company is the exclusive owner in the relevantmarkets of all trademarks and trade names used in connection with the operationor conduct of the business of the Company and its Subsidiaries, including thesale, distribution or provision of any Company Products by the Company or itsSubsidiaries; (ii) the Company owns exclusively, and has good title to, allcopyrighted works that are Company Products or which the Company or any of itsSubsidiaries 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’sknowledge, any non-U.S. Patents.

 

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

 

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

 

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

 

(j)            All contracts, licenses andagreements relating to either (i) Company Intellectual Property or (ii) IntellectualProperty of a third party used in the business of the Company or any of itsSubsidiaries, are in full force and effect. The consummation of the transactions contemplated by this Agreement willneither violate nor result in the breach, modification, cancellation,termination or suspension of such contracts, licenses and agreements.  Each of the Company and its Subsidiaries isin compliance in all material respects with, and has not materially breachedany term of any such contracts, licenses and agreements and, to the knowledgeof the Company, all other parties to such contracts, licenses and agreementsare in compliance in all material respects with, and have not materially breachedany term of, such contracts, licenses and agreements.  To the Company’s knowledge, immediately followingthe Closing, the Surviving Corporation will be permitted to exercise all of theCompany’s rights under such contracts, licenses and agreements to the sameextent the Company and its Subsidiaries would have been able to had thetransactions contemplated by this Agreement not occurred and without thepayment 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 transactionscontemplated by this Agreement, including the assignment to Parent or MergerSubby operation of law or otherwise of any contracts or agreements to which theCompany is a party, will result in (i) either Parent’s or the MergerSub’sgranting to any third party any right to or with respect to any IntellectualProperty right owned by, or licensed to, either of them, (ii) either the Parent’sor the Merger Sub’s being bound by, or subject to, any non-compete or otherrestriction 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 orother amounts to any third party in excess of those payable by Parent or MergerSub, respectively, prior to the Closing.

 

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(k)           The operation of thebusiness of the Company and its Subsidiaries as such business currently isconducted, including (i) the Company’s and its Subsidiaries’ design,development, manufacture, distribution, reproduction, marketing or sale of theproducts or services of the Company and its Subsidiaries (including CompanyProducts) and (ii) to the knowledge of the Company, the Company’s use of anyproduct, 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 ofany third party or constitute unfair competition or trade practices under thelaws of any jurisdiction applicable to the Company’s business.

 

(l)            Neither the Company nor anyof its Subsidiaries has received notice from any third party that the operationof the business of the Company or any of its Subsidiaries or any act, productor service of the Company or any of its Subsidiaries, infringes ormisappropriates the Intellectual Property of any third party or constitutesunfair competition or trade practices under the laws of any jurisdiction.

 

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

 

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

 

4.31         InformationFurnished.  Neither this Agreement nor theSchedules attached hereto, taken as a whole, contain any untrue statement of amaterial fact or omit to state any material fact necessary to make thestatements herein or therein not misleading.

 

ARTICLE 5.Covenants Related to Conduct of the Business

 

5.1           Inspection.  From and afterthe date hereof and until the Closing, the Company shall, and shall cause itsSubsidiaries to: (i) give to each of Parent and MergerSub and itsofficers, directors, employees, agents, financial, advisors, attorneys,accountants, environmental professionals and other representatives(collectively, “**Representatives**”) free, full, andcomplete access on reasonable notice during normal business hours to all books,records, Tax Returns, files, correspondence, personnel, facilities, andproperties of the Company and its Subsidiaries; (ii) provide each ofParent and MergerSub and its Representatives all information and materialpertaining to the business and affairs of the Company and its Subsidiaries as Parentand MergerSub may deem reasonably necessary or appropriate; (iii) withoutlimiting the generality of the foregoing, permit Parent’s and MergerSub’saccountants to examine the Company’s and its Subsidiaries’ financial statementsfor any fiscal period; and (iv) use its reasonable efforts to afford eachof Parent and MergerSub and its Representatives the opportunity to meet, atmutually agreed times and, at the election of the Company, with a Companyrepresentative in attendance,

 

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

 

5.2           Financial Statements.  From and afterthe date hereof and continuing until the Closing, as soon as available, and inany event within 20 days after the end of each calendar month, the Companyshall, and shall cause its Subsidiaries to, furnish to Parent and MergerSub anunaudited balance sheet as of the last day of the month during such period andthe related statements of income and cash flows of the Company and itsSubsidiaries for such month.  Suchmonthly financial statements shall fairly present in all material respects thefinancial position, results of operations, and changes in financial position ofthe Company and its Subsidiaries as of the indicated dates and for theindicated periods and shall be prepared in accordance with GAAP, consistentlyapplied, except as otherwise stated therein, and the omission of footnotedisclosure and any year-end adjustment consistent with past practice.

