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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
COMMISSION FILE NUMBER 1-12912
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CENTENNIAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its Charter)
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<TABLE>
<S> <C>
DELAWARE 04-2978400
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
7 LOPEZ ROAD, WILMINGTON, MASSACHUSETTS 01887
(Address of principal executive offices) (Zip Code)
</TABLE>
(978) 988-8848
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
None
(Title and Class)
Securities registered pursuant to Section 12(g) of the Act:
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<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Common Stock, $0.01 par value Not Applicable
Preferred Stock Purchase Rights Not Applicable
</TABLE>
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Indicate by check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant on May 27, 1999 was $16,186,433. The fair market value of the common
stock, $0.01 par value per share (the "Common Stock"), of the registrant on May
27, 1999 was $.79 per share, based on information reported by certain
internet-based bulletin board services purporting to monitor trading activities.
The registrant is unable to verify the accuracy or completeness of such
information. As of May 27, 1999, there were 20,552,449 shares of Common Stock of
the registrant outstanding.
Certain items in Part III of this Form 10-K incorporate by reference certain
portions of the registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission in connection with the registrant's 1999
Annual Meeting of Stockholders.
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PART I
CAUTIONARY STATEMENTS
Except for historical information contained herein, the discussions
contained in this document include forward-looking statements. By way of
example, the discussions include statements regarding possible price competition
and erosion, expansion into new markets, future sales mix, future supply of raw
materials, gross margins, raw material inventory procurement practices, the
Company's customer base, future developments involving certain investments,
assessments regarding systems required to address Year 2000 issues, and future
availability of financing. Such statements involve a number of risks and
uncertainties, including, but not limited to, those (i) discussed under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations," (ii) discussed under the heading "Risk Factors," and (iii)
identified from time to time in the Company's filings with the Securities and
Exchange Commission. These risks and uncertainties could cause actual results to
differ materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company assumes no obligation
to update these forward-looking statements to reflect events or circumstances
after the date hereof.
ITEM 1. BUSINESS
For purposes of this Annual Report on Form 10-K, all references to "fiscal
1999" and "fiscal 1998" relate to the fiscal year consisting of the twelve-month
period of Centennial Technologies, Inc. and its subsidiaries ("Centennial" or
the "Company") ending March 31, 1999 and March 31, 1998, respectively. All
references to "fiscal 1997" relate to the fiscal year consisting of the
Company's nine-month period ended March 31, 1997. All references to "fiscal
1996" and "fiscal 1995" relate to the Company's twelve month fiscal year ended
June 30, 1996 and June 30, 1995, respectively.
GENERAL
The Company was incorporated in 1994 in Delaware as the successor by merger
to C. Centennial, Inc., a Massachusetts corporation. The Company's principal
executive offices are located at 7 Lopez Road, Wilmington, Massachusetts, and
its telephone number is (978) 988-8848.
The Company designs, manufactures and markets an extensive line of PC
card-based solutions to original equipment manufacturers ("OEMs"). The Company
focuses on OEM applications and sells into a broad range of markets, including:
Communications (routers, wireless telephones, and local area networks);
Transportation (navigation, vehicle diagnostics); Mobile Computing (hand-held
data collection terminals, notebook computers, personal digital assistants); and
Medical (blood gas analysis systems, defibrillators, hand-held glucometers). The
Company has sold its products and services to over 250 OEMs, including Nortel
Networks, a division of Northern Telecom Limited ("Nortel Networks"), Lucent
Technologies, Inc. ("Lucent Technologies"), Solectron Corporation ("Solectron"),
and Intermec Technologies Corporation, a division of Unova, Inc. ("Intermec").
The Company was incorporated and began operation in 1987 to develop and
commercialize font cartridges for laser printers. In 1992, the Company began
designing, manufacturing and marketing cards which conformed to the
specifications agreed upon by the Personal Computer Memory Card International
Association ("PCMCIA") and became known as "PC cards," and gradually
de-emphasized and ceased the marketing and sales of font cartridges in order to
focus on the rapidly growing PC card market.
INDUSTRY OVERVIEW
In recent years, digital computing and processing have expanded beyond the
boundaries of desktop computer systems to include a broader array of electronic
systems, such as mobile communication systems, network switches, medical
devices, navigation systems, cellular telephones, portable computers, digital
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cameras and portable data collection terminals. PC cards, with characteristics
such as high shock and vibration tolerance, low power consumption, small size
and higher access speed, better meet the requirements of these emerging
applications than do traditional hard drive and floppy disk storage solutions.
The Company believes that demand for PC cards will increase from increased
adoption of PCMCIA standards by electronic equipment manufacturers, the
inclusion of PC card slots on next generation electronic devices and the
development of PC cards offering new applications. In addition, the Company
believes that widening acceptance of Microsoft Corporation's hand-held and
mobile computer operating system, Windows CE, may stimulate demand for certain
hand-held computers and personal digital assistants ("PDAs") that use PC cards
for storage and other applications.
PRODUCTS
The Company's PC cards may contain memory chips (such as flash, static
random access memory ("SRAM") or one time programmable ("OTP") memory) for
storage capacity, input/output chips for transmitting and receiving data, and
memory chips with programmed software and other devices for specific
applications. Application-specific PC cards are generally designed by the
Company in cooperation with an OEM for a specific industry or commercial
application. The following are some of the applications in which the Company's
PC cards are used:
PC CARD PRODUCTS
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TARGET INDUSTRY APPLICATIONS
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COMMUNICATIONS......................... PC cards are used for storage in certain wireless telephones and other
personal communication devices such as screen phones. PC cards are also
used in other communication devices, such as PBX switches and network
routers. The Company also markets network interface cards, which are
used to connect computing devices to local and wide area networks.
TRANSPORTATION......................... The Company markets PC cards for navigation systems, such as Global
Positioning Satellite ("GPS") equipment used in rental cars, fleet
vehicles, emergency and rescue vehicles, airplanes, ships and military
vehicles. GPS systems interpret signals from a dedicated network of
satellites that circle the earth, providing data on the position,
direction, altitude and speed of an object. The Company also develops PC
cards used to interact with on-board information systems embedded in
air, marine and land based vehicles.
MOBILE COMPUTING AND OFFICE
AUTOMATION........................... PC cards with memory chips are used for storage capacity in portable
consumer electronics devices, such as notebooks, handheld computers and
PDAs, and in office automation products, such as laser printers,
facsimile machines and desktop computers. PC cards are also used for
data acquisition and data conversion. The Company's ATA card offerings
may be used to display images recorded by a digital camera on a personal
computer. Other data acquisition and conversion cards are used by field
personnel to gather information, which can then be transmitted and
downloaded to computing devices in remote offices.
</TABLE>
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<TABLE>
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TARGET INDUSTRY APPLICATIONS
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MEDICAL................................ The Company sells PC cards for use in medical monitoring and diagnostic
equipment. Applications include blood gas analysis systems,
defibrillators and hand-held glucometers. PC cards are used for
recording patient data and storing system program information.
CONSUMER OEM........................... The Company sells PC cards to original equipment manufacturers who
design and sell various consumer products, such as sewing machines and
digital cameras. In these particular applications, PC cards are used to
store embroidery patterns and digital images, respectively.
</TABLE>
The Company provides other non-PC card products based on flash memory
technology. Flash memory requires no power to retain data and is electronically
programmable and re-programmable, characteristics that are not present together
in other memory chips. Based on these advantages and recent decreases in the
cost of flash memory, the Company believes the use of flash memory will become
more prevalent in industrial and commercial equipment. Management believes that
its flash SIMMs (defined below) and miniature cards complement the Company's PC
card product offerings and provide the Company's OEM customers with alternative
solutions to address data storage and processing needs.
SMALL FORM FACTOR FLASH CARDS are removable flash memory devices that fit
into small electronic devices, such as compact digital cameras, through slots
that are smaller than those designed for PC cards. Small form factor flash cards
increase memory capacity and functionality and are similar to PC cards in that
they are made with existing flash memory technology in a modified mechanical
package with modified electrical connections. The Company offers four types of
standardized small form factor flash cards, in addition to custom form factors
tailored to particular OEM requirements:
- The CompactFlash-TM- (a trademark of SanDisk Corporation) is based on the
standard endorsed by the CompactFlash Association, an industry
organization established to promote uniform standards for compact flash
cards, of which the Company is a member. The CompactFlash uses a design
that relies on an on-board microcontroller and NAND flash technology.
- The Compact Linear Flash, or CLF-TM- card (a trademark of the Company), is
based upon a design promoted by the Company. The CLF-TM- card is based on
linear flash devices, NOR flash technology, and requires no on-board
micro-controller. The CLF-TM- card uses a similar housing to the
CompactFlash-TM-.
- The MiniatureCard-TM- (a trademark of Intel Corporation ("Intel")) is
based upon a design promoted by Intel. The MiniatureCard is based on
linear flash devices, NOR flash technology, uses a linear design, as
opposed to the design of the CompactFlash, and requires no on-board
microcontroller. The MiniatureCard-TM- uses a different housing design
than the CLF-TM- card or CompactFlash-TM-.
- The Half Card is based upon a proprietary design developed by the Company
utilizing linear flash technology and requires no on-board microcontroller
or PCMCIA interface logic devices.
FLASH SINGLE IN-LINE MEMORY MODULES ("SIMMS") are a type of compact circuit
board assembly consisting of flash memory devices and related circuitry.
Electronic systems increasingly employ SIMMs as building blocks in system
design. SIMMs allow OEMs to configure a system with a variety of different
levels of memory, thus enabling OEMs to address cost-effectively multiple price
points or applications with a single base system that is easily upgradable.
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BUSINESS STRATEGY
The Company's goal is to become a leading worldwide provider of PC
card-based solutions to OEMs in the communications, transportation, mobile
computing, medical and consumer OEM industries. Key elements of the Company's
business strategy include the following:
OFFER COMPREHENSIVE PC CARD-BASED SOLUTIONS. The Company offers an
extensive PC card product line as well as related value-added services, such as
(i) in-house design expertise, (ii) flexible manufacturing, including the
ability to make short production runs with minimum down time, (iii) private
labeling, (iv) programming and testing capabilities, (v) rapid order turnaround,
and (vi) just-in-time delivery programs. By offering comprehensive solutions for
OEM PC card requirements, from design to shipment, the Company believes it has a
competitive advantage in the PC card market.
FOCUS ON OEM CUSTOMERS. The Company markets its products and services to
OEMs that sell products for applications within the Company's target industries.
The Company believes that it can achieve higher gross margins and customer
loyalty by serving the OEM market rather than consumer markets due to the OEM
market's requirements for value-added services, such as design expertise,
programming and prototype development. In addition, the Company believes that
serving OEMs gives it exposure to new technologies and emerging applications,
which helps the Company respond to technological advances and anticipate changes
in market conditions.
PROVIDE FLEXIBLE, HIGH QUALITY MANUFACTURING SOLUTIONS. The Company has
periodically upgraded and automated its manufacturing facilities to expand
production capacity. By manufacturing its PC cards in-house, the Company can
offer more flexible production schedules to accommodate OEMs that require the
delivery of a number of different products within a short time frame. The
Company's PC card manufacturing facility in Wilmington, Massachusetts is a
certified ISO 9001 manufacturer. ISO certification is based on numerous aspects
of the Company's business, including manufacturing, purchasing, human resources,
engineering and research.
SALES AND MARKETING
The Company targets industrial and commercial applications for PC cards
primarily in the communications, transportation, mobile computing, medical and
consumer OEM industries. The Company markets its products primarily through
direct sales people, independent manufacturer representatives and distributors.
The Company's customer service staff operates from the Company's main office in
Wilmington, Massachusetts. Field sales representatives operate from remote
offices and the Company's main office. During fiscal 1998, the Company opened a
foreign sales branch in Cheshire, England.
The Company generally markets its products and capabilities directly to
OEMs. The Company's sales staff and engineers work with OEM engineers to design
and engineer PC cards to OEM requirements, which often leads to the Company
providing custom-designed PC cards for specific applications. The Company
believes its interaction with OEM customers provides exposure to emerging
technologies and applications, facilitating a proactive approach to product
design. The Company's sales to its OEM customers are generally made pursuant to
purchase orders rather than long-term sales agreements. The Company has sold its
products and services to more than 250 OEMs, including Nortel Networks, Lucent
Technologies, Solectron and Intermec. The Company also pursues sales to the
military sector, and to corporate end-users.
During fiscal 1999, Nortel Networks accounted for approximately 14% of the
Company's sales. During fiscal 1999, Nortel Networks engaged Solectron, a
contract manufacturer, to complete the final assembly of a majority of its
products for which the Company has historically supplied PC cards. In addition
to sales to Nortel Networks, sales to Solectron represented almost 10% of the
Company's sales during fiscal 1999. During fiscal 1998, Nortel Networks
accounted for approximately 29% of the Company's sales. During fiscal 1997,
Nortel Networks and Philips Electronics N.V. accounted for approximately 32% and
22%,
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respectively, of the Company's sales. During fiscal 1999, 1998 and 1997,
approximately 12%, 14% and 8% of the Company's sales, respectively, were outside
of the United States. See "Risk Factors--Dependence on Major Customers;
Concentration of Credit Risk" and "--Risks of International Operations and Euro
Currency."
ENGINEERING AND PRODUCT DEVELOPMENT
The Company directs its engineering and design efforts towards products for
which the Company believes there is a growing and profitable market. In
particular, the Company seeks to meet the requirements of its OEM customers for
products aimed at emerging applications in the communications, transportation,
mobile computing and medical industries by applying the latest available
technology and the PC card design and engineering know-how gained from the
Company's focus on these markets. The Company provides engineering and design
support to many of its OEM customers in order to help integrate the Company's
products into OEM equipment. OEMs often require PC cards for new applications
within the Company's target markets. The Company has developed a library of
several hundred designs through its work with OEMs. By working with these OEMs,
the Company is exposed to new market opportunities for the Company's PC
card-based solutions.
EMPLOYEES
As of March 31, 1999, the Company had 116 full-time employees, of whom 6
were executive officers, 14 were involved in sales and marketing, 16 were
involved with engineering and product development, 16 were involved with
administration, and 64 were involved in manufacturing.
None of the Company's employees are represented by a labor union, and the
Company is not aware of any activities seeking such organization. The Company
considers its relationships with its employees to be satisfactory.
ITEM 2. PROPERTIES
The Company maintains its principal executive offices and ISO 9001 certified
manufacturing operations in a 34,000 square foot leased facility in Wilmington,
Massachusetts. The Company currently pays rent in the amount of approximately
$18,000 per month, pursuant to a lease that expires on April 30, 2002. The lease
contains an option to renew for an additional five-year period. The lease
provides for annual rent increases of 4% and provides that the Company will pay
to its landlord as additional rent its pro rata share of certain operational and
maintenance costs at the facility during the term of the lease.
In March 1999, the Company's UK subsidiary renewed a lease on an office
located in Cheshire, England for a term of twelve months. The Company pays rent
in the amount of approximately $825 per month. The lease also provides for the
payment of any value added tax by the Company's subsidiary, as well as a
reasonable proportion of certain operational and maintenance costs of the sales
office during the term of the lease.
The Company conducts business with its domestic field sales representatives
using local in-home offices.
The Company believes that its facilities are adequate for its current needs
and that adequate facilities for expansion, if required, are available at
competitive rates.
ITEM 3. LEGAL PROCEEDINGS
CLASS ACTION LITIGATION
Since the Company's announcement on February 11, 1997 that it was
undertaking an inquiry into the accuracy of its prior reported financial
results, and that preliminary information had raised questions as to
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whether reported results contained material misstatements, approximately 35
purported class action lawsuits have been filed in or transferred to the United
States District Court for the District of Massachusetts. These complaints assert
claims against the Company under Section 10(b) of the Securities Exchange Act of
1934 (the "1934 Act") and Rule 10b-5 promulgated thereunder, and related state
law claims of fraud, deceit and negligent misrepresentation. The complaints also
assert claims against some or all of the Company's Board of Directors, and some
complaints assert claims against certain of the Company's nondirector officers,
under Section 20(a) of the 1934 Act, as well as the same state law claims
asserted against the Company. The Company's former independent accountants,
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), the Company's lead underwriter
for its March 1996 subsequent public offering, Needham & Company, Inc., and a
financial advisory subscription company, Cabot Heritage Corporation, have also
been named in some of the suits. These class action lawsuits were purportedly
brought by and on behalf of purchasers of the Company's Common Stock between the
Company's initial public offering on April 12, 1994 and February 10, 1997 (the
"Centennial Securities Litigation").
On and after February 26, 1997, four complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased the Company's Common Stock on
February 25, 1997. The complaint also names the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and alleges violations of Sections
10(b) and 20(a) of the 1934 Act (the "February 25 Securities Litigation").
On January 13, 1998, a plaintiff purporting to represent classes of
shareholders who purchased the Company's Common Stock on February 27, 1997 filed
a complaint in the United States District Court for the District of
Massachusetts. The Complaint also names the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and Mr. Ramaekers' employer, Jay Alix
& Co., and alleges violations of Sections 10(b) and 20(a) of the 1934 Act (the
"February 27 Securities Litigation").
On February 9, 1998, a consolidated amended complaint combining the
Centennial Securities Litigation, the February 25 Securities Litigation, and the
February 27 Securities Litigation was filed in the United States District Court
for the District of Massachusetts (the "Consolidated Litigation"). Also on
February 9, 1998, the Company and lead counsel representing the plaintiffs in
the Consolidated Litigation filed a Stipulation of Settlement (the "Settlement
Agreement"), whereby the Company and certain of its officers and directors would
be released from liability arising from the allegations included in the
Consolidated Litigation. In return, the Company agreed to pay the plaintiffs in
the Consolidated Litigation $1.475 million in cash and to issue to these
plaintiffs 37% of the Company's Common Stock. The Company also agreed to adopt
certain corporate governance policies and procedures.
The Court granted final approval of the Settlement Agreement of the
Consolidated Litigation on April 29, 1998. The Settlement Agreement became
effective on July 20, 1998.
A significant number of class members opted not to participate in the
Settlement Agreement. No assurance can be given that claims by class members who
declined to participate in the Settlement Agreement will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
The plaintiffs in the Consolidated Litigation have not yet reached an
agreement with the Company's former Interim Chief Executive Officer, Lawrence J.
Ramaekers, regarding their alleged claims against him. The plaintiffs have
agreed to release the Company from any direct liability related to those alleged
claims. In the agreement under which Mr. Ramaekers provided services to the
Company, the Company agreed to provide Mr. Ramaekers with the same
indemnification as is applicable to other officers of the Company pursuant to
the Company's By-Laws. The Company has agreed to indemnify, hold harmless, and
defend Mr. Ramaekers from and against certain claims arising out of his
engagement with the Company. The plaintiffs also retained their claims against
the Company's former President and Chief Executive Officer, Emanuel Pinez; the
Company's former Chief Financial Officer, James M. Murphy; the Company's former
independent accountants, Coopers & Lybrand; and others.
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On February 20, 1997, the Company received a subpoena from the United States
Department of Justice ("DOJ") to produce documents in connection with a grand
jury investigation regarding various irregularities in the Company's previous
press releases and financial statements. The DOJ also requested certain
information regarding some of the Company's former officers, certain stock
transactions by Mr. Pinez, and correspondence with the Company's auditors. The
DOJ has subsequently subpoenaed additional Company records and files. The
Company has not been notified by the DOJ that it is a target or subject of this
investigation.
In mid-February 1997, the Company was notified that the Boston District
Office of the Securities and Exchange Commission ("SEC") was conducting an
investigation of the Company. The SEC has requested that the Company provide the
SEC with certain documents concerning the Company's public reports and financial
statements. The SEC indicated that its inquiry should not be construed as an
indication by the SEC or its staff that any violations have occurred, or as a
reflection upon the merits of the securities involved or upon any person who
effected transactions in such securities. The Company is cooperating with the
SEC in connection with this investigation, the outcome of which cannot yet be
determined.
On and after March 26, 1997, several complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased stock of WebSecure, Inc.
("WebSecure") between December 5, 1996 and February 27, 1997 (the "WebSecure
Complaints"). The WebSecure Complaints assert claims against WebSecure, certain
officers, directors and underwriters of WebSecure, and the Company. Claims
against the Company include alleged violations of Sections 11 and 15 of the
Securities Act of 1933 (the "1933 Act") (the "WebSecure Securities Litigation").
On November 13, 1998, the Company reached an agreement to settle the
WebSecure Securities Litigation. The settlement agreement contemplates that the
Company and certain of its officers and directors would be released from any and
all liability arising from the allegations included in the WebSecure Securities
Litigation in return for the issuance to the WebSecure Securities Litigation
class of 345,000 shares of the Company's Common Stock and the payment to the
class of up to $50,000 for notice and administrative costs. The settlement
agreement must be submitted to the Court for review and approval and,
thereafter, presented to class members for consideration. If a sufficiently
large number of class members opt not to participate in the settlement
agreement, the agreement may be withdrawn. No assurance can be given that the
Court will approve the settlement agreement, or that, if such approval is
obtained, that a material number of class members will not decline to
participate in the settlement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1999, the Company did not submit any
matter to a vote of its security holders, through a solicitation of proxies or
otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is not currently traded on an organized stock
exchange. From March 1997 until May 1998, the Company's Common Stock was traded
on the "pink sheets," and since May 1998, has traded on the Over-the-Counter
Electronic Bulletin Board under the symbol "CENL." For the periods indicated,
the following table sets forth the range of high and low sale prices for the
Common Stock based on information reported by certain internet-based bulletin
board services purporting to monitor trading activities. The Company is unable
to verify the accuracy or completeness of the internet-based bulletin board
information. All sale prices have been rounded to the nearest one-sixteenth.
<TABLE>
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HIGH LOW
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FISCAL 1998
April 1, 1997 through June 30, 1997............................................. 3 9/16 2 5/16
July 1, 1997 through September 27, 1997......................................... 5 1/8 1
September 28, 1997 through December 27, 1997.................................... 4 7/8 1 3/16
December 28, 1997 through March 31, 1998........................................ 3 3/4 1
FISCAL 1999
April 1, 1998 through June 27, 1998............................................. 2 5/8 1 5/16
June 28, 1998 through September 26, 1998........................................ 1 11/16 7/16
September 27, 1998 through December 26, 1998.................................... 1 3/8 3/8
December 27, 1998 through March 31, 1999........................................ 1 1/2 9/16
</TABLE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with the Company's consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein. The selected consolidated
financial data as of March 31, 1997 and June 30, 1996 and 1995 and for the years
ended June 30, 1996 and 1995 have been derived from financial statements not
included herein.
During fiscal 1998 the Company completed a restatement of its financial
results previously reported for the first six months of fiscal 1997 and fiscal
years 1996, 1995 and 1994. The financial statements set forth below give effect
to the adjustments arising from the financial review.
On March 24, 1997 the Company's Board of Directors voted to change the
fiscal year end from June 30 to March 31. See Note 1 of the Consolidated
Financial Statements. All references to fiscal 1999 and 1998 in the accompanying
financial statements relate to the twelve months ended March 31, 1999 and 1998,
respectively. All references to fiscal 1997 relate to the nine months ended
March 31, 1997. References to fiscal 1996 and 1995 relate to the respective
years ended June 30.
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CONSOLIDATED INCOME STATEMENT DATA (in thousands of dollars, except per share
data):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31, JUNE 30,
--------------------------------- ------------------------ ------------------------
1999 1998 1997 1997 1996 1996 1995
--------- --------- ----------- --------- ------------- ----------- -----------
(UNAUDITED) (RESTATED AND (RESTATED) (RESTATED)
UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................................. $ 27,633 $ 28,263 $ 39,907 $ 28,263 $ 21,768 $ 33,412 $ 8,982
Cost of goods sold........................ 18,968 23,683 33,213 24,453 21,018 29,778 11,575
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Gross profit............................ 8,665 4,580 6,694 3,810 750 3,634 (2,593)
Operating expenses:
Engineering, research and development
costs................................. 750 838 1,369 1,061 1,126 1,434 753
Selling, general and administrative
expenses.............................. 6,132 9,957 8,416 7,318 2,705 3,803 2,442
--------- --------- ----------- --------- ------------- ----------- -----------
Operating income/(loss)............... 1,783 (6,215) (3,091) (4,569) (3,081) (1,603) (5,788)
Other (income)/expense:
Loss on investment activities........... 733 14,065 16,689 14,096 69 2,662 --
Special investigation costs............. -- 597 3,673 3,673 -- -- --
Provision for settlement of shareholder
litigation............................ -- -- 20,000 20,000 -- -- --
Provision for loss on inventory subject
to customer dispute................... -- 1,841 -- -- -- -- --
Proceeds from resolution of customer
dispute............................... (1,600) -- -- -- -- -- --
Other expense, net...................... 132 258 -- -- -- -- --
Net interest (income)/expense........... (344) 56 234 391 174 17 64
--------- --------- ----------- --------- ------------- ----------- -----------
Income/(loss) before income taxes and
equity in earnings of affiliate......... 2,862 (23,032) (43,687) (42,729) (3,324) (4,282) (5,852)
Equity in earnings of affiliate........... -- 423 959 959 -- -- --
--------- --------- ----------- --------- ------------- ----------- -----------
Income/(loss) before income taxes......... 2,862 (22,609) (42,728) (41,770) (3,324) (4,282) (5,852)
Provision for income taxes................ 56 -- -- -- -- -- --
--------- --------- ----------- --------- ------------- ----------- -----------
Net income/(loss)......................... $ 2,806 $ (22,609) $ (42,728) $ (41,770) $ (3,324) $ (4,282) $ (5,852)
--------- --------- ----------- --------- ------------- ----------- -----------
--------- --------- ----------- --------- ------------- ----------- -----------
Net income/(loss) per share--basic and
diluted................................. $ .12 $ (1.22) $ (2.49) $ (2.41) $ (.26) $ (.31) $ (.63)
Weighted average shares
outstanding--basic...................... 23,255 18,460 17,174 17,367 12,678 13,632 9,363
Weighted average shares
outstanding--diluted.................... 23,508 18,460 17,174 17,367 12,678 13,632 9,363
</TABLE>
CONSOLIDATED BALANCE SHEET DATA (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
------------------------------- ------------------------
1999 1998 1997 1996 1995
--------- --------- --------- ----------- -----------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C> <C>
Current assets................................ $ 14,553 $ 11,497 $ 27,213 $ 37,017 $ 8,237
Total assets.................................. 18,804 17,078 52,090 41,132 9,550
Current liabilities........................... 7,108 8,140 22,644 8,856 5,121
Working capital............................... 7,445 3,357 4,569 28,161 3,116
Stockholders' equity.......................... 11,696 8,902 29,446 31,909 4,267
</TABLE>
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information contained herein, the discussions
contained in this document include forward-looking statements. By way of
example, the discussions include statements regarding price competition and
erosion, expansion into new markets, future sales mix, future supply of raw
materials, gross margins, raw materials inventory procurement practices, the
Company's customer base, future developments involving certain investments,
assessments regarding systems required to address Year 2000 issues, and future
availability of financing. Such statements involve a number of risks and
uncertainties, including, but not limited to, those (i) discussed below, (ii)
discussed under the heading "Risk Factors," and (iii) identified from time to
time in the Company's filings with the Securities and Exchange Commission. These
risks and uncertainties could cause actual results to differ materially from
those projected. Readers are cautioned not to place undue reliance on these
forward-looking statements. The Company assumes no obligation to update these
forward-looking statements to reflect events or circumstances after the date
hereof.
INTRODUCTION
On February 11, 1997 the Company announced that it had commenced a special
investigation into certain apparent financial and management irregularities and
that its previously published financial statements and related financial
disclosures could no longer be relied upon. On June 12, 1997, the Company
announced the completion of the financial review associated with the special
investigation, including condensed restated financial information, as well as
the financial results for the periods ended March 31, 1997. The Company had
previously changed its fiscal year end to March 31, in order to accelerate the
receipt of certain tax refunds and in order to complete audited financial
statements for the entire periods under review as quickly as possible. The
accompanying financial statements give effect to the adjustments arising from
the financial review.
During fiscal 1997, the Company completed three separate business
acquisitions of contract manufacturing activities and formed an entity, Century
Electronics Manufacturing, Inc. ("Century") of which Centennial held a 67%
equity ownership position for the purpose of conducting this business. On March
14, 1997, the Company agreed to reduce its equity ownership position to 45% in a
transaction which was completed July 1, 1997. Accordingly, the accompanying
financial statements include the results of operations of Century from the dates
of acquisition on the equity method of accounting.
OVERVIEW
The Company designs, manufacturers and markets an extensive line of PC cards
used primarily by OEMs in industrial and commercial applications. The Company's
PC cards provide added functionality to devices containing microprocessors by
supplying increased storage capacity, communications capabilities and programmed
software for specialized applications.
The Company was incorporated and began operation in 1987 to develop and
commercialize font cartridges for laser printers. Beginning in 1992, when the
Company began designing, manufacturing and marketing PC cards, the Company
gradually de-emphasized and ceased the marketing and sales of font cartridges in
order to focus on the rapidly growing PC card market. As the Company effected
this shift in focus, the Company's sales increased from $7.8 million in fiscal
1994 to $39.9 million in the twelve month period ended March 31, 1997 to $27.6
million in fiscal 1999.
The Company incurred losses through fiscal 1998. See "Results of Operations"
for further discussion of the Company's losses.
During fiscal 1996, the Company began a strategy of making investments,
financed through a combination of cash and common stock, in technology companies
for the expressed purpose of market development for its PC card business as well
as investment gain. In late fiscal 1997, management decided
11
<PAGE>
to focus its financial resources on its core business, and to suspend its
investment activities. With the exception of Century, the Company has fully
reserved the carrying value of its investments.
The following table sets forth certain statements of operations data as a
percentage of sales for the periods presented:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------------- --------------------
1999 1998 1997 1997 1996
--------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales..................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................................ 68.6 83.8 83.2 86.5 96.6
--------- ----- --------- --------- ---------
Gross profit................................................ 31.4 16.2 16.8 13.5 3.4
Operating expenses:
Engineering, research and development costs................. 2.7 3.0 3.5 3.7 5.2
Selling, general and administrative expenses................ 22.2 35.2 21.1 25.9 12.4
--------- ----- --------- --------- ---------
Operating income/(loss)..................................... 6.5 (22.0) (7.8) (16.1) (14.2)
Loss on investment activities............................... 2.7 49.8 41.8 49.9 0.3
Special investigation costs................................. -- 2.1 9.2 13.0 --
Provision for settlement of shareholder litigation.......... -- -- 50.1 70.8 --
Provision for loss on inventory subject to customer
dispute................................................... 6.5 -- -- --
Proceeds from resolution of customer dispute................ (5.8) -- -- -- --
Other expenses, net......................................... 0.4 0.9 -- -- --
Net interest (income)/expense............................... (1.2) 0.2 0.6 1.4 0.8
--------- ----- --------- --------- ---------
Income/(loss) before income taxes and equity in earnings of
affiliate................................................... 10.4 (81.5) (109.5) (151.2) (15.3)
Equity in earnings of affiliate............................... -- 1.5 2.4 3.4 --
--------- ----- --------- --------- ---------
Income/(loss) before income taxes............................. 10.4 (80.0) (107.1) (147.8) (15.3)
Provision for income taxes.................................... 0.2 -- -- -- --
--------- ----- --------- --------- ---------
Net income/(loss)............................................. 10.2% (80.0)% (107.1)% (147.8)% (15.3)%
--------- ----- --------- --------- ---------
--------- ----- --------- --------- ---------
</TABLE>
YEAR 2000 DISCLOSURE
The Company is aware of problems associated with computer systems as the
year 2000 approaches. "Year 2000" problems are the result of common computer
programming techniques that result in systems that do not function properly when
manipulating dates later than December 31, 1999. The issue is complex and
wide-ranging. The problem may affect transaction processing computer
applications used by the Company for accounting, distribution, manufacturing,
planning and other applications. Problems may also affect embedded systems such
as building security systems, machine controllers and production test equipment.
Year 2000 problems with any or all of these systems may affect the effectiveness
or efficiency with which the Company can perform many significant functions,
including but not limited to:
- order processing
- product assembly
- invoicing
- material planning
- product test
- payroll and financial reporting
In addition, the problem may affect the computer systems of vendors and
customers, disrupting their operations and possibly impairing the Company's
sources of supply and demand.
