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 4, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------------- -----------------------
Commission file number 0-20109
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Kronos Incorporated
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2640942
- -------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Fifth Avenue, Waltham, MA 02154
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(781) 890-3232
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
-------- -------
As of May 1, 1998, 8,294,986 shares of the registrant's Common Stock, $.01
par value, were outstanding.
<PAGE>
KRONOS INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Statements of Income for the Three
Months and Six Months Ended April 4, 1998 and March 29, 1997 1
Condensed Consolidated Balance Sheets at April 4, 1998
and September 30, 1997 2
Condensed Consolidated Statements of Cash Flows for the Three
Months and Six Months Ended April 4, 1998 and March 29, 1997 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
UNAUDITED
Three Months Ended Six Months Ended
--------- --------- --------- ---------
April 4, March 29, April 4, March 29,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues:
Product .......................... $ 30,111 $ 26,121 $ 59,872 $ 51,839
Service .......................... 16,361 13,282 31,173 24,674
--------- --------- --------- ---------
--------- --------- --------- ---------
46,472 39,403 91,045 76,513
--------- --------- --------- ---------
Cost of sales:
Product .......................... 7,743 7,041 14,783 13,456
Service .......................... 10,494 8,813 20,623 16,785
--------- --------- --------- ---------
18,237 15,854 35,406 30,241
--------- --------- --------- ---------
Gross profit ................. 28,235 23,549 55,639 46,272
Expenses:
Sales and marketing .............. 15,878 13,835 31,929 26,579
Engineering, research and development 4,557 4,166 8,881 8,138
General and administrative ....... 3,317 2,745 6,412 5,253
Other (income) expense, net ...... (184) (75) (186) (112)
--------- --------- --------- ---------
23,568 20,671 47,036 39,858
--------- --------- --------- ---------
Income before income taxes ... 4,667 2,878 8,603 6,414
Provision for income taxes ......... 1,783 1,099 3,287 2,449
--------- --------- --------- ---------
Net income ................... $ 2,884 $ 1,779 $ 5,316 $ 3,965
========= ========= ========= =========
Net income per common share:
Basic ........................ $ 0.35 $ 0.22 $ 0.65 $ 0.49
========= ========= ========= =========
Diluted ...................... $ 0.34 $ 0.21 $ 0.63 $ 0.47
========= ========= ========= =========
Average common and common equivalent shares outstanding:
Basic ........................ 8,274,942 8,185,134 8,232,509 8,158,144
========= ========= ========= =========
Diluted ...................... 8,527,857 8,439,627 8,484,485 8,418,489
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
UNAUDITED
April 4, September 30,
1998 1997
--------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents .................................................... $ 16,517 $ 20,698
Marketable securities ................................................... 24,451 15,530
Accounts receivable, less allowances for doubtful accounts of $1,000
at April 4, 1998 and $1,091 at September 30, 1997 .................... 36,965 38,817
Inventories ............................................................. 4,418 4,322
Deferred income taxes ................................................... 4,277 4,277
Other current assets .................................................... 7,515 6,539
--------- ---------
Total current assets ............................................. 94,143 90,183
Equipment, net ............................................................. 16,414 17,038
Net investment in sales-type leases ........................................ 5,924 5,312
Excess of cost over net assets of businesses acquired ...................... 11,222 7,855
Other assets ............................................................... 8,724 7,726
--------- ---------
Total assets ...................................................... $ 136,427 $ 128,114
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ................................... $ 12,759 $ 13,217
Accrued compensation .................................................... 9,466 10,105
Federal and state income taxes payable .................................. 1,359 3,497
Unearned service revenue ................................................ 24,806 22,209
--------- ---------
Total current liabilities ......................................... 48,390 49,028
Deferred income taxes ...................................................... 2,587 2,587
Unearned service revenue ................................................... 6,224 3,523
Other liabilities .......................................................... 435 503
Shareholders' equity:
Preferred Stock, par value $1.00 per share: authorized 1,000,000 shares,
no shares issued and outstanding
Common Stock, par value $.01 per share: authorized 20,000,000 shares,
8,291,639 shares and 8,246,453 shares issued at April 4, 1998 and
September 30, 1997, respectively ..................................... 83 82
Additional paid-in capital .............................................. 29,044 29,770
Retained earnings ....................................................... 50,362 45,045
Equity adjustment from translation ...................................... (697) (262)
Cost of Treasury Stock (23 shares and 86,493
shares at April 4, 1998 and September 30, 1997, respectively) ........ (1) (2,162)
--------- ---------
Total shareholders' equity ........................................ 78,791 72,473
--------- ---------
Total liabilities and shareholders' equity ........................ $ 136,427 $ 128,114
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
UNAUDITED
Six Months Ended
---------------------
April 4, March 29,
1998 1997
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 5,317 $ 3,965
Adjustments to reconcile net income to net cash and equivalents
provided by operating activities:
Depreciation 3,571 3,023
Amortization of deferred software development costs and
excess of cost over net assets of businesses acquired 3,010 2,149
Changes in certain operating assets and liabilities:
Accounts receivable, net 1,637 965
Inventories (111) (677)
Unearned service revenue 5,347 2,680
Accounts payable, accrued compensation
and other liabilities (3,393) (1,814)
Net investment in sales-type leases (812) (2,684)
Other (828) (721)
-------- --------
Net cash and equivalents provided by operating activities 13,738 6,886
Investing activities:
Purchase of equipment (3,000) (5,124)
Capitalization of software development costs (3,023) (2,552)
(Increase) decrease in marketable securities (8,921) 3,795
Acquisitions of businsesses (4,360) (422)
-------- --------
Net cash and equivalents used in investing activities (19,304) (4,303)
Financing activities:
Net proceeds from exercise of stock option and employee stock
purchase plans 1,463 939
Purchase of treasury stock (27) (27)
-------- --------
Net cash and equivalents provided by financing activities 1,436 912
Effect of exchange rate changes on cash and equivalents (51) 16
-------- --------
Increase (decrease) in cash and equivalents (4,181) 3,511
Cash and equivalents at the beginning of the period 20,698 10,795
-------- --------
Cash and equivalents at the end of the period $16,517 $14,306
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
KRONOS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - General
The accompanying unaudited condensed consolidated financial statements include
all adjustments, consisting of normal recurring accruals, that management
considers necessary for a fair presentation of the Company's financial position
and results of operations as of and for the interim periods presented pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
the disclosures in these financial statements are adequate to make the
information presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the Company's audited financial
statements for the fiscal year ended September 30, 1997. The results of
operations for the three and six month periods ended April 4, 1998 are not
necessarily indicative of the results for a full fiscal year. Certain amounts
have been reclassified in fiscal 1997 to permit comparison with fiscal 1998.
NOTE B - Fiscal Quarters
The Company utilizes a system of fiscal quarters. Under this system, the first
three quarters of each fiscal year end on a Saturday. However, the fourth
quarter of each fiscal year will always end on September 30. Because of this,
the number of days in the first quarter (95 days in fiscal 1998 and 89 days in
fiscal 1997) and fourth quarter (88 days in fiscal 1998 and 94 days in fiscal
1997) of each fiscal year varies from year to year. The second and third
quarters of each fiscal year will be exactly thirteen weeks long. This policy
does not have a material effect on the comparability of results of operations
between quarters.
NOTE C - Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, "Earnings per Share." SFAS No. 128 replaced the previously reported
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts presented have been restated
to conform to SFAS No. 128 requirements.
<PAGE>
<TABLE>
<CAPTION>
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Six Months Ended
------------------------- -------------------------
April 4,. March 29, April 4, March 29,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (in thousands) ........................ $ 2,884 $ 1,779 $ 5,316 $ 3,965
=========== =========== =========== ===========
Weighted average shares .......................... 8,274,942 8,185,134 8,232,509 8,158,144
Effect of dilutive securities:
Employee stock options ........................... 252,915 254,493 251,976 260,345
----------- ----------- ----------- -----------
Adjusted weighted average shares
and assumed conversions ........................ 8,527,857 8,439,627 8,484,485 8,418,489
=========== =========== =========== ===========
Basic earnings per share ............................ $ 0.35 $ 0.22 $ 0.65 $ 0.49
=========== =========== =========== ===========
Diluted earnings per share .......................... $ 0.34 $ 0.21 $ 0.63 $ 0.47
=========== =========== =========== ===========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward Looking Statements
This discussion includes certain forward-looking statements about the
Company's business and its expectations. Any such statements are subject to risk
that could cause the actual results to vary materially from expectations. For a
further discussion of the various risks that may affect the Company's business
and expectations, see "Certain Factors That May Affect Future Operating Results"
at the end of Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Revenues. Revenues for the second quarter of fiscal 1998 amounted to
$46.5 million as compared with $39.4 million for the second quarter of the prior
year. Revenues for the first six months of fiscal 1998 were $91.0 million as
compared with $76.5 million for the first six months of the prior year. Revenue
growth was 18% and 19% in the three and six month periods ended April 4, 1998,
respectively, as compared to 19% for each of the comparable periods of the prior
year.
Product revenues for the second quarter of fiscal 1998 amounted to $30.1
million as compared with $26.1 million for the second quarter of the prior year.
Product revenues for the first six months of fiscal 1998 were $59.9 million as
compared with $51.8 million for the first six months of the prior year. Product
revenue growth of 15% in the three and six month periods ended April 4, 1998,
respectively, increased from 12% and 13% for comparable periods of the prior
year. Product revenue growth in the three and six month periods ended April 4,
1998, was principally driven by customer demand for the Company's Windows and
client/server products. Service revenues for the second quarter of fiscal 1998
amounted to $16.4 million as compared with $13.2 million for the second quarter
of the prior year. Service revenues for the first six months of fiscal 1998 were
$31.2 million as compared with $24.7 million for the first six months of the
prior year. Service revenue growth of 23% and 26% in the three and six month
periods ended April 4, 1998, respectively, decreased from 35% and 31% for
comparable periods of the prior year. The growth in service revenues reflects an
increase in the level of professional services accompanying new sales as well as
an increase in maintenance revenue from expansion of the installed base. Revenue
growth rates experienced in previous periods benefited from service revenue
enhancement programs implemented by the Company through fiscal 1997. Management
anticipates the growth in service revenue will continue to exceed the growth in
product revenue over the remainder of this fiscal year. However, as the customer
installed base continues to grow, management anticipates that service revenue
growth rates will gradually become more consistent with product revenue growth
rates.