 

5.3           Interim Operations of theCompany and its Subsidiaries.

 

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

 

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

 

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

 

(iii)          declare, setaside, make, or pay any dividend or other distribution in respect of theircapital stock;

 

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

 

(v)           authorize anycapital expenditures or sell, pledge, dispose of, or encumber, or agree tosell, pledge, dispose of, or encumber, any assets of the Company or itsSubsidiaries except for sales of inventory in the ordinary course of businessconsistent with past practices;

 

(vi)          acquire (bymerger, share exchange, consolidation, combination, or acquisition of stock orassets) any corporation, partnership, or other business organization ordivision thereof or enter into any contract,

 

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agreement, commitment, orarrangement in respect of any of the foregoing;

 

(vii)         incur anyindebtedness for borrowed money, issue any debt securities, or enter into ormodify any contract, agreement, lease, commitment, or arrangement in respectthereof;

 

(viii)        enter into anynew material contract, agreement, lease, or commitment, or amend or terminateany 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, enterinto, amend, or terminate any employment or consulting agreement or arrangementwith any other person or take any action in respect of the grant or payment ofany severance or termination pay other than pursuant to policies or agreementsof 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 anyaccounts payable of the Company or its Subsidiaries in the ordinary course ofbusiness consistent with past practice and in accordance with their termsconsistent with past practices (although the Company may accelerate the paymentof bank loans in order to obtain Lien releases relating to the Company’sassets);

 

(xii)          accelerate thecollection of, or sell or otherwise transfer, any accounts receivable of theCompany or its Subsidiaries;

 

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

 

(xiv)        pay (except forcompensation under existing employment arrangements, advances to salesmen inthe ordinary course of business, and directors’ fees under standard terms ineffect 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 orarrangement 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 (orwrite up) the value of any inventory or write off as uncollectible any AccountsReceivable other than in the ordinary course of business consistent with pastpractice;

 

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

 

(xvii)       dispose of orpermit 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 personany trade secret, formula, process, or know-how not theretofore a matter ofpublic knowledge;

 

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

 

(xix)         grant or extendany 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 changein financial or Tax accounting methods, principles, or practices or make orcause to be made any elections on Tax Returns of the Company and its Subsidiaries,unless required by GAAP or applicable law;

 

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

 

(xxii)        fail tomaintain its books, accounts, and records in the usual, regular, and ordinarymanner on a basis consistent with prior years;

 

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

 

(xxiv)       grant anyincrease in compensation, or grant or make any bonus or other compensatorypayments, to any director, officer, consultant, or employee of the Company orits Subsidiaries;

 

(xxv)        make or revokeany Tax election that could reasonably be expected to have a Material AdverseEffect on the Company and its Subsidiaries, or compromise or settle anymaterial Tax liability; or

 

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

 

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

 

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

 

ARTICLE 6.Additional Agreements

 

6.1           Company Shareholder Meeting.  Unless thisAgreement has been terminated pursuant to the provisions of Article 8,the Company shall take all lawful action to (i) cause a special meeting ofits shareholders (the “**Company ShareholderMeeting**”) to be duly called and held as soon as practicable afterthe date of this Agreement for the purpose of voting on the approval andadoption of this Agreement and (ii) solicit proxies from its shareholdersto obtain the Company Requisite Vote for the approval and adoption of thisAgreement, or alternatively shall obtain the written consent of the holders ofoutstanding shares of the Company’s stock having not less than the minimumnumber of votes that would be necessary to approve and adopt this Agreement ata 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 AllConditions Precedent.  Fromthe date hereof to the Closing, each of the Company, Parent, and MergerSubshall use its commercially reasonable efforts to cause all conditions precedentto the obligations of Parent and MergerSub, in the case of the Company, and theCompany, in the case of Parent and MergerSub, hereunder to be satisfied.

 

6.3           Acquisition Proposals. Until the termination ofthis Agreement, the Company will not, nor will it authorize or permit anyRepresentative 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 toany person any information in respect of, or knowingly take any other action tofacilitate, any Acquisition Proposal or any inquiries or the making of anyproposal that constitutes, or may reasonably be expected to lead to, anyAcquisition Proposal.  The Company shallnotify Parent of any Acquisition Proposal (including the material terms andconditions thereof, any subsequent modifications thereto, and the identity ofthe person making it) as promptly as practicable after its receipt thereof, andshall provide Parent with a copy of any written Acquisition Proposal oramendments or supplements thereto. Immediately after the execution and delivery of this Agreement, theCompany will, and will use its commercially reasonable efforts to cause itsaffiliates, and their respective Representatives to, cease and terminate anyexisting activities, discussions, or negotiations with any parties conductedheretofore in respect of any possible Acquisition Proposal.  The Company shall take all necessary steps topromptly inform the persons referred to in the first sentence of this Section 6.5of the obligations undertaken in this Section 6.5.  “**Acquisition Proposal**”means an inquiry, offer, or proposal regarding any of the following (other thanthe transactions contemplated by this Agreement) involving the Company:(w) any merger, consolidation, share exchange, recapitalization, businesscombination, or other similar transaction; (x) any sale, lease, exchange,mortgage, pledge, transfer, or other disposition of all or substantially allthe assets of the Company in a single transaction or series of relatedtransactions; (y) any tender offer or

 

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

 

6.4           Notice of Developments.  From the datehereof to the Closing, the Company shall notify Parent and MergerSub of anychanges or developments in respect of the business, operations, or prospects ofthe Company that has had, or could reasonably be expected to result in, aMaterial Adverse Effect.

