<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 27, 1996
-------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1984
For the transition period from to
---------------------- -----------------------
Commission file number 0-28062
-------
CERION TECHNOLOGIES INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 02-0485458
- ------------------------ ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
1401 Interstate Drive
Champaign, Illinois 61821-1090
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (217) 359-3700
-----------------------
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.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 27, 1996
- ---------------------------- ---------------------------------
Common Stock, par value $.01 7,016,184 shares
<PAGE> 2
PART 1 -FINANCIAL INFORMATION
ITEM 1 -FINANCIAL STATEMENTS
CERION TECHNOLOGIES INC.
<TABLE>
BALANCE SHEETS
(dollars in thousands)
<CAPTION>
September 27, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,104 $ 173
Short term investments 3,502
Accounts receivable 2,648 5,930
Inventories 1,994 312
Deferred income taxes and other assets 495 94
------- -------
Total current assets 14,743 6,509
Property, plant and equipment, net 9,636 5,365
Other assets 102 --
------- -------
$24,481 $11,874
======= =======
LIABILITIES, PARENT COMPANY INVESTMENT
AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 3,691 $ 3,073
------- -------
Total current liabilities 3,691 3,073
Deferred income taxes 343 343
Parent company investment -- 8,458
Shareholders' equity:
Preferred Stock, par value $.01 per share, 100,000
shares authorized, none issued -- --
Common Stock, par value $.01 per share, 20,000,000 70 --
shares authorized; 7,016,184 shares issued and
outstanding
Additional paid in capital 18,639 --
Retained earnings 1,738 --
------- -------
Total shareholders' equity 20,447 --
------- -------
$24,481 $11,874
======= =======
</TABLE>
1
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CERION TECHNOLOGIES INC.
<TABLE>
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
(unaudited) (unaudited)
September 27, September 29, September 27, September 29,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $5,522 $7,232 $30,736 $18,150
Cost of sales 4,954 5,101 20,515 13,264
------ ------ ------- -------
Gross profit 568 2,131 10,221 4,886
Selling, general and administrative expenses 1,446 653 4,306 1,645
------ ------ ------- -------
Operating income (loss) (878) 1,478 5,915 3,241
Interest income (expense) 99 (76) 61 (240)
------ ------ ------- -------
Income (loss) before provision (benefit)
for income taxes (779) 1,402 5,976 3,001
Provision (benefit) for income taxes (312) 548 2,391 1,173
------ ------ ------- -------
Net income (loss) $ (467) $ 854 $ 3,585 $ 1,828
====== ====== ======= =======
Net income (loss) per share $(0.07) $ 0.16 $ 0.58 $ 0.34
====== ====== ======= =======
Average common shares 7,016 5,400 6,157 5,400
</TABLE>
2
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CERION TECHNOLOGIES INC.
<TABLE>
STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Nine Months Ended
-----------------
(unaudited)
September 27, September 29,
1996 1995
-------------- -------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 3,585 $ 1,828
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 1,461 737
Deferred income taxes
Changes in operating assets and liabilities:
Accounts receivable 3,282 (1,657)
Inventories (1,682) 22
Deferred income taxes and other assets (516) 91
Accounts payable and accrued expenses 619 989
-------- -------
Net cash provided by operating activities 6,749 2,010
-------- -------
Cash flows used in investing activities:
Additions to property, plant and equipment 5,719 (1,009)
Purchase of short-term investments (4,496) --
Proceeds from redemption of short term investments 994 --
-------- -------
Cash flows used in investing activities (9,221) (1,009)
-------- -------
Cash flows provided by (used in) financing activities:
Payments to parent company (779)
Repayment of borrowings (11,142) (315)
Dividends paid -- --
Proceeds from shares issued 19,545 --
-------- -------
Cash flows provided by (used in) financing activities 8,403 (1,094)
-------- -------
Increase (decrease) in cash 5,931 (93)
Cash at beginning of period 173 99
-------- -------
Cash at end of period $ 6,104 $ 6
======== =======
Supplemental disclosure of cash flow information:
Interest paid $ 74 $ 240
Taxes paid $ 192 $ --
</TABLE>
3
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CERION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Earnings Per Common and Common Equivalent Share
-----------------------------------------------
<TABLE>
Earnings per common and common equivalent share is computed based on the total
of the weighted average number of common shares and, as applicable, the weighted
average number of common equivalent shares outstanding during the period.
<CAPTION>
Three Months Ended
------------------
September 27, September 29,
1996 1995
------------- -------------
<S> <C> <C>
Common shares outstanding 7,016,184 5,400,000
Common share equivalents None None
</TABLE>
The increase in the common shares outstanding represents the issuance of
additional shares at the closing of the Company's initial public offering on May
30, 1996.
2. Revolving Credit Facility
-------------------------
On May 30, 1996, the Company entered into a three year, $15.0 million revolving
credit facility ("facility") with LaSalle National Bank. The facility is
collateralized by all the Company's assets and the Company may borrow against
the facility based upon prescribed advance rates applied to the Company's
accounts receivable; inventories, short-term investments and property, plant and
equipment.
The facility bears interest either at the banks prime rate or LIBOR plus 185
basis points. The facility's terms include a fee for the unused credit facility
equal to 1/4% applied to the amount of the facility not outstanding payable
monthly. The facility contains certain covenants including a limitation of
dividends, and the maintenance of certain financial ratios. No amounts were
outstanding under the facility as of September 27, 1996.
In connection with the obtaining of the facility, the Company paid a commitment
fee equal to 25 basis points (1/4%) of the total facility and other costs
totaling approximately $112,000. These costs are amortized over the term of the
facility.
The net loss reported for the three month period ended September 27, 1996
results in the Company being out of compliance with certain financial covenants
in its revolving credit facility with its lender. The Company expects to
renegotiate the terms of its facility. As the Company has no debt outstanding,
this development has only an effect to the Company in terms of future borrowing
requirements.
Other
- -----
The financial statements for the three month and nine month periods ended
September 27, 1996 and September 29, 1995 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's
4
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discussion and analysis of financial condition and results of operations,
contained in the Company's Prospectus dated May 24, 1996. The results of
operations for the three months and nine months ended September 27, 1996 are not
necessarily indicative of the results for the entire fiscal year ending December
31, 1996.