<PAGE>
Gross Profit. Gross profit as a percentage of revenues were 61% in the
three and six month periods ended April 4, 1998, as compared with 60% in the
comparable periods of the prior year. The improvement in gross profit was
evidenced in both product and service gross profit.
Product gross profit as a percentage of product revenues of 74% and 75%
in the three and six month periods ended April 4, 1998, respectively, increased
from 73% and 74% for comparable periods of the prior year. The improvement in
product gross profit in both periods is primarily attributable to an increased
proportion of product revenues generated by software, which typically generates
higher gross profit than other product. Service gross profit as a percentage of
service revenues of 36% and 34% in the three and six month periods ended April
4, 1998, respectively, increased from 34% and 32% for comparable periods of the
prior year. The improvement in service gross profit in both periods is primarily
attributable to the growth in service revenues without a proportionate increase
in service expenses. This has been accomplished by more fully leveraging service
resources and improving the efficiency of the system implementation process.
Management expects service gross profit as a percentage of service revenues to
decrease during the third quarter as the Company invests in service organization
personnel in response to increasing customer demand for its services.
Expenses. Total operating expenses as a percentage of revenues were 51%
and 52% in the three and six month periods ended April 4, 1998, respectively, as
compared to 52% in the comparable periods of the prior year. Sales and marketing
expenses as a percentage of revenues were 34% and 35% in the three and six month
periods ended April 4, 1998, respectively, as compared to 35% in the comparable
periods of the prior year. The slight decrease in sales and marketing expenses
as a percentage of revenues is primarily attributable to the delay of various
discretionary spending programs. Management expects to incur this spending over
the remainder of the fiscal year.
Engineering expenses as a percentage of revenues were 10% in the three
and six month periods ended April 4, 1998, respectively, as compared to 11% in
the comparable periods of the prior year. Engineering expenses of $4.6 million
and $4.2 million in the second quarter of fiscal 1998 and 1997, respectively,
are net of capitalized software development costs of $1.6 million and $1.4
million, respectively. Engineering expenses of $8.9 million and $8.1 million in
the first six months of fiscal 1998 and 1997, respectively, are net of
capitalized software development costs of $3.0 million and $2.6 million,
respectively. The growth in engineering, research and development expenses
results primarily from efforts to standardize products and the development of
new products in the Windows and client/server environments.
<PAGE>
General and administrative expenses as a percentage of revenues amounted
to 7% for all periods presented. Other (income) expense, net amounted to less
than 1% of revenues for all periods presented. Other (income) expense, net is
composed primarily of amortization of intangible assets related to acquisitions
made by the Company which is offset by interest income earned on its
investments.
Income Taxes. The provision for income taxes as a percentage of pretax
income was 38% for all periods presented. The Company's effective income tax
rate may fluctuate between periods as a result of various factors, none of which
is material, either individually or in aggregate, to the consolidated results of
operations.
Liquidity and Capital Resources
Working capital as of April 4, 1998, amounted to $45.8 million as
compared with $41.2 million at September 30, 1997. As of those dates, cash and
equivalents and marketable securities amounted to $41.0 million and $36.2
million, respectively. Cash generated from operations increased to $13.7 million
in the first six months of fiscal 1998 from $6.9 million in the first six months
of the prior year, principally due to increased earnings and unearned service
revenues as well as cash provided from the Company's lease portfolio. Cash
provided from those sources was partially offset by the reduction in income tax
obligations. During the second quarter of fiscal 1998 the Company invested
approximately $4.4 million to acquire labor productivity technology and
distribution rights in a dealer territory. The Company's investment in equipment
in the first six months of the fiscal year decreased from its investment in the
first six months of the prior year due to the timing of capital projects. The
Company anticipates that investment in equipment in fiscal 1998 will be
comparable to fiscal 1997.
Cash generated from operations was more than sufficient to fund
investments in equipment and capitalized software development costs. The Company
expects to fund its investments in equipment and software development costs over
the remainder of its fiscal year with available cash and operating cash flow
generated in fiscal 1998.
Certain Factors That May Affect Future Operating Results
Except for historical matters, the matters discussed in this Quarterly
Report on Form 10-Q are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Act"). The Company
desires to take advantage of the safe harbor provisions of the Act and is
including this statement for the express purpose of availing itself of the
protection of the safe harbor with respect to all forward looking statements
that involve risks and uncertainties.
<PAGE>
The Company's actual operating results may differ from those indicated
by forward looking statements made in this Quarterly Report on Form 10-Q and
presented elsewhere by management from time to time because of a number of
factors including the potential fluctuations in quarterly results, timing and
market acceptance of new product introductions by the Company and its
competitors, competitive pricing pressures, rapid technological change, new
competitors entering the market, the dependence on alternate distribution
channels, potential effects associated with the century change, the ability to
attract and retain sufficient technical personnel, and the dependence on the
Company's time and attendance product line and on key vendors, as further
described below and in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1997, which factors are specifically incorporated by
reference herein.
Potential Fluctuations in Quarterly Results. The Company's quarterly
operating results may fluctuate as a result of a variety of factors, including
the timing of the introduction of new products and product enhancements by the
Company and its competitors, market acceptance of new products, mix of products
sold, the purchasing patterns of its customers, competitive pricing pressure and
general economic conditions. The Company historically has realized a relatively
larger percentage of its annual revenues and profits in the fourth quarter and a
relatively smaller percentage in the first quarter of each fiscal year, although
there can be no assurance that this pattern will continue. In addition, while
the Company has contracts to supply systems to certain customers over an
extended period of time, substantially all of the Company's product revenue and
profits in each quarter result from orders received in that quarter. If
near-term demand for the Company's products weakens or if significant
anticipated sales in any quarter do not close when expected, the Company's
revenues for that quarter will be adversely affected. The Company believes that
its operating results for any one period are not necessarily indicative of
results for any future period.
Product Development and Technological Change. The markets for time and
attendance, labor management, and data collection systems are characterized by
continual change and improvement in computer software and hardware technology.
The Company's future success will depend largely on its ability to enhance its
existing product lines and to develop new products and interfaces to third party
products on a timely basis for the increasingly sophisticated needs of its
customers. Although the Company is continually seeking to further enhance its
product offerings and to develop new products and interfaces, there can be no
assurance that these efforts will succeed, or that, if successful, such product
enhancements or new products will achieve widespread market acceptance, or that
the Company's competitors will not develop and market products which are
superior to the Company's products or achieve greater market acceptance.
Although management believes the Company has substantially completed the product
transition from DOS and UNIX platforms to the Windows and client/server
environments, the Company's revenue growth and results of operations in fiscal
1998 will depend in part on the continuing growth of sales of its Windows and
client/server products.
<PAGE>
Competition. The time and attendance, labor management, and data
collection industries are highly competitive. Competition is increasing as
competitors in related industries, such as human resources and payroll, enter
the market. Advances in software development tools have accelerated the software
development process and, therefore, can allow competitors to penetrate certain
of the Company's markets. Maintaining the Company's technological and other
advantages over competitors will require continued investment by the Company in
research and development and marketing and sales programs. There can be no
assurance that the Company will have sufficient resources to make such
investments or be able to achieve the technological advances necessary to
maintain its competitive advantages. Increased competition could adversely
affect the Company's operating results through price reductions and/or loss of
market share.
Dependence on Alternate Distribution Channels. The Company markets and
sells its products through its direct sales organization, independent dealers
and OEMs. For the fiscal year ended September 30, 1997, approximately 22% of the
Company's revenue was generated through sales to dealers and OEMs. Reduction in
the sales efforts of the Company's major dealers and/or OEMs, or termination or
changes in their relationships with the Company, could have a material adverse
effect on the results of the Company's operations.
Year 2000. Many currently installed computer systems and software
products will not function properly in the year 2000 and beyond. As a result,
computer systems and/or software used by many companies may need to be upgraded
to comply with such "year 2000" requirements. Significant uncertainty exists in
the software industry concerning the potential effects associated with the
century change. Although the Company currently offers software products that are
designed to work properly in the year 2000 and beyond, there can be no assurance
that the Company's software products contain all necessary date code changes.
The Company has warranted, and may in the future warrant, to certain customers
that its products will work in the year 2000 and beyond. In addition, the
Company has initiated a program to assess the products offered by it, its
internal operating systems, and third party products incorporated into or used
to develop its products and to develop a timetable for correcting any issues, if
necessary. The Company is currently developing a complete cost estimate but does
not anticipate that costs associated with this program will be material.
However, if the Company's program is not completed on a timely basis, if there
is a failure of the products or systems of other companies on which the Company
relies for use internally or in its products, if customer demand is reduced due
to customers' concerns about year 2000 issues, or if the Company's own products
fail in the year 2000 and beyond, there could be a material adverse effect on
the Company's business, financial condition or results of operations.
<PAGE>
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The 1998 Annual Meeting of Stockholders of Kronos Incorporated was
held on January 30, 1998.
(b) At the Annual Meeting, Messrs. Mark S. Ain, Richard J. Dumler and
Samuel Rubinovitz were elected as Class III Directors for three-year
terms expiring in 2001. In addition, the Directors whose terms of
office continue after the meeting are two Class I Directors: Messrs.
D. Bradley McWilliams and Lawrence Portner and one Class II Director:
Messr. W. Patrick Decker. The tabulation of votes for each Director
nominee was as follows:
FOR WITHHELD
--------- --------
Mark S. Ain 7,433,579 165,286
Richard J. Dumler 7,433,579 165,286
Samuel Rubinovitz 7,433,556 165,309
(c) The other items voted upon at the meeting were as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--------- ------- ------- ---------
<S> <C> <C> <C> <C>
(i) Approval of an amendment 7,017,025 459,955 100,464 21,421
to the Company's Restated
Articles of Organization increasing
the number of authorized shares
of Common Stock from
12,000,000 to 20,000,000 shares
(ii) Approval of an amendment to 4,648,625 1,817,736 212,071 920,433
the Company's 1992 Equity
Incentive Plan (i) increasing from
1,237,500 to 2,237,500 (subject to
Adjustments for certain changes in
the Company's capitalization) the
Number of shares available for
Issuance under the Plan; (ii)
Increasing from 75,000 to 100,000
(subject to adjustments for certain
Changes in the Company's
Capitalization) the number of shares
for which Awards under the Plan
may be granted in any calendar
year to any one employee; and (iii)
to continue the Plan.