The Company has established a Year 2000 readiness team to assess the impact
of the Year 2000 issue on the Company, and to coordinate testing and remediation
activities. In general, the Company's products
12
<PAGE>
do not perform date related processing and are not materially affected by Year
2000 issues. Product testing has uncovered no Year 2000 problems, and
investigation into product design, specifically firmware and microcode, has
uncovered no design assumptions or application programming interfaces that would
cause Year 2000 problems. The Company has also sample tested 100% of its
manufacturing, testing and labeling equipment and uncovered no Year 2000
problems. The Company has not specifically tested software obtained from its
customers that is incorporated into its products for such customers, which may
in some cases involve date related processing, but the Company has sought
assurances from all of its customers that provide the Company with software for
incorporation into the Company's products that the software is Year 2000
compliant, as well as a disclaimer of liability and indemnification should any
Year 2000 issues arise with regard to the customer's software. The Company will
analyze the responses to these requests as they are received. There can be no
assurance that the Company will be successful in obtaining from these customers
such assurance or indemnification.
The Company has completed its Year 2000 compliance assessment and
remediation of the Company's management information system. The Company upgraded
its core management information systems to address the Year 2000 issues with
respect to internal budgeting, financial planning, material planning, sales
order processing, accounting, inventory control, shop floor accounting and
purchasing. All of the modules of this new system are currently operational. The
Company has tested the upgrade to verify its Year 2000 compliance. The cost of
this management information system was approximately $450,000, of which
approximately $394,000 is attributable to the purchase of new software, which
has been capitalized; the balance has been expensed as incurred. The Company has
used operating cash flows as the source of funds for Year 2000 compliance
issues.
The assessment and remediation of Year 2000 problems in tertiary business
information systems is on-going. The Company believes that over 95% of its
desktop PC hardware units are Year 2000 compliant. The majority of the software
used on these systems and network servers is composed of recent versions of
vendor supported, commercially available products that the Company believes are
Year 2000 compliant. Upgrading these applications as respective vendors release
Year 2000 compliant patches has not been a significant burden on the Company.
The Company has also replaced and tested one operating system that was not and
could not be modified to become year 2000 compliant. The cost for this new
system was not material.
The Company has completed its assessment and remediation of Year 2000
problems with computer systems used for facilities control. The Company has
recently purchased a Year 2000 compliant telephone system. The cost to purchase
and install the new telephone systems was approximately $108,000, which has been
capitalized. The Company has also tested its building security system and
determined that it is Year 2000 compliant.
During fiscal 1999, the Company initiated formal communications with its key
suppliers and customers regarding their Year 2000 readiness status. The Company
is in the process of analyzing the responses received from suppliers and
customers and is following up with those who have not yet provided a formal
response. The Company plans to complete this assessment phase early in fiscal
2000. While suppliers and customers may indicate that their products are or will
be Year 2000 compliant prior to the year 2000 and that they expect their
operations and services will continue uninterrupted, the Company can provide no
assurances that the Company's key suppliers and customers have, or will have
technology systems, non-information technology systems and products that are
Year 2000 compliant. Any Year 2000 compliance problem facing the Company's
customers or suppliers could have a material adverse effect on the Company's
business, financial condition and results of operations.
Any additional expenses related to the management of the Company's Year 2000
compliance program are not expected to be material to the Company's quarterly
operating results. The Company estimates that it has spent in aggregate
approximately $600,000 in addressing Year 2000 readiness issues. These
expenditures have been funded through operations.
13
<PAGE>
The Company has not deferred or delayed any information technology projects
due to Year 2000 efforts.
The costs and time schedules for the Company's Year 2000 problem abatement
are based on management's best estimates for the implementation of its new
operating system and Year 2000 problems uncovered to date. These estimates were
derived from utilizing numerous assumptions, including that the most significant
Year 2000 risks have already been identified, that certain resources will
continue to be available, that third party plans will be fulfilled, and other
factors. However, there can be no assurance that these estimates will be
achieved or that the anticipated time schedule will be met. Actual results could
differ materially from those anticipated.
Because computer systems may involve different hardware, firmware and
software components from different manufacturers, it may be difficult to
determine which component in a computer system may cause a Year 2000 issue. As a
result, the Company may be subjected to Year 2000-related lawsuits independent
of whether its products and services are Year 2000 ready. Any Year 2000 related
lawsuits, if adversely determined, could have a material adverse effect on the
Company's business, financial condition, and results of operations.
The Company is in the process of preparing contingency plans for critical
areas to address Year 2000 failures if remedial efforts are not fully
successful. The Company expects to complete its initial contingency plans during
early fiscal 2000, which plans may thereafter be revised from time to time as
deemed appropriate. Should previously undetected Year 2000 problems be found in
systems that support the Company's on-going operations or other systems, these
systems will be upgraded, replaced, turned off, or operated in place with manual
procedures to compensate for their deficiencies. While the Company believes that
these alternative plans would be adequate to meet the Company's need without
materially impacting its operations, there can be no assurance that such
alternatives would be successful or that the Company's results of operations
would not be materially adversely affected by the delays and inefficiencies
inherent in conducting operations in this manner.
There may be additional Year 2000 problems that are as yet unknown to the
Company and for which remediation plans have not yet been made. Any such Year
2000 compliance problem of the Company, its suppliers or its customers could
materially adversely affect the Company's business, results of operations,
financial condition, and prospects. If, for example, third party suppliers were
unable to deliver necessary components, the Company may be unable to manufacture
products in a timely manner. Similarly, if shipping and freight forwarders were
unable to ship product, the Company would be unable to deliver product to its
customers. There can be no assurance that the Company's insurance will cover
losses from business interruptions arising from year 2000 problems of the
Company or its suppliers or customers.
The foregoing discussion of the Company's Year 2000 readiness includes
forward-looking statements, including estimates of the timeframes and costs for
addressing the known Year 2000 issues confronting the Company, and is based on
management's current estimates, which were derived using numerous assumptions.
There can be no assurance that these estimates will be achieved, and actual
events and results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not limited
to, the ability of the Company to identify and correct all relevant computer
code and the success of third parties with whom the Company does business in
addressing their Year 2000 issues.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
(FASB 133), which establishes new standards for recording derivatives in interim
and annual financial statements. This statement requires recording all
derivative instruments as assets or liabilities, measured at fair value. FASB
133 is effective for fiscal years beginning after June 15, 1999. Management does
not anticipate that the adoption of the new statement will have a significant
impact on the consolidated results of operations or financial position of the
Company.
14
<PAGE>
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto contained elsewhere in this
Annual Report on Form 10-K.
RESULTS OF OPERATIONS
TWELVE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
SALES. Sales decreased 2% to approximately $27.6 million in the 1999 period
compared to $28.3 million in the 1998 period. The average selling price for the
Company's products fell approximately 7% during fiscal 1999, which was partially
offset by an increase in the volume of PC cards sold of approximately 5%.
Decreasing component costs between periods and competitive pricing pressures
contributed to the decrease in the average selling price of the Company's
products. The Company expects that its sales will continue to be affected in
future periods by, among other things, changes in the cost of component memory
devices and continued competitive pricing pressures.
Sales outside of the United States represented 12% of sales in the 1999
period compared to 14% of sales for the 1998 period. At the end of fiscal 1998,
the Company opened a new sales office in Cheshire, England. The Company expects
that sales outside the United States will continue to represent a percentage of
the Company's sales consistent with that of fiscal 1999 for the foreseeable
future.
Sales to one of the Company's customers represented 14% of total sales in
the 1999 period compared to 29% of total sales in the 1998 period. During fiscal
1999, this customer engaged a contract manufacturer to complete the final
assembly of a majority of its products for which the Company has historically
supplied PC cards. The Company's sales to this contract manufacturer represented
almost 10% of total sales during the 1999 period. If these customers were to
reduce significantly the amount of business they conduct with the Company, it
could have a material adverse effect on the Company's business, financial
condition and results of operations. No other customer or group of related
customers accounted for more than 10% of the Company's sales during fiscal 1999.
COST OF GOODS SOLD. Cost of goods sold decreased 20% to $19.0 million for
the 1999 period compared to $23.7 million for the 1998 period. Gross margins
were 31.4% for the 1999 period compared to 16.2% for the 1998 period. During
fiscal 1999, the Company sold portions of some customized inventory for
approximately $1.2 million, the cost of which had been previously fully reserved
due to a dispute with the customer for whom the customized cards were originally
produced and who had attempted to cancel the order. Gross margin for fiscal
1999, excluding this sale of fully reserved inventory, was 28.1%. Costs of goods
sold include provisions for inventory obsolescence of $0 in the 1999 period and
$886,000 in the 1998 period, representing 3.1% of sales in the 1998 period,
which reflects the strategy of prior management to build inventory in
anticipation of customer orders, a portion of which did not materialize. During
fiscal 1998, the Company instituted policies that have resulted in a significant
decrease in the amount of inventory purchased in advance of receipt of customer
orders, which has resulted in a decrease in inventory obsolescence exposure in
fiscal 1999. The Company's gross margins were also negatively impacted during
fiscal 1998 by declining memory chip prices, which reduced PC card selling
prices in certain situations where the Company had already purchased memory
chips at higher prices. Beginning in fiscal 1998, the Company instituted new
procurement practices reflecting increased emphasis on reducing inventory
levels, and established on-site stores of raw materials consigned by several of
the Company's major vendors, which has resulted in decreased inventory carrying
cost exposure through fiscal 1999.
ENGINEERING, RESEARCH AND DEVELOPMENT COSTS. Engineering, research and
development costs decreased by 11% to approximately $750,000 in the 1999 period
compared to $838,000 for the 1998 period. The Company expects that engineering,
research and development costs will continue to trend slightly higher in fiscal
2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses decreased by 39% to $6.1 million in the 1999 period
compared to $10.0 million in the 1998 period. This decrease
15
<PAGE>
primarily resulted from the non-recurrence in fiscal 1999 of the following
expenses incurred in fiscal 1998: legal and consulting expenses relating to the
negotiation and finalization of the settlement of the class action litigation
against the Company, the settlement of several other legal claims against the
Company, the filing of revised tax returns, and the conclusion of the Company's
arrangements for interim senior management consulting services. Bad debt
expenses were also higher in fiscal 1998 than in fiscal 1999 as the Company
provided specific reserves for several of the Company's former customers. The
Company also paid non-recurring retention bonuses during fiscal 1998 to several
key employees following the announcement of the special investigation into the
Company's prior reported financial results. The Company also incurred
non-recurring costs in fiscal 1998 in hiring a new senior management team, and
paid severance benefits to certain of the Company's former officers and
employees. The Company also incurred non-recurring costs during fiscal 1998 in
closing its Canadian and UK offices and establishing a new sales office in
Cheshire, England. The Company incurred increased sales expenses related to its
new UK sales office during fiscal 1999. Employee benefits and commissions
expenses increased in fiscal 1999 as the Company implemented a profit-sharing
plan and a new commissions program.
LOSS ON INVESTMENT ACTIVITIES. Loss on investment activities consists of
write-downs, valuation adjustments and accruals for losses recorded associated
with certain investments. During fiscal 1999, the Company reduced the carrying
value of its investment in Century by $733,000 to $1.7 million, reflecting
management's assessment of the deterioration in value of contract manufacturing
businesses in general and a permanent decline in the value of its investment.
PROCEEDS FROM RESOLUTION OF CUSTOMER DISPUTE. During fiscal 1998, the
Company filed suit against a customer regarding inventory specifically purchased
and manufactured pursuant to a purchase order from the customer (the "Custom
Inventory"). The customer attempted to cancel a portion of the purchase order.
The Company disputed the customer's claim that the purchase order cancellation
was effective. During fiscal 1998, the Company fully reserved the cost of the
Custom Inventory of approximately $1.8 million due to the legal costs and
inherent uncertainties involved in litigation.
During fiscal 1999, the Company and the customer agreed to settle the
litigation. As a result of this settlement, the Company received $1.6 million in
cash and the customer agreed that the Company would retain all rights with
regard to the Custom Inventory. During fiscal 1999, the Company recognized the
cash payment of $1.6 million as income. Also during fiscal 1999, after the
settlement agreement was reached, the Company sold portions of the Custom
Inventory for approximately $1.2 million, which the Company has included in net
sales.
OTHER EXPENSES, NET. During fiscal 1999, the Company incurred a loss on the
disposal of certain equipment that had a net book value of approximately
$132,000, which equipment was replaced. During fiscal 1998, the Company
increased its accrual for Special Investigation Costs by $597,000 due to
incremental costs. During fiscal 1998, the Company paid in full its line of
credit and lease financing obligations with the bank that was previously
providing the Company with its credit facilities. That bank required the Company
to pay lease cancellation charges of approximately $258,000 in order to release
its lien on the equipment being financed pursuant to those leases.
NET INTEREST INCOME/EXPENSE. Net interest income was $344,000 for fiscal
1999 and net interest expense was $56,000 in fiscal 1998, reflecting cash
available for investment in fiscal 1999 and outstanding borrowings during fiscal
1998.
PRIOR ACQUISITIONS. The Company's analysis of the future viability of
several development stage businesses in which the Company invested during fiscal
1997 and 1996, combined with the Company's decision to continue to focus its
financial resources on its core business, led the Company to reserve fully the
carrying value of its investments in these development stage companies. As of
March 31, 1998, the only remaining investment with a carrying value greater than
zero was the Company's remaining investment in the Series B Preferred Stock of
its former affiliate, Century Electronics Manufacturing, Inc., valued at
16
<PAGE>
approximately $2.4 million. During fiscal 1999, the Company reduced the carrying
value of its investment in Century by $733,000 to $1.7 million, reflecting
management's assessment of the deterioration in value of contract manufacturing
businesses in general and a permanent decline in the value of its investment.
TWELVE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
SALES. Sales decreased 29% to approximately $28.3 million in the 1998
period compared to $39.9 million in the 1997 period. The average selling price
for the Company's products fell approximately 40% during fiscal 1998, which was
partially offset by an increase in the volume of PC cards sold of approximately
15%.
Sales outside of the United States represented 14% of sales in the 1998
period compared to 8% of sales for the 1997 period. At the end of fiscal 1998,
the Company opened a new sales office in Cheshire, England. The Company expects
that sales outside the United States will continue to represent a percentage of
the Company's sales consistent with that of fiscal 1998.
Sales to one of the Company's customers represented 29% of total sales in
both the 1998 and 1997 periods. If this customer were to reduce significantly
the amount of business they conduct with the Company, it could have a material
adverse effect on the Company's business, financial condition and results of
operations. No other customer or group of related customers accounted for more
than 10% of the Company's sales.
COST OF GOODS SOLD. Cost of goods sold decreased 29% to $23.7 million for
the 1998 period compared to $33.2 million for the 1997 period. Gross margins
were 16.2% for the 1998 period compared to 16.8% for the 1997 period. Costs of
goods sold include provisions for inventory obsolescence of $886,000 in the 1998
period and $1,263,000 in the 1997 period, representing 3.1% of sales in the 1998
period and 3.2% in the 1997 period, reflecting a strategy of prior management to
build inventory in anticipation of customer orders, a portion of which did not
materialize. In February 1997, the Company instituted policies that have
resulted in significantly decreasing the amount of inventory purchased in
advance of receipt of customer orders. The Company's gross margins have also
been impacted by declining memory chip prices, which reduced PC card selling
prices in certain situations where the Company had already purchased memory
chips at higher prices. During fiscal 1998, the Company instituted new
procurement practices reflecting increased emphasis on reducing inventory
levels, and has established on-site stores of raw materials consigned by several
of the Company's major vendors.
ENGINEERING, RESEARCH AND DEVELOPMENT COSTS. Engineering, research and
development costs were $0.8 million in the 1998 period compared to $1.4 million
for the 1997 period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased to $10.0 million in the 1998 period compared
to $8.4 million in the 1997 period. The Company incurred increased legal
expenses during fiscal 1998 as it negotiated and finalized the settlement of the
class action litigation against the Company, and settled several other legal
claims against the Company. The Company also paid retention bonuses during
fiscal 1998 to several key employees following the announcement of the special
investigation into the Company's prior reported financial results. The Company
also incurred costs in hiring a new senior management team, and paid severance
benefits to certain of the Company's former officers and employees. The Company
also incurred costs in closing its Canadian and UK offices and establishing a
new sales office in Cheshire, England.
17
<PAGE>
LOSS ON INVESTMENT ACTIVITIES. Loss on investment activities consists of
write-downs, valuation adjustments and accruals for losses on disposition of a
series of investments made during the 1997 period and prior. The following table
describes the elements and the amounts reflected in this category (in
thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Provision for loss on Century Electronics Manufacturing, Inc................................ $ 5,142 $ --
Costs incurred in connection with ITP/Fleet.Net............................................. 3,869 4,761
Provision for loss on investment in Infos International..................................... -- 6,024
Provision for loss on investment in Industrial Imaging...................................... -- 2,283
Provision for loss on investment in WebSecure............................................... (125) 1,765
Less gain on sale of investment in WebSecure................................................ -- (1,200)
Provision for loss on investment in Advent Technology Management, Inc....................... -- 1,000
Provision for loss on investment in P.G. Technologies, Inc.................................. -- 497
Amortization of goodwill and equity in losses of ViA........................................ -- 585
Provision for loss on investment in ViA..................................................... 4,415 --
Other losses................................................................................ 764 974
--------- ---------
$ 14,065 $ 16,689
--------- ---------
--------- ---------
</TABLE>
CENTURY ELECTRONICS MANUFACTURING, INC.
During the twelve months ended March 31, 1997, the Company completed three
separate business acquisitions of contract manufacturing activities. On July 10,
1996, the Company acquired a majority equity position in Design Circuits, Inc.
("DCI") for approximately $3.2 million in cash, 250,000 shares of the Company's
Common Stock and assumption of certain liabilities.
In October 1996, the Company and the minority shareholders in DCI exchanged
their DCI shares for shares of capital stock in a newly formed entity, Century
Electronics Manufacturing, Inc. ("Century").
Pursuant to a joint venture agreement executed in May 1996, the Company
invested $1.3 million during the twelve months ended March 31, 1997 as its
initial capital into its 51% owned contract manufacturing joint venture in
Thailand. The Company's joint venture partner's initial capital contribution was
$3.7 million.
On November 5, 1996, Century purchased Triax Technology Group Limited
("Triax"), a provider of contract manufacturing services located in the United
Kingdom for approximately $4.2 million in cash, and approximately 2.2 million
shares of common stock of Century. The Company also contributed 25,000 shares of
Centennial Common Stock as a finder's fee. At the conclusion of the Triax
transaction, Triax and DCI were wholly-owned subsidiaries of Century, and
Centennial owned approximately 67% of Century.
On March 14, 1997, Century entered into an agreement in principal with the
Company, whereby Century agreed to redeem a portion of its shares in exchange
for $1.3 million in cash and a $6.0 million subordinated debenture, reducing the
Company's equity ownership position to 45%. The debentures bore interest at a
rate of 6% and were to mature in ten years. Under certain conditions, the
debentures would be convertible into the capital stock of an entity with which
Century might merge. In addition, the Company agreed to contribute to Century
its interest in the Thailand joint venture. Century also agreed to repay an 8.5%
note payable to Centennial in the amount of $4.1 million and to take the
necessary steps to remove all outstanding guarantees of third-party
indebtedness.
On July 1, 1997, the transaction agreed upon on March 14, 1997 was
completed. In order to remove certain guarantees of equipment subleased to DCI,
Centennial executed lease buyouts amounting to approximately $2.4 million and
sold the underlying equipment to Century for cash and a $1.9 million 9%
promissory note due December 1998.
18
<PAGE>
On February 4, 1998, the Company entered into a transaction with Century
whereby Century redeemed the Company's remaining holdings of Century common
stock, repurchased its $1.9 million 9% promissory note due December 1998, and
satisfied its $6.0 million 6% Convertible Subordinated Debenture due June 2007,
in exchange for $9.7 million in cash and $4.0 million of Century Series B
Convertible Preferred Stock. The Company recorded a loss on investment
activities of $5.1 million during fiscal 1998 to reflect the difference between
the fair value of the consideration received from Century and the carrying value
of the Company's investment.
ITP/FLEET.NET
On December 13, 1996, the Company entered into merger agreements with
Intelligent Truck Project, Inc., Fleet.Net, Inc. and Smart Traveler Plazas, Inc.
(collectively, "ITP/Fleet.Net") agreeing to exchange an aggregate of 792,960
shares of Common Stock of the Company for all of the outstanding common stock of
the acquired businesses. Subsequent to the Company's February 1997 announcement
of financial irregularities, the principal shareholder of ITP/Fleet.Net filed
suit, alleging, among other things, breach of representations and warranties
regarding the Company's prior reported financial statements. On March 4, 1997,
the Company and the principal shareholder of ITP/Fleet.Net entered into a
memorandum of understanding pursuant to which the companies would unwind the
merger agreement. The parties were unable to reach mutually satisfactory terms
to complete the unwinding and on May 15, 1997 agreed to complete the merger and
exchange mutual releases of certain claims. Based on the material uncertainties
surrounding the value of consideration on the original merger date, which
uncertainties were not resolved until the execution of the Settlement and Mutual
Release, the Company has recorded the merger and corresponding issuance of
Common Stock as of May 15, 1997. Advances to ITP/Fleet.Net made during fiscal
1996 and fiscal 1997, certain of which were previously characterized as advance
payments for technology license arrangements, have been included in loss on
investment activities in the periods the advances were made. The merger has been
recorded using purchase accounting, and the excess of the purchase price over
the fair value of assets acquired (approximately $3.0 million) was written off
as of May 15, 1997, the settlement agreement date, because of the uncertainties
related to the future operations of ITP/Fleet.Net.
VIA, INC.
In December 1996, the Company acquired a 12% interest in ViA, Inc., a
development stage privately held technology company that designs, develops, and
markets miniature communication and computing products. Due to the significance
of the Company's investment to ViA's total capitalization and on the basis of
the complementary nature of the companies' products and related development
plans, the Company accounted for this investment using the equity method, and
amortized the purchase price in excess of its interest in the investee's
underlying net assets, which excess amounted to $5.0 million, over 60 months.
The Company has recorded this amortization, as well as its share of the
investee's losses since the date of the investment through March 31, 1997, for
an aggregate amount of $585,000, as loss on investment activities. During fiscal
1998, the Company reserved the remaining carrying value of its investment, and
recorded a loss on investment activities during fiscal 1998 related thereto of
approximately $4.4 million.
The Company's analysis of the future viability of several development stage
businesses in which the Company invested during fiscal 1997 and 1996, combined
with the Company's decision to continue to focus its financial resources on its
core business, led the Company to reserve fully the carrying value of its
investments in these development stage companies. As of March 31, 1998, the only
remaining investment with a carrying value greater than zero was the Company's
remaining investment in the Series B Preferred Stock of its former affiliate,
Century Electronics Manufacturing, Inc., valued at approximately $2.4 million.
19
<PAGE>
WEBSECURE, INC.
During fiscal 1996, the Company purchased for $569,000 a minority interest
in WebSecure, Inc. ("WebSecure"), a corporation that provided Internet services.
The former president and a shareholder of WebSecure was a Director of the
Company from February 1994 through November 1995. In connection with WebSecure's
initial public offering, the Company realized a gain of $1.2 million from the
sale of a portion of its investment. The remaining investment, having a cost of
$560,000, was fully reserved as of March 31, 1997 on the basis that its value
appeared to have been permanently impaired. During fiscal 1998, the Company sold
this remaining investment for $125,000. In addition, the Company has accrued an
amount equal to the gain pending final resolution of certain litigation
described in Note 14 of Notes to Consolidated Financial Statements.
SPECIAL INVESTIGATION COSTS. The following table describes the elements and
the amounts reflected in this category for the 1998 and 1997 periods (in
thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Fees for services provided by the Company's Independent Accountants.......... $ -- $ 933
Fees for services provided by the Company's Special Litigation Legal
Counsel.................................................................... -- 942
Fees for services provided by the Company's Interim Chief Executive Officer
and Interim Chief Financial Officer........................................ 520 1,195
Fees for services provided by Counsel to the Special Committee of the Board
of Directors............................................................... -- 541
Other........................................................................ 77 62
--------- ---------
$ 597 $ 3,673
--------- ---------
--------- ---------
</TABLE>
These expenses reflect fees in connection with the completion of the special
investigation, certain refinancing activities, and costs of legal defense
associated with shareholder litigation.
PROVISION FOR SETTLEMENT OF SHAREHOLDER LITIGATION. As of March 31, 1997,
the Company has recorded a provision for the settlement of the Consolidated
Securities Litigation of $20.0 million, representing the cash portion of the
settlement, together with an amount equal to 37% of the estimated market
capitalization of the Company. The Company satisfied its obligation to remit the
cash portion ($1,475,000) into a settlement fund during fiscal 1998. The Common
Stock portion ($18,525,000) is included in additional paid-in capital as of
March 31, 1998 and 1997.
PROVISION FOR LOSS ON INVENTORY SUBJECT TO CUSTOMER DISPUTE. During fiscal
1998, the Company filed suit against Philips Home Services, Inc., a subsidiary
of Philips Electronics, N.V. ("Philips"), seeking to recover damages regarding
inventory specifically purchased and manufactured pursuant to a purchase order
from Philips (the "Custom Inventory"). Philips later attempted to cancel a
portion of the purchase order. The Company claimed that the purchase order
cancellation was not effective. Due to the legal costs and inherent
uncertainties involved in litigation, the Company reserved the cost of the
Philips Inventory of approximately $1.8 million during fiscal 1998.
OTHER EXPENSES, NET. During fiscal 1998, the Company paid in full its line
of credit and lease financing obligations with the bank that was previously
providing the Company with its credit facilities. That bank required the Company
to pay lease cancellation charges of approximately $258,000 in order to release
its lien on the equipment being financed pursuant to those leases.
NET INTEREST EXPENSE. Net interest expense decreased to $56,000 in the 1998
period from $234,000 in the 1997 period, reflecting a decreased level of
borrowing under the Company's revolving credit agreements.
20
<PAGE>
EQUITY INTEREST IN EARNINGS OF AFFILIATE. The equity interest in earnings
of affiliate reflects the Company's net interest in earnings of Century.
NINE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
SALES. Sales increased 30% to approximately $28.3 million in the 1997
period compared to $21.8 million in the 1996 period, primarily as a result of
increased volume of sales of PC cards. Such increase resulted primarily from
expansion of the PC card market, increased sales and marketing efforts by the
Company and the broadening of the Company's product line.
Sales outside of the United States represented 8% of sales in the 1997
period compared to 12% of sales in the 1996 period.
Sales to one of the Company's customers represented 22% of total sales in
the 1997 period and 12% of sales in the 1996 period. Another significant
customer represented 32% of total sales in the 1997 period and 16% of total
sales in the 1996 period. No other customer or group of related customers
accounted for more than 10% of the Company's sales.
COSTS OF GOODS SOLD. Cost of goods sold increased 16% to $24.5 million for
the 1997 period compared to $21.0 million for the 1996 period. Gross margins
were 13.5% for the 1997 period compared to 3.5% for the 1996 period. Costs of
goods sold include provisions for inventory obsolescence of $925,000 in the 1997
period and $1,351,000 in the 1996 period, representing 3.3% of sales in the 1997
period and 6.2% in the 1996 period, reflecting a strategy of prior management to
build inventory in anticipation of customer orders, a portion of which did not
materialize. The decline in obsolescence as a percentage of sales reflects, in
part, a change in the practice in February 1997, which change significantly
decreased the amount of inventory purchased in advance of receipt of customer
orders. The Company's gross margins were also impacted by declining memory chip
prices, which reduced PC card selling prices in certain situations where the
Company had already purchased memory chips at higher prices.
During the 1997 and 1996 periods, the Company recorded sales of $5.3 million
and $3.7 million, respectively, which were subsequently deemed to be invalid and
reversed in the process of restating the Company's financial statements. These
transactions had the effect of overstating the Company's gross margins and
contributed to inappropriate pricing decisions and selling practices.
ENGINEERING, RESEARCH AND DEVELOPMENT COSTS. Engineering, research and
development costs were $1.1 million in both periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expenses increased to $7.3 million in the 1997 period compared to
$2.7 million in the 1996 period. Sales compensation and related travel costs for
domestic operations increased from $872,000 to $1,604,000, reflecting increased
investment in sales personnel. Legal, accounting and other professional fees
were approximately $1.8 million in the 1997 period compared to $90,000 in the
1996 period, reflecting increased costs associated with Company's investment
activities as well as costs associated with a public offering for convertible
debentures which was cancelled in December 1996.
Depreciation expense increased to $702,000 in the 1997 period compared to
$336,000 in the 1996 period, reflecting increased capital equipment expenditures
to increase production capacity and improve productivity.
The Company's Canadian and UK sales subsidiaries incurred $590,000 of
selling, general and administrative expenses in the 1997 period compared to
$464,000 in the 1996 period. These operations were both shut down in April 1997
and support for all international sales activities was consolidated at the
Company's headquarters.
21
<PAGE>
During the 1997 period, the Company revised its method of allocating
overhead costs to cost of goods sold, which revision reduced the allocation for
this period by approximately $360,000.
LOSS ON INVESTMENT ACTIVITIES. Loss on investment activities consists of
write-downs, valuation adjustments and accruals for losses on disposition of a
series of investments made during the 1997 and 1996 periods. The following table
describes the elements and the amounts reflected in this category for fiscal
1997 (in thousands):
<TABLE>
<S> <C>
Costs incurred in connection with ITP/Fleet.Net.................... $ 3,729
Provision for loss on investment in Infos International............ 6,024
Provision for loss on investment in Industrial Imaging............. 2,283
Provision for loss on investment in WebSecure...................... 1,765
Less gain on sale of investment in WebSecure....................... (1,200)
Amortization of goodwill and equity in losses of ViA............... 585
Other losses....................................................... 910
---------
$ 14,096
---------
---------
</TABLE>
See discussion of 1998 results concerning loss on investment activities
related to ITP/Fleet.Net and ViA.
INFOS INTERNATIONAL, INC.
During fiscal 1997, the Company acquired a 38% interest in Infos
International, Inc. ("Infos"), a supplier of intelligent hand-held data
collection equipment for route and shop floor accounting. The purchase price
amounted to approximately $3.0 million in cash and 230,000 shares of Centennial
Common Stock having a market value of $3.9 million at date of acquisition. On
February 6, 1998, the Company, Infos and the shareholders of Infos entered into
a transaction whereby the Company agreed to return its shares of Infos capital
stock in exchange for an agreement to sell Infos inventory and equipment arising
from the contract manufacturing relationship between Infos and Century, which
relationship was terminated. The parties also agreed to exchange mutual releases
of any claims arising from the original acquisition agreement. The full amount
of the investment cost ($7.0 million) has been written off. The recorded loss of
$6.0 million reflects the use by Infos of $1.0 million of the original cash
proceeds to repay an obligation of that amount due to Centennial from an Infos
subsidiary, Information Capture Corporation ("ICC"). This obligation originally
arose in fiscal 1995, prior to Infos acquiring ICC, in connection with a sales
transaction that was determined in the Company's financial review not to be bona
fide. The effect of the adjustment is to reflect $1.0 million of the investment
cost as a reduction of sales and net income in fiscal 1995 and the remainder as
loss on investment activities in fiscal 1997.
INDUSTRIAL IMAGING, INC.
For $730,000 in cash and the conversion of $200,000 of notes, the Company
purchased a minority interest in Industrial Imaging, Inc., which designs,
manufactures and markets automated optical vision and individual imaging systems
for inspection and identification of defects in printed circuit boards. In
addition, effective April 1, 1996 and expiring June 30, 1997, the Company agreed
to provide procurement services and purchase material using the Company's credit
arrangements for a service fee of $200,000. The Company completed purchases
aggregating $1.4 million on behalf of the investee and initially reflected by
the Company as sales with the equivalent amount of cost of goods sold. Such
sales have been reversed in connection with the Company's financial review.
During fiscal 1997, the Company determined that the investee was unable to repay
the Company for the material purchased, and also determined that the value of
the equity investment was permanently impaired. The Company agreed to convert
its account receivable into common stock of the investee and recorded a
valuation reserve equal to the carrying value of the
22
<PAGE>
investment. The Company sold its remaining investment in Industrial Imaging,
Inc. during fiscal 1998 for $550,000.
WEBSECURE, INC.
During fiscal 1996, the Company purchased for $569,000 a minority interest
in WebSecure, a corporation that provided Internet services. The former
president and a shareholder of WebSecure was a Director of the Company from
February 1994 through November 1995. In connection with WebSecure's initial
public offering, the Company realized a gain of $1.2 million from the sale of a
portion of its investment. The remaining investment, having a cost of $560,000,
was fully reserved as of March 31, 1997 on the basis that its value appeared to
have been permanently impaired. In addition, the Company has accrued an amount
equal to the gain pending final resolution of certain litigation described in
Note 14 of Notes to Consolidated Financial Statements.