 

6.5           Public Announcements.  Each of Parent,MergerSub, and the Company will consult with one another before issuing anypress release or otherwise making any statement to any other person in respectof the transactions contemplated by this Agreement, including the Merger, andshall not issue any such press release or make any such statement prior to suchconsultation, except as may be required by applicable law or by obligationspursuant 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 datehereof to the Closing, each party hereto shall, promptly upon becoming awarethereof, give detailed written notice to the other parties hereto of theoccurrence of, or the impending or threatened occurrence of, any event thatwould cause or constitute a breach, or would have caused or constituted abreach had such event occurred or been known to such party prior to the date ofthis Agreement, of any of such party’s covenants, agreements, representations,or warranties contained or referred to herein or in any document delivered inaccordance with the terms hereof.

 

6.7           Continuation of InsuranceCoverage.  Fromthe date hereof to the Closing, the Company shall keep in full force and effectinsurance coverage for the Company and its assets and operations comparable inamount and scope to the coverage now maintained covering the Company and itsassets and operations.

 

6.8           Maintenance of Credit Terms.  From the datehereof to the Closing, the Company shall continue to effect sales of itsproducts and services only on the terms that have historically been offered bythe Company or on such other terms as market conditions may dictate consistentwith commercially reasonable practices.

 

6.9           Updating Schedules.  From the datehereof until the Closing, the Company shall disclose to Parent and MergerSubany material variances from the representations and warranties contained in Article 4(which are based on the most recent Schedules as delivered by the Company toParent on or prior to the date of this Agreement) promptly upon discoverythereof.  The Company shall promptlyprovide Parent and MergerSub with any additional information regarding suchdisclosure that is reasonably requested. The applicable Schedule(s) shall be deemed supplemented by (i) anysuch disclosures that relate to occurrences subsequent to the date of thisAgreement and (ii) any such disclosures that relate to occurrences priorto the date of this Agreement but subsequent to the date of the most recentSchedules as delivered by the Company to Parent. In the event the Closingcondition in Section 7.2 is satisfied or waived by Parent andMergerSub, the right of Parent or MergerSub to recover under the indemnityprovisions of Article 9 shall be determined based upon theSchedules as supplemented as

 

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provided above, whichsupplements shall be deemed to cure and correct any breach of therepresentations and warranties contained in Article 4 that wouldhave existed in the absence thereof.

 

6.10         Third Party Consents.  The Companyshall use its commercially reasonable efforts to obtain at the earliestpracticable 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 MergerSubcopies of each such Company Consent promptly after it is obtained. Parent andMergerSub shall cooperate fully with the Company in connection with theobtaining of the Company Consents; provided, however, that Parentand MergerSub shall not be required to pay any additional sums to secure suchCompany Consents.

 

6.11         Commercially ReasonableEfforts and Certain Filings.  Subject to theterms and conditions of this Agreement, each of the Company, Parent andMergerSub will use its respective commercially reasonable efforts to maintainthe accuracy of its representations and warranties hereunder and to take, orcause to be taken, all actions and to do, or cause to be done, all thingsnecessary or desirable to consummate the transactions contemplated by thisAgreement.  None of the Company or itsSubsidiaries, Parent, or MergerSub will take, agree to take, or knowinglypermit to be taken any action or do or knowingly permit to be done anything inthe conduct of its business, or otherwise, that would be contrary to or inbreach of any of the terms or provisions of this Agreement.

 

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

 

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

 

6.14         Contingent Earn-Out Payment. TriQuint and Parent shall usecommercially reasonable efforts to maximize the amount of the ContingentEarn-Out Payment.  For the avoidance ofdoubt, none of TriQuint, Parent, or their affiliates are required to continueoperating the Company’s business after the Effective Time or sell any productsthat incorporate the Company Intellectual Property if such operations or salesare not profitable, cost-effective, or otherwise consistent with TriQuint’sbusiness needs, goals, or strategies.  IfTriQuint or Parent sell or otherwise transfer the Surviving Corporation or theCompany Intellectual Property to a third party, then TriQuint or Parent (as thecase may be) shall ensure that the Contingent Earn-Out Payment obligations setforth in this Agreement are appropriately binding on the third party.

 

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6.15         Benefits for RetainedEmployees.  To the extent that service is relevant forpurposes of eligibility, vesting, allowances, benefit accrual or any otherpurpose under any employee benefit plan, program, arrangement, policy orpractice of Parent or any of its subsidiaries or affiliates extended toRetained Employees (as defined below), Retained Employees shall receive fullcredit for their service with the Company prior to the Closing with theexceptions outlined below.

 

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

 

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

 

Nothingin this Section 6.15 shall be deemed to limit or otherwise affectthe right of Parent and its subsidiaries and affiliates to terminate theemployment or change the place of work, responsibilities, status or descriptionof 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 asany amendment, modification or termination applies to other employees of theParent.  For purposes of this Section 6.15“**Retained Employees**” means individualswho were employees of the Company immediately prior to the Closing and whoremain employed by the Surviving Corporation, or become employed by Parent ofany of its subsidiaries or Affiliates, immediately after the Closing.

 

ARTICLE 7.Conditions to Consummation of the Merger

 

7.1           Conditions to Each Party’sObligation to Effect the Merger.  The respectiveobligations of each party to consummate the transactions contemplated by thisAgreement are subject to the fulfillment at or prior to the Effective Time ofeach of the following conditions, any or all of which may be waived in whole orin part by the party being benefited thereby, to the extent permitted byapplicable law:

 

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

 

(b)           The Company, Parent, andMergerSub shall have timely obtained from each Governmental Entity allapprovals, waivers, and consents, if any, necessary for consummation of or inconnection with the transactions contemplated hereby.