(iii) Ratification of the selection of 7,585,870 6,290 6,705 -----
Ernst & Young LLP
</TABLE>
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Articles of Organization of the Registrant, as amended
10.1 1992 Equity Incentive Plan, as amended and restated
27.1 Financial Data Schedule
(b) Reports of Form 8-K
There were no reports on Form 8-K filed during the fiscal quarter
ended April 4, 1998.
<PAGE>
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.
KRONOS INCORPORATED
By /s/ Paul A. Lacy
Paul A. Lacy
Vice President of Finance
and Administration
(Duly Authorized Officer and
Principal Financial Officer)
May 15, 1998
<PAGE>
KRONOS INCORPORATED
EXHIBIT INDEX
Exhibit
Number Description
3.1 Restated Articles of Organization of the Registrant, as amended
10.1 1992 Equity Incentive Plan, as amended and restated
27.1 Financial Data Schedule
FEDERAL INDENTIFICATION
NO. ______04-2640942______
The Commonwealth of Massachusetts
- ------------
Examiner William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
- ------------
Name
Approved
We, ________________W. Patrick Decker_______________, * President/
and ________________Paul A. Lacy______________________, *Clerk/
of _______________Kronos Incorporated_____________________________,
(Exact name of corporation)
located at ______400 Fifth Avenue, Waltham, MA 02154______________,
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
_____________________________3____________________________________
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held
on January 30, 19 98, by vote of:
7,017,025 shares of Common Stock of 8,207,008 shares outstanding,
--------- ------------ ----------
(type, class & series, if any)
C ___
___ _________ shares of _________ of __________ shares outstanding, and
P ___ (type, class & series, if any)
___
M ___ _________ shares of _________ of __________ shares outstanding,
___ (type, class & series, if any)
R.A___
1**being at least a majority of each type, class or series
outstanding and entitled to vote thereon:/and of each type,class
or series of stock whose rights are adversely affected thereby:
*Delete the inapplicable words. **Delete the inapplicable clause.
1 For amendments adopted pursuant to Chapter 156B, Section 70.
2 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form
is insufficient, additions shall be set forth on one side only of
separate 8 1/2 x 11 sheets of paper with a left margin of at least
1 inch. Additions to more than one article may be made on a
_______ single sheet so long as each article requiring each addition
P.C. is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common: Common: 12,000,000 $ .01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $ 1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common: Common: 20,000,000 $ .01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 1,000,000 $ 1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: ________________________________.
SIGNED UNDER THE PENALTIES OF PERJURY, this 10th day of February , 19 98 ,
S/ W. Patrick Decker
___________________________________________________________________, *President/
S/ Paul Lacy
____________________________________________________________________, *Clerk/.
*Delete the inapplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
===============================================================
I hereby approve the within Articles of Amendment and, the
filing fee in amount of $ 8,000.00 having been paid, said
articles are deemed to have been filed with me this 20th day of
February__ 19 98.
Effective date: _____________________________________________
S/William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Sally Wallace, Esq.___
Kronos Incorporated___
400 Fifth Avenue_____
Waltham, MA 02154____
<PAGE>
The Commonwealth of Massachusetts
MICHAEL JOSEPH CONNOLLY
Secretary of State
Federal Identification
ONE ASHBURTON PLACE, BOSTON, MASS. 02108 No. 04-2640942
--------------
RESTATED ARTICLES OF ORGANIZATION
General Laws, Chapter 156B, Section 74
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
restated articles or organization. The fee for filing this certificate is
prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the
Commonwealth of Massachusetts.
----------
We, Mark S. Ain , President/and
Paul A. Lacy , Clerk of
. . . . . . . . . . . . . . Kronos Incorporated . . . . . . . . . . . . . . . .
(Name of Corporation)
located at . . . 62 Fourth Avenue, Waltham, MA 02154 . . . . . . . . . . . . .
do hereby certify that the following restatement of the articles of
organization of the corporation was duly adopted at a meeting held on April 16,
1992, by vote of . . 1,127,890 . . shares of ..Common Stock . . . . . . out of
(Class of Stock)
1,234,798 . . shares outstanding, .20,152.. shares of . Series A. Preferred
(Class of Stock)
Stock . out of . 21,855 . shares outstanding, and . . . . . . . shares of . . .
. . . . . . . out of . . . . . . . . . . . . . . . . . shares outstanding,
being at least two-thirds of each class of stock outstanding and entitled to
vote and of each class or series of stock adversely affected thereby: -
1. The name by which the corporation shall be known is: -
Kronos Incorporated
2. The purposes for which the corporation is formed are as follows: -
See Page 2A attached hereto.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions to
more than one article may be continued on a single sheet so long as each article
requiring each such addition is clearly indicated.
<PAGE>
3. The total number of shares and the par value, if any, of each class
of stock which the corporation is authorized to issue is as follows:
WITHOUT PAR WITH PAR VALUE
----------- --------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- -------------- ---------------- ---------------- ---------
Preferred 1,000,000 $1.00
Common 12,000,000 $ .01
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established:
See Pages 4A through 4M attached hereto.
*5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows:
None
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See Pages 6A through 6G attached hereto.
*If there are no such provisions, state "None".
<PAGE>
Article 2
- ---------
Purposes
(a) to develop, manufacture and market electrical, electronic and
mechanical products of any kind, and to conduct research in connection with any
of the foregoing.
(b) to carry on any manufacturing, mercantile, selling, management,
service or other business, operation or activity which may be lawfully carried
on by a corporation organized under the Business Corporation Law of The
Commonwealth of Massachusetts, whether or not related to those referred to in
the foregoing paragraph.
-2A-
<PAGE>
Continuation Sheet 4A
---------------------
ARTICLE 4
PROVISIONS RELATING TO CAPITAL STOCK
The capital stock of the Corporation shall consist of (i) 12,000,000
shares of Common Stock, $.01 par value per share and (ii) 1,000,000 shares of
preferred stock, $1.00 par value per share, issuable in one or more series (the
"Series Preferred Stock"), of which 21,855 shares shall be designated Series A
Cumulative Convertible Preferred Stock (the "Series A Preferred").
SERIES PREFERRED STOCK AND COMMON STOCK
- ---------------------------------------
1. The shares of Series Preferred Stock may be issued from time to time
in one or more series. To the extent not inconsistent with the other provisions
of this Article 4, the Board of Directors is authorized to establish and
designate the different series, and to fix and determine the variations and the
relative rights and preferences among the different series, provided that all
shares of Series Preferred Stock shall be identical except for variations so
fixed and determined among the different series to the extent permitted by
Massachusetts General Laws, Chapter 156B, Section 26 and any successor to that
Section.
2. The preferences, voting powers, qualifications, special or relative
rights or privileges of the Common Stock, the Series Preferred Stock and the
Series A Preferred are as follows:
(a) Liquidation Preference. Upon any liquidation, dissolution
or winding up of this Corporation, whether voluntary or involuntary and
after provision for the payment of creditors, the holders of each
series of Series Preferred Stock shall be entitled, before any
distribution or payment is made upon any shares of Common Stock, to be
paid the amount fixed and determined by the Board of Directors for such
series plus (except as otherwise provided for any series of Series
Preferred Stock) an amount equal to dividends accrued to the date of
payment, and to no further payment. Except as otherwise provided for
any series of Series Preferred Stock, in the event that the assets of
this Corporation available for distribution to holders of Series
Preferred Stock shall be insufficient to permit payment to such holders
of such amounts, then all the assets of the Corporation then remaining
shall be distributed among the series of Series Preferred Stock ratably
on the basis of the relative aggregate liquidation preferences of each
series and,
-4A-
<PAGE>
within each such series, ratably among the holders of the shares of
such series. The aggregate amount of payments to be made to holders of
Series Preferred Stock upon any liquidation, dissolution or winding up
of this Corporation may be fixed at any amount up to the full amount
legally available for distribution to stockholders. After payment in
full has been made to all holders of Series Preferred Stock, then, and
only then, the remaining assets of this Corporation may be distributed
to the holders of Common Stock. The holders of any series of Series
Preferred Stock shall be entitled to participate in any such
distribution to holders of Common Stock to the extent, if any,
specified for such series by the Board of Directors. Except as
otherwise provided for any series of Series Preferred Stock, neither
the purchase or redemption by this Corporation of shares of any class
or series of its capital stock in any manner permitted by the Restated
Articles of Organization, nor the merger or consolidation of this
Corporation with or into any other corporation or corporations, nor the
sale or transfer by this Corporation of all or any part of its assets,
shall be deemed to be a liquidation, dissolution or winding up of this
Corporation for the purposes of this Article 4.
(b) Dividend Preference. Holders of Series Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the purpose, dividends at
such annual rate or rates, and no more, as are fixed for each series of
Series Preferred Stock by the Board of Directors, payable in cash or in
property or in shares of any series of Series Preferred Stock, or in
Common Stock, or in any combination thereof. Holders of Series
Preferred Stock may receive in the aggregate dividends equal to the
full amount of funds legally available for the payment of dividends.
Except as otherwise provided for any series of Series Preferred Stock,
until all accrued dividends, if any, on all shares of Series Preferred
Stock shall have been declared and set apart for payment, no dividend
or distribution shall be made to holders of Common Stock, other than a
dividend payable in Common Stock of this Corporation, nor shall any
shares of Common Stock be repurchased, redeemed or otherwise retired.
The holders of any series of Series Preferred Stock shall be entitled
to participate in any dividend or distribution to holders of Common
Stock to the extent, if any, specified for such series by the Board of
Directors.
(c) Voting Powers and Qualifications. Each share of Common
Stock shall entitle the holder thereof to one vote on all matters
presented to stockholders. The holders of Series Preferred Stock shall
be entitled to vote separately as a class, or in combination with the
holders
-4B-
<PAGE>
of Common Stock as a single class, to the extent (if any), and in
regard to such matters and transactions (if any), as the Board of
Directors may specify in establishing any such series or as may be
otherwise required by law. Matters and transactions as to which the
Board of Directors, in establishing any series, may specify a separate
class vote of holders of Series Preferred Stock or any series thereof
may include, without limitation, the election of a specified number or
percentage of the directors, changes in this Corporation's authorized
capital stock, amendments to this Corporation's Restated Articles of
Organization or By-laws, mergers, a sale of substantially all of the
assets of this Corporation, and dissolution of this Corporation. The
Board of Directors may specify the percentage of votes required to
approve any matter or transaction requiring a separate vote of the
Series Preferred Stock or any series thereof. As to matters and
transactions as to which the Series Preferred Stock is entitled to vote
in combination with holders of Common Stock as a single class, the
Board of Directors, in establishing any such series, may specify that
the voting power of each share of such series may be greater or less
than the voting power of each share of Common Stock, provided that
Series Preferred Stock shall have no more than ten votes per share, or
such greater number as is equivalent to the number of shares of Common
Stock into which such shares of Series Preferred Stock are convertible.