The business of Cerion Technologies Inc. (the "Company") has been operated by
Nashua Corporation ("Nashua" or the "Parent") since its acquisition in 1986. As
of December 31, 1995, Nashua converted the Company into a wholly-owned
subsidiary of Nashua and contributed to it the business of the Nashua Precision
Technologies division in return for the Company's stock and its assumption of
the liabilities of the business. The Company was renamed Cerion Technologies
Inc. on March 4, 1996.
On May 30, 1996, the Company closed on the Initial Public Offering of its stock
with the sale of 4,416,000 shares of its Common Stock. Of the 4,416,000 shares
of Common Stock sold, 1,615,000 shares were sold by the Company and 2,801,000
were sold by Nashua Corporation. Nashua Corporation continues to own
approximately 37% of the Company's outstanding Common Stock.
The shares were sold to the public at $13.00 per share. The net proceeds to the
Company after the Underwriting Discount was $19,525,350.
On May 31, 1996, the Company repaid the two outstanding Promissory Notes issued
to Nashua Corporation in March 1996 having a combined principal sum of
$11,142,000. The prepayments were made without penalty. The Company received the
benefit of a prepayment discount of $183,000, representing accrued interest, by
paying the $10 million promissory note on or before May 31, 1996. The prepayment
discount is included in Interest Income for the nine months ended September 27,
1996.
On July 9, 1996, the Company announced that StorMedia Inc., a major customer,
had canceled all of its outstanding purchase orders with the Company, following
a significant loss of orders by StorMedia. The Company has no assurance that it
will receive any future orders from StorMedia. This cancellation had a negative
impact on the Company's performance in the third quarter of 1996 and could have
a negative impact on subsequent quarters. StorMedia accounted for approximately
7% and 34% of the Company's revenues for the three months ended September 27,
1996 and June 28, 1996, respectively, and 47% of its revenue for the fiscal year
ended December 31, 1995.
Employment Contracts
- --------------------
The Company entered into employment contracts with its executive officers that
provide for specified conditions and benefits of employment including; contract
length of either two or three years, salary continuation and benefits upon
termination of either two or one year, and a noncompete provision for a period
of one-year after final payment is made to the employee under the agreements.
The agreements provide for the employees to receive salary continuation equal to
three times salary in the event a change of control occurs as defined in the
agreements and employment termination occurs within three years of when such
change in control occurs.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FORWARD -LOOKING STATEMENTS -- SAFE HARBOR
- ------------------------------------------
This Report contains certain forward-looking statements, including the statement
below regarding the possible impact of cancellation of orders by a major
customer and backwards integration within the industry towards the manufacture
of aluminum disk substrates. Moreover, from time to time in both written
releases and reports and oral statements, the company and its senior management
may express expectations regarding future performance of the Company. All of
these "forward-looking statements" are inherently uncertain, and investors must
recognize that events may differ from Senior Management expectations. Key risk
factors that could, in particular, have an adverse impact on current and future
performance include the Company's dependence on a small number of customers, as
witnessed by the cancellation of orders in July 1996 by StorMedia Inc. (which
had been one of the Company's two largest customers), a trend toward vertical
integration among thin-film disk manufacturers that may reduce demand for the
Company's products, dependence on the intensely competitive and cyclical
hard-disk drive industry, absence of long-term purchase commitments from the
Company's customers and risk of excess industry capacity, particularly in light
of an apparent recent softening in demand for thin-film disks. See "Risk
Factors" beginning at Page 6 of the Company's Prospectus dated May 24, 1996 for
a more detailed discussion of factors (updated by the foregoing and other
discussion in this Report) that could affect the Company's performance and the
value of its common stock.
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
Net Sales. Net sales decreased $1.7 million, or 23.6%, to $5.5 million in
the three months ended September 27, 1996 from $7.2 million in the three months
ended September 29, 1995. This decrease of revenue in the three months ended
September 27, 1996 is attributable to the loss of sales volume with cancellation
of orders by a major customer and lower than expected orders from remaining
customers. The reduced orders are attributable to an apparent slowdown in
industry requirements and the expansion of capacity for the manufacture of
aluminum disk substrates by customers and potential customers, limiting current
overall order potential. The lower order volumes combined with the other factors
noted here resulted in lower average selling prices in the third quarter and
such prices are expected to continue to decrease in subsequent quarters.
Net sales increased $12.6 million, or 69.6%, to $30.7 million in the nine months
ended September 27, 1996 from $18.1 million in the nine months ended September
29, 1995. This growth during the beginning of the nine month period was
attributable to growth in the market for aluminum disk substrates, growth of net
sales to its existing customers and the addition of a new customer in the
beginning of 1996. The increase in net sales consisted primarily of growth in
unit volume due to improved utilization of existing production capacity,
productivity gains and capital expenditures for additional capacity.
On July 9, 1996, the Company announced that StorMedia Inc., a major customer,
had canceled all of its outstanding purchase orders with the Company, following
a significant loss of orders by StorMedia. The Company has no assurance that it
will receive any future orders from StorMedia. This cancellation had a negative
impact on the Company's performance in the third quarter of 1996 and could have
a negative impact on subsequent quarters. StorMedia accounted for approximately
7% and 34% of the Company's
6
<PAGE> 8
revenues for the three months ended September 27, 1996 and June 28, 1996,
respectively, and 47% of its revenue for the fiscal year ended December 31,
1995.
Gross Profit. Gross profit decreased $1.5 million to $0.6 million in the
three months ended September 27, 1996 from $2.1 million in the three months
ended September 29, 1995. Gross profit as a percentage of net sales decreased to
10.3% in the third quarter of 1996 compared to 29.5% in the third quarter of
1995. The decrease in gross profit was attributable to the under utilization of
existing capacity and the spreading of higher fixed costs attributable to a
larger available production capacity over a substantially lower sales volume.
Gross profit also decreased due to lower average selling prices of the Company's
products in the third quarter of 1996 compared to the third quarter of 1995.
Gross profit increased $5.3 million to $10.2 million in the nine months ended
September 27, 1996 from $4.9 million in the nine months ended September 29,
1995. Gross profit as a percentage of net sales increased to 33.3% in the first
nine months of 1996 compared to 26.9% in the first nine months of 1995. The
increase in gross profit was due to increases in volume, improved utilization of
existing manufacturing capacity and the spreading of fixed costs over a
substantially higher sales volume during the first six months of 1996.