 

(c)           There shall not be in effectany Law or Order of any Governmental Entity of competent jurisdictionrestraining, enjoining, or otherwise preventing consummation of thetransactions contemplated by this Agreement.

 

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7.2           Conditions to theObligations of Parent and MergerSub.  Therespective obligations of Parent and MergerSub to consummate the transactionscontemplated by this Agreement are subject to the fulfillment at or prior tothe Effective Time of each of the following additional conditions, any or allof which may be waived in whole or part by Parent and MergerSub, as the casemay be, to the extent permitted by applicable law:

 

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

 

(b)           Prior to the Closing, thereshall not have occurred any Material Adverse Effect or any material casualty ordamage (whether or not insured) to any facility, property, or equipment ownedor used by the Company.

 

(c)           The Company shall havedelivered 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 inconnection 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 havedelivered to Parent and MergerSub such good standing certificates and officers’certificates and similar documents as counsel for Parent and MergerSub shallhave 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 notwithdrawn, forfeited, or otherwise permitted to lapse dissenter’s or similarrights under applicable Law with respect to their shares of Company CommonStock in connection with the Merger.

 

(g)           The Company shall haveentered into appropriate agreements with each holder of outstanding CompanyStock Options, in form and substance acceptable to Parent, providing that:  subject to the consummation of the Merger andeffective immediately prior to the Effective Time, (A) the Company Stock Optionshall be exercised in full for shares of Company Common Stock, whether or notexercisable, and whether or not vested, and (B) the holder of the Company StockOption may elect to pay the exercise price by means of a promissory note thatwill be repaid by a corresponding deduction as an offset from the payment thatwould otherwise be made to such holder on account of the Tranche One Payment asset forth in Article 2.  Anyper share exercise price that is unpaid upon the exercise of a Company StockOption 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 andconditions that are reasonable and acceptable to Parent.

 

(i)            The Executive EmploymentAgreement between the Surviving Corporation and Kenneth Lakin shall have beenexecuted and delivered by Mr. Lakin.

 

(j)            Each of the Stay BonusAgreements between the Surviving Corporation and each of the employees listedon Schedule 7.2(j) shall have been executed and delivered by suchemployees.

 

The decision of Parent and MergerSub toconsummate the transactions contemplated by this Agreement without thesatisfaction of any of the preceding conditions shall not constitute a waiverof any of the Company’s representations, warranties, covenants, or indemnitiesherein, except as otherwise provided in Section 6.10.

 

7.3           Conditions to Obligations ofthe Company.  Theobligations of the Company to consummate the transactions contemplated by thisAgreement are subject to the fulfillment at or prior to the Effective Time ofeach of the following additional conditions, any or all of which may be waivedin whole or part by the Company, to the extent permitted by applicable law:

 

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

 

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

 

(c)           The Executive EmploymentAgreement between the Surviving Corporation and Kenneth Lakin shall have beenexecuted and delivered by the Surviving Corporation.

 

(d)           Each of the Stay BonusAgreements between the Surviving Corporation and each of the employees listedon Schedule 7.2(j) shall have been executed and delivered by theSurviving Corporation.

 

The decision of Company to consummate thetransactions contemplated by this Agreement without the satisfaction of any ofthe preceding conditions shall not constitute a waiver of any of therepresentations, warranties, covenants, or indemnities of Parent or MergerSubset forth herein.

 

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ARTICLE 8.Termination

 

8.1           Termination by MutualAgreement.  ThisAgreement may be terminated and the Merger may be abandoned at any time priorto the Effective Time, whether before or after the approval of the Merger bythe Company Requisite Vote, by mutual written consent of the Company and Parentby action of their respective Boards of Directors.

 

8.2           Termination by Either Parentor the Company.  ThisAgreement may be terminated and the Merger may be abandoned at any time priorto the Effective Time by action of the Board of Directors of either Parent orthe Company upon the occurrence of a Termination Event; provided, however,that the right to terminate this Agreement pursuant to this Section 8.2shall not be available to any party that has breached in any material respectits obligations under this Agreement in any manner that shall have proximatelycontributed to the occurrence of the failure of the Merger to beconsummated.  For the purposes of thisAgreement, a “**Termination Event**” is deemed tooccur if:

 

(a)           the Company Requisite Voteshall not have been obtained at the Company Shareholder Meeting or at anyadjournment or postponement thereof (and the Shareholder Consent shall not havebeen obtained); or

 

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

 

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

 

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

 

(a)           there is a breach by Parentor MergerSub of any representation, warranty, covenant, or agreement containedin this Agreement that cannot be cured and would cause a condition set forth inSection 7.3(a) to be incapable of being satisfied as of 120 daysfollowing the date of this Agreement (the “**Termination Date**”);or

 

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

 

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

 

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(a)           there is a breach by theCompany of any representation, warranty, covenant, or agreement contained inthis 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 ofthe Company shall have withdrawn its recommendation of this Agreement in amanner adverse to Parent or shall have resolved to do the foregoing.