(d) Additional Special or Relative Rights or Privileges.
Holders of any series of Series Preferred Stock shall enjoy such
additional special or relative rights or privileges vis-a-vis the
holders of Common Stock as the Board of Directors (subject to the
limitations imposed by this Article 4) may specify in the votes
creating such series, including, without limitation, rights of
redemption, sinking or purchase fund provisions and conversion rights.
(e) Series A Preferred. The rights, preferences, privileges and
restrictions granted to or imposed on the Series A Preferred and the
Common Stock or the holders thereof are as follows:
1. Dividends.
1.1. The holders of the Series A Preferred shall be entitled
to receive, out of funds legally available therefor, dividends at the
rate of $2.025 per share per annum, payable quarterly beginning on June
30, 1988 and in preference and priority to any payment of any dividend
on any class of stock or series thereof of the Corporation
-4C-
<PAGE>
for such year. The right to such dividends on the Series A Preferred
shall accrue and cumulate on the books of this Corporation as an
obligation of the Corporation on a quarterly basis, whether or not
declared, beginning on July 31, 1987, provided, however, that if the
Series A Preferred is automatically converted pursuant to Section 4.2
hereof on or prior to July 1, 1988, the holders of the Series A
Preferred shall not be entitled to receive any dividends which, on or
prior to such date, have accrued pursuant to this section.
No dividend shall be paid on any class of stock or series
thereof in any year, other than dividends payable solely in Common
Stock, until all accrued dividends have been declared and paid on the
Series A Preferred.
1.2. Increase in Dividend. If the Corporation shall fail to
pay any dividend when due in accordance with this Section 1 or if the
Corporation shall fail to make a mandatory redemption of the Series A
Preferred in accordance with Section 7 hereof, then the rate at which
dividends are payable, and, if dividends are not paid, the rate at
which they accrue and cumulate, shall be increased by $0.1125 per share
for each quarter that such dividend shall remain unpaid or that such
mandatory redemption shall not be made, and shall be increased by
$0.05625 for each successive quarter; provided that the maximum
dividend payable in any quarter shall not exceed $0.8375 per share.
2. Liquidation Preference.
2.1. In the event of any liquidation, dissolution, or winding
up of the Corporation, either voluntary or involuntary, distributions
to the stockholders of the Corporation shall be made in the following
manner: The holders of the Series A Preferred shall be entitled to
receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of any class
of stock or series thereof of the Corporation by reason of their
ownership of such stock, the amount of $22.50 per share for each share
of Series A Preferred then held by them, and, in addition, an amount
equal to all accrued but unpaid dividends on the Series A Preferred
held by them. If the assets and funds thus distributed among the
holders of the Series A Preferred shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then
the entire assets and funds of the Corporation so distributed shall be
distributed ratably among the holders of the Series A Preferred in
proportion to the aggregate preferential amount of all shares of Series
A Preferred then held by them bears to the aggregate preferential
-4D-
<PAGE>
amount of all shares of Series A Preferred outstanding as of the date
of the distribution upon the occurrence of such event. After payment
has been made to the holders of the Series A Preferred of the full
amounts to which they shall be entitled as aforesaid, the holders of
the Common Stock shall be entitled to share ratably in the remaining
assets, based on the number of shares of Common Stock held by each of
them.
3. Voting Rights. The holder of each share of Series A Preferred issued
and outstanding shall be entitled to the number of votes per share as
shall equal the number of shares of Common Stock into which each share
of Series A Preferred is then convertible, and the holders of Series A
Preferred shall be entitled to vote on all matters as to which the
holders of Common Stock shall be entitled to vote, voting together with
the holders of Common Stock as a single class. The holder of each share
of Common Stock issued and outstanding shall be entitled to one vote
per share of such Common Stock.
4. Conversion. The holders of the Series A Preferred have conversion
rights as follows (the "Conversion Rights"):
4.1. Right of Conversion. Each share of Series A Preferred
shall be convertible (at the option of the holder thereof) at any time
after the date of issuance at the office of the Corporation or any
transfer agent for the Series A Preferred into the number of shares of
the Common Stock of the Company obtained by dividing $22.50 by the
conversion price in effect at the time of conversion, determined as
hereinafter provided (the "Conversion Price"). The initial Conversion
Price shall be $22.50 per share. All calculations under this Section 4
shall be made to the nearest cent.
4.2. Automatic Conversion. Each share of Series A Preferred
shall automatically be converted into shares of Common Stock at the
then effective Conversion Price, at the option of the Corporation, upon
the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the
Corporation to the public generally at a price per share (prior to
underwriting commissions and offering expenses) of not less than $35
per share (appropriately adjusted for any recapitalizations, stock
splits, stock combinations and stock dividends) in which the aggregate
proceeds received by the Corporation (after underwriting discounts and
commissions) equal or exceed $7,500,000. In the event of such automatic
conversion of the Series A Preferred, such conversion shall not be
-4E-
<PAGE>
deemed to have occurred until the person(s) entitled to receive the
Common Stock issuable upon such conversion of Series A Preferred has
received from the Corporation all accrued and unpaid dividends owed on
such person's Series A Preferred.
4.3. Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of Series A Preferred. In lieu of
any fractional shares to which the holder would otherwise be entitled,
the Corporation shall pay cash equal to such fraction multiplied by the
then effective Conversion Price. Before any holder of Series A
Preferred shall be entitled to convert the same into full shares of
Common Stock and to receive certificates therefor, he shall surrender
the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Series A Preferred,
and shall give written notice to the Corporation at such office that he
elects to convert the same; provided, however, that in the event of an
automatic conversion pursuant to Section 4.2, the outstanding shares of
Series A Preferred shall be converted automatically without any further
action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent, and provided further that the
Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless
the certificates evidencing such shares of Series A Preferred are
either delivered to the Corporation or its transfer agent as provided
above, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes
an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such
certificates provided that nothing contained herein shall require the
holder to provide a surety or indemnity bond where the Common Stock
issued is registered in the same name as the Series A Preferred
surrendered for conversion. The Corporation shall, as soon as
practicable after such delivery, or such agreement of indemnification
in the case of a lost certificate, but in no event later than ten (10)
business days after such delivery or agreement of indemnification,
issue and deliver at such office to such holder of Series A Preferred,
a certificate or certificates for the number of shares of Common Stock
to which he shall be entitled as aforesaid and a check payable to the
holder in the amount of any cash amounts payable as the result of a
conversion into fractional shares of Common Stock plus all accrued and
unpaid dividends on such holder's Series A Preferred. Such conversion
shall be deemed to have been made immediately prior to the close of
business on the date of
-4F-
<PAGE>
such surrender of the shares of Series A Preferred to be
converted, or in the case of automatic conversion on the date
immediately prior to closing of the public offering (provided that
all accrued and unpaid dividends have been paid prior to such date),
and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on
such date.
Upon conversion of only a portion of the number of shares
covered by a certificate representing shares of Series A Preferred
surrendered for conversion, the Corporation shall issue and deliver to
the holder of the certificate so surrendered for conversion, at the
expense of the Corporation, a new certificate covering the number of
shares of Series A Preferred representing the unconverted portion of
the certificate so surrendered.
4.4. Adjustment of Conversion Price for Subdivisions,
Combinations, or Consolidation of Common Stock. In the event the
outstanding shares of Common Stock shall be subdivided (by stock split,
or otherwise) into a greater number of shares of Common Stock, the
Conversion Price then in effect shall, concurrently with the
effectiveness of such subdivision, be proportionately decreased. In the
event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, the Conversion Price then in effect shall,
concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
4.5. Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger, consolidation or sale of assets
transaction provided for elsewhere herein), provision shall be made so
that the holders of the Series A Preferred shall thereafter be entitled
to receive upon conversion of the Series A Preferred the number of
shares of stock or other securities or property of the Company or
otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any
such case, appropriate adjustment shall be made in the application of
the provisions of this Section 4 with respect to the rights of the
holders of the Series A Preferred after the recapitalization to the end
that the provisions of this Section 4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable
upon conversion of the Series A Preferred) shall be applicable after
that event in as nearly an equivalent manner as may be practicable.
-4G-
<PAGE>
4.6. No Impairment. The Company will not, by amendment of its
Articles of Organization or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at
all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion
rights of the holders of the Series A Preferred against impairment.
4.7. Reservation of Shares. The Company agrees that, so long
as any share of Series A Preferred shall remain outstanding, the
Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized capital stock, for the purpose
of issue upon conversion of the Series A Preferred, the full number of
shares of Common Stock then issuable upon exercise of all outstanding
shares of Series A Preferred.
4.8. Validity of Shares. The Company agrees that it will from
time to time take all such actions as may be requisite to assure that
all shares of Common Stock which may be issued upon conversion of any
share of the Series A Preferred will, upon issuance, be validly issued,
fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issue thereof; and, without limiting the
generality of the foregoing, the Company agrees that it will from time
to time take all such action as may be requisite to assure that the par
value per share, if any, of the Common Stock is at all times equal to
or less than the then current Conversion Price of the Series A
Preferred.
4.9. Notice of Adjustment. Upon each adjustment of the
Conversion Price, the Company shall give prompt written notice thereof
addressed to the registered holder of each share of the Series A
Preferred at the address of such holder as shown on the records of the
Company, which notice shall state the Conversion Price resulting from
such adjustment and the increase or decrease, if any, in the number of
shares issuable upon the conversion of his shares of Series A
Preferred, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
4.10. Notice of Capital Changes. If at any time:
(a) the Company shall declare any dividend or
distribution payable to the holders of its Common Stock;
-4H-
<PAGE>
(b) the Company shall offer for subscription pro rata
to the holders of Common Stock any additional shares of stock
of any class or other rights;
(c) there shall be any proposed capital
reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another
corporation or business organization; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give the
registered holders of the Series A Preferred written notice, by
registered or certified mail, of the date on which a record shall be
taken for such dividend, distribution or subscription rights or for
determining stockholders entitled to vote upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation
or winding up and of the date when any such transaction shall take
place, as the case may be. Such notice shall also specify the date as
of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be
entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding up,
as the case may be. Such written notice shall be given at least 20 days
prior to the transaction in question and not less than 10 days prior to
the record date with respect thereto.