Selling, General & Administrative Expenses. Selling, general and
administrative expenses increased $793,000, or 121%, to $1.4 million in the
three months ended September 27, 1996 from $656,000 in the three months ended
September 29, 1995. Selling, general and administrative expenses increased $2.7
million, or 162%, to $4.3 million in the nine months ended September 27, 1996
from $1.6 million in the nine months ended September 29, 1995. This increase was
primarily due to the costs of additional personnel to support the Company's
growth experienced in the first six months of 1996 (including the addition of
two executive officers), the costs associated with the Company becoming a
stand-alone company, and increased profit-sharing and performance-based bonus
expenses during the first six months of 1996. Selling, general and
administrative expenses as a percentage of net sales increased to 26.2% in the
third quarter of 1996 compared to 9.0% in the third quarter of 1995. The
increase in the percentage results from both growth in absolute spending and a
lower revenue base during the third quarter of 1996.
Interest Income. Interest income consists of interest income from
short-term investments.
Provision (Benefit) for Income Taxes. The Company recognized a benefit for
income taxes of $312,000 in the three months ended September 27, 1996 resulting
from operating losses compared to a provision for income taxes of $548,000 in
the three months ended September 29, 1995. The Company's effective tax rate was
40% in the third quarter of 1996 compared to 39% in the third quarter of 1995.
Fourth Quarter 1996. The Company expects that future operating results will
be impacted by industry vertical integration that reduces demand for its
products and will result in lower sales prices and gross margins. The Company
expects that the financial results for the fourth quarter of 1996 will not
exceed the results reported for the three months ended September 27, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements have been to fund working capital
needs and capital expenditures in order to support the Company's sales growth
experienced in the first six months of 1996. During the periods presented, these
capital requirements have generally been satisfied by cash flows from
7
<PAGE> 9
operations. Nashua Corporation (previously owned 100% of Cerion until the
initial public offering which reduced Nashua's ownership to 37%) historically
has performed cash management services for the Company. The Company's cash flow
was directed to Nashua, and Nashua in turn provided cash to the Company to fund
operating expenses and capital expenditures. On May 31, 1996, this arrangement
ceased. Shortly thereafter, the Company and Nashua determined the respective
cash flows from the Company to Nashua, and from Nashua to the Company, during
the period from January 1, 1996 through May 30, 1996, and settled a net amount
due from Cerion to Nashua for approximately $200,000.
Net cash provided by operating activities was $6.7 million and $2.0 million in
the nine months ended September 27, 1996 and September 29, 1995, respectively.
The increase in cash provided by operating activities from the first nine months
of 1995 to the first nine months of 1996 was primarily due to increases in net
income and the decrease in accounts receivable from December 31, 1995 to
September 27, 1996 associated with the decline of the Company's net sales
experienced in the three months ended September 27, 1996. The increase in
accounts payable from December 31, 1995 to September 27, 1996 consisted of
increased trade payables associated with the overall growth in the business and
capital projects undertaken by the Company in connection with its expansion that
were begun in the second quarter.
Net cash used in investing activities was $9.2 million and $1.0 million in the
first nine months of 1996 and 1995, respectively. Cash used in investing
activities was primarily capital expenditures related to modifications of
existing equipment, purchases of new equipment and the purchase and redemption
of short-term investments. The newly purchased equipment increased both
manufacturing capacities and efficiencies. The Company's short-term investments
are comprised of investment grade commercial paper.
Net cash provided by financing activities increased in the first nine months of
1996 due to the proceeds from the initial public offering partially offset by
the repayment of the Company's indebtedness. Net cash provided by financing
activities was $8.4 million in the first nine months of 1996. In the first nine
months of 1995, net cash used by financing activities was $1.1 million.
The Company is currently renegotiating the terms of its revolving credit
facility with LaSalle National Bank because of being out of compliance with
certain financial covenants. As the Company has no debt outstanding, being out
of compliance has only an effect to the Company in terms of future borrowing
requirements. The Company's current levels of cash and cash equivalents combined
with short-term investments will be sufficient to meet near term cash
requirements of the Company including planned capital expenditures through the
end of 1996. The Company has put the construction of a second manufacturing
facility on hold at this time.
On May 30, 1996, the Company closed on the Initial Public Offering of its stock
with the sale of 4,416,000 shares of its Common Stock. Of the 4,416,000 shares
of Common Stock sold, 1,615,000 shares were sold by the Company and 2,801,000
were sold by Nashua Corporation. Nashua Corporation continues to own
approximately 37% of the Company's outstanding Common Stock.
The shares were sold to the public at $13.00 per share. The net proceeds to the
Company after the Underwriting Discount was $19,525,350.
8
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On May 31, 1996, the Company repaid the two outstanding Promissory Notes issued
to Nashua Corporation in March 1996 having a combined principal sum of
$11,142,000. The prepayments were made without penalty. The Company received the
benefit of a prepayment discount of $183,000, representing accrued interest, by
paying the $10 million promissory note on or before May 31, 1996. The prepayment
discount is included in Interest Income.
INFLATION
In the opinion of management, inflation has not had a material effect on the
operations of the Company.
9
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
On August 8, 1996, an individual plaintiff, Joshua Teitelbaum, initiated a
lawsuit against the Company, Nashua Corporation ("Cerion"), William Blair & Co.,
David A. Peterson, Paul A. Harter, Richard A. Clark and Gerald G. Garbacz in the
Circuit Court of Cook County, Illinois. The action purports to be on behalf of a
class consisting of all persons (other than the defendants) who purchased the
common stock of the Company between May 24, 1996 and July 9, 1996. The complaint
alleges that, in connection with the Company's initial public offering, the
defendants issued certain materially false and misleading statements and omitted
the disclosure of material facts regarding, in particular, certain significant
customer relationships. The complaint alleges that the defendants violated
sections 11, 12, and 15 of the 1993 Securities Act sections 12 and 13 of the
Illinois Blue Sky Law. The complaint seeks a declaration that the case may
proceed as a class action, damages, recission of the sale of the Company's
common stock by the Company, costs, attorneys fees, and other relief on behalf
of the individual plaintiff and the class. The Company believes the lawsuit to
be without merit and intends to vigorously defend against this action.
