<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 28, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
Commission File Number 0-25376
TYLAN GENERAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-2659273
(State or other jurisdiction) (I.R.S. employer identification
of incorporation or organization) number)
9577 CHESAPEAKE DRIVE, SAN DIEGO CALIFORNIA 92123
(Address of principal executive offices)
(619) 571-1222
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. /X/ YES / / NO
As of May 26, 1996, there were 6,517,382 shares of the Registrant's Common Stock
outstanding.
<PAGE> 2
TYLAN GENERAL, INC.
FORM 10-Q
APRIL 28, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Statements of Income for the three months
and six months ended April 28, 1996 and April 30, 1995 ....................... 3
Consolidated Balance Sheets as of April 28, 1996
and October 29, 1995 ......................................................... 4
Consolidated Statements of Cash Flows for the
six months ended April 28, 1996 and April 30, 1995 ........................... 5
Notes to Consolidated Financial Statements ....................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................................... 8
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders .............................. 17
Item 6. Exhibits and Reports on Form 8-K ................................................. 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
TYLAN GENERAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- ----------------------
APRIL 28, APRIL 30, APRIL 28, APRIL 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES ....................................... $ 29,198 $ 18,717 $ 52,720 $ 33,531
COST OF SALES ................................... 16,582 10,547 30,350 19,065
-------- -------- -------- --------
Gross profit .......................... 12,616 8,170 22,370 14,466
-------- -------- -------- --------
OPERATING EXPENSES:
Sales and marketing .......................... 3,627 2,701 6,939 4,817
General and administrative ................... 2,478 1,936 4,443 3,364
Research and development ..................... 2,029 1,416 3,298 2,325
Amortization, primarily goodwill ............. 92 120 184 239
-------- -------- -------- --------
Total operating expenses .............. 8,226 6,173 14,864 10,745
-------- -------- -------- --------
INCOME FROM OPERATIONS .......................... 4,390 1,997 7,506 3,721
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income (expense) -- net ............. 90 (100) 176 (459)
Foreign currency exchange gain--net .......... 32 404 14 397
Other -- net ................................. 1 (21) 204 (33)
-------- -------- -------- --------
Total other income (expense) .......... 123 283 394 (95)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM ....................... 4,513 2,280 7,900 3,626
PROVISION FOR INCOME TAXES ...................... (1,737) (958) (3,028) (1,523)
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM ................ 2,776 1,322 4,872 2,103
======== ======== ======== ========
EXTRAORDINARY ITEM, NET OF INCOME
TAX BENEFIT .................................. (695) (695)
-------- -------- -------- --------
NET INCOME ...................................... $ 2,776 $ 627 $ 4,872 $ 1,408
======== ======== ======== ========
EARNINGS PER SHARE DATA:
Earnings per share before extraordinary
item ....................................... $ 0.41 $ 0.25 $ 0.72 $ 0.45
Extraordinary item ........................... (0.13) (0.15)
-------- -------- -------- --------
Earnings per share ........................... $ 0.41 $ 0.12 $ 0.72 $ 0.30
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding .............. 6,713 5,325 6,726 4,660
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
TYLAN GENERAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
APRIL 28, OCTOBER 29,
1996 1995
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ....................................................... $ 10,288 $15,148
Accounts receivable ........................................ 18,301 14,245
Current portion of note receivable ......................... 1,300
Inventories (Note 2) ....................................... 15,290 11,903
Prepaid expenses and other ................................. 1,399 1,035
Deferred income taxes ...................................... 1,517 1,517
-------- -------
Total current assets ................................ 48,095 43,848
NOTE RECEIVABLE--net of current portion ....................... 2,313
PROPERTY--net ................................................. 13,342 11,140
GOODWILL--net ................................................. 2,359 2,505
DEFERRED INCOME TAXES ......................................... 385 385
OTHER ASSETS .................................................. 1,065 963
-------- -------
TOTAL ......................................................... $ 67,559 $58,841
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................... $ 9,996 $ 7,571
Accrued expenses ........................................... 4,856 4,514
Current portion of long-term debt and capital leases ....... 960 881
Income taxes payable ....................................... 2,211 1,551
-------- -------
Total current liabilities ........................... 18,023 14,517
LONG-TERM DEBT AND CAPITAL LEASES ............................. 2,160 1,649
-------- -------
Total liabilities ................................... 20,183 16,166
======== =======
COMMITMENTS AND CONTINGENCIES (Notes 3, 4)
STOCKHOLDERS' EQUITY:
Common stock:
-- authorized -- 50,000,000 shares, par value $.001,
issued and outstanding -- 6,517,382 shares and
6,476,228 shares ...................................... 7 6
Paid-in capital ............................................ 36,027 35,813
Retained earnings .......................................... 11,494 6,622
Cumulative translation adjustment .......................... (152) 234
-------- -------
Total stockholders' equity .......................... 47,376 42,675
-------- -------
TOTAL ......................................................... $ 67,559 $58,841
======== =======
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
TYLAN GENERAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
APRIL 28, APRIL 30,
OPERATING ACTIVITIES: 1996 1995
-------- --------
<S> <C> <C>
Net income ......................................................... $ 4,872 $ 1,408
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Write-off of unamortized Deferred Issuance Cost ............... 949
Depreciation and amortization ................................. 1,304 928
Deferred Income Taxes ......................................... 43
Net loss of Korean joint venture .............................. 125
Change in assets and liabilities:
Accounts receivable ...................................... (4,339) (3,798)
Note receivable .......................................... (3,613)
Inventories .............................................. (3,644) (2,139)
Prepaid expenses and other ............................... (539) (521)
Accounts payable and other liabilities ................... 3,602 4,249
------- -------
Net cash provided by (used in) operating
activities ........................................ (2,357) 1,244
------- -------
INVESTING ACTIVITIES:
Capital expenditures ............................................... (3,442) (1,313)
------- -------
Net cash used in investing activities ............... (3,442) (1,313)
------- -------
FINANCING ACTIVITIES:
Net repayments under line of credit ................................ (608)
Proceeds from long-term debt ....................................... 1,200 300
Repayments of long-term debt ....................................... (314) (5,500)
Proceeds from capital leases ....................................... 482
Repayments of capital leases ....................................... (246) (262)
Net proceeds from initial public offering .......................... 7,403
Proceeds from exercise of stock options and employee
stock purchases .................................................. 215
Translation adjustment and other ................................... 84 (94)
------- -------
Net cash provided by financing activities ........... 939 1,721
------- -------
INCREASE (DECREASE) IN CASH ........................................... (4,860) 1,652
CASH AT BEGINNING OF PERIOD ........................................... 15,148 1,471
------- -------
CASH AT END OF PERIOD ................................................. $ 10,288 $ 3,123
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest ...................................................... $ 99 $ 549
Income taxes, net of refunds .................................. $ 2,258 $ 359
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
TYLAN GENERAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The interim consolidated financial statements included herein have been
prepared by Tylan General, Inc. (the "Company") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC").
Certain information and footnote disclosures, normally included in annual
financial statements, have been condensed or omitted pursuant to such SEC rules
and regulations; nevertheless, the management of the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended October 29, 1995 included in the Company's Form 10-K. In the opinion
of management, the consolidated financial statements included herein reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the consolidated financial position of the Company as of April
28, 1996 and the results of its operations for the three-month and six-month
periods ended April 28, 1996 and April 30, 1995. The results of operations for
the interim periods are not necessarily indicative of the results which may be
reported for any other interim period or for the entire fiscal year.
2. INVENTORIES
The components of inventory at April 28, 1996 and October 29, 1995
consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
April 28, October 29,
1996 1995
--------- -----------
<S> <C> <C>
Raw materials.................... $ 10,846 $ 6,535
Work in process.................. 1,466 1,611
Finished goods................... 2,978 3,757
========= ==========
Total............................ $ 15,290 $ 11,903
========= ==========
</TABLE>
3. PROPOSED ACQUISITION
On February 20, 1996, the Company signed an agreement to acquire Span
Instruments, Inc., a privately held manufacturer of high purity pressure
monitoring and control instrumentation. Under terms of the agreement, the
Company will acquire all of the outstanding shares of Span capital stock in
exchange for 1,470,000 shares of Tylan General common stock. The agreement,
which is intended to be accounted for as a
6
<PAGE> 7
pooling of interest, is subject to the approval of Tylan General's stockholders
and Span's shareholders.
As of April 28, 1996, the Company had $3.6 million due from Span
Instruments for returned inventory, which had been purchased by certain of the
Company's subsidiaries under international distribution agreements. The $3.6
million is payable in monthly installments of $100,000 plus interest beginning
April 15, 1996.
4. RESEARCH AND DEVELOPMENT AGREEMENT
In April 1996, the Company signed a five-year research and development
agreement with Integrated Sensing Systems, Inc. ("ISSYS"). Under terms of the
agreement, ISSYS will undertake research and development of certain products
which may be sold to Tylan General or incorporated into Tylan General's products
and Tylan General will make equal quarterly payments of $250,000 to ISSYS
through January 2001. Tylan General may terminate the agreement prior to the
expiration date, at which time the Company will be obligated to make quarterly
payments through the end of the current contract year plus the next full
contract year.
7
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements that involve risks
and uncertainties. The Company's actual future results could differ materially
from those forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, risks associated with changes
in demand for semiconductor capital equipment, changes in product mix, new
product introductions, and the integration of operations and product offerings
following completion of the proposed combination with Span Instruments, Inc., as
well as those discussed elsewhere in this section and in the Company's Annual
Report on Form 10-K for the fiscal year ended October 29, 1995.
GENERAL
Tylan General designs, manufactures and markets precision mass flow controllers,
gas panels and pressure measurement and control instrumentation. The Company's
products are used primarily in integrated circuit ("IC") fabrication, and also
in other manufacturing processes such as flat panel display and fiber optic
cable fabrication.
The Company's business depends substantially upon the capital expenditures of IC
manufacturers, which in turn depend upon the demand for ICs and products
utilizing ICs. IC manufacturers purchase the Company's products either as part
of processing systems purchased from semiconductor capital equipment suppliers
("equipment suppliers") or directly from the Company for retrofit or replacement
applications. Sales to equipment suppliers and IC manufacturers accounted for a
substantial majority of the Company's net sales in the first six months of
fiscal 1996 and substantially all of the Company's growth in net sales in recent
years. The Company anticipates that sales to such customers will continue to
account for a substantial majority of its sales. The semiconductor industry is
highly cyclical and historically has experienced periods of oversupply,
resulting in significantly reduced demand for capital equipment, including the
products manufactured by the Company. In 1991 and 1992, the semiconductor
capital equipment industry and the Company were materially and adversely
impacted by decreased demand for semiconductor capital equipment. In recent
years, the IC industry has experienced significant growth which in turn has
resulted in significant growth in the semiconductor capital equipment industry.
The Company believes that the rate of growth in the IC industry will
deteriorate, and further, there can be no assurance that demand for ICs and
products utilizing ICs will not decline or that supply of ICs will not outpace
demand. The Company does not expect to be able to sustain in the future the rate
of growth in revenues that it experienced for the three months and six months
ended April 28, 1996 compared to the three months and six months ended April 30,
1995. The Company anticipates that a significant portion of new orders for its
products will depend upon demand from IC manufacturers building or expanding
large fabrication facilities, and there can be no assurance that such demand
will exist. In recent months, several IC manufacturers have delayed or cancelled
planned capacity expansions as the supply of
8
<PAGE> 9
ICs from existing sources has outpaced the demand for ICs. Such delays have
resulted in rescheduling of some significant orders for the Company's products.
The Company expects that existing conditions of oversupply in the IC market will
continue, resulting in further delays and cancellation of orders for the
Company's products. A further weakening of demand for semiconductor capital
equipment, as well as downturns or slowdowns in the IC market, will have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, the Company's need to continue to invest in
research and development, marketing and customer service and support
capabilities will limit its ability to reduce expenses in response to such
downturns or slowdowns.
In February 1996, the Company signed an agreement to acquire Span
Instruments, Inc., a privately held manufacturer of high purity pressure
monitoring and control instrumentation. Tylan General and Span Instruments
differ in certain respects, and the Company anticipates that, if the Span
Instruments acquisition is completed, the integration of Span Instruments will
continue to divert some of its management resources for an indefinite period of
time. There can be no assurance that difficulties will not arise in integrating
the operations and product offerings of Span Instruments with those of the
Company. Moreover, there can be no assurance that the Company will realize any
increased earnings as a result of the proposed acquisition of Span Instruments.
The failure to accomplish any of the goals of the acquisition, or the failure to
successfully integrate the operations and product offerings of Span Instruments
with those of the Company, could have a material adverse effect on the Company's
business, results of operations and financial condition.
All assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at the rates of exchange in effect at the close of the period. The
aggregate effect of translating the balance sheets is included as a separate
component of stockholders' equity entitled "cumulative translation adjustment."
Revenues and expenses are translated into U.S. dollars at the average rates of
exchange during the period.
RESULTS OF OPERATIONS
The Company's quarterly results have in the past and may in the future vary
significantly due to a number of factors, including factors pertaining to (i)
customer demand, such as general economic conditions in the semiconductor
industry, market acceptance of products of both the Company and its customers,
changes in product mix, and the timing, cancellation or delay of customer
orders; (ii) competition, such as competitive pressures on prices of the
Company's products, the introduction or announcement of new products by
competitors and intellectual property rights of third parties; (iii)
manufacturing and operations, such as fluctuations in manufacturing yields,
availability and cost of production capacity and raw materials, inventory
obsolescence and inventory management; (iv) fluctuations in foreign currency
exchange rates; (v) new product development, such as increased research,
development and marketing expenses associated with new product introductions,
the Company's ability to introduce new
9
<PAGE> 10
products and technologies on a timely basis and the amount and timing of
recognition of non-recurring development revenue; (vi) sales and marketing, such
as concentration of customers, discounts that may be granted to certain
customers, product returns and exchanges and credit losses in the event of
non-performance by customers or other creditors; and (vii) the current and
potential future dependence on the Company's existing product lines; as well as
other factors, such as levels of expenses relative to revenue levels, personnel
changes and generally prevailing economic conditions.
The following table sets forth for the periods indicated the relative
percentages that certain income and expense items bear to net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ---------------------
APRIL 28, APRIL 30, APRIL 28, APRIL 30,
1996 1995 1996 1995
----- ----- ------ --------
<S> <C> <C> <C> <C>
Net sales ........................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales .................................... 56.8 56.3 57.6 56.9
----- ----- ----- -----
Gross profit ................................ 43.2 43.7 42.4 43.1
Operating expenses:
Sales and marketing ......................... 12.4 14.4 13.2 14.4
General and administrative .................. 8.5 10.3 8.4 10.0
Research and development .................... 7.0 7.6 6.3 6.9
Amortization, primarily goodwill ............ .3 .7 .3 .7
----- ----- ----- -----
Total operating expenses .................... 28.2 33.0 28.2 32.0
----- ----- ----- -----
Income from operations ........................... 15.0 10.7 14.2 11.1
Other income (expense) -- net .................... .4 1.5 .7 (.3)
----- ----- ----- -----
Income before income taxes, extraordinary item ... 15.4 12.2 14.9 10.8
Provision for income taxes ....................... (5.9) (5.1) (5.7) (4.5)
----- ----- ----- -----
Income before extraordinary item ................. 9.5 7.1 9.2 6.3
Extraordinary item, net of income tax benefit .... (3.7) (2.1)
===== ===== ===== =====
Net income .................................. 9.5% 3.4% 9.2% 4.2%
===== ===== ===== =====
</TABLE>
Net Sales. Net sales for the three months ended April 28, 1996 increased
56.0% to $29.2 million from $18.7 million for the three months ended April 30,
1995. Net sales for the six months ended April 28, 1996 increased 57.2% to $52.7
million from $33.5 million for the six months ended April 30, 1995. The increase
in net sales was primarily due to increased demand for the Company's flow,
pressure and gas panel products by U.S.-based equipment suppliers and increased
sales of flow products in Europe and Asia. The increase in net sales for the six
months ended April 28, 1996 compared to the prior year was also due to a
non-recurring pass-through sale of industrial gas panel equipment in Germany.
10
<PAGE> 11
The Company believes the strong business environment that has fueled the
increased demand for the Company's products for the three months and six months
ended April 28, 1996 compared to the prior year is beginning to weaken. Some of
the Company's largest customers have reduced their order rate, delayed or
cancelled orders for the Company's products as a result of cancelled or delayed
planned capacity expansions by device makers. Future downturns or slowdowns in
the IC market may have a material adverse effect on the Company's business,
financial condition and results of operations.
For the three months ended April 28, 1996, net sales to U.S. customers
increased by 64.0% to $20.3 million from $12.4 million for the three months
ended April 30, 1995. For the six months ended April 28, 1996, net sales to U.S.
customers increased by 62.6% to $35.5 million from $21.8 million for the six
months ended April 30, 1995. The increase in sales to U.S. customers for the
three and six months ended April 28, 1996 compared to the prior year was
primarily due to higher sales of the Company's gas panel products, as well as
increased demand for flow and pressure products.
Sales to U.S. customers are increasing as a percentage of total net sales.
Sales to U.S. customers accounted for 69.5% and 66.1% of the Company's total net
sales for the three months ended April 28, 1996 and April 30, 1995,
respectively. Sales to U.S. customers were 67.3% and 65.1% of total net sales
for the six months ended April 28, 1996 and the six months ended April 30, 1995,
respectively. The Company believes that a significant portion of its sales to
U.S.-based equipment suppliers was for gas flow and pressure measurement and
control equipment incorporated into systems delivered to foreign IC
manufacturers.
For the three months ended April 28, 1996, net sales to customers located
outside the United States (primarily in Asia and Europe) increased by 40.4% to
$8.9 million from $6.4 million for the three months ended April 30, 1995. For
the six months ended April 28, 1996, net sales to customers located outside of
the United States (primarily in Asia and Europe) increased by 47.3% to $17.2
million from $11.7 million for the six months ended April 30, 1995. The increase
in sales to customers located outside the U.S. was primarily due to increased
sales of flow products, and for the six months ended April 28, 1996, was also
due to a non-recurring pass-through sale of industrial gas panel equipment in
Germany.
The Company anticipates that international sales will continue to account
for a significant portion of net sales. International sales are subject to
certain risks that could materially and adversely affect the Company's results
of operations, including: difficulties in staffing and managing foreign
subsidiary operations; exchange rate fluctuations; tariffs, import restrictions
and other barriers; unexpected changes in regulatory requirements; political and
economic instability; difficulties in accounts receivable collection; extended
payment terms; and potentially adverse tax consequences. A significant portion
of the Company's sales to U.S.-based equipment suppliers are incorporated into
systems delivered outside the United States, and these risks also apply
11
<PAGE> 12
to those sales. The Company's international sales are also subject to certain
governmental restrictions, including the Export Administration Act and the
regulations promulgated thereunder. There can be no assurance that these factors
will not have a material adverse effect on the Company's business, financial
condition and results of operations in the future or require the Company to
modify its current business practices.
Sales of the Company's products are becoming increasingly concentrated with
a small number of customers. Sales to the Company's five largest customers for
the three months ended April 28, 1996 and April 30, 1995 were 50.3% and 46.9% of
net sales, respectively; and sales to Lam Research Corporation alone accounted
for 27.1% and 20.3% of net sales for the three months ended April 28, 1996 and
April 30, 1995, respectively. Sales to the Company's five largest customers for
the six months ended April 28, 1996 and April 30, 1995 were 49.8% and 46.1% of
net sales, respectively; and sales to Lam Research Corporation alone accounted
for 25.1% and 20.7% of net sales for the six months ended April 28, 1996 and
April 30, 1995, respectively. The Company expects that sales of its products to
relatively few customers will continue to account for a high percentage of its
net sales. None of the Company's customers has entered into a long-term
agreement requiring it to purchase the Company's products. The loss of a
significant customer or any reduction in orders from any significant customer,
including reductions due to changes in customer buying patterns, market,
economic or competitive conditions in the IC industry or in the industries that
manufacture products utilizing IC's, would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company believes that its future success will depend, in part, on the
Company's ability to maintain and increase the acceptance of its products in the
market. Because a substantial investment is required by IC manufacturers to
install and integrate capital equipment into an IC production line, the Company
believes that IC manufacturers choose equipment suppliers based on cost of
ownership, past relationships, product compatibility, perceptions regarding a
supplier's ability to continue to manufacture and support its products and other
factors. The Company also believes that equipment suppliers choose component
suppliers based on similar factors. It has generally been the Company's
experience that once a component supplier has been chosen for a specific
application or system, an equipment supplier or IC manufacturer will continue to
use or nominate such component supplier's products for that application or
system and will frequently consolidate other component requirements with the
same supplier. For this reason, equipment suppliers and IC manufacturers may
develop strong ties with particular component suppliers. Consequently, it will
be difficult for the Company to sell products to potential customers that have
established relationships with other component suppliers, and the Company's
ability to receive orders will depend, in part, upon potential customers
undertaking an evaluation for new equipment. Most potential customers conduct
such evaluations infrequently. As a result, there can be no assurance that the
Company will be able to maintain or increase the market acceptance of its
products.
12
<PAGE> 13
Gross Profit. The Company's gross profit for the three months ended April
28, 1996 increased to $12.6 million from $8.2 million for the three months ended
April 30, 1995 and decreased as a percentage of net sales to 43.2% from 43.7%.
The Company's gross profit for the six months ended April 28, 1996 increased to
$22.4 million from $14.5 million for the six months ended April 30, 1995 and
decreased as a percentage of net sales to 42.4% from 43.1%. The decrease in
gross margin for the three months ended April 28, 1996 compared to the prior
year was primarily due to a shift in product mix towards gas panels, which carry
a lower gross margin. The decrease in gross margin for the six months ended
April 28, 1996 compared to the prior year was also due to lower gross margin on
a one-time pass-through sale of equipment for industrial gas panels in Germany.
From time to time, the Company has experienced declines in prices for some
of its products that materially and adversely affected the Company's gross
margin, primarily as a result of negotiated price reductions related to volume
purchase arrangements. The Company believes that worldwide competitive pressures
in the Company's markets could result in declines in the prices of its products
in the future. Declines in the selling prices of the Company's products, if not
offset by reductions in the cost of producing such products and increased unit
volume sales, or by sales of products with higher gross margins, will have a
material adverse effect on the Company's business, financial condition and
results of operations.
Sales and Marketing. Sales and marketing expense increased 34.3% to $3.6
million for the three months ended April 28, 1996 from $2.7 million for the
three months ended April 30, 1995 but decreased as a percentage of net sales to
12.4% from 14.4%. Sales and marketing expense increased 44.1% to $6.9 million
for the six months ended April 28, 1996 from $4.8 million for the six months
ended April 30, 1995 but decreased as a percentage of net sales to 13.2% from
14.4%. The increase in sales and marketing expense for the three and six months
ended April 28, 1996 compared to the prior year was primarily due to increased
staffing in sales and marketing personnel required to support higher sales
levels and to further penetrate new and existing markets for the Company's
products, higher travel expenses and higher sales commissions.
General and Administrative. General and administration expense increased
28.0% to $2.5 million for the three months ended April 28, 1996 from $1.9
million for the three months ended April 30, 1995 but decreased as a percentage
of net sales to 8.5% from 10.3%. General and administration expense increased
32.1% to $4.4 million for the six months ended April 28, 1996 from $3.4 million
for the six months ended April 30, 1995 but decreased as a percentage of net
sales to 8.4% from 10.0%. The increase in general and administrative expense was
primarily due to increased staffing in administrative personnel required to
support the Company's expanding international operations and business activity,
increased stockholder reporting expense and increased legal and professional
fees. The increase in general and administrative expense for the six months
ended April 28, 1996 compared to the prior year was also due to higher travel
expense.
13
<PAGE> 14
The Company has undergone a period of rapid growth and expansion of its
worldwide organization. The difficulty of managing a globally dispersed
organization has strained the Company's management, manufacturing and human
resources. Continued expansion by the Company, including the proposed
acquisition of Span Instruments by the Company, may further strain such
resources. Any failure on the part of the Company to manage its dispersed
organization or expand in an efficient manner could have a material adverse
effect on the Company's business, financial condition and results of operations.
Moreover, there can be no assurance that the Company's systems, procedures and
controls will be adequate to support its organization and operations.
Research and Development. Research and development expense increased 43.3%
to $2.0 million for the three months ended April 28, 1996 from $1.4 million for
the three months ended April 30, 1995 but decreased as a percentage of net sales
to 7.0% from 7.6%. Research and development expense increased 41.8% to $3.3
million for the six months ended April 28, 1996 from $2.3 million for the six
months ended April 30, 1995 but decreased as a percentage of net sales to 6.3%
from 6.9%. The increase in research and development expense for the three and
six months ended April 28, 1996 compared to the prior year was primarily due to
increased staffing in research and development personnel and the increased use
of contracted engineering services including payments to Integrated Sensing
Systems, Inc. under a research and development contract. The Company does not
expect its spending on research and development in the future to decline
significantly as a percentage of net sales.
The Company believes that its future success will depend, in part, on the
Company's ability to develop and manufacture new products and product
enhancements. The markets in which the Company competes are characterized by
evolving industry standards and frequent improvements in products and services.
To compete effectively in such markets, the Company must continually improve its
products and its process management technologies and develop new technologies
and products that compete effectively on the basis of price and performance and
that adequately address customer requirements. The markets in which the
Company's customers compete are characterized by rapidly changing technology and
emerging industry standards. To compete effectively, the Company must adapt its
products to meet these technological changes and to support such standards.