OTHER INVESTMENTS
During fiscal 1997 and 1996, the Company made investments aggregating
$860,000 in development stage businesses that had not reached commercial
viability as of March 31, 1997. Such investments have been fully reserved as of
March 31, 1997 (net of certain offsets included in accounts payable and accrued
expenses).
SPECIAL INVESTIGATION COSTS. The following table describes the elements and
the amounts reflected in this category for fiscal 1997 (in thousands):
<TABLE>
<S> <C>
Fees for services provided by the Company's Independent
Accountants....................................................... $ 933
Fees for services provided by the Company's Special Litigation Legal
Counsel........................................................... 942
Fees for services provided by the Company's Interim Chief Executive
Officer and Interim Chief Financial Officer....................... 1,195
Fees for services provided by Counsel to the Special Committee of
the Board of Directors............................................ 541
Other............................................................... 62
---------
$ 3,673
---------
---------
</TABLE>
As of March 31, 1997, $1.6 million of these fees had been paid and $2.0
million are included in accounts payable and accrued expenses. Such accruals
include estimates of fees in connection with the completion of the special
investigation, certain refinancing activities, and costs of legal defense
associated with shareholder litigation.
PROVISION FOR SETTLEMENT OF SHAREHOLDER LITIGATION. As of March 31, 1997,
the Company has recorded a provision for the settlement of the Consolidated
Securities Litigation of $20.0 million, representing the cash portion of the
settlement, together with an amount equal to 37% of the estimated market
capitalization of the Company. The cash portion ($1,475,000) of the settlement
is included in accounts payable and accrued expenses and the Common Stock
portion ($18,525,000) is included in additional paid-in capital as of March 31,
1997.
NET INTEREST EXPENSE. Net interest expense increased from $174,000 in
fiscal 1996 to $391,000 in fiscal 1997, reflecting increased borrowings under
the Company's revolving credit agreement.
EQUITY INTEREST IN EARNINGS OF AFFILIATE. The equity interest in earnings
of affiliate reflects the Company's net interest in earnings of Century.
23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since the Company's inception, it has financed its operating activities
primarily from loans from financial institutions, public and private offerings
of equity securities, and positive cash flows from operations.
The Company experienced significant losses from operations from fiscal 1994
through fiscal 1998. The Company has taken measures since the firing of its
former Chief Executive Officer in February 1997 to reduce those losses,
including the following: hiring new senior management, reducing various
expenses, and implementing new cost controls. If cost savings are not achieved
or revenues are not increased, the operating plan for the Company could include
further cost reductions. If cost savings are not achieved, or revenues are not
increased, it would significantly impair the ability of the Company to continue
as a going concern. The Company believes that its cash balances, bank financing,
and anticipated future cash flows will be sufficient to fund operations for the
foreseeable future. The Company can make no assurances that measures taken to
date or to be taken in the future will be sufficient to stem losses or that
future financing will be available to the Company or, if available, on terms
that will be satisfactory to the Company. Management believes the existing cash
and cash equivalents, short-term investments and available financing
arrangements will be sufficient to meet the Company's currently anticipated
working capital and capital expenditure requirements for the foreseeable future.
OPERATING ACTIVITIES
At March 31, 1999, working capital increased to approximately $7.4 million,
compared to working capital of $3.4 million at March 31, 1998, due principally
to the Company's achieving positive operating income. In fiscal 1999, the
Company generated cash flow from operations of approximately $2.8 million,
compared to cash flow from operations of $8.0 million for fiscal 1998. Days of
sales outstanding in accounts receivable amounted to 49 days at March 31, 1999
compared to 60 days at March 31, 1998. The Company's inventories represent
approximately 8 weeks of manufacturing output at March 31, 1999, compared to 6
weeks at March 31, 1998. Management has implemented new procurement practices
reflecting increased emphasis on reducing inventory levels, and has established
on-site stores of raw materials consigned by several of the Company's major
vendors. During the latter part of fiscal 1999, the Company purchased in bulk
several items of raw materials with extended lead times based upon purchase
orders received by the Company. The Company expects to use these raw materials
in the early part of fiscal 2000.
INVESTING TRANSACTIONS
Capital expenditures amounted to $0.7 million in fiscal 1999, $1.7 million
in fiscal 1998, and $2.3 million for the twelve month period ended March 31,
1997; such expenditures having been financed, in part, through leasing
arrangements. As of March 31, 1999, the Company had remaining obligations of
$36,000 on these equipment financing leases.
The Company has commitments for future capital equipment expenditures of
approximately $430,000 at March 31, 1999, which the Company expects to incur
during fiscal 2000. The Company expects to finance approximately $360,000 of
these capital expenditures through lease financing arrangements.
Depending on the demand for the Company's products, the Company may decide
to make additional investments, which could be substantial, in capital equipment
to support its business in the future.
FINANCING TRANSACTIONS
On August 14, 1997, the Company entered into a credit agreement, effective
through August 13, 2000 unless terminated sooner, with Congress Financial Corp.
("Congress Financial"), a commercial credit institution, for a revolving credit
facility and term loan facility of up to $4.1 million and $0.9 million,
24
<PAGE>
respectively, and a $2.0 million capital equipment acquisition facility, based
on certain limitations and covenants. On August 15, 1997, the Company paid in
full its line of credit and lease financing obligations with the bank that was
previously providing the Company with its credit facilities. At March 31, 1998,
the Company had no outstanding borrowings under the Congress Financial credit
agreement. On November 24, 1998, the Company terminated its credit agreement
with Congress Financial and entered into a new credit agreement with Fleet
National Bank ("Fleet") for a revolving credit facility, equipment term loan
facility and foreign exchange facility of $3.5 million, $1.5 million and $2.0
million, respectively. Allowable borrowings are based on accounts receivable and
the cost of equipment, are secured by substantially all of the Company's assets,
and are based on certain limitations and covenants. At March 31, 1999, the
Company had no outstanding borrowings under the Fleet credit agreement.
CONTINGENCIES
The Company is a defendant in numerous lawsuits alleging violations of
securities and other laws in connection with the Company's prior reported
financial results and certain other related matters. See "Item 3--Legal
Proceedings." The Company has been granted final approval of its proposed
settlement of these suits, and believes that such lawsuits will be settled
substantially in accordance with the description contained in "Item 3--Legal
Proceedings." The Company believes that such settlements will not have a
material adverse impact on its liquidity. As of March 31, 1997, the Company
recorded a provision for the settlement of the Consolidated Securities
Litigation of $20.0 million, representing the cash portion of the settlement,
together with an amount equal to 37% of the estimated market capitalization of
the Company. The Company satisfied its obligations regarding the cash portion
($1,475,000) of the Settlement Agreement by remitting that amount into a
settlement fund during fiscal 1998. The Common Stock portion ($18,525,000) is
included in additional paid-in capital.
There can be no assurance that claims by shareholders who opted not to
participate in the class action settlement will not be material, or that the
claims against Lawrence J. Ramaekers, the Company's former interim Chief
Executive Officer, in connection with the February 25 Securities Litigation and
the February 27 Securities Litigation, as to which the Company may have
indemnification obligations will be settled, and such inability to settle
pending litigation could have a material adverse affect on the Company's
liquidity, business, financial condition and results of operations.
IMPACT OF INFLATION
The Company believes that the impact of inflation on its operations is not
significant.
SEASONALITY
The Company generally does not experience seasonality with respect to the
sale of its products; however, the Company has experienced reduced sales to
certain customers in European countries during the months of July and August.
DIVIDENDS
The Company has never paid cash dividends. The Company currently intends to
retain all future earnings, if any, for use in its business and does not
anticipate paying any cash dividends in the foreseeable future. In addition, the
Company's credit agreement with its bank prohibits the payment of cash dividends
without the bank's consent.
RISK FACTORS
From time to time, information provided by the Company or statements made by
its employees may contain forward-looking information. The Company's actual
future results may differ materially from those
25
<PAGE>
projections or suggestions made in such forward-looking information as a result
of various potential risks and uncertainties including, but not limited to, the
factors discussed below.
LOSSES IN PRIOR PERIODS; LIQUIDITY AND FINANCING RISKS. The Company has
experienced significant losses from operations from fiscal 1994 through fiscal
1998. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations--Liquidity."
DEPENDENCE ON MAJOR CUSTOMERS; CONCENTRATION OF CREDIT RISK.
During fiscal 1999, Nortel Networks accounted for approximately 14% of the
Company's sales. During fiscal 1999, Nortel Networks engaged Solectron, a
contract manufacturer, to complete the final assembly of a majority of its
products for which the Company has historically supplied PC cards. In addition
to sales to Nortel Networks, sales to Solectron represented almost 10% of the
Company's sales during fiscal 1999. During fiscal 1998, Nortel Networks
accounted for approximately 29% of the Company's sales. The loss of, or a
significant curtailment of purchases by these customers, or any other
significant customer of the Company, could have a material adverse effect on the
Company's business, financial condition and results of operations. The
industries served by the Company are characterized by frequent mergers,
consolidations, acquisitions, corporate restructuring and changes in management,
and the Company has from time to time experienced reductions in purchase orders
from customers as a result of such events. There can be no assurance that such
events involving customers of the Company will not result in a significant
reduction in the level of sales by the Company to such customers or the
termination of the Company's relationship with such customers. In addition, the
percentage of the Company's sales to individual customers may fluctuate from
period to period. Customer orders can be canceled and volume levels can be
changed or delayed. The timely replacement of canceled, delayed, or reduced
orders with new customers cannot be assured. These risks are exacerbated because
a majority of the Company's sales are to customers in the electronics industry,
which is subject to rapid technological change and product obsolescence. The
electronics industry is also subject to economic cycles and has experienced, and
is likely to experience, fluctuations in demand. The Company anticipates that a
significant portion of its sales will continue for the foreseeable future to be
concentrated in a small number of customers in the electronics industry.
DECLINING AVERAGE SALES PRICES.
The Company has experienced, and expects to continue to experience,
declining average sales prices for its products. The data storage markets in
which the Company competes are characterized by intense competition. Therefore,
the Company expects to incur increasing pricing pressures from its customers in
future periods, which will likely result in a further decline in average sales
prices for the Company's products. The Company believes that it must continue to
achieve manufacturing costs reductions, develop new products that incorporate
customized features and increase its volume of PC card sales in order to offset
the effect of these declining average sales prices. If the Company were not able
to achieve such cost reductions, develop new customized products or increase its
unit sales volumes, each of these factors could have a material adverse effect
on the Company's business, financial condition and results of operations.
FLUCTUATIONS IN QUARTERLY RESULTS.
The Company's results of operations may be subject to quarterly fluctuations
due to a number of factors, including the following:
- timing of receipt and delivery of significant orders for the Company's
products
- costs associated with the expansion of operations
- production difficulties
- write-downs or write-offs of investments in other companies
26
<PAGE>
- competitive pricing pressures
- increases in raw material costs
- changes in customer and product mix
- quality of the Company's products
- exchange rate fluctuations
- market acceptance of new or enhanced versions of the Company's products
Other factors, some of which are beyond the Company's control, may also
cause fluctuations in the Company's results of operations. Additionally, as is
the case with many high technology companies, a significant portion of the
Company's orders and shipments typically occurs in the last few weeks of a
quarter. As a result, revenues for a quarter are not predictable, and the
Company's revenues may shift from one quarter to the next, having a significant
effect on reported results.
FLUCTUATIONS IN TRADING PRICE.
The trading price of the Company's Common Stock may fluctuate widely in
response to, among other things, the following:
- quarter-to-quarter operating results
- awards of orders to the Company or its competitors
- changes in earnings estimates by analysts
- industry conditions
- new product or product development
announcements by the Company or its competitors
There can be no assurance that the Company's future performance will meet the
expectations of analysts or investors. In addition, the volatility of the stock
markets may cause wide fluctuations in trading prices of securities of high
technology companies.
DEPENDENCE ON KEY PERSONNEL.
The Company's success depends to a significant degree upon the efforts and
abilities of members of its senior management and other key personnel, including
technical personnel. The loss of any of these individuals could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's business also depends upon its ability to continue to
attract and retain senior managers and skilled technical employees. Failure to
attract and retain such senior personnel could materially and adversely affect
the Company's business, financial condition and results of operations.
NEED TO RESPOND TO RAPID TECHNOLOGICAL CHANGE.
The markets for the Company's products are characterized by rapid
technological change, evolving industry standards and rapid product
obsolescence. Rapid technological development substantially shortens product
life cycles, and the Company's growth and future success will depend upon its
ability, on a timely basis, to develop and introduce new products, to enhance
existing products and to adapt products for various industrial applications and
equipment platforms, as well as upon customer acceptance of these products,
enhancements and adaptations. The Company, having more limited resources than
many of its competitors, focuses its development efforts at any given time to a
relatively narrow scope of development projects. There can be no assurance that
the Company will select the correct projects for development or that the
Company's development efforts will be successful. In addition, no assurance can
be given that the Company will not experience difficulties that could delay or
prevent the successful development, introduction or marketing of new products,
that new products and product enhancements will meet the requirements of the
marketplace and achieve market acceptance, or that the Company's current or
future products will conform to applicable industry standards. Any inability of
the Company to introduce on a timely basis new products or enhancements that
contribute to profitable sales would have a material adverse effect on the
Company's business, financial condition and results of operations.
27
<PAGE>
HISTORICAL SINGLE PRODUCT CONCENTRATION.
PC cards and related services constitute 100% of the Company's sales for
fiscal 1999 and 1998. The market for PC cards is still developing and there can
be no assurance that computing and electronic equipment that utilize PC cards
will not be modified to render the Company's PC cards obsolete or otherwise have
the effect of reducing demand for the Company's PC cards. In addition, the
Company faces intense competition from competitors that have greater financial,
marketing and technological resources than the Company, which competition may
reduce demand for the Company's PC cards. Decreased demand for the Company's PC
cards as a result of technological change, competition or other factors would
have a material adverse effect on the Company's business, financial condition
and results of operations.
COMPETITION.
Each of the markets in which the Company competes is intensely competitive.
The Company competes with manufacturers of PC cards and related products,
including SanDisk Corporation and Smart Modular Technologies, Inc., as well as
with electronic component manufacturers who also manufacture PC cards, including
Advanced Micro Devices, Inc., Hitachi Semiconductor, Inc., Intel Corporation and
Mitsubishi Electric Corporation. Certain of these competitors supply the Company
with raw materials, including electronic components, which are occasionally
subject to industry wide allocation. These competitors may have the ability to
manufacture products at lower costs than the Company as a result of their higher
levels of integration. In addition, many of the Company's competitors or
potential competitors have greater name recognition, a larger installed base of
customers, more extensive engineering, manufacturing, marketing, distribution
and support capabilities and greater financial, technological and personnel
resources than the Company. The Company expects competition to increase in the
future from existing competitors and from other companies that may enter the
Company's existing or future markets with similar or alternative products that
may be less costly or provide additional features. The Company believes that its
ability to compete successfully depends on a number of factors, including the
following:
- product quality and performance
- provision of competitive design capabilities
- adequate manufacturing capacity
- timing of new product introductions by the Company, its customers and its
competitors
- price
- order turnaround
- timely response to advances in technology
- production efficiency
- number and nature of the Company's competitors in a given market
- general market and economic conditions
In addition, market conditions are expected to lead to intensified price
competition for the Company's products and services, resulting in lower prices
and gross margins, which could materially and adversely affect the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will compete successfully in the future.
RAW MATERIAL SHORTAGES AND DEPENDENCE ON SINGLE SOURCE SUPPLIERS.
The Company has from time to time experienced shortages in the supply of
computer memory chips and other electronic components used to manufacture PC
cards. The Company expects that such supply shortages may continue, particularly
with respect to computer memory chips and other electronic components used in
products targeted at high-growth market segments. Occasionally, certain memory
chips important to the Company's products are on industry-wide allocation by
suppliers. Any such shortages could have a material adverse effect on the
Company's business, financial condition and results of operations.
28
<PAGE>
The Company purchases certain key components from single source vendors for
which alternative sources are not currently available. The Company does not
maintain long-term supply agreements with any of its vendors. The inability to
develop alternative sources for these single source components or to obtain
sufficient quantities of components could result in delays or reductions in
product shipments, or higher prices for these components, or both, any of which
could materially and adversely affect the Company's business, financial
condition and results of operations. No assurance can be given that one or more
of the Company's vendors will not reduce supplies to the Company.
ANTI-TAKEOVER PROVISIONS.
The Company has taken a number of actions that could have the effect of
discouraging a takeover attempt. For example, the Company has adopted a
Shareholder Rights Plan that would cause substantial dilution to a stockholder
who attempts to acquire the Company on terms not approved by the Company's Board
of Directors. In addition, the Company's Certificate of Incorporation grants the
Board of Directors the authority to fix the rights, preferences and privileges
of and issue up to 1,000,000 shares of Preferred Stock without stockholder
action. The Board of Directors has reserved 50,000 shares of Preferred Stock for
issuance pursuant to the Company's Shareholder Rights Plan. Although the Company
has no present intention of issuing shares of Preferred Stock, such an issuance
could have the effect of making it more difficult and less attractive for a
third party to acquire a majority of our outstanding voting stock. Preferred
Stock may also have other rights, including economic rights senior to the Common
Stock that could have a material adverse effect on the market value of the
Common Stock. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. This section
provides that a corporation shall not engage in any business combination with
any interested shareholder during the three-year period following the time that
such stockholder becomes an interested shareholder. This provision could have
the effect of delaying or preventing a change in control of the Company.
YEAR 2000 COMPLIANCE.
The Company is aware of problems associated with computer systems as the
year 2000 approaches. "Year 2000" problems are the result of common computer
programming techniques that result in systems that do not function properly when
manipulating dates later than December 31, 1999. The issue is complex and
wide-ranging. The problem may affect transaction processing computer
applications used by the Company for accounting, distribution, manufacturing,
planning and other applications. Problems may also affect embedded systems such
as building security systems, machine controllers and production test equipment.
Year 2000 problems with any or all of these systems may affect the effectiveness
or efficiency with which the Company can perform many significant functions,
including but not limited to:
- order processing
- product assembly
- invoicing
- material planning
- product test
- payroll and financial reporting
In addition, the problem may affect the computer systems of vendors and
customers, disrupting their operations and possibly impairing the Company's
sources of supply and demand. See--"Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of the Company's
Year 2000 Status.
RISKS OF INTERNATIONAL OPERATIONS AND EURO CURRENCY.
During fiscal 1999 and 1998, the Company derived approximately 12% and 14%,
respectively, of its sales from outside the United States. The Company's
international operations subject the Company to the risks of doing business
abroad, including currency fluctuations, export duties, import controls and
trade barriers, restrictions on the transfer of funds, greater difficulty in
accounts receivable collection, burdens of complying with a wide variety of
foreign laws and, in certain parts of the world, political instability.
29
<PAGE>
The participating member countries of the European Union adopted the Euro as
the common legal currency on January 1, 1999. On that same date, they
established the fixed conversion rates between their existing sovereign
currencies and the Euro. The Company has begun to assess the potential impact on
the Company that may result from the Euro conversion. At this early stage of its
assessment, the Company cannot yet predict the impact of the Euro conversion, or
the cost of any necessary system modifications. If the Company is unable to
complete any necessary system modifications in a timely fashion, its ability to
bill and collect on products shipped to its European customers may be adversely
affected.
PROTECTION OF PROPRIETARY INFORMATION.
The Company's products require technical know-how to engineer and
manufacture. To the extent proprietary technology is involved, the Company
relies on trade secrets that it seeks to protect, in part, through
confidentiality agreements with certain employees, consultants and other
parties. There can be no assurance that these agreements will not be breached,
that the Company will have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known to, or independently
developed by, existing or potential competitors of the Company. The Company
historically has not sought to protect its proprietary information through
patents or registered trademarks, although it instituted a patent program in
fiscal 1999. There can be no assurance that the Company's products will not
infringe on patents held by others. The Company may be involved from time to
time in litigation to determine the enforceability, scope and validity of its
rights. Litigation could result in substantial cost to the Company and could
divert the attention and time of the Company's management and technical
personnel from the operations of the Company.
The Company currently licenses certain proprietary and patented technology
from third parties. There can be no assurance that the Company will be able to
continue to license such technology, that such licenses will be or remain
exclusive or that any patented technology licensed by the Company will provide
meaningful protection from competitors. In the event that a competitor's
products were to infringe on patents licensed by the Company, it would be costly
for the Company to enforce its rights in an infringement action and such an
action would divert funds and management resources from the Company's
operations.
RISKS OF ACQUISITIONS AND INVESTMENTS IN OTHER COMPANIES.
The Company has terminated its earlier program of acquiring interests in
companies and related technologies, and has written-off or provided valuation
reserves for many such investments. However, the Company may determine that it
is in the best interests to acquire or invest in other companies in the future.
There can be no assurance that the companies in which the Company has invested
(or may invest) will develop successful products or technologies beneficial to
the Company or that such investments will be economically justified.
ENVIRONMENTAL COMPLIANCE.
The Company is subject to a variety of environmental regulations relating to
the use, storage and disposal of hazardous chemicals used during its
manufacturing processes. Any failure by the Company to comply with present and
future regulations could subject the Company to significant liabilities. In
addition, such regulations could restrict the Company's ability to expand its
facilities or could require the Company to acquire costly equipment or to incur
other significant expenses in order to comply with environmental regulations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is incorporated herein by reference from
the discussion under the heading Fair Value of Financial Instruments in the
Notes to the Financial Statements included in this Annual Report on Form 10-K.
30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Centennial Technologies, Inc.
We have audited the accompanying consolidated balance sheet of Centennial
Technologies, Inc. as of March 31, 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended. Our
audit also included the financial statement schedule listed in the Index at Item
14(a)(2). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Centennial Technologies Inc. at March 31, 1999, and the consolidated results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
May 6, 1999
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Centennial Technologies, Inc.:
In our opinion, the consolidated financial statements listed in the
accompanying index on page 59 present fairly, in all material respects, the
financial position of Centennial Technologies, Inc. and Subsidiaries at March
31, 1998, and the results of their operations and their cash flows for the
twelve months ended March 31, 1998, and the nine months ended March 31, 1997 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule listed in the index on page 59
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinions expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
May 15, 1998
32
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................ $ 4,922 $ 5,358
Short-term investments................................................................... 2,500 --
Trade accounts receivable................................................................ 4,521 3,677
Less allowances...................................................................... (795) (868)
----------- -----------
3,726 2,809
Recoverable income taxes................................................................. 125 337
Inventories.............................................................................. 3,049 2,309
Other current assets..................................................................... 231 684
----------- -----------
Total current assets....................................................................... 14,553 11,497
Equipment and leasehold improvements....................................................... 3,967 3,973
Less accumulated depreciation and amortization........................................... (1,508) (1,242)
----------- -----------
2,459 2,731
Other assets............................................................................... 92 417
Investment in former affiliate............................................................. 1,700 2,433
----------- -----------
Total assets............................................................................... $ 18,804 $ 17,078
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.................................................... $ 7,072 $ 8,070
Obligations under capital leases......................................................... 36 70
----------- -----------
Total current liabilities.................................................................. 7,108 8,140
Long-term obligations under capital leases................................................. -- 36
Commitments and contingencies (Notes 9 and 16)
Stockholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares authorized, none issued................ -- --
Common Stock, $.01 par value; 50,000,000 shares authorized, 20,549,000 issued and
outstanding at March 31, 1999 and 18,499,000 issued and outstanding at March 31,
1998................................................................................... 205 185
Additional paid-in capital................................................................. 84,200 84,220
Accumulated deficit........................................................................ (72,697) (75,503)
Accumulated other comprehensive income..................................................... (12) --
----------- -----------
Total stockholders' equity................................................................. 11,696 8,902
----------- -----------
Total liabilities and stockholders' equity................................................. $ 18,804 $ 17,078
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
33
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NINE MONTHS
MARCH 31, ENDED
--------------------------------- MARCH 31,
1999 1998 1997 1997
--------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.......................................... $ 27,633 $ 28,263 $ 39,907 $ 28,263
Cost of goods sold................................. 18,968 23,683 33,213 24,453
--------- --------- ----------- -----------
Gross profit..................................... 8,665 4,580 6,694 3,810
Operating expenses:
Engineering, research and development costs...... 750 838 1,369 1,061
Selling, general and administrative expenses..... 6,132 9,957 8,416 7,318
--------- --------- ----------- -----------
Operating income/(loss)........................ 1,783 (6,215) (3,091) (4,569)
Loss on investment activities.................... 733 14,065 16,689 14,096
Special investigation costs...................... -- 597 3,673 3,673
Provision for settlement of shareholder
litigation..................................... -- -- 20,000 20,000
Provision for loss on inventory subject to
customer dispute............................... -- 1,841 -- --
Proceeds from resolution of customer dispute..... (1,600) -- -- --
Other expenses, net.............................. 132 258 -- --
Net interest (income)/expense.................... (344) 56 234 391
--------- --------- ----------- -----------
Income/(loss) before income taxes and equity in
earnings of affiliate............................ 2,862 (23,032) (43,687) (42,729)
Equity in earnings of affiliate.................... -- 423 959 959
--------- --------- ----------- -----------
Income/(loss) before income taxes.................. 2,862 (22,609) (42,728) (41,770)
Provision for income taxes......................... 56 -- -- --
--------- --------- ----------- -----------
Net income/(loss)............................ $ 2,806 $ (22,609) $ (42,728) $ (41,770)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Net income/(loss) per share--basic and diluted..... $ .12 $ (1.22) $ (2.49) $ (2.41)
Weighted average shares outstanding--basic......... 23,255 18,460 17,174 17,367
Weighted average shares outstanding--diluted....... 23,508 18,460 17,174 17,367
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
34
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1997
AND THE TWELVE MONTHS ENDED MARCH 31, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
---------------------- PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT INCOME EQUITY
--------- ----------- ----------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996...................... 16,631 $ 165 $ 42,712 $ (10,968) $ 31,909
Comprehensive income/(loss):
Net loss.................................... (41,770) (41,770)
Other comprehensive income--foreign currency
translation of equity in investment....... $ (233) (233)
------------
Total comprehensive income/(loss)............. (42,003)
------------
Proceeds from certain related party
transactions................................ 2,254 2,254
Exercise of options........................... 281 3 3,539 3,542
Exercise of warrants.......................... 172 2 516 518
Compensation from option grants............... 34 34
Issuance of Common Stock in connection with
acquisition of affiliates................... 275 3 4,822 4,825
Issuance of Common Stock in connection with
investments................................. 386 4 9,838 9,842
Estimated fair market value of shares to be
issued in connection with shareholder
litigation.................................. 18,525 18,525
--------- ----- ----------- ------------ ----- ------------
Balance at March 31, 1997..................... 17,745 177 82,240 (52,738) (233) 29,446
--------- ----- ----------- ------------ ----- ------------
Comprehensive income/(loss):
Net loss...................................... (22,609) (22,609)
Other comprehensive income--foreign currency
translation adjustment...................... (156) 233 77
------------
Total comprehensive income/(loss)............. (22,532)
------------
Exercise of options........................... 117 1 206 207
Issuance of Common Stock in connection with
acquisition of affiliates................... 793 8 2,173 2,181
Retirement of shares repurchased.............. (156) (1) 1 0
Settlement of claims related to ViA
investment.................................. (400) (400)
--------- ----- ----------- ------------ ----- ------------
Balance at March 31, 1998..................... 18,499 185 84,220 (75,503) -- 8,902
--------- ----- ----------- ------------ ----- ------------
Comprehensive income/(loss):
Net income.................................... 2,806 2,806
Other comprehensive income--foreign currency
translation adjustment...................... (12) (12)
------------
Total comprehensive income.................... 2,794
------------
Partial distribution of shares in settlement
of class action litigation.................. 2,050 20 (20) 0
--------- ----- ----------- ------------ ----- ------------
Balance at March 31, 1999..................... 20,549 $ 205 $ 84,200 $ (72,697) $ (12) $ 11,696
--------- ----- ----------- ------------ ----- ------------
--------- ----- ----------- ------------ ----- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
35
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NINE MONTHS
MARCH 31, ENDED
--------------------------------- MARCH 31,
1999 1998 1997 1997
--------- --------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss)................................................ $ 2,806 $ (22,609) $ (42,728) $ (41,770)
Adjustments to reconcile net income/(loss) to net cash used in
operating activities:
Provision for settlement of shareholder litigation............... -- -- 20,000 20,000
Depreciation and amortization.................................... 1,057 1,035 956 831
Equity in earnings of affiliate.................................. -- (423) (959) (959)
Provision for loss on accounts receivable........................ 170 177 516 400
Provision for losses on sale of equipment........................ -- (480) 318 318
Provision for loss on note receivable............................ -- -- 100 100
Provision for loss on investments................................ -- 7,019 9,317 8,027
Provision for loss on investment in affiliates................... 733 5,142 -- --
Provision for loss on inventory.................................. (2,114) -- -- --
Loss on disposal of capital equipment............................ 128 1,315 -- --
Other non-cash items............................................. 41 -- 102 34
Change in operating assets and liabilities:
Accounts receivable............................................ (1,087) 2,631 1,833 5,289
Accounts receivable from affiliate............................. -- 676 (676) (676)
Inventories.................................................... 1,374 5,485 (613) 454
Notes receivable............................................... -- -- 875 1,509
Notes receivable from affiliate................................ -- 4,129 (4,129) (4,129)
Recoverable income taxes....................................... 171 7,019 (6,746) (4,214)
Other assets................................................... 494 695 (1,172) (582)
Accounts payable and accrued expenses.......................... (1,054) (3,884) 7,668 6,572
Income taxes payable........................................... 56 27 -- --
--------- --------- ----------- -------------
Net cash provided by (used in) operating activities.......... 2,775 7,954 (15,338) (8,796)
Cash flows from investing activities:
Capital expenditures............................................. (669) (1,265) (2,257) (2,074)
Disposal of capital equipment.................................... 40 -- -- --
Purchase of held-to-maturity and available-for-sale securities... (2,500) -- (36,164) (27,250)
Proceeds from sale of available-for-sale securities.............. -- -- 36,163 32,182
Purchase of investments.......................................... -- -- (2,801) (1,291)
Purchase of investment in affiliates............................. -- -- (10,351) (10,351)
Proceeds from sale of investment in affiliates................... -- 8,983 -- --
--------- --------- ----------- -------------
Net cash provided by (used in) investing activities.......... (3,129) 7,718 (15,410) (8,784)
Cash flows from financing activities:
Net borrowings (repayments) under line of credit................. -- (10,090) 10,090 5,406
Borrowings from term loans....................................... -- 938 -- --
Repayments on term loans and leases.............................. (70) (938) -- --
Proceeds from equipment lease financing.......................... -- -- 250 250
Payments on equipment lease financing............................ -- (566) (370) (282)
Proceeds from exercise of stock options.......................... -- 208 3,544 3,542
Proceeds from exercise of warrants............................... -- -- 633 518
Net proceeds from public offerings of Common Stock............... -- -- 1,221 --
Proceeds from certain related party transactions................. -- -- 3,389 2,254
Foreign currency translation of equity investment................ -- 77 (233) (233)
--------- --------- ----------- -------------
Net cash provided by (used in) financing activities.......... (70) (10,371) 18,524 11,455
--------- --------- ----------- -------------
Effect of exchange rate changes on cash............................ (12) -- -- --
--------- --------- ----------- -------------
Net increase (decrease) in cash and cash equivalents............... (436) 5,301 (12,224) (6,125)
Cash and cash equivalents at beginning of period................... 5,358 57 12,281 6,182
--------- --------- ----------- -------------
Cash and cash equivalents at end of period......................... $ 4,922 $ 5,358 $ 57 $ 57
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest....................................................... $ 4 $ 452 $ 604 $ 535
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Income taxes................................................... $ -- $ 18 $ 6,154 $ 4,151
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Non-cash transactions:
Issuance of Common Stock in connection with acquisition of
affiliates..................................................... $ -- $ -- $ 4,825 $ 4,825
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Issuance of Common Stock in connection with purchase of
investments.................................................... $ -- $ 2,181 $ 9,842 $ 9,842
--------- --------- ----------- -------------
--------- --------- ----------- -------------
Settlement of claim related to ViA investment.................... $ -- $ 400 $ -- $ --
--------- --------- ----------- -------------
--------- --------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
36
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND CHANGE IN FISCAL YEAR
BASIS OF PRESENTATION
The consolidated financial statements of Centennial Technologies, Inc. (the
"Company") include the accounts of the Company and all wholly owned
subsidiaries. Investments in companies in which ownership interests range from
20 to 50 percent and the Company exercises significant influence over operating
and financial policies are accounted for using the equity method. The Company's
investment in Century Electronics Manufacturing, Inc. ("Century"), of which it
had a 67% equity ownership position at March 31, 1997, has been accounted for
using the equity method for fiscal 1997 because the Company had a plan of
disposition of a portion of the investment in place prior to March 31, 1997 and
the transaction closed on July 1, 1997. During fiscal 1998, the Company further
reduced its equity ownership position in Century, and thereafter has accounted
for its remaining investment using the cost method. See Note 5. Other
investments are accounted for using the cost method. See Note 6. All significant
intercompany balances and transactions have been eliminated.