 

8.5           Effect of Termination andAbandonment.  Inthe event of termination of this Agreement and the abandonment of the Mergerpursuant to this Article 8, this Agreement (other than this Section 8.5,Section 6.12, and Article 10) shall become void and ofno effect with no liability on the part of any party hereto (or of any of itsRepresentatives); provided, however, that except as otherwise provided herein,no such termination shall relieve any party hereto of any liability or damagesresulting from any willful breach of this Agreement.

 

8.6           Amendment.

 

(a)           Before the Effective Time, thisAgreement may be amended by action taken by the Company, Parent, and MergerSubat any time before or after approval of the Merger by the Company RequisiteVote but, after any such approval, no material amendment shall be made thatchanges any of the terms of this Agreement. Before the Effective Time, this Agreement may not be amended except byan 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 Sharesoutstanding immediately before the Effective Time; provided, however, that anyamendment that would adversely affect the amount of Merger Considerationpayable to the holders of Company Common Stock immediately prior to theEffective Time will require the consent of the holders in interest of at least95% of the Outstanding Shares.  After theEffective Time, this Agreement may not be amended except by an instrument inwriting signed on behalf of such persons.

 

8.7           Extension; Waiver.  At any timeprior to the Effective Time, each party hereto (for these purposes, Parent andMergerSub shall together be deemed one party and the Company shall be deemedthe other party) may (i) extend the time for the performance of any of theobligations or other acts of the other party, (ii) waive any inaccuraciesin the representations and warranties of the other party contained herein or inany document, certificate, or writing delivered pursuant hereto, or(iii) waive compliance by the other party with any of the agreements orconditions contained herein.  Anyagreement on the part of either party hereto to any such extension or waivershall be valid only if set forth in an instrument in writing signed on behalfof such party.  The failure of any partyhereto to assert any of its rights hereunder shall not constitute a waiver ofsuch rights.

 

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

 

9.1           Survival of Representations,Warranties, Covenants and Agreements; Warranty Reserve.  Notwithstandingany right of Parent, MergerSub, or the Company (whether or not exercised) toinvestigate the affairs of Parent, MergerSub, or the Company, each party shallhave the right, subject to Section 6.10, to rely fully upon therepresentations, warranties, covenants, and agreements of the other partycontained in this Agreement or in any instrument required to be deliveredpursuant to Article 7.  Thecovenants and agreements of the Company, Parent, and MergerSub contained inthis Agreement or in any instrument delivered pursuant to this Agreement thatby their terms apply or are to be performed in whole or in part after theEffective Time shall survive the Effective Time.  The representations and warranties of theCompany, Parent, and MergerSub contained in this Agreement or in any instrumentdelivered pursuant to this Agreement shall survive the Merger and continueuntil the first anniversary of the Closing Date, provided, however, that therepresentations and warranties of Company contained in Section 4.23shall survive the Merger and shall continue in full force and effect until 30days following the expiration of the applicable statutes of limitations(including any extensions thereof) (the “**Expiration Date**”).  Except for the representations and warrantiescontained in this Agreement, none of Parent, MergerSub, or the Company has madeany representations or warranties and, except for the representations andwarranties contained in this Agreement, each of Parent, MergerSub, and theCompany acknowledges that no representations or warranties have been made by,and it has not relied upon any representations or warranties made by, any ofthe parties hereto or any of their respective Representatives in respect ofthis Agreement and the transactions contemplated hereby, and the documents andinstruments referred to herein, notwithstanding the delivery or disclosure tosuch party or its Representatives of any documentation or other information inrespect of any one or more of the foregoing. The inclusion of any entry on the Schedules attached hereto shall notconstitute an admission by, or agreement of, the Company that such matter ismaterial to the Company.  Withoutlimiting the generality of the foregoing, the Company makes no representationor warranty to Parent or MergerSub with respect to any projections, estimates,plans, or budgets delivered to or made available to Parent or anyRepresentative thereof of future revenues, expenses or expenditures, or futureresults of operations or performance of the Company or its business.

 

9.2           Warranty Reserve.

 

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

 

(b)           Recourse to the WarrantyReserve.  The Warranty Reserve shall be available (and except onlyfor claims relating to the representations and warranties of Company containedin Section 4.23, to the extent made after the first anniversary ofthe Effective Time, shall be the sole and exclusive remedy of Parent andMergerSub after the Effective Time) to compensate Parent for any and all Losses(whether or not involving a Third Party Claim) incurred or sustained by Parentas a result of any inaccuracy or breach of any representation, warranty,covenant, or agreement of the Company contained in this Agreement or anyinstrument required to be delivered pursuant to Article 7 thatsurvives 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 untilthe aggregate Losses incurred or sustained by Parent exceed $50,000 (the “**Threshold Amount**”), in which event Parent may make claimsagainst 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 liableto Parent with respect to any such Losses beyond such shareholder’s respectivepro rata share (based on the number of shares of Company Common Stock heldthereby prior to the Effective Time) of the Warranty Reserve.