There can be no assurance that the Company will be able to improve its existing
products or its process management technologies or develop new products or
technologies. Even if the Company is able to develop new or enhanced products,
there can be no assurance such products will be cost-effective or introduced in
a timely manner. Failure of the Company to develop or introduce new products or
product enhancements in a timely manner will have a material adverse effect on
the Company's business, financial condition and results of operations.
Other Income (Expense)--Net. For the three months ended April 28, 1996,
other income was $123,000 compared to other income of $283,000 for the three
months ended
14
<PAGE> 15
April 30, 1995. For the six months ended April 28, 1996, other income was
$394,000 compared to other expense of $95,000 for the six months ended April 30,
1995. The decrease in other income for the three months ended April 28, 1996
compared to the prior year was primarily due to a large foreign exchange gain in
the prior year quarter resulting from an increase in the value of the yen vs.
the dollar. The increase in other income for the six months ended April 28, 1996
compared to the prior year was primarily due to a decrease in interest expense
resulting from the repayment of $5.4 million in debt in February 1995 and other
income resulting from a strategic sales alliance with Span Instruments, offset
by a decrease in foreign exchange gain.
Provision for Income Taxes. The Company's effective tax rate was 38.5% for
the three months ended April 28, 1996 as compared to 42.0% for the three months
ended April 30, 1995. The Company's effective tax rate was 38.3% for the six
months ended April 28, 1996 as compared to 42.0% for the six months ended April
30, 1995. The decrease in the effective tax rate for the three and six months
ended April 28, 1996 over the prior year was primarily due to the realization of
additional foreign tax credit benefits. The Company's effective tax rate for the
three and six months ended April 28, 1996 was higher than the U.S. statutory tax
rate of 35% due to state taxes, the non-deductibility of goodwill amortization
and higher foreign tax rates.
Extraordinary Item. In February 1995, the Company repaid $5.4 million in
debt with proceeds from the Company's Initial Public Offering. In connection
with the repayment of debt, the Company wrote-off the unamortized deferred issue
costs of $949,000 and incurred a prepayment penalty of $250,000. An
extraordinary item of $695,000 or $0.13 per share was recorded in the second
quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of April 28, 1996, the Company had $10.3 million in cash, cash
equivalents and short term investments and net working capital of $30.1 million.
In addition, the Company maintains a $4.0 million revolving line of credit and a
$3.5 million capital term loan facility. The line of credit and term loan
facility expire in June 1996. As of April 28, 1996, there were no amounts
outstanding under the revolving line of credit or the term loan facility.
In June 1996, the Company obtained a new $11.0 million global revolving
line of credit. The new line of credit permits borrowings by the Company's
various international subsidiaries and permits borrowings denominated in
Japanese yen and Korean won up to $4.0 million and $1.0 million, respectively.
The new line of credit expires in March 1997.
For the first six months of fiscal 1996, the Company's operating activities
used $2.4 million in cash, primarily as a result of increases in accounts
receivable, note receivable and inventories offset by an increase in accounts
payable and by income from operations.
15
<PAGE> 16
The Company's financing activities for the first six months of fiscal 1996,
generated $939,000 in cash, primarily from $1.2 million in bank borrowings in
Japan. Investing activities in the period used $3.4 million in cash for capital
expenditures.
16
<PAGE> 17
PART II--OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Tylan General, Inc. (the "Annual Meeting")
was held on April 8, 1996 in Rancho Dominguez, California.
Proposal 1 -- Election of Directors
Each of the candidates listed below were duly elected to the Board of Directors
at the Annual Meeting by the tally indicated to hold office until the 1999
Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
<S> <C> <C>
Candidate Votes in Favor Votes Withheld
David J. Ferran 4,915,582 21,160
Larry Hansen 4,918,172 18,570
Michael H. Khougaz 4,915,982 20,760
</TABLE>
In addition to the foregoing directors who were elected at the Annual Meeting,
Derrick N. Key and Wade Woodson will continue in office until the 1997 Annual
Meeting of Stockholders and Bruce C. Rhine and Arthur C. Spinner will continue
in office until the 1998 Annual Meeting of Stockholders.
Proposal 2 -- Approval of the 1994 Stock Option Plan, as Amended
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Votes in Favor Votes Against Votes Abstained Non-Votes
2,889,070 376,390 19,461 1,651,821
</TABLE>
Proposal 3 --Ratification of Selection of Ernst & Young LLP as Independent
Auditors
<TABLE>
<CAPTION>
<S> <C> <C>
Votes in Favor Votes Against Votes Abstained
4,904,580 19,700 12,462
</TABLE>
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibit Index
2.1 Agreement and Plan of Reorganization among the Company, Tylan
General Acquisition Subsidiary, Inc., Span Instruments, Inc. and
the Shareholders of Span Instruments, Inc., dated February 20,
1996.
11.1 Statement Re Computation of Per Share Earnings.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
17
<PAGE> 18
TYLAN GENERAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TYLAN GENERAL, INC.
Date: June 12, 1996 By: /s/ David L. Stone
----------------------
David L. Stone
Executive Vice President, Chief
Financial Officer and Secretary
(Principal Financial and
Accounting Officer)
18
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
TYLAN GENERAL, INC.
TYLAN GENERAL ACQUISITION SUBSIDIARY, INC.
SPAN INSTRUMENTS, INC.
AND
SHAREHOLDERS OF SPAN INSTRUMENTS, INC.
FEBRUARY 20, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. DESCRIPTION OF TRANSACTION................................................................................ 1
1.1 Merger of Tylan Sub into Span.................................................................. 1
1.2 Effect of the Merger............................................................................ 1
1.3 Closing......................................................................................... 2
1.4 Exchange of Span Stock.......................................................................... 2
1.5 Conversion of Tylan Sub Common Stock............................................................ 3
1.6 Closing of Company Transfer Books............................................................... 3
1.7 Exchange of Certificates........................................................................ 3
1.8 No Fractional Shares............................................................................ 3
1.9 Adjustment of Common Exchange Ratio............................................................. 4
1.10 Accounting Treatment............................................................................ 4
1.11 Tax Consequences............................................................................... 4
1.12 Stock Subject to Conditions or Forfeiture...................................................... 4
1.13 Further Action.................................................................................. 4
1.14 Dissenting Shares............................................................................... 4
1.15 Shareholders' Agreements........................................................................ 5
2.1 Organization.................................................................................... 6
2.2 Financial....................................................................................... 8
2.3 Tax Matters..................................................................................... 9
2.4 Conduct of Business............................................................................. 11
2.5 Contracts....................................................................................... 13
2.7 Litigation and Claims; Compliance with Law...................................................... 18
2.8 Environmental Provisions........................................................................ 19
2.9 Properties...................................................................................... 21
2.10 Intellectual Property.......................................................................... 23
2.11 Disclosure..................................................................................... 25
2.12 Finders........................................................................................ 25
2.13 Transactions with Affiliates................................................................... 25
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
2.14 No Contemplated Transactions Inconsistent with Pooling-of-Interests Accounting................. 26
3. REPRESENTATIONS AND WARRANTIES OF TYLAN AND TYLAN SUB..................................................... 26
3.1 Organization.................................................................................... 26
3.2 Common Stock To Be Issued....................................................................... 28
3.3 Financial....................................................................................... 28
3.4 disclosure...................................................................................... 28
3.5 Finders......................................................................................... 29
4. COVENANTS OF SPAN AND THE PRINCIPAL SHAREHOLDERS.......................................................... 29
4.1 Negative Covenants.............................................................................. 29
4.2 Affirmative Covenants........................................................................... 32
5. COVENANTS OF TYLAN AND TYLAN SUB.......................................................................... 36
5.1 Negative Covenants.............................................................................. 36
5.2 Affirmative Covenants........................................................................... 36
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLAN AND TYLAN SUB................................................ 39
5.4 Satisfactory Completion of Pre Acquisition Review............................................... 39
6.2 Compliance with Covenants; Representations and Warranties Correct............................... 40
6.3 No Material Adverse Change...................................................................... 40
6.4 Consents of Others.............................................................................. 40
6.5 Legal Opinion................................................................................... 40
6.6 Dissenters' Rights.............................................................................. 40
6.7 Continuity of Interest.......................................................................... 40
6.8 Absence of Restraint............................................................................ 40
6.9 No Litigation................................................................................... 41
6.10 Required Approvals............................................................................. 41
6.11 State Securities Law Requirements.............................................................. 41
6.12 Span Shareholders' Approval.................................................................... 41
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
6.13 Tylan Stockholders' Approval................................................................... 41
6.14 Noncompetition Agreements...................................................................... 41
6.15 Resignations................................................................................... 41
6.16 FIRPTA......................................................................................... 41
6.17 Tax Opinion.................................................................................... 42
6.18 Pooling-of-Interest Letters.................................................................... 42
6.19 Affiliate Agreements........................................................................... 42
6.20 Effectiveness of Registration Statement........................................................ 42
6.21 Accounts Receivable............................................................................ 42
6.22 Fairness Opinion............................................................................... 42
6.23 Comfort Letter................................................................................. 42
7. CONDITIONS PRECEDENT TO SPAN'S OBLIGATIONS................................................................ 43
7.1 Compliance with Covenants; Representations and Warranties Correct............................... 43
7.2 No Material Adverse Change...................................................................... 43
7.3 Legal Opinion................................................................................... 43
7.4 Required Approvals.............................................................................. 43
7.5 Securities Law Requirements..................................................................... 43
7.6 Span Shareholders' Approval..................................................................... 43
7.7 Tylan Stockholders' Approval.................................................................... 43
7.8 Absence of Restraint............................................................................ 44
7.9 Tax Opinion..................................................................................... 44
7.10 Employment Agreements.......................................................................... 44
7.11 Effectiveness of Registration Statement........................................................ 44
7.12 Chairman of the Board.......................................................................... 44
7.13 Board of Directors............................................................................. 44
8.1 Indemnity....................................................................................... 44
8.2 Threshold....................................................................................... 45
8.3 Expiration of Indemnity......................................................................... 45
</TABLE>
iii.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
8.4 Fraud........................................................................................... 45
8.5 Survival of Representations and Warranties...................................................... 45
8.6 Merger Consideration Adjustments................................................................ 45
8.7 Shareholders' Agent............................................................................. 45
9. INDEMNITY BY TYLAN........................................................................................ 47
9.1 Indemnity....................................................................................... 47
9.2 Threshold....................................................................................... 47
9.3 Expiration of Indemnity......................................................................... 47
9.4 Fraud........................................................................................... 47
9.5 Survival of Representations and Warranties...................................................... 47
10. EMPLOYEE MATTERS......................................................................................... 47
10.1 Employees...................................................................................... 47
11. TERMINATION OF AGREEMENT................................................................................. 48
11.1 Termination.................................................................................... 48
11.2 Effect of Termination.......................................................................... 48
11.3 Costs and Expenses............................................................................. 48
11.4 Extension of Time; Waivers..................................................................... 49
12. MISCELLANEOUS............................................................................................ 49
12.1 Amendment...................................................................................... 49
12.2 Entire Agreement; Counterparts; Applicable Law................................................. 49
12.3 Attorneys' Fees................................................................................ 49
12.4 Assignability.................................................................................. 49
12.5 Notices........................................................................................ 50
12.6 Titles......................................................................................... 50
12.7 Cooperation.................................................................................... 50
</TABLE>
iv.
<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of February 20, 1996 by and among TYLAN GENERAL, INC., a Delaware corporation
("Tylan"), TYLAN GENERAL ACQUISITION SUBSIDIARY, INC., a Delaware corporation
("Tylan Sub"), SPAN INSTRUMENTS, INC., a Texas corporation ("Span") and all of
the shareholders of Span (each a "Shareholder" and collectively the
"Shareholders").
RECITALS
A. Tylan has formed Tylan Sub as a wholly owned subsidiary to effect
the merger of Tylan Sub with and into Span (the "Merger") in accordance with the
laws of the State of Texas and the State of Delaware and in accordance with this
Agreement, so that upon consummation of the Merger, Tylan Sub will cease to
exist and Span will become a wholly owned subsidiary of Tylan.
B. This Agreement has been approved by the Boards of Directors of
Tylan, Tylan Sub and Span, and by Tylan in its capacity as the sole shareholder
of Tylan Sub; and
C. The Merger is intended to qualify as a reorganization within the
meaning of the provisions of Section 368 of the Internal Revenue Code of 1986,
as amended (the "Code") and to be accounted for as a pooling-of-interests.
AGREEMENT
NOW, THEREFORE, in consideration of their mutual covenants, promises
and obligations contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be bound hereby, agree as follows:
1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF TYLAN SUB INTO SPAN. Subject to the terms and conditions
of this Agreement, Tylan Sub shall be merged with and into Span and the separate
existence of Tylan Sub shall cease. Span shall be the surviving corporation in
the Merger under the corporate name it possesses immediately prior to the
Merger, and Tylan shall own all of the issued and outstanding shares of capital
stock of Span. Span, in its capacity as the corporation surviving the Merger, is
sometimes referred to herein as the "Surviving Corporation."
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth
in the Texas Business Corporation Act (the "Texas Law") and the Delaware General
Corporation Law ("DGCL"). Without limiting the generality of the foregoing, the
1
<PAGE> 7
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as a private nature, and be subject to all the
restrictions, disabilities and duties, of each of Tylan Sub and Span
(collectively, the "Constituent Corporations"). The Surviving Corporation shall
be vested with the rights, privileges, powers and franchises, all property
(real, personal, and mixed) and all debts due on whatever account and all other
things in action or belonging to, and all and every other interest of, each of
the Constituent Corporations. All debts, liabilities and duties of each of the
Constituent Corporations shall attach to the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it.
1.3 CLOSING. Consummation of the transactions contemplated by this
Agreement (the "Closing") will take place at such place, time and date as Tylan
and Span may mutually select (the "Closing Date"), which shall be as soon as
practicable following satisfaction or waiver of the closing conditions contained
in Articles 6 and 7 hereof, but in any event not later than June 28, 1996. At
the Closing, Tylan Sub and Span will each carry out the procedures specified
under the applicable provisions of the Texas Law and DGCL, including duly
executing and filing Articles of Merger with the Texas Secretary of State (the
"Texas Articles of Merger") and a Certificate of Merger with the Delaware
Secretary of State (the "Delaware Certificate of Merger") to the end that the
Merger shall become effective. The Merger shall become effective on the last to
occur of (a) the date the Texas Articles of Merger is duly filed with the Texas
Secretary of State (b) the date the Delaware Certificate of Merger is duly filed
with the Delaware Secretary of State or (c) such later date as may be specified
in the Texas Articles of Merger and Delaware Certificate of Merger (the
"Effective Date").
1.4 EXCHANGE OF SPAN STOCK.
(a) On the Effective Date, each then outstanding share, no par
value, of Span (collectively, the "Span Common Shares"), other than Span Common
Shares to be canceled pursuant to Section b and Dissenting Shares (as defined in
Section 1.14), shall cease to be an existing and issued Span Common Share and
shall become and be converted into, by virtue of the Merger and without any
action on the part of Tylan, Tylan Sub, Span or the holder thereof, into that
number of duly authorized, validly issued, fully paid and nonassessable shares
of common stock, $.001 par value, of Tylan (the "Tylan Common Stock") equal to
1,470,000 divided by the Fully Diluted Span Common Shares Outstanding, as
defined in Section 2.1(c) (the "Common Exchange Ratio").
(b) Each Span Common Share issued and outstanding immediately
prior to the Effective Date owned by Tylan, Tylan Sub or any subsidiary thereof
shall automatically be canceled at the Effective Date, and no conversion shall
be made in respect thereof.
2
<PAGE> 8
1.5 CONVERSION OF TYLAN SUB COMMON STOCK. Each share of Tylan Sub's
common stock issued and outstanding immediately prior to the Effective Date
shall automatically be converted into and become one validly issued, fully paid
and nonassessable share of Common Stock of the Surviving Corporation and the
aggregate of such shares issuable upon such conversion shall constitute the only
outstanding capital shares of the Surviving Corporation.
1.6 CLOSING OF COMPANY TRANSFER BOOKS. On and after the Effective Date,
holders of certificates representing Span Common Shares shall cease to have any
rights as shareholders of Span (except rights, if any, under Article 5.11 of the
Texas Law) and the share transfer books of Span shall be closed with respect to
Span Common Shares issued and outstanding immediately prior to the Effective
Date, and no further transfer of such shares shall thereafter be made on such
share transfer books. If, after the Effective Date, valid certificates
previously representing such shares are presented to the Surviving Corporation
they shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES. The parties anticipate that all Span
Common Share certificates (except certificates representing canceled shares)
shall be exchanged for Tylan Common Stock certificates (and cash in lieu of any
fractional shares) at the Closing. Any certificates for Span Common Shares not
so surrendered and exchanged at the Closing shall represent solely the right to
receive the shares of Tylan Common Stock into which the Span Common Shares it
theretofore represented shall have been converted pursuant to Section 4 (or to
perfect the holder thereof's right to receive payment for such shares pursuant
to Article 5.12 of the Texas Law and Section 1.14 hereof); provided, however,
that customary and appropriate certifications and indemnities (but without the
requirement to post a bond) allowing exchange against lost or destroyed
certificates shall be provided; and provided further that nothing in this
Section 1.7 shall require Tylan to exchange Tylan Common Stock to any holder of
Span Common Shares who shall fail to surrender a certificate representing such
shares or the certification and indemnities relating to a lost certificate.
1.8 NO FRACTIONAL SHARES. No fractional shares of Tylan Common Stock
will be issued in connection with the Merger and no certificate therefor will be
issued. In lieu of such fractional shares, any holder of Span Common Shares who
would otherwise receive a fractional share of Tylan Common Stock shall, upon
surrender of his certificate or certificates representing Span Common Shares, be
paid an amount in cash (without interest) determined by multiplying such
fraction by the closing price of Tylan Common Stock as reported on the NASDAQ
National Market System on the last trading date immediately preceding the
Closing Date. Tylan will, subject to any applicable statute of limitation or
abandoned property or similar law, pay to such holders, upon surrender of their
certificates representing Span Common Shares outstanding immediately prior to
the Effective Date, the cash value of such fractions so determined, without
interest.
3
<PAGE> 9
1.9 ADJUSTMENT OF COMMON EXCHANGE RATIO. If, between the date of this
Agreement and the Effective Date, the outstanding Tylan Common Stock shall have
been changed into a greater or lesser number of shares of Tylan Common Stock or
into a different security by reason of a reclassification, stock split, stock
combination, stock dividend or other recapitalization or similar transaction,
the Common Exchange Ratio shall be correspondingly adjusted.
1.10 ACCOUNTING TREATMENT. The parties intend that the Merger will be
treated as a pooling-of-interests for accounting purposes.
1.11 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section
368(a)(2)(E) of the Code.
1.12 STOCK SUBJECT TO CONDITIONS OR FORFEITURE. All shares of Tylan
Common Stock which are received in the Merger in exchange for Span Common Shares
which, under applicable stock purchase or restriction agreements, as amended,
with Span, are unvested or subject to a repurchase option or other condition of
forfeiture which by its terms does not terminate due to the Merger, will also be
unvested or subject to the same repurchase option or other condition, as the
case may be, and the certificates evidencing such shares will be marked with
appropriate legends; provided, however, that this Section 1.12 shall not
preclude modification of the existing agreements between Span and its
shareholders consistent with pooling-of-interests accounting.
1.13 FURTHER ACTION. If at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with the full right, title and
possession to all assets, property, rights, privileges, immunities, powers and
franchises of either or both of the Constituent Corporations, the officers and
directors of the Surviving Corporation are fully authorized in the name of
either or both of the Constituent Corporations or otherwise to take all such
action at Tylan's expense.
1.14 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, Span Common Shares that are issued and outstanding immediately
prior to the Effective Date and that are held by shareholders who have not voted
such shares in favor of the Merger and who have delivered a written notice of
intention to demand payment for such shares in the manner provided in Article
5.12 of the Texas Law ("Dissenting Shares") shall not be canceled and converted
into shares of Tylan Common Stock in accordance with the provisions of Section
1.4(a) unless and until such holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's right to payment under the Texas
Law. If such holder shall have so failed to perfect, or shall have effectively
withdrawn or lost such right, such holder's Span Common Shares shall thereupon
be deemed to have been canceled and converted as described in Section 1.4 at the
Effective Date, and each such share shall represent solely the right to receive
shares of Tylan Common Stock in
4
<PAGE> 10
accordance with the provisions of Section 1.4(a). Span shall give Tylan prompt
notice of any demands received by Span for purchase of its shares, and, prior to
the Effective Date, Tylan shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Date, Span shall not, except with the prior written consent of Tylan,
make any payment with respect to, or settle or offer to settle, any such
demands. From and after the Effective Date, no shareholder who has exercised
dissenters' rights as provided in Article 5.12 of the Texas Law shall be
entitled to vote such holder's shares for any purpose or to receive payment of
dividends or other distributions with respect to such holder's shares (except
dividends and other distributions payable to shareholders of record at a date
which is prior to the Effective Date).
1.15 SHAREHOLDERS' AGREEMENTS.
(a) Upon execution of this Agreement, each of the Shareholders
shall enter into a Shareholder Agreement with Tylan in substantially the form
attached hereto as Exhibit a.
(b) At or prior to Closing, each of the Shareholders shall
execute the Continuity of Interest Certificate referred to in Section h.
(c) At or prior to Closing, Donald E. Whitson, Leo E. Whitson,
Robert Barraclough, Robert Lipsky, John Rabbitt, George Yurch, John Jul, John
Jordon, Brian Day, Tom Gray and Ron Ewers (the "Affiliates") shall execute the
Affiliate Agreement referred to in Section p.
2. REPRESENTATIONS AND WARRANTIES OF SPAN AND THE PRINCIPAL SHAREHOLDERS
Span and each of Donald E. Whitson and Leo E. Whitson (each, a
"Principal Shareholder" and collectively, the "Principal Shareholders") jointly
and severally represent and warrant to Tylan and Tylan Sub as of the date of
this Agreement as follows:
2.1 ORGANIZATION.
(a) Each of Span and Ocala, Inc. ("Ocala") is a corporation
duly organized, validly existing and in good standing, under the laws of the
State of Texas. Each of Span and Ocala has all necessary power and authority
under applicable corporate law and its Articles of Incorporation and Bylaws to
own or lease its properties and to carry on its business as presently conducted.
Span has provided Tylan with true and correct copies of the Articles of
Incorporation and Bylaws of each of Span and Ocala. Except for Ocala, Span has
no subsidiaries, and, except as set forth on Schedule 2.1(a), Span does not own
or hold, directly or indirectly, any debt or equity securities of, nor has any
other interest in, any corporation, partnership, joint venture or other entity.
5
<PAGE> 11
(b) Each of Span and Ocala is qualified to do business as a
foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a "Material Adverse Effect." For the
purposes of this Agreement, "Material Adverse Effect" as it applies to Span or
Tylan means an adverse effect on the business, operations, condition (financial
or otherwise), assets or prospects of Span and Ocala, taken as a whole, or Tylan
and its subsidiaries, taken as a whole, respectively, which is material. For
purposes of this Agreement, documents, objects, effects, conditions, events or
occurrences shall be deemed "material" as they relate to Span or Ocala if they
involve amounts, or result in Damages (as hereinafter defined), in excess of
$50,000 during any fiscal year period. For purposes of this Agreement,
documents, objects, effects, conditions, events or occurrences shall be deemed
"material" as they relate to Tylan if upon public disclosure, they would be
viewed by a reasonable investor as significantly altering the total mix of
information then available concerning Tylan and its subsidiaries, taken as a
whole.
(c) The authorized capital stock of Span consists, and on the
Closing Date will consist, of 500,000 shares, no par value, of which 265,699
shares are issued and outstanding. The authorized capital stock of Ocala
consists, and on the Closing Date will consist, of 1,000,000 shares, $0.01 par
value per share, of Common Stock, of which 100,000 shares are issued and
outstanding. All of the issued and outstanding shares of Span and Ocala are
validly issued, fully paid and nonassessable and the issuance of such issued and
outstanding shares were not subject to any preemptive rights which have not been
effectively waived. Schedule c sets forth a list of the Shareholders and the
holders of all outstanding shares of capital stock of Ocala, including their
names and addresses and the kind and number of shares of Span capital stock and
Ocala capital stock that they hold. No holder of Span capital stock or Ocala
capital stock possesses shares that are subject to vesting. Except as set forth
above, there are not as of the date hereof, and on the Closing Date there will
not be, any capital shares of Span or Ocala authorized, issued or outstanding or
any authorized or outstanding subscriptions, options, warrants, stock
appreciation rights, calls, rights, convertible securities or other agreements
or commitments of any character relating to issued or unissued capital shares or
other securities of Span or Ocala, or otherwise obligating Span or Ocala to
issue, transfer or sell any capital shares of Span or Ocala, or other securities
convertible into, exchangeable for, or evidencing the right to subscribe for,
any capital shares of Span or Ocala. The sum of the number of Span Common Shares
outstanding and the maximum number of Span Common Shares issuable upon exercise,
conversion, exchanging or subscription pursuant to any security agreement or
commitment of Span immediately before the Effective Date shall be referred to
herein as the "Fully Diluted Span Common Shares Outstanding." Following the
Closing, neither Span nor Ocala will have any obligation to issue, transfer or
sell any of its capital shares or other securities of Span or Ocala pursuant to
any currently existing employee benefit plan or otherwise. Except as set forth
on Schedule 2.1(c), neither Span nor Ocala has any liability to any current or
former shareholder of Span or Ocala arising from or relating to the
6
<PAGE> 12
offer and sale of any of its securities, whether under federal or state
securities law, or otherwise.