CHANGE IN FISCAL YEAR
On March 24, 1997, the Company's Board of Directors voted to change the
fiscal year end from June 30 to March 31. All references to fiscal 1999 and
fiscal 1998 in the accompanying financial statements relate to the twelve months
ended March 31, 1999 and 1998, respectively. All references to fiscal 1997
relate to the nine months ended March 31, 1997. References to fiscal 1996 relate
to the year ended June 30, 1996.
2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue from product sales is recognized at time of shipment and when title
passes.
WARRANTY COSTS
The Company offers a limited warranty, ranging from one to two years, on
materials and workmanship for certain of its products. Costs relating to product
warranty are generally accrued at time of shipment. In addition, on sales to
certain wholesalers, the Company offers a stock rotation policy under which the
Company accepts returns on certain merchandise within two months of shipping for
merchandise or credit toward future orders, and accepts returns after two months
but within six months of shipping for merchandise credit minus a 15% restocking
charge. The Company has not experienced material costs associated with its
warranty and restocking policy.
RESEARCH AND DEVELOPMENT COSTS
Expenditures relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents include highly liquid temporary cash investments having
maturities of three months or less at date of acquisition. Short-term
investments include commercial paper having a maturity longer than three months
but less than one year at date of acquisition.
37
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and cash equivalents,
short-term investments and trade receivables. At March 31, 1999, over 98% of the
Company's cash, cash equivalents and short-term investments were held by one
financial institution. Additionally, short-term investments at March 31, 1999
included commercial paper from one issuer. Sales to the Company's recurring
customers are generally made on open account which sales to occasional customers
are typically made on a C.O.D. basis. The Company performs periodic credit
evaluations of its ongoing customers and generally does not require collateral.
Reserves are maintained for potential credit losses, and such losses have been
within management's expectations.
For fiscal 1999, one customer accounted for approximately 14% of the
Company's sales. At March 31, 1999, this customer accounted for approximately
$.06 million, or 2% of the Company's net accounts receivable balance.
For fiscal 1998, one customer accounted for approximately 29% of the
Company's sales. At March 31, 1998, this customer accounted for approximately
$1.1 million, or 40% of the Company's net accounts receivable balance.
For fiscal 1997, two customers accounted for approximately 54% of the
Company's sales. At March 31, 1997, these customers accounted for approximately
$3.0 million, or 54% of the Company's net accounts receivable balance.
Approximately 12%, 14% and 8% of the Company's sales in fiscal 1999, 1998
and 1997, respectively, were outside the United States, primarily in several
Western European countries, Israel and Canada. No one area comprised more than
10% of the Company's sales.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of cash and cash
equivalents, short-term investments, accounts receivable, accounts payable and
other accrued expenses. The Company believes all of the carrying amounts
approximate fair value.
INVENTORIES
Inventories are stated on a first-in, first-out basis at the lower of cost
or market.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment is stated at cost. Major renewals and improvements are capitalized
while repair and maintenance charges are expensed when incurred. Depreciation is
provided over the estimated useful life of the respective assets, ranging from
three to seven years, on a straight-line basis. Leasehold improvements are
amortized over the lesser of the term of the lease or the estimated useful life
of the related assets. When assets are sold or retired, their cost and related
accumulated depreciation are removed from the accounts. Any gain or loss is
included in the determination of net income.
38
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes by the liability method as set forth
in Financial Accounting Standards Board (FASB) Statement No. 109, ACCOUNTING FOR
INCOME TAXES. Under the liability method, deferred taxes are determined based on
the difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees in accordance with
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES (APB 25) and has adopted the disclosure-only alternative to FASB
Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.
EARNINGS (LOSS) PER SHARE
The Company adopted FASB Statement No. 128, EARNINGS PER SHARE (FASB 128),
as of March 31, 1998. FASB 128 replaced the calculation of 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
effect of options, warrants and convertible securities. Diluted earnings per
share is similar to fully diluted earnings per share. All earnings per share
amounts for all periods have been presented to conform to FASB 128 requirements
and the accounting rules set forth in Staff Accounting Bulletin 98 issued by the
Securities and Exchange Commission on February 3, 1998.
39
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table sets forth the computation of earnings/(loss) per share
(in thousands, except per share data). All shares issuable in connection with
the settlement of the Consolidated Litigation described in Note 14 are included
in the weighted average shares outstanding calculation as of July 20, 1998.
<TABLE>
<CAPTION>
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS NINE MONTHS
ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
1999 1998 1997 1997
----------------- ----------------- ----------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
BASIC EARNINGS/(LOSS)
PER SHARE
Numerator
Net income/(loss)... $ 2,806 $ (22,609) $ (42,728) $ (41,770)
Denominator
Common shares
outstanding....... 23,255 18,460 17,174 17,367
------ -------- -------- ---------------
Basic earnings/(loss)
per share........... $ .12 $ (1.22) $ (2.49) $ (2.41)
------ -------- -------- ---------------
------ -------- -------- ---------------
DILUTED
EARNINGS/(LOSS) PER
SHARE
Numerator
Net income/(loss)... $ 2,806 $ (22,609) $ (42,728) $ (41,770)
Denominator
Common shares
outstanding....... 23,255 18,460 17,174 17,367
Stock options....... 253 -- -- --
------ -------- -------- ---------------
Shares used in
computing diluted
earnings/(loss)
per share......... 23,508 18,460 17,174 17,367
------ -------- -------- ---------------
Diluted
earnings/(loss) per
share............... $ .12 $ (1.22) $ (2.49) $ (2.41)
------ -------- -------- ---------------
------ -------- -------- ---------------
</TABLE>
Options to purchase 863,300, 2,932,000 and 1,779,600 shares of Common Stock
on March 31, 1999, 1998 and 1997, respectively, were excluded from the
period-to-date calculations of diluted net loss per share as the effect of their
inclusion would have been anti-dilutive.
STOCK SPLIT
The Company effected a two-for-one stock split of its outstanding shares of
Common Stock in the form of a stock dividend in November 1996. All references in
the accompanying consolidated financial statements to number of shares, weighted
average number of shares outstanding and related prices, per share amounts, and
stock plan data reflect this split on a retroactive basis.
40
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
COMPREHENSIVE INCOME
As of April 1, 1998, the Company adopted FASB Statement No. 130, REPORTING
COMPREHENSIVE INCOME (FASB 130). FASB 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's net income or
stockholders' equity. FASB 130 requires the Company's foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
FASB 130.
SEGMENTS OF BUSINESS ENTERPRISE
Effective April 1, 1998, the Company adopted the FASB Statement No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (FASB 131).
FASB 131 superseded FASB 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS
ENTERPRISE. FASB 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. FASB 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The Company operates in a single industry segment, the
design and manufacture of high technology memory chip based products used in
industrial and commercial applications. As such, the adoption of FASB 131 did
not affect results of operations, financial position or the disclosure of
segment information.
RECLASSIFICATIONS
Certain amounts in the fiscal 1998 and 1997 consolidated financial
statements have been reclassified to conform to the current year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES. The
Statement is effective for fiscal years beginning after December 15, 1998, and
requires that start-up costs capitalized prior to January 1, 1999 be written off
and any future start-up costs be expensed as incurred. Adoption of this
Statement will not have a significant effect on the Company's results of
operations or its financial position.
In June 1998, the FASB issued Statement No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is required to be adopted in years
beginning after June 15, 1999. Management does not anticipate that the adoption
of the new Statement will have a significant effect on earnings or the financial
position of the Company.
41
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
Raw materials, primarily electronic components......................... $ 1,709 $ 1,239
Work in process........................................................ 399 620
Finished goods......................................................... 941 450
----------- -----------
$ 3,049 $ 2,309
----------- -----------
----------- -----------
</TABLE>
The Company maintains levels of inventories that it believes are necessary
based upon assumptions concerning its growth, mix of sales and availability of
raw materials. Changes in those underlying assumptions could affect management's
estimates of inventory valuation.
In fiscal 1998, the Company reserved fully $1.8 million of costs related to
inventory specifically purchased and manufactured pursuant to a customer
purchase order (the "Custom Inventory"). The customer later attempted to cancel
the purchase order. The Company disputed the customer's claim that the purchase
order cancellation was effective, and sought legal remedies related thereto.
During fiscal 1999, the Company agreed to settle its claims against the
customer, in return for a $1.6 million cash payment and the right to retain and
sell the Custom Inventory at issue. The Company reduced its reserve for the
Custom Inventory by approximately $1.7 million during fiscal 1999 as a portion
of the Custom Inventory was sold for approximately $1.2 million during fiscal
1999. These sales proceeds have been included in net sales. At March 31, 1999,
the costs related to the Custom Inventory still on hand remained fully reserved.
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consisted of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
Equipment.............................................................. $ 3,702 $ 3,743
Equipment under capital leases......................................... 106 106
Leasehold improvements................................................. 159 124
----------- -----------
3,967 3,973
Accumulated depreciation and amortization.............................. (1,508) (1,242)
----------- -----------
$ 2,459 $ 2,731
----------- -----------
----------- -----------
</TABLE>
During fiscal 1999, the Company placed in service certain testing equipment
originally purchased in fiscal 1997 and which was outfitted with software and
custom design services during fiscal 1999. The total cost of this testing
equipment was approximately $300,000.
During fiscal 1999, the Company wrote off equipment with an original cost of
$885,000 and accumulated depreciation of $757,000 in connection with the
upgrading of its manufcturing processes and the remodeling of its office space.
The Company also disposed of equipment with an original cost of $73,000 and
accumulated depreciation of $33,000 in connection with these activities. During
fiscal 1998, the Company paid in full its lease obligations to the bank that had
been providing the Company with its
42
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS (CONTINUED)
line of credit (See Note 7), and disposed of equipment having an original cost
and accumulated depreciation of approximately $691,000. During fiscal 1997, the
Company wrote off $80,000 of net book value of leasehold improvements in
connection with its move to new facilities.
Depreciation expense (including amortization of equipment under capital
lease) for fiscal 1999, 1998 and 1997 was approximately $1,057,000, $1,035,000
and $831,000, respectively. Depreciation expense for the twelve months ended
March 31, 1997 was approximately $956,000.
5. INVESTMENT IN CENTURY ELECTRONICS MANUFACTURING, INC.
During fiscal 1997, the Company completed three separate business
acquisitions of contract manufacturing activities. On July 10, 1996, the Company
acquired a majority equity position in Design Circuits, Inc. ("DCI") for
approximately $3.2 million in cash, 250,000 shares of the Company's Common Stock
and assumption of certain liabilities.
In October 1996, the Company and the minority shareholders in DCI exchanged
their DCI shares for shares of capital stock in a newly formed entity, Century
Electronics Manufacturing, Inc. ("Century").
Pursuant to a joint venture agreement executed in May 1996, the Company
invested $1.3 million during fiscal 1997 as its initial capital into its 51%
owned contract manufacturing joint venture in Thailand. The Company's joint
venture partner's initial capital contribution was $3.7 million.
On November 5, 1996, Century purchased Triax Technology Group Limited
("Triax"), a provider of contract manufacturing services located in the United
Kingdom for approximately $4.2 million in cash and approximately 2.2 million
shares of common stock of Century. The Company also contributed 25,000 shares of
Centennial common stock as a finder's fee. At the conclusion of the Triax
transaction, Triax and DCI were wholly-owned subsidiaries of Century, and
Centennial owned approximately 67% of Century.
On March 14, 1997, Century entered into an agreement in principal with the
Company, whereby Century agreed to redeem a portion of its shares in exchange
for $1.3 million in cash and a $6.0 million subordinated debenture, reducing the
Company's equity ownership position to 45%. The debentures bore interest at a
rate of 6% and were to mature in ten years. Under certain conditions, the
debentures would be convertible into the capital stock of an entity with which
Century might merge. In addition, the Company agreed to contribute to Century
its interest in the Thailand joint venture. Century also agreed to repay an 8.5%
note payable to Centennial in the amount of $4.1 million and to take the
necessary steps to remove all outstanding guarantees of third-party
indebtedness.
On July 1, 1997, the aforementioned transaction was completed. In order to
remove certain guarantees of equipment subleased to DCI, Centennial executed
lease buyouts amounting to approximately $2.4 million and sold the underlying
equipment to Century for cash and a $1.9 million 9% promissory note due December
1998.
On February 4, 1998, the Company entered into a transaction with Century
whereby Century redeemed the Company's remaining holdings of Century common
stock, repurchased its $1.9 million 9% promissory note due December 1998,
recovered a warrant for the purchase of 250,000 shares of Century common stock,
and satisfied its $6 million 6% Convertible Subordinated Debenture due June
2007, in exchange for $9.7 million in cash and $4.0 million of Century Series B
Convertible Preferred Stock and the forgiveness of interest due on the note and
debenture. The Series B Convertible Preferred Stock is equivalent upon
conversion to approximately 7%, non-diluted, of Century's outstanding shares, is
43
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT IN CENTURY ELECTRONICS MANUFACTURING, INC. (CONTINUED)
non-voting, has no dividend, and has a liquidation preference of $4 million
senior to the common shareholders and subordinate to the holders of Century
Series A Convertible Preferred Stock. The Company recorded a loss on investment
activities of $5.1 million during fiscal 1998 to reflect the difference between
the fair value of the consideration received from Century and the carrying value
of the Company's investment in Century.
During fiscal 1999, the Company reduced the carrying value of its investment
in Century by $733,000 to $1.7 million, reflecting management's assessment of
the deterioration in value of contract manufacturing businesses in general and a
permanent decline in the value of its investment.
The Company had sales to Century of $120,000 during fiscal 1997, but no
sales to this entity thereafter.
6. OTHER INVESTMENTS
VIA, INC.
In December 1996, the Company issued 156,000 unregistered shares of its
Common Stock in exchange for a 12% interest in ViA, Inc., a development stage
privately held technology company that designs, develops, and markets miniature
communication and computing products. Due to the significance of the Company's
investment to ViA's total capitalization and on the basis of the complementary
nature of the companies' products and related development plans, the Company
accounted for this investment during fiscal 1997 using the equity method, and
amortized the purchase price in excess of its interest in the investee's
underlying net assets, which excess amounted to $5.0 million, over 60 months.
The Company recorded this amortization, as well as its share of the investee's
losses from the date of the investment through March 31, 1997, for an aggregate
amount of $585,000, as loss on investment activities. During fiscal 1998, the
Company reserved the remaining carrying value of its investment, and recorded a
loss on investment activities during fiscal 1998 related thereto of
approximately $4.4 million.
INTELLIGENT TRUCK PROJECT, INC., FLEET.NET, INC. AND SMART TRAVELER PLAZAS,
INC.
On December 13, 1996, the Company entered into merger agreements with
Intelligent Truck Project, Inc., Fleet.Net, Inc. and Smart Traveler Plazas, Inc.
(collectively, "ITP/Fleet.Net") agreeing to exchange an aggregate of 792,960
shares of Common Stock of the Company for all of the outstanding common stock of
the acquired businesses. Subsequent to the Company's February 1997 announcement
of financial irregularities, the principal shareholder of ITP/Fleet.Net filed
suit, alleging, among other things, breach of representations and warranties as
to the financial statements of Centennial. On March 4, 1997, the Company and the
principal shareholder of ITP/Fleet.Net entered into a memorandum of
understanding pursuant to which the companies would unwind the merger
agreements. The parties were unable to reach mutually satisfactory terms to
complete the unwinding and on May 15, 1997 agreed to complete the merger and
exchange mutual releases of certain claims. Based on the material uncertainties
surrounding the value of consideration on the original merger date, which
uncertainties were not resolved until the execution of a settlement and mutual
release agreement, the Company has recorded the merger and corresponding
issuance of Common Stock as of May 15, 1997. Advances to ITP/Fleet.Net made
during fiscal 1996 and fiscal 1997, certain of which were previously
characterized as advance payments for technology license arrangements, have been
included in loss on investment activities in the periods the
44
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. OTHER INVESTMENTS (CONTINUED)
advances were made. The merger has been recorded using purchase accounting, and
the excess (approximately $3.0 million) of the purchase price over the fair
value of assets acquired was written off as of the agreement date (May 15, 1997)
because of the uncertainties related to the future operations of ITP/ Fleet.Net.
INFOS INTERNATIONAL, INC.
During fiscal 1997, the Company acquired a 38% interest in Infos
International, Inc. ("Infos"), a supplier of intelligent hand held data
collection equipment for route and shop floor accounting. The purchase price
amounted to approximately $3.0 million in cash and 230,000 shares of Centennial
Common Stock having a fair market value of $3.9 million at date of acquisition.
On February 6, 1998, the Company, Infos and shareholders of Infos entered into a
transaction whereby the Company agreed to return its shares of Infos capital
stock in exchange for an agreement to sell Infos inventory and equipment arising
from the contract manufacturing relationship between Infos and Century, which
relationship was terminated. The parties also agreed to exchange mutual releases
of any claims arising from the original acquisition agreement. Accordingly, the
full amount of the investment cost ($7.0 million) has been written off. The
recorded loss of $6.0 million reflects the use by Infos of $1.0 million of the
original cash proceeds to repay an obligation of that amount due to Centennial
from an Infos subsidiary, Information Capture Corporation ("ICC"). This
obligation originally arose in fiscal 1995, prior to Infos acquiring ICC, in
connection with a sales transaction that was determined in the Company's special
investigation not to be bona fide. The effect of the adjustment is to reflect
$1.0 million of the investment cost as a reduction of sales and net income in
fiscal 1995 and the remainder as loss on investment activities in fiscal 1997.
INDUSTRIAL IMAGING, INC.
The Company purchased for $730,000 in cash and conversion of $200,000 of
notes a minority interest in Industrial Imaging, Inc. which designs,
manufactures and markets automated optical vision and individual imaging systems
for inspection and identification of defects in printed circuit boards. In
addition, effective April 1, 1996 and expiring June 30, 1997, the Company agreed
to provide procurement services and buy material using the Company's credit
arrangements for a service fee of $200,000. Purchases aggregating $1.4 million
were made on behalf of the investee and were initially reflected by the Company
as sales with an equivalent amount of cost of goods sold. Such sales have been
reversed in connection with the Company's financial review. During fiscal 1997,
the Company determined that the investee was unable to repay the Company for the
material purchased, and also determined that the value of the equity investment
was permanently impaired. The Company has agreed to convert its accounts
receivable into common stock of the investee and has recorded a valuation
reserve equal to the carrying value of the investment. During fiscal 1998, the
Company sold its investment in Industrial Imaging, Inc. for $550,000.
WEBSECURE, INC.
During fiscal 1996 the Company purchased for $569,000 a minority interest in
WebSecure, Inc. ("WebSecure"), a corporation that provided Internet services.
The former president and a shareholder of WebSecure was a Director of the
Company from February 1994 through November 1995. In connection with WebSecure's
initial public offering, the Company realized a gain of $1.2 million from the
sale of a portion of its investment; however, based upon the WebSecure
shareholder complaints and related litigation described in Note 14, the Company
provided a reserve in an amount equal to this gain. The
45
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. OTHER INVESTMENTS (CONTINUED)
remaining investment, having a cost of $560,000, was fully reserved as of March
31, 1997 on the basis that its value appeared to have been permanently impaired.
During fiscal 1998, the Company sold this remaining investment for $125,000.
OTHER INVESTMENTS
The Company's analysis of the future viability of several development stage
businesses in which the Company invested during fiscal 1998, 1997 and 1996,
combined with the Company's decision to continue to focus its financial
resources on its core business, led the Company to reserve fully the carrying
value of its investments in these development stage companies. As of March 31,
1999 and 1998, the only remaining investment with a carrying value greater than
zero was the Company's remaining investment in Series B Preferred Stock of its
former affiliate, Century Electronics Manufacturing, Inc., valued at
approximately $1.7 million as of March 31, 1999 and $2.4 million as of March 31,
1998.
During fiscal 1996, the Company purchased for $250,000 a minority interest
in a corporation which designs, manufactures and markets small form factor
computer hard drives. This technology, when and if implemented, could be used to
increase the speed and processing capabilities of PC cards. During fiscal 1998
and 1997, the Company increased its investment by $96,000 and $164,000,
respectively.
During fiscal 1997 and 1996, the Company made investments aggregating
$860,000 in development stage businesses that have not yet reached commercial
viability. Such investments have been fully reserved as of March 31, 1997.
7. DEBT
On August 14, 1997, the Company entered into a credit agreement, effective
through August 13, 2000 unless terminated sooner, with Congress Financial
Corporation ("Congress Financial") for a revolving credit facility and term loan
facility of up to $4.1 million and $0.9 million, respectively, and a $2.0
million capital equipment acquisition facility. This arrangement contained
certain limitations and covenants, the most restrictive of which is a minimum
net worth requirement. Allowable borrowings were based on available accounts
receivable and the cost of equipment, and were collateralized by all of the
Company's assets. On August 15, 1997, the Company paid in full its line of
credit and lease financing obligations with the bank that was previously
providing the Company with its credit facilities. At March 31, 1998, the Company
had no outstanding borrowings under these credit facilities.
On November 24, 1998, the Company terminated its credit agreement with
Congress Financial and entered into a new credit agreement with Fleet National
Bank ("Fleet") for a revolving credit facility, equipment term loan facility and
foreign exchange facility of $3.5 million, $1.5 million and $2.0 million,
respectively. This arrangement contains certain limitations and covenants, the
most restrictive of which is a covenant regarding the maintenance of the
Company's liquidity, as defined. Allowable borrowings are based on accounts
receivable and the cost of equipment, are secured by substantially all of the
Company's assets. At March 31, 1999, the Company had no outstanding borrowings
under either of these credit agreements.
LEASES
The Company leased certain equipment under three year lease financing
agreements with the bank that was providing the Company with its line of credit
prior to August 14, 1997. These lease arrangements
46
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. DEBT (CONTINUED)
have been accounted for as financing transactions. The subject equipment is
recorded as an asset for financial statement purposes, and is being depreciated
accordingly. On August 15, 1997, the Company paid in full its lease obligations
to the bank that had been providing the Company with its line of credit.
The Company leases its facilities under operating leases with renewal
options, which expire at various dates through fiscal 2003. The lease on the
Company's headquarters and manufacturing facility contains an option to renew
for an additional five-year period, provides for annual rent increases of 4% and
provides that the Company will pay to its landlord as additional rent its pro
rata share of certain operational and maintenance costs at the facility during
the term of the lease.
At March 31, 1999, the minimum annual rental commitments under
non-cancelable operating lease obligations are as follows (in thousands):
<TABLE>
<S> <C>
Year ending March 31,
2000................................................................. $ 267
2001................................................................. 261
2002................................................................. 254
2003................................................................. 20
2004 and thereafter.................................................. --
---------
Total minimum lease payments......................................... $ 802
---------
---------
</TABLE>
Rental expense under operating leases totaled approximately $250,000,
$427,000 and $312,000 in fiscal 1999, 1998 and 1997, respectively.
8. INCOME TAXES
The income/(loss) before income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR YEAR NINE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
----------- ---------- ------------
<S> <C> <C> <C>
U.S..................................................... $ 2,842 $ (22,609) $ (42,104)
Foreign................................................. 20 -- 334
----------- ---------- ------------
$ 2,862 $ (22,609) $ (41,770)
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
47
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR YEAR NINE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
------------- ----------- ---------------
<S> <C> <C> <C>
Current:
Federal............................................... $ 40 $ -- $ --
State................................................. 9 -- --
Foreign............................................... 7 -- --
--- ----- -----
Total current....................................... $ 56 $ -- $ --
--- ----- -----
--- ----- -----
Provision for income taxes.............................. $ 56 $ -- $ --
--- ----- -----
--- ----- -----
</TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to loss before income taxes as follows:
<TABLE>
<CAPTION>
YEAR YEAR NINE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
----------- ----------- ---------------
<S> <C> <C> <C>
Tax provision (benefit) at U.S. statutory rates......... 34.0% (34.0)% (34.0)%
State taxes net of federal benefit...................... 6.4 (3.4) (6.1)
Change in valuation allowance........................... (40.0) 37.5 39.8
Alternative minimum tax................................. 1.6 -- --
Other................................................... -- (0.1) 0.3
----- ----- -----
2.0% --% --%
----- ----- -----
----- ----- -----
</TABLE>
The components of deferred income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, MARCH 31,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Allowance for doubtful accounts........................... $ 406 $ 230 $ 95
Notes receivable reserve.................................. 349 349 391
Inventory reserve and capitalization...................... 581 1,557 1,065
Investment reserve........................................ 5,648 5,355 5,235
Accrued expenses.......................................... 1,410 1,378 139
Equipment, net............................................ 371 211 276
Net operating losses...................................... 19,970 20,633 15,497
Capital loss carryforward................................. 1,473 1,473 --
---------- ---------- ----------
30,208 31,186 22,698
Less valuation allowance.................................. (30,208) (31,186) (22,698)
---------- ---------- ----------
Net deferred taxes........................................ $ -- $ -- $ --
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Management of the Company has evaluated the positive and negative evidence
bearing upon the realizability of its deferred tax assets, which are comprised
principally of net operating losses and reserves.
48
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Management has considered the Company's history of losses and concluded that
there is insufficient evidence that it is more likely than not that the Company
will generate future taxable income prior to the expiration of these net
operating losses in 2013. Accordingly, the deferred tax assets have been fully
reserved.
At March 31, 1999, the Company had federal net operating loss carryforwards
of approximately $50.9 million available to offset future taxable income
expiring in 2009 through 2013, and federal capital loss carryforwards of
approximately $4.3 million, which will expire in 2013. Approximately $2.1
million of the Company's net operating loss is attributable to the exercise of
stock options which, when utilized, will be credited as additional paid-in
capital. Additionally, the Company has a net operating loss of approximately
$1.3 million available to offset future taxable income in foreign jurisdictions.
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
Trade accounts payable................................................. $ 1,720 $ 2,004
Accrual related to WebSecure litigation................................ 1,200 1,200
Accrued special investigation costs.................................... 1,197 1,554
Other accrued expenses................................................. 2,955 3,312
----------- -----------
Total accounts payable and accrued expenses.......................... $ 7,072 $ 8,070
----------- -----------
----------- -----------
</TABLE>
Accrued special investigation costs represent professional and legal fees in
connection with the completion of the Company's special investigation, certain
refinancing activities, and legal fees associated with the shareholder
litigation. See Note 14.
10. STOCKHOLDERS' EQUITY
The Company is authorized to issue up to 950,000 shares of $0.01 par value
preferred stock without further stockholder approval with such additional
designations, powers, preferences, rights, qualifications, limitations and
restrictions as may be designated by the Company's Board of Directors from time
to time.
On March 16, 1999, the Board of Directors of the Company, declared a
dividend of one Right for each outstanding share of the Company's Common Stock
to stockholders of record at the close of business on March 31, 1999 (the
"Record Date"). Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of Series A Junior Participating Preferred
Stock, $.01 par value per share (the "Preferred Stock"), at a Purchase Price of
$6.00 in cash, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement dated as of March 16, 1999 (the "Rights
Agreement") between the Company and American Securities Transfer & Trust, Inc.,
as Rights Agent.
The Rights attach to all Common Stock certificates representing outstanding
shares. The Rights will separate from the Common Stock and a Distribution Date
will occur upon the earlier of (i) 10 business days (or such later date as may
be determined by the Board of Directors of the Company) following the later of
(a) a public announcement that a person or group of affiliated or associated
persons (an
49
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY (CONTINUED)
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock or (b) the
first date on which an executive officer of the Company has actual knowledge
that an Acquiring Person has become such (the "Stock Acquisition Date"), or (ii)
10 business days (or such later date as may be determined by the Board of
Directors of the Company) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of such outstanding shares of Common Stock. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be evidenced by
the Common Stock certificates and will be transferred with and only with such
Common Stock certificates.
The Rights are not exercisable until the Distribution Date and will expire
upon the close of business on March 16, 2009 (the "Final Expiration Date")
unless earlier redeemed or exchanged as described below.
In the event that any Person becomes an Acquiring Person, then, at such time
as the Rights are no longer redeemable by the Company as described below, each
holder of a Right (except as provided below and in Section 7(e) of the Rights
Agreement) shall thereafter have the right to receive, upon exercise, that
number of shares of Common Stock of the Company (or, in certain circumstances,
cash, property or other securities of the Company) which equals the exercise
price of the Right divided by 50% of the current market price (as defined in the
Rights Agreement) per share of Common Stock at the date of the occurrence of
such event. Following the occurrence of such event, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and void. At any time
after a Person becomes an Acquiring Person, subject to certain conditions, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by such Acquiring Person which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, or one one-thousandth of a share
of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
In the event that, at any time after any Person becomes an Acquiring Person,
(i) the Company is consolidated with, or merged with and into, another entity
and the Company is not the surviving entity of such consolidation or merger or
if the Company is the surviving entity, but shares of its outstanding Common
Stock are changed or exchanged for stock or securities (of any other person) or
cash or any other property, or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights
which previously have been voided as set forth above) shall thereafter have the
right to receive, upon exercise, that number of shares of common stock of the
acquiring company which equals the exercise price of the Right divided by 50% of
the current market price of such common stock at the date of the occurrence of
the event. The events summarized in this paragraph are referred to as "Section
13 Events." A Section 11(a)(ii) Event and Section 13 Events are collectively
referred to as "Triggering Events."
The Purchase Price payable, and the number of units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution. The number of Rights
associated with each share of Common Stock is also subject to adjustment in the
event of a stock split or reverse stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
50
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY (CONTINUED)
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to receive, when, as
and if declared by the Board of Directors, a minimum preferential quarterly
dividend payment of $10 per share or, if greater, an aggregate dividend of 1,000
times the dividend declared per share of Common Stock. In the event of
liquidation, the holders of the Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1,000 per share and will be entitled to an
aggregate payment of 1,000 times the payment made per share of Common Stock.
Each share of Preferred Stock will have 1,000 votes, voting together with the
Common Stock. In the event of any merger, consolidation or other transaction in
which Common Stock is changed or exchanged, each share of Preferred Stock will
be entitled to receive 1,000 times the amount received per share of Common
Stock. These rights are protected by customary antidilution provisions. Because
of the nature of the Preferred Stock's dividend, liquidation and voting rights,
the value of one one-thousandth of a share of Preferred Stock purchasable upon
exercise of each Right should approximate the value of one share of Common
Stock.
At any time prior to the earlier of (i) the tenth business day (or such
later date as may be determined by the Board of Directors of the Company) after
the Stock Acquisition Date, or (ii) the Final Expiration Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.001 per Right (the
"Redemption Price"), payable in cash or stock. Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price. The Rights may also be redeemable following certain other
circumstances specified in the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Subject to certain exceptions, any of the provisions of the Rights Agreement
may be amended by the Board of Directors of the Company prior to such time as
the Rights are no longer redeemable.
11. STOCK OPTION PLANS
Under the Company's 1994 Stock Option Plan (the "Plan"), incentive and
non-qualified stock options may be granted to employees, officers, directors and
consultants of the Company. The Company initially reserved 900,000 shares of
Common Stock for issuance under the Plan. During fiscal 1996, the amount
reserved for issuance was increased to 1,500,000 shares, during fiscal 1997, the
amount reserved for issuance was increased to 3,000,000 shares, and during
fiscal 1999 the amount reserved for issuance was increased to 6,000,000 shares.
These options generally vest over a three-year period and expire after 10 years.
On December 6, 1994, the Company's stockholders adopted a formula stock
option plan (the "Formula Plan"), which is designed to provide certain
incentives to non-employee directors. Under the Formula Plan, options will be
granted pursuant to a formula that determines the timing, pricing and amount of
the option awards using objective criteria. The Company has reserved 300,000
shares of Common Stock for issuance under the Formula Plan. The exercise price
of the options granted to a
51
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLANS (CONTINUED)
non-employee director upon election as a director was 85% of the fair market
value of the shares of Common Stock on the date of the grant. During fiscal
1997, the Formula Plan was amended to provide that options are granted at fair
market value. These options vest and are exercisable on the date of grant and
expire after 5 years. All other options granted under the Formula Plan vest and
are exercisable one year from the date of the grant. During fiscal 1998, a
non-employee director was granted options to purchase 15,000 shares at $3.50 per
share. During fiscal 1999, non-employee directors were granted options to
purchase 51,000 shares at $.75 per share.