On September 4, 1996, an individual plaintiff, Philippe Olczyk, initiated a
lawsuit against the Company, Nashua Corporation, William Blair & Co., David A.
Peterson, Daniel M. Junius and Gerald G. Garbacz in the Circuit Court of Cook
County, Illinois. The action purports to be on behalf of a class consisting of
all persons (other than the defendants) who purchased the common stock of the
Company between May 24, 1996 and July 9, 1996. The complaint alleges that, in
connection with the Company's initial public offering, the defendants issued
certain materially false and misleading statements and omitted the disclosure of
material facts regarding, in particular, certain significant customer
relationships. The complaint alleges that the defendants violated the Illinois
Blue Sky Law and the Illinois Consumer Fraud and Deceptive Practices Act. The
complaint seeks declarations that the case may be maintained as a class action
and that the defendants violated the Illinois Consumer Fraud Act, actual
punitive damages, costs, attorneys fees, appointment of a trustee, and other
relief. The Company believes the lawsuit to be without merit and intends to
vigorously defend against this action.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
A. Exhibits
10.1 Employment Contract between Cerion Technologies Inc. and David Peterson
as President and Chief Executive Officer.
10.2 Form of Employment Contract between Cerion Technologies Inc. and the
four remaining executive officers of the Company.
11.1 Computation of Per Share Earnings
B. Reports on Form 8-K
None.
10
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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.
CERION TECHNOLOGIES INC.
--------------------------------
(Registrant)
Date: November 8, 1996 By: /s/ Richard A. Clark
-----------------------------
Richard A. Clark
Vice President-Finance,
Chief Financial Officer and
Treasurer
(principal financial and duly
authorized officer)
11
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Exhibit 10.1 Employment Contract between Cerion Technologies Inc. and David
Peterson as President and Chief Executive Officer
EMPLOYMENT CONTRACT
-------------------
THIS AGREEMENT made this 25th day of June, 1996, between CERION
TECHNOLOGIES INC., A DELAWARE Corporation, with offices located at 1401
Interstate Drive, Champaign, Illinois, hereinafter called "Employer", and DAVID
PETERSON, hereinafter called "Employee".
WITNESSETH:
WHEREAS, Employer desires to employ Employee for a time certain and the
Employee desires to provide services to the Employer for a time certain; and,
WHEREAS, each party to this Agreement is agreeable to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, the parties agree as follows:
1. EMPLOYMENT. The Employer represents that it is a Corporation engaged in
business with its principal office located at Champaign, Illinois. The Employer
hereby employs the Employee and Employee hereby accepts employment from the
Employer upon the terms and conditions set forth herein.
2. TERM. The term of this Agreement shall begin on the 25th day of June,
1996, and shall automatically renew itself each day for a continuing term of
three years, it being the intent of the parties that this Employment Contract
renew itself daily for a continuing three year term. In the event of termination
of Employee's employment by Employer, prior to the end of the continuing three
year term, for a reason other than cause, Employee shall be entitled to the
benefits
1
<PAGE> 2
described below: two years of salary continuation (excluding bonuses) and two
years of health insurance, life insurance, and disability insurance; provided,
however, that Paragraph 12 below shall apply instead of this Paragraph 2 if such
termination takes place within three years of a "change of control".
3. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Employer shall pay the Employee compensation in accordance with
the compensation authorized by the Board of Directors, said compensation to
continue until modified by the Board of Directors on an annual basis.
4. EMPLOYEE COVENANTS. Employee promises and agrees to abide by the
following representations:
(a) Employee agrees that Employee will not engage in any other gainful
employment without the prior written consent of the Employer.
(b) Employee agrees to devote Employee's best efforts to the promotion
of the Corporate business and agrees to represent the Corporation in the
best manner possible.
(c) Employee recognizes and agrees that the services of Employee are
special and unique, and that Employee has a special fiduciary duty to
Employer based on Employee's position and access to information and that
for these reasons, a Covenant on the part of Employee not to compete during
his employment and for a reasonable period after the termination or
expiration of such employment, is essential to protect Employer.
Accordingly, and in consideration of Employer's covenants and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Employee agrees that for the
Restricted Period, neither the Employee nor any person or entity
controlled, directly or indirectly, by the Employee, whether individually
or as an Officer,
2
<PAGE> 3
Director, Employee, Consultant, Partner, or Owner of more than 1% of the
equity interest in any Corporation or other entity, shall, directly or
indirectly (i) in the United States, engage in, or render any services in
connection with, any Business that is Competitive, directly or indirectly,
with the businesses (including, without limitation, the Disk Business)
carried on by Employer at or prior to the termination or expiration of the
Employee's employment by Employer, or (ii) interfere with the business
relationships (whether formed heretofore or hereafter) between Employer and
any of its customers and suppliers. The term "Disk Business" shall mean the
manufacture, processing, or sale of substrates for disks used in the hard
disk drives of computers, network servers, or storage devices and
substrates for organic photoconductor drums. The term "Restricted Period"
shall mean the period from the date hereof until a date one year after the
termination or expiration of the Employee's employment with Employer, or in
the event Employer pays Employee following termination based on the terms
of this Agreement, the period will be from the date hereof until a date one
year after the final payment made to Employee pursuant to this Agreement.
The term "Business that is Competitive" shall mean a business which markets
products in the United States which are competitive, directly or
indirectly, with the businesses carried on by Employer whether those
businesses operate from within the United States or outside the United
States.
(d) During the Restricted Period, neither the Employee nor any person
or entity controlled, directly or indirectly, by the Employee, shall,
directly or indirectly, hire, retain (including as a Consultant), solicit
or encourage to leave the employment of Employer, any employee of Employer,
3
<PAGE> 4
or hire or retain any former employee of Employer who has left such
employment within one year prior to such hiring or retention.
(e) Employee agrees that all rights to discoveries, inventions,
improvements, and innovations (including all data and records pertaining
thereto) which relate to the business of Employer, whether or not
patentable, copyrightable, or reduced to writing which the Employee may
discover, invent, or originate during the Restricted Period, either alone,
or with others, and whether or not during working hours, or by the use of
the facilities of Employer ("Inventions") shall be the exclusive property
of Employer. The Employee shall promptly disclose all Inventions to
Employer. Whether during the term of this Agreement or thereafter, the
Employee shall execute at the request of Employer any assignments or other
documents Employer may deem necessary to protect or perfect its rights in
any Inventions, and shall assist Employer, at Employer's expense, in
obtaining, defending, and enforcing Employer's rights therein. The Employee
hereby appoints Employer as the Attorney-in-Fact for Employee to execute on
Employee's behalf any assignments or other documents necessary by Employer
to protect or perfect its rights to any Inventions.