(d) Span has full corporate power and authority to execute,
deliver and perform this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Span, and no other corporate
proceedings on the part of Span are necessary for Span to authorize this
Agreement or to consummate the transactions contemplated hereby (other than
approval by the Shareholders). This Agreement has been duly executed and
delivered by duly authorized officers of Span. This Agreement constitutes a
legal, valid and binding obligation of Span enforceable against it in accordance
with its terms (except to the extent that enforcement is affected by laws
pertaining to bankruptcy, reorganization, insolvency and creditors' rights and
by the availability of injunctive relief, specific performance and other
equitable remedies).
(e) Except as may be required by the Securities Act of 1933,
as amended (the "Securities Act"), state securities laws, the Texas Law or the
DGCL, there is no requirement applicable to Span or Ocala to make any filing
with, or to obtain any permit, authorization, consent or approval of, any
governmental or regulatory authority as a condition to the lawful consummation
by Span of the transactions contemplated by this Agreement. Neither Span nor
either of the Principal Shareholders knows of any reason why any required
permit, authorization, consent or approval will not be obtained. Except as set
forth on Schedule 2.1(e), neither the execution and delivery of this Agreement
by Span nor the consummation by Span of the transactions contemplated by this
Agreement will (i) conflict with or result in any breach of any provision of the
Articles of Incorporation or Bylaws of Span or Ocala, (ii) result in a material
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture or other evidence of indebtedness of Span or Ocala or any material
license agreement, lease or other material contract, instrument or obligation to
which Span or Ocala is a party or by which Span or Ocala or any of either of
their assets may be bound, (iii) violate any statute, rule, regulation, order,
writ, injunction, decree or arbitration award applicable to Span or Ocala or any
of either of their assets, which violation would have a Material Adverse Effect
on Span, or (iv) result in the creation of any material (individually or in the
aggregate) liens, charges or encumbrances on any of the assets of Span or Ocala.
(f) Span has delivered to Tylan complete and accurate copies
of the minutes of all its directors and shareholders meetings, and all actions
by written consent of the directors and shareholders, of Span and Ocala since
January 1, 1990 as to Span and since inception as to Ocala, and will deliver to
Tylan at or prior to the Closing complete and accurate copies of all minutes of
such meetings and such actions that occur between the date hereof and the
Closing Date.
7
<PAGE> 13
2.2 FINANCIAL.
(a) The audited consolidated balance sheet of Span as of
August 31, 1995 and the audited consolidated statement of operations,
consolidated statement of cash flows and consolidated statement of changes in
shareholders' equity of Span for the fiscal year ended August 31, 1995 (the
"Audited Financial Statements"), each certified by Ernst & Young LLP,
independent certified public accountants, whose report thereon is included
therein, and the unaudited consolidated balance sheet of Span as of November 30,
1995 (the "November 30, 1995 Balance Sheet") and the unaudited consolidated
statement of operations and consolidated statement of cash flows of Span for the
three-month period ending November 30, 1995 have been prepared in accordance
with the books and records of Span, which books and records are complete,
maintained on a consistent basis, and correctly reflect its income, expenses,
assets and liabilities, are true, complete and accurate and present fairly the
financial position of Span as of the date of said balance sheets and the results
of operations of Span for the periods covered by said statements of operations,
in accordance with generally accepted accounting principles ("GAAP")
consistently applied, except as otherwise disclosed therein and except, in the
case of unaudited statements, for normally recurring year-end adjustments, which
adjustments will not be material either individually or in the aggregate, and
the absence of notes required by GAAP. The financial statements described in
this Section a are referred to in this Agreement as the "Financial Statements."
(b) Except as disclosed in Schedule b, neither Span nor Ocala
has any material Liability, except for any Liability which (i) is accrued or
fully reserved against in the November 30, 1995 Balance Sheet or disclosed in
the notes included in the Audited Financial Statements; or (ii) is of a normally
recurring nature and was incurred after November 30, 1995 in the ordinary course
of business consistent with past practice. As used herein, "Liabilities" shall
mean any liability or obligation of any kind or nature, secured or unsecured
(whether absolute, accrued, contingent or otherwise, and whether due or to
become due).
(c) The accounts receivable of Span on November 30, 1995, and
those existing on the Closing Date:
(i) will have arisen out of sales in the ordinary
course of business and represent bona fide indebtedness of the
applicable account debtor;
(ii) to the best knowledge of Span and each of the
Principal Shareholders, are and will be collectible in full (except as
set forth on Schedule 2.2(c)), net of the reserves therefore set forth
on the books of Span, which reserves were calculated consistent with
past practices and with GAAP applied consistently with the Audited
Financial Statements; and
8
<PAGE> 14
(iii) except as set forth on Schedule 2.2(c), are
subject to no claim of offset, counterclaim, recoupment or setoff and,
to the best knowledge of Span and each of the Principal Shareholders,
there are no facts or circumstances (whether asserted or unasserted)
that could give rise to such a claim.
Schedule c sets forth complete and accurate accounts receivable aging report as
of November 30, 1995. Span will use all reasonable efforts to ensure that the
aging of the accounts receivable on the Closing Date shall not be materially
worse than that shown on Schedule c.
(d) Other than as set forth on Schedule 2.2(d), the
inventories of Span on November 30, 1995 and those existing on the Closing Date
are and will be usable in all material respects in the ordinary course of
business at a value which is not less than the value at which such inventory is
carried on the books of Span. The inventory is adequate for the conduct of the
business of Span and inventory levels are not in excess of the normal operating
requirements of Span. Schedule d sets forth all inventories as of the date
hereof that Span in good faith believes to be in excess of the reasonable
requirements of Span for the next six months.
2.3 TAX MATTERS. With respect to Taxes (as defined below):
(a) Except as set forth on Schedule 2.3, Span and Ocala have
filed or will file or cause to be filed, within the time and in the manner
prescribed by law, all material returns, declarations, reports, estimates,
information returns and statements, including information returns and reports
("Returns") required to be filed under federal, state, local or any foreign laws
by Span or Ocala for all taxable periods ending on or prior to the Closing Date;
all Returns so filed complied in all material respects with the laws, rules and
regulations applicable to such Returns.
(b) Except as set forth on Schedule 2.3, Span and Ocala have
within the time and in the manner prescribed by law, paid (and until the Closing
will, within the time and in the manner prescribed by law, pay) all Taxes (as
defined below) that are due and payable prior to the Closing, and there is (and
until the Closing shall be) no material difference between the amount of the
book basis and the tax basis of assets (net of liabilities) that are not
accounted for by an accrual on the books for federal income tax purposes.
(c) All Taxes payable by Span or Ocala as of November 30, 1995
or which will become payable as a result of activities of Span or Ocala on or
before November 30, 1995 are clearly identified and reflected on the November
30, 1995 Balance Sheet as taxes payable or as accrued taxes. No Taxes will
become payable by Span or Ocala as a result of activities of Span or Ocala
between November 30, 1995 and the Closing Date other
9
<PAGE> 15
than Taxes of a normally recurring nature incurred by Span or Ocala after
November 30, 1995 in the ordinary course of business consistent with past
practice.
(d) Span has established (and until the Closing will
establish) on its books and records reserves that are adequate for the payment
of all Taxes not yet due and payable.
(e) There are no liens for unpaid Taxes filed against the
assets of Span or Ocala except liens for Taxes not yet due.
(f) Neither Span nor Ocala has filed (nor will file prior to
the Closing Date) any consent agreement under Section 341(f) of the Code nor
agreed to have Section 341(f)(2) of the Code apply to any disposition of the
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by Span or Ocala.
(g) Except as set forth on Schedule 2.3(g), no deficiency or
adjustment for any Taxes has been proposed or asserted or assessed against Span
or Ocala and, to the best knowledge of Span and each of the Principal
Shareholders, no foreign, federal, state or local audits, examination or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes, and no waiver or consent extending any statute of
limitations for the assessment or collection of any Taxes, which waiver or
consent remains in effect, has been executed by (or on behalf of) Span or Ocala
nor are any requests for such waiver or consent pending. The federal income tax
returns of Span and Ocala have been examined by the Internal Revenue Service
(the "IRS") or the statutes of limitations for the assessment of federal income
taxes has expired for all periods to and including August 31, 1991.
(h) Neither Span nor Ocala is a party to any tax-sharing or
allocation agreement, nor does Span or Ocala owe any amount under any
tax-sharing or allocation agreement.
(i) The acquisition of Span by Tylan will not result in the
payment of any "excess parachute payment" within the meaning of Section 280G of
the Code and there is no agreement, plan or arrangement covering any employee or
independent contractor of Span or Ocala that would give rise to any payment that
would not be deductible pursuant to Section 280G or Section 162 of the Code.
(j) Neither Span nor Ocala has made any election under Section
338(g) of the Code with respect to any acquisition and no outstanding debt
obligation of Span or Ocala is "corporate acquisition indebtedness" within the
meaning of Section 279(b) of the Code.
(k) Neither Span nor Ocala is a United States Real Property
Holding Corporation as defined under Section 897(c)(2) of the Code.
10
<PAGE> 16
(l) There have been no audits of Taxes based on income of Span
or Ocala since August 31, 1991.
(m) For purposes of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies, or other assessments of whatever kind or nature,
including, without limitation, all net income, gross income, gross receipts,
sales, use, value-added, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp, net
worth, environmental, occupancy or property taxes, customs duties, fees,
assessments or charges of any kind whatsoever (together with any interest and
any penalties, additions to tax or additional amounts) imposed by any taxing
authority (domestic or foreign) upon or payable by Span or Ocala.
2.4 CONDUCT OF BUSINESS. Except as set forth in Schedule 2.4, since
August 31, 1995, neither Span nor Ocala has:
(a) sold, leased, optioned or transferred any material portion
of the assets of Span or Ocala or any material portion of the interests in such
portion, except for sales of inventory in the ordinary course of business;
(b) suffered any material loss, or material interruption in
use, of any material asset or property (whether or not covered by insurance), on
account of fire, flood, riot, strike or other hazard or Act of God;
(c) made any material change in the conduct or nature of its
business or operations;
(d) waived any material rights arising out of the conduct of,
or with respect to, its business or operations;
(e) made or committed to make any capital expenditures in an
amount in excess of $1,500,000 in the aggregate;
(f) declared or paid any dividend or other distribution with
respect to its capital shares or redeemed, repurchased or otherwise acquired any
of its own capital shares;
(g) made any material increase in the rate or terms of
compensation payable by Span or Ocala to, or any increase in the rate or terms
of any bonus, insurance, pension or other employee benefit plan on behalf of any
director, officer or key employee of Span or Ocala;
(h) made any change in accounting methods, principles or
practices except as required by GAAP;
11
<PAGE> 17
(i) suffered any creation, occurrence or assumption of any material
indebtedness for money borrowed other than in the form of accounts payable for
goods and services in the ordinary course of business;
(j) assumed, guaranteed, or incurred any liability for the obligations
of any other person or suffered the subjecting of any property or assets of Span
or Ocala to mortgage, lien, pledge or other encumbrance other than purchase
money security interests or liens for taxes not yet due and payable in the
ordinary course of business;
(k) suffered any termination or threatened termination, or substantial
adverse modification, of the relationship of Span or Ocala with a customer or
supplier or the occurrence of any event affecting any product or process used by
Span or Ocala having, in any such case or in the aggregate, a Material Adverse
Effect;
(l) without limitation by the enumeration of any of the foregoing,
entered into any material transaction (including any borrowing, leasing or
capital financing or any lease of real property) other than in the ordinary
course of business;
(m) incurred any material Liabilities other than in the ordinary course
of business;
(n) suffered or been threatened with any adverse change which has had
or could have a Material Adverse Effect; or
(o) agreed to do any of the foregoing.
2.5 CONTRACTS.
(a) Except as set forth in Schedule a, neither Span nor Ocala is a
party to, or bound by, any material undischarged written or oral:
(i) contract for the employment for any period of time
whatsoever, or restricting the employment, of any employee;
(ii) consulting agreement;
(iii) collective bargaining agreement;
(iv) contract or agreement restricting in any manner Span's or
Ocala's right to compete with any other person or restricting Span's or
Ocala's right to sell to or purchase from any other person;
12
<PAGE> 18
(v) agreement with any affiliate of Span or Ocala or person
controlled by an affiliate of Span or Ocala for or with respect to the
purchase or sale of goods or the performance of services;
(vi) contract for the payment or receipt of license fees or
royalties to or from any person, firm or corporation;
(vii) contract of agency, representation, distribution or
franchise which cannot be canceled without payment or penalty upon
notice of thirty (30) days or less;
(viii) service contract in an annual amount in excess of
$50,000;
(ix) guaranty, performance, bid or completion bond, or surety
or indemnification agreement;
(x) contract relating to the purchase, sale, ownership, use or
license of technology except licenses for third party software
generally available to the public;
(xi) lease or sublease, either as lessee or sublessee, lessor
or sublessor, of real or personal property or intangibles;
(xii) contracts relating to the purchase, sale or margining of
securities;
(xiii) warranty or product service contracts;
(xiv) joint venture, partnership or other contracts involving
a sharing of profits, losses, costs or liabilities; or
(xv) contract not listed above.
All material contracts, leases, subleases and other instruments of the
type referred to in this Section a and described in Schedule a (collectively,
"Contracts") are in full force and effect and are binding upon Span or Ocala, as
the case may be, and, to the best knowledge of Span and each of the Principal
Shareholders, are binding on the other parties thereto. Except as set forth on
Schedule 2.5(a), no material default by Span or Ocala, as the case may be, has
occurred thereunder and, to the best knowledge of Span and each of the Principal
Shareholders, no material default by the other contracting parties has occurred
thereunder, and no event has occurred which with the giving of notice or the
lapse of time, or both, would constitute a material default by Span or Ocala, as
the case may be. Span has delivered to Tylan true and complete copies of each
contract, lease, sublease, or other instrument described in Schedule a.
13
<PAGE> 19
(b) Except as disclosed in Schedule b, neither Span nor Ocala
is a party to, or bound by, any Contract under the terms of which performance by
Span or Ocala according to the terms of this Agreement will be a default or an
event of acceleration, or would otherwise require consent.
(c) Neither Span nor Ocala is a party to, or bound by, any
Contract requiring Span or Ocala to perform engineering development or
documentation development services, which services have not been fully
performed, delivered and unconditionally accepted by the party contracting for
such services or any third party beneficiary thereof.
(d) Schedules d and b contain a list of every material
license, permit or governmental approval, order, directive and agreement applied
for, pending, issued, rejected or given to Span or Ocala with respect to the
conduct of their respective businesses or operations. Each of Span and Ocala
possesses all licenses, permits, and governmental approvals and authorizations
which are required in order to operate its business as presently conducted and
each of Span and Ocala is in compliance with all such licenses, permits,
approvals and authorizations, except where the failure to possess, or comply
with, such licenses, permits, approvals and authorizations would not have a
Material Adverse Effect.
(e) Schedule e contains a list of all pending or threatened
claims against Span or Ocala under each Contract (including, without limitation,
claims for back charges, rebates, price reductions, breaches of product or
service warranties or for product or service liability for products manufactured
or sold), excluding requests for service in the ordinary course of business
which Span or Ocala is required to perform pursuant to the terms of standard
warranties and which are covered by warranty reserves, to the extent such
claims, individually or in the aggregate, could have a Material Adverse Effect.
2.6 EMPLOYEES.
(a) With respect to the employees of Span and Ocala:
(i) Schedule a contains a true and complete list of
each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization
or other medical, life or other insurance, supplemental unemployment
benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement (collectively, the "Plans"), currently
sponsored, maintained or contributed to or required to be contributed
to by Span or Ocala for the benefit of any employee of Span or Ocala
(an "Employee" and collectively, the "Employees").
(ii) Neither Span nor Ocala, now or at any time in
the past, has maintained, sponsored or contributed to any employee
pension benefit plan (as
14
<PAGE> 20
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Subtitles of ERISA) for the benefit of Employees or former Employees
(a "Pension Plan").
(iii) Span and Ocala maintain, sponsor or contribute to only those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Subtitles of ERISA) for the
benefit of Employees or former Employees which are described in Schedule a (the
"Welfare Plans"), none of which is a multiemployer plan (within the meaning of
Section 3(37) of ERISA).
(iv) With respect to each of the Plans, Span has heretofore delivered
to Tylan true and complete copies of each of the following documents:
(A) a copy of each such Plan (including all amendments
thereto);
(B) a copy of the annual report, if required under ERISA, with
respect to each such Plan for the last two years;
(C) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications, if required under ERISA,
with respect to each such Plan, and all material employee communications
relating to such Plan;
(D) if such Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof;
(E) all contracts relating to the Plans, including, without
limitation, service provider agreements, insurance contracts, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and
(F) the most recent determination letter received from the IRS
with respect to each such Plan that is intended to be qualified under Section
401 of the Code.
(v) Neither Span nor Ocala has, and neither has ever had, any
affiliates as determined under Section 4001(b)(1) of ERISA or Section 414(b),
(c), (m) or (o) of the Code, nor has Span or Ocala ever been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code;
neither Span nor Ocala has ever made a complete or partial withdrawal from a
multiemployer
15
<PAGE> 21
plan, as such term is defined in Section 3(37) of ERISA, resulting in
"withdrawal liability," as such term is defined in Section 4201 of
ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(vi) Neither Span nor Ocala has any plan or
commitment, whether legally binding or not, to create any additional
Welfare Plan or any Pension Plan, or any plan or commitment to modify
or change any existing Welfare Plan, other than changes to comply with
applicable law, that would affect any Employee.
(vii) No Welfare Plan provides death, medical or
health benefits (whether or not insured) with respect to current or
former employees of Span or Ocala after any such employee's retirement
or other termination of service (other than (A) benefit coverage
mandated by applicable law, including, without limitation, coverage
provided pursuant to Section 4980B of the Code, (B) deferred
compensation benefits accrued as liabilities on the books of Span or
Ocala, (C) benefits the full cost of which is borne by the current or
former employee (or the employee's beneficiary)).
(viii) With respect to each of the Welfare Plans
constituting a group health plan within the meaning of Section 162(i)
of the Code, the provisions of Section 4980B of the Code have been
complied with in all material respects.
(ix) Each of the Plans has been operated and
administered in all material respects in accordance with applicable
laws, including but not limited to ERISA and the Code.
(x) Each of the Plans intended to be qualified under
Section 401 of the Code has received a favorable determination from the
Internal Revenue Service and nothing has occurred since such
determinations to adversely affect them.
(xi) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
payment (including, without limitation, any bonus, golden parachute or
severance payment) to any director of Span or Ocala or Employee under
any Plan, or materially increase the benefits payable under any Plan,
or result in the acceleration of the time of payment or vesting of such
benefits.
(b) Schedule b contains a list of all employees of Span and
Ocala as of February 1, 1996. Said list correctly reflects, in all material
respects, their salaries, other compensation (other than under the Welfare
Plans), dates of employment, positions, social security numbers and birth dates.
16
<PAGE> 22
(c) Each of Span and Ocala has complied in all material
respects and is currently complying in all material respects with all applicable
laws relating to employment and employment practices, including, without
limitation, wages, workplace safety, equal employment opportunity and
nondiscrimination ("Labor Laws"). Other than as set forth on Schedule 2.6(c),
neither Span nor Ocala has received any notice of noncompliance or violation of
any Labor Law that is pending or unresolved; no action is pending or to the best
knowledge of Span and each of the Principal Shareholders, threatened before the
National Labor Relations Board, the Equal Employment Opportunity Commission, the
U.S. Department of Labor or any other foreign, federal, state or local
governmental authority or court relating to employment matters or any Labor Law;
and there is no pending or, to the best knowledge of Span and each of the
Principal Shareholders, threatened arbitration, suit, litigation or proceeding,
against Span or Ocala or any current or former director, major shareholder,
officer or supervisory employee of Span or Ocala, alleging wrongful termination,
racial, religious, sexual or age discrimination, improper post-termination
conduct, or breach of contract or covenant of employment.
(d) Schedule d identifies all employees of Span and Ocala who
are not available fully to perform work because of disability, layoff, leave or
similar status and sets forth the basis of such leave and the anticipated date
of return to full service.
(e) To the best knowledge of Span and each of the Principal
Shareholders, all individuals who are performing or have performed services for
Span or Ocala within the last two years and are or were classified as
"independent contractors" for tax purposes qualify for such classification.
(f) Neither Span nor Ocala is subject to any collective
bargaining agreement with respect to any of its employees, has any current labor
problems or disputes, or, to the best knowledge of Span and each of the
Principal Shareholders, has been subject to any effort to organize any of its
employees during the last 24 months.
2.7 LITIGATION AND CLAIMS; COMPLIANCE WITH LAW.
(a) Except for litigation or proceedings relating to the
environment (which are exclusively provided for in Section 2.8 below), there is
no material arbitration, suit, litigation or proceeding, in law or in equity,
pending, or, to the best knowledge of Span and each of the Principal
Shareholders, threatened before any court, tribunal, master or governmental
agency, authority or body in which Span or Ocala is a party or to which its
business or property is subject. To the best knowledge of Span and each of the
Principal Shareholders, there are no preliminary proceedings or governmental
investigations before any commission or other administrative authority pending
or threatened against Span or Ocala, and, except as set forth on Schedule
2.7(a), no event has occurred or circumstance
17
<PAGE> 23
exists that (with or without notice or lapse of time) may serve as the basis for
or give rise to any such arbitration, suit, litigation or proceeding.
(b) Neither Span nor Ocala is a party to any decree, order or
arbitration award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any governmental authority) with respect to its
properties, assets, personnel or business activities.
(c) Except for laws, rules and regulations relating to the
environment (which are exclusively provided for in Section 2.8 below), neither
Span nor Ocala is in violation of, or delinquent in respect to, any decree,
order or arbitration award or law, statute, or regulation of, or agreement with,
or any license or permit from, any federal, state, local and foreign
governmental authority to which its properties, assets, personnel or business
activities are subject or to which Span or Ocala is subject, including, without
limitation, laws, rules and regulations relating to occupational health and
safety, equal employment opportunities, fair employment practices, and sex,
race, religious and age discrimination, except such violation of delinquency
which either in the particular instance or in the aggregate would not have a
Material Adverse Effect.
2.8 ENVIRONMENTAL PROVISIONS.
(a) For the purposes of this Section 2.8:
(i) "Environmental Claim" means any material claim,
action, cause of action, investigation or notice (written or oral) by
any person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (A) the presence, or release into the environment, of
any Material of Environmental Concern at any location, whether or not
owned or operated by Span or Ocala, or (B) circumstances forming the
basis for any violation, or alleged violation, of any Environmental
Law.
(ii) "Environmental Laws" means all federal, state,
local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
18
<PAGE> 24
(iii) "Materials of Environmental Concern" means chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products or any other substance now or hereafter regulated by
Environmental Laws or that is otherwise a danger to health,
reproduction or the environment.
(b) Except as set forth in Schedule b, each of Span and Ocala
is in compliance in all material respects with all applicable Environmental
Laws, which compliance includes, but is not limited to, the possession by Span
and Ocala of all material permits and other governmental authorizations required
under applicable Environmental Laws, and material compliance with the terms and
conditions thereof. Except as set forth in Schedule b, neither Span nor Ocala
has received any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that it is not in
such full compliance, and, to the best knowledge of Span and each of the
Principal Shareholders, there are no circumstances that may prevent or interfere
with such material compliance in the future. Except as set forth in Schedule b,
to the best knowledge of Span and each of the Principal Shareholders, no current
or prior owner of any property owned or leased by Span or Ocala has received any
communication (written or oral), whether from a government authority, citizens
group, employee or otherwise, that alleges that it, or Span or Ocala, is not in
such full compliance. All permits and other governmental authorizations
currently held by Span or Ocala pursuant to the Environmental Laws are
identified in Schedule b.
(c) Except as set forth in Schedule c, there is no
Environmental Claim pending or, to the best knowledge of Span and each of the
Principal Shareholders, threatened against Span or Ocala or against any person
or entity whose liability for any Environmental Claim Span or Ocala has or may
have retained or assumed either contractually or by operation of law.
(d) Except as set forth in Schedule d and except as would not,
either in the particular instance or in the aggregate, have a Material Adverse
Effect, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that could form a reasonable basis for any Environmental Claim against
Span or Ocala or, to the best knowledge of Span and each of the Principal
Shareholders, against any person or entity whose liability for any Environmental
Claim Span or Ocala has or may have retained or assumed either contractually or
by operation of law.
(e) Without in any way limiting the generality of the
foregoing, (i) all on-site and off-site locations where Span or Ocala have
stored, disposed of or arranged for the disposal of, Materials of Environmental
Concern are identified in Schedule e, (ii) to the best knowledge of Span and
each of the Principal Shareholders, all underground storage tanks (whether or
not in use by Span or Ocala), and the capacity and contents of such tanks,
19
<PAGE> 25
located on property owned or leased by Span or Ocala, are identified in Schedule
e, (iii) to the best knowledge of Span and each of the Principal Shareholders,
except as set forth in Schedule e, there is no asbestos contained in or forming
part of any building, building component, structure or office space owned or
leased by Span or Ocala, and (iv) to the best knowledge of Span and each of the
Principal Shareholders, except as set forth in Schedule e, no polychlorinated
biphenyls (PCBs) are used or stored at any property owned or leased by Span or
Ocala.