4.11. Taxes. The Company will pay all taxes and other
governmental charges that may be imposed in respect of the issue or
delivery of shares of the Series A Preferred or Common Stock upon
conversion of the Series A Preferred.
5. Status of Converted Stock. In case any shares of any series of
Series A Preferred shall be converted pursuant to Section 4 hereof, the
shares so converted shall be restored to authorized and undesignated,
but unissued shares of Series Preferred Stock of the Company.
6. Optional Redemption.
(a) The Corporation may, at any time, redeem
-4I-
<PAGE>
any or all shares of the Series A Preferred on a pro rata
basis. If the Corporation so elects it shall issue a Notice of
Redemption (the "Redemption Notice") to the holders of record
of the Series A Preferred. The Redemption Notice shall set
forth the Redemption Date, which shall be at least thirty (30)
days after the date of the Notice of Redemption, the number of
such holder's shares of Series A Preferred to be redeemed, and
the applicable Redemption Amount. The Redemption Amount of the
Series A Preferred shall be equal to the product of (a) the
number of shares of Series A Preferred of the holder which are
subject to redemption multiplied by the sum of (b) $27.00 plus
(c) the aggregate of all accrued and unpaid dividends per
share but in no event shall the total of the Redemption
Amounts paid to the holders of the Series A Preferred be less
than $750,000. The Redemption Date shall be as specified in
the Redemption Notice. The Redemption Amount shall be paid in
a lump sum payment on the Redemption Date.
(b) The Corporation shall deposit the Redemption
Amount in an escrow account with a state or national bank at
least two (2) days prior to the Redemption Date and shall
notify the holders of the Series A Preferred of such deposit
immediately thereafter. Failure to make such deposit or notify
the holders shall invalidate the Redemption Notice and no
redemption under this Section 6 may be made until such failure
is cured. The holders of the Series A Preferred shall have the
right to convert their shares pursuant to Section 4 at any
time prior to the Redemption Date.
(c) The Redemption Amount set forth in this Section 6
shall be subject to equitable adjustment whenever there shall
occur a stock split, dividend, combination, reclassification
or other similar event involving the Series A Preferred.
(d) Each holder of shares of Series A Preferred to be
redeemed shall surrender his or her certificate or
certificates representing such shares to the Corporation at
the place designated in the Redemption Notice, and thereupon
the applicable Redemption Amount for such shares as set forth
in this Section 6 shall be paid to the order of the person
whose name appears on such certificate or certificates and
each surrendered certificate shall be cancelled and retired.
(e) If any shares of Series A Preferred are not
redeemed solely because a holder fails to surrender
-4J-
<PAGE>
the certificate or certificates representing such shares as
required by Section 6(d) hereof, then, from and after the
Redemption Date, and except for the right to receive payment
under this Section 6, such shares of Series A Preferred
thereupon subject to redemption shall not be entitled to any
further right as Series A Preferred, including but not limited
to the conversion provisions set forth in Section 4 hereof.
7. Mandatory Redemption.
(a) On August 31, 1991 the Corporation shall redeem
fifty percent (50%) of all of the shares of the Series A
Preferred then outstanding and on August 31, 1992 the
Corporation shall redeem the balance of the shares of Series A
Preferred (the date on which such shares are redeemed by the
Corporation referred to herein as the "Mandatory Redemption
Date"). The redemption price for each share of Series A
Preferred redeemed pursuant to this Section 7 shall be $22.50
per share plus all accrued and unpaid dividends on such share,
whether or not earned or declared, up to and including the
date fixed for redemption (the "Redemption Price"). Each
redemption of Series A Preferred shall be made so that the
number of shares of Series A Preferred held by each registered
owner shall be reduced in an amount which shall bear the same
ratio to the total number of shares of the Series A Preferred
being so redeemed as the number of shares of Series A
Preferred then held by such registered owner bears to the
aggregate number of shares of Series A Preferred then
outstanding.
(b) The Redemption Price set forth in this Section 7
shall be subject to equitable adjustment whenever there shall
occur a stock split, dividend, combination, reclassification
or other similar event involving the Series A Preferred.
(c) At least 45 days before any Mandatory Redemption
Date pursuant to Section 7(a), written notice (hereinafter
referred to as the "Mandatory Redemption Notice") shall be
mailed, postage prepaid, to each holder of record of the
Series A Preferred which is to be redeemed, at its address
shown on the records of the Corporation; provided, however,
that the holders of Series A Preferred shall have the right to
covert their shares pursuant to Section 4 at any time prior to
the Mandatory Redemption Date; provided, further, that the
Corporation's failure to give such Mandatory Redemption Notice
shall in no way affect its obligation to redeem the shares of
Series A Preferred as provided in Section 7(a) hereof.
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(d) Each holder of shares of Series A Preferred to be
redeemed shall surrender his or her certificate or
certificates representing such shares to the Corporation at
the place designated in the Mandatory Redemption Notice, and
thereupon the applicable Redemption Price for such shares as
set forth in this Section 7 shall be paid to the order of the
person whose name appears on such certificate or certificates
and each surrendered certificate shall be cancelled and
retired.
(e) If any shares of Series A Preferred are not
redeemed solely because a holder fails to surrender the
certificate or certificates representing such shares pursuant
to Section 7, then, from and after the Redemption Date, and
except for the right to receive payment under this Section 7,
such shares of Series A Preferred thereupon subject to
redemption shall not be entitled to any further right as
Series A Preferred, including but not limited to the
conversion provisions set forth in Section 4 hereof.
8. Protective Provisions. The Corporation shall not, without the affirmative
consent of the holders of shares representing at least 662/3% in voting power
(90% in voting power with respect to Section 8(b) below) of the Series A
Preferred then outstanding, acting separately as one class, given by written
consent or by vote at a meeting called for such purpose for which notice shall
have been given to the holders of the Series A Preferred:
(a) in any manner authorize, create, or issue any class or
series of capital stock (i) ranking, either as to payment of dividends,
distribution of assets, or redemptions, prior to or on a parity with
the Series A Preferred (other than the Series A Preferred itself), or
(ii) that in any manner adversely affects the holders of Series A
Preferred, or authorize, create, or issue any shares of any class or
series or any bonds, debentures, notes, or other obligations
convertible into or exchangeable for, or having optional rights to
purchase, any shares having any such preference or priority or so
adversely affecting the holders of Series A Preferred;
(b) in any manner alter or change the designations or the
powers, preferences, or rights, or the qualifications, limitations, or
restrictions of the Series A Preferred;
(c) reclassify the shares of Common Stock or any other shares
of any class or series of capital stock hereafter created junior to the
Series A Preferred into shares of any class or series of capital stock
(i)
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ranking, either as to payment of dividends, distribution of assets, or
redemptions prior to or on a parity with the Series A Preferred, or
(ii) that in any manner otherwise adversely affects the holders of
Series A Preferred;
(d) sell or otherwise transfer all or substantially all of the
Corporation's rights in its technology or intellectual property such
that the Corporation no longer owns or has any right to such technology
or intellectual property;
(e) merge or consolidate with or into, or permit any
subsidiary to merge with or into, any other corporation or
corporations, or other entity or entities (in which merger or
consolidation the shareholders of the Corporation receive distributions
of cash or securities of another issuer as a result of such merger or
consolidation).
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Article 6____________________________
Other Lawful Provisions
6.1 The Corporation may carry on any business, operation or activity
referred to in Article 2 to the same extent as might an individual, whether as
principal, agent, contractor or otherwise, and either alone or in conjunction or
a joint venture or other arrangement with any corporation, association, trust,
firm or individual.
6.2 The Corporation may carry on any business, operation or activity
through a wholly or partly owned subsidiary.
6.3 The Corporation may be a partner in any business enterprise which
it would have power to conduct by itself.
6.4 The Board of Directors may make, amend or repeal the By-laws of the
Corporation in whole or in part, except with respect to any provision thereof
which by law or the By-laws requires action by the stockholders and subject to
the right of the stockholders entitled to vote with respect thereto to amend or
repeal By-laws made by the Board of Directors as provided for in these Restated
Articles of Organization. The affirmative vote of two thirds of the total number
of votes of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required for the adoption, amendment or repeal of By-laws
by the stockholders of the Corporation. Subject to the provisions set forth
herein, the Corporation reserves the right to amend, alter, repeal or rescind
any provision contained in these Restated Articles of Organization in the manner
now or hereafter prescribed by law.
6.5 Meetings of the stockholders may be held anywhere in the United
States.
6.6 Except as otherwise provided by law, no stockholder shall have any
right to examine any property or any books, accounts or other writings of the
Corporation if there is reasonable ground for belief that such examination will
for any reason be adverse to the interests of the Corporation, and a vote of the
directors refusing permission to make such examination and setting forth that in
the opinion of the directors such examination would be to the interests of the
Corporation shall be prima facie evidence that such examination would be adverse
to the interests of the Corporation. Every such examination shall be subject to
such reasonable regulations as the directors may establish in regard thereto.
6.7 The directors may specify the manner in which the accounts of the
Corporation shall be kept and may determine what constitutes net earnings,
profits and surplus, what amounts, if
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any, shall be reserved for any corporate purpose, and what amounts, if any,
shall be declared as dividends. Unless the Board of Directors otherwise
specifies, the excess of the consideration for any share of its capital stock
with par value issued by it over such par value shall be surplus. The Board of
Directors may allocate to capital stock less than all of the consideration for
any share of its capital stock without par value issued by it, in which case the
balance of such consideration shall be surplus. All surplus shall be available
for any corporate purpose, including the payment of dividends.
6.8 The purchase or other acquisition or retention by the Corporation
of shares of its own capital stock shall not be deemed a reduction of its
capital stock. Upon any reduction of capital or capital stock, no stockholder
shall have any right to demand any distribution from the Corporation, except as
and to the extent that the stockholders shall have provided at the time of
authorizing such reduction.
6.9 (a) A director who has a financial, family or other interest in a
contract or other transaction may be counted for purposes of establishing the
existence of a quorum at a meeting of the board of directors (or of a committee
of the board of directors) at which action with respect to the transaction is
taken and may vote to approve the transaction and any related matters.