(f) Employee agrees that during and after the period of Employee's
employment by Employer, the Employee and any person or entity controlled
directly or indirectly by the Employee shall maintain in confidence and
shall not directly or indirectly, disclose, sell, use, publish, make copies
of, or communicate to any person, firm, or Corporation any confidential
information, trade secrets, or proprietary data of Employer of which
Employee learns or learned or to which
4
<PAGE> 5
Employee has or had access during the course of the Employee's employment
by Employer. The term "confidential information, trade secrets, or
proprietary data" means any information concerning any matters affecting or
relating to the business of Employer, including, without limiting the
generality of the foregoing, any Inventions, improvements, and enhancements
(whether patentable or not); patents or patent applications; any
protectable technology, know-how, and copyrightable material; trade
secrets, including any formulas, patterns, devices, machines, processes,
compilations of information, or expenditures of time or money; product
designs and developments; research reports, market studies and plans;
customer lists; the prices Employer obtains or has obtained from the sale
of, or at which it sells or has sold, its products or services; estimates,
bids, and projections; or any other information concerning the business of
Employer, its manner of operation, its plans, policies, processes,
strategies, or other data, and including any information as to the
existence or terms and provisions of this Agreement, without regard to
whether any or all of the foregoing are or would be deemed confidential,
material, or important, it being agreed that the same are confidential,
material, and important, and gravely affect the effective and successful
conduct of Employer's business and Employer's goodwill, and that any breach
of the terms of this provision shall be a material breach of this
Agreement, and will result in immediate and irreparable harm to Employer;
provided, however, that nothing shall be considered "confidential
information, trade secrets, or proprietary data" which is or becomes known
to the public by acts of others (other than other
5
<PAGE> 6
signatories to this type of Agreement with Employer) or through the normal
or other authorized course of operation of Employer.
All memoranda, notes, lists, records, and other documents (and all
copies thereof) made or compiled by the Employee or any person or entity
controlled, directly or indirectly, by the Employee, or made available to
the Employee or any person or entity controlled, directly or indirectly, by
the Employee concerning the business of the Employer, shall be Employer's
property and shall be delivered to Employer promptly upon the termination
of the Employee's employment by Employer.
(g) The benefits of the Employee's agreements and covenants in this
Section 4 may be assigned without notice to or consent of the Employee to
any acquiror of Employer or all, or substantially all of the assets in a
sale, and the Employee hereby unconditionally and irrevocably consents to
any such assignment, and furthermore, agrees to be bound by the provisions
of this Section 4, notwithstanding any sale of Employer, or any assignment
of the benefits of this Section 4 in connection with any such sale.
(h) Employee acknowledges that damages for breaches of the covenants
contained in this Section 4 are difficult, if not impossible to prove
precisely; therefore, it is agreed that the provisions of this Agreement
shall be enforceable by injunction. If any of the restrictions contained in
this Agreement hereof shall be deemed to be unenforceable by reason of the
extent, duration, or geographical scope or other provision hereof, then the
parties hereto contemplate that the Court or other body having jurisdiction
over the matter shall reduce
6
<PAGE> 7
such extent, duration, geographical scope, or other provision hereof, and
enforce the affected provisions of this Agreement in reduced form for all
purposes in the manner contemplated hereby, and the parties hereto agree
that such provisions of this Agreement, as so modified, shall be valid and
binding as though any unenforceable provisions had not been included
therein.
5. CORPORATE FACILITIES. The Employer shall furnish the Employee with
suitable working space and other facilities which are necessary for Employee's
position and adequate for the performance of Employee's duties.
6. EXPENSES. The Employer shall furnish or shall reimburse Employee for
actual expenses incurred in connection with the performance of Employee's duties
provided that the expenses were incurred on behalf of the Employer and were
authorized by Employer.
7. FRINGE BENEFITS. Fringe benefit plans which have been installed by the
Corporation for the benefit of Employees in accordance with appropriate Board of
Director resolutions shall apply to Employee in accordance with the particular
fringe benefit involved. The Board of Directors policy regarding vacation plans,
sick leave, medical insurance, and any additional fringe benefit plans which may
be approved by the Board of Directors shall apply to Employee without
discrimination in accordance with the provisions of the Corporate plan for the
Employee's particular class of employment.
8. DUTIES. The Employee accepts employment as President of the Employer and
agrees to perform those duties assigned to Employee by the Board of Directors of
the Corporation.
9. ENTIRE AGREEMENT. This is the entire agreement between the parties and
embodies all forms of compensation which shall become due to Employee, but
7
<PAGE> 8
is subject to modification for the purpose of adding additional benefits and
compensation due to the Employee when directed by the Board of Directors of the
Company. This Agreement supersedes all prior Agreements between Employee and
Employer and Employee and Nashua Corporation, or any of its subsidiaries,
relating to termination of employment.
10. DISCHARGE FOR CAUSE. Employer shall have the right to discharge
Employee at any time, for cause, without notice. A discharge for cause shall
include the following: If Employee is convicted of a crime under the laws of the
State of Illinois or the United States, other than those laws involving a
traffic violation; is involved in fraudulent conduct in connection with the
affairs of the Employer, a customer, or a member of the public; violates
Employee's duty of loyalty to the Employer by assisting competitors of Employer;
or Employee acts in such a manner that the actions clearly bring discredit to
the name of Employer. In case of a discharge for cause, this Agreement will
immediately terminate, and Employer shall have no obligation to compensate
Employee after the termination of employment for cause.
11. GOVERNING LAW. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Illinois.
12. CHANGE OF CONTROL. If within three years after a "change of control" of
the ownership of Employer, Employee's employment is terminated by Employer for a
reason other than cause, or if Employee terminates for "good reason", Employee
shall be entitled to the benefits described below:
Three times the Employee's highest annual salary (including bonuses)
per annum paid by the Employer to Employee in any one of the three calendar
years prior to termination of employment, providing such amount shall not be
greater than $1.00 less than three times the Employee's "base amount" as defined
in the
8
<PAGE> 9
Internal Revenue Code, Section 280(g), as amended from time to time. Payment
shall be made within 30 days of the date of termination.