2.9 PROPERTIES.
(a) Span has previously delivered to Tylan true and correct
copies of all leases pursuant to which Span or Ocala leases real or personal
property (the "Leases"). Each of the Leases is valid, binding and enforceable
against Span, Ocala or Whitson Properties, L.C. and, to the best knowledge of
Span and each of the Principal Shareholders, against each of the lessors
thereunder in accordance with its terms and is in full force and effect. Except
as described in Schedule a, neither Span nor Ocala is in default under any term
of any Lease nor, to the best knowledge of Span and each of the Principal
Shareholders, is any other party thereto in default thereunder, and no event has
occurred which (whether with or without notice, lapse of time or both) would
constitute a default by Span or Ocala. The transactions contemplated by this
Agreement shall not constitute a breach of any Lease. The properties subject to
the Leases and the conditions of the Leases are suitable in all material
respects for the business currently being conducted thereon by Span or Ocala, as
the case may be. There are no condemnation proceedings pending or, to the best
knowledge of Span and each of the Principal Shareholders, threatened with
respect to any portion of the property subject to the Leases.
(b) Each of Span and Ocala has good and valid title to its
assets reflected as owned in the November 30, 1995 Balance Sheet (as well as all
of its properties and assets which have been fully depreciated and are not
reflected therein) or acquired after that date. Except as set forth in Schedule
b, as of November 30, 1995 and as of the Closing, each of Span and Ocala shall
have good and valid title to its assets, free and clear of any mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances or charges of any kind (collec tively, "Liens"), other than (i)
Liens shown on the November 30, 1995 Balance Sheet as securing specified
liabilities (with respect to which no default exists), (ii) Liens for current
taxes not yet due, (iii) purchase money security interests and (iv) all minor
imperfections of title and encumbrances, if any, which do not impair the
operations of Span or Ocala in any material respect. All of the assets of Span
and Ocala are in all material respects (i) fit for the purposes for which
intended and (ii) in good operating condition and repair, except for ordinary
wear and tear, are currently used by Span or Ocala in the ordinary course of its
business, and are sufficient for the operation of Span's or Ocala's business, as
the case may be. As of the Closing, the assets of Span and Ocala shall
constitute all of the properties, rights and assets (other than insurance
policies) necessary for
20
<PAGE> 26
the conduct of the businesses of Span and Ocala as currently conducted and as
conducted at Closing. Except as set forth in Schedule b, all material tangible
assets of Span and Ocala are located in Plano, Texas, Ocala, Florida, and San
Clemente, California. Except as set forth on Schedule b, no tangible personal
property has been loaned or otherwise made available to Span or Ocala for
development or other purposes.
(c) Span has fire and casualty insurance policies, with
extended coverage (subject to reasonable deductibles and policy exclusions),
sufficient to allow Span and Ocala to replace any of their material properties
that might be damaged or destroyed, and has liability insurance reasonably
adequate to protect each of Span and Ocala and its financial condition against
the risks involved in the business conducted by it. Schedule c lists all such
policies. Span and Ocala have paid all premiums when due and have not done
anything by way of action or inaction which could be reasonably likely to
invalidate any of such policies, in whole or in part. There are no outstanding
requirements or recommendations of any insurance company that has issued a
policy to Span or Ocala which require or recommend any changes to the conduct of
the business of Span or Ocala, or any repair or other work with respect to any
of its properties, and no insurance company providing coverage to Span or Ocala
has refused to cover any claim or given any notice of defense subject to
reservation of rights or provided any notice of cancellation of any coverage.
(d) Each of Span and Ocala has good, marketable and insurable
title to each piece of real property owned by it (collectively, "Property"),
free and clear of all material liens, encumbrances, covenants, conditions,
restrictions, rights of way, easements and other matters affecting title. True
and complete copies of any title report relating to the Property have been
delivered to Tylan.
(e) To the best knowledge of Span and each of the Principal
Shareholders, (i) no action, suit, proceeding or investigation is pending or
threatened (including without limitation environmental litigation and eminent
domain, condemnation or similar proceedings) materially affecting the Property
or against Span or Ocala and relating to or arising from its interest in any
tangible asset owned by it, and (ii) none of Span, Ocala or either of the
Principal Shareholders has received any notice of or has any knowledge that any
such proceedings are contemplated. To the best knowledge of Span and each of the
Principal Shareholders, (A) the uses presently being made of the Property
conform to existing zoning laws, (B) all material permits and licenses necessary
for the use, occupancy and operation of the Property have been obtained, (C)
Span and Ocala have complied in all material respects with all laws, ordinances,
rules and regulations of any governmental agency or body having or asserting
jurisdiction over the Property, and (D) the Property complies in all material
respects with all building, fire and life safety codes and requirements.
21
<PAGE> 27
(f) Neither Span nor Ocala is a "foreign person" as that term
is defined in the Code and in applicable regulations.
2.10 INTELLECTUAL PROPERTY.
(a) Schedule a lists all domestic and foreign patents and
patent applications owned or licensed by Span or Ocala (the "Patents") and all
material agreements relating thereto. Except where such Patents are indicated to
be licensed, Span (or Ocala, as the case may be) owns the Patents and all
related patent rights free and clear of all liens, claims or encumbrances and
may assign or license them free and clear of any liens, claims or encumbrances.
There are no proceedings, and to the best knowledge of Span and each of the
Principal Shareholders, there are no claims, threats or other communications,
which challenge the validity of any claim of any Patent. All such Patents are
currently in compliance with formal legal requirements (including payment of
filing, examination and maintenance fees and proofs of working or use), and
neither Span nor either of the Principal Shareholders has any reason to believe
that any of the Patents is not, or upon issuance will not be, valid and
enforceable. No Patent has been or is now involved in any interference
proceeding or has been challenged in any way, and neither Span nor either of the
Principal Shareholders is aware of any interfering patent or patent application.
Neither Span nor either of the Principal Shareholders is aware of any relevant
information that is material to the examination of an application for any Patent
that has not been disclosed to the U.S. Patent and Trademark Office pursuant to
the disclosure requirements of 37 C.F.R. 1.56. Span has delivered to Tylan
copies of all opinions and memoranda of counsel received by it and relating to
(i) the validity and patentability of the Patents, (ii) infringement by third
parties of the Patents and (iii) Span's or Ocala's freedom to operate. Schedule
a lists all existing agreements including licenses relating to the Patents
granted to third parties by Span or Ocala. Except as disclosed in Schedule
2.10(a), subject to any right of Span (or Ocala, as the case may be) to conduct
an audit of its licensees, all royalties and other payments due under said
agreements have been paid, and no party to those agreements is in material
default in any manner respecting its obligations under those agreements. Except
for the agreements listed in Schedule a and except for any license implied by
the sale of a product, no other license, covenant, or agreement has been granted
or entered into by Span or Ocala with respect to the Patents.
(b) Schedule b lists all domestic and foreign registered
copyrights, trademarks and trademark applications owned by Span or Ocala and/or
licensed by Span or Ocala from (other than pursuant to standard end-user
Licenses) or to third parties (the "Trademarks" and "Copyrights"), indicating in
each case whether the Trademark or Copyright is owned or licensed, and a listing
and summary description of all agreements relating to the Trademarks and
Copyrights. Other than as set forth on Schedule 2.10(b), each of Span and Ocala
owns free and clear of all liens, claims or encumbrances the Trademarks and
Copyrights which are so designated as owned by it, and all agreements
22
<PAGE> 28
with respect to Trademarks and Copyrights are valid and binding, are in full
force and effect, and neither Span nor, to the best knowledge of Span and each
of the Principal Shareholders, any other party thereto is in material default,
or with the giving of notice or lapse of time or both, would be in material
default under the terms of such agreement. All registered Trademarks and
Copyrights are in compliance with all formal legal requirements (including, in
the case of Trademarks, the timely post registration filing of affidavits of use
and incontestability and of renewal applications), are valid and enforceable,
and are not subject to any maintenance fees or taxes or actions falling due
within 180 days after the Closing Date. To the best knowledge of Span and each
of the Principal Shareholders, there are no interference, opposition or
cancellation proceedings or infringement suits pending or threatened with
respect to any of the Trademarks or Copyrights. Neither Span nor either of the
Principal Shareholders has been advised or has any reason to believe that Span
or Ocala is infringing a trademark or copyright held by another person.
(c) Each of Span and Ocala owns or has in its possession
certain information, know-how and show-how (including, without limitation, data,
documents, drawings, designs, software, procedures, customer lists and other
proprietary materials) relating to, without limitation, the specification,
examination, simulation, design, implementation, manufacture, procurement of
materials and the like from suppliers or subcontractors, quality control and
testing, use and delivery of its products (the "Trade Secrets"). Each of Span
and Ocala has taken reasonable precautions to maintain Trade Secrets in
confidence and to prevent their disclosure to unauthorized persons, including
having each of its employees execute and deliver its standard proprietary
information protection and assignment agreement (a copy of which has been
delivered to Tylan). To the best knowledge of Span and each of the Principal
Shareholders, Span (or Ocala, as the case may be) has good title and an absolute
right to use all Trade Secrets, and the use of the Trade Secrets does not
infringe the rights of any third party. Schedule c sets forth a list of all
agreements relating to the Trade Secrets. To the extent that the Trade Secrets
are not available in documentary or fixed form, disclosure shall be made to
Tylan prior to Closing to permit Tylan to make full use of the Trade Secrets to
operate the business of Span.
(d) All personnel, including Employees, agents, consultants
and contractors, who have contributed to or participated in the conception and
development of the software programs, technical documentation or other
intellectual property of Span or Ocala either (i) have been party to a
"work-for-hire" arrangement or agreement with Span or Ocala, in accordance with
applicable federal and state law, that has accorded Span (or Ocala, as the case
may be) full, effective, exclusive and original ownership of all tangible and
intangible property thereby arising, or (ii) have executed appropriate
instruments of assignment in favor of Span (or Ocala, as the case may be) as
assignee that have conveyed to Span (or Ocala, as the case may be) full,
effective and exclusive ownership of all tangible and intangible property
thereby arising.
23
<PAGE> 29
(e) To the best knowledge of Span and each of the Principal
Shareholders, no person is infringing upon any Patent, Trademark or Copyright or
is misappropriating any Trade Secret. To the best knowledge of Span and each of
the Principal Shareholders, none of the products sold by, nor any processes or
know-how used by, Span or Ocala, infringes any patent, trademark or copyright of
any third party. To the best knowledge of Span and each of the Principal
Shareholders, there is no intellectual property, in any form, whether patent,
trademark, tradename, trade secret, copyright or otherwise, necessary for the
operation of Span's or Ocala's business as conducted which neither Span (or
Ocala, as the case may be) does not currently own or license on commercially
reasonable terms.
2.11 DISCLOSURE.
(a) The copies of all documents furnished by Span pursuant to
the terms of this Agreement are complete and accurate.
(b) For purposes of this Agreement and the transactions
contemplated hereby, none of (i) the representations and warranties made by Span
in this Agreement, (ii) the disclosure schedules delivered to Tylan pursuant
hereto (the "Span Disclosure Schedule") or (iii) any statement by Span or, to
the best knowledge of Span and each of the Principal Shareholders, any other
person, contained in any document, certificate or other writing furnished by
Span to Tylan in connection with this Agreement, the Merger or the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make the
statements made herein or therein, in light of the circumstances in which they
were made, not misleading.
2.12 FINDERS. Span has not dealt with any person, firm or corporation
(other than Blum & Co., Inc.) who is or may be entitled to a broker's
commission, finder's fee, investment banker's fee or similar payment from Span
for arranging the transaction contemplated hereby or introducing the parties to
each other.
2.13 TRANSACTIONS WITH AFFILIATES. Except for compensation of
employees, every material transaction between Span and any of its "affiliates"
or their "associates" (as such terms are defined in the rules and regulations of
the Securities and Exchange Commission ("SEC")) other than Tylan, which is
currently in effect or was consummated in the last three years, is set forth on
Schedule 2.13.
2.14 NO CONTEMPLATED TRANSACTIONS INCONSISTENT WITH
POOLING-OF-INTERESTS ACCOUNTING. Neither Span nor any of the Shareholders is
contemplating any transaction that would constitute a change in equity interests
in Span's Common Shares or otherwise would result in the Merger not qualifying
for pooling-of-interests accounting.
24
<PAGE> 30
3. REPRESENTATIONS AND WARRANTIES OF TYLAN AND TYLAN SUB
Tylan and Tylan Sub represent and warrant to Span as of the date of
this Agreement and as of the Closing Date as follows:
3.1 ORGANIZATION.
(a) Tylan is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Tylan Sub is a
corporation duly organized, existing and in good standing under the laws of the
State of Delaware. Each of Tylan and Tylan Sub has all necessary power and
authority under applicable corporate law and its organizational documents to own
or lease its properties and to carry on its business as presently conducted.
(b) Each of Tylan and Tylan Sub is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect.
(c) The authorized capital stock of Tylan consists of
50,000,000 shares of common stock, par value $.001 per share, of which, as of
January 31, 1996, 6,479,732 shares were issued and outstanding, and 10,000,000
shares of preferred stock, par value $.001 per share, of which, as of the date
hereof, no shares were issued and outstanding. All the issued and outstanding
shares of Tylan are validly issued, fully paid and nonassessable and free of
preemptive rights. As of January 31, 1996, Tylan has outstanding options to
purchase 669,695 shares of Tylan Common Stock. Except as set forth above or
pursuant to the exercise of the foregoing options, there are not as of the date
hereof any shares of capital stock of Tylan authorized, issued or outstanding or
any outstanding subscriptions, options, warrants, stock appreciation rights,
calls, rights, convertible securities or other agreements or commitments of any
character relating to unissued shares of capital stock of Tylan, or otherwise
obligating Tylan to issue, transfer or sell any shares of capital stock of
Tylan, or other securities convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of the capital stock of Tylan. The authorized
capital of Tylan Sub consists of 10,000 shares of Common Stock, $.001 par value,
100 of which are issued and outstanding.
(d) Each of Tylan and Tylan Sub has full corporate power and
authority to execute, deliver and perform this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Boards of Directors of each
of Tylan and Tylan Sub, and no other corporate proceedings on the part of Tylan
or Tylan Sub are necessary for Tylan and Tylan Sub to authorize this Agreement
or to consummate the transactions contemplated hereby (other than approval by
the stockholders of Tylan). This Agreement has been duly executed and delivered
by duly authorized officers of Tylan and Tylan Sub. This
25
<PAGE> 31
Agreement constitutes a legal, valid and binding obligation of Tylan and Tylan
Sub, enforceable against each of them in accordance with its terms (except to
the extent that enforcement is affected by laws pertaining to bankruptcy,
insolvency, reorganization and creditors' rights and by the availability of
injunctive relief, specific performance and other equitable remedies).
(e) The Employment Agreements (as defined in Section 5.2) have
been, or prior to the Closing will be, duly and validly authorized and, when
executed and delivered pursuant to their terms, will constitute valid and
binding agreements of Tylan enforceable against Tylan in accordance with their
terms (except to the extent that enforcement is affected by laws pertaining to
bankruptcy, insolvency, reorganization and creditors' rights and by the
availability of injunctive relief, specific performance and other equitable
remedies).
(f) Except as may be required by the Securities Act, state
securities laws, the Texas Law or the DGCL, there is no requirement applicable
to Tylan or Tylan Sub to make any filing with, or to obtain any permit,
authorization, consent or approval of, any governmental or regulatory authority
as a condition to the lawful consummation by Tylan and Tylan Sub of the
transactions contemplated by this Agreement. Neither Tylan nor Tylan Sub knows
of any reason why any required permit, authorization, consent or approval will
not be obtained. Neither the execution and delivery of this Agreement by Tylan
and Tylan Sub nor the consummation by Tylan and Tylan Sub of the transactions
contemplated by this Agreement will (i) conflict with or result in any breach of
any provision of the Certificate of Incorporation or Bylaws of Tylan or Tylan
Sub, (ii) result in a material default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture or other evidence of
indebtedness of Tylan or Tylan Sub or any material license agreement, lease or
other material contract, instrument or obligation to which Tylan or Tylan Sub is
a party or by which Tylan or Tylan Sub or any of their respective assets may be
bound, (iii) violate any statute, rule, regulation, order, writ, injunction,
decree or arbitration award applicable to Tylan or Tylan Sub or any of their
respective assets which violation would have a Material Adverse Effect on Tylan
or (iv) result in the creation of any material (individually or in the
aggregate) liens, charges or encumbrances on any of the assets of Tylan or Tylan
Sub.
(g) Tylan has delivered to Span complete and accurate copies
of Tylan's Certificate of Incorporation and Bylaws, and Tylan Sub's Certificate
of Incorporation and Bylaws, each as amended.
3.2 COMMON STOCK TO BE ISSUED. The Tylan Common Stock to be issued to
the Shareholders hereunder, when issued by Tylan to the Shareholders pursuant to
the terms of this Agreement, will be duly authorized, validly issued, fully paid
and non-assessable, will be issued in compliance with applicable federal and
state securities laws, will have the rights and preferences set forth in the
Certificate of Incorporation of Tylan previously
26
<PAGE> 32
delivered to Span, and will be free and clear of all liens, encumbrances and
adverse claims; provided that the Tylan Common Stock to be issued to the
Shareholders may be subject to restrictions on transfer under federal securities
laws as set forth in this Agreement.
3.3 FINANCIAL. The audited consolidated balance sheet of Tylan as of
October 31, 1995 and the audited consolidated statement of operations and
statement of cash flows of Tylan for the fiscal year ended October 29, 1995,
each certified by Deloitte & Touche LLP, independent certified public
accountants, whose report thereon is included therein, have been prepared in
accordance with the books and records of Tylan, which books and records are
complete, maintained on a consistent basis, and correctly reflect its income,
expenses, assets and liabilities, are true, complete and accurate and present
fairly the financial position of Tylan as of the date of said balance sheets and
the results of operations of Tylan for the periods covered by said statements of
operations, in accordance with GAAP consistently applied, except as otherwise
disclosed therein. The financial statements described in this Section 3.3 are
referred to in this Agreement as the "Tylan Financial Statements."
3.4 DISCLOSURE.
(a) Tylan has previously delivered to Span copies of Tylan's
Annual Report on Form 10-K for the fiscal year ended October 29, 1995.
(b) The copies of all documents furnished by Tylan pursuant to
the terms of this Agreement are complete and accurate.
(c) For purposes of this Agreement and the transactions
contemplated thereby, none of (i) the representations and warranties made by
Tylan or Tylan Sub in this Agreement or (ii) any statement by Tylan or, to the
best of Tylan's knowledge, any other person, contained in any document,
certificate or other writing furnished by Tylan to Span in connection with this
Agreement, the Merger or the transactions contemplated hereby (when read
together), contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the statements
made herein or therein, in light of the circumstances in which they were made,
not misleading.
3.5 FINDERS. Tylan has not dealt with any person, firm or corporation
(other than Kleinwort Benson Limited and Adams, Harkness & Hill, Inc.) who is or
may be entitled to a broker's commission, finder's fee, investment banker's fee
or similar payment for arranging the transaction contemplated hereby or
introducing the parties to each other.
27
<PAGE> 33
4. COVENANTS OF SPAN AND THE PRINCIPAL SHAREHOLDERS
Span and each of the Principal Shareholders hereby jointly and
severally covenant and agree as follows:
4.1 NEGATIVE COVENANTS. Between the date of this Agreement and the
Effective Date, unless Tylan shall otherwise consent in writing, except as
provided hereunder, Span will not do, or commit to do, and neither of the
Principal Shareholders shall take any action, or omit to take any action, to
cause Span to do or commit to do, and Span shall not take any action, or omit to
take any action, to cause Ocala to do or commit to do any of the following:
(a) make any purchase, sale or disposition of any asset or
property, other than in the ordinary course of business consistent with past
practices or the disposition of immaterial assets, or mortgage, pledge, subject
to a lien or otherwise encumber any of its properties or assets (other than the
existing liens of Fleet Credit Corporation);
(b) incur any material contingent liability as a guarantor or
otherwise with respect to the obligations of any person or entity, except for
any such liability pursuant to Contracts listed on Schedule 2.5(a) (not
including any amendments thereto after the date hereof);
(c) take any action, or permit any action within Span's or the
Principal Shareholders' control, which would prevent the Merger from qualifying
as a tax-free reorganization under Section 368 of the Code or from being
eligible for pooling-of-interests accounting treatment in accordance with GAAP
and all rules, regulations and policies of the SEC, and Span will use its best
efforts to prevent any of the Shareholders or any of the officers or directors
of Span or Ocala from taking or permitting any such action;
(d) amend any charter documents as previously delivered to
Tylan;
(e) issue any of its capital shares or grant any options,
warrants or rights to acquire any capital shares, or modify the terms or waive
any rights under any options, warrants or other securities currently outstanding
or accelerate vesting with respect to any unvested options or capital shares; or
declare, set aside or pay any dividend or make any other distribution in respect
of its capital shares, or make any direct or indirect redemption, purchase or
other acquisition of its capital shares, except pursuant to Contracts listed on
Schedule 2.5(a) (not including any amendments thereto after the date hereof);
(f) make any material change in the compensation payable or to
become payable to any of its officers or employees or enter into, amend or
terminate any employment or consulting agreements or waive any rights
thereunder;
28
<PAGE> 34
(g) engage in transactions with any of its shareholders,
officers, directors or employees other than in the ordinary course of business,
except pursuant to agreements in existence on the date hereof and listed on
Schedule 2.5(a) (not including any amendments thereto after the date hereof);
(h) enter into, amend, renew, extend, modify or terminate
(prior to its scheduled termination date) any sales, agency or distribution
agreement, any management or employment or consulting agreement, any lease,
license or royalty agreement, or any other material agreement or Contract or
waive any material rights thereunder;
(i) undertake any stock split, recapitalization or
reorganization;
(j) solicit, encourage, negotiate, provide information for, or
otherwise cooperate in any way with, assist, or facilitate and use its best
efforts to prevent any of its officers and directors, employees, representatives
and agents from soliciting, encouraging or negotiating or providing information
for or otherwise cooperating in any way with, assisting or facilitating any of
the following (an "Acquisition Proposal"):
(i) any merger or consolidation of Span or Ocala with
any person other than Tylan or Tylan Sub,
(ii) any sale of assets of Span or Ocala to any
person other than Tylan or Tylan Sub (other than sales of
inventory in the ordinary course of business);
(iii) any equity or debt investment (other than on
terms approved by Tylan) in Span or Ocala by any person; or
(iv) any purchase of outstanding securities of Span
or Ocala by any person;
(k) undertake a course of action inconsistent with this
Agreement or which would cause any representation or warranty in this Agreement
to become untrue in any material respect or which would prevent any condition
precedent to its obligations under this Agreement from being satisfied at or
prior to the Effective Date;
(l) provide or publish to its shareholders any material which
might constitute an unauthorized "prospectus" within the meaning of the
Securities Act, or any impermissible solicitation under the applicable state
law;
(m) incur any material obligation other than in ordinary
course of business, except pursuant to Contracts listed on Schedule 2.5(a) (not
including any amendments thereto after the date hereof);
29
<PAGE> 35
(n) borrow money (other than pursuant to Contracts listed on
Schedule 2.5(a) (not including any amendments thereto after the date hereof) or
pursuant to capital expenditures between the date hereof and the Closing Date
that will not exceed $1,500,000 in the aggregate) or incur new or additional
indebtedness (other than as set forth above in this Section 4.1(n) and accounts
payable or trade payables incurred in the ordinary course of business and
indebtedness pursuant to Contracts listed on Schedule 2.5(a) (not including any
amendments thereto after the date hereof)) or loan money to any person (other
than to Ocala in amounts not to exceed $1,000,000 in the aggregate and travel
and similar advances to employees in the ordinary course of business);
(o) incur liabilities in connection with the leasing of
property or assets;
(p) issue any press release or public disclosure, either
written or oral, of the transactions contemplated by this Agreement without the
prior knowledge and written consent of Tylan;
(q) make any investment in any other business or entity
through purchase of stock or securities, contribution to capital, property
transfer, purchase of property or assets or otherwise;
(r) alter the manner of keeping its books and accounts or its
accounting practices and procedures other than as required by GAAP;
(s) revalue any of its assets, including without limitation
writing down the value of inventory or accounts receivable other than in the
ordinary course of business consistent with past practice;
(t) make any material tax election except in the ordinary
course of business consistent with past practice, change any material tax
election already made, adopt any tax accounting method except in the ordinary
course of business consistent with past practice, change any tax accounting
method, enter into any closing agreement, settle any tax claim or assessment or
consent to any tax claim or assessment or any waiver of the statute of
limitations for any such claim or assessment;
(u) commence any lawsuit except for routine collection of
bills or for a breach of this Agreement;
(v) impair any of its Patents, Copyrights, Trademarks or other
intellectual property rights; or
(w) fail to maintain its qualifications to do business in any
state in which Span or Ocala is qualified, or fail to maintain any other permit,
license, authorization or approval material to the operations of its business.
30
<PAGE> 36
Notwithstanding the foregoing, this Section 4.1 shall not prohibit (i)
any refinancing or increase in Span's senior indebtedness, provided that the
aggregate amount of such indebtedness (including existing amounts) shall not
exceed $14,000,000, and/or (ii) incurrence by Span or Ocala of subordinated
indebtedness not to exceed $5,000,000 in the aggregate.