 

(c)           Reserve Period; Distributionof Warranty Reserve upon Termination of Reserve Period.  Subjectto the following requirements, the Warranty Reserve shall be in existenceimmediately following the Effective Time and shall terminate at 5:00 P.M.,Portland, Oregon time, on the Expiration Date (the period from the EffectiveTime 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 theholders of the Company’s Common Stock immediately prior to the Effective Time inproportion to each shareholders’ respective contributions to the WarrantyReserve; provided, however, that the Reserve Period shall notterminate in respect of such amount (or some portion thereof) that is necessaryin the reasonable judgment of Parent, subject to the objection of theShareholder Agent and the subsequent resolution of the matter in the manner asprovided in Section 9.2(e), to satisfy any unsatisfied writtenclaims under this Section 9.2 concerning facts and circumstancesexisting prior to the termination of such Reserve Period which claims are specifiedin any Officer’s Certificate delivered to the Shareholder Agent prior totermination of such Reserve Period.  Uponresolution 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 WarrantyReserve designated for such individual claim after the resolution of such claimto the Paying Agent for the holders of the Company’s Common Stock immediatelyprior to the Effective Time as part of the Tranche Two Payment.

 

(d)           Claims Upon Warranty Reserve.

 

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

 

(ii)           For purposes ofthis 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 Lossesinclude special, indirect, incidental, or consequential damages.

 

(iii)          Paymentspursuant to this Article 9 shall be limited to the amount of any Loss thatremains after deducting therefrom (A) any indemnity, contribution, or othersimilar payment recoverable by Parent or any affiliates thereof from any personwith respect thereto, any other savings that would reduce the impact of theLosses upon Parent or any such affiliates and (B) any reserve provided for theitem in question in the Financial Statements.

 

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

 

(e)           Objections to Claims.  Fora period of 30 days after delivery of such notice to the ShareholderAgent, Parent shall make no reduction to the Warranty Reserve pursuant to Section 9.2(d)unless Parent shall have received written authorization from the ShareholderAgent to make such reduction.  After theexpiration of such 30-day period, Parent shall make the reduction to theWarranty Reserve pursuant to Section 9.2(d); provided, however,that no such payment or delivery may be made if the Shareholder Agent shallobject 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 expirationof such 30-day period.

 

(f)            Resolution of Conflicts.  Inthe event the Shareholder Agent timely objects in writing to any claim orclaims made in any Officer’s Certificate, the Shareholder Agent and Parentshall attempt in good faith to agree upon the rights of the respective partiesin respect of each of such claims.  Ifthe Shareholder Agent and Parent are unable to reach agreement with respect toany such contested claim within 45 days after the delivery of the ShareholderAgent’s objection, the matter shall be settled by binding arbitration inPortland, Oregon as set forth below.  Allclaims shall be settled in accordance with the Commercial Arbitration Rulesthen in effect of the American Arbitration Association (the “**AAA Rules**”), although the parties shall not be required touse AAA arbitrators.  The ShareholderAgent and Parent shall mutually appoint a single arbitrator within 15 daysafter the termination of such 45 day period. The Shareholder Agent and Parentshall cause the arbitrator to decide the matter to be arbitrated pursuanthereto within 60 days after the arbitrator’s appointment.  The decision of the arbitrator shall relateto whether Parent is entitled to reduce the Warranty Reserve for the disputedclaim, or the disputed portion thereof, pursuant to the applicable terms ofthis Agreement.  The final decision ofthe arbitrator shall be furnished to the Shareholder Agent and Parent inwriting and shall constitute the conclusive determination of the issue inquestion binding upon all parties hereto, and shall not be contested by any ofthem.  Such decision may be used in acourt of law only for the purpose of seeking enforcement of the decision of thearbitrator.  All the fees and expenses ofthe arbitrator shall be paid by the party who does not prevail in thearbitration.

 

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9.3           Shareholder Agent of theShareholders; Power of Attorney.

 

(a)           Shareholder Agent.  Inthe event that the Merger is approved by the shareholders of the Company,effective upon such vote, and without further act of any shareholder, KennethLakin 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 ofCompany Stock Options (except such shareholders, if any, as shall haveperfected their dissenters’ rights under the Act), for and on behalf ofshareholders of the Company, to give and receive notices and communications, toauthorize reductions of the Warranty Reserve in satisfaction of claims byParent, to object to such reductions, to agree to, negotiate, enter intosettlements and compromises of, and demand litigation or arbitration and complywith orders and awards of courts and arbitrators in respect of such claims, andto take all actions necessary or appropriate in the judgment of the ShareholderAgent for the accomplishment of the foregoing. Such agency may be changed by the shareholders of the Company from timeto time upon not less than 30 days’ prior written notice to Parent; provided,however, that the Shareholder Agent may not be removed unless theholders of at least a two-thirds’ interest in the Warranty Reserve agree tosuch removal and to the identity of the substituted shareholder agent.  Any vacancy in the position of ShareholderAgent may be filled by approval of the holders of a majority in interest of theWarranty Reserve.  No bond shall berequired of the Shareholder Agent, and the Shareholder Agent shall not receivecompensation for his services.  Noticesor communications to or from the Shareholder Agent shall constitute notice toor from each of the shareholders of the Company.

 

(b)           Exculpation.  TheShareholder Agent shall not be liable for any act done or omitted hereunder asShareholder Agent while acting in good faith and in the exercise of reasonablejudgment.

 

(c)           Actions of the ShareholderAgent.  A decision, act, consent, or instruction of theShareholder Agent shall constitute a decision for all of the shareholders ofthe Company for whom a portion of the funds otherwise issuable to them aredeposited in the Warranty Reserve, and shall be final, binding, and conclusiveupon each of such shareholders, and the Depositary Agent and Parent may relyupon any such decision, act, consent, or instruction of the Shareholder Agentas being the decision, act, consent, or instruction of every such shareholderof the Company.  Parent is herebyrelieved from any liability to any Person for any acts done by it in accordancewith such decision, act, consent, or instruction of the Shareholder Agent.