(b) A contract or other transaction in which a director or
officer has a financial, family or other interest shall not be void or voidable
for that reason, if any one of the following is met:
(1) The material facts as to the director's or officer's
interest are disclosed or are known to the board of directors or committee of
the board of directors acting on the transaction, and the board or committee
authorizes, approves or ratifies the transaction by the affirmative vote of a
majority of the disinterested directors (or, if applicable, the sole
disinterested director) on the board of directors or committee, as the case may
be, even though the disinterested directors be less than a quorum; or
(2) The material facts as to the director's or officer's
interest are disclosed or are known to the holders of the shares of the
corporation's capital stock then entitled to vote for directors, and such
holders, voting such shares as a single class, by a majority of the votes cast
on the question, specifically authorize, approve or ratify the transaction; or
(3) The transaction was fair to the corporation as of the
time it was entered into by the corporation.
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A failure to meet any of the requirements in subparagraphs (1), (2) or
(3) shall not create an inference that the transaction is void or voidable for
that reason.
(c) The directors shall have the power to fix from time to
time their own compensation.
6.10 A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that exculpation from liability is not
permitted under the Massachusetts Business Corporation Law as in effect at the
time such liability is determined. No amendment or repeal of this paragraph 6.10
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
6.11 The Corporation shall have all powers granted to Corporations by
the laws of The Commonwealth of Massachusetts, provided that no such power shall
include any activity inconsistent with the Business Corporation Law or the
general laws of said Commonwealth.
6.12 Any action required or permitted to be taken at any meeting of the
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of stockholders. Such consents shall be
treated for all purposes as a vote at a meeting.
6.13 In determining what he reasonably believes to be in the best
interests of the Corporation in the performance of his duties as a director, a
director may consider, both in the consideration of tender and exchange offers,
mergers, consolidations and sales of all or substantially all of the
Corporation's assets and otherwise, such factors as the Board of Directors
determines to be relevant, including, without limitation:
(i) the long-term and short-term interests of the Corporation
and its stockholders, including the possibility that these interests may be best
served by the continued independence of the Corporation;
(ii) whether the proposed transaction might violate federal or
state laws;
(iii) if applicable, not only the consideration being offered
in a proposed transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market price for
the capital stock
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<PAGE>
of the Corporation over a period of years, the estimated price that might be
achieved in a negotiated sale of the Corporation as a whole or in part or
through orderly liquidation, the premiums over market price for the securities
of other corporations in similar transactions, current political, economic and
other factors bearing on securities prices and the Corporation's financial
condition and future prospects; and
(iv) the interests of the Corporation's employees, suppliers,
creditors and customers, the economy of the state, region and nation, and
community and societal considerations.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and to engage in such legal proceedings as the Board
of Directors may determine.
6.14 Subject to the rights of the holders of shares of any class or
series of Preferred Stock, the Board of Directors of the Corporation is
authorized from time to time to enact by resolution, without additional
authorization by the stockholders of the Corporation, By-laws of the
Corporation, in such form and with such additional terms as the Board of
Directors may determine, with respect to the matters of corporate proceedings
set forth below:
(a) Regulation of the procedure for submitting nominations of persons
to be elected directors, which shall be made only at a meeting of stockholders,
including requirements that nominations of persons to be elected directors,
other than nominations submitted on behalf of the incumbent Board of Directors,
be (i) accompanied by a petition in support of such nominations signed by at
least that number of holders of record of that percentage of shares of capital
stock of the Corporation entitled to vote in the election of directors as are
specified in such By-law (but a number of record holders not greater than 100
and a percentage of such shares not greater than 1%); and (ii) submitted to the
clerk or other designated officer or agent of the Corporation at least that
number of days before the meeting of the stockholders at which such election is
to be held as is specified in such By-law (but not more than sixty days before
such meeting). The presiding officer of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the provisions prescribed by this paragraph 6.14 or any By-law
adopted pursuant hereto, and if he so determines, he shall so declare to the
meeting, and the defective nomination shall be disregarded.
(b) Regulation of business to be conducted at meetings of stockholders,
including requirements that only such business shall be conducted and only such
proposals shall be acted upon as are directed by the Board of Directors or as
are made by a
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<PAGE>
stockholder who has submitted notice thereof to the clerk or other designated
officer or agent of the Corporation at least that number of days before the
meeting of stockholders at which such proposal is to be made as is specified in
such By-law (but not more than sixty days before such meeting) setting forth
such proposal, the reasons therefor, the identity of the stockholder or
stockholders making such proposal, the number of shares of capital stock which
are beneficially owned by them and any financial interest of such stockholders
in such proposal as specified in such By-law. The presiding officer of the
meeting shall, if the facts warrant, determine and declare to the meeting that
proposed business or a proposal was not made in accordance with the provisions
prescribed by this paragraph 6.14 or any By-law adopted pursuant hereto, and if
he so determines, he shall so declare to the meeting, and any such business
shall not be transacted or any such proposal shall be disregarded.
(c) Regulation of the order of business and conduct of stockholder
meetings and the authority of the presiding officer and of the attendance at
annual or special meetings of the stockholders of the Corporation, including the
limitation of attendance through a ticket procedure pursuant to which persons
who wish to attend such meetings would be required to provide written notice to
the clerk or other designated officer or agent of the Corporation at least that
number of days prior to the date of such meeting specified in such By-law (but
not more than thirty days before such meeting) of their intent to attend in
person, and the clerk or other designated officer or agent of the Corporation
would issue a single admission ticket to each holder of shares of the stock of
the Corporation entitled to vote at such meeting and to such other persons as
the Board of Directors may direct, and admission to such meeting would be
limited to holders of such tickets and officers and directors of, counsel to,
and the auditors of, the Corporation and, to the extent authorized by the Board
of Directors, the presiding officer at such meeting, employees or other agents
of the Corporation. Application of any such By-law, if adopted, in any
particular case would be permitted to be waived by the presiding officer at such
meeting.
In the event that any such By-law is adopted pursuant to this paragraph
6.14, such By-law may only be amended or repealed upon the affirmative vote of
two thirds of the total number of votes then outstanding represented by shares
of capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class, at any regular or special
meeting of the stockholders, but only if notice of the proposed amendment or
repeal was contained in the notice of such meeting.
6.15(A) After the consummation of an initial public offering of the
Corporation's common stock registered with the
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Securities and Exchange Commission (the "Public Offering Time"), the directors
of the Corporation, subject to the rights of the holders of shares of any class
or series of Preferred Stock, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as shall be provided in the By-laws of the Corporation, one class
("Class I") whose term expires at the first annual meeting of stockholders to be
held after the Public Offering Time, and another class ("Class II") whose term
expires at the second annual meeting of stockholders to be held after the Public
Offering Time, and another class ("Class III") whose term expires at the third
annual meeting of stockholders to be held after the Public Offering Time, with
each class to hold office until its successors are elected and qualified. The
classes shall be initially comprised of directors serving on the Board of
Directors at the Public Offering Time, and the membership of each class shall be
initially determined by the Board of Directors at such time. At each annual
meeting of the stockholders of the Corporation after the Public Offering Time,
the date of which shall be fixed by or pursuant to the By-laws of the
Corporation, and subject to the rights of the holders of shares of any class or
series of Preferred Stock, the successors of the class of directors whose term
expires at that meeting shall be elected to hold office for a term expiring at
the annual meeting of stockholders held in the third year following the year of
their election. Any director elected to fill a newly created directorship or any
vacancy on the Board of Directors resulting from any death, resignation, removal
or other cause shall hold office for the remainder of the full term of the class
of directors in which the new directorship was created or the vacancy occurred
and until such director's successor shall have been elected and qualified.
(B) After the Public Offering Time and subject to the rights of the
holders of shares of any class or series of Preferred Stock, any director or
directors may be removed from office at any time, but only for cause and only by
the affirmative vote of 80% of the total number of votes of the then outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class. Any vacancy in the
Board of Directors resulting from any such removal may be filled by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, and any director so chosen shall hold office until the
next election of the class for which such director shall have been chosen and
until such director's successor shall be elected and qualified or until such
director's earlier death, resignation or removal. For purposes of this
subparagraph (B), "cause" shall mean the (1) conviction of a felony, (2)
declaration of unsound mind by order of court, (3) gross dereliction of duty,
(4) commission of an action involving moral turpitude, or (5) commission of an
action
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which constitutes intentional misconduct or a knowing violation of law if such
action in either event results both in an improper substantial personal benefit
and a material injury to the Corporation.
(C) In the event of any increase or decrease in the authorized number
of directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. No decreases in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
6.16 Notwithstanding any other provisions of these Restated Articles of
Organization or the By-laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Restated Articles of
Organization or the By-laws of the Corporation), the affirmative vote of 80% of
the total number of votes of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class shall be required to amend or repeal, or to adopt any
provision inconsistent with the purpose or intent of paragraphs 6.4, 6.9, 6.10
and 6.13 through 6.16 of Article 6 of these Restated Articles of Organization.
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*We further certify that the foregoing restated articles of organization effect
no amendments to the articles of organization of the corporation as heretofore
amended, except amendments to the following articles ....2,.3,.4.&.6............
................................................................................
(*If there are no such amendments, state "None")
Briefly describe amendments in space below:
Article 2
The language describing the purposes of the corporation has been
revised to delete paragraphs (c) and (d). Said paragraphs (c) and (d) now appear
as paragraphs 6.2 and 6.1 respectively of Article 6.
Article 3
The amount of authorized capital stock of the corporation has been
increased to an aggregate of (i) 12,000,000 shares of Common Stock, $.01 par
value per share, and (ii) 1,000,000 shares of Preferred Stock, $1.00 par value
per share.
Article 4
The capitalization of the corporation has been amended so that the
number of authorized shares of (i) Common Stock, $.01 par value per share, has
been increased from 2,500,000 shares to 12,000,000 shares and (ii) Preferred
Stock, $1.00 par value per share, has been increased from 250,000 shares to
1,000,000 shares.
The voting rights that the Board of Directors may grant to any series
of the Corporation's Preferred Stock, $1.00 par value per share, have been
increased from one (1) vote per share to up to ten (10) votes per share.
Paragraph 5 of the Certificate of Designation of Series A Cumulative
Convertible Preferred Stock has been amended to clarify that converted shares
revert to the status of authorized and undesignated, but unissued shares of the
corporation's Preferred Stock, $1.00 par value per share.