4.2 AFFIRMATIVE COVENANTS. Prior to the Effective Date, Span will do,
and each of the Principal Shareholders will take such action as is necessary or
appropriate to cause Span to do, each of the following:
(a) use its best efforts to perform and fulfill all conditions
and obligations on its part to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be fully
carried out;
(b) subject to Section 4.1, use its best efforts to obtain all
authorizations, consents and permits of others required to permit the
consummation by Span of the transactions contemplated by this Agreement and the
continuation of Span's business after the consummation of the Merger;
(c) promptly advise Tylan in writing of (i) any change that
has or had a Material Adverse Effect on Span; (ii) the occurrence of any event
which causes the representations and warranties made by Span in this Agreement
or the information included in the Span Disclosure Schedule to be incomplete or
inaccurate in any material respect; and (iii) the receipt of any inquiry
relating to an Acquisition Proposal from a third party, including the identity
of the third party and a copy of the inquiry;
(d) use reasonable best efforts to keep intact its business
organization, to keep available its present officers and key employees and to
preserve the goodwill of all suppliers, customers and others having business
relations with it;
(e) permit Tylan and its authorized representatives to have
full access during normal business hours to all of its properties, assets,
records, tax returns, contracts and documents and furnish to Tylan and its
authorized representatives such financial and other information with respect to
its business and properties as Tylan may from time to time reasonably request
for purposes of making a review of the business of Span and Ocala;
(f) as promptly as reasonably practicable after the date of
this Agreement, file with any governmental agencies or departments all notices,
reports and other documents required by law with respect to this Agreement and
the Merger and promptly submit any additional information or documentary
material properly requested by any such governmental agency or department;
(g) in the event that between the date hereof and the
Effective Date, any federal, state, local or foreign governmental authority
shall commence any examination,
31
<PAGE> 37
review, investigation, action, suit or proceeding against Span with respect to
the Merger, give prompt notice thereof to Tylan, keep Tylan informed as to the
status thereof, and (except as may be prohibited by such governmental authority
or by any court order or decree in an action or suit instituted by a person
other than Span or an affiliate of Span) permit Tylan to observe and be present
at each meeting, conference or other proceeding and have access to and be
consulted in connection with any document filed or provided to such governmental
authority in connection with such examination, review, investigation, action,
suit or proceeding (provided, however, that Span will not be required to waive
any privilege it may have in connection with any such examination, review,
investigation, action, suit or proceeding);
(h) use its best efforts to deliver to Tylan a Continuity of
Interest Certificate in the form attached hereto as Exhibit h (a "Continuity of
Interest Certificate") executed by each Shareholder;
(i) deliver to Tylan at the Closing the resignations of all
directors of Span;
(j) promptly provide Tylan with (i) copies of all written
materials and written communications furnished by Span to its shareholders after
the date of this Agreement, and (ii) copies of all notices, reports or other
documents filed with any government agency or department pursuant to Section g
hereof; (provided, however, that Span will not be required to waive any
privilege it may have in connection with any such examination, review,
investigation, action, suit or proceeding);
(k) promptly provide Tylan copies of all material operating
and financial reports prepared by Span, including copies of Span's consolidated
balance sheet and related consolidated statements of operations and consolidated
statements of cash flows for each month commencing January 1996 through the
Closing Date; such monthly financial statements shall be prepared in conformity
with GAAP applied on a consistent basis and shall fairly present (subject to
immaterial year-end audit adjustments) the financial condition, results of
operations and cash flows of Span as of the dates and for the periods covered by
such statements and shall be delivered promptly after preparation, but in no
event later than 21 days after the end of the month;
(l) use its best efforts to deliver to Tylan, or to cause its
counsel to deliver to Tylan, the closing documents referred to in this
Agreement;
(m) with respect to the Notification letter described in
Section 6.16, provide the notification to the IRS required pursuant to Treasury
Regulations Section 1.897-2(h)(2);
(n) use its best efforts to deliver to Tylan the audited
consolidated balance sheet of Span as of February 29, 1996 and the audited
consolidated statement of operations,
32
<PAGE> 38
consolidated statement of cash flows and consolidated statement of changes in
shareholders' equity of Span for the six months ended February 29, 1996, each
certified by Ernst & Young LLP, whose report thereon shall be unqualified;
(o) provide to Tylan, and use its best efforts to cause Ernst
& Young LLP to provide to Tylan, such financial statements and information and
such accountant's consents as may be required to be provided by Tylan in any
filing required by the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any state securities or Blue Sky law;
(p) use its best efforts to deliver to Tylan an Affiliate
Agreement in the form attached hereto as Exhibit 4.2(p) executed by each
Affiliate;
(q) provide to tax counsel for both Tylan and Span appropriate
representation certificates as described in Sections 6.17 and 7.9;
(r) take all steps necessary in accordance with its Articles
of Incorporation and By-laws to call, give notice of, convene and hold a meeting
of its shareholders (the "Span Shareholder Meeting") as soon as practicable
after the effectiveness of the Registration Statement (as defined in Section
5.2(m) hereof), for the purpose of approving this Agreement and for such other
purposes as may be necessary. Unless this Agreement shall have been validly
terminated as provided herein, the Board of Directors of Span (subject to any
fiduciary duties it may have under applicable law to do otherwise) will (i)
recommend to its shareholders the approval of this Agreement, the transactions
contemplated hereby and any other matters to be submitted to its shareholders in
connection therewith, to the extent that such approval is required by applicable
law in order to consummate the Merger, and (ii) use its reasonable, good faith
efforts to obtain the approval by its shareholders of this Agreement and the
transactions contemplated hereby;
(s) the information specifically designated as being supplied
by Span for inclusion in the Registration Statement shall not, at the time the
Registration Statement is declared effective, at the time the Proxy Statement
(as defined in Section 5.2(m) hereof) is first mailed to holders of Span common
stock and holders of Tylan Common Stock, at the time of the Meetings (as defined
in Section 5.2(l) hereof) and on the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. If at
anytime prior to the Effective Date any event or circumstance relating to Span
or its officers or directors, should be discovered by Span which should be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement, Span shall promptly inform Tylan. All documents, if any, that Span is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
33
<PAGE> 39
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder;
(t) shall furnish all information to Tylan with respect to
Span and Ocala as Tylan may reasonably request for inclusion in the Registration
Statement and the Proxy Statement and shall otherwise cooperate with Tylan in
the preparation and filing of such documents; and
(u) shall deliver to Tylan a comfort letter, dated a date not
more than two business days before the date upon which the Registration
Statement becomes effective, from Ernst & Young LLP, in form and substance
reasonably satisfactory to Tylan and Tylan's counsel and accountants, covering
such matters as are normally covered in a comfort letter delivered in connection
with a Registration Statement on Form S-4 covering transactions of the type
contemplated by this Agreement.
5. COVENANTS OF TYLAN AND TYLAN SUB
Tylan and Tylan Sub covenant and agree as follows:
5.1 NEGATIVE COVENANTS. From the date of this Agreement until the
Effective Date, Tylan and Tylan Sub will not, unless Span shall otherwise
consent in writing:
(a) undertake a course of action inconsistent with this
Agreement or which would cause any representation or warranty of Tylan in this
Agreement to become untrue in any material respect or which would prevent any
condition precedent to its obligations under this Agreement from being satisfied
at or prior to the Effective Date;
(b) take or permit any action which would prevent the Merger
from qualifying as a reorganization under Section 368 of the Code or from being
eligible for pooling-of-interests accounting treatment in accordance with GAAP
and all rules, regulations and policies of the SEC, and Tylan will use its best
efforts to prevent any of its officers or directors from taking or permitting
any such action;
(c) amend its Certificate of Incorporation in any manner which
would adversely affect the Merger;
(d) declare, set aside or pay any dividend in respect of its
capital shares; or
(e) issue any press release or public disclosure, either
written or oral, of the transactions contemplated by this Agreement without the
prior knowledge and written consent of Span except to the extent required by
applicable laws, rules and regulations in which event Span shall be provided
with a copy of any such release at or prior to its publication; or
34
<PAGE> 40
(f) change the number of votes to which each share of Tylan's
capital stock is entitled.
5.2 AFFIRMATIVE COVENANTS. Prior to the Effective Date, Tylan and/or
Tylan Sub will do the following:
(a) use its best efforts to perform and fulfill all conditions
and obligations on its part to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be fully
carried out, provided, however, that in no event shall this covenant be deemed
to impose any obligation on Tylan or Tylan Sub to waive any of the conditions
set forth in Article 6;
(b) use its best efforts to obtain all authorizations,
consents and permits of others required to permit the consummation by Tylan and
Tylan Sub of the transactions contemplated by this Agreement;
(c) use its best efforts to qualify the Tylan Common Stock to
be issued pursuant to the Merger under the securities or "blue sky" laws of
every jurisdiction of the United States in which a Shareholder has an address on
the records of Span's transfer agent on the record date for determining the Span
shareholders entitled to notice of and to vote on the Merger, except any such
jurisdiction with respect to which counsel for Tylan has determined that such
qualification is not required under the securities or "blue sky" laws of such
jurisdiction;
(d) as promptly as reasonably practicable after the date of
this Agreement, file with any governmental agencies or departments of all
notices, reports and other documents required by law with respect to this
Agreement and the Merger and promptly submit any additional information or
documentary material properly requested by any such governmental agency or
department;
(e) use its best efforts to cause the Tylan Common Stock to be
issued pursuant to the Merger to be listed on the Nasdaq National Market, free
of restrictions on transfer other than (i) restrictions pursuant to Rule 144 and
Rule 145 promulgated under the Securities Act and (ii) restrictions related to
the Continuity of Interest Certificate referred to in Section 4.2(h);
(f) cause Tylan Sub to perform all of its agreements contained
herein;
(g) promptly advise Span in writing of (i) any change that has
or had a Material Adverse Effect on Tylan; and (ii) the occurrence of any event
which causes the representations or warranties made by Tylan or Tylan Sub in
this Agreement to be incomplete or inaccurate in any material respect;
35
<PAGE> 41
(h) in the event that between the date hereof and the
Effective Date, any federal, state, local or foreign governmental authority
shall commence any examination, review, investigation, action, suit or
proceeding against Tylan with respect to the Merger, give prompt notice thereof
to Span, keep Span informed as to the status thereof, and (except as may be
prohibited by such governmental authority or by any court order or decree in an
action or suit instituted by a person other than Tylan or an affiliate of Tylan)
permit Span to observe and be present at each meeting, conference or other
proceeding and have access to and be consulted in connection with any document
filed or provided to such governmental authority in connection with such
examination, review, investigation, action, suit or proceeding (provided,
however, that neither Tylan nor Tylan Sub will be required to waive any
privilege either of them may have in connection with any such examination,
review, investigation, action, suit or proceeding);
(i) enter into an employment agreement in substantially the
form attached hereto as Exhibit 5.2(i) with Donald E. Whitson (the "Whitson
Employment Agreement").
(j) enter into an employment agreement in substantially the
form attached hereto as Exhibit 5.2(j) with each of John Jul, George A. Yurch,
John Rabbitt, John Jordon, Tom Gray and Brian Day (collectively with the Whitson
Employment Agreement, the "Employment Agreements");
(k) provide to tax counsel for both Tylan and Span appropriate
representation certificates as described in Sections 6.17 and 7.9;
(l) take all steps necessary in accordance with its
Certificate of Incorporation and By-laws to call, give notice of, convene and
hold a meeting of stockholders (the "Tylan Stockholder Meeting" and, together
with the Span Shareholder Meeting, the "Meetings") as soon as practicable after
the effectiveness of the Registration Statement, for the purpose of approving
this Agreement and for such other purposes as may be necessary. Unless this
Agreement shall have been validly terminated as provided herein, the Board of
Directors of Tylan (subject to any fiduciary duties it may have under applicable
law to do otherwise) will (i) recommend to its stockholders the approval of this
Agreement, the transactions contemplated hereby and any other matters to be
submitted to its stockholders in connection therewith, to the extent that such
approval is required by applicable law in order to consummate the Merger, and
(ii) use its reasonable, good faith efforts to obtain the approval by its
stockholders of this Agreement and the transactions contemplated hereby;
(m) prepare and file with the SEC and any other applicable
regulatory bodies, as soon as reasonably practicable, a Registration Statement
on Form S-4 with respect to the shares of Tylan Common Stock to be issued in the
Merger (the "Registration Statement"), and will otherwise proceed promptly to
satisfy the requirements of the Securities Act, including Rule 145 thereunder.
Such Registration Statement shall contain a
36
<PAGE> 42
joint proxy statement of Tylan and Span containing the information required by
the Exchange Act (the "Proxy Statement"). Tylan shall take all reasonable steps
to cause the Registration Statement to be declared effective and to maintain
such effectiveness until all of the shares covered thereby have been
distributed. Tylan shall promptly amend or supplement the Registration Statement
to the extent necessary in order to make the statements therein not misleading.
Tylan shall use its reasonable, good faith efforts to have the Proxy Statement
approved by the SEC under the provisions of the Exchange Act. Tylan shall
provide Span with copies of all filings made pursuant to this Section m and
shall consult with Span on responses to any comments made by the Staff of the
SEC with respect thereto;
(n) the information specifically designated as being supplied
by Tylan for inclusion in the Registration Statement shall not, at the time the
Registration Statement is declared effective, at the time the Proxy Statement is
first mailed to holders of Span common stock and holders of Tylan Common Stock,
at the time of the Meetings and on the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, not
misleading. The information specifically designated as being supplied by Tylan
for inclusion in the Proxy Statement to be sent to the holders of Span common
stock in connection with the Span Shareholder Meeting and to the holders of
Tylan Common Stock in connection with the Tylan Stockholder Meeting shall not,
at the date the Proxy Statement (or any amendment thereof or supplement thereto)
is first mailed to holders of Span common stock and holders of Tylan Common
Stock, at the time of the Meetings or on the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, not
misleading. If at any time prior to the Effective Date any event or circumstance
relating to Tylan or its officers of directors, should be discovered by Tylan
which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Tylan shall promptly inform Span and shall
promptly file such amendment to the Registration Statement. All documents that
Tylan is responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder; and
(o) use its best efforts to substitute Tylan for Donald E.
Whitson as guarantor of Span's senior indebtedness and leases that Donald E.
Whitson guarantees (which senior indebtedness and leases are identified on
Schedule 5.2(o)) and, if Tylan is unable to do so within 90 days after the
Closing Date, Tylan shall repay such indebtedness in full.
37
<PAGE> 43
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF TYLAN AND TYLAN SUB
The obligations of Tylan and Tylan Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or upon
the Closing, of the following conditions precedent:
6.1 SATISFACTORY COMPLETION OF PRE-ACQUISITION REVIEW. Tylan shall have
satisfactorily completed its pre-acquisition investigation and review of Span's
business, condition, assets, liabilities, operations, financial performance, net
income and prospects and shall be satisfied with the results of that
investigation and review as evidenced by the approval of such results by a
majority of the members of the Board of Directors of Tylan.
6.2 COMPLIANCE WITH COVENANTS; REPRESENTATIONS AND WARRANTIES CORRECT.
Span and the Shareholders shall have complied with and performed in all material
respects each covenant contained in this Agreement to be performed by it or them
at or prior to the Closing Date; the representations and warranties of Span and
the Shareholders contained in this Agreement shall be true and correct in all
material respects as of the Closing Date with the same effect as though made on
the Closing Date except to the extent that information in Span's Schedules as of
the date hereof changes as of the Closing Date (and such changes are contained
in the certificate referred to below in this Section 6.2) and each such change
does not violate Section 4.1 or 4.2 hereof or any other provision in this
Article 6; and Span shall have delivered to Tylan a certificate of the Chief
Executive Officer and the Chief Financial Officer of Span evidencing compliance
with the conditions set forth in this Section 6.2.
6.3 NO MATERIAL ADVERSE CHANGE. After the date hereof, there shall have
been no change that had an adverse effect on the business, operations, condition
(financial or otherwise), assets or prospects of Span and Ocala, taken as a
whole, in excess of $100,000.
6.4 CONSENTS OF OTHERS. The consent to the Merger of each third party
whose consent is required for Span to consummate the transactions completed
hereby shall have been received except for consents which, if not obtained, in
the aggregate would not have a Material Adverse Effect on Span, including
without limitation the parties to the contracts listed on Schedule a.
6.5 LEGAL OPINION. Tylan shall have received an opinion of Gardere &
Wynne, L.L.P., counsel to Span, dated the Closing Date, substantially to the
effect of Exhibit 6.5 hereto.
6.6 DISSENTERS' RIGHTS. No holders of outstanding Span Common Shares
shall be, or shall have the right to become, entitled to dissenters rights
pursuant to Section 5.11 of the Texas Law.
38
<PAGE> 44
6.7 CONTINUITY OF INTEREST. Tylan shall have received prior to the
Closing Date executed copies of the Continuity of Interest Certificate from the
Shareholders as provided in Section h.
6.8 ABSENCE OF RESTRAINT. No action shall be pending or threatened
before any court or administrative body to restrain, enjoin or otherwise prevent
the consummation of, or which questions the validity or legality of, this
Agreement or the transactions contemplated hereby, and no order, statute, rule,
regulation, executive order, decree, judgment, injunction or court order shall
have been enacted, entered, issued or promulgated by any court or governmental
authority which prohibits or materially restricts the consummation of this
Agreement and the transactions contemplated hereby, and no such action shall be
threatened.
6.9 NO LITIGATION. No litigation shall have commenced against Span or
Ocala which would, if adversely determined, have an adverse effect on the
business, operations, condition (financial or otherwise), assets or prospects of
Span and Ocala, taken as a whole, in excess of $100,000.
6.10 REQUIRED APPROVALS. Tylan, Tylan Sub and Span shall have received
all such governmental approvals, consents, authorizations or modifications as
may be required to permit the performance by Tylan, Tylan Sub and Span, of their
respective obligations under this Agreement and the consummation of the
transactions herein contemplated.
6.11 STATE SECURITIES LAW REQUIREMENTS. The shares of Tylan Common
Stock to be issued in connection with the Merger shall have been issued in
transactions qualified or exempt from registration under the securities or "blue
sky" laws of every jurisdiction required under Section 5.2(c) hereof.
6.12 SPAN SHAREHOLDERS' APPROVAL. The approval and adoption of this
Agreement by the requisite vote of the outstanding shares of Span Common Shares
entitled to vote, in accordance with Section 4.2(s) hereof and the applicable
provisions of the Texas Law, shall have occurred and be continuing and remain in
full force and effect.
6.13 TYLAN STOCKHOLDERS' APPROVAL. The approval and adoption of this
Agreement by the requisite vote of the outstanding shares of Tylan Common Stock
entitled to vote, in accordance with Section 5.2(l) hereof and the applicable
provisions of the DGCL, shall have occurred and be continuing and remain in full
force and effect.
6.14 NONCOMPETITION AGREEMENTS. Each of the Shareholders who will be
party to an Employment Agreement as provided in Section i or 5.2(j) shall have
executed a noncompetition agreement substantially in the form attached hereto as
Exhibit 6.14.
39
<PAGE> 45
6.15 RESIGNATIONS. Tylan shall have received the written resignation,
effective as of the Closing, of each director of Span.
6.16 FIRPTA. Tylan, as agent for the Shareholders, shall have received
a properly executed "FIRPTA" Notification Letter, in form and substance
reasonably acceptable to Tylan, which states that shares of Span do not
constitute "United States Real Property Interests" under Section 897(c) of the
Code for purposes of satisfying Tylan's obligations under Treasury Regulations
Section 1.1445-2(c)(3).
6.17 TAX OPINION. Each of Tylan and Span shall have received a written
opinion from its respective counsel, dated the Closing Date, to the effect that
the Merger will constitute a reorganization within the meaning of Section
368(a)(2)(E) of the Code, which opinions will be substantially identical in form
and substance. Such counsel shall, in rendering such opinions, be entitled to
rely on, and to the extent reasonably required the parties shall make,
reasonable representations related thereto.
6.18 POOLING-OF-INTEREST LETTERS. Tylan shall have received, if it so
requests, a reaffirmation from its independent public accountants and from
Span's independent public accountants, dated the Effective Date, of letters in
form and substance satisfactory to Tylan, to the effect that the Merger will
qualify for pooling-of-interests accounting treatment in accordance with GAAP
and all rules, regulations and policies of the SEC.
6.19 AFFILIATE AGREEMENTS. Tylan shall have received an Affiliate
Agreement from each Affiliate as contemplated by Section p.
6.20 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective and no stop order with respect to
the Registration Statement shall be in effect.
6.21 ACCOUNTS RECEIVABLE. The aging of Span's accounts receivable on
the Closing Date shall not be materially worse than that shown on Schedule
2.2(c).
6.22 FAIRNESS OPINION. The Board of Directors of Tylan shall have
received the written opinion of Adams, Harkness & Hill, Inc., financial advisor
to Tylan, to the effect that the consideration to be received by the
Shareholders is fair to the stockholders of Tylan from a financial point of
view, which fairness opinion shall be in customary form, without any unusual
limitations or qualifications.
6.23 COMFORT LETTER. Tylan shall have received the comfort letter
required under Section 4.2(u) and, in addition, a bring-down letter, in form and
substance reasonably satisfactory to Tylan, dated the Closing Date.
40
<PAGE> 46
7. CONDITIONS PRECEDENT TO SPAN'S OBLIGATIONS
The obligation of Span to consummate the transactions contemplated
herein is subject to the fulfillment, prior to or upon the Closing, of the
following conditions precedent:
7.1 COMPLIANCE WITH COVENANTS; REPRESENTATIONS AND WARRANTIES CORRECT.
Tylan and Tylan Sub shall have complied with and performed in all material
respects each covenant contained in this Agreement to be performed by them at or
prior to the Closing Date; the representations and warranties of Tylan and Tylan
Sub contained in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same effect as though made on the
Closing Date; and Tylan shall have delivered to Span a certificate of the Chief
Executive Officer and Chief Financial Officer of Tylan evidencing compliance
with the conditions set forth in this Section 7.1.
7.2 NO MATERIAL ADVERSE CHANGE. After the date hereof, there shall have
been no change that had a Material Adverse Effect on Tylan.
7.3 LEGAL OPINION. Span shall have received an opinion of Cooley
Godward Castro Huddleson & Tatum, dated the Closing Date, substantially to the
effect of Exhibit 7.3 hereto.
7.4 REQUIRED APPROVALS. Tylan, Tylan Sub and Span shall have received
all such governmental approvals, consents, authorizations or modifications as
may be required to permit the performance by Tylan, Tylan Sub and Span, of their
respective obligations under this Agreement and the consummation of the
transactions herein and therein contemplated.
7.5 SECURITIES LAW REQUIREMENTS. All permits, licenses, consents and
approvals necessary under any laws relating to the issuance and sale of the
Tylan Common Stock to the Shareholders shall have been issued or given, and no
such permit, license, consent or approval, shall have been revoked, canceled,
terminated, suspended or made the subject of any stop order or proceeding
therefor.
7.6 SPAN SHAREHOLDERS' APPROVAL. The approval and adoption of this
Agreement by the requisite vote of the outstanding Span Common Shares entitled
to vote, as required by and in accordance with the applicable provisions of the
Texas Law, shall have occurred and remain in full force and effect.
7.7 TYLAN STOCKHOLDERS' APPROVAL. The approval and adoption of this
Agreement by the requisite vote of the outstanding shares of Tylan Common Stock
entitled to vote, in accordance with Section 5.2(l) hereof and the applicable
provisions of the DGCL, shall have occurred and be continuing and remain in full
force and effect.
41
<PAGE> 47
7.8 ABSENCE OF RESTRAINT. No action shall be pending or threatened
before any court or administrative body to restrain, enjoin or otherwise prevent
the consummation of, or which questions the validity or legality of, this
Agreement or the transactions contemplated hereby, and no order, statute, rule,
regulation, executive order, decree, judgment, injunction or court order shall
have been enacted, entered, issued or promulgated by any court or governmental
authority which prohibits or materially restricts the consummation of this
Agreement and the transactions contemplated hereby, and no such action shall be
threatened.
7.9 TAX OPINION. Each of Tylan and Span shall have received a written
opinion from its respective counsel, dated the Closing Date, to the effect that
the Merger will constitute a reorganization within the meaning of Section
368(a)(2)(E) of the Code, which opinions will be substantially identical in form
and substance. Such counsel shall, in rendering such opinions, be entitled to
rely on, and to the extent reasonably required the parties shall make,
reasonable representations related thereto.
7.10 EMPLOYMENT AGREEMENTS. The Employment Agreements shall have been
executed by Tylan.
7.11 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective and no stop order with respect to
the Registration Statement shall be in effect.
7.12 CHAIRMAN OF THE BOARD. David J. Ferran ("Ferran") shall be the
Chairman of the Board and Chief Executive Officer of Tylan, and Ferran shall be
active on a full-time basis in Tylan's business.
7.13 BOARD OF DIRECTORS. Donald E. Whitson shall have been elected for
a full term to serve on Tylan's Board of Directors.
8. INDEMNITY BY SHAREHOLDERS
8.1 INDEMNITY. In connection with the Merger, each Shareholder shall,
on a pro rata basis based on the Fully Diluted Span Common Shares Outstanding,
indemnify Tylan, Tylan Sub and Span against any loss, expense, liability, or
other damages, including the reasonable costs of investigation, interest,
penalties and attorney's and accountant's fees ("Damages"), incurred in
connection with or arising from or attributable to any breach or inaccuracy of
any representation or warranty made by Span or the Shareholders herein or any
breach or failure to perform any agreement or covenant of Span or the
Shareholders herein.