In addition, during fiscal 1998, the Company granted options to acquire
1,045,000 shares outside of the Company's stock option plans, exercisable at
prices ranging from $1.625 to $3.50 per share, of which 200,000 options were
granted to four non-employee directors and the balance to employees of the
Company; the vesting period for these options range from immediately upon grant
to three years, and the options expire in ten years.
FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires
that companies either recognize compensation expense for grants of stock, stock
options, and other equity instruments based on fair value, or provide pro forma
disclosure of net income and earnings per share in the notes to the financial
statements. The Company adopted the disclosure provisions of Statement No. 123
in fiscal 1997 and has applied APB 25 and related Interpretations in accounting
for its plans. Compensation costs of $0, $0 and $34,000 were recognized for
fiscal 1999, 1998 and 1997, respectively. Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates as calculated in accordance with Statement No. 123, the
Company's net loss and net loss per share for the twelve months ended March 31,
1999 and 1998, and the nine months ended March 31, 1997 would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------- --------------------------- ---------------------------
NET INCOME/(LOSS) NET INCOME/(LOSS) NET LOSS NET LOSS NET LOSS NET LOSS
(IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE (IN THOUSANDS) PER SHARE
----------------- ------------------- -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
As Reported................... $ 2,806 $ .12 $ (22,609) $ (1.22) $ (41,770) $ (2.41)
Pro forma..................... $ (1,966) $ (.08) $ (29,869) $ (1.62) $ (47,699) $ (2.75)
</TABLE>
The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions: an expected life of 5 years for grants prior to April 1, 1998, and
3 years for fiscal 1999, expected volatility of 55% for grants prior to April 1,
1997, 100% for fiscal 1998 and 141% for fiscal 1999, no dividends and a
risk-free interest rate of 6.0%, 6.0% and 6.2% for the twelve months ended March
31, 1999 and 1998 and the nine months ended March 31, 1997, respectively.
The effects on fiscal 1999, 1998, and 1997 pro forma net income/(loss) and
net income/(loss) per share of expensing the estimated fair value of stock
options are not necessarily representative of the effects on reported net
income/(loss) for future years due to such things as the vesting period of the
stock options and the potential for issuance of additional stock options and
stock in future years.
52
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLANS (CONTINUED)
A summary of the status of the Company's stock option plans as of March 31,
1999, 1998 and 1997 and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1997
MARCH 31, 1999 -------------------------- -------------------------
---------------------------- WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE
AVERAGE EXERCISE EXERCISE
EXERCISE PRICE PRICE PRICE
NUMBER PER SHARE NUMBER PER SHARE NUMBER PER SHARE
----------- --------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of
period............................ 2,932,000 1,779,600 986,200
Granted............................. 4,273,550 $ .80 2,581,000 $ 2.08 1,075,100 $ 21.78
Exercised........................... 0 $ -- (112,400) $ 1.75 (281,100) $ 12.60
Cancelled........................... (3,179,650) $ 1.82 (1,316,200) $ 16.42 (600) $ 2.77
----------- ----- ----------- ------ ---------- ------
Outstanding at period end........... 4,025,900 $ 1.64 2,932,000 $ 3.04 1,779,600 $ 14.26
Options exercisable at period end... 843,520 352,012 569,330
Weighted average fair value of
options granted during the year... $ .59 $ 1.61 $ 11.79
</TABLE>
The following table summarizes information about stock options outstanding
at March 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------
WEIGHTED-AVERAGE OPTIONS EXERCISABLE
REMAINING ------------------------------
RANGE OF NUMBER CONTRACTUAL WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------------------- ----------- ---------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$.33 - $.49...................... 5,000 9.5 years .43 0 --
$.50 - $.75...................... 3,137,600 8.6 years .65 45,000 .75
$.76 - $1.14..................... 126,500 9.3 years 1.12 125,500 1.12
$1.55 - $2.33.................... 217,500 8.2 years 2.30 145,000 2.30
$2.34 - $3.50.................... 235,300 7.6 years 3.40 235,300 3.40
$6.00 - $9.00.................... 233,000 0.9 years 7.49 221,720 7.42
$10.00 - $15.00.................. 15,000 2.3 years 12.89 15,000 12.89
$20.00 - $30.00.................. 56,000 7.5 years 21.48 56,000 21.48
----------- -------- ----- ----------- -----
$.33 - $30.00.................... 4,025,900 7.9 years 1.64 843,520 5.16
</TABLE>
During fiscal 1998, the exercise price of options granted on October 1, 1996
to purchase approximately 488,000 shares of Common Stock were repriced from
$20.53 to $2.30, and the vesting period for exercise of such options was
extended.
During fiscal 1999, the exercise price of options to purchase approximately
2,846,700 shares of Common Stock were repriced to $.65 from a range between $.68
and $13.875 through cancellation and reissuance of new options. These options
cannot be exercised until the later of July 1, 1999 or the date said options
were initially scheduled to vest.
During fiscal 1999, the Company established a 1999 Employee Stock Purchase
Plan (the "ESPP") that provides for the grant of rights to eligible employees to
purchase up to 200,000 shares of the Company's
53
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLANS (CONTINUED)
Common Stock at 85% of the fair market value of the Common Stock at the end of
the established offering period. There were no shares issued under the ESPP in
fiscal 1999.
12. RELATED PARTY TRANSACTIONS
During fiscal 1998, the Company agreed to forgive the remaining balance of a
loan initially made to an executive officer during fiscal 1996. The remaining
loan balance was approximately $32,000.
13. SAVINGS PLAN
In fiscal 1994, the Company established a 401(k) Savings Plan under which
substantially all U.S. employees may voluntarily defer a portion of their
compensation and the Company may elect to match a portion of the employee
deferral. The Company made contributions of $29,000 to the plan related to
contributions by employees during fiscal 1999. For fiscal 1998 and 1997, the
Company made no contributions to this plan.
14. CONTINGENCIES
CLASS ACTION LITIGATION. Since the Company's announcement on February 11,
1997 that it was undertaking an inquiry into the accuracy of its prior reported
financial results, and that preliminary information had raised questions as to
whether reported results contained material misstatements, approximately 35
purported class action lawsuits have been filed in or transferred to the United
States District Court for the District of Massachusetts. These complaints assert
claims against the Company under Section 10(b) of the Securities Exchange Act of
1934 (the "1934 Act") and Rule 10b-5 promulgated thereunder, and related state
law claims of fraud, deceit and negligent misrepresentation. The complaints also
assert claims against some or all of the Company's Board of Directors, and some
complaints assert claims against certain of the Company's nondirector officers,
under Section 20(a) of the 1934 Act, as well as the same state law claims
asserted against the Company. The Company's former independent accountants,
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), the Company's lead underwriter
for its March 1996 subsequent public offering, Needham & Company, Inc., and a
financial advisory subscription company, Cabot Heritage Corporation, have also
been named in some of the suits. These class action lawsuits were purportedly
brought by and on behalf of purchasers of the Company's Common Stock between the
Company's initial public offering on April 12, 1994 and February 10, 1997 (the
"Centennial Securities Litigation").
On and after February 26, 1997, four complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased the Company's Common Stock on
February 25, 1997. The complaint also names the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and alleges violations of Sections
10(b) and 20(a) of the 1934 Act (the "February 25 Securities Litigation").
On January 13, 1998, a plaintiff purporting to represent classes of
shareholders who purchased the Company's Common Stock on February 27, 1997 filed
a complaint in the United States District Court for the District of
Massachusetts. The Complaint also names the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and Mr. Ramaekers' employer, Jay Alix
& Co., and alleges violations of Sections 10(b) and 20(a) of the 1934 Act (the
"February 27 Securities Litigation").
54
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONTINGENCIES (CONTINUED)
On February 9, 1998, a consolidated amended complaint combining the
Centennial Securities Litigation, the February 25 Securities Litigation, the
February 27 Securities Litigation and the Derivative Litigation was filed in the
United States District Court for the District of Massachusetts (the
"Consolidated Litigation"). Also on February 9, 1998, the Company and lead
counsel representing the plaintiffs in the Consolidated Litigation filed a
Stipulation of Settlement (the "Settlement Agreement"), whereby the Company and
certain of its officers and directors would be released from liability arising
from the allegations included in the Consolidated Litigation. In return, the
Company agreed to pay the plaintiffs in the Consolidated Litigation $1.475
million in cash and to issue to these plaintiffs 37% of the Company's Common
Stock. The Company also agreed to adopt certain corporate governance policies
and procedures.
The Court granted final approval of the Settlement Agreement of the
Consolidated Litigation on April 29, 1998 and the Settlement Agreement became
effective on July 20, 1998. All shares issuable in connection with the
Consolidated Litigation are included in the weighted average shares outstanding
calculation from July 20, 1998 forward.
A significant number of class members opted not to participate in the
Settlement Agreement. No assurance can be given that claims by class members who
declined to participate in the Settlement Agreement will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
The plaintiffs in the Consolidated Litigation have not yet reached an
agreement with the Company's former Interim Chief Executive Officer, Lawrence J.
Ramaekers, regarding their alleged claims against him. The plaintiffs have
agreed to release the Company from any direct liability related to those alleged
claims. In the agreement under which Mr. Ramaekers provided services to the
Company, the Company agreed to provide Mr. Ramaekers with the same
indemnification as is applicable to other officers of the Company pursuant to
the Company's By-Laws. The Company has agreed to indemnify, hold harmless, and
defend Mr. Ramaekers from and against certain claims arising out of his
engagement with the Company. The plaintiffs also retained their claims against
the Company's former President and Chief Executive Officer, Emanuel Pinez; the
Company's former Chief Financial Officer, James M. Murphy; the Company's former
independent accountants, Coopers & Lybrand; and others.
On February 20, 1997, the Company received a subpoena from the United States
Department of Justice ("DOJ") to produce documents in connection with a grand
jury investigation regarding various irregularities in the Company's previous
press releases and financial statements. The DOJ also requested certain
information regarding some of the Company's former officers, certain stock
transactions by Mr. Pinez, and correspondence with the Company's auditors. The
DOJ has subsequently subpoenaed additional Company records and files. The
Company has not been notified by the DOJ that it is a target or subject of this
investigation.
In mid-February 1997, the Company was notified that the Boston District
Office of the Securities and Exchange Commission ("SEC") was conducting an
investigation of the Company. The SEC has requested that the Company provide the
SEC with certain documents concerning the Company's public reports and financial
statements. The SEC indicated that its inquiry should not be construed as an
indication by the SEC or its staff that any violations have occurred, or as a
reflection upon the merits of the securities involved or upon any person who
effected transactions in such securities. The Company is cooperating with the
SEC in connection with this investigation, the outcome of which cannot yet be
determined.
55
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONTINGENCIES (CONTINUED)
On and after March 26, 1997, several complaints were filed in the United
States District Court for the District of Massachusetts by plaintiffs purporting
to represent classes of shareholders who purchased stock of WebSecure, Inc.
("WebSecure") between December 5, 1996 and February 27, 1997 (the "WebSecure
Complaints"). The WebSecure Complaints assert claims against WebSecure, certain
officers, directors and underwriters of WebSecure, and the Company. Claims
against the Company include alleged violations of Sections 11 and 15 of the
Securities Act of 1933 (the "1933 Act") (the "WebSecure Securities Litigation").
As described in Note 6, in fiscal 1997 the Company recorded a reserve of $1.2
million in connection with the expected settlement of the WebSecure Securities
Litigation.
On November 13, 1998, the Company reached an agreement to settle the
WebSecure Securities Litigation. The settlement agreement contemplates that the
Company and certain of its officers and directors would be released from any and
all liability arising from the allegations included in the WebSecure Securities
Litigation in return for the issuance to the WebSecure Securities Litigation
class of 345,000 shares of the Company's Common Stock and the payment to the
class of up to $50,000 for notice and administrative costs. The settlement
agreement must be submitted to the Court for review and approval and,
thereafter, presented to class members for consideration. If a sufficiently
large number of class members opt not to participate in the settlement
agreement, the agreement may by withdrawn. No assurance can be given that the
Court will approve the settlement agreement, or that, if such approval is
obtained, that a material number of class members will not decline to
participate in the settlement.
56
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1999 AND 1998,
AND THE NINE MONTHS ENDED MARCH 31, 1997
SCHEDULE II
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO CHARGED TO
OF COSTS AND OTHER BALANCE AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ---------------------------------------------- ----------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Accounts receivable allowance
Fiscal 1999................................. $ 868 $ 170 $ 243 $ 795
Fiscal 1998................................. 692 588 412 868
Nine months ended March 31, 1997............ 375 400 83 692
Notes receivable reserve
Fiscal 1999................................. $ 971 $ 0 $ 971
Fiscal 1998................................. 971 0 971
Nine months ended March 31, 1997............ 871 100 971
Investment reserve
Fiscal 1999................................. $ 13,095 $ 0 $ 13,095
Fiscal 1998................................. 8,669 4,426 13,095
Nine months ended March 31, 1997............ 646 8,023 8,669
Inventory reserve
Fiscal 1999................................. $ 3,485 $ 0 $ 2,114 $ 1,371
Fiscal 1998................................. 2,083 2,676 1,274 3,485
Nine months ended March 31, 1997............ 2,040 1,202 1,159 2,083
</TABLE>
57
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
In June 1998, the Company requested proposals from several independent
accounting firms to provide auditing and tax services. On July 6, 1998, the
Company's former independent accountants, PricewaterhouseCoopers LLP ("PwC"),
advised the Company that they did not intend to submit a proposal. On July 7,
1998, the Company selected Ernst & Young and engaged them as independent
auditors. The selection of accountants was made by the Audit Committee of the
Board of Directors of the Company. None of the reports of PwC on the financial
statements of the Company for either of the past two fiscal years contained an
adverse opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles. The report on the financial
statements for the nine month period ended March 31, 1997 noted that significant
and recurring losses from operations, accumulated deficit and the absence of a
final shareholder settlement raised substantial doubt about the Company's
ability to continue as a going concern.
In connection with its audit for Fiscal 1998 and through July 6, 1998, there
were no disagreements with PwC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement if not resolved to the satisfaction of PwC would have caused them
to make reference thereto in their report on the financial statements for such
years, except as set forth in the following paragraphs.
On January 29, 1997, prior to the Company's announcement of its results for
the quarter ended December 31, 1996, PwC met with management and raised
questions regarding the treatment of certain accounting transactions which were
included in the Company's results. Management agreed to communicate with the
Audit Committee and then with PwC prior to announcing earnings. On January 30,
1997, the Company announced the quarter's earnings, which included the
questioned amounts without informing PwC. As a result of the announcement, PwC
requested a meeting with the Audit Committee to discuss the disagreements. PwC
informed the Audit Committee that they would need to perform extensive
procedures to obtain sufficient information to address the issues raised in the
disagreements, and that, if the Company was not willing to authorize such
procedures, PwC would be required to contact the Securities and Exchange
Commission and inform them of the potential misstatement of results. The Audit
Committee directed PwC to expand its procedures, which PwC began immediately.
On February 10, 1997, the Company's Board of Directors reviewed information
that raised significant questions as to whether previously reported financial
results contained material misstatements. A special committee consisting of
independent members of the Company's Board of Directors, with the assistance of
outside counsel and PwC, conducted an investigation regarding the financial
statements and business affairs of the Company. The results of the
investigation, which included significant restatements of financial statements
for the Fiscal 1994 through Fiscal 1996 and interim periods during Fiscal 1997,
are more fully described in the Company's Form 10-K/A filed in April 1998.
58
<PAGE>
PART III
Items 10 to 13 are incorporated herein by reference to the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission.
ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a)(1) Financial Statement. The financial statements required to be filed by
Item 8 are as follows:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................. 31
Consolidated Balance Sheets as of March 31, 1999 and 1998.................. 33
Consolidated Statements of Operations for the twelve months ended March 31,
1999 and 1998, and the nine months ended March 31, 1997.................. 34
Consolidated Statements of Stockholders' Equity for the twelve months ended
March 31, 1999 and 1998, and the nine months ended March 31, 1997........ 35
Consolidated Statements of Cash Flows for the twelve months ended March 31,
1999 and 1998, and the nine months ended March 31, 1997.................. 36
Notes to Consolidated Financial Statements................................. 37
</TABLE>
(a)(2)Financial Statement Schedules. The financial statement schedule
required to be filed herewith is included in Item 8 of this report:
Schedule II--Valuation and Qualifying Accounts, page 46.
All other schedules have been omitted either because they are not required
or the information is included in the financial statements.
(a)(3)Exhibits.
<TABLE>
<CAPTION>
ITEM LOCATION
NO. DESCRIPTION SEE NOTE:
- --------- ----------------------------------------------------------------------------------- -----------------
<C> <C> <S> <C>
3.1 -- Certificate of Incorporation (originally filed as Exhibit 3a)...................... (3)
3.2 -- Certificate of Amendment to the Certificate of Incorporation....................... (1)
3.3 -- Amended and Restated By-Laws....................................................... (2)
3.4 -- Shareholder Voting Agreement between Centennial Technologies, Inc. and the
Shareholders who are a party thereto, dated November 27, 1996...................... (1)
3.5 -- Certificate of Designations for Preferred Stock.................................... Filed Herewith
4.1 -- Specimen Stock Certificate......................................................... (2)
4.2 -- Rights Agreement, dated as of March 16, 1999....................................... Filed Herewith
10.1 -- Form of the Company's Domestic Distributor Agreement between the Company and its
domestic distributors (originally filed as Exhibit 10.10).......................... (3)
10.2 -- Form of the Company's Agreement with its Manufacturer's Representatives (originally
filed as Exhibit 10.11)............................................................ (3)
10.3 -- Investment and Stockholders Agreement by and between Centennial Technologies, Inc.
and ViA, Inc., dated November 27, 1996 (originally filed as Exhibit 10.13)......... (1)
</TABLE>
59
<PAGE>
ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K (CONTINUED)
<TABLE>
<CAPTION>
ITEM LOCATION
NO. DESCRIPTION SEE NOTE:
- --------- ----------------------------------------------------------------------------------- -----------------
<C> <C> <S> <C>
10.4 -- 1994 Stock Option Plan, as amended (originally filed as Exhibit 10.1).............. (4)
10.5 -- 1994 Formula Stock Option Plan, as amended (originally filed as Exhibit 10.2)...... (4)
10.6 -- 1999 Employee Stock Purchase Plan.................................................. Filed Herewith
10.7 -- Key Employee Agreement between Centennial Technologies, Inc. and Donald R. Peck,
dated February 1, 1997 (originally filed as Exhibit 10.18)......................... (1)
10.8 -- Agreement to Provide Interim Management and Consulting Services Between Centennial
Technologies, Inc. and Jay Alix & Associates, dated February 17, 1997 (originally
filed as Exhibit 10.19)............................................................ (1)
10.9 -- Lease Agreement by and between Centennial Technologies, Inc. and Michael A.
Howland, as Trustee of the Hownat Trust, dated April 17, 1997 (originally filed as
Exhibit 10.27)..................................................................... (5)
10.10 -- Employment Agreement between Centennial Technologies, Inc. and L. Michael Hone,
effective August 19, 1997 (originally filed as Exhibit 10.31)...................... (6)
10.11 -- Key Employee Agreement between Centennial Technologies, Inc. and Richard N. Stathes
dated September 15, 1997 (originally filed as Exhibit 10.32)....................... (6)
10.12 -- Key Employee Agreement between Centennial Technologies, Inc. and Jacques Assour
dated as of April 1, 1998 (originally filed as Exhibit 10.1)....................... (7)
10.13 -- Letter Agreement between Centennial Technologies, Inc. and John C. Nugent dated as
of January 12, 1998 (originally filed as Exhibit 10.2)............................. (7)
10.14 -- $3,500,000 Revolving Note, dated November 20, 1998, made by Centennial
Technologies, Inc. and payable to the order of Fleet National Bank (originally
filed as Exhibit 10.3)............................................................. (7)
10.15 -- $1,500,000 Term Note, dated November 20, 1998, made by Centennial Technologies,
Inc. and payable to the order of Fleet National Bank (originally filed as Exhibit
10.4).............................................................................. (7)
10.16 -- Letter Agreement, dated November 20, 1998, by and between Centennial Technologies,
Inc. and Fleet National Bank (originally filed as Exhibit 10.5).................... (7)
10.17 -- Letter Agreement between Centennial Technologies, Inc. and John J. McDonald dated
January 20, 1998................................................................... (8)
10.18 -- Executive Retention Agreement between Centennial Technologies, Inc. and L. Michael
Hone dated as of February 26, 1999................................................. Filed Herewith
10.19 -- Executive Retention Agreement between Centennial Technologies, Inc. and Richard N.
Stathes dated as of February 26, 1999.............................................. Filed Herewith
</TABLE>
60
<PAGE>
ITEM 14. EXHIBITS, LIST AND REPORTS ON FORM 8-K (CONTINUED)
<TABLE>
<CAPTION>
ITEM LOCATION
NO. DESCRIPTION SEE NOTE:
- --------- ----------------------------------------------------------------------------------- -----------------
<C> <C> <S> <C>
10.20 -- Executive Retention Agreement between Centennial Technologies, Inc. and Jacques
Assour dated as of February 26, 1999............................................... Filed Herewith
10.21 -- Executive Retention Agreement between Centennial Technologies, Inc. and Donald R.
Peck dated as of February 26, 1999................................................. Filed Herewith
10.22 -- Executive Retention Agreement between Centennial Technologies, Inc. and Kathleen C.
Little dated as of February 26, 1999............................................... Filed Herewith
10.23 -- Executive Retention Agreement between Centennial Technologies, Inc. and John C.
Nugent dated as of February 26, 1999............................................... Filed Herewith
10.24 -- Letter Agreement between Centennial Technologies, Inc. and Kathleen C. Little dated
March 31, 1999..................................................................... Filed Herewith
21 -- Schedule of Subsidiaries........................................................... Filed Herewith
24.1 -- Consent of Ernst & Young LLP, Independent Auditors................................. Filed Herewith
24.2 -- Consent of PricewaterhouseCoopers LLP, Independent Auditors........................ Filed Herewith
27 -- Financial Data Schedule............................................................ Filed Herewith
</TABLE>
(1) Incorporated by reference to the Exhibits to the Company's Annual Report on
Form 10-K/A filed with the Securities and Exchange Commission (the
"Commission") on April 28, 1998.
(2) Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form 8-A filed with the Commission on November 19, 1998.
(3) Incorporated by reference to the Exhibits to the Company's Form SB-2
Registration Statement (No. 33-74862-NY) declared effective by the
Commission on April 12, 1994.
(4) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on November 6, 1998.
(5) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on August 14, 1997.
(6) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on February 10, 1997.
(7) Incorporated by reference to the Exhibits to the Company's Quarterly Report
on Form 10-Q filed with the Commission on February 8, 1998.
(8) Incorporated by reference to the Exhibits to the Company's Annual Report on
Form 10-K filed with the Commission on August 14, 1997.
(b) Reports on Form 8-K. During the last quarter of the period covered by
this report, the Company filed a Form 8-K on March 30, 1999 regarding the
Company's Shareholder Rights Plan.
61
<PAGE>
SIGNATURES
IN ACCORDANCE WITH SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CENTENNIAL TECHNOLOGIES, INC.
Dated: June 4, 1999 By: /s/ L. MICHAEL HONE
-----------------------------------------
L. Michael Hone
PRESIDENT AND CHIEF EXECUTIVE OFFICER
IN ACCORDANCE WITH THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
NAME CAPACITY DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ L. MICHAEL HONE Officer
- ------------------------------ and Director (Principal June 4, 1999
L. Michael Hone Executive Officer)
/s/ WILLIAM J. SHEA Chairman of the Board
- ------------------------------ June 4, 1999
William J. Shea
/s/ EUGENE M. BULLIS Director
- ------------------------------ June 4, 1999
Eugene M. Bullis
/s/ STEVEN M. DEPERRIOR Director
- ------------------------------ June 4, 1999
Steven M. DePerrior
/s/ JAY M. EASTMAN Director
- ------------------------------ June 4, 1999
Jay M. Eastman
/s/ DAVID A. LOVENHEIM Director
- ------------------------------ June 4, 1999
David A. Lovenheim
/s/ JOHN J. SHIELDS Director
- ------------------------------ June 4, 1999
John J. Shields
Secretary, Treasurer and
/s/ DONALD R. PECK General Counsel (Acting
- ------------------------------ Principal Financial and June 4, 1999
Donald R. Peck Accounting Officer)
62
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
CENTENNIAL TECHNOLOGIES, INC.
------------------------------
Centennial Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation at a meeting duly called and held on March 16,
1999:
RESOLVED: That pursuant to the authority granted to and vested in the
Board of Directors of the Corporation (hereinafter called the "Board") in
accordance with the provisions of the Certificate of Incorporation, as amended,
the Board hereby creates a series of Preferred Stock, $.01 par value per share
(the "Preferred Stock"), of the Corporation and hereby states the designation
and number of shares, and fixes the relative rights, preferences and limitations
thereof as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be Fifty Thousand (50,000). Such number of shares may be increased
or decreased by resolution of the Board prior to issuance; PROVIDED, that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock, par value $.01
per share (the
1
<PAGE>
"Common Stock"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board out of funds of the
Corporation legally available for the payment of dividends, quarterly dividends
payable in cash on the last day of each fiscal quarter of the Corporation in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth,
1,000 times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event. In the event the Corporation shall at any time declare or pay any
dividend on the Series A Preferred Stock payable in shares of Series A Preferred
Stock, or effect a subdivision, combination or consolidation of the outstanding
shares of Series A Preferred Stock (by reclassification or otherwise than by
payment of a dividend in shares of Series A Preferred Stock) into a greater or
lesser number of shares of Series A Preferred Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the first sentence of this
Section 2(A) shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Series A Preferred Stock that were
outstanding immediately prior to such event and the denominator of which is the
number of shares of Series A Preferred Stock outstanding immediately after such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock) and the Corporation
shall pay such dividend or distribution on the Series A Preferred Stock before
the dividend or distribution
2
<PAGE>
declared on the Common Stock is paid or set apart; provided that, in the event
no dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A
3
<PAGE>
Preferred Stock (by reclassification or otherwise than by payment of a dividend
in shares of Series A Preferred Stock) into a greater or lesser number of shares
of Series A Preferred Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of Series A Preferred
Stock that were outstanding immediately prior to such event and the denominator
of which is the number of shares of Series A Preferred Stock outstanding
immediately after such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock shall
be in arrears in an amount equal to six quarterly dividends thereon, the holders
of the Series A Preferred Stock, voting as a separate series from all other
series of Preferred Stock and classes of capital stock, shall be entitled to
elect two members of the Board in addition to any Directors elected by any other
series, class or classes of securities and the authorized number of Directors
will automatically be increased by two. Promptly thereafter, the Board of the
Corporation shall, as soon as may be practicable, call a special meeting of
holders of Series A Preferred Stock for the purpose of electing such members of
the Board. Such special meeting shall in any event be held within 45 days of the
occurrence of such arrearage.
(ii) During any period when the holders of Series A Preferred
Stock, voting as a separate series, shall be entitled and shall have exercised
their right to elect two Directors, then, and during such time as such right
continues, (a) the then authorized number of Directors shall be increased by
two, and the holders of Series A Preferred Stock, voting as a separate series,
shall be entitled to elect the additional Directors so provided for, and (b)
each such additional Director shall not be a member of any existing class of the
Board, but shall serve until the next annual meeting of stockholders for the
election of Directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates pursuant to the
provisions of this Section 3(C).
(iii) A Director elected pursuant to the terms hereof may be
removed with or without cause by the holders of Series A Preferred Stock
entitled to vote in an election of such Director.
(iv) If, during any interval between annual meetings of
stockholders for the election of Directors and while the holders of Series A
Preferred Stock shall be entitled to elect two Directors, there is no such
Director in office by reason of
4
<PAGE>
resignation, death or removal, then, promptly thereafter, the Board shall call a
special meeting of the holders of Series A Preferred Stock for the purpose of
filling such vacancy and such vacancy shall be filled at such special meeting.
Such special meeting shall in any event be held within 45 days of the occurrence
of such vacancy.
(v) At such time as the arrearage is fully cured, and all
dividends accumulated and unpaid on any shares of Series A Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend
has been paid subsequent to curing such arrearage, the term of office of any
Director elected pursuant to this Section 3(C), or his successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series A Preferred Stock to vote as provided in this Section 3(C) shall cease,
subject to renewal from time to time upon the same terms and conditions, and the
holders of shares of the Series A Preferred Stock shall have only the limited
voting rights elsewhere herein set forth.
(D) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in
5
<PAGE>
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board) to all
holders of such shares upon such terms as the Board, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation, dissolution or winding up of the Corporation,
no distribution shall be made (1) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $1000 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
6
<PAGE>
(B) Neither the consolidation, merger or other business combination of
the Corporation with or into any other corporation nor the sale, lease, exchange
or conveyance of all or any part of the property, assets or business of the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 6.
(C) In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of paragraph (A) of this Section 6 shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
A Preferred Stock) into a greater or lesser number of shares of Series A
Preferred Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of paragraph (A) of this Section 6 shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Series A Preferred Stock that were outstanding immediately
prior to such event and the denominator of which is the number of shares of
Series A Preferred Stock outstanding immediately after such event.
Section 7. CONSOLIDATION, MERGER, ETC. Notwithstanding anything to the
contrary contained herein, in case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of
7
<PAGE>
Common Stock) into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
A Preferred Stock) into a greater or lesser number of shares of Series A
Preferred Stock, then in each such case the amount set forth in the first
sentence of this Section 7 with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Series A Preferred
Stock that were outstanding immediately prior to such event and the denominator
of which is the number of shares of Series A Preferred Stock outstanding
immediately after such event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. RANK. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Preferred Stock issued either before or after the
issuance of the Series A Preferred Stock, unless the terms of any such series
shall provide otherwise.
Section 10. AMENDMENT. At such time as any shares of Series A Preferred
Stock are outstanding, the Certificate of Incorporation, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series A Preferred Stock.
8
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chief Executive Officer this 16th day of March,
1999.
CENTENNIAL TECHNOLOGIES, INC.
By: /s/ L. Michael Hone
-------------------------------
L. Michael Hone
President and
Chief Executive Officer
9
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
CENTENNIAL TECHNOLOGIES, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
RIGHTS AGENT
----------------------
RIGHTS AGREEMENT
DATED AS OF MARCH 16, 1999
- --------------------------------------------------------------------------------
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of March 16, 1999 (the "Agreement"), between
Centennial Technologies, Inc., a Delaware corporation (the "Company"), and
American Securities Transfer & Trust, Inc., a Colorado corporation, as Rights
Agent (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on March 16, 1999 the Board of Directors of the Company (the
"Board") authorized and declared a dividend distribution of one Right for each
share of Common Stock (as hereinafter defined) of the Company outstanding at the
close of business on March 31, 1999 (the "Record Date"), and authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the earlier of the Distribution Date or the
Expiration Date, each Right initially representing the right to purchase one
one-thousandth of a share of Series A Junior Participating Preferred Stock of
the Company having the rights, powers and preferences set forth in the form of
Certificate of Designations attached hereto as EXHIBIT A, upon the terms and
subject to the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company, or
(iv) any Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan. Notwithstanding the foregoing, if the
Board determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement unless and until
such Person shall again become an "Acquiring Person."
(b) "Act" shall mean the Securities Act of 1933, as amended.
<PAGE>
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, beneficially owns or has the right
to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities), whether or not in writing, or upon the
exercise of conversion rights, exchange rights, other rights, warrants
or options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant
to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act, or any
comparable or successor rule), including pursuant to any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona
fide public offering of securities), whether or not in writing;
PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act, and (B) is not then reportable
by such
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Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities) whether or not in
writing, for the purpose of acquiring, holding, voting (except pursuant
to a revocable proxy as described in the proviso to subparagraph (ii)
of this paragraph (d)) or disposing of any voting securities of the
Company.
For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(l)(i) of the General Rules
and Regulations under the Exchange Act.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Massachusetts are
authorized or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00
p.m., Boston time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 p.m., Boston time, on the next succeeding
Business Day.
(g) "Common Stock" shall mean the common stock, $.01 par value
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Common stock equivalents" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(i) Intentionally omitted.
(j) "Current market price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(k) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) hereof.