The term "change of control" shall mean (1) the time of approval by
the Shareholders of the Employer of (A) any consolidation or merger of the
Employer in which the Employer is not the continuing or surviving Corporation or
pursuant to which shares would be converted into cash, securities, or other
property, other than a merger in which the holders of stock immediately prior to
the merger will have the same proportionate ownership of common stock of the
surviving Corporation immediately after the merger, (B) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Employer, or (C)
adoption of any plan or proposal for the liquidation of dissolution of the
Employer; or (2) the date on which any "person" (as defined in Section 13(d) of
the Securities Exchange Act of 1934), other than Nashua Corporation, a Delaware
Corporation ("Nashua"), the Employer or a subsidiary or employee benefit plan or
trust maintained by the Employer or any of its subsidiaries shall become
(together with its "affiliates" and "associates", as defined in Rule 12b-2 under
the Securities Exchange Act of 1934) the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of
more than 50% of the stock outstanding at the time.
For purposes of this Agreement, "good reason" means:
(a) (i) The assignment to Employee of any duties inconsistent in any
respect with Employee's position (including status, offices, titles, and
reporting requirements), authority, duties, or responsibilities immediately
prior to the change in control or (ii) any other action by the Employer
which results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and
9
<PAGE> 10
inadvertent action which is remedied by the Employer promptly after receipt
of notice thereof given by Employee;
(b) Any failure by the Employer to comply with any of the provisions of
this Agreement, other than an insubstantial and inadvertent failure which
is remedied by the Employer promptly after receipt of notice thereof given
by Employee;
(c) The Employer's requiring Employee to be based at any office or
location more than 35 miles from Champaign, Illinois, except for travel
reasonably required in the performance of responsibilities;
(d) A reduction in salary (including bonuses) from the level prior to
the change of control; or
(e) Any failure by Employer to comply with or satisfy the provisions of
Paragraph 13(b) hereof.
13. BINDING EFFECT.
(a) This Agreement shall be binding upon and inure to the benefit of the
Employer and any successor of the Employer. Neither this Agreement nor any
rights arising hereunder may be assigned or pledged by Employee. This Agreement
shall inure to the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees.
(b) In the event of a change of control of Employer, any parent company or
successor to all or substantially all the assets of the Employer shall, in the
case of a successor, by an agreement in form and substance satisfactory to
Employee, expressly assume and agree to perform this Agreement and, in the case
of a parent company, by an agreement in form and substance satisfactory to
Employee, guarantee and agree to cause the performance of this Agreement, in
10
<PAGE> 11
each case, in the same manner and to the same extent as the Employer would be
required to perform if no change of control had taken place.
(c) If Employee should die while any amount would still be payable to
Employee hereunder if Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Employee's legatee or other designee or, if there be no such
designee, to Employee's estate.
IN WITNESS WHEREOF, this Employment Contract has been executed by Employer
and Employee on the date first above written.
EMPLOYER:
CERION TECHNOLOGIES INC.:
By:
-----------------------------
President
EMPLOYEE:
--------------------------------
DAVID PETERSON
11
<PAGE> 1
Exhibit 10.2 Form of Employment Contract between Cerion Technologies Inc. and
the four remaining executive officers of the Company
EMPLOYMENT CONTRACT
THIS AGREEMENT made this 25th day of June, 1996, between CERION
TECHNOLOGIES INC., A DELAWARE Corporation, with offices located at 1401
Interstate Drive, Champaign, Illinois, hereinafter called "Employer", and
_________________________________, hereinafter called "Employee".
WITNESSETH:
WHEREAS, Employer desires to employ Employee for a time certain and the
Employee desires to provide services to the Employer for a time certain; and,
WHEREAS, each party to this Agreement is agreeable to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, the parties agree as follows:
1. EMPLOYMENT. The Employer represents that it is a Corporation engaged in
business with its principal office located at Champaign, Illinois. The Employer
hereby employs the Employee and Employee hereby accepts employment from the
Employer upon the terms and conditions set forth herein.
2. TERM. The term of this Agreement shall begin on the 25th day of June,
1996, and shall automatically renew itself each day for a continuing term of two
years, it being the intent of the parties that this Employment Contract renew
itself daily for a continuing two year term. In the event of termination of
Employee's employment by Employer, prior to the end of the continuing two year
term, for a reason other than cause, Employee shall be entitled to the benefits
described below: one year of salary continuation (excluding bonuses) and one
year of health insurance, life insurance, and disability insurance; provided,
however,
1
<PAGE> 2
that Paragraph 12 below shall apply instead of this Paragraph 2 if such
termination takes place within three years of a "change of control".
3. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Employer shall pay the Employee compensation in accordance with
the compensation authorized by the Board of Directors, said compensation to
continue until modified by the Board of Directors on an annual basis.
4. EMPLOYEE COVENANTS. Employee promises and agrees to abide by the
following representations:
(a) Employee agrees that Employee will not engage in any other gainful
employment without the prior written consent of the Employer.
(b) Employee agrees to devote Employee's best efforts to the promotion
of the Corporate business and agrees to represent the Corporation in the
best manner possible.
(c) Employee recognizes and agrees that the services of Employee are
special and unique, and that Employee has a special fiduciary duty to
Employer based on Employee's position and access to information and that
for these reasons, a Covenant on the part of Employee not to compete during
his employment and for a reasonable period after the termination or
expiration of such employment, is essential to protect Employer.
Accordingly, and in consideration of Employer's covenants and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Employee agrees that for the
Restricted Period, neither the Employee nor any person or entity
controlled, directly or indirectly, by the Employee, whether individually
or as an Officer, Director, Employee, Consultant, Partner, or Owner of more
than 1% of the equity interest in any Corporation or other entity, shall,
directly or indirectly (i) in the United States, engage in, or render any
services in connection with, any Business that is Competitive, directly or
indirectly, with the businesses
2
<PAGE> 3
(including, without limitation, the Disk Business) carried on by Employer
at or prior to the termination or expiration of the Employee's employment
by Employer, or (ii) interfere with the business relationships (whether
formed heretofore or hereafter) between Employer and any of its customers
and suppliers. The term "Disk Business" shall mean the manufacture,
processing, or sale of substrates for disks used in the hard disk drives of
computers, network servers, or storage devices and substrates for organic
photoconductor drums. The term "Restricted Period" shall mean the period
from the date hereof until a date one year after the termination or
expiration of the Employee's employment with Employer, or in the event
Employer pays Employee following termination based on the terms of this
Agreement, the period will be from the date hereof until a date one year
after the final payment made to Employee pursuant to this Agreement. The
term "Business that is Competitive" shall mean a business which markets
products in the United States which are competitive, directly or
indirectly, with the businesses carried on by Employer whether those
businesses operate from within the United States or outside the United
States.