8.2 THRESHOLD. The Shareholders shall not be required to make any
indemnification payment pursuant to Section 8.1 for any Damages until such time
as the total amount of all Damages that have been directly or indirectly
suffered or incurred by any
42
<PAGE> 48
one or more of Tylan, Tylan Sub and Span, or to which any one or more of Tylan,
Tylan Sub and Span has or have otherwise become subject exceeds $100,000 in the
aggregate. At such time as the total amount of such Damages exceeds $100,000 in
the aggregate, Tylan, Tylan Sub and Span shall be entitled to be indemnified
against the full amount of such Damages (and not solely the amount that exceeds
$100,000).
8.3 EXPIRATION OF INDEMNITY. Tylan, Tylan Sub and Span may make no
claim for indemnification for Damages after January 31, 1997 (the "Claim
Deadline"). The expiration of the period within which claims may be made shall
not affect any rights of Tylan, Tylan Sub and Span with respect to claims made
prior to the Claim Deadline.
8.4 FRAUD. Notwithstanding any provision in this Agreement to the
contrary, the liability of a shareholder for fraud shall be subject only to
applicable statutes of limitations, and any claim against any shareholder
alleging fraud need not be presented by the Claim Deadline.
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Other than disclosures
set forth in the Schedules hereto or in the compliance certificate to be
delivered at Closing pursuant to Section 6.2 hereof, no disclosure by Span nor
any investigation by or on behalf of Tylan or Tylan Sub with respect to Span
shall be deemed to affect Tylan's or Tylan Sub's reliance on the
representations, warranties, covenants or agreements contained herein or to
waive Span's, Tylan's or Tylan Sub's rights to indemnity as provided herein for
the breach or inaccuracy or failure to perform or comply with any
representation, warranty, covenant or agreement of Span. The indemnity
obligations of the Shareholders under this Article 8 (and the representations,
warranties, covenants and agreements of Span and the Shareholders) shall survive
the Closing until the Claim Deadline.
8.6 MERGER CONSIDERATION ADJUSTMENTS. Any amount paid by the
Shareholders to Tylan, Tylan Sub or Span pursuant to this Article 8 shall be an
adjustment to the consideration paid to the Shareholders in connection with the
Merger.
8.7 SHAREHOLDERS' AGENT.
(a) Each of the Shareholders hereby constitutes and appoints
Donald E. Whitson (the "Shareholders' Agent") as his agent and attorney-in-fact
to take such action on behalf of the Shareholder, and to exercise such rights,
power and authority as are authorized, delegated and granted to the
Shareholders' Agent under this Agreement in connection with the transactions
contemplated hereby, to give and receive notices and communications, and to take
all actions necessary or appropriate in the judgment of the Shareholders' Agent
for the accomplishment of the foregoing, including without limitation the right
to resolve any disagreement or disputes, and to exercise such rights, power and
authority as are incidental thereto. A decision, act, consent, instruction or
determination of the Shareholders' Agent shall constitute a decision of all
Shareholders and shall be final,
43
<PAGE> 49
binding and conclusive upon each of the Shareholders. The Shareholders' Agent
shall not be liable for any act done or omitted hereunder as Shareholders' Agent
unless resulting from gross negligence or willful misconduct. The Shareholders
shall jointly and severally indemnify the Shareholders' Agent and hold him
harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of such Shareholders' Agent and arising out of or in
connection with the acceptance or administration of his duties hereunder. No
bond shall be required of the Shareholders' Agent, and the Shareholders' Agent
shall receive no compensation for his services.
(b) The provisions set forth in this Section 8.7 shall have no
effect on the obligations of either the Shareholders' Agent or the Shareholders
to Tylan, Tylan Sub or Span, and such provisions are solely for the purposes of
determining the rights and obligations of the Shareholders, on the one hand, and
the Shareholders' Agent, on the other, vis-a-vis each other and shall in no way
impose any obligations on Tylan, Tylan Sub or Span other than those explicitly
set forth in this Agreement. In particular, notwithstanding in any case any
notice received by Tylan, Tylan Sub or Span to the contrary, Tylan, Tylan Sub or
Span shall be fully protected in relying upon and shall be entitled (i) to rely
upon actions, decisions, consents, instructions and determinations of the
Shareholders' Agent in his capacity as the Shareholders' Agent, and (ii) to
assume that all actions, decisions, consents, instructions and determinations of
the Shareholders' Agent are fully authorized by the Shareholders, and all such
actions, decisions, consents, instructions and determinations shall be binding
and conclusive upon each Shareholder.
(c) In the event that Donald E. Whitson is unavailable to act
as the Shareholders' Agent, or becomes incapable (through death or legal
incapacity) of acting as the Shareholders' Agent, then Leo E. Whitson shall
become the Shareholders' Agent, and, in connection therewith, is authorized to
take such action on behalf of the Shareholders and to exercise such rights,
power and authority as are authorized, delegated and granted to such
Shareholders' Agent under this Agreement in connection with the transactions
contemplated hereby, and to exercise such rights, power and authority as are
incidental thereto.
9. INDEMNITY BY TYLAN
9.1 INDEMNITY. In connection with the Merger, Tylan shall indemnify the
Shareholders against any Damages incurred in connection with or arising from or
attributable to any breach or inaccuracy of any representation or warranty made
by Tylan or Tylan Sub herein or any breach or failure to perform any agreement
or covenant of Tylan or Tylan Sub herein.
9.2 THRESHOLD. Tylan shall not be required to make any indemnification
payment pursuant to Section 9.1 for any Damages until such time as the total
amount of all Damages that have been directly or indirectly suffered or incurred
by any one or more of the Shareholders, or to which any one or more of the
Shareholders has or have otherwise
44
<PAGE> 50
become subject exceeds $100,000 in the aggregate. At such time as the total
amount of such Damages exceeds $100,000 in the aggregate, the Shareholders shall
be entitled to be indemnified against the full amount of such Damages (and not
solely the amount that exceeds $100,000).
9.3 EXPIRATION OF INDEMNITY. The Shareholders may make no claim for
indemnification for Damages after the Claim Deadline. The expiration of the
period within which claims may be made shall affect any rights of the
Shareholders with respect to claims made prior to the Claim Deadline.
9.4 FRAUD. Notwithstanding any provision in this Agreement to the
contrary, the liability of Tylan for fraud shall be subject only to applicable
statutes of limitations, and any claim against Tylan alleging fraud need not be
presented by the Claim Deadline.
9.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The indemnity
obligations of Tylan under this Article 9 (and the representations, warranties,
covenants and agreements of Tylan and Tylan Sub) shall survive the Closing until
the Claim Deadline.
10. EMPLOYEE MATTERS
10.1 EMPLOYEES. Each employee of Span immediately before the Closing
(each, a "Span Employee") shall continue to be employed by Span or Tylan after
the Effective Date; provided that, except as provided in Section i hereof or
pursuant to existing employment agreements between Ronald L. Ewers and Bradley
L. Busch and Ocala, such employment shall be on an at-will basis, and nothing
herein shall obligate Span or Tylan to continue to employ any Span Employee for
any period of time; and provided further that with respect solely to the
employee benefit plans and arrangements of Tylan, the term of each Span
Employee's employment at Span will be added to his or her term of employment at
Tylan or the Surviving Corporation.
11. TERMINATION OF AGREEMENT
11.1 TERMINATION. At any time prior to the Closing Date, this Agreement
may be terminated:
(a) by mutual consent of all the parties;
(b) by Tylan if a majority of the members of the Board of
Directors of Tylan does not approve the results of Tylan's pre-acquisition
investigation and review as required in Section 6.1;
(c) by Tylan if (i) there has been a material breach by Span
of any covenant, representation or warranty contained in this Agreement, (ii)
Tylan has notified
45
<PAGE> 51
Span in writing of the existence of such breach, and (iii) Span has failed to
cure such breach within ten days after receiving such notice;
(d) by Span if (i) there has been a material breach by Tylan
of a covenant, representation or warranty contained in this Agreement, (ii) Span
has notified Tylan in writing of the existence of such breach, and (iii) Tylan
has failed to cure such breach within ten days after receiving such notice; or
(e) by either Tylan or Span if (i) there shall be a
non-appealable order of a federal or state court in effect preventing
consummation of the Merger, (ii) there shall be any action taken, or any
statute, rule, regulations or order enacted, promulgated, issued or deemed
applicable to the Merger, by any governmental entity that would make
consummation of the Merger illegal, (iii) upon a vote at a duly held meeting of
stockholders or any adjournment thereof, any required approval of the holders of
Span common stock or the holders of Tylan Common Stock shall not have been
obtained, or (iv) it shall be after June 28, 1996.
11.2 EFFECT OF TERMINATION. If this Agreement shall be terminated as
provided in Section 11.1, this Agreement shall forthwith become void and there
shall be no liability on the part of any party hereto to any other party except
for (a) if appropriate, payment of legal fees pursuant to Section 12.3 and (b)
any damages for a material breach of this Agreement.
11.3 COSTS AND EXPENSES. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement will be paid by
the party incurring such expense; provided, however, that if the Merger is
consummated, the Shareholders shall indemnify and hold harmless Tylan, Tylan Sub
and Span from any costs or expenses incurred by any Shareholder and for all
costs and expenses of Span in excess of $350,000, which amount may be increased
only with the prior written approval of Tylan.
11.4 EXTENSION OF TIME; WAIVERS. At any time prior to the Closing Date:
(a) Tylan and Tylan Sub may (i) extend the time for the
performance of any of the obligations or other acts of Span, and (ii) waive
compliance with any of the agreements or conditions contained herein to be
performed by Span. Any agreement on the part of Tylan and Tylan Sub to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of Tylan and Tylan Sub; and
(b) Span may (i) extend the time for the performance of any of
the obligations or other acts of Tylan and/or Tylan Sub, and (ii) waive
compliance with any of the agreements or conditions contained herein to be
performed by Tylan and/or Tylan Sub. Any agreement on the part of Span to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of Span.
46
<PAGE> 52
12. MISCELLANEOUS
12.1 AMENDMENT. This Agreement may be amended with the approval of the
Board of Directors of Tylan, Tylan Sub and Span at any time before or after
approval hereof by the shareholders of Span, but, after any such shareholder
approval, no amendment shall be made which would change the principal terms of
this Agreement without the further approval of such shareholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
12.2 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the agreements contemplated by the exhibits hereto (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof (excluding
the Strategic Sales Alliance Agreement and all international distribution
agreements of Span), (b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and the same
instrument and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of California as applied to
contracts entered into and to be performed entirely within California.
12.3 ATTORNEYS' FEES. In any action at law or suit in equity to enforce
this Agreement or the rights of the parties hereunder, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
12.4 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties named herein and their
respective successors; provided, however, that this Agreement may not be
assigned by any party without the prior written consent of the other parties,
and any attempted assignment in violation of this Section 12.4 shall be void and
of no effect.
12.5 NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered by hand or mailed
by certified or registered mail:
To Span: with a copy to:
Span Instruments, Inc. Gardere & Wynne, L.L.P.
P.O. Box 860709 1601 Elm Street, Suite 3000
Plano, Texas 75086 Dallas, Texas 75201
Attn: Donald E. Whitson Attn: Richard L. Waggoner
or
47
<PAGE> 53
Span Instruments, Inc.
2201 Avenue K
Plano, Texas 75074
Attn: Donald E. Whitson
To a Shareholder:
To such person's address as set forth on Schedule c hereof.
To Tylan or Tylan Sub: with a copy to:
Tylan General, Inc. Cooley Godward Castro Huddleson & Tatum
9577 Chesapeake Drive 4365 Executive Drive, Suite 1100
San Diego, California 92123 San Diego, California 92121-2128
Attn: David J. Ferran Attn: D. Bradley Peck
or to such other address at which any party may be registered mail notify the
other party, and shall be deemed given on the date on which hand-delivered or on
the third business day following the date on which mailed.
12.6 TITLES. The titles and captions of the sections and paragraphs of
this Agreement are included for convenience of reference only and shall have no
effect on the construction or meaning of this Agreement.
12.7 COOPERATION. Tylan, Tylan Sub and Span each agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
expeditiously or implement the transactions contemplated by this Agreement.
48
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement and Plan of Reorganization as of the date first written
above.
TYLAN GENERAL, INC.
By:______________________________________
David J. Ferran
Chairman of the Board, President and Chief
Executive Officer
TYLAN GENERAL ACQUISITION
SUBSIDIARY, INC.
By:______________________________________
David L. Stone
Executive Vice President and Chief
Financial Officer
SPAN INSTRUMENTS, INC.
By:______________________________________
Donald E. Whitson
President and Chief Executive Officer
SHAREHOLDERS
______________________________________
DONALD E. WHITSON
______________________________________
LEO E. WHITSON
______________________________________
SAM R. CROWE
______________________________________
TOMMY GRAY
49
<PAGE> 55
______________________________________
MARGUERITE WHITSON
______________________________________
ROBERT M. LIPSKY
______________________________________
ROBERT J. BARRACLOUGH
______________________________________
JOHN JUL
______________________________________
JOHN JORDON
______________________________________
GEORGE A. YURCH
______________________________________
BRIAN DAY
______________________________________
KAVEH ZARKAR
______________________________________
JOHN RABBITT
50
<PAGE> 56
EXHIBIT 1.15(a)
SHAREHOLDER AGREEMENT
This Shareholder Agreement (the "Agreement") is entered into as of
February 20, 1996, between TYLAN GENERAL, INC., a Delaware corporation
("Tylan"), and the undersigned shareholder ("Shareholder") of SPAN INSTRUMENTS,
INC., a Texas corporation ("Span").
RECITALS
A. Tylan, TYLAN GENERAL ACQUISITION SUBSIDIARY, INC., a Delaware
corporation ("Tylan Sub"), Span, Shareholder and the other shareholders of Span
have entered into an Agreement and Plan of Reorganization dated as of the date
hereof (the "Reorganization Agreement"), providing for the merger of Tylan Sub
with and into Span pursuant to the terms and conditions of the Reorganization
Agreement (the "Merger") and setting forth certain representations, warranties,
covenants and agreements which each of the parties thereto is making thereby in
connection with the Merger.
B. The Reorganization Agreement contemplates that Shareholder will
agree to vote its Span Common Shares (as defined in the Reorganization
Agreement) in favor of the Merger and to take no action inconsistent with the
Merger.
C. To comply with the Reorganization Agreement and to induce Tylan to
proceed to consummate the Merger, Shareholder has agreed to enter into this
Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Reorganization
Agreement.
2. REPRESENTATIONS OF SHAREHOLDER. Shareholder represents that he (i)
is the holder and beneficial owner of that number of Span Common Shares set
forth under his signature below, (ii) has full power and authority to make,
enter into and carry out the terms of the Reorganization Agreement and this
Agreement and (iii) is not a party to or bound by any contract, commitment,
agreement, understanding, arrangement or restriction of any kind with respect to
which the execution of the Reorganization Agreement or this Agreement, or the
consummation by Shareholder of the transactions contemplated thereby or hereby,
will constitute a violation, or cause a default or a conflict.
1.
<PAGE> 57
3. AGREEMENT TO SUPPORT MERGER. Shareholder agrees to approve the
Reorganization Agreement and the Merger, and further agrees to take no action,
whether at a meeting of shareholders or in an action without a meeting, or
otherwise, to modify or rescind his approval of the Reorganization Agreement and
the Merger; however, the foregoing does not affect Span's right to terminate or
refuse to close in accordance with the Reorganization Agreement.
4. NO-SHOP. Shareholder agrees that he shall not, directly or
indirectly, through any officer, director, partner, agent or representative or
otherwise, (i) solicit, initiate or encourage submission of proposals or offers
from any person other than Tylan or Tylan Sub relating to any acquisition or
purchase of all or any material portion of the assets of or any equity interest
in, or any merger, consolidation or business combination with, Span or any of
its subsidiaries, or (ii) participate in any discussions or negotiations
regarding, or furnish any person other than Tylan or Tylan Sub or their
respective officers, directors or agents any information with respect to, or
otherwise cooperate with, assist in, or participate in, or facilitate or
encourage any effort by any person other than Tylan or Tylan Sub to do any of
the foregoing.
5. NO ACTIONS INCONSISTENT WITH REORGANIZATION AGREEMENT. Shareholder
agrees not to knowingly take any action inconsistent with the Reorganization
Agreement or that would prevent any condition precedent to the Merger from being
satisfied at or prior to the Closing Date.
6. TRANSFER AND ENCUMBRANCE. Shareholder agrees not to transfer, sell,
offer, pledge, or otherwise dispose of or reduce his right relative to or
encumber any of his Span Common Shares without the prior written consent of
Tylan prior to the earlier of (i) the Closing Date or (ii) the date the
Reorganization Agreement shall have been terminated in accordance with its
terms; provided, however, that Shareholder may transfer 7,500 Span Common Shares
pursuant to an outstanding option agreement.
7. SPECIFIC PERFORMANCE. Each party hereto acknowledges that (i) it
will be impossible to measure in money the damage to Tylan if Shareholder fails
to comply with any of the obligations imposed by this Agreement, (ii) every such
obligation is material and (iii) in the event of any such failure, Tylan will
not have an adequate remedy at law or in damages and, accordingly, each party
hereto agrees that injunctive relief or other equitable remedy, in addition to
remedies at law or damages, is an appropriate remedy for any such failure.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns and shall not be assignable without the written consent of the other
party hereto.
2.
<PAGE> 58
9. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and, together with the Reorganization Agreement and the other agreements
delivered pursuant thereto, contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified and no provisions hereof may be modified or waived,
except expressly by an instrument in writing signed by all the parties hereto.
No waiver of any provisions hereof by any party shall be deemed a waiver by any
such party, and no such waiver shall be deemed a continuing waiver of any
provision hereof by such party.
10. MISCELLANEOUS.
(a) This Agreement shall be deemed a contract made under, and
for all purposes shall be construed in accordance with, the laws of the State
of California.
(b) If any provisions of this Agreement or the application of
such provisions to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid
and the application of such provision to persons or circumstances, other than
the party as to which it is held invalid, shall not be affected.
(c) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(d) This Agreement shall terminate upon the earlier to occur
of (i) the termination of the Reorganization Agreement or (ii) the Closing
Date, and all of the provisions hereof shall terminate at such time. The
termination of this Agreement shall not relieve Shareholder of his obligations
under Sections 2, 7, 8, 9 and 10 of this Agreement, and the provisions of
Section 4 shall survive the termination of this Agreement for a period of 30
days from the date of termination of the Reorganization Agreement.
(e) All Section headings herein are for convenience of
reference only and are not part of this Agreement and no construction or
reference shall be derived therefrom.
3.
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first written above.
TYLAN GENERAL, INC.
By:_________________________________
SHAREHOLDER
____________________________________
Address:____________________________
____________________________________
____________________________________
Span Common Shares Beneficially Owned:_________
4.
<PAGE> 60
EXHIBIT 4.2(h)
CONTINUITY OF INTEREST CERTIFICATE
The undersigned is aware that pursuant to an Agreement and Plan of
Reorganization, dated as of February 20, 1996 (the "Reorganization Agreement"),
made and entered into by and among TYLAN GENERAL, INC., a Delaware corporation
("Tylan"), TYLAN GENERAL ACQUISITION SUBSIDIARY, INC., a Delaware corporation
("Tylan Sub"), SPAN INSTRUMENTS, INC., a Texas corporation ("Span"), and the
shareholders of Span, Tylan Sub will merge with and into Span (the "Merger").
Unless otherwise indicated, capitalized terms used but not defined herein have
the meanings set forth in the Reorganization Agreement.
1. The undersigned represents as follows:
(a) The undersigned currently is the owner of that number of
Span Common Shares set forth below and (i) has held such Span Common Shares at
all times since ______, 19__ and (ii) did not acquire any of such Span Common
Shares in contemplation of the Merger;
(b) The undersigned has not engaged in a Sale (as defined
below) of any Span Common Shares (i) at any time or (ii) in contemplation of the
Merger; provided, however, that the undersigned has transferred 7,500 Span
Common Shares to Donald E. Whitson pursuant to an outstanding option agreement;
(c) The undersigned has no current plan or intention (a
"Plan") to engage in a sale, exchange, transfer, distribution, redemption or
reduction in any way of the undersigned's risk of ownership by short sale or
otherwise, or other disposition, directly or indirectly (such actions being
collectively referred to herein as a "Sale") of a majority of the shares of
Tylan Common Stock to be received by the undersigned pursuant to the Merger;
(d) Except to the extent written notification to the contrary
is received by Span from the undersigned prior to the Closing Date, the
representations contained herein shall be true and correct at all times from the
date hereof through the Closing Date; and
(e) The undersigned has consulted with such legal and
financial counsel as the undersigned has deemed appropriate in connection with
the execution of this Certificate.
(f) The undersigned understands that Tylan, Tylan Sub, Span
and their respective shareholders as well as their respective counsel and
accounting firms will be relying on (a) the truth and accuracy of the
representations contained herein and (b) the undersigned's performance of the
obligations set forth herein.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
___ day of _________, 1996.
______________________________________
Shareholder
Span Common Shares Beneficially Owned:
<PAGE> 61
EXHIBIT 4.2(q)
AFFILIATE AGREEMENT
This Affiliate Agreement (the "Agreement") is entered into as of
___________, 1996, between TYLAN GENERAL, INC., a Delaware corporation
("Tylan"), and the undersigned affiliate ("Affiliate") of SPAN INSTRUMENTS,
INC., a Texas corporation ("Span").
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization (the
"Reorganization Agreement"), dated as of February 20, 1996, by and among Tylan,
TYLAN GENERAL ACQUISITION SUBSIDIARY, INC., a Delaware corporation ("Tylan
Sub"), Span and the shareholders of Span, Tylan Sub will merge with and into
Span (the "Merger").
B. As a result of the Merger and certain related transactions, the
shareholders of Span will receive shares (the "Shares") of Tylan Common Stock
(as defined in the Reorganization Agreement). Affiliate understands that he may
be deemed an "affiliate" of Span as such term is defined in paragraphs (c) and
(d) of Rule 145 under the Securities Act of 1933, as amended (the "Act") ("Rule
145"), and the Securities and Exchange Commissions Accounting Series Release
Nos. 130 and 135 (the "Pooling Rules"), as amended, and as such Affiliate may
only transfer, sell or dispose of the Shares in accordance with Rule 145, this
Agreement and the Pooling Rules.
C. Affiliate understands that the representations, warranties and
covenants set forth herein will be relied upon by Tylan, Tylan Sub and Span, and
their respective counsel and accounting firms.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Capitalized terms used in this Agreement and not otherwise defined
shall have the meanings given them in the Reorganization Agreement.
2. Affiliate represents, warrants, understands and agrees that:
(a) Affiliate has full power and capacity to execute and
deliver this Agreement and to make the representations, warranties and
agreements herein and to perform its obligations hereunder.
1.
<PAGE> 62
(b) Affiliate has carefully read this Agreement and has
discussed with counsel, to the extent Affiliate felt necessary, the
requirements, limitations and restrictions on his ability to sell, transfer or
otherwise dispose of the Shares he may receive and fully understands the
requirements, limitations and restrictions this Agreement places upon
Affiliate's ability to transfer, sell or otherwise dispose of the Shares.
(c) If Affiliate has executed a Shareholder Agreement and a
Continuity of Interest Certificate (the "Other Agreements"), he understands and
agrees to abide by all restrictions contained therein.
(d) Affiliate will not, publicly or privately, sell, transfer
or otherwise dispose of, or reduce Affiliate's interest in or risk relating to,
any Shares held by Affiliate until such time as the financial results covering
at least 30 days of post-Closing combined operations of Tylan have been
published by Tylan (within the meaning of the Pooling Rules).
(e) Until the earlier of (i) the Closing Date or (ii) the
termination of the Reorganization Agreement, Affiliate will not sell, transfer
or otherwise dispose of, or reduce Affiliate's interest in or risk relating to,
any Span Common Shares held by Affiliate; provided, however, that Affiliate may
transfer 8,000 Span Common Shares to Donald Whitson pursuant to an outstanding
option agreement.
(f) Subject to Section 2(d) above, Affiliate will not sell,
pledge, transfer or otherwise dispose of any of the Shares held by Affiliate
unless at such time either (i) such transfer shall be in conformity with the
provisions of Rule 145, (ii) Affiliate shall have furnished to Tylan an opinion
of counsel reasonably satisfactory to Tylan, to the effect that no registration
under the Act would be required in connection with the proposed offer, sale,
pledge, transfer or other disposition, (iii) a registration statement under the
Act covering the proposed offer, sale, pledge, or other disposition shall be
effective under the Act, or (iv) if Affiliate is a partnership, such transfer
shall be a pro rata distribution from the Affiliate to its partners without
receipt of consideration.
3. Affiliate understands and agrees that Tylan is under no obligation
to register the sale, transfer or other disposition of the Shares or to take any
other action necessary in order to make compliance with an exemption from
registration available.
4. Affiliate further represents that it is the beneficial owner of the
Span Common Shares set forth below, or, if not set forth below, that it is not
the beneficial owner of any Span Common Shares.
5. Each party hereto acknowledges that (i) it will be impossible to
measure in money the damage to Tylan if Affiliate fails to comply with any of
the obligations imposed by this Agreement, (ii) every such obligation is
material and (iii) in the event of
2.
<PAGE> 63
any such failure, Tylan will not have an adequate remedy at law or damages and,
accordingly, each party hereto agrees that injunctive relief or other equitable
remedy, in addition to remedies at law or damages, is an appropriate remedy for
any such failure.
6. This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
California.
7. This Agreement shall be binding upon, enforceable by and inure to
the benefit of the parties named herein and their respective successors; this
Agreement may not be assigned by any party without the prior written consent of
Tylan. Any attempted assignment not in compliance with this Section 7 shall be
void and have no effect.
8. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same agreement.