 

9.4           Third-Party Claims.  In the eventParent or the Surviving Corporation receives written notice of a third-partyclaim (a “**Third Party Claim**”) that Parent reasonablyexpects may result in a demand against the Warranty Reserve, Parent shallprovide the Shareholder Agent with prompt written notice thereof.  The Shareholder Agent, as representative forthe shareholders of the Company, shall have the right to participate in or, bygiving written notice to Parent, to assume the defense of any Third Party Claimat the expense of the Warranty Reserve and by counsel selected by theShareholder Agent (which counsel must be reasonably satisfactory to Parent),and Parent will cooperate in good faith (and shall be permitted to participateat Parent’s expense) in such defense; provided, however*,* that the Shareholder Agent shall not be entitled to assumecontrol of the defense of any Third Party Claim that (i) could reasonably beexpected to have any impact on the ongoing operations or goodwill of the

 

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SurvivingCorporation or Parent or (ii) could reasonably be expected to result inLosses in excess of the Warranty Reserve. Parent shall have the right to settle any Third Party Claim contemplatedby clause (i) or (ii) above with consent of the Shareholder Agent, whichconsent shall not be unreasonably withheld. In the event that the Shareholder Agent has consented to any suchsettlement, the Shareholder Agent shall have no power or authority to objectunder any provision of this Article 9 to the amount of any claim byParent against the Warranty Reserve with respect to the amount of Lossesincurred by Parent in such settlement as consented to by the Shareholder Agent.

 

9.5           Remedies.  Parent hereby acknowledges and agrees thatits sole and exclusive remedy with respect to any and all claims relating tothe subject matter of this Agreement shall be pursuant to the provisions setforth in this Article 9.  Infurtherance of the foregoing, Parent hereby waives, to the fullest extentpermitted under applicable law, any and all rights, claims and causes of actionit may have against any other party hereto arising under or based upon anyfederal, state or local statute, law, ordinance, rule or regulation (includingany such rights, claims or causes of action arising under or based upon commonlaw or otherwise).  Parent furtheracknowledges and agrees that no breach of any representation, warranty,covenant or agreement contained herein or in any instrument required to be deliveredpursuant to Article 7 shall give rise to any right on the part of Parentor MergerSub, after the Closing, to rescind this Agreement or any of thetransactions contemplated hereby.

 

ARTICLE 10.Miscellaneous

 

10.1         CollateralAgreements.  This Agreement (together with thedocuments 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 ofthe subject matter hereof.

 

10.2         Successors andAssigns.  Neither the rights nor obligations of the Company, Parent,or MergerSub under this Agreement may be assigned or delegated, in whole or inpart, without the written consent of the other parties hereto, which will notbe unreasonably withheld; provided, however, that the rights and obligations ofParent, MergerSub, and the Surviving Corporation hereunder may be assigned ordelegated freely among TriQuint, Parent, and their affiliates; and providedfurther that the holders of Company Common Stock immediately prior to theEffective Time may assign their rights hereunder at any time following theClosing to such holders’ near relatives or to a trust for the benefit of suchholders or any of their respective near relatives.  Any assignment in violation of the precedingsentence shall be null and void.  Subjectto the preceding sentences of this Section 10.2, the provisions ofthis Agreement (and, unless otherwise expressly provided therein, of anydocument delivered pursuant to this Agreement) shall be binding upon and inuresolely to the benefit of the parties hereto and their respective legalrepresentatives, successors, and permitted assigns, and nothing in thisAgreement, express or implied, is intended to or shall confer upon any otherperson any rights, benefits, or remedies of any nature whatsoever under or byreason of this Agreement; provided, however, that the holders of the CompanyCommon Stock immediately prior to the Effective Time (and their respectivesuccessors, heirs, legal representatives, and permitted assigns) shall, afterthe Closing,

 

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bedeemed third party beneficiaries of this Agreement and shall be entitled toenforce the terms of this Agreement as if parties hereto.

 

10.3         Guaranty. TriQuintSemiconductor, Inc. (“**TriQuint**”) herebyguarantees absolutely and unconditionally the obligations of Parent to makepayment of the Merger Consideration pursuant to Article 2.  This is a continuing guaranty and shallremain in force and effect until the Merger Consideration has been paidpursuant to Article 2.

 

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

 

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

 

10.6         Notices.  Anynotices required or permitted to be given under this Agreement (and, unlessotherwise expressly provided therein, under any document delivered pursuant tothis Agreement) shall be given in writing and shall be deemed received(i) when personally delivered to the relevant party at such party’saddress as set forth below, (ii) if sent by mail (which must be certifiedor registered mail, postage prepaid) or overnight courier, when received orrejected by the relevant party at such party’s address indicated below, or(iii) if sent by facsimile, when confirmation of delivery is received bythe 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           |

 

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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                    |
|                |     | [    ]        |
|                |     | [    ]        |

 

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

 

10.7         FurtherAssurances.  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 reasonablyrequest for the purpose of carrying out the intent of this Agreement and thedocuments and instruments referred to herein.