(d) During the Restricted Period, neither the Employee nor any person
or entity controlled, directly or indirectly, by the Employee, shall,
directly or indirectly, hire, retain (including as a Consultant), solicit
or encourage to leave the employment of Employer, any employee of Employer,
or hire or retain any former employee of Employer who has left such
employment within one year prior to such hiring or retention.
(e) Employee agrees that all rights to discoveries, inventions,
improvements, and innovations (including all data and records pertaining
thereto) which relate to the business of Employer, whether or not
patentable, copyrightable, or reduced to writing which the Employee may
discover, invent, or originate during the Restricted
3
<PAGE> 4
Period, either alone, or with others, and whether or not during working
hours, or by the use of the facilities of Employer ("Inventions") shall be
the exclusive property of Employer. The Employee shall promptly disclose
all Inventions to Employer. Whether during the term of this Agreement or
thereafter, the Employee shall execute at the request of Employer any
assignments or other documents Employer may deem necessary to protect or
perfect its rights in any Inventions, and shall assist Employer, at
Employer's expense, in obtaining, defending, and enforcing Employer's
rights therein. The Employee hereby appoints Employer as the
Attorney-in-Fact for Employee to execute on Employee's behalf any
assignments or other documents necessary by Employer to protect or perfect
its rights to any Inventions.
(f) Employee agrees that during and after the period of Employee's
employment by Employer, the Employee and any person or entity controlled
directly or indirectly by the Employee shall maintain in confidence and
shall not directly or indirectly, disclose, sell, use, publish, make copies
of, or communicate to any person, firm, or Corporation any confidential
information, trade secrets, or proprietary data of Employer of which
Employee learns or learned or to which Employee has or had access during
the course of the Employee's employment by Employer. The term "confidential
information, trade secrets, or proprietary data" means any information
concerning any matters affecting or relating to the business of Employer,
including, without limiting the generality of the foregoing, any
Inventions, improvements, and enhancements (whether patentable or not);
patents or patent applications; any protectable technology, know-how, and
copyrightable material; trade secrets, including any formulas, patterns,
devices, machines, processes, compilations of information, or
4
<PAGE> 5
expenditures of time or money; product designs and developments; research
reports, market studies and plans; customer lists; the prices Employer
obtains or has obtained from the sale of, or at which it sells or has sold,
its products or services; estimates, bids, and projections; or any other
information concerning the business of Employer, its manner of operation,
its plans, policies, processes, strategies, or other data, and including
any information as to the existence or terms and provisions of this
Agreement, without regard to whether any or all of the foregoing are or
would be deemed confidential, material, or important, it being agreed that
the same are confidential, material, and important, and gravely affect the
effective and successful conduct of Employer's business and Employer's
goodwill, and that any breach of the terms of this provision shall be a
material breach of this Agreement, and will result in immediate and
irreparable harm to Employer; provided, however, that nothing shall be
considered "confidential information, trade secrets, or proprietary data"
which is or becomes known to the public by acts of others (other than other
signatories to this type of Agreement with Employer) or through the normal
or other authorized course of operation of Employer.
All memoranda, notes, lists, records, and other documents (and all
copies thereof) made or compiled by the Employee or any person or entity
controlled, directly or indirectly, by the Employee, or made available to
the Employee or any person or entity controlled, directly or indirectly, by
the Employee concerning the business of the Employer, shall be Employer's
property and shall be delivered to Employer promptly upon the termination
of the Employee's employment by Employer.
5
<PAGE> 6
(g) The benefits of the Employee's agreements and covenants in this
Section 4 may be assigned without notice to or consent of the Employee to
any acquiror of Employer or all, or substantially all of the assets in a
sale, and the Employee hereby unconditionally and irrevocably consents to
any such assignment, and furthermore, agrees to be bound by the provisions
of this Section 4, notwithstanding any sale of Employer, or any assignment
of the benefits of this Section 4 in connection with any such sale.
(h) Employee acknowledges that damages for breaches of the covenants
contained in this Section 4 are difficult, if not impossible to prove
precisely; therefore, it is agreed that the provisions of this Agreement
shall be enforceable by injunction. If any of the restrictions contained in
this Agreement hereof shall be deemed to be unenforceable by reason of the
extent, duration, or geographical scope or other provision hereof, then the
parties hereto contemplate that the Court or other body having jurisdiction
over the matter shall reduce such extent, duration, geographical scope, or
other provision hereof, and enforce the affected provisions of this
Agreement in reduced form for all purposes in the manner contemplated
hereby, and the parties hereto agree that such provisions of this
Agreement, as so modified, shall be valid and binding as though any
unenforceable provisions had not been included therein.
5. CORPORATE FACILITIES. The Employer shall furnish the Employee with
suitable working space and other facilities which are necessary for Employee's
position and adequate for the performance of Employee's duties.
6. EXPENSES. The Employer shall furnish or shall reimburse Employee for
actual expenses incurred in connection with the performance of Employee's duties
6
<PAGE> 7
provided that the expenses were incurred on behalf of the Employer and were
authorized by Employer.
7. FRINGE BENEFITS. Fringe benefit plans which have been installed by the
Corporation for the benefit of Employees in accordance with appropriate Board of
Director resolutions shall apply to Employee in accordance with the particular
fringe benefit involved. The Board of Directors policy regarding vacation plans,
sick leave, medical insurance, and any additional fringe benefit plans which may
be approved by the Board of Directors shall apply to Employee without
discrimination in accordance with the provisions of the Corporate plan for the
Employee's particular class of employment.
8. DUTIES. The Employee accepts employment as ____________________
______________________________ of the Employer and agrees to perform those
duties assigned to Employee by the President and the Board of Directors of the
Corporation.