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(l) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(m) "Exchange Act" shall have the meaning set forth in Section
1(c) hereof.
(n) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(o) "Final Expiration Date" shall mean the close of business
on March 16, 2009.
(p) Intentionally omitted.
(q) "Person" shall mean any individual, firm, corporation,
partnership, trust, association, limited liability company or other entity.
(r) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, $.01 par value per share, of the Company having
the rights and preferences set forth in the form of Certificate of Designations
attached to this Agreement as EXHIBIT A and, to the extent that there is not a
sufficient number of shares of Series A Junior Participating Preferred Stock
authorized to permit the full exercise of the Rights, any other series of
Preferred Stock of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Junior Participating
Preferred Stock.
(s) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(t) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.
(u) "Record Date" shall have the meaning set forth in the
WHEREAS clause at the beginning of the Agreement.
(v) "Redemption Date" shall have the meaning set forth in
Section 7(a) hereof.
(w) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(x) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of the Agreement.
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(y) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.
(z) "Section 11(a)(ii) Event" shall mean an acquisition of
Common Stock described in the first sentence of Section 11(a)(ii) hereof.
(aa) "Section 11(a)(ii) Trigger Date" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(bb) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(cc) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(dd) "Stock Acquisition Date" shall mean the later of (i) the
first date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such or (ii) the first date on which an executive officer of the Company
has actual knowledge that an Acquiring Person has become such.
(ee) "Subsidiary" shall mean, with reference to any Person,
any corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially owned,
directly or indirectly, by such Person, or otherwise controlled by such Person.
(ff) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(gg) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(hh) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable upon ten (10) days' prior written notice to the Rights Agent. The
Rights Agent shall
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have no duty to supervise, and shall in no event be liable for, the acts or
omissions of any such co-Rights Agent.
Section 3. ISSUANCE OF RIGHTS.
(a) Until the earlier of (i) the close of business on the
tenth Business Day (or such later date as may be determined by the Board) after
the Stock Acquisition Date (or, if the tenth Business Day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), or (ii) the close of business on the tenth Business Day (or such
later date as may be determined by action of the Board) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person organized, appointed or established by the Company
for or pursuant to the terms of any such plan) is first published or sent or
given within the meaning of Rule 14d-2(a) of the General Rules and Regulations
under the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
(the earlier of (i) and (ii) being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced by the certificates for the Common
Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as of the close
of business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in substantially the
form of EXHIBIT B hereto (the "Rights Certificates"), evidencing one Right for
each share of Common Stock so held, subject to adjustment as provided herein. In
the event that an adjustment in the number of Rights per share of Common Stock
has been made pursuant to Sections 11(i) or 11(p) hereof, at the time of
distribution of the Right Certificates, the Company shall make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as EXHIBIT C, by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for the Common Stock outstanding as
of the close of business on the Record Date, until the Distribution Date, the
Rights will be evidenced
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<PAGE>
by such certificates for the Common Stock and the registered holders of the
Common Stock shall also be the registered holders of the associated Rights.
(c) Rights shall be issued (i) in respect of all shares of
Common Stock that are issued (either as an original issuance or from the
Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date and (ii) in connection with the
issuance or sale of Common Stock following the Distribution Date and prior to
the Expiration Date upon the exercise of stock options, or upon the exercise,
conversion or exchange of securities, granted or issued by the Company prior to
the Distribution Date. Certificates representing such shares of Common Stock
(including, without limitation, certificates issued upon transfer or exchange of
Common Stock) shall also be deemed to be certificates for Rights, and shall bear
the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between
Centennial Technologies, Inc. (the "Company") and American
Securities Transfer & Trust, Inc. (the "Rights Agent") dated as of
March 16, 1999, as the same may be amended, restated or renewed
from time to time (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder
of this certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who
is, was or becomes an Acquiring Person or any Affiliate or
Associates thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person
or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights.
(d) Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any certificates representing shares of Common
Stock in respect of which Rights have been issued shall also constitute the
transfer of the Rights associated with such shares of Common Stock. In the event
that the Company purchases or acquires any shares of Common Stock after the
Record Date but prior to
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<PAGE>
the Distribution Date, any Rights associated with such shares of Common Stock
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with the shares of Common Stock which are no
longer outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase, certification and assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in EXHIBIT B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or over-the-counter
market on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-thousandth of a share, the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3,
Section 11(i) or Section 22 hereof that represents Rights beneficially owned by
persons known to be: (i) an Acquiring Person or any Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement, arrangement or understanding
(whether or not in writing) regarding the transferred Rights or (B) a transfer
which the Board has determined is part of a plan, arrangement or understanding
(whether or not in writing) that has as a primary purpose or effect avoidance of
Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined
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<PAGE>
in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof, which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be manually countersigned by the Rights Agent and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent shall
keep or cause to be kept, at its office designated as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates, the Certificate number and the date of each of the Rights
Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Certificates (other than Rights Certificates
representing Rights that have become void pursuant to Section 7(e) hereof or
that have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Rights Certificate or Certificates,
entitling the registered holder to purchase a like number of one one-thousandths
of a share of Preferred Stock (or, following a Triggering Event, Common Stock,
other securities, cash or other assets, as the case may be) as the
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<PAGE>
Rights Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged, with the form of assignment and certificate
appropriately executed, at the office of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandths of a share (or other shares, securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earliest of (i) the Final Expiration Date, (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the "Redemption
Date") or
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(iii) the time at which such Rights are exchanged as provided in Section 24
hereof (the earliest of (i), (ii) and (iii) being herein referred to as the
"Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share
of Preferred Stock pursuant to the exercise of a Right shall initially be $6.00
and shall be subject to adjustment from time to time as provided in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-thousandth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-thousandths of a share of Preferred
Stock to be purchased and the Company hereby authorizes its transfer agent to
comply with such requests, or (B) if the Company shall have elected to deposit
the total number of shares of Preferred Stock issuable upon exercise of the
Rights hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such requests, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) may be made in cash or by certified bank
check or money order payable to the order of the Company. In the event that the
Company is obligated to issue other securities (including Common Stock) of the
Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company shall make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such
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Rights Certificate, registered in such name or names as may be designated by
such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding (whether or not in writing) regarding the transferred Rights or
(B) a transfer which the Board has determined is part of a plan, arrangement or
understanding (whether or not in writing) that has as a primary purpose or
effect avoidance of this Section 7(e), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported transfer or exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate following
the form of assignment or election to purchase set forth on the reverse side of
the Rights Certificate surrendered for such assignment or exercise, and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights
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Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange or automated quotation system, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be so listed upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the Act,
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the Expiration
Date. The Company will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days after the date set
forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction
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unless the requisite registration or qualification in such jurisdiction shall
have been effected or obtained.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one one-thousandths of a
share of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-thousandths of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
(i) to pay any transfer tax that may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-thousandths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or (ii) to issue or deliver any certificates for
a number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate, as such, shall not be entitled to
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any rights of a stockholder of the Company with respect to securities for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock
or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open, he
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification.
If an event occurs that would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the event
that any Person, alone or together with its Affiliates or Associates,
becomes an Acquiring Person, then, promptly following the first
occurrence of such event, proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive (subject to the last
sentence of Section 23(a)), upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of one one- thousandths of a share of Preferred Stock, such
number of shares of Common Stock of the Company that
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equals the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
that are authorized by the Company's Certificate of Incorporation but
not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii)
of this Section 11(a), the Company shall: (A) determine the excess of
(1) the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such excess,
the "Spread"), and (B) with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of
preferred stock which the Board has deemed to have the same value and
voting rights as shares of Common Stock (such shares of preferred
stock, "common stock equivalents")), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board based upon the advice
of a nationally recognized investment banking firm selected by the
Board; PROVIDED, HOWEVER, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) the first occurrence of a Section
11(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Board shall determine in good faith that it is
likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the thirty
(30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek shareholder
approval for the authorization of such additional shares (such period,
as it may be extended, the "Substitution Period"). To the extent that
the Company
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determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares and/or
to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Stock shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of the
Common Stock on the Section 11(a)(ii) Trigger Date and the value of any
"common stock equivalent" shall be deemed to have the same value as the
Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities convertible into Preferred
Stock or equivalent preferred stock at a price per share of Preferred Stock or
per share of equivalent preferred stock (or having a conversion price per share,
if a security convertible into Preferred Stock or equivalent preferred stock)
less than the current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
and in the event
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<PAGE>
that such rights, options or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes) of the portion
of the cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock and the
denominator of which shall be such current market price (as determined pursuant
to Section 11(d) hereof) per share of Preferred Stock on such record date. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"current market price" per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Stock for the thirty (30) consecutive Trading Days (as such term
is hereinafter defined) immediately prior to such date, and for
purposes of computations made pursuant to Section 11(a)(iii) hereof,
the "current market price" per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten (10) consecutive Trading Days immediately
following such date; PROVIDED, HOWEVER, that in the event that the
current market price per share of the Common Stock is determined during
a period following the announcement by the issuer of such Common Stock
of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of
such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, after the ex-dividend date for such
dividend or
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distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market
price" shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of
the high bid and the low asked prices in the over-the-counter market,
as reported by The Nasdaq Stock Market, Inc. ("Nasdaq") or such other
system then in use, including an internet-based bulletin board service,
or, if on any such date the shares of Common Stock are not quoted by
any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the
Common Stock selected by the Board. If on any such date no market maker
is making a market in the Common Stock, the fair value of such shares
on such date as determined in good faith by the Board shall be used.
The term "Trading Day" shall mean a day on which Nasdaq or any national
securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on Nasdaq
or any national securities exchange, a Business Day. If the Common
Stock is not publicly held or not so listed or traded, "current market
price" per share shall mean the fair value per share as determined in
good faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be determined
in the same manner as set forth above for the Common Stock in clause
(i) of this Section 11(d) (other than the last sentence thereof). If
the current market price per share of Preferred Stock cannot be
determined in the manner provided above or if the Preferred Stock is
not publicly held or listed or traded in a manner described in clause
(i) of this Section 11(d), the "current market price" per share of
Preferred Stock shall be conclusively deemed to be an amount equal to
1,000 (as such number may be appropriately adjusted for such events as
forward or reverse stock splits, stock dividends and recapitalizations
with respect to the Common Stock occurring after the date of this
Agreement) multiplied by the current market price per share of the
Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, "current market price" per share
of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board, whose
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<PAGE>
determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the "current market price" of one one-thousandth of a
share of Preferred Stock shall be equal to the "current market price"
of one share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-millionth of a share of
Preferred Stock, or hundred-thousandth of a share of Common Stock or other
security, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any securities other than Preferred Stock,
thereafter the number of such other securities so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other securities; PROVIDED, HOWEVER, that the Company shall
not be liable for its inability to reserve and keep available for issuance upon
exercise of the Rights pursuant to Section 11(a)(ii) a number of shares of
Common Stock greater than the number then authorized by the Company's
Certificate of Incorporation but not outstanding or reserved for other purposes.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest
ten-millionth) obtained by (i) multiplying
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(x) the number of one one-thousandths of a share covered by a Right immediately
prior to this adjustment, by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price, and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-thousandths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-hundred-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
one-thousandth of a share and the number of one one-thousandths of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one
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one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue such number of one one-thousandths of a share of fully paid and
nonassessable Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees for the benefit of the
holders from time to time of the Rights that it shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect that would
substantially
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diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the shareholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates. The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such other Person shall have executed and delivered to the Rights Agent a
supplemental agreement evidencing compliance with this Section 11(n).
(o) The Company covenants and agrees for the benefit of the
holders from time to time of the Rights that, after the Distribution Date, it
will not, except as permitted by Section 23, Section 24 or Section 27 hereof,
take (or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Record Date and prior to the Distribution Date (i) declare or pay any dividend
on the outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares such as in a
reverse stock split, the number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the occurrence of such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately following the occurrence of such event.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any adjustment unless and
until it shall have received such certificate.
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Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, at any time after a Person has become
an Acquiring Person, (x) the Company shall consolidate with, or merge with and
into, any other Person (other than a Subsidiary of the Company in a transaction
that complies with Section 11(o) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction that complies
with Section 11(o) hereof) shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case, proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one one-thousandths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one one-thousandths of a share
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and (2) dividing that product (which, following the
first occurrence of a Section 13 Event, shall be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by 50% of the
current market price (determined pursuant to Section 11(d)(i) hereof) per share
of the Common Stock of such Principal Party on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that, subject to clause (v) below, the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not
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limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of Common Stock
of the Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is
the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value; and (3)
in case such Person is owned, directly or indirectly, by a joint venture formed
by two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint ventures and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as
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soon as practicable after the date of any consolidation, merger or sale of
assets mentioned in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under
the blue sky laws of such jurisdictions as may be necessary or
appropriate; and
(iii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
that comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(i) or
(p) hereof, or to distribute Rights Certificates that evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which the Rights are
listed or admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and the low asked prices in the
over-the-counter market, as reported by Nasdaq or such other
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system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board.
If on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined in good faith by the Board
shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates that evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock), the Company shall pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-thousandth of a share of Preferred
Stock shall be one one-thousandth of the closing price of a share of Preferred
Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market price of one (1) share of Common Stock (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, except the rights of action expressly given to the Rights Agent in
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise
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act in respect of, his right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates duly completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, the Company must use its best
efforts to prevent the issuance of any such order, decree or ruling and to have
any such order, decree or ruling lifted or otherwise overturned as soon as
practicable.
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Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
one-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the
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corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; PROVIDED, HOWEVER, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any
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action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11, Section 13 or Section 24 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after receipt of a
certificate describing any such adjustment, delivered pursuant to Section 12);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken or omitted by the Rights Agent with
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respect to its duties or obligations under this Rights Agreement and the date on
and/or after which such action shall be taken or omitted and the Rights Agent
shall not be liable for any action taken or omitted in accordance with a
proposal included in any such application on or after the date specified therein
(which date shall not be less than five Business Days after the date any such
officer actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking or omitting any
such action, the Rights Agent has received written instructions in response to
such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; PROVIDED, HOWEVER, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has not been
completed, the Company and the Rights Agent will deem the beneficial owner of
the rights evidenced by such Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof and such assignment or election to purchase will
not be honored.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the
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Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States
(or of any state of the United States) in good standing, which is authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities issued by the Company prior to the
Distribution Date, and (b) may, in any
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other case, if deemed necessary or appropriate by the Board, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; PROVIDED, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the close of business on the tenth
Business Day (or such later date as may be determined by the Board pursuant to
clause (i) of the first sentence of Section 3(a) with respect to the
Distribution Date) following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth Business Day following the Record Date) or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.001 per Right, as such amount may be appropriately
adjusted to reflect any forward or reverse stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the Rights
by the Board may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. The Company may,
at its option, pay the Redemption Price in cash, shares of Common Stock (based
on the "current market price," as defined in Section 11(d)(i) hereof, of the
Common Stock at the time of redemption) or any other form of consideration, or
any combination of any of the foregoing, deemed appropriate by the Board of
Directors of the Company. Notwithstanding anything contained in this Agreement
to the contrary, the Rights shall not be exercisable after the first occurrence
of a Section 11(a)(ii) Event until such time as the Company's right of
redemption hereunder has expired.
(b) Immediately upon the action of the Board ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right to
exercise the Rights shall terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board ordering the redemption of the Rights,
the Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all such
holders at each holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the
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holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.
(c) In the event of a redemption of the Rights in accordance
with this Agreement, the Company may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent of the Common Stock, and upon such action, all outstanding Rights
and Right Certificates shall be null and void without any further action by the
Company.
Section 24. EXCHANGE.
(a) The Board may, at its option, at any time after a Section
11(a)(ii) Event, exchange all or part of the then outstanding and exercisable
Rights (which (i) shall not include Rights that have become void pursuant to the
provisions of Section 7(e) hereof, and (ii) shall include, without limitation,
any Rights issued after the Distribution Date) for shares of Common Stock at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any forward or reverse stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Stock for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the shares of Common Stock then outstanding.
(b) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24, evidence
of which shall have been filed with the Rights Agent, and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
that number of shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; PROVIDED, HOWEVER, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange shall state the method by which the exchange of
shares of Common Stock for Rights will be effected and, in the
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<PAGE>
event of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of Section 7(e)
hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Preferred Stock (or equivalent preferred stock, as
such term is defined in Section 11(b) hereof) for shares of Common Stock
exchangeable for Rights, at the initial rate of one one-thousandth of a share of
Preferred Stock (or equivalent preferred stock) for each share of Common Stock,
as appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to Section 3(A) of the Certificate of Designations
attached hereto as EXHIBIT A, so that the fraction of a share of Preferred Stock
(or equivalent preferred stock) delivered in lieu of each share of Common Stock
shall have the same voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of
Common Stock or Preferred Stock issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be necessary to
authorize additional shares of Common Stock or Preferred Stock for issuance upon
exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, there
shall be paid to the registered holders of the Right Certificates with regard to
which such fractional shares of Common Stock would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For the purposes of this subsection (e), the current
market value of a whole share of Common Stock shall be the closing price per
share of Common Stock (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the
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<PAGE>
Company in a transaction which complies with Section 11(o) hereof), or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then, in
any such case, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer also to Common Stock and/or,
if appropriate, other securities.
Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Centennial Technologies, Inc.
7 Lopez Road
Wilmington, MA 01887
Attention: Chief Executive Officer
37
<PAGE>
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: S. Donald Gonson, Esq.
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Securities Transfer & Trust, Inc.
938 Quail Street, Suite 101
Lakewood, CO 80215
Attention: Ms. Kim Zeigler
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may, in its sole and absolute discretion, and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement in any respect without the approval of any holders of the Rights.
At any time when the Rights are no longer redeemable, except as provided in the
penultimate sentence of this Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights in order (i) to cure any ambiguity or (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, PROVIDED that no such supplement
or amendment shall adversely affect the interests of the holders of Rights as
such (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person). Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price or the Final Expiration Date.
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Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. ACTIONS BY THE BOARD OF DIRECTORS, ETC. The Board shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend this Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board to any liability to
the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement (including without limitation Section 23(c) or the
proviso in Section 1(p)) is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid, void or unenforceable
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth day
following the date of such determination by the Board of Directors of the
Company.
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<PAGE>
Section 32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of Delaware applicable to contracts made
and to be performed entirely within Delaware.
Section 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: CENTENNIAL TECHNOLOGIES, INC.
By:/s/ Donald R. Peck By:/s/ L. Michael Hone
------------------------- -------------------------------------
Name:Donald R. Peck L. Michael Hone
----------------------- President and Chief Executive Officer
Title:Secretary, Treasurer
and General Counsel
Attest: AMERICAN SECURITIES TRANSFER
& TRUST, INC.
By: By:/s/ Laura Sisneros
------------------------- -------------------------------------
Name: Name: Laura Sisneros
-----------------------
Title: Title: Vice President/Trust Officer
----------------------- ----------------------------
40
<PAGE>
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
CENTENNIAL TECHNOLOGIES, INC.
------------------------------
Centennial Technologies, Inc., a corporation organized and existing
under the laws of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation at a meeting duly called and held on March 16,
1999:
RESOLVED: That pursuant to the authority granted to and vested in the
Board of Directors of the Corporation (hereinafter called the "Board") in
accordance with the provisions of the Certificate of Incorporation, as amended,
the Board hereby creates a series of Preferred Stock, $.01 par value per share
(the "Preferred Stock"), of the Corporation and hereby states the designation
and number of shares, and fixes the relative rights, preferences and limitations
thereof as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be Fifty Thousand (50,000). Such number of shares may be increased
or decreased by resolution of the Board prior to issuance; PROVIDED, that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A
<PAGE>
Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock, par value $.01
per share (the "Common Stock"), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board out
of funds of the Corporation legally available for the payment of dividends,
quarterly dividends payable in cash on the last day of each fiscal quarter of
the Corporation in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $10 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event. In the event the Corporation shall at any time declare or pay any
dividend on the Series A Preferred Stock payable in shares of Series A Preferred
Stock, or effect a subdivision, combination or consolidation of the outstanding
shares of Series A Preferred Stock (by reclassification or otherwise than by
payment of a dividend in shares of Series A Preferred Stock) into a greater or
lesser number of shares of Series A Preferred Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the first sentence of this
Section 2(A) shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Series A Preferred Stock that were
outstanding immediately prior to such event and the denominator of which is the
number of shares of Series A Preferred Stock outstanding immediately after such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend
2
<PAGE>
payable in shares of Common Stock) and the Corporation shall pay such dividend
or distribution on the Series A Preferred Stock before the dividend or
distribution declared on the Common Stock is paid or set apart; provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on
3
<PAGE>
the Series A Preferred Stock payable in shares of Series A Preferred Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of
Series A Preferred Stock (by reclassification or otherwise than by payment of a
dividend in shares of Series A Preferred Stock) into a greater or lesser number
of shares of Series A Preferred Stock, then in each such case the number of
votes per share to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Series A
Preferred Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Series A Preferred Stock
outstanding immediately after such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock shall
be in arrears in an amount equal to six quarterly dividends thereon, the holders
of the Series A Preferred Stock, voting as a separate series from all other
series of Preferred Stock and classes of capital stock, shall be entitled to
elect two members of the Board in addition to any Directors elected by any other
series, class or classes of securities and the authorized number of Directors
will automatically be increased by two. Promptly thereafter, the Board of the
Corporation shall, as soon as may be practicable, call a special meeting of
holders of Series A Preferred Stock for the purpose of electing such members of
the Board. Such special meeting shall in any event be held within 45 days of the
occurrence of such arrearage.
(ii) During any period when the holders of Series A Preferred
Stock, voting as a separate series, shall be entitled and shall have exercised
their right to elect two Directors, then, and during such time as such right
continues, (a) the then authorized number of Directors shall be increased by
two, and the holders of Series A Preferred Stock, voting as a separate series,
shall be entitled to elect the additional Directors so provided for, and (b)
each such additional Director shall not be a member of any existing class of the
Board, but shall serve until the next annual meeting of stockholders for the
election of Directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates pursuant to the
provisions of this Section 3(C).
(iii) A Director elected pursuant to the terms hereof may be
removed with or without cause by the holders of Series A Preferred Stock
entitled to vote in an election of such Director.
4
<PAGE>
(iv) If, during any interval between annual meetings of
stockholders for the election of Directors and while the holders of Series A
Preferred Stock shall be entitled to elect two Directors, there is no such
Director in office by reason of resignation, death or removal, then, promptly
thereafter, the Board shall call a special meeting of the holders of Series A
Preferred Stock for the purpose of filling such vacancy and such vacancy shall
be filled at such special meeting. Such special meeting shall in any event be
held within 45 days of the occurrence of such vacancy.
(v) At such time as the arrearage is fully cured, and all
dividends accumulated and unpaid on any shares of Series A Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend
has been paid subsequent to curing such arrearage, the term of office of any
Director elected pursuant to this Section 3(C), or his successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series A Preferred Stock to vote as provided in this Section 3(C) shall cease,
subject to renewal from time to time upon the same terms and conditions, and the
holders of shares of the Series A Preferred Stock shall have only the limited
voting rights elsewhere herein set forth.
(D) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;
5
<PAGE>
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board) to all
holders of such shares upon such terms as the Board, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation, dissolution or winding up of the Corporation,
no distribution shall be made (1) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $1000 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation,
6
<PAGE>
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.
(B) Neither the consolidation, merger or other business combination of
the Corporation with or into any other corporation nor the sale, lease, exchange
or conveyance of all or any part of the property, assets or business of the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 6.
(C) In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of paragraph (A) of this Section 6 shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
A Preferred Stock) into a greater or lesser number of shares of Series A
Preferred Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of paragraph (A) of this Section 6 shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Series A Preferred Stock that were outstanding immediately
prior to such event and the denominator of which is the number of shares of
Series A Preferred Stock outstanding immediately after such event.
Section 7. CONSOLIDATION, MERGER, ETC. Notwithstanding anything to the
contrary contained herein, in case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or
7
<PAGE>
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series A Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
A Preferred Stock) into a greater or lesser number of shares of Series A
Preferred Stock, then in each such case the amount set forth in the first
sentence of this Section 7 with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Series A Preferred
Stock that were outstanding immediately prior to such event and the denominator
of which is the number of shares of Series A Preferred Stock outstanding
immediately after such event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. RANK. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Preferred Stock issued either before or after the
issuance of the Series A Preferred Stock, unless the terms of any such series
shall provide otherwise.
Section 10. AMENDMENT. At such time as any shares of Series A Preferred
Stock are outstanding, the Certificate of Incorporation, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series A Preferred Stock.
8
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chief Executive Officer this 16th day of March,
1999.
CENTENNIAL TECHNOLOGIES, INC.
By:
--------------------------
L. Michael Hone
President and
Chief Executive Officer
9
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER MARCH 16, 2009 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND
VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.](1)
Centennial Technologies, Inc.
Rights Certificate
This certifies that ____________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of March 16, 1999 (the "Rights Agreement"), between
Centennial Technologies, Inc., a Delaware corporation (the "Company"), and
American Securities Transfer & Trust, Inc. (the "Rights Agent"), to purchase
from the Company after the Distribution Date (as such term is defined in the
Rights Agreement) and at any time prior to 5:00 p.m. (Boston time) on March 16,
2009 at the office of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of Series A Junior Participating Preferred Stock (the "Preferred Stock")
of the Company, $.01 par value per share, at a purchase price of $6.00 in cash
per one one-thousandth of a share (the "Purchase Price"), upon presentation and
- --------
(1) The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
Front Side of Rights Certificate
<PAGE>
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one one-thousandth of a share of Preferred Stock
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of the close of
business on March 31, 1999, based on the Preferred Stock as constituted at such
date. Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to such terms in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Associate or Affiliate who becomes a transferee after the Acquiring
Person becomes an Acquiring Person, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, concurrently
with or after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Section 11(a)(ii) Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal offices of the
Company and are available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
with the Form of Election and Certificate set forth on the reverse side duly
executed, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of one one-thousandths of a share of Preferred Stock as the
Rights evidenced by the Rights
Front Side of Rights Certificate
2
<PAGE>
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right at any time prior to the earlier of (i) the
Distribution Date and (ii) the Final Expiration Date.
Subject to the provisions of the Rights Agreement, the Company may, at
its option, at any time after a Section 11(a)(ii) Event, exchange all or part of
the Rights evidenced by this Certificate for shares of the Company's Common
Stock or for Preferred Stock (or shares of a class or series of the Company's
preferred stock having the same rights, privileges and preferences as the
Preferred Stock).
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
Front Side of Rights Certificate
3
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of _______________
ATTEST: CENTENNIAL TECHNOLOGIES, INC.
By:
- ---------------------------- --------------------------------
Secretary
Title:
-----------------------------
COUNTERSIGNED:
[ ]
By:
-------------------------
Authorized Signature
Front Side of Rights Certificate
4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _____________________________________________ hereby
sells, assigns and transfers unto _____________________________________
_______________________________________________________________________
(Please print name and address of transferee)
_________________________________________________________________________ this
Rights Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
----------------------
-----------------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by, or being assigned to, an
Acquiring Person or an Affiliate or Associate thereof (as such terms are defined
pursuant to the Rights Agreement).
Dated:
----------------------
-----------------------------
Signature
Signature Guaranteed:
Reverse Side of Rights Certificate
<PAGE>
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Reverse Side of Rights Certificate
2
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: American Securities Transfer & Trust, Inc.
The undersigned hereby irrevocably elects to exercise ___________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number __________________________________________________
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number __________________________________________________
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:
----------------------
-----------------------------
Signature
Signature Guaranteed:
Reverse Side of Rights Certificate
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined pursuant to the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate thereof.
Dated:
----------------------
-----------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
Reverse Side of Rights Certificate
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO
PURCHASE PREFERRED STOCK
The Board of Directors of Centennial Technologies, Inc. (the
"Company"), has declared a dividend of one Right for each outstanding share of
the Company's Common Stock to stockholders of record at the close of business on
March 31, 1999 (the "Record Date"). Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A Junior
Participating Preferred Stock, $.01 par value per share (the "Preferred Stock"),
at a Purchase Price of $6.00 in cash, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement dated as of March 16,
1999 (the "Rights Agreement") between the Company and American Securities
Transfer & Trust, Inc., as Rights Agent.
Initially, the Rights will be attached to all Common Stock then
outstanding, and no separate Rights Certificates will be distributed. The Rights
will separate from the Common Stock and a Distribution Date will occur upon the
earlier of (i) 10 business days (or such later date as may be determined by the
Board of Directors of the Company) following the later of (a) the first date of
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of Common Stock or
(b) the first date on which an executive officer of the Company has actual
knowledge that an Acquiring Person has become such (the "Stock Acquisition
Date"), or (ii) 10 business days (or such later date as may be determined by the
Board of Directors of the Company) following the commencement of a tender offer
or exchange offer that would result in a person or group beneficially owning 15%
or more of such outstanding shares of Common Stock. Until the Distribution Date
(or earlier redemption or expiration of the rights), the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates. The surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire upon the close of business on March 16, 2009 (the "Final Expiration
Date") unless earlier redeemed or exchanged as described below. As soon as
practicable after the Distribution Date, separate Rights Certificates will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. Except as otherwise determined by the Board of
Directors, and except for shares of Common Stock issued upon exercise,
conversion or exchange of then outstanding options,
<PAGE>
convertible or exchangeable securities or other contingent obligations to issue
shares, only shares of Common Stock issued prior to the Distribution Date will
be issued with Rights.
In the event that any Person becomes an Acquiring Person, then,
promptly following the first occurrence of such event, each holder of a Right
(except as provided below and in Section 7(e) of the Rights Agreement) shall
thereafter have the right to receive, upon exercise, that number of shares of
Common Stock of the Company (or, in certain circumstances, cash, property or
other securities of the Company) which equals the exercise price of the Right
divided by 50% of the current market price (as defined in the Rights Agreement)
per share of Common Stock at the date of the occurrence of such event.
Notwithstanding any of the foregoing, following the occurrence of such event,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void. The event summarized in this paragraph is referred to as a "Section
11(a)(ii) Event."
In the event that, at any time after any Person becomes an Acquiring
Person, (i) the Company is consolidated with, or merged with and into, another
entity and the Company is not the surviving entity of such consolidation or
merger or if the Company is the surviving entity, but shares of its outstanding
Common Stock are changed or exchanged for stock or securities (of any other
person) or cash or any other property, or (ii) 50% or more of the Company's
assets or earning power is sold or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, that number of shares of common stock
of the acquiring company which equals the exercise price of the Right divided by
50% of the current market price of such common stock at the date of the
occurrence of the event.
At any time after the occurrence of a Section 11(a)(ii) Event, subject
to certain conditions, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such Acquiring Person which have become
void), in whole or in part, at an exchange ratio of one share of Common Stock,
or one one-thousandth of a share of Preferred Stock (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
The Purchase Price payable, and the number of units of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution. The number of
Rights associated with each share of Common Stock is also subject to adjustment
in the event of a forward or reverse stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock occurring, in any such
case, prior to the Distribution Date.
-2-
<PAGE>
No fractional shares of Preferred Stock (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock) will be
issued and, in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Stock on the last trading date prior to the date
of exercise.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. In the event of liquidation, the holders of the Preferred Stock will
be entitled to a minimum preferential liquidation payment of $1,000 per share
and will be entitled to an aggregate payment of 1,000 times the payment made per
share of Common Stock. Each share of Preferred Stock will have 1,000 votes,
voting together with the Common Stock. In the event of any merger, consolidation
or other transaction in which Common Stock is changed or exchanged, each share
of Preferred Stock will be entitled to receive 1,000 times the amount received
per share of Common Stock. Because of the nature of the Preferred Stock's
dividend, liquidation and voting rights, the value of one one-thousandth of a
share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
At any time prior to the earlier of (i) the tenth Business Day (or such
later date as may be determined by the Board of Directors of the Company) after
the Stock Acquisition Date, or (ii) the Final Expiration Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.001 per Right (the
"Redemption Price"), payable in cash or stock. Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price. The Rights may also be redeemable following certain other
circumstances specified in the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Subject to certain exceptions, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company prior to such
time as the Rights are no longer redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Company's Current Report on Form 8-K
dated March 26, 1999. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
-3-
<PAGE>
complete and is qualified in its entirety by reference to the Rights Agreement,
which, in the event of inconsistency with this summary, will control.
-4-
<PAGE>
EXHIBIT 10.6
CENTENNIAL TECHNOLOGIES, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Centennial
Technologies, Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par value
(the "Common Stock"), commencing on December 27, 1998. Two hundred thousand
(200,000) shares of Common Stock in the aggregate have been approved for this
purpose. This Plan is not intended to qualify as an "employee stock purchase
plan" as defined in Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations promulgated thereunder.