3.
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
TYLAN GENERAL, INC.
By:________________________________________
AFFILIATE
___________________________________________
Leo Whitson
Address:___________________________________
___________________________________________
___________________________________________
Span Common Shares Beneficially Owned:_____
4.
<PAGE> 65
EXHIBIT 5.2(i)
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and effective as of ___________,
1996 by and between TYLAN GENERAL, INC., a Delaware corporation (the "Company"),
and DONALD E. WHITSON (the "Employee"), with respect to the following facts.
A. The Board of Directors (the "Board") of the Company has determined
that the best interests of the Company would be served by Employee's employment
by the Company in the capacity of Vice Chairman and Chief Administrative Officer
and such mutually acceptable additional capacities as the Chief Executive
Officer may delegate to him from time-to-time during the term of this Agreement.
B. The Company wishes to assure itself of the continued benefit of
Employee's services provided in this Agreement, and Employee is willing to serve
in the employ of the Company solely within the terms hereof for said period.
C. The Company and Employee desire to define their respective rights
and obligations as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ the Employee to serve in
the capacity of Vice Chairman and Chief Corporate Officer of the Company, and
Employee hereby accepts such employment by the Company upon the terms and
conditions set forth herein.
2. POSITION AND RESPONSIBILITIES
(a) DUTIES. The Company shall employ Employee in the capacity
of Vice Chairman and Chief Corporate Officer and such other mutually
acceptable executive positions as the Chief Executive Officer may determine to
be in the best interests of the Company, and Employee shall serve as such for
the term and under other conditions hereinafter set forth. Employee shall
devote his full business time and attention to the performance of such
services and to such other services as may be
1.
<PAGE> 66
necessarily requested by the Chief Executive Officer that are consistent with
those required of a Vice Chairman and Chief Corporate Officer of a company. In
this capacity as Vice Chairman and Chief Corporate Officer, Employee shall
perform such duties and have such powers and authority as are customary for
the Vice Chairman and Chief Corporate Officer of a company. The Employee shall
report directly to and shall be responsible to the Chief Executive Officer
regarding his services. In the event that, without his consent, Employee is
assigned to a position involving a different title or materially lesser
authority and responsibility, then Employee shall have the option, exercisable
for 30 days following notice to Employee of such assignment or new title, to
consider that this Agreement has been terminated without cause in which case
Employee shall be entitled to the benefits set forth in Section 8(c) herein.
(b) COMPETITIVE ACTIVITY. Except upon the prior written
consent of the Chief Executive Officer, Employee, during the term of his
employment hereunder, will not accept any other employment of any nature and
will not engage, directly or indirectly, in any other business activity
(whether or not pursued for pecuniary advantage) that is or may be competitive
with, or that might place him in a competing position to that of the Company
or any other corporation or entity that directly or indirectly controls, is
controlled by or is under common control with the Company.
3. TERM OF EMPLOYMENT
The effective date of this Agreement shall be ________, 1996
(the "Effective Date") and shall remain in effect until terminated pursuant to
Section 7.
4. WORKING FACILITIES
Employee shall be furnished with a private office,
secretarial and other necessary clerical and stenographic assistance, and such
other facilities, amenities and services as may at the time be generally
furnished to executive officers of the Company and as are appropriate for
Employee's position and adequate for the performance of his duties hereunder.
5. PLACE OF PERFORMANCE
In connection with this Agreement, Employee shall maintain an
office at the principal executive offices of Span Instruments, Inc. ("Span") in
Plano, Texas.
6. SALARY, BONUS, EXPENSES AND BENEFITS
(a) SALARY. The Company shall pay Employee an initial salary
of $250,000 per year. Employee's salary shall be reviewed and revised (if
appropriate) at least annually by the Chief Executive Officer and shall be
adjusted based upon Employee's job performance, the Company's financial
condition and performance and
2.
<PAGE> 67
the salary and compensation levels of executives in similar companies with
similar responsibilities. Furthermore, any salary payable to Employee after the
second anniversary of the Effective Date shall be determined in accordance with
the Company's compensation policy for senior management. Any increases in
Employee's salary pursuant to this Section 6(a) shall require approval by the
Compensation Committee of the Board of Directors of the Company (the
"Committee") (without the vote of the Employee if Employee is a member of such
committee).
(b) BONUS. The Company shall pay Employee an annual bonus of
up to twenty-five percent (25%) of Employee's annual salary for the immediately
preceding year. The Committee (without the vote of the Employee if Employee is a
member of such committee) shall determine in good faith the amount of such bonus
giving consideration to the Company's overall achievement of the goals set forth
in the Company's annual plan for the applicable fiscal year and Employee's
performance during the year. The Company shall pay such bonus no later than 45
days after the end of each fiscal year of the Company.
(c) PARTICIPATION IN WELFARE AND BENEFIT PLANS. Employee shall
be entitled to participate in, personally and/or for the benefit of his family
or other beneficiaries, any welfare, insurance, pension, or other employee
benefit plans as are at the time made generally available to other executives of
the Company. Employee shall be eligible to receive during the term hereof all
benefits for which executives are eligible under every such plan or program to
the extent permissible under the general terms and provisions of such plans or
programs and in accordance with the provisions thereof.
(d) VACATION. Employee shall be entitled to six weeks' paid
vacation time each year, during which such time his compensation hereunder shall
be paid in full. Unless otherwise directed by the Chief Executive Officer,
Employee shall have the discretion to take vacation time on the dates as he
determines to be appropriate and not detrimental to the Company.
(e) HOLIDAYS, LEAVE DAYS, ETC. Employee shall be entitled to
such holidays, sick leave, leaves of absence and other absences as are at the
time made generally available to other executives of the Company of comparable
tenure and position.
(f) AUTOMOBILE. During the term of this Agreement, the Company
shall make an automobile available to Employee under such terms and conditions
as are presently applied or as may be later applied to other executives of the
Company of comparable tenure and position. In connection therewith, the Company
shall bear all expenses relating to such automobile, including insurance,
maintenance and repair, gas and oil. Upon termination of this Agreement, the
Company shall offer Employee the right to purchase the automobile then being
operated by Employee at the depreciated
3.
<PAGE> 68
value of such automobile or to assume the Company's lease of such automobile and
shall execute and deliver to Employee all documentation necessary to establish
Employee's ownership or leasing of such automobile.
(g) LIFE INSURANCE. The Company shall pay for and provide life
insurance for each year of this Agreement for the benefit of Employee under the
Company's group life insurance plan.
(h) HEALTH INSURANCE. The Company shall provide health
insurance for Employee under the Company's health insurance plan.
(i) DISABILITY INSURANCE. The Company shall provide disability
insurance for Employee pursuant to the Company's directors' and officers'
disability policy according to the Company's policy established by the
Committee.
(j) REIMBURSEMENT OF EXPENSES. The Company shall pay or
reimburse Employee, on a monthly basis, for reasonable travel, entertainment,
promotional and other expenses incurred by Employee in the performance of his
obligations under this Agreement. Employee must submit timely detailed expense
reports for appropriate review prior to reimbursement.
(k) TAX, LEGAL AND FINANCIAL ADVICE. The Company shall pay for
the fees and expenses of legal, tax and financial advisory, and income tax
preparation services for Employee in an aggregate amount not to exceed $1,500
for each year of this Agreement; provided that no payment of any fees shall be
made by the Company for legal services obtained by Employee in connection with
any dispute with the Company regarding this Agreement.
(l) OTHER FRINGE BENEFITS. Employee shall be entitled to any
and all other fringe benefits according to the Company's policy as set by the
Committee.
7. TERMINATION
Employee's employment under this Agreement may be terminated
by the Company or Employee as herein provided, without further obligation or
liability except as expressly provided herein.
(a) RESIGNATION, DEATH OR DISABILITY. Employee's employment
hereunder may be terminated at any time by Employee's resignation (other than a
resignation for good reason as provided in Section 7(d)), or by Employee's death
or disability. In the event Employee wishes to resign, he shall give the Company
not less than 30 days prior notice of such resignation, which notice shall
indicate the proposed resignation date. Following receipt of such notice, the
Company shall have the right to accelerate the date of Employee's resignation
and to cause his resignation to become
4.
<PAGE> 69
effective at any time prior to the resignation date set forth in Employee's
original notice; provided, however, that such acceleration or changed effective
date of resignation shall not affect in any manner the delivery of any benefits
or payments to which Employee may be entitled under Section 8 of this Agreement.
For purposes of this Agreement, disability shall be deemed to have occurred only
after the following procedure has been satisfied. If within 45 days after notice
of proposed termination for disability is given to Employee by the Company,
Employee has not returned to the performance of substantially all his duties,
the Company may terminate Employee's employment by giving notice of termination
for disability. The notice of proposed termination may only be given by the
Company following Employee's substantial and material absence from Employee's
duties by reason of physical or mental disability for a period of 120 calendar
days.
(b) TERMINATION FOR CAUSE. Employee's employment hereunder may
be terminated by the Company for cause; provided, however, that Employee shall
be given notice of the Company's findings of conduct by Employee amounting to
cause for such termination. Cause for termination under this Agreement shall be
limited to (i) Employee's personal dishonesty or gross misconduct; (ii) a
material breach of any material provision of this Agreement; (iii) Employee's
refusal or failure to act in accordance with any lawful, reasonable direction or
order of the Chief Executive Officer or the Board and such refusal or failure
results or is reasonably likely to result in a materially adverse effect on the
Company's business; (iv) conviction of any felony involving moral turpitude (not
including a conviction for operating a motor vehicle under the influence of
alcohol or any other motor vehicle violation if no bodily injury to a third
party is involved); (v) any chemical dependency or substance abuse resulting in
a continuous and material impairment of Employee's ability to perform his duties
under this Agreement; or (vi) the willful and continued failure by Employee to
substantially perform Employee's duties with the Company or its subsidiaries or
affiliates (other than any failure resulting from disability) after a written
demand identifies the manner in which the Company believes that Employee has not
substantially performed his duties. Termination of Employee's employment under
this Agreement for cause as set forth in clauses (i) or (iv) of the preceding
sentence shall be deemed to be effective upon delivery of notice thereof in
accordance with the provisions of Section 9(i) of this Agreement. Employee shall
have 30 days from the date notice is given for cause as set forth in clause
(ii), (iii), (v) or (vi) of the second sentence of this Section 7(b) to cure
such conduct.
(c) TERMINATION WITHOUT CAUSE. The Company shall have the
right, exercisable at any time during the term of this Agreement upon written
notice to Employee, to terminate Employee's employment without cause upon 30
days prior notice. If Employee is terminated without cause, he shall be entitled
to receive the severance benefits pursuant to Section 8(c) hereof subject to his
full compliance with said Section 8(c).
5.
<PAGE> 70
(d) RESIGNATION FOR GOOD REASON. During the term hereof,
Employee may regard Employee's employment as being constructively terminated and
may, therefore, resign within 30 days of Employee's discovery of the occurrence
of one or more of the following events, any of which will constitute "good
reason" for such resignation:
(1) Without Employee's express written consent, the
assignment to Employee of any duties materially inconsistent with Employee's
position, duties, responsibilities and status with the Company;
(2) Without Employee's express written consent, the
termination and/or material reduction in Employee's facilities (including office
space and general location) and staff reporting available to Employee, unless
such reduction occurs as part of a company-wide action authorized by the Board
(including the vote of Employee) to reduce the Company's expenses;
(3) A reduction by the Company of Employee's base
salary or of any bonus compensation formula applicable to him unless in
connection with (i) an across-the-board reduction for all senior management of
the Company, (ii) a reduction after the second anniversary of the Effective Date
in order to make Employee's salary consistent with the Company's compensation
policy for senior management or (iii) a company-wide salary expense reduction
necessitated by poor financial performance of the Company, in any case as
determined by the Committee in its reasonable discretion;
(4) A failure by the Company to maintain any of the
employee benefits to which Employee is entitled at a level substantially equal
to or greater than the value of those employee benefits currently in effect
through the continuation of the same or substantially similar plans, programs
and policies; or the taking of any action by the Company or its affiliate(s)
that would materially affect Employee's participation in or reduce Employee's
benefits under any such plans, programs or policies, or deprive Employee of any
material fringe benefits enjoyed by Employee unless such failure or reduction
occurs as part of a company-wide action authorized by the Board (including the
vote of Employee if Employee is a Director of the Company) to reduce the
Company's expenses;
(5) The failure by the Company to permit Employee to
take substantially the same number of paid vacation days and leave to which
Employee is entitled;
(6) The Company or any affiliate(s) requiring
Employee to be based anywhere other than within 20 miles of Plano, Texas, except
for required travel on the Company's or an affiliate's business to an extent
substantially consistent with Employee's present business travel obligations;
6.
<PAGE> 71
(7) Any termination of Employee's employment by the
Company which is not affected pursuant to the requirements of this Section 7
with respect to death, disability or termination for cause;
(8) The failure of the Company to obtain the
assumption of this Agreement by any successor as contemplated in Section 9(e)
hereof; and
(9) A material breach of any provision of this
Agreement by the Company.
In the event of the occurrence of any of the above listed events and
in the event Employee wishes to resign on the basis of occurrence of such event,
Employee shall give the Company notice of his proposed resignation, and the
Company shall have a period of 30 days following its receipt of such notice to
remedy the breach or occurrence giving rise to such proposed resignation. In the
event the Company fails to so remedy said breach or occurrence by expiration of
said 30-day period, Employee shall be deemed to have resigned from his
employment with the Company for good reason pursuant to this Section 7(d).
(e) TERMINATION OBLIGATIONS. Employee hereby acknowledges and
agrees that all personal property of the Company, including, without limitation,
all books, manuals, records, reports, notes, contracts, lists, and other
documents, proprietary information, copies of any of the foregoing, and
equipment furnished to or prepared by Employee in the course of or incident to
his employment, belong to the Company and shall be promptly returned to the
Company upon termination of his employment for any reason. Employee shall retain
the rights to remove all of his personal property from the premises of the
Company and any personal property of the Company as may be mutually agreed upon
between the Company and Employee.
8. PAYMENTS TO EMPLOYEE UPON TERMINATION.
(a) DEATH OR DISABILITY. In the event of Employee's death or
disability, all benefits generally available to the Company's executives as of
the date of such an event as determined by the Committee shall be payable to
Employee or Employee's estate, without reduction, in accordance with the terms
of any plan, contract, understanding or arrangement forming the basis for such
payment, including, but not limited to, payments under the plans identified in
Section 6(c). Employee shall be entitled to such other payments as might arise
from any plan, contract, understanding or arrangement between Employee and the
Company at the time of any such event pursuant to Section 6(c) or 6(i) hereof.
7.
<PAGE> 72
(b) TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON.
In the event Employee is terminated by the Company for cause as provided in
Section 7(b) or Employee resigns for other than good reasons as defined in
Section 7(d), neither the Company nor an affiliate shall have any further
obligation or liability of any nature to Employee under this Agreement or
otherwise.
(c) TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
Upon the occurrence of termination without cause, or resignation for good
reason, as defined in Section 7(d), Employee shall be entitled to receive the
following:
(1) SEVERANCE PAYMENT. The Company shall continue to
pay to the Employee his salary (i) until the date that is eighteen (18) months
from the effective date of this Agreement (the "Initial Period") and (ii) for
twelve (12) months following the later of (x) the date of Employee's actual
termination of employment and (y) termination of the Initial Period (the
"Severance Payment"). Such salary shall be determined with reference to the
salary in effect for the month in which the date of employment termination
occurs.
(2) METHOD OF PAYMENT. The Severance Payment shall be
paid to Employee in cash in one lump sum no later than thirty (30) days
following the actual date of termination.
(3) PAYMENT IN LIEU OF CONTRACT DAMAGES. The
Severance Payment shall be in lieu of any further payments to the Employee and
any further accrual of benefits with respect to periods subsequent to the date
of the employment termination and shall constitute a full satisfaction and
discharge of any claims by Employee related to the Agreement or the
circumstances surrounding the termination of employment hereunder.
Notwithstanding the preceding sentence, neither the Severance Payment nor any
other payments under this Section 8(c) shall reduce or offset any benefits the
Employee may be entitled to under the specific terms of the benefit plans of the
Company.
9. GENERAL PROVISIONS
(a) ENTIRE AGREEMENT. The terms and provisions of this
Agreement, together with the terms and provisions of the Noncompetition
Agreement dated the date hereof between Employee and the Parent, shall
constitute the entire understanding between Employee and the Company with
respect to the subject matter hereof, and shall supersede any and all prior
agreements or understandings between Employee and the Company (or any affiliate
of the Company, including Span), whether written or oral.
(b) AMENDMENTS. This Agreement may be amended or modified only
by a written instrument executed by Employee and the Company.
8.
<PAGE> 73
(c) GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California.
(d) SEVERABILITY. In the event that any terms or provisions of
this Agreement shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remaining terms and provisions hereof.
(e) ASSUMPTION. The Company shall require any
successor-in-interest (whether direct or indirect or as a result of purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform the
obligations under this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place.
(f) ASSIGNABILITY. The rights or obligations contained in this
Agreement shall not be assigned, transferred or divided in any manner by
Employee or the Company, without the prior written consent of the other;
provided, however, that nothing in this Section 9(f) shall preclude Employee
from designating a beneficiary to receive any benefits hereunder upon his death,
or the executors, administrators or other legal representatives of Employee or
his estate from assigning any rights hereunder to the person(s) entitled
thereto. Notwithstanding the foregoing, this Agreement shall be assignable by
the Company without Employee's consent and be binding on (i) any affiliate of
the Company and (ii) any entity which by purchase of assets, merger or
otherwise, becomes a successor to the business of the Company.
(g) WAIVER OF BREACH. Any waiver of any breach of employment
terms set forth herein shall not be construed to be a continuing waiver or
consent to any subsequent breach on the part of Employee or the Company.
(h) HEADINGS. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation and performance of any of the provisions of this Agreement.
(i) NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if mailed by United States certified or
registered mail, prepaid, to the parties or their permitted assignees at the
following addresses (or at such other address as shall be given in writing by
either party to the other):
To: Tylan General, Inc.
9577 Chesapeake Drive
San Diego, California 92123
Attn: Chief Executive Officer
9.
<PAGE> 74
To: Donald E. Whitson
Span Instruments, Inc.
1947 Avenue K
Plano, Texas 75074
10.
<PAGE> 75
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first written above.
TYLAN GENERAL, INC.
By:______________________________________
Its: Chairman of the Board, President
and Chief Executive Officer
EMPLOYEE
_________________________________________
Donald E. Whitson
11.
<PAGE> 76
EXHIBIT 5.2(j)
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and effective as of ___________,
1996, by and between TYLAN GENERAL, INC., a Delaware corporation (the "Parent"),
SPAN INSTRUMENTS, INC., a Texas corporation and a wholly-owned subsidiary of
Parent (the "Company"), and _______________ (the "Employee").
WHEREAS, the Company desires to assure itself of the continued
services of Employee, and Employee desires to be employed by the Company, under
the terms and conditions herein; and
WHEREAS, the Company, the Parent and Employee desire to define their
respective rights and obligations as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT; TERM
(a) EMPLOYMENT. The Company hereby agrees to continue to
employ, and the Parent hereby agrees to cause the Company to continue to employ,
the Employee to serve in the capacity of ____________________ of the Company,
and Employee hereby accepts such continued employment by the Company upon the
terms and conditions set forth herein.
(b) TERM. The effective date of this Agreement shall be
_________, 1996 (the "Effective Date") and shall remain in effect until the
earlier of (i) __________ or (ii) the date when Employee's employment is
terminated pursuant to Section 3 of this Agreement.
(c) DUTIES. During the term of this Agreement, Employee will,
to the best of his ability, devote substantially all of his business time and
attention to the performance of his duties hereunder, including such
responsibilities as shall be established by custom, by the Bylaws of the
Company and, from time to time, by the Board of Directors and/or senior
management of the Company or the Parent.
(d) COMPETITIVE ACTIVITY. Employee, during the term of his
employment hereunder, will not accept any other employment of any nature and
will not engage, directly or indirectly, in any other business activity
(whether or not pursued for pecuniary advantage) that is or may be competitive
with, or that might place him in a
1.
<PAGE> 77
competing position to that of the Company or any other corporation or entity
that directly or indirectly controls, is controlled by or is under common
control with the Company.
2. SALARY AND BENEFITS
(a) SALARY. The Company shall pay to Employee for the services
to be rendered hereunder a salary at an annual rate of $________, payable in
installments in accordance with Company policy, subject to increase in
accordance with the policies of the Company or the Parent, as determined by its
Board of Directors, in force from time to time (the "Salary").
(b) BENEFITS. Employee shall be eligible to participate in the
Company's employee benefit plans and incentive compensation programs for
employees, including the stock option plan of the Parent, subject in each case
to the generally applicable terms and conditions of the plan or program in
question.
3. TERMINATION
(a) GENERAL. Employee's employment under this Agreement may be
terminated by the Company, the Parent or Employee as herein provided, without
further obligation or liability except as expressly provided herein. The Company
shall not provide or pay for any employee benefits or bonuses following the
termination of Employee's employment pursuant to Section 3(b), 3(c) or 3(d)
hereof, and the vesting of any stock options granted to Employee during the term
of his employment with the Company shall cease on the date of such termination
of employment.
(b) RESIGNATION. Employee's employment hereunder may be
terminated at any time, upon 30 days prior notice, by Employee's resignation. If
Employee resigns, he shall be entitled to receive payments pursuant to Section
4(a) hereof, subject to his full compliance with said Section 4(a).
(c) DEATH OR DISABILITY. Employee's employment shall terminate
upon the date of Employee's death or disability. For purposes of this Agreement,
disability shall be deemed to have occurred only after the following procedure
has been satisfied. If within 45 days after notice of proposed termination for
disability is given to Employee by the Company or the Parent, Employee has not
returned to the performance of substantially all his duties, the Company or the
Parent may terminate Employee's employment by giving notice of termination for
disability. The notice of proposed termination may only be given by the Company
or the Parent following Employee's substantial and material absence from
Employee's duties by reason of physical or mental disability for a period of 120
calendar days.
2.
<PAGE> 78
(d) TERMINATION FOR CAUSE. Employee's employment hereunder may
be terminated by the Company or the Parent for cause; provided, however, that
Employee shall be given notice of the findings of conduct by Employee amounting
to cause for such termination. Cause for termination under this Agreement shall
be limited to (i) Employee's personal dishonesty or gross misconduct; (ii) a
material breach of any provision of this Agreement; (iii) Employee's refusal or
failure to act in accordance with any lawful, reasonable direction or order of
the Board of Directors or senior management of the Company or the Parent and
such refusal or failure results or is reasonably likely to result in a
materially adverse effect on the Company's or the Parent's business; or (iv) the
continued failure by Employee to perform Employee's duties with the Company or
its subsidiaries or affiliates, including the Parent (other than any failure
resulting from disability) in a manner consistent with Employee's position after
a written demand identifies the manner in which Employee's supervisor believes
that Employee has not substantially performed his duties. Termination of
Employee's employment under this Agreement for cause as set forth in clause (i)
of the preceding sentence shall be deemed to be effective upon delivery of
notice thereof in accordance with the provisions of Section 5(i) of this
Agreement. Employee shall have 30 days from the date notice is given for cause
as set forth in clause (ii), (iii) or (iv) of the second sentence of this
Section 3(d) to cure such conduct.
(e) TERMINATION WITHOUT CAUSE. The Company and the Parent
shall have the right, exercisable at any time during the term of this Agreement
upon written notice to Employee, to terminate Employee's employment without
cause upon 30 days prior notice. If Employee is terminated without cause, he
shall be entitled to receive severance benefits pursuant to Section 4(d) hereof,
subject to his full compliance with said Section 4(d).
(f) TERMINATION OBLIGATIONS. Employee hereby acknowledges and
agrees that all personal property of the Company or the Parent, including,
without limitation, all books, manuals, records, reports, notes, contracts,
lists, and other documents, proprietary information, copies of any of the
foregoing, and equipment furnished to or prepared by Employee in the course of
or incident to his employment, belong to the Company or the Parent, as the case
may be, and shall be promptly returned to the Company or the Parent, as the case
may be, upon termination of his employment for any reason. Employee shall retain
the rights to remove all of his personal property from the premises of the
Company and any personal property of the Company or the Parent as may be
mutually agreed upon between the Company or the Parent and Employee.
4. PAYMENTS TO EMPLOYEE UPON TERMINATION.
(a) RESIGNATION. In the event of Employee's resignation, the
Company shall continue to pay Employee Employee's Salary for a period of six (6)
months
3.
<PAGE> 79
commencing on the date of Employee's resignation. Such salary shall be
determined with reference to the salary in effect for the month in which the
date of employment termination occurs. The Company's obligation to make each
such monthly payment is conditioned on Employee's performance of four (4) hours
of consulting services per month for the Company; provided, however, that the
Company's obligation to make such monthly payments pursuant to this Section 4(a)
shall cease if Employee engages, at any time during the six (6) months following
his resignation, directly or indirectly, in any other business activity (whether
or not pursued for pecuniary advantage) that is or may be competitive with, or
that might place him in a competing position to that of the Company or any other
corporation or entity that directly or indirectly controls, is controlled by or
is under common control with the Company.
(b) DEATH OR DISABILITY. In the event of Employee's death or
disability, all benefits generally available to the Company's employees as of
the date of such an event as determined by the Board of Directors of the Company
shall be payable to Employee or Employee's estate, without reduction, in
accordance with the terms of any plan, contract, understanding or arrangement
forming the basis for such payment.