9. ENTIRE AGREEMENT. This is the entire agreement between the parties and
embodies all forms of compensation which shall become due to Employee, but is
subject to modification for the purpose of adding additional benefits and
compensation due to the Employee when directed by the Board of Directors of the
Company. This Agreement supersedes all prior Agreements between Employee and
Employer and Employee and Nashua Corporation, or any of its subsidiaries,
relating to termination of employment.
10. DISCHARGE FOR CAUSE. Employer shall have the right to discharge
Employee at any time, for cause, without notice. A discharge for cause shall
include the following: If Employee is convicted of a crime under the laws of the
State of Illinois or the United States, other than those laws involving a
traffic violation; is involved in fraudulent conduct in connection with the
affairs of the Employer, a customer, or a member of the public; violates
Employee's duty of loyalty to the Employer by assisting competitors of Employer;
or Employee acts in
7
<PAGE> 8
such a manner that the actions clearly bring discredit to the name of Employer.
In case of a discharge for cause, this Agreement will immediately terminate, and
Employer shall have no obligation to compensate Employee after the termination
of employment for cause.
11. GOVERNING LAW. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Illinois.
12. CHANGE OF CONTROL. If within three years after a "change of control" of
the ownership of Employer, Employee's employment is terminated by Employer for a
reason other than cause, or if Employee terminates for "good reason", Employee
shall be entitled to the benefits described below:
Three times the Employee's highest annual salary (including bonuses)
per annum paid by the Employer to Employee in any one of the three calendar
years prior to termination of employment, providing such amount shall not be
greater than $1.00 less than three times the Employee's "base amount" as defined
in the Internal Revenue Code, Section 280(g), as amended from time to time.
Payment shall be made within 30 days of the date of termination.
The term "change of control" shall mean (1) the time of approval by
the Shareholders of the Employer of (A) any consolidation or merger of the
Employer in which the Employer is not the continuing or surviving Corporation or
pursuant to which shares would be converted into cash, securities, or other
property, other than a merger in which the holders of stock immediately prior to
the merger will have the same proportionate ownership of common stock of the
surviving Corporation immediately after the merger, (B) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Employer, or (C)
adoption of any plan or proposal for the liquidation of dissolution of the
Employer; or (2) the date on which any "person" (as defined in Section 13(d) of
the Securities Exchange Act of 1934), other than Nashua Corporation, a Delaware
Corporation ("Nashua"), the Employer
8
<PAGE> 9
or a subsidiary or employee benefit plan or trust maintained by the Employer or
any of its subsidiaries shall become (together with its "affiliates" and
"associates", as defined in Rule 12b-2 under the Securities Exchange Act of
1934) the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of more than 50% of the stock
outstanding at the time.
For purposes of this Agreement, "good reason" means:
(a) (i) The assignment to Employee of any duties inconsistent in any
respect with Employee's position (including status, offices, titles, and
reporting requirements), authority, duties, or responsibilities immediately
prior to the change in control or (ii) any other action by the Employer
which results in a diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent action which
is remedied by the Employer promptly after receipt of notice thereof given
by Employee;
(b) Any failure by the Employer to comply with any of the provisions of
this Agreement, other than an insubstantial and inadvertent failure which
is remedied by the Employer promptly after receipt of notice thereof given
by Employee;
(c) The Employer's requiring Employee to be based at any office or
location more than 35 miles from Champaign, Illinois, except for travel
reasonably required in the performance of responsibilities;
(d) A reduction in salary (including bonuses) from the level prior to
the change of control; or
(e) Any failure by Employer to comply with or satisfy the provisions of
Paragraph 13(b) hereof.
13. BINDING EFFECT.
(a) This Agreement shall be binding upon and inure to the benefit of the
Employer and any successor of the Employer. Neither this Agreement nor any
9
<PAGE> 10
rights arising hereunder may be assigned or pledged by Employee. This Agreement
shall inure to the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees.
(b) In the event of a change of control of Employer, any parent company or
successor to all or substantially all the assets of the Employer shall, in the
case of a successor, by an agreement in form and substance satisfactory to
Employee, expressly assume and agree to perform this Agreement and, in the case
of a parent company, by an agreement in form and substance satisfactory to
Employee, guarantee and agree to cause the performance of this Agreement, in
each case, in the same manner and to the same extent as the Employer would be
required to perform if no change of control had taken place.
(c) If Employee should die while any amount would still be payable to
Employee hereunder if Employee had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Employee's legatee or other designee or, if there be no such
designee, to Employee's estate.
IN WITNESS WHEREOF, this Employment Contract has been executed by Employer
and Employee on the date first above written.
EMPLOYER:
CERION TECHNOLOGIES INC.:
By:
------------------------------
President
EMPLOYEE:
---------------------------------
---------------------------------
10
<PAGE> 1
EXHIBIT 11.1
CERION TECHNOLOGIES INC.
<TABLE>
COMPUTATION OF NET INCOME (LOSS)
PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
For the Three Months Ended
--------------------------
September 27, 1996 September 29, 1995
------------------ ------------------
<S> <C> <C>
Net income (loss) $ (467) $ 854
====== ======
Shares:
Weighted average common shares outstanding during the period 7,016 5,400
Common equivalent shares -- --
------ ------
Net income (loss) per common share: 7,016 5,400
====== ======
$(0.07) $ 0.16
====== ======
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-27-1996
<EXCHANGE-RATE> 1
<CASH> 6,104
<SECURITIES> 3,502
<RECEIVABLES> 2,856
<ALLOWANCES> 208
<INVENTORY> 1,994
<CURRENT-ASSETS> 14,743
<PP&E> 13,865
<DEPRECIATION> 4,229
<TOTAL-ASSETS> 24,481
<CURRENT-LIABILITIES> 3,691
<BONDS> 0
<COMMON> 70
0
0
<OTHER-SE> 20,377
<TOTAL-LIABILITY-AND-EQUITY> 24,481
<SALES> 30,736
<TOTAL-REVENUES> 30,736
<CGS> 20,515
<TOTAL-COSTS> 20,515
<OTHER-EXPENSES> 4,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (61)
<INCOME-PRETAX> 5,976
<INCOME-TAX> 2,391
<INCOME-CONTINUING> 3,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,585
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