1. ADMINISTRATION. The Plan will be administered by the Company's Board
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. ELIGIBILITY. All employees of the Company, including Directors who
are employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a "Designated Subsidiary"), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
(a) they are customarily employed by the Company or a
Designated Subsidiary for more than 20 hours a week and for more than
five months in a calendar year; and
(b) they have been employed by the Company or a Designated
Subsidiary for at least three (3) full months prior to enrolling in the
Plan; and
(c) they are employees of the Company or a Designated
Subsidiary on the first day of the applicable Plan Period (as defined
below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
-1-
<PAGE>
3. OFFERINGS. The Company will make one or more offerings ("Offerings")
to employees to purchase stock under this Plan. The first Offering shall
commence on December 27, 1998. Subsequent offerings will begin on the beginning
of each fiscal quarter of the Company or the first business day thereafter if
such day is not a business day (together with the December 27, 1998 Offering
commencement date, the "Offering Commencement Dates"). The Company's fiscal year
begins April 1 and each fiscal quarter ends on the Saturday of the thirteenth
week following the beginning of the quarter except for the fourth quarter, which
ends on March 31. Each Offering Commencement Date will begin a fiscal quarter
period (a "Plan Period") during which payroll deductions will be made and held
for the purchase of Common Stock at the end of the Plan Period. The Board or the
Committee may, at its discretion, choose a different Plan Period of twelve (12)
months or less for subsequent Offerings.
4. PARTICIPATION. An employee eligible on the Offering Commencement
Date of any Offering may participate in such Offering by completing and
forwarding a payroll deduction authorization form to the employee's appropriate
payroll office at least seven (7) days prior to the applicable Offering
Commencement Date. The form will authorize a regular payroll deduction from the
Compensation received by the employee during the Plan Period. Unless an employee
files a new form or withdraws from the Plan, his deductions and purchases will
continue at the same rate for future Offerings under the Plan as long as the
Plan remains in effect. The term "Compensation" means the amount of money
reportable on the employee's Federal Income Tax Withholding Statement, excluding
overtime, shift premium, incentive or bonus awards, allowances and
reimbursements for expenses such as relocation allowances for travel expenses,
income or gains on the exercise of Company stock options or stock appreciation
rights, and similar items, whether or not shown on the employee's Federal Income
Tax Withholding Statement, but including, in the case of salespersons, sales
commissions to the extent determined by the Board or the Committee to be part of
such salesperson's regular compensation.
5. DEDUCTIONS. The Company will maintain payroll deduction accounts for
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction in any dollar amount up to a
maximum of 15% of the Compensation he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made. Any change in
compensation during the Plan Period will result in an automatic corresponding
change in the dollar amount withheld. The minimum payroll deduction is such
percentage of compensation as may be established from time to time by the Board
or the Committee.
No employee may be permitted to withhold more than an aggregate of
$25,000 per calendar year under this Plan and any other stock-based compensation
plan of the Company permitting withholding.
-2-
<PAGE>
6. DEDUCTION CHANGES. An employee may decrease or discontinue his
payroll deduction once during any Plan Period by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. INTEREST. Interest will not be paid on any employee accounts, except
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. WITHDRAWAL OF FUNDS. An employee may at any time prior to the close
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. PURCHASE OF SHARES. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
determined by dividing (i) the amount in the eligible employee's payroll
deduction account by (ii) the purchase price per share set forth in the
following paragraph plus the taxes required to be withheld with respect to each
such share as described in Section 23 hereof.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on the Exercise Date. Such closing price shall be (a)
the closing price on any national securities exchange on which the Common Stock
is listed, (b) the closing price of the Common Stock on the Nasdaq National
Market or (c) the average of the closing bid and asked prices in the over the
counter market, whichever is applicable, as published in The Wall Street Journal
or, in the case of (c), an internet-based bulletin board service. If no sales of
Common Stock were made on such a day, the price of the Common Stock for purposes
of clauses (a) and (b) above shall be the reported price for the next preceding
day on which sales were made.
Each employee who continues to be a participant in the Plan on the
Exercise Date shall be deemed to have exercised his Option at the Option Price
on such date and shall be deemed to have purchased from the Company the number
of full shares
-3-
<PAGE>
of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for pursuant to the formula set forth
above.
Any balance remaining in an employee's payroll deduction account at the
end of a Plan Period will be automatically refunded to the employee, except that
any balance which is less than the purchase price of one share of Common Stock
will be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. ISSUANCE OF CERTIFICATES. Certificates representing shares of
Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or (in the Company's sole discretion) in
the street name of a brokerage firm, bank or other nominee holder designated by
the employee. The Company may, in its sole discretion and in compliance with
applicable laws, authorize the use of book entry registration of shares in lieu
of issuing stock certificates.
11. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee (less amounts owed by the employee to the Company) or, in
the event of the employee's death, (a) to a beneficiary previously designated in
a revocable notice signed by the employee (with any spousal consent required
under state law) or (b) in the absence of such a designated beneficiary, to the
executor or administrator of the employee's estate or (c) if no such executor or
administrator has been appointed to the knowledge of the Company, to such other
person(s) as the Company may, in its discretion, designate. If, prior to the
last business day of the Plan Period, the Designated Subsidiary by which an
employee is employed shall cease to be a subsidiary of the Company, or if the
employee is transferred to a subsidiary of the Company that is not a Designated
Subsidiary, the employee shall be deemed to have terminated employment for the
purposes of this Plan.
12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee.
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14. APPLICATION OF FUNDS. All funds received or held by the Company
under this Plan may be combined with other corporate funds and may be used for
any corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event
of a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan shall be
increased proportionately, and such other adjustment shall be made as may be
deemed equitable by the Board or the Committee. In the event of any other change
affecting the Common Stock, including but not limited to a reverse stock split,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. MERGER. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Committee shall take
such steps in connection with such merger or consolidation as the Committee
shall deem necessary to assure that the provisions of Paragraph 15 shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
said securities or property as to which such holder of such Option might
thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
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17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to
time, amend this Plan in any respect.
18. INSUFFICIENT SHARES. In the event that the total number of shares
of Common Stock specified in elections to be purchased under any Offering plus
the number of shares purchased under previous Offerings under this Plan exceeds
the maximum number of shares issuable under this Plan, the Board or the
Committee will allot the shares then available on a pro rata basis.
19. TERMINATION OF THE PLAN. This Plan may be terminated at any time by
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and
deliver Common Stock under this Plan is subject to the approval of all
governmental authorities required in connection with the authorization, issuance
or sale of such stock.
21. GOVERNING LAW. The Plan shall be governed by Delaware law except to
the extent that such law is preempted by federal law.
22. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. WITHHOLDING. Each employee shall pay to the Company out of such
employees' payroll deduction account any taxes required by law to be withheld in
connection with the grants or exercise of Options no later than the date of the
event creating the tax liability. If the employee's payroll deduction account is
not sufficient to pay any such taxes, the Company may, to the extent permitted
by law, deduct any such tax obligations from any payment of any kind otherwise
due to a participant.
24. EFFECTIVE DATE. The Plan shall take effect as of December 27, 1998.
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Exhibit 10.18
CENTENNIAL TECHNOLOGIES, INC.
EXECUTIVE RETENTION AGREEMENT
L. Michael Hone
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
Executive Retention Agreement
THIS EXECUTIVE RETENTION AGREEMENT by and between Centennial Technologies,
Inc., a Delaware corporation (the "Company"), and L. Michael Hone (the
"Executive") is made as of February 26, 1999 (the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued employment and dedication of the Company's
key personnel without distraction from the possibility of a change in control of
the Company and related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below subsequent to a Change in Control (as defined in Section 1.1).
1. Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
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1.1 "Change in Control" means an event or occurrence set forth in
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of
any capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company), (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii)
of subsection (c) of this Section 1.1; or
(b) such time as the Continuing Directors (as defined below)
do not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
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(c) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Change in Control Date" means the first date during the Term
(as defined in Section 2) on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if (a) a Change in Control occurs,
(b) the Executive's employment with the Company is terminated prior to the date
on which the Change in Control occurs, and (c) it is reasonably demonstrated by
the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with or in anticipation of a
Change in Control, then for all purposes of this Agreement
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the "Change in Control Date" shall mean the date immediately prior to the date
of such termination of employment.
1.3 "Cause" means:
(a) the Executive's willful and continued failure
substantially to perform his reasonable assigned duties as an officer of the
Company (other than any such failure resulting from incapacity due to physical
or mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
of Directors of the Company which specifically identifies the manner in which
the Board of Directors believes the Executive has not substantially performed
the Executive's duties; or
(b) the Executive's willful engagement in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.3, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
1.4 "Good Reason" means the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (a)
through (g) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 3.2(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(a) the assignment to the Executive of duties inconsistent in
any material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority or responsibilities in effect
immediately prior to the earliest to occur of (i) the Change in Control Date,
(ii) the date of the execution by the Company of the initial written agreement
or instrument providing for the Change in Control or (iii) the date of the
adoption by the Board of Directors of a resolution providing for the Change in
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Control (with the earliest to occur of such dates referred to herein as the
"Measurement Date"), or any other action or omission by the Company which
results in a diminution in such position, authority or responsibilities;
(b) a reduction in the Executive's annual base salary as in
effect on the Measurement Date or as the same was or may be increased from time
to time;
(c) the failure by the Company to (i) continue in effect any
material compensation or benefit plan or program (including without limitation
any life insurance, medical, health and accident or disability plan and any
vacation program or policy) (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, than the basis existing
immediately prior to the Measurement Date or (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with past practice
in light of the Company's financial performance;
(d) a change by the Company in the location at which the
Executive performs his principal duties for the Company to a new location that
is both (i) outside a radius of 35 miles from the Executive's principal
residence immediately prior to the Measurement Date and (ii) more than 20 miles
from the location at which the Executive performed his principal duties for the
Company immediately prior to the Measurement Date; or a requirement by the
Company that the Executive travel on Company business to a substantially greater
extent than required immediately prior to the Measurement Date;
(e) the failure of the Company to obtain the agreement, in a
form reasonably satisfactory to the Executive, from any successor to the Company
to assume and agree to perform this Agreement, as required by Section 6.1;
(f) a purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of
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Section 3.2(a), which purported termination shall not be effective for purposes
of this Agreement; or
(g) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of any employment agreement with the
Executive.
In addition, the termination of employment by the Executive for any reason
or no reason during the 30-day period beginning on the first anniversary of the
Change in Control Date shall be deemed to be termination for Good Reason for all
purposes under this Agreement.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive, binding and final. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
1.5 "Disability" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
2. Term of Agreement. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term, (b) the date 24
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (c) the fulfillment by the Company of all
of its obligations under Sections 4 and 5.2 and 5.3 if the Executive's
employment with the Company terminates within 24 months following the Change in
Control Date. "Term" shall mean the period commencing as of the Effective Date
and continuing in effect through March 31, 2001; provided, however, that
commencing on April 1, 2001 and each April 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
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3. Employment Status; Termination Following Change in Control.
3.1 Not an Employment Contract. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time. If the
Executive's employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment.
(a) If the Change in Control Date occurs during the Term, any
termination of the Executive's employment by the Company or by the Executive
within 24 months following the Change in Control Date (other than due to the
death of the Executive) shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"), given in accordance with Section 7.
Any Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the "Date of Termination") shall be the close of business on the date specified
in the Notice of Termination (which date may not be less than 15 days or more
than 120 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive's death, or the date
of the Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
(c) Any Notice of Termination for Cause given by the Company
must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination
for Cause being given (and
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prior to any termination for Cause being effective), the Executive shall be
entitled to a hearing before the Board of Directors of the Company at which he
may, at his election, be represented by counsel and at which he shall have a
reasonable opportunity to be heard. Such hearing shall be held on not less than
15 days prior written notice to the Executive stating the Board of Directors'
intention to terminate the Executive for Cause and stating in detail the
particular event(s) or circumstance(s) which the Board of Directors believes
constitutes Cause for termination. Any such Notice of Termination for Cause must
be approved by an affirmative vote of two-thirds of the members of the Board of
Directors.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good Reason.
4. Benefits to Executive.
4.1 Stock Acceleration. If the Change in Control Date occurs during
the Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive,
not otherwise fully exercisable or automatically exercisable in full upon a
Change in Control, shall become immediately exercisable in full, (b) each
outstanding restricted stock award shall be deemed to be fully vested and no
longer subject to a right of repurchase by the Company and (c) notwithstanding
any provision in any applicable option agreement to the contrary, each such
option shall continue to be exercisable by the Executive (to the extent such
option was exercisable on the Date of Termination) for a period of six months
following the Date of Termination.
4.2 Compensation. If the Change in Control Date occurs during the
Term and the Executive's employment with the Company terminates within 24 months
following the Change in Control Date, the Executive shall be entitled to the
following benefits:
(a) Termination Without Cause or for Good Reason. If the
Executive's employment with the Company is terminated by the Company (other than
for Cause, Disability or Death) or by the Executive for Good Reason within 24
months following the Change in Control Date, then the Executive shall be
entitled to the following benefits:
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(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(1) the sum of (A) the Executive's base
salary through the Date of Termination, (B) the product of (x) the annual bonus
paid or payable (including any bonus or portion thereof which has been earned
but deferred) for the most recently completed fiscal year and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (C) the amount
of any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation or compensatory
time off pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (A), (B), and (C) shall be hereinafter referred to
as the "Accrued Obligations"); and
(2) the amount equal to (A) three
multiplied by (B) the sum of (x) the Executive's highest annual base salary from
the Company during the five-year period prior to the Change in Control Date and
(y) the Executive's highest annual bonus from the Company (paid and/or accrued)
during the five-year period prior to the Change in Control Date.
(ii) for 36 months after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date or, if more favorable to the Executive and his family,
in effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from such employer
on terms at least as favorable to the Executive and his family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and his family;
(iii) to the extent not previously paid or
provided, the Company shall timely pay or provide to the Executive outplacement
assistance commensurate with the Executive's position as well as any other
amounts or benefits
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required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); and
(iv) for purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits to which the Executive is entitled, the Executive shall be considered
to have remained employed by the Company until 36 months after the Date of
Termination.
(b) Resignation without Good Reason; Termination for Death or
Disability. If the Executive voluntarily terminates his employment with the
Company within 24 months following the Change in Control Date, excluding a
termination for Good Reason, or if the Executive's employment with the Company
is terminated by reason of the Executive's death or Disability within 24 months
following the Change in Control Date, then the Company shall (i) pay the
Executive (or his estate, if applicable), in a lump sum in cash within 30 days
after the Date of Termination, the Accrued Obligations and (ii) timely pay or
provide to the Executive the Other Benefits.
(c) Termination for Cause. If the Company terminates the
Executive's employment with the Company for Cause within 24 months following the
Change in Control Date, then the Company shall (i) pay the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the sum of (A) the
Executive's annual base salary through the Date of Termination and (B) the
amount of any compensation previously deferred by the Executive, in each case to
the extent not previously paid, and (ii) timely pay or provide to the Executive
the Other Benefits.
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4.3 Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), the Company shall, within 30 days
after each date on which the Executive becomes entitled to receive (whether or
not then due) a Contingent Compensation Payment (as defined below) relating to
such Change in Ownership or Control, determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or otherwise)
following such Change in Ownership or Control constitute Contingent Compensation
Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), by the Executive with respect to such Contingent Compensation Payment
and (iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 30 days
after delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the "Executive Response") stating either (A) that he
agrees with the Company's determination pursuant to the preceding sentence or
(B) that he disagrees with such determination, in which case he shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company's initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this Section 4.3(a).
(b) For purposes of this Section 4.3, the following terms
shall have the following respective meanings:
(i) "Change in Ownership or Control" shall
mean a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
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(ii) "Contingent Compensation Payment" shall
mean any payment (or benefit) in the nature of compensation that is made or
supplied (under this Agreement or otherwise) to a "disqualified individual" (as
defined in Section 280G(c) of the Code) and that is contingent (within the
meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
(iii) "Gross-Up Payment" shall mean an amount
equal to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable withholding
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4.4 Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
5. Disputes.
5.1 Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board of Directors of the Company and shall be in writing. Any denial by the
Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
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5.2 Expenses. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
5.3 Compensation During a Dispute. If the Change in Control Date
occurs during the Term and the Executive's employment with the Company
terminates within 24 months following the Change in Control Date, and the right
of the Executive to receive benefits under Section 4 (or the amount or nature of
the benefits to which he is entitled to receive) are the subject of a dispute
between the Company and the Executive, the Company shall continue (a) to pay to
the Executive his base salary in effect as of the Measurement Date and (b) to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them, if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date, until such dispute is resolved either by mutual written
agreement of the parties or by an arbitrator's award pursuant to Section 5.1.
Following the resolution of such dispute, the sum of the payments made to the
Executive under clause (a) of this Section 5.3 shall be deducted from any cash
payment which the Executive is entitled to receive pursuant to Section 4; and if
such sum exceeds the amount of the cash payment which the Executive is entitled
to receive pursuant to Section 4, the excess of such sum over the amount of such
payment shall be repaid (without interest) by the Executive to the Company
within 60 days of the resolution of such dispute.
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6. Successors.
6.1 Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6.2 Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or his family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
7 Lopez Road, Wilmington, Massachusetts 01887, and to the Executive at 826
Arboretum Way, Burlington, MA 01803 (or to such other address as either the
Company or the Executive may have furnished to the other in writing in
accordance herewith). Any such notice, instruction or communication shall be
deemed to have been delivered five business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, or one business
day after it is sent via a reputable nationwide overnight courier service.
Either party may give any notice, instruction or other communication hereunder
using any other means, but no such notice, instruction or other communication
shall be deemed to
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have been duly delivered unless and until it actually is received by the party
for whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.5 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.7 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.8 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations
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or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
8.9 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
CENTENNIAL TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
-----------------------------------
L. Michael Hone
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Exhibit 10.19
CENTENNIAL TECHNOLOGIES, INC.
EXECUTIVE RETENTION AGREEMENT
Richard N. Stathes
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
Executive Retention Agreement
THIS EXECUTIVE RETENTION AGREEMENT by and between Centennial Technologies,
Inc., a Delaware corporation (the "Company"), and Richard N. Stathes (the
"Executive") is made as of February 26, 1999 (the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued employment and dedication of the Company's
key personnel without distraction from the possibility of a change in control of
the Company and related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below subsequent to a Change in Control (as defined in Section 1.1).
1. Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
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1.1 "Change in Control" means an event or occurrence set forth in
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of
any capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company), (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii)
of subsection (c) of this Section 1.1; or
(b) such time as the Continuing Directors (as defined below)
do not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
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(c) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Change in Control Date" means the first date during the Term
(as defined in Section 2) on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if (a) a Change in Control occurs,
(b) the Executive's employment with the Company is terminated prior to the date
on which the Change in Control occurs, and (c) it is reasonably demonstrated by
the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with or in anticipation of a
Change in Control, then for all purposes of this Agreement
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the "Change in Control Date" shall mean the date immediately prior to the date
of such termination of employment.
1.3 "Cause" means:
(a) the Executive's willful and continued failure
substantially to perform his reasonable assigned duties as an officer of the
Company (other than any such failure resulting from incapacity due to physical
or mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
of Directors of the Company which specifically identifies the manner in which
the Board of Directors believes the Executive has not substantially performed
the Executive's duties; or
(b) the Executive's willful engagement in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.3, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
1.4 "Good Reason" means the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (a)
through (g) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 3.2(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(a) the assignment to the Executive of duties inconsistent in
any material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority or responsibilities in effect
immediately prior to the earliest to occur of (i) the Change in Control Date,
(ii) the date of the execution by the Company of the initial written agreement
or instrument providing for the Change in
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Control or (iii) the date of the adoption by the Board of Directors of a
resolution providing for the Change in Control (with the earliest to occur of
such dates referred to herein as the "Measurement Date"), or any other action or
omission by the Company which results in a diminution in such position,
authority or responsibilities;
(b) a reduction in the Executive's annual base salary as in
effect on the Measurement Date or as the same was or may be increased from time
to time;
(c) the failure by the Company to (i) continue in effect any
material compensation or benefit plan or program (including without limitation
any life insurance, medical, health and accident or disability plan and any
vacation program or policy) (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, than the basis existing
immediately prior to the Measurement Date or (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with past practice
in light of the Company's financial performance;
(d) a change by the Company in the location at which the
Executive performs his principal duties for the Company to a new location that
is both (i) outside a radius of 35 miles from the Executive's principal
residence immediately prior to the Measurement Date and (ii) more than 20 miles
from the location at which the Executive performed his principal duties for the
Company immediately prior to the Measurement Date; or a requirement by the
Company that the Executive travel on Company business to a substantially greater
extent than required immediately prior to the Measurement Date;
(e) the failure of the Company to obtain the agreement, in a
form reasonably satisfactory to the Executive, from any successor to the Company
to assume and agree to perform this Agreement, as required by Section 6.1;
(f) a purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of
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Section 3.2(a), which purported termination shall not be effective for purposes
of this Agreement; or
(g) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of any employment agreement with the
Executive.
In addition, the termination of employment by the Executive for any reason
or no reason during the 30-day period beginning on the first anniversary of the
Change in Control Date shall be deemed to be termination for Good Reason for all
purposes under this Agreement.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive, binding and final. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
1.5 "Disability" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
2. Term of Agreement. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term, (b) the date 24
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (c) the fulfillment by the Company of all
of its obligations under Sections 4 and 5.2 and 5.3 if the Executive's
employment with the Company terminates within 24 months following the Change in
Control Date. "Term" shall mean the period commencing as of the Effective Date
and continuing in effect through March 31, 2001; provided, however, that
commencing on April 1, 2001 and each April 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
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3. Employment Status; Termination Following Change in Control.
3.1 Not an Employment Contract. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time. If the
Executive's employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment.
(a) If the Change in Control Date occurs during the Term, any
termination of the Executive's employment by the Company or by the Executive
within 24 months following the Change in Control Date (other than due to the
death of the Executive) shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"), given in accordance with Section 7.
Any Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the "Date of Termination") shall be the close of business on the date specified
in the Notice of Termination (which date may not be less than 15 days or more
than 120 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive's death, or the date
of the Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
(c) Any Notice of Termination for Cause given by the Company
must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination
for Cause being given (and
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prior to any termination for Cause being effective), the Executive shall be
entitled to a hearing before the Board of Directors of the Company at which he
may, at his election, be represented by counsel and at which he shall have a
reasonable opportunity to be heard. Such hearing shall be held on not less than
15 days prior written notice to the Executive stating the Board of Directors'
intention to terminate the Executive for Cause and stating in detail the
particular event(s) or circumstance(s) which the Board of Directors believes
constitutes Cause for termination. Any such Notice of Termination for Cause must
be approved by an affirmative vote of two-thirds of the members of the Board of
Directors.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good Reason.
4. Benefits to Executive.
4.1 Stock Acceleration. If the Change in Control Date occurs during
the Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive,
not otherwise fully exercisable or automatically exercisable in full upon a
Change in Control, shall become immediately exercisable in full, (b) each
outstanding restricted stock award shall be deemed to be fully vested and no
longer subject to a right of repurchase by the Company and (c) notwithstanding
any provision in any applicable option agreement to the contrary, each such
option shall continue to be exercisable by the Executive (to the extent such
option was exercisable on the Date of Termination) for a period of six months
following the Date of Termination.
4.2 Compensation. If the Change in Control Date occurs during the
Term and the Executive's employment with the Company terminates within 24 months
following the Change in Control Date, the Executive shall be entitled to the
following benefits:
(a) Termination Without Cause or for Good Reason. If the
Executive's employment with the Company is terminated by the Company (other than
for Cause, Disability or Death) or by the Executive for Good Reason within 24
months following the Change in Control Date, then the Executive shall be
entitled to the following benefits:
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(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(1) the sum of (A) the Executive's base
salary through the Date of Termination, (B) the product of (x) the annual bonus
paid or payable (including any bonus or portion thereof which has been earned
but deferred) for the most recently completed fiscal year and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (C) the amount
of any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation or compensatory
time off pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (A), (B), and (C) shall be hereinafter referred to
as the "Accrued Obligations"); and
(2) the amount equal to (A) two and
one-half multiplied by (B) the sum of (x) the Executive's highest annual base
salary from the Company during the five-year period prior to the Change in
Control Date and (y) the Executive's highest annual bonus from the Company
during the five-year period prior to the Change in Control Date.
(ii) for 30 months after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date or, if more favorable to the Executive and his family,
in effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from such employer
on terms at least as favorable to the Executive and his family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and his family;
(iii) to the extent not previously paid or
provided, the Company shall timely pay or provide to the Executive outplacement
assistance commensurate with the Executive's position as well as any other
amounts or benefits
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required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); and
(iv) for purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits to which the Executive is entitled, the Executive shall be considered
to have remained employed by the Company until 30 months after the Date of
Termination.
(b) Resignation without Good Reason; Termination for Death or
Disability. If the Executive voluntarily terminates his employment with the
Company within 24 months following the Change in Control Date, excluding a
termination for Good Reason, or if the Executive's employment with the Company
is terminated by reason of the Executive's death or Disability within 24 months
following the Change in Control Date, then the Company shall (i) pay the
Executive (or his estate, if applicable), in a lump sum in cash within 30 days
after the Date of Termination, the Accrued Obligations and (ii) timely pay or
provide to the Executive the Other Benefits.
(c) Termination for Cause. If the Company terminates the
Executive's employment with the Company for Cause within 24 months following the
Change in Control Date, then the Company shall (i) pay the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the sum of (A) the
Executive's annual base salary through the Date of Termination and (B) the
amount of any compensation previously deferred by the Executive, in each case to
the extent not previously paid, and (ii) timely pay or provide to the Executive
the Other Benefits.
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4.3 Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), the Company shall, within 30 days
after each date on which the Executive becomes entitled to receive (whether or
not then due) a Contingent Compensation Payment (as defined below) relating to
such Change in Ownership or Control, determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or otherwise)
following such Change in Ownership or Control constitute Contingent Compensation
Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), by the Executive with respect to such Contingent Compensation Payment
and (iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 30 days
after delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the "Executive Response") stating either (A) that he
agrees with the Company's determination pursuant to the preceding sentence or
(B) that he disagrees with such determination, in which case he shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company's initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this Section 4.3(a).
(b) For purposes of this Section 4.3, the following terms
shall have the following respective meanings:
(i) "Change in Ownership or Control" shall
mean a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
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(ii) "Contingent Compensation Payment" shall
mean any payment (or benefit) in the nature of compensation that is made or
supplied (under this Agreement or otherwise) to a "disqualified individual" (as
defined in Section 280G(c) of the Code) and that is contingent (within the
meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
(iii) "Gross-Up Payment" shall mean an amount
equal to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable withholding
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4.4 Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
5. Disputes.
5.1 Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board of Directors of the Company and shall be in writing. Any denial by the
Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
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5.2 Expenses. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
5.3 Compensation During a Dispute. If the Change in Control Date
occurs during the Term and the Executive's employment with the Company
terminates within 24 months following the Change in Control Date, and the right
of the Executive to receive benefits under Section 4 (or the amount or nature of
the benefits to which he is entitled to receive) are the subject of a dispute
between the Company and the Executive, the Company shall continue (a) to pay to
the Executive his base salary in effect as of the Measurement Date and (b) to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them, if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date, until such dispute is resolved either by mutual written
agreement of the parties or by an arbitrator's award pursuant to Section 5.1.
Following the resolution of such dispute, the sum of the payments made to the
Executive under clause (a) of this Section 5.3 shall be deducted from any cash
payment which the Executive is entitled to receive pursuant to Section 4; and if
such sum exceeds the amount of the cash payment which the Executive is entitled
to receive pursuant to Section 4, the excess of such sum over the amount of such
payment shall be repaid (without interest) by the Executive to the Company
within 60 days of the resolution of such dispute.
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6. Successors.
6.1 Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6.2 Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or his family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
7 Lopez Road, Wilmington, Massachusetts 01887, and to the Executive at 35
Muirfield Court, Pittsford, NY 14534 (or to such other address as either the
Company or the Executive may have furnished to the other in writing in
accordance herewith). Any such notice, instruction or communication shall be
deemed to have been delivered five business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, or one business
day after it is sent via a reputable nationwide overnight courier service.
Either party may give any notice, instruction or other communication hereunder
using any other means, but no such notice, instruction or other communication
shall be deemed to
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have been duly delivered unless and until it actually is received by the party
for whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.5 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.7 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.8 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations
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or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
8.9 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
CENTENNIAL TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
-----------------------------------
Richard N. Stathes
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Exhibit 10.20
CENTENNIAL TECHNOLOGIES, INC.
EXECUTIVE RETENTION AGREEMENT
Jacques Assour
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
Executive Retention Agreement
THIS EXECUTIVE RETENTION AGREEMENT by and between Centennial Technologies,
Inc., a Delaware corporation (the "Company"), and Jacques Assour (the
"Executive") is made as of February 26, 1999 (the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued employment and dedication of the Company's
key personnel without distraction from the possibility of a change in control of
the Company and related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below subsequent to a Change in Control (as defined in Section 1.1).
1. Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
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1.1 "Change in Control" means an event or occurrence set forth in
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of
any capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company), (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii)
of subsection (c) of this Section 1.1; or
(b) such time as the Continuing Directors (as defined below)
do not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
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(c) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Change in Control Date" means the first date during the Term
(as defined in Section 2) on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if (a) a Change in Control occurs,
(b) the Executive's employment with the Company is terminated prior to the date
on which the Change in Control occurs, and (c) it is reasonably demonstrated by
the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with or in anticipation of a
Change in Control, then for all purposes of this Agreement
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the "Change in Control Date" shall mean the date immediately prior to the date
of such termination of employment.
1.3 "Cause" means:
(a) the Executive's willful and continued failure
substantially to perform his reasonable assigned duties as an officer of the
Company (other than any such failure resulting from incapacity due to physical
or mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
of Directors of the Company which specifically identifies the manner in which
the Board of Directors believes the Executive has not substantially performed
the Executive's duties; or
(b) the Executive's willful engagement in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.3, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
1.4 "Good Reason" means the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (a)
through (g) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 3.2(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(a) the assignment to the Executive of duties inconsistent in
any material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority or responsibilities in effect
immediately prior to the earliest to occur of (i) the Change in Control Date,
(ii) the date of the execution by the Company of the initial written agreement
or instrument providing for the Change in
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Control or (iii) the date of the adoption by the Board of Directors of a
resolution providing for the Change in Control (with the earliest to occur of
such dates referred to herein as the "Measurement Date"), or any other action or
omission by the Company which results in a diminution in such position,
authority or responsibilities;
(b) a reduction in the Executive's annual base salary as in
effect on the Measurement Date or as the same was or may be increased from time
to time;
(c) the failure by the Company to (i) continue in effect any
material compensation or benefit plan or program (including without limitation
any life insurance, medical, health and accident or disability plan and any
vacation program or policy) (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, than the basis existing
immediately prior to the Measurement Date or (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with past practice
in light of the Company's financial performance;
(d) a change by the Company in the location at which the
Executive performs his principal duties for the Company to a new location that
is both (i) outside a radius of 35 miles from the Executive's principal
residence immediately prior to the Measurement Date and (ii) more than 20 miles
from the location at which the Executive performed his principal duties for the
Company immediately prior to the Measurement Date; or a requirement by the
Company that the Executive travel on Company business to a substantially greater
extent than required immediately prior to the Measurement Date;
(e) the failure of the Company to obtain the agreement, in a
form reasonably satisfactory to the Executive, from any successor to the Company
to assume and agree to perform this Agreement, as required by Section 6.1;
(f) a purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of
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Section 3.2(a), which purported termination shall not be effective for purposes
of this Agreement; or
(g) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of any employment agreement with the
Executive.
In addition, the termination of employment by the Executive for any reason
or no reason during the 30-day period beginning on the first anniversary of the
Change in Control Date shall be deemed to be termination for Good Reason for all
purposes under this Agreement.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive, binding and final. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
1.5 "Disability" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
2. Term of Agreement. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term, (b) the date 24
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (c) the fulfillment by the Company of all
of its obligations under Sections 4 and 5.2 and 5.3 if the Executive's
employment with the Company terminates within 24 months following the Change in
Control Date. "Term" shall mean the period commencing as of the Effective Date
and continuing in effect through March 31, 2001; provided, however, that
commencing on April 1, 2001 and each April 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
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3. Employment Status; Termination Following Change in Control.
3.1 Not an Employment Contract. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time. If the
Executive's employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment.