Article 6
New provisions have been added to Article 6 and some existing
provisions have been revised. New provisions added, include but are not limited
to, provisions relating to (i) stockholder action by written consent, (ii)
interested transactions, (iii) a staggered board of directors, (iv)
supermajority voting requirements to amend certain provisions of these Restated
Articles of Organization and (v) the ability of the corporation's directors to
consider special factors when evaluating corporate action.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this 11th day of May in the year 19 92.
........................../S/ Mark S. Ain............................. President
........................../S/ Paul A. Lacy................................ Clerk
As amended through
January 30, 1998
Exhibit A
KRONOS INCORPORATED
1992 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance
the interests of Kronos Incorporated (the "Company") by enhancing its ability to
attract and retain employees and other persons or entities who are in a position
to make significant contributions to the success of the Company and its
subsidiaries through ownership of shares of the Company's common stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company
to grant Awards in the form of Options, Stock Appreciation Rights, Restricted
Stock or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards,
Loans or Supplement Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a Participant (as defined
below) with any obligations to be performed by the Participant under an Award
and waive any term or condition of an Award; (f) amend or cancel an existing
Award in whole or in part (and if an award is canceled, grant another Award in
its place on such terms as the Board shall specify), except that the Board may
not, without the consent of the holder of an Award, take any action under this
clause with respect to such Award if such action would adversely affect the
rights of such holder; (g) prescribe the form or forms of instruments that are
required or deemed appropriate under the Plan, including any written notices and
elections required of Participants, and change such forms from time to time; (h)
adopt, amend and rescind rules and regulations for the administration of the
Plan; and (i) interpret the Plan and decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations and actions of the Board, and all other determinations and
actions of the Board made or taken under authority granted by any provision of
the Plan, will be conclusive and will bind all parties. Nothing in this
paragraph shall be construed as limiting the power of the Board to make
adjustments under Section 7.3, Section 7.4 or Section 8.6.
The Board may, in its discretion, delegate some or all of its powers
with respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. On and after registration of the Stock under the Securities
Exchange Act of 1934 (the "1934 Act"), the Board may delegate any or all of its
powers under the Plan to a Committee, each member of which shall be an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") and a "non-employee director" as defined in Rule
16b-3 promulgated under the 1934 Act.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by
the stockholders of the Company. Grants of Awards under the Plan may be made
prior to that date (but after Board adoption of the Plan), subject to such
approval of the Plan.
No Award may be granted under the Plan after March 27, 2002, but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the
aggregate number of shares of Stock that may be delivered under the Plan will be
2,237,500. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award payable
in Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Stock delivered under the Plan may be either authorized but unissued
Stock or previously issued Stock acquired by the Company and held in treasury.
No fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will
be persons in the employ of the Company or any of its subsidiaries ("Employees")
and other persons or entities (including without limitation non-Employee
directors of the Company or a subsidiary of the Company) who, in the opinion of
the Board, are in a position to make a significant contribution to the success
of the Company or its subsidiaries. A "subsidiary" for purposes of the Plan will
be a corporation in which the Company owns, directly or indirectly, stock
possessing 50% or more of the total combined voting power of all classes of
stock.
Subject to adjustment as provided in Section 8.6 below, the maximum
number of shares of Stock with respect to which Awards may be granted to any
employee under the Plan in any one calendar year shall not exceed 100,000
Shares. For the purpose of calculating such maximum number, (a) an Award shall
continue to be treated as outstanding notwithstanding its repricing,
cancellation or expiration and (b) the repricing of an outstanding option or the
issuance of a new option in substitution for a cancelled option shall be deemed
to constitute the grant of a new additional option separate from the original
grant of the option that is repriced or cancelled.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Code
(any Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not incentive stock options, may
be granted under the Plan. ISOs shall be awarded only to Employees.
(b) Exercise Price. The exercise price of an Option will be determined
by the Board subject to the following:
(1) The exercise price of an ISO shall not be less than 100%
(110% in the case of an ISO granted to a ten-percent shareholder) of
the fair market value of the Stock subject to the Option, determined as
of the time the Option is granted. A "ten-percent shareholder" is any
person who at the time of grant owns, directly or indirectly, or is
deemed to own by reason of the attribution rules of section 424(d) of
the Code, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any of its
subsidiaries.
(2) In no case may the exercise price paid for Stock which is
part of an original issue of authorized Stock be less than the par
value per share of the Stock.
(3) The Board may reduce the exercise price of an Option at
any time after the time of grant, but in the case of an Option
originally awarded as an ISO, only with the consent of the Participant.
(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Board at the time the Option was granted.
(d) Exercise of Options. An Option will become exercisable at such time
or times, and on such conditions, as the Board may specify. The Board may at any
time accelerate the time at which all or any part of the Option may be
exercised.
Any exercise of an Option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any documents
required by the Board and (2) payment in full in accordance with paragraph (e)
below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the Option (or in the case of an Option which is not an
ISO, by the Board at or after grant of the Option), (i) through the delivery of
shares of Stock which have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and which have a fair market value on
the last business day preceding the date of exercise equal to the exercise
price, or (ii) by delivery of a promissory note of the Option holder to the
Company, payable on such terms as are specified by the Board, or (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (iv) by
any combination of the permissible forms of payment; provided, that if the Stock
delivered upon exercise of the Option is an original issue of authorized Stock,
at least so much of the exercise price as represents the par value of such Stock
must be paid other than by the Option holder's promissory note.
(f) Discretionary Payments. If the market price of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise price
of the Option at the time of its exercise, the Board may cancel the Option and
cause the Company to pay in cash or in shares of Common Stock (at a price per
share equal to the fair market value per share) to the person exercising the
Option an amount equal to the difference between the fair market value of the
Stock which would have been purchased pursuant to the exercise (determined on
the date the Option is canceled) and the aggregate exercise price which would
have been paid. The Board may exercise its discretion to take such action only
if it has received a written request from the person exercising the Option, but
such a request will not be binding on the Board.
6.2. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is
an Award entitling the recipient on exercise of the Right to receive an amount,
in cash or Stock or a combination thereof (such form to be determined by the
Board), determined in whole or in part by reference to appreciation in Stock
Value.
In general, a Stock Appreciation Right entitles the Participant to
receive, with respect to each share of Stock as to which the Right is exercised,
the excess of the share's fair market value on the date of exercise over its
fair market value on the date the Right was granted. However, the Board may
provide at the time of grant that the amount the recipient is entitled to
receive will be adjusted upward or downward under rules established by the Board
to take into account the performance of the Stock in comparison with the
performance of other stocks or an index or indices of other stocks. The Board
may also grant Stock Appreciation Rights that provide, that following a Change
in Control of the Company as defined in Appendix 1 hereto that the holder of
such Right will be entitled to receive, with respect to each share of Stock
subject to the Right, an amount equal to the excess of a specified value (which
may include an average of values) for a share of Stock during a period preceding
such Change in Control over the fair market value of a share of Stock on the
date the Right was granted.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may
be granted in tandem with, or independently of, Options granted under the Plan.
A Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights
are granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at
such time or times, and to the extent, that the related Option is
exercisable and will be exercisable in accordance with the procedure
required for exercise of the related Option.
(2) The Stock Appreciation Right will terminate and no longer
be exercisable upon the termination or exercise of the related Option,
except that a Stock Appreciation Right granted with respect to less
than the full number of shares covered by an Option will not be reduced
until the number of shares as to which the related Option has been
exercised or has terminated exceeds the number of shares not covered by
the Stock Appreciation Right.
(3) The Option will terminate and no longer be exercisable
upon the exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only
with the related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO
may be exercised only when the market price of the Stock subject to the
Option exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock
Appreciation Right not granted in tandem with an Option will become exercisable
at such time or times, and on such conditions, as the Board may specify. The
Board may at any time accelerate the time at which all or any part of the Right
may be exercised.
Any exercise of an independent Stock Appreciation Right must be in
writing, signed by the proper person and delivered or mailed to the Company,
accompanied by any other documents required by the Board.
6.3. Restricted and Unrestricted Stock.
(a) Nature of Restricted Stock Award. A Restricted Stock Award entitles
the recipient to acquire, for a purchase price equal to par value, shares of
Stock subject to the restrictions described in paragraph (d) below ("Restricted
Stock").
(b) Acceptance of Award. A Participant who is granted a Restricted
Stock Award will have no rights with respect to such Award unless the
Participant accepts the Award by written instrument delivered or mailed to the
Company accompanied by payment in full of the specified purchase price, if any,
of the shares covered by the Award. Payment may be by certified or bank check or
other instrument acceptable to the Board.
(c) Rights as a Stockholder. A Participant who receives Restricted
Stock will have all the rights of a stockholder with respect to the Stock,
including voting and dividend rights, subject to the restrictions described in
paragraph (d) below and any other conditions imposed by the Board at the time of
grant. Unless the Board otherwise determines, certificates evidencing shares of
Restricted Stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
(d) Restrictions. Except as otherwise specifically provided by the
Plan, Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of, and if the Participant ceases to be an
Employee or otherwise suffers a Status Change (as defined at Section 7.2(a)
below) for any reason, must be offered to the Company for purchase for the
amount of cash paid for the Stock, or forfeited to the Company if no cash was
paid. These restrictions will lapse at such time or times, and on such
conditions, as the Board may specify. The Board may at any time accelerate the
time at which the restrictions on all or any part of the shares will lapse.
(e) Notice of Election. Any Participant making an election under
Section 83(b) of the Code with respect to Restricted Stock must provide a copy
thereof to the Company within 10 days of the filing of such election with the
Internal Revenue Service.
(f) Other Awards Settled with Restricted Stock. The Board may, at the
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Board may, in its sole discretion, approve
the sale to any Participant of shares of Stock free of restrictions under the
Plan for a price which is not less than the par value of the Stock.
6.4. Deferred Stock.
A Deferred Stock Award entitles the recipient to receive shares of
Stock to be delivered in the future. Delivery of the Stock will take place at
such time or times, and on such conditions, as the Board may specify. The Board
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any Award described in this Section 6 is
granted, the Board may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. Performance Awards; Performance Goals.