(c) TERMINATION FOR CAUSE. In the event Employee is terminated
by the Company or the Parent for cause as provided in Section 3(d) hereof,
Employee shall be entitled to receive the following:
(1) TERMINATION PAYMENT. The Company shall continue to
pay to the Employee his salary for six (6) months following the date of
Employee's actual termination of employment (the "Termination Payment"). Such
salary shall be determined with reference to the salary in effect for the month
in which the date of employment termination occurs.
(d) TERMINATION WITHOUT CAUSE. In the event Employee is
terminated by the Company or the Parent without cause as provided in Section
3(e) hereof, Employee shall be entitled to receive the following:
(1) SEVERANCE PAYMENT. The Company shall continue to
pay to the Employee his salary (i) until the date that is [eighteen (18)/six
(6)] months from the effective date of this Agreement (the "Initial Period") and
(ii) for six (6) months following the later of (x) the date of Employee's actual
termination of employment and (y) termination of the Initial Period (the
"Severance Payment"). Such salary shall be determined with reference to the
salary in effect for the month in which the date of employment termination
occurs.
(e) PAYMENT IN LIEU OF CONTRACT DAMAGES. The Termination
Payment and the Severance Payment shall be in lieu of any further payments to
the Employee and any further accrual of benefits with respect to periods
subsequent to the date of the
4.
<PAGE> 80
employment termination and shall constitute a full satisfaction and discharge of
any claims by Employee related to the Agreement or the circumstances surrounding
the termination of employment hereunder. Notwithstanding the preceding sentence,
neither the Termination Payment, the Severance Payment nor any other payments
under this Section 4(e) shall reduce or offset any benefits the Employee may be
entitled to under the specific terms of the benefit plans of the Company.
5. GENERAL PROVISIONS
(a) ENTIRE AGREEMENT. The terms and provisions of this
Agreement, together with the terms and provisions of the Noncompetition
Agreement dated the date hereof between Employee and the Parent, shall
constitute the entire understanding between Employee, the Company and the Parent
with respect to the subject matter hereof, and shall supersede any and all prior
agreements or understandings between Employee, the Company and the Parent,
whether written or oral.
(b) AMENDMENTS. This Agreement may be amended or modified only
by a written instrument executed by Employee, the Company and the Parent.
(c) GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California.
(d) SEVERABILITY. In the event that any terms or provisions of
this Agreement shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remaining terms and provisions hereof.
(e) ASSUMPTION. The Company and the Parent shall require any
successor-in-interest (whether direct or indirect or as a result of purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company or the Parent to expressly assume and agree to
perform the obligations under this Agreement in the same manner and to the same
extent that the Company or the Parent would be required to perform it if no such
succession had taken place.
(f) ASSIGNABILITY. The rights or obligations contained in this
Agreement shall not be assigned, transferred or divided in any manner by
Employee, the Company or the Parent, without the prior written consent of the
other; provided, however, that nothing in this Section 5(f) shall preclude
Employee from designating a beneficiary to receive any benefits hereunder upon
his death, or the executors, administrators or other legal representatives of
Employee or his estate from assigning any rights hereunder to the person(s)
entitled thereto. Notwithstanding the foregoing, this Agreement shall be
assignable by the Company without Employee's consent and be binding on (i) the
Parent or any other affiliate of the Company, and (ii) any entity which by
purchase of assets, merger or otherwise, becomes a successor to the business of
the Company or the Parent.
5.
<PAGE> 81
(g) WAIVER OF BREACH. Any waiver of any breach of employment
terms set forth herein shall not be construed to be a continuing waiver or
consent to any subsequent breach on the part of Employee, the Parent or the
Company.
(h) HEADINGS. The headings of paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation and performance of any of the provisions of this Agreement.
(i) NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if mailed by United States certified or
registered mail, prepaid, to the parties or their permitted assignees at the
following addresses (or at such other address as shall be given in writing by
either party to the other):
To: Tylan General, Inc.
9577 Chesapeake Drive
San Diego, California 92123
Attn: Chief Executive Officer
To: Span Instruments, Inc.
2201 Avenue K
Plano, Texas 75074
Attn: President
To: _________________________
_________________________
_________________________
6.
<PAGE> 82
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first written above.
TYLAN GENERAL, INC. SPAN INSTRUMENTS, INC.
By:_______________________________________ By:____________________________
Its: Chairman of the Board, President Its: President
and Chief Executive Officer
EMPLOYEE
____________________________
[Name]
7.
<PAGE> 83
EXHIBIT 6.5
PROPOSED FORM OF OPINION LETTER
OF GARDERE & WYNNE, COUNSEL TO SPAN
1. Each of Span and Ocala has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Texas. Each of Span
and Ocala has the requisite corporate power to own its property and assets and
to conduct its business as it is currently being conducted and to the best of
counsel's knowledge is qualified as a foreign corporation to do business and is
in good standing in each jurisdiction in the United States in which the
ownership of its property or the conduct of its business requires such
qualification and where any statutory fines or penalties or any corporate
disability imposed for the failure to qualify would materially and adversely
affect Tylan, its assets, financial condition or operations. To the best of
counsel's knowledge, except for Ocala, Span has no subsidiaries.
2. All corporate action on the part of Span, its Board of Directors and
its shareholders necessary for the authorization, execution, delivery and
performance of the Reorganization Agreement has been taken. The Reorganization
Agreement has been duly and validly authorized, executed and delivered by Span
and constitutes a valid and binding agreement of Span enforceable against Span
in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and subject to general equity principles and
to limitations on availability of equitable relief, including specific
performance.
3. The Reorganization Agreement, the Shareholder Agreements and the
Affiliate Agreements (collectively, the "Agreements") have been duly and validly
authorized, executed and delivered by each of the Shareholders and constitute
valid and binding agreements of the Shareholders enforceable against each of
them in accordance with their terms, except as indemnity obligations under
Sections 8.1 of the Reorganization Agreement may be limited by applicable laws
and except as enforcement of each of the Agreements may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and subject to general equity principles and
to limitations on availability of equitable relief, including specific
performance.
1.
<PAGE> 84
4. The authorized capital stock of Span consists of 500,000 shares of
Common Stock, no par value, of which 265,699 shares are issued and outstanding.
The authorized capital stock of Ocala consists of 1,000,000 shares, $0.01 par
value, of which 100,000 shares are issued and outstanding, of which 75,000
shares are owned by Span. All of the issued and outstanding shares of Span and
Ocala (i) have been duly authorized and validly issued, (ii) are fully paid and
non-assessable and (iii) have been issued in full compliance with all applicable
securities laws. To the best of counsel's knowledge, there are no subscriptions,
options, warrants, stock appreciation rights, calls, rights, convertible
securities or other agreements or commitments of any character relating to
issued or unissued capital shares or other securities of Span or Ocala, or other
securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any capital shares of Span or Ocala. To the best of counsel's
knowledge, none of the outstanding shares of Span or Ocala's capital stock are
subject to any preemptive right other than the preemptive rights provided in
their respective Certificates of Incorporation, co-sale right, right of first
refusal or other similar right (other than with respect to the shares of Ocala
owned by Span, as provided in Section 5.1 of the Shareholders Agreement dated
____________).
5. The execution, delivery and performance by Span of the
Reorganization Agreement and the consummation by Span of the transactions
contemplated therein will not violate any provision of Span's or Ocala's charter
or bylaws, and will not constitute a material default (or give rise to any right
of termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture or other evidence of
indebtedness of Span or Ocala or any material license agreement, lease or other
material contract, instrument or obligation to which Span or Ocala is a party or
by which Span or Ocala or any of either of their assets may be bound, and will
not violate or contravene (i) any governmental statute, rule or regulation
applicable to Span or Ocala or (ii) any order, writ, judgment, injunction,
decree, determination or award which has been entered against Span or Ocala and
of which we are aware, the violation or contravention of which would materially
and adversely affect Span or Ocala, or either of their assets, financial
condition or otherwise.
6. To the best of counsel's knowledge, there is no action, proceeding
or investigation pending or overtly threatened in writing against Span or the
Shareholders before any court or administrative agency that questions the
validity of the Agreements or might result in any material adverse change in the
assets, financial conditions or operations of Span.
2.
<PAGE> 85
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the consummation by Span and the
Shareholders of the transactions contemplated by the Reorganization Agreement
have been made or obtained.
8. In the course of the preparation of the Registration Statement and
the Prospectus/Joint Proxy Statement, we have participated in discussions and
conferences with officers of Tylan and Span and with representatives of their
respective independent public accountants during which successive drafts of the
Registration Statement and the Prospectus/Joint Proxy Statement were reviewed
and we have also reviewed and discussed with various of such persons materials
submitted for use in the Registration Statement, the Prospectus/Joint Proxy
Statement and certain other data and information furnished in support of the
statements made therein. While we have not independently verified, are not
passing upon and assume no responsibility for the accuracy, completeness or
fairness of the Registration Statement or the Prospectus/Joint Proxy Statement,
we advise you that, with regard to Span, nothing has come to our attention which
caused us to believe that the Registration Statement as of its effective date
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus/Joint Proxy Statement, as of its date and
as of the date hereof, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary in order to make the statement therein, in the light of the
circumstances under which they were made, not misleading (except, in each case,
for the financial statements, schedules and other financial and statistical
information derived therefrom, as to which we express no view).
3.
<PAGE> 86
EXHIBIT 6.14
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (the "Agreement") is made this __ day of
________________ 1996, by and between TYLAN GENERAL, INC., a Delaware
corporation ("Tylan"), and the undersigned shareholder ("Shareholder") of SPAN
INSTRUMENTS, INC., a Texas corporation ("Span").
RECITALS
A. Tylan, TYLAN GENERAL ACQUISITION SUBSIDIARY, INC., a Delaware
corporation ("Tylan Sub"), Span, Shareholder and the other shareholders of Span
have entered into an Agreement and Plan of Reorganization dated as of February
20, 1996 (the "Reorganization Agreement"), providing for the merger of Tylan Sub
with and into Span pursuant to the terms and conditions of the Reorganization
Agreement (the "Merger") and setting forth certain representations, warranties,
covenants and agreements which each of the parties thereto is making thereby in
connection with the Merger.
B. The Reorganization Agreement contemplates that the Shareholder has
voted his Span Common Shares (as defined in the Reorganization Agreement) in
favor of the Merger and will agree not to compete with Tylan in the manner and
to the extent herein set forth.
C. To comply with the Reorganization Agreement and to induce Tylan to
proceed to consummate the Merger, Shareholder has agreed to enter into this
Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Reorganization
Agreement.
2. ACKNOWLEDGMENT BY SHAREHOLDER. Shareholder acknowledges that by
virtue of his position with Span he has developed considerable expertise in the
business operations of Span and has had access to trade secrets and confidential
business methods, plans and practices considered confidential by Span and not
generally known in its industry. Shareholder recognizes that this information
will have commercial value in the business in which Tylan is engaged and
therefore that Tylan would be irreparably damaged if Shareholder were to enter
into an activity competing or interfering with
1.
<PAGE> 87
Span's business in violation of the terms of this Agreement or if Shareholder
were to disclose or make unauthorized use of any confidential information
concerning the business of Span. Accordingly, Shareholder expressly acknowledges
that he is voluntarily entering into this Agreement and that the terms and
conditions of this Agreement are fair and reasonable to Shareholder in all
respects and that Tylan, in addition to any other remedies which it may have,
shall be entitled, as a matter of right, to injunctive relief, including
specific performance, in any court of competent jurisdiction with respect to any
actual or threatened breach by Shareholder of any of the provisions of Sections
3 and 4 hereof.
3. NON-COMPETITION. Until the third anniversary of the Closing Date,
Shareholder agrees that he shall not:
(a) directly or indirectly own, manage, operate, or control,
in whole or in part, or become engaged, directly or indirectly, as a director,
officer, employee, partner, principal, agent, or representative of or consultant
to, any business, enterprise, firm or person engaged in direct competition with
Tylan's or Span's current businesses (a "Competing Company"), in (i) every state
in which Tylan or Span currently operates their respective businesses, (ii)
every state in which Tylan or Span has taken action to facilitate commencement
of the operation of their respective businesses and (iii) every state in which
Tylan or Span has current definite plans to operate their respective businesses
within the next year (the "Territory"); or
(b) directly or indirectly purchase equity in, lend money to,
borrow money from or otherwise render financial assistance to or accept
financial assistance from any Competing Company.
Notwithstanding the above, Shareholder shall not be deemed to be
engaged directly or indirectly in any business in contravention of this
Agreement, if Shareholder participates in any such business solely as a passive
investor in up to 1% of the equity securities of a company or partnership, the
securities of which are publicly traded.
4. NON-INTERFERENCE. Shareholder further agrees that until the third
anniversary of the Closing Date, he will not, without the prior written consent
of Tylan, (i) interfere with the business of Span or Tylan by soliciting,
attempting to solicit, inducing, or otherwise causing any employee or consultant
of Span or Tylan to terminate his or her employment as such in order to become
an employee, consultant or independent contractor to or for any Competing
Company or to or for any company with which Shareholder is associated in any
way; or (ii) induce or attempt to induce any customers, suppliers, distributors,
resellers, or independent contractors of Span to terminate their relationships
with Span.
2.
<PAGE> 88
5. INDEPENDENCE OF OBLIGATIOnS. The covenants of Shareholder set forth
in this Agreement shall be construed as independent of any other agreement or
arrangement between Shareholder, on the one hand, and Span or Tylan or any of
their subsidiaries, on the other, and the existence of any claim or cause of
action by Shareholder against Span or Tylan or any of their subsidiaries shall
not constitute a defense to the enforcement of such covenants against
Shareholder.
6. SEVERABILITY. If any provision of this Agreement or the application
of such provision to any person or circumstances shall be held invalid by a
court of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than the
party as to which it is held invalid, shall not be affected.
7. NOTICES. All notices or other communications hereunder shall be in
writing and deemed given if and when delivered to a party in person, or if and
when mailed by registered or certified mail, return receipt requested, to the
parties at the addresses set forth below or such other addresses as shall be
specified by notice to the other party hereunder:
To Tylan at: TYLAN GENERAL, INC.
9577 Chesapeake Drive
San Diego, CA 92123
Attn: David J. Ferran
To Shareholder at: _______________________
_______________________
_______________________
8. WAIVER OF BREACH. No waiver of any provisions hereof by any party
shall be deemed a waiver by any such party, and no such waiver shall be deemed a
continuing waiver of any provision hereof by such party.
9. ASSIGNMENT. This Agreement shall be assignable by Tylan only to any
person, firm or corporation which may become a successor in interest by
purchase, merger or otherwise to Tylan, or the business operated by Tylan, or
the business operated by Span prior to the Merger, provided Shareholder receives
prompt notice of such assignment. This Agreement is not assignable by
Shareholder.
10. ENTIRE AGREEMENT; AMENDMENT. This Agreement supersedes all prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and, together with the Reorganization Agreement and any
other agreement to be executed by each undersigned party pursuant to the
Reorganization Agreement, contains the entire agreement among the parties with
respect to the subject matter hereof. This
3.
<PAGE> 89
Agreement may not be amended, supplemented or modified, and no provisions hereof
may be modified or waived, except expressly by an instrument in writing signed
by all the parties hereto.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of Tylan and its permitted successors and assigns and Shareholder
and their respective heirs and legal representatives.
12. GOVERNING LAW. This Agreement shall be deemed a contract made
under, and for all purposes shall be construed in accordance with, the laws of
the State of California.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
SHAREHOLDER
_________________________________________
TYLAN GENERAL, INC.
By: ____________________________________
4.
<PAGE> 90
EXHIBIT 7.3
FORM OF OPINION OF COOLEY GODWARD,
COUNSEL TO TYLAN AND TYLAN SUB
________________, 1996
Span Instruments, Inc.
1947 Avenue K
Plano, TX 75074
Ladies and Gentlemen:
We have acted as counsel for Tylan General, Inc., a Delaware corporation
("Tylan"), and Tylan General Acquisition Subsidiary, Inc., a Delaware
corporation ("Tylan Sub"), in connection with that certain Agreement and Plan of
Reorganization among Tylan, Tylan Sub, Span Instruments, Inc., a Texas
corporation ("Span"), and the shareholders of Span (the "Shareholders") dated as
of February __, 1996 (the "Reorganization Agreement") pursuant to which Tylan
Sub will merge with and into Span (the "Merger"). We are rendering this opinion
pursuant to Section 7.3 of the Reorganization Agreement. Except as otherwise
defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Reorganization Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Reorganization Agreement, the Shareholder Agreements and the
Affiliate Agreements (collectively, the "Agreements") by the various parties and
originals or copies certified to our satisfaction, of such records, documents,
certificates, opinions, memoranda and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinion expressed below.
Where we render an opinion "to the best of our knowledge" or concerning and item
"known to us" or our opinion otherwise refers to our knowledge, it is based
solely upon (i) an inquiry of attorneys within this firm who perform legal
services for Tylan, (ii) receipt of a certificate executed by an officer of
Tylan or Tylan Sub covering such matters and (iii) such other investigation, if
any, that we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization,
1.
<PAGE> 91
execution and delivery of the Agreements by Tylan and the Reorganization
Agreement by Tylan Sub) where authorization, execution and delivery are
prerequisites to the effectiveness of such documents. We have also assumed: that
all individuals executing and delivering documents had the legal capacity to so
execute and deliver; that you have received all documents you were to receive
under the Agreements; that the Reorganization Agreement is an obligation binding
upon you and that the Agreements are obligations binding upon the Shareholders;
that the parties to the Agreements other than Tylan and Tylan Sub have filed any
required California franchise or income tax returns and have paid any required
California franchise or income taxes; and that there are no extrinsic agreements
or understandings among the parties to the Agreements that would modify or
interpret the terms of the Agreements or the respective rights or obligations of
the parties thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion as to compliance
with any antitrust laws or antifraud law, rule or regulation relating to
securities, or to the sale or issuance thereof.
With regard to our opinion in paragraph 4 below, we have examined and relied
upon (i) a certificate executed by an officer of the Company, to the effect that
the consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Director resolutions and any plan or agreement relating to the issuance
of such shares, and (ii) a certificate executed by Tylan's transfer agent, The
First National Bank of Boston, as to the number of shares of Common Stock issued
and outstanding as of _______________, 1996; and we have undertaken no
independent verification with respect thereto.
With regard to our opinion in paragraph 6 below with respect to any material
default under the provisions of any Material Contract, we have relied solely
upon an examination of the agreements and instruments filed as exhibits to the
Company's Annual Report on Form 10-K for the fiscal year ended October 29, 1995
(collectively, the "Material Contracts"); we have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. Each of Tylan and Tylan Sub has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Delaware. Each of Tylan and Tylan Sub has the requisite corporate power to own
its property and assets and to
2.
<PAGE> 92
conduct its business as it is currently being conducted and, to the best of our
knowledge, is qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in the United States in which the ownership of its
property or the conduct of its business requires such qualification and where
any statutory fines or penalties or any corporate disability imposed for the
failure to qualify would materially and adversely affect Tylan, its assets,
financial condition or operations.
2. The Agreements have been duly and validly authorized, executed and
delivered by Tylan and constitute valid and binding agreements of Tylan
enforceable against Tylan in accordance with their respective terms, except as
indemnity obligations under Section 9.1 of the Reorganization Agreement may be
limited by applicable laws and except as enforcement of the Agreements may be
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.
3. The Reorganization Agreement has been duly and validly authorized,
executed and delivered by Tylan Sub and constitutes a valid and binding
agreement of Tylan Sub enforceable against Tylan Sub in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific performance.
4. Tylan's authorized capital stock consists of 10,000,000 shares of
Preferred Stock, none of which there are issued and outstanding, and 50,000,000
shares of Common Stock, $.001 par value, of which there are outstanding
_____________ shares. The outstanding shares have been duly authorized and
validly issued and are fully paid and nonassessable; and no preemptive rights or
rights of refusal in favor of stockholders exist with respect to the Common
Stock of Tylan, or the issue and sale thereof, under the Certificate of
Incorporation or Bylaws of Tylan.
5. The ________ shares of Tylan Common Stock issuable to Shareholders
in the Merger (the "Shares") have been duly authorized, and upon issuance and
delivery upon consummation of the Merger in accordance with the terms of the
Reorganization Agreement, the Shares will be validly issued, fully paid and
nonassessable.
6. The execution and delivery by Tylan and Tylan Sub of the
Reorganization Agreement and the issuance of the Shares pursuant thereto will
not violate any provision of Tylan's or Tylan Sub's charter or bylaws, and will
not constitute a material default under the provisions of any Material Contract,
and will not violate or contravene (a) any governmental statute, rule or
regulation applicable to Tylan or Tylan Sub or (b) any order,
3.
<PAGE> 93
writ, judgment, injunction, decree, determination or award which has been
entered against Tylan or Tylan Sub and of which we are aware, the violation or
contravention of which would materially and adversely affect Tylan, its assets,
financial condition or operations.
7. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against Tylan or Tylan Sub before
any court or administrative agency that questions the validity of the
Reorganization Agreement or might result in any material adverse change in the
assets, financial conditions or operations of Tylan.
8. All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with any regulatory authority or governmental
body in the United States required for the consummation by Tylan and Tylan Sub
of the transactions contemplated by the Reorganization Agreement have been made
or obtained, except for any blue sky filings required by applicable state
securities laws.
9. The Registration Statement became effective under the Securities Act
of 1933, as amended (the "Act"), by order of the Securities and Exchange
Commission on ______________, 1996, and, to the best of our knowledge, no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending or
threatened under the Act.
10. The Registration Statement and the Prospectus/Joint Proxy Statement
and any supplements or amendments thereto (except for the financial statements,
the schedules thereto and other financial and statistical information included
therein as to which we express no opinion) comply as to form in all material
respects with the Securities Act and rules and regulations promulgated
thereunder.
***
In the course of the preparation of the Registration Statement and the
Prospectus/Joint Proxy Statement, we have participated in discussions and
conferences with officers of Tylan and Span and with representatives of their
respective independent public accountants during which successive drafts of the
Registration Statement and the Prospectus/Joint Proxy Statement were reviewed
and we have also reviewed and discussed with various of such persons materials
submitted for use in the Registration Statement, the Prospectus/Joint Proxy
Statement and certain other data and information furnished in support of the
statements made therein. While we have not independently verified, are not
passing upon and assume no responsibility for the accuracy, completeness or
fairness of the Registration Statement or the Prospectus/Joint Proxy Statement,
we advise you that, with regard to Tylan, nothing has come to our attention
which caused us to believe (i) that the Registration Statement as of its
effective date contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
4.
<PAGE> 94
statements therein not misleading, or that the Prospectus/Joint Proxy Statement,
as of its date and as of the date hereof, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except, in each case, for the financial statements, schedules and
other financial and statistical information derived therefrom, as to which we
express no view), or (ii) that any of the documents incorporated by reference in
the Prospectus/Joint Proxy Statement, when such documents were filed with the
Securities and Exchange Commission, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (except, in each case, for the
financial statements, schedules and other financial and statistical information
derived therefrom, as to which we express no view).
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm or entity without our prior
written consent.
Sincerely,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
By:____________________________
D. Bradley Peck
5.
<PAGE> 1
EXHIBIT 11.1
TYLAN GENERAL. INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- -------------------
APRIL 28, APRIL 30, APRIL 28, APRIL 30,
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before extraordinary item $ 2,776 $ 1,322 $ 4,872 $ 2,103
Extraordinary item, net of income
tax benefit (695) (695)
--------- ------- ------- -------
Net Income $ 2,776 $ 627 $ 4,872 $ 1,408
========= ======= ======= =======
PRIMARY EARNINGS PER SHARE
Weighted average common and common
equivalent shares outstanding:
Weighted average common shares 6,503 5,095 6,490 4,463
Assumed exercise of outstanding stock
options and warrants (1) 210 230 236 197
--------- ------- ------- -------
Total 6713 5,325 6,726 4,660
========= ======= ======= =======
Earnings per share before extraordinary item $ 0.41 $ 0.25 $ 0.72 $ 0.45
Extraordinary item (0.13) (0.15)
--------- ------- ------- -------
Earnings per share $ 0.41 $ 0.12 $ 0.72 $ 0.30
========= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE
Weighted average common and common
equivalent shares outstanding:
Weighted average common shares 6,503 5,095 6,490 4,463
Assumed exercise of outstanding stock
options and warrants (1) 227 262 236 261
--------- ------- ------- -------
Total 6,730 5,357 6,726 4,724
========= ======= ======= =======
Earnings per share before extraordinary item $ 0.41 $ 0.25 $ 0.72 $ 0.45
Extraordinary item (0.13) (0.15)
--------- ------- ------- -------
Earnings per share $ 0.41 $ 0.12 $ 0.72 $ 0.30
========= ======= ======= =======
</TABLE>
(1)Computed utilizing the treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-START> OCT-30-1995
<PERIOD-END> APR-28-1996
<CASH> 10,288
<SECURITIES> 0
<RECEIVABLES> 19,614
<ALLOWANCES> 0
<INVENTORY> 15,290
<CURRENT-ASSETS> 48,108
<PP&E> 13,342
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,559
<CURRENT-LIABILITIES> 18,023
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 47,369
<TOTAL-LIABILITY-AND-EQUITY> 67,559
<SALES> 52,720
<TOTAL-REVENUES> 52,720
<CGS> 30,350
<TOTAL-COSTS> 30,350
<OTHER-EXPENSES> 14,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (176)
<INCOME-PRETAX> 7,900
<INCOME-TAX> 3,028
<INCOME-CONTINUING> 4,872
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,872
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