 

10.8         SpecificPerformance.  The parties recognize that if the Companyrefuses to perform under the provisions of this Agreement, monetary damagesalone will not be adequate to compensate Parent for its injury.  Parent shall therefore be entitled, inaddition to any other remedies that may be available, to obtain specificperformance of the terms of this Agreement. If any action is brought by Parent to enforce this Agreement, theCompany shall waive the defense that there is an adequate remedy at law.  In the event of litigation pertaining to anycontroversy, claim, or dispute between the parties hereto arising out of orrelating to this Agreement or the breach of any provision thereof, theprevailing party shall be entitled to recover from the non-prevailing partyreasonable expenses, attorneys’ fees, and costs.

 

10.9         Governing Law.  ThisAgreement shall be governed by and construed in accordance with the laws of theState of Oregon.

 

10.10       Remedies NotExclusive.  Except to the extent otherwiseexpressly provided herein with respect to Parent, the rights and remedies hereinprovided shall be cumulative and not exclusive of any rights or remediesprovided by law or equity.

 

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10.11       Counterparts.  ThisAgreement may be executed in two or more counterparts, each of which will bedeemed an original, but all of which together will constitute one and the sameagreement.

 

10.12       Titles andHeadings.  Titles and headings to articles andsections herein are inserted for convenience of reference only, and are notintended to be a part of or to affect the meaning or interpretation of thisAgreement.

 

10.13       CertainInterpretive Matters and Definitions.

 

(a)           Unless the context otherwiserequires, (i) all references to Articles, Sections, Exhibits, or Schedulesare 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 necessarilyexclusive, (iv) words in the singular include the plural and viceversa,and (v) the term “**affiliate**” hasthe meaning given to it in Rule 12b-2 of Regulation 12B under theExchange Act.  All references to “$” ordollar amounts will be to lawful currency of the United States of America.

 

(b)           No provision of thisAgreement will be interpreted in favor of, or against, any of the partieshereto by reason of the extent to which any such party or its counselparticipated in the drafting thereof or by reason of the extent to which anysuch provision is inconsistent with any prior draft hereof or thereof.

 

(c)           “**MaterialAdverse Effect**” means, as to any person, any event, circumstance,condition, fact, effect, or other matter that has had or would reasonably beexpected 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 anymaterial obligation under this Agreement or to consummate the transactionscontemplated hereby, excluding, in each of clauses (i) and (ii), the effects ofchanges to the extent related to (x) conditions in the United States or globaleconomy or financial or capital markets generally, (y) general changes inconditions (including changes in legal, regulatory or business conditions orchanges in GAAP) in or otherwise affecting the industries or businesses inwhich the Company operates (except, in the case of (x) or (y), to the extentthat such changes materially disproportionately affect the Company compared tothe manner in which the changes affect the industries or businesses in whichthe Company operates), or (z) this Agreement, the announcement or performancehereof and the transactions and obligations contemplated hereby.

 

(d)           The phrase “**to the knowledge of the Company**” means the actual knowledgeof 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 (asdefined in the Exchange Act).

 

(f)            The Exhibits and Schedulesattached hereto are incorporated herein by reference as though fully set forthherein.

 

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Parent,MergerSub, and the Company have executed and delivered this Agreement as of thedate 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

----

 

Byexecution of this signature page, TriQuint confirms that it is bound by the applicableprovisions of this Agreement and Plan of Reorganization to which this page isattached, 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 |   |
|   |                          |

 

Byexecution of this signature page, Shareholder Agent confirms that it is boundby the applicable provisions of this Agreement and Plan of Reorganization towhich this page is attached, effective as of the effective date of thisAgreement.

 
|   | Shareholder  Agent:  |
|--------|----------------------|
|   |                 |
|   | By:                  | /s/  KENNETH LAKIN |   |
|   | Name:  Kenneth Lakin |   |

 

Byexecution of this signature page, Paying Agent confirms that it is bound by theapplicable provisions of this Agreement and Plan of Reorganization to whichthis 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)

 
|                               | 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, theinformation on this application is public record.

We must release this information to all parties uponrequest and it will be posted on our website.                     Foroffice use only

 

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

** **

1) **NAMESAND 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 COPYOF THE MERGER PLAN IS ATTACHED.**See ORS 60.481(2)

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

ýA copy of the vote required by each entity is attached.

 

**FOR PARENT AND 90% OWNEDSUBSIDIARY 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 OFPLAN**

oA copy of the plan of merger setting forth the manner and basis of convertingshares of the subsidiary into shares, obligations, or 

other securities of the parent corporation or anyother 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 |   |
|                                                                                                                                                                                                                                                            |   |   |

oThe mailing of a copy of the plan or summary was waived by all outstandingshares.

 

10) **EXECUTION**
| Signature         |   | Printed Name  |   | Title               |
|-------------------|--------|---------------|--------|---------------------|
|              |   |          |   |                |
| /s/ Ralph Quinsey |   | Ralph Quinsey |   | President & CEO |

 

11) **CONTACTNAME**(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)

 

----

 

**Attachmentto Articles of Merger**

 

**ShareholderApproval.**  Shareholderapproval of the Plan of Merger was required as follows:

 

A.            TFRAcquisition, Inc.

 

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

 

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

 

B.            TFRTechnologies, Inc.

 

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

 

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

 

----