(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Board) following the
attainment of Performance Goals. Performance Goals may be related to personal
performance, corporate performance, departmental performance or any other
category of performance deemed by the Board to be important to the success of
the Company. The Board will determine the Performance Goals, the period or
periods during which performance is to be measured and all other terms and
conditions applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Board may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
<PAGE>
6.6. Loans and Supplemental Grants.
(a) Loans. The Company may make a loan to a Participant ("Loan"),
either on the date of or after the grant of any Award to the Participant. A Loan
may be made either in connection with the purchase of Stock under the Award or
with the payment of any Federal, state and local income tax with respect to
income recognized as a result of the Award. The Board will have full authority
to decide whether to make a Loan and to determine the amount, terms and
conditions of the Loan, including the interest rate (which may be zero), whether
the Loan is to be secured or unsecured or with or without recourse against the
borrower, the terms on which the Loan is to be repaid and the conditions, if
any, under which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.
(b) Supplemental Grants. In connection with any Award, the Board may at
the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 6. Any payments under this subsection (b) will be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Board may determine) and shall thereupon terminate. In no event, however, shall
an Option or Stock Appreciation Right remain exercisable beyond the latest date
on which it could have been exercised without regard to this Section 7. Except
as otherwise determined by the Board, all Options and Stock Appreciation Rights
held by a Participant immediately prior to death that are not then exercisable
shall terminate at death.
(b) Except as otherwise determined by the Board, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the
Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to death will be forfeited and the Award canceled as of the time
of death, unless otherwise determined by the Board.
7.2. Termination of Service (Other Than By Death).
If a Participant who is an Employee ceases to be an Employee for any
reason other than death, or if there is a termination (other than by reason of
death) of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply:
(a) Except as otherwise determined by the Board, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such longer period as the Board may determine), and shall thereupon terminate,
unless the Award provides by its terms for immediate termination in the event of
a Status Change or unless the Status Change results from a discharge for cause
which in the opinion of the Board casts such discredit on the Participant as to
justify immediate termination of the Award. In no event, however, shall an
Option or Stock Appreciation Right remain exercisable beyond the latest date on
which it could have been exercised without regard to this Section 7. For
purposes of this paragraph, in the case of a Participant who is an Employee, a
Status Change shall not be deemed to have resulted by reason of (i) a sick leave
or other bona fide leave of absence approved for purposes of the Plan by the
Board, so long as the Employee's right to reemployment is guaranteed either by
statute or by contract, or (ii) a transfer of employment between the Company and
a subsidiary or between subsidiaries, or to the employment of a corporation (or
a parent or subsidiary corporation of such corporation) issuing or assuming an
option in a transaction to which section 424(a) of the Code applies.
(b) Except as otherwise determined by the Board, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3
above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to the Status Change will be forfeited and the Award canceled as
of the date of such Status Change unless otherwise determined by the Board.
7.3. Change in Control.
Notwithstanding any other provision of the Plan or of any Award to the
contrary, in the event of a Change in Control as defined in Appendix 1 the
following will apply:
(a) Each outstanding Option and Stock Appreciation Right will
immediately become exercisable in full unless otherwise expressly provided at
the time of grant.
(b) Each outstanding share of Restricted Stock will immediately become
free of all restrictions and conditions.
(c) Conditions on Deferred Stock Awards, Performance Awards and
Supplemental Grants which relate only to the passage of time and continued
employment will be removed. Performance or other conditions (other than
conditions relating only to the passage of time and continued employment) will
continue to apply unless otherwise provided in the instrument evidencing the
Awards or in any other agreement between the Participant and the Company or
unless otherwise agreed to by the Committee.
7.4. Certain Corporate Transactions.
Subject to Section 7.3, in the event of a consolidation or merger in
which the Company is not the surviving corporation or which results in the
acquisition of substantially all the Company's outstanding Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of substantially all the Company's assets
or a dissolution or liquidation of the Company (a "covered transaction"), all
outstanding Awards will terminate as of the effective date of the covered
transaction, and the following rules shall apply:
(a) Subject to paragraphs (b) and (c) below, the Board may in its sole
discretion, prior to the effective date of the covered transaction, (1) make
each outstanding Option and Stock Appreciation Right exercisable in full, (2)
remove the restrictions from each outstanding share of Restricted Stock, (3)
cause the Company to make any payment and provide any benefit under each
outstanding Deferred Stock Award, Performance Award, and Supplemental Grant
which would have been made or provided with the passage of time had the
transaction not occurred and the Participant not suffered a Status Change (or
died), and (4) forgive all or any portion of the principal of or interest on a
Loan.
(b) If an outstanding Award is subject to performance or other
conditions (other than conditions relating only to the passage of time and
continued employment) which will not have been satisfied at the time of the
covered transaction, the Board may in its sole discretion remove such
conditions. If it does not do so, however, such Award will terminate as of the
date of the covered transaction notwithstanding paragraph (a) above.
(c) With respect to an outstanding Award held by a Participant who,
following the covered transaction, will be employed by or otherwise providing
services to a corporation which is a surviving or acquiring corporation in such
transaction or an affiliate of such a corporation, the Board may, in lieu of or
in addition to any action described in paragraph (a) above, arrange to have such
surviving or acquiring corporation or affiliate grant to the Participant a
replacement award which, in the judgment of the Board, is substantially
equivalent to the Award.
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Board from time to time. Such instruments may be in the form
of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award
will not give a Participant rights as a stockholder; the Participant will obtain
such rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Board may, on
such conditions as it deems appropriate, provide that a Participant will receive
a benefit in lieu of cash dividends that would have been payable on any or all
Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Board may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3. Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan or to remove restriction from shares previously delivered
under the Plan (a) until all conditions of the Award have been satisfied or
removed, (b) until, in the opinion of the Company's counsel, all applicable
federal and state laws and regulation have been complied with, (c) if the
outstanding Stock is at the time listed on any stock exchange, until the shares
to be delivered have been listed or authorized to be listed on such exchange
upon official notice of notice of issuance, and (d) until all other legal
matters in connection with the issuance and delivery of such shares have been
approved by the Company's counsel. If the sale of Stock has not been registered
under the Securities Act of 1933, as amended, the Company may require, as a
condition to exercise of the Award, such representations or agreements as
counsel for the Company may consider appropriate to avoid violation of such Act
and may require that the certificates evidencing such Stock bear an appropriate
legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Board will have the right to require that the Participant or other appropriate
person remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Board with regard
to such requirements, prior to the delivery of any Stock. If and to the extent
that such withholding is required, the Board may permit the Participant or such
other person to elect at such time and in such manner as the Board provides to
have the Company hold back from the shares to be delivered, or to deliver to the
Company, Stock having a value calculated to satisfy the withholding requirement.
If at the time an ISO is exercised the Board determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Board may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock received upon exercise, and (b) to give such security as the
Board deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Board to preserve the adequacy of such
security.
8.5. Nontransferabilty of Awards.
Except as otherwise provided in a specific Award agreement, no Award
(other than an Award in the form of an outright transfer of cash or Unrestricted
Stock) may be transferred other than by will or by the laws of descent and
distribution, and during an employee's lifetime an Award requiring exercise may
be exercised only by the Participant (or in the event of the Participant's
incapacity, the person or persons legally appointed to act on the Participant's
behalf.)
8.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution to common stockholders other than normal cash dividends,
after the effective date of the Plan, the Board will make any appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
under Section 4 above.
(b) In any event referred to in paragraph (a), the Board will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Board may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Board that adjustments are
appropriate to avoid distortion in the operation of the Plan.
8.7. Employment Rights, Etc.
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued retention by the Company or any
subsidiary as an Employee or otherwise, or affect in any way the right of the
Company or subsidiary to terminate an employment, service or similar
relationship at any time. Except as specifically provided by the Board in any
particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment, service or similar relationship even if the
termination is in violation of an obligation of the Company to the Participant.
8.8. Deferral of Payments.
The Board may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. Past Services as Consideration.
Where a Participant purchases Stock under an Award for a price equal to
the par value of the Stock the Board may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of awards to a Participant
will affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock be issued to
Employees.
The Board may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under section 422 of the Code
and to continue to qualify under Rule 16b-3 promulgated under Section 16 of the
1934 Act.
<PAGE>
Appendix 1
"Change in Control" shall be deemed to have occurred if:
(a) any `person' as such term is used in Sections 13(d) and 14(d) of
the 1934 Act (other than (i) the Company, (ii) any subsidiary of the Company,
(iii) any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or of any subsidiary of the Company, or (iv) any
Company owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company)
is or becomes the `beneficial owner' (as defined in Section 13(d) of the 1934
Act), together with all Affiliates and Associates (as such terms are used in
Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of such
person, directly or indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding securities
(other than as a result of acquisition of such securities from the Company); or
(b) during any period of two consecutive years (not including any
period prior to the effective date of the Plan), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a) of this definition)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved
cease for any reason to constitute at least a majority thereof.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Financial Statements of the Corporation for the
three months ended April 4, 1998 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000886903
<NAME> Kronos Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C> <C>
<PERIOD-TYPE> 6-mos 6-mos
<FISCAL-YEAR-END> Sep-30-1998 Sep-30-1997
<PERIOD-START> Oct-01-1997 Oct-01-1996
<PERIOD-END> Apr-04-1998 Mar-29-1997
<EXCHANGE-RATE> 1 1
<CASH> 16,517 14,306
<SECURITIES> 24,451 18,200
<RECEIVABLES> 37,965 30,581
<ALLOWANCES> 1,000 907
<INVENTORY> 4,418 4,832
<CURRENT-ASSETS> 94,143 74,341
<PP&E> 44,080 37,700
<DEPRECIATION> 27,666 20,720
<TOTAL-ASSETS> 136,427 110,391
<CURRENT-LIABILITIES> 48,390 38,880
<BONDS> 0 0
0 0
0 0
<COMMON> 83 82
<OTHER-SE> 78,708 65,795
<TOTAL-LIABILITY-AND-EQUITY> 136,427 110,391
<SALES> 59,872 51,839
<TOTAL-REVENUES> 91,045 76,513
<CGS> 14,783 13,456
<TOTAL-COSTS> 35,406 30,241
<OTHER-EXPENSES> 47,036 39,858
<LOSS-PROVISION> 237 173
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 8,603 6,414
<INCOME-TAX> 3,287 2,449
<INCOME-CONTINUING> 5,316 3,965
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,316 3,965
<EPS-PRIMARY> 0.65 0.49
<EPS-DILUTED> 0.63 0.47
</TABLE>