(a) If the Change in Control Date occurs during the Term, any
termination of the Executive's employment by the Company or by the Executive
within 24 months following the Change in Control Date (other than due to the
death of the Executive) shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"), given in accordance with Section 7.
Any Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the "Date of Termination") shall be the close of business on the date specified
in the Notice of Termination (which date may not be less than 15 days or more
than 120 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive's death, or the date
of the Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
(c) Any Notice of Termination for Cause given by the Company
must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination
for Cause being given (and
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prior to any termination for Cause being effective), the Executive shall be
entitled to a hearing before the Board of Directors of the Company at which he
may, at his election, be represented by counsel and at which he shall have a
reasonable opportunity to be heard. Such hearing shall be held on not less than
15 days prior written notice to the Executive stating the Board of Directors'
intention to terminate the Executive for Cause and stating in detail the
particular event(s) or circumstance(s) which the Board of Directors believes
constitutes Cause for termination. Any such Notice of Termination for Cause must
be approved by an affirmative vote of two-thirds of the members of the Board of
Directors.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good Reason.
4. Benefits to Executive.
4.1 Stock Acceleration. If the Change in Control Date occurs during
the Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive,
not otherwise fully exercisable or automatically exercisable in full upon a
Change in Control, shall become immediately exercisable in full, (b) each
outstanding restricted stock award shall be deemed to be fully vested and no
longer subject to a right of repurchase by the Company and (c) notwithstanding
any provision in any applicable option agreement to the contrary, each such
option shall continue to be exercisable by the Executive (to the extent such
option was exercisable on the Date of Termination) for a period of six months
following the Date of Termination.
4.2 Compensation. If the Change in Control Date occurs during the
Term and the Executive's employment with the Company terminates within 24 months
following the Change in Control Date, the Executive shall be entitled to the
following benefits:
(a) Termination Without Cause or for Good Reason. If the
Executive's employment with the Company is terminated by the Company (other than
for Cause, Disability or Death) or by the Executive for Good Reason within 24
months following the Change in Control Date, then the Executive shall be
entitled to the following benefits:
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(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(1) the sum of (A) the Executive's base
salary through the Date of Termination, (B) the product of (x) the annual bonus
paid or payable (including any bonus or portion thereof which has been earned
but deferred) for the most recently completed fiscal year and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (C) the amount
of any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation or compensatory
time off pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (A), (B), and (C) shall be hereinafter referred to
as the "Accrued Obligations"); and
(2) the amount equal to (A) two and
one-half multiplied by (B) the sum of (x) the Executive's highest annual base
salary from the Company during the five-year period prior to the Change in
Control Date and (y) the Executive's highest annual bonus from the Company
during the five-year period prior to the Change in Control Date.
(ii) for 30 months after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date or, if more favorable to the Executive and his family,
in effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from such employer
on terms at least as favorable to the Executive and his family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and his family;
(iii) to the extent not previously paid or
provided, the Company shall timely pay or provide to the Executive outplacement
assistance commensurate with the Executive's position as well as any other
amounts or benefits
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required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); and
(iv) for purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits to which the Executive is entitled, the Executive shall be considered
to have remained employed by the Company until 30 months after the Date of
Termination.
(b) Resignation without Good Reason; Termination for Death or
Disability. If the Executive voluntarily terminates his employment with the
Company within 24 months following the Change in Control Date, excluding a
termination for Good Reason, or if the Executive's employment with the Company
is terminated by reason of the Executive's death or Disability within 24 months
following the Change in Control Date, then the Company shall (i) pay the
Executive (or his estate, if applicable), in a lump sum in cash within 30 days
after the Date of Termination, the Accrued Obligations and (ii) timely pay or
provide to the Executive the Other Benefits.
(c) Termination for Cause. If the Company terminates the
Executive's employment with the Company for Cause within 24 months following the
Change in Control Date, then the Company shall (i) pay the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the sum of (A) the
Executive's annual base salary through the Date of Termination and (B) the
amount of any compensation previously deferred by the Executive, in each case to
the extent not previously paid, and (ii) timely pay or provide to the Executive
the Other Benefits.
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4.3 Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), the Company shall, within 30 days
after each date on which the Executive becomes entitled to receive (whether or
not then due) a Contingent Compensation Payment (as defined below) relating to
such Change in Ownership or Control, determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or otherwise)
following such Change in Ownership or Control constitute Contingent Compensation
Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), by the Executive with respect to such Contingent Compensation Payment
and (iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 30 days
after delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the "Executive Response") stating either (A) that he
agrees with the Company's determination pursuant to the preceding sentence or
(B) that he disagrees with such determination, in which case he shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company's initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this Section 4.3(a).
(b) For purposes of this Section 4.3, the following terms
shall have the following respective meanings:
(i) "Change in Ownership or Control" shall
mean a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
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(ii) "Contingent Compensation Payment" shall
mean any payment (or benefit) in the nature of compensation that is made or
supplied (under this Agreement or otherwise) to a "disqualified individual" (as
defined in Section 280G(c) of the Code) and that is contingent (within the
meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
(iii) "Gross-Up Payment" shall mean an amount
equal to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable withholding
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4.4 Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
5. Disputes.
5.1 Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board of Directors of the Company and shall be in writing. Any denial by the
Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
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5.2 Expenses. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
5.3 Compensation During a Dispute. If the Change in Control Date
occurs during the Term and the Executive's employment with the Company
terminates within 24 months following the Change in Control Date, and the right
of the Executive to receive benefits under Section 4 (or the amount or nature of
the benefits to which he is entitled to receive) are the subject of a dispute
between the Company and the Executive, the Company shall continue (a) to pay to
the Executive his base salary in effect as of the Measurement Date and (b) to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them, if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date, until such dispute is resolved either by mutual written
agreement of the parties or by an arbitrator's award pursuant to Section 5.1.
Following the resolution of such dispute, the sum of the payments made to the
Executive under clause (a) of this Section 5.3 shall be deducted from any cash
payment which the Executive is entitled to receive pursuant to Section 4; and if
such sum exceeds the amount of the cash payment which the Executive is entitled
to receive pursuant to Section 4, the excess of such sum over the amount of such
payment shall be repaid (without interest) by the Executive to the Company
within 60 days of the resolution of such dispute.
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6. Successors.
6.1 Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6.2 Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or his family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
7 Lopez Road, Wilmington, Massachusetts 01887, and to the Executive at 118
Northgate Circle, Melville, NY 11747 (or to such other address as either the
Company or the Executive may have furnished to the other in writing in
accordance herewith). Any such notice, instruction or communication shall be
deemed to have been delivered five business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, or one business
day after it is sent via a reputable nationwide overnight courier service.
Either party may give any notice, instruction or other communication hereunder
using any other means, but no such notice, instruction or other communication
shall be deemed to
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have been duly delivered unless and until it actually is received by the party
for whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.5 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.7 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.8 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations
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or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
8.9 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
CENTENNIAL TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
-----------------------------------
Jacques Assour
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Exhibit 10.21
CENTENNIAL TECHNOLOGIES, INC.
EXECUTIVE RETENTION AGREEMENT
Donald R. Peck
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
Executive Retention Agreement
THIS EXECUTIVE RETENTION AGREEMENT by and between Centennial Technologies,
Inc., a Delaware corporation (the "Company"), and Donald R. Peck (the
"Executive") is made as of February 26, 1999 (the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued employment and dedication of the Company's
key personnel without distraction from the possibility of a change in control of
the Company and related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below subsequent to a Change in Control (as defined in Section 1.1).
1. Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
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1.1 "Change in Control" means an event or occurrence set forth in
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of
any capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company), (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii)
of subsection (c) of this Section 1.1; or
(b) such time as the Continuing Directors (as defined below)
do not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
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(c) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Change in Control Date" means the first date during the Term
(as defined in Section 2) on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if (a) a Change in Control occurs,
(b) the Executive's employment with the Company is terminated prior to the date
on which the Change in Control occurs, and (c) it is reasonably demonstrated by
the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with or in anticipation of a
Change in Control, then for all purposes of this Agreement
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the "Change in Control Date" shall mean the date immediately prior to the date
of such termination of employment.
1.3 "Cause" means:
(a) the Executive's willful and continued failure
substantially to perform his reasonable assigned duties as an officer of the
Company (other than any such failure resulting from incapacity due to physical
or mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
of Directors of the Company which specifically identifies the manner in which
the Board of Directors believes the Executive has not substantially performed
the Executive's duties; or
(b) the Executive's willful engagement in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.3, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
1.4 "Good Reason" means the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (a)
through (g) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 3.2(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(a) the assignment to the Executive of duties inconsistent in
any material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority or responsibilities in effect
immediately prior to the earliest to occur of (i) the Change in Control Date,
(ii) the date of the execution by the Company of the initial written agreement
or instrument providing for the Change in
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Control or (iii) the date of the adoption by the Board of Directors of a
resolution providing for the Change in Control (with the earliest to occur of
such dates referred to herein as the "Measurement Date"), or any other action or
omission by the Company which results in a diminution in such position,
authority or responsibilities;
(b) a reduction in the Executive's annual base salary as in
effect on the Measurement Date or as the same was or may be increased from time
to time;
(c) the failure by the Company to (i) continue in effect any
material compensation or benefit plan or program (including without limitation
any life insurance, medical, health and accident or disability plan and any
vacation program or policy) (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, than the basis existing
immediately prior to the Measurement Date or (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with past practice
in light of the Company's financial performance;
(d) a change by the Company in the location at which the
Executive performs his principal duties for the Company to a new location that
is both (i) outside a radius of 35 miles from the Executive's principal
residence immediately prior to the Measurement Date and (ii) more than 20 miles
from the location at which the Executive performed his principal duties for the
Company immediately prior to the Measurement Date; or a requirement by the
Company that the Executive travel on Company business to a substantially greater
extent than required immediately prior to the Measurement Date;
(e) the failure of the Company to obtain the agreement, in a
form reasonably satisfactory to the Executive, from any successor to the Company
to assume and agree to perform this Agreement, as required by Section 6.1;
(f) a purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of
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Section 3.2(a), which purported termination shall not be effective for purposes
of this Agreement; or
(g) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of any employment agreement with the
Executive.
In addition, the termination of employment by the Executive for any reason
or no reason during the 30-day period beginning on the first anniversary of the
Change in Control Date shall be deemed to be termination for Good Reason for all
purposes under this Agreement.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive, binding and final. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
1.5 "Disability" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
2. Term of Agreement. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term, (b) the date 24
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (c) the fulfillment by the Company of all
of its obligations under Sections 4 and 5.2 and 5.3 if the Executive's
employment with the Company terminates within 24 months following the Change in
Control Date. "Term" shall mean the period commencing as of the Effective Date
and continuing in effect through March 31, 2001; provided, however, that
commencing on April 1, 2001 and each April 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
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3. Employment Status; Termination Following Change in Control.
3.1 Not an Employment Contract. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time. If the
Executive's employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment.
(a) If the Change in Control Date occurs during the Term, any
termination of the Executive's employment by the Company or by the Executive
within 24 months following the Change in Control Date (other than due to the
death of the Executive) shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"), given in accordance with Section 7.
Any Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the "Date of Termination") shall be the close of business on the date specified
in the Notice of Termination (which date may not be less than 15 days or more
than 120 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive's death, or the date
of the Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
(c) Any Notice of Termination for Cause given by the Company
must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination
for Cause being given (and
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prior to any termination for Cause being effective), the Executive shall be
entitled to a hearing before the Board of Directors of the Company at which he
may, at his election, be represented by counsel and at which he shall have a
reasonable opportunity to be heard. Such hearing shall be held on not less than
15 days prior written notice to the Executive stating the Board of Directors'
intention to terminate the Executive for Cause and stating in detail the
particular event(s) or circumstance(s) which the Board of Directors believes
constitutes Cause for termination. Any such Notice of Termination for Cause must
be approved by an affirmative vote of two-thirds of the members of the Board of
Directors.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good Reason.
4. Benefits to Executive.
4.1 Stock Acceleration. If the Change in Control Date occurs during
the Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive,
not otherwise fully exercisable or automatically exercisable in full upon a
Change in Control, shall become immediately exercisable in full, (b) each
outstanding restricted stock award shall be deemed to be fully vested and no
longer subject to a right of repurchase by the Company and (c) notwithstanding
any provision in any applicable option agreement to the contrary, each such
option shall continue to be exercisable by the Executive (to the extent such
option was exercisable on the Date of Termination) for a period of six months
following the Date of Termination.
4.2 Compensation. If the Change in Control Date occurs during the
Term and the Executive's employment with the Company terminates within 24 months
following the Change in Control Date, the Executive shall be entitled to the
following benefits:
(a) Termination Without Cause or for Good Reason. If the
Executive's employment with the Company is terminated by the Company (other than
for Cause, Disability or Death) or by the Executive for Good Reason within 24
months following the Change in Control Date, then the Executive shall be
entitled to the following benefits:
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(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(1) the sum of (A) the Executive's base
salary through the Date of Termination, (B) the product of (x) the annual bonus
paid or payable (including any bonus or portion thereof which has been earned
but deferred) for the most recently completed fiscal year and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (C) the amount
of any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation or compensatory
time off pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (A), (B), and (C) shall be hereinafter referred to
as the "Accrued Obligations"); and
(2) the amount equal to (A) two and
one-half multiplied by (B) the sum of (x) the Executive's highest annual base
salary from the Company during the five-year period prior to the Change in
Control Date and (y) the Executive's highest annual bonus from the Company
during the five-year period prior to the Change in Control Date.
(ii) for 30 months after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date or, if more favorable to the Executive and his family,
in effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from such employer
on terms at least as favorable to the Executive and his family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and his family;
(iii) to the extent not previously paid or
provided, the Company shall timely pay or provide to the Executive outplacement
assistance commensurate with the Executive's position as well as any other
amounts or benefits
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required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); and
(iv) for purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits to which the Executive is entitled, the Executive shall be considered
to have remained employed by the Company until 30 months after the Date of
Termination.
(b) Resignation without Good Reason; Termination for Death or
Disability. If the Executive voluntarily terminates his employment with the
Company within 24 months following the Change in Control Date, excluding a
termination for Good Reason, or if the Executive's employment with the Company
is terminated by reason of the Executive's death or Disability within 24 months
following the Change in Control Date, then the Company shall (i) pay the
Executive (or his estate, if applicable), in a lump sum in cash within 30 days
after the Date of Termination, the Accrued Obligations and (ii) timely pay or
provide to the Executive the Other Benefits.
(c) Termination for Cause. If the Company terminates the
Executive's employment with the Company for Cause within 24 months following the
Change in Control Date, then the Company shall (i) pay the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the sum of (A) the
Executive's annual base salary through the Date of Termination and (B) the
amount of any compensation previously deferred by the Executive, in each case to
the extent not previously paid, and (ii) timely pay or provide to the Executive
the Other Benefits.
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4.3 Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), the Company shall, within 30 days
after each date on which the Executive becomes entitled to receive (whether or
not then due) a Contingent Compensation Payment (as defined below) relating to
such Change in Ownership or Control, determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or otherwise)
following such Change in Ownership or Control constitute Contingent Compensation
Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), by the Executive with respect to such Contingent Compensation Payment
and (iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 30 days
after delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the "Executive Response") stating either (A) that he
agrees with the Company's determination pursuant to the preceding sentence or
(B) that he disagrees with such determination, in which case he shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company's initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this Section 4.3(a).
(b) For purposes of this Section 4.3, the following terms
shall have the following respective meanings:
(i) "Change in Ownership or Control" shall
mean a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
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(ii) "Contingent Compensation Payment" shall
mean any payment (or benefit) in the nature of compensation that is made or
supplied (under this Agreement or otherwise) to a "disqualified individual" (as
defined in Section 280G(c) of the Code) and that is contingent (within the
meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
(iii) "Gross-Up Payment" shall mean an amount
equal to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable withholding
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4.4 Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
5. Disputes.
5.1 Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board of Directors of the Company and shall be in writing. Any denial by the
Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
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5.2 Expenses. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
5.3 Compensation During a Dispute. If the Change in Control Date
occurs during the Term and the Executive's employment with the Company
terminates within 24 months following the Change in Control Date, and the right
of the Executive to receive benefits under Section 4 (or the amount or nature of
the benefits to which he is entitled to receive) are the subject of a dispute
between the Company and the Executive, the Company shall continue (a) to pay to
the Executive his base salary in effect as of the Measurement Date and (b) to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them, if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date, until such dispute is resolved either by mutual written
agreement of the parties or by an arbitrator's award pursuant to Section 5.1.
Following the resolution of such dispute, the sum of the payments made to the
Executive under clause (a) of this Section 5.3 shall be deducted from any cash
payment which the Executive is entitled to receive pursuant to Section 4; and if
such sum exceeds the amount of the cash payment which the Executive is entitled
to receive pursuant to Section 4, the excess of such sum over the amount of such
payment shall be repaid (without interest) by the Executive to the Company
within 60 days of the resolution of such dispute.
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6. Successors.
6.1 Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6.2 Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or his family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
7 Lopez Road, Wilmington, Massachusetts 01887, and to the Executive at 6 Doran
Farm Lane, Lexington, MA 02420 (or to such other address as either the Company
or the Executive may have furnished to the other in writing in accordance
herewith). Any such notice, instruction or communication shall be deemed to have
been delivered five business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service. Either party may give
any notice, instruction or other communication hereunder using any other means,
but no such notice, instruction or other communication shall be deemed to
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have been duly delivered unless and until it actually is received by the party
for whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.5 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.7 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.8 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations
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or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
8.9 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
CENTENNIAL TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
-----------------------------------
Donald R. Peck
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Exhibit 10.22
CENTENNIAL TECHNOLOGIES, INC.
EXECUTIVE RETENTION AGREEMENT
Kathleen C. Little
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
Executive Retention Agreement
THIS EXECUTIVE RETENTION AGREEMENT by and between Centennial Technologies,
Inc., a Delaware corporation (the "Company"), and Kathleen C. Little (the
"Executive") is made as of February 26, 1999 (the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued employment and dedication of the Company's
key personnel without distraction from the possibility of a change in control of
the Company and related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below subsequent to a Change in Control (as defined in Section 1.1).
1. Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
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1.1 "Change in Control" means an event or occurrence set forth in
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of
any capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company), (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii)
of subsection (c) of this Section 1.1; or
(b) such time as the Continuing Directors (as defined below)
do not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
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(c) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Change in Control Date" means the first date during the Term
(as defined in Section 2) on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if (a) a Change in Control occurs,
(b) the Executive's employment with the Company is terminated prior to the date
on which the Change in Control occurs, and (c) it is reasonably demonstrated by
the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with or in anticipation of a
Change in Control, then for all purposes of this Agreement
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the "Change in Control Date" shall mean the date immediately prior to the date
of such termination of employment.
1.3 "Cause" means:
(a) the Executive's willful and continued failure
substantially to perform her reasonable assigned duties as an officer of the
Company (other than any such failure resulting from incapacity due to physical
or mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
of Directors of the Company which specifically identifies the manner in which
the Board of Directors believes the Executive has not substantially performed
the Executive's duties; or
(b) the Executive's willful engagement in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.3, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
1.4 "Good Reason" means the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (a)
through (g) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 3.2(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(a) the assignment to the Executive of duties inconsistent in
any material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority or responsibilities in effect
immediately prior to the earliest to occur of (i) the Change in Control Date,
(ii) the date of the execution by the Company of the initial written agreement
or instrument providing for the Change in
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Control or (iii) the date of the adoption by the Board of Directors of a
resolution providing for the Change in Control (with the earliest to occur of
such dates referred to herein as the "Measurement Date"), or any other action or
omission by the Company which results in a diminution in such position,
authority or responsibilities;
(b) a reduction in the Executive's annual base salary as in
effect on the Measurement Date or as the same was or may be increased from time
to time;
(c) the failure by the Company to (i) continue in effect any
material compensation or benefit plan or program (including without limitation
any life insurance, medical, health and accident or disability plan and any
vacation program or policy) (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, than the basis existing
immediately prior to the Measurement Date or (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with past practice
in light of the Company's financial performance;
(d) a change by the Company in the location at which the
Executive performs her principal duties for the Company to a new location that
is both (i) outside a radius of 35 miles from the Executive's principal
residence immediately prior to the Measurement Date and (ii) more than 20 miles
from the location at which the Executive performed her principal duties for the
Company immediately prior to the Measurement Date; or a requirement by the
Company that the Executive travel on Company business to a substantially greater
extent than required immediately prior to the Measurement Date;
(e) the failure of the Company to obtain the agreement, in a
form reasonably satisfactory to the Executive, from any successor to the Company
to assume and agree to perform this Agreement, as required by Section 6.1;
(f) a purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of
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Section 3.2(a), which purported termination shall not be effective for purposes
of this Agreement; or
(g) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of any employment agreement with the
Executive.
In addition, the termination of employment by the Executive for any reason
or no reason during the 30-day period beginning on the first anniversary of the
Change in Control Date shall be deemed to be termination for Good Reason for all
purposes under this Agreement.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive, binding and final. The
Executive's right to terminate her employment for Good Reason shall not be
affected by her incapacity due to physical or mental illness.
1.5 "Disability" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
2. Term of Agreement. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term, (b) the date 24
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (c) the fulfillment by the Company of all
of its obligations under Sections 4 and 5.2 and 5.3 if the Executive's
employment with the Company terminates within 24 months following the Change in
Control Date. "Term" shall mean the period commencing as of the Effective Date
and continuing in effect through March 31, 2001; provided, however, that
commencing on April 1, 2001 and each April 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
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3. Employment Status; Termination Following Change in Control.
3.1 Not an Employment Contract. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time. If the
Executive's employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment.
(a) If the Change in Control Date occurs during the Term, any
termination of the Executive's employment by the Company or by the Executive
within 24 months following the Change in Control Date (other than due to the
death of the Executive) shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"), given in accordance with Section 7.
Any Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the "Date of Termination") shall be the close of business on the date specified
in the Notice of Termination (which date may not be less than 15 days or more
than 120 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive's death, or the date
of the Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
(c) Any Notice of Termination for Cause given by the Company
must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination
for Cause being given (and
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prior to any termination for Cause being effective), the Executive shall be
entitled to a hearing before the Board of Directors of the Company at which she
may, at her election, be represented by counsel and at which she shall have a
reasonable opportunity to be heard. Such hearing shall be held on not less than
15 days prior written notice to the Executive stating the Board of Directors'
intention to terminate the Executive for Cause and stating in detail the
particular event(s) or circumstance(s) which the Board of Directors believes
constitutes Cause for termination. Any such Notice of Termination for Cause must
be approved by an affirmative vote of two-thirds of the members of the Board of
Directors.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good Reason.
4. Benefits to Executive.
4.1 Stock Acceleration. If the Change in Control Date occurs during
the Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive,
not otherwise fully exercisable or automatically exercisable in full upon a
Change in Control, shall become immediately exercisable in full, (b) each
outstanding restricted stock award shall be deemed to be fully vested and no
longer subject to a right of repurchase by the Company and (c) notwithstanding
any provision in any applicable option agreement to the contrary, each such
option shall continue to be exercisable by the Executive (to the extent such
option was exercisable on the Date of Termination) for a period of six months
following the Date of Termination.
4.2 Compensation. If the Change in Control Date occurs during the
Term and the Executive's employment with the Company terminates within 24 months
following the Change in Control Date, the Executive shall be entitled to the
following benefits:
(a) Termination Without Cause or for Good Reason. If the
Executive's employment with the Company is terminated by the Company (other than
for Cause, Disability or Death) or by the Executive for Good Reason within 24
months following the Change in Control Date, then the Executive shall be
entitled to the following benefits:
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(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(1) the sum of (A) the Executive's base
salary through the Date of Termination, (B) the product of (x) the annual bonus
paid or payable (including any bonus or portion thereof which has been earned
but deferred) for the most recently completed fiscal year and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (C) the amount
of any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation or compensatory
time off pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (A), (B), and (C) shall be hereinafter referred to
as the "Accrued Obligations"); and
(2) the amount equal to (A) two and
one-half multiplied by (B) the sum of (x) the Executive's highest annual base
salary from the Company during the five-year period prior to the Change in
Control Date and (y) the Executive's highest annual bonus from the Company
during the five-year period prior to the Change in Control Date.
(ii) for 30 months after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date or, if more favorable to the Executive and her family,
in effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from such employer
on terms at least as favorable to the Executive and her family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and her family;
(iii) to the extent not previously paid or
provided, the Company shall timely pay or provide to the Executive outplacement
assistance commensurate with the Executive's position as well as any other
amounts or benefits
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required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); and
(iv) for purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits to which the Executive is entitled, the Executive shall be considered
to have remained employed by the Company until 30 months after the Date of
Termination.
(b) Resignation without Good Reason; Termination for Death or
Disability. If the Executive voluntarily terminates her employment with the
Company within 24 months following the Change in Control Date, excluding a
termination for Good Reason, or if the Executive's employment with the Company
is terminated by reason of the Executive's death or Disability within 24 months
following the Change in Control Date, then the Company shall (i) pay the
Executive (or her estate, if applicable), in a lump sum in cash within 30 days
after the Date of Termination, the Accrued Obligations and (ii) timely pay or
provide to the Executive the Other Benefits.
(c) Termination for Cause. If the Company terminates the
Executive's employment with the Company for Cause within 24 months following the
Change in Control Date, then the Company shall (i) pay the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the sum of (A) the
Executive's annual base salary through the Date of Termination and (B) the
amount of any compensation previously deferred by the Executive, in each case to
the extent not previously paid, and (ii) timely pay or provide to the Executive
the Other Benefits.
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4.3 Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), the Company shall, within 30 days
after each date on which the Executive becomes entitled to receive (whether or
not then due) a Contingent Compensation Payment (as defined below) relating to
such Change in Ownership or Control, determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or otherwise)
following such Change in Ownership or Control constitute Contingent Compensation
Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), by the Executive with respect to such Contingent Compensation Payment
and (iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 30 days
after delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the "Executive Response") stating either (A) that she
agrees with the Company's determination pursuant to the preceding sentence or
(B) that she disagrees with such determination, in which case she shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company's initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this Section 4.3(a).
(b) For purposes of this Section 4.3, the following terms
shall have the following respective meanings:
(i) "Change in Ownership or Control" shall
mean a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
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(ii) "Contingent Compensation Payment" shall
mean any payment (or benefit) in the nature of compensation that is made or
supplied (under this Agreement or otherwise) to a "disqualified individual" (as
defined in Section 280G(c) of the Code) and that is contingent (within the
meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
(iii) "Gross-Up Payment" shall mean an amount
equal to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable withholding
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4.4 Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
5. Disputes.
5.1 Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board of Directors of the Company and shall be in writing. Any denial by the
Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
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5.2 Expenses. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
5.3 Compensation During a Dispute. If the Change in Control Date
occurs during the Term and the Executive's employment with the Company
terminates within 24 months following the Change in Control Date, and the right
of the Executive to receive benefits under Section 4 (or the amount or nature of
the benefits to which she is entitled to receive) are the subject of a dispute
between the Company and the Executive, the Company shall continue (a) to pay to
the Executive her base salary in effect as of the Measurement Date and (b) to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them, if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date, until such dispute is resolved either by mutual written
agreement of the parties or by an arbitrator's award pursuant to Section 5.1.
Following the resolution of such dispute, the sum of the payments made to the
Executive under clause (a) of this Section 5.3 shall be deducted from any cash
payment which the Executive is entitled to receive pursuant to Section 4; and if
such sum exceeds the amount of the cash payment which the Executive is entitled
to receive pursuant to Section 4, the excess of such sum over the amount of such
payment shall be repaid (without interest) by the Executive to the Company
within 60 days of the resolution of such dispute.
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6. Successors.
6.1 Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6.2 Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or her family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
7 Lopez Road, Wilmington, Massachusetts 01887, and to the Executive at 50 Hosmer
Street, Acton, MA 01720 (or to such other address as either the Company or the
Executive may have furnished to the other in writing in accordance herewith).
Any such notice, instruction or communication shall be deemed to have been
delivered five business days after it is sent by registered or certified mail,
return receipt requested, postage prepaid, or one business day after it is sent
via a reputable nationwide overnight courier service. Either party may give any
notice, instruction or other communication hereunder using any other means, but
no such notice, instruction or other communication shall be deemed to
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have been duly delivered unless and until it actually is received by the party
for whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.5 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.7 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.8 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations
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or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
8.9 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
CENTENNIAL TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
-----------------------------------
Kathleen C. Little
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Exhibit 10.23
CENTENNIAL TECHNOLOGIES, INC.
EXECUTIVE RETENTION AGREEMENT
John C. Nugent
<PAGE>
CENTENNIAL TECHNOLOGIES, INC.
Executive Retention Agreement
THIS EXECUTIVE RETENTION AGREEMENT by and between Centennial Technologies,
Inc., a Delaware corporation (the "Company"), and John C. Nugent (the
"Executive") is made as of February 26, 1999 (the "Effective Date").
WHEREAS, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and
WHEREAS, the Compensation Committee of the Board of Directors of the
Company (the "Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued employment and dedication of the Company's
key personnel without distraction from the possibility of a change in control of
the Company and related events and circumstances.
NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
severance benefits set forth in this Agreement in the event the Executive's
employment with the Company is terminated under the circumstances described
below subsequent to a Change in Control (as defined in Section 1.1).
1. Key Definitions.
As used herein, the following terms shall have the following respective
meanings:
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1.1 "Change in Control" means an event or occurrence set forth in
any one or more of subsections (a) through (d) below (including an event or
occurrence that constitutes a Change in Control under one of such subsections
but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of
any capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 30% or more of either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible
into or exchangeable for common stock or voting securities of the Company,
unless the Person exercising, converting or exchanging such security acquired
such security directly from the Company or an underwriter or agent of the
Company), (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i) and (ii)
of subsection (c) of this Section 1.1; or
(b) such time as the Continuing Directors (as defined below)
do not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
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(c) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i) all
or substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation in such Business Combination (which shall include,
without limitation, a corporation which as a result of such transaction owns the
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation is referred
to herein as the "Acquiring Corporation") in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively; and (ii) no Person (excluding the Acquiring Corporation or any
employee benefit plan (or related trust) maintained or sponsored by the Company
or by the Acquiring Corporation) beneficially owns, directly or indirectly, 20%
or more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
1.2 "Change in Control Date" means the first date during the Term
(as defined in Section 2) on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if (a) a Change in Control occurs,
(b) the Executive's employment with the Company is terminated prior to the date
on which the Change in Control occurs, and (c) it is reasonably demonstrated by
the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with or in anticipation of a
Change in Control, then for all purposes of this Agreement
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the "Change in Control Date" shall mean the date immediately prior to the date
of such termination of employment.
1.3 "Cause" means:
(a) the Executive's willful and continued failure
substantially to perform his reasonable assigned duties as an officer of the
Company (other than any such failure resulting from incapacity due to physical
or mental illness or any failure after the Executive gives notice of termination
for Good Reason), which failure is not cured within 30 days after a written
demand for substantial performance is received by the Executive from the Board
of Directors of the Company which specifically identifies the manner in which
the Board of Directors believes the Executive has not substantially performed
the Executive's duties; or
(b) the Executive's willful engagement in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this Section 1.3, no act or failure to act by the
Executive shall be considered "willful" unless it is done, or omitted to be
done, in bad faith and without reasonable belief that the Executive's action or
omission was in the best interests of the Company.
1.4 "Good Reason" means the occurrence, without the Executive's
written consent, of any of the events or circumstances set forth in clauses (a)
through (g) below. Notwithstanding the occurrence of any such event or
circumstance, such occurrence shall not be deemed to constitute Good Reason if,
prior to the Date of Termination specified in the Notice of Termination (each as
defined in Section 3.2(a)) given by the Executive in respect thereof, such event
or circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).
(a) the assignment to the Executive of duties inconsistent in
any material respect with the Executive's position (including status, offices,
titles and reporting requirements), authority or responsibilities in effect
immediately prior to the earliest to occur of (i) the Change in Control Date,
(ii) the date of the execution by the Company of the initial written agreement
or instrument providing for the Change in
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Control or (iii) the date of the adoption by the Board of Directors of a
resolution providing for the Change in Control (with the earliest to occur of
such dates referred to herein as the "Measurement Date"), or any other action or
omission by the Company which results in a diminution in such position,
authority or responsibilities;
(b) a reduction in the Executive's annual base salary as in
effect on the Measurement Date or as the same was or may be increased from time
to time;
(c) the failure by the Company to (i) continue in effect any
material compensation or benefit plan or program (including without limitation
any life insurance, medical, health and accident or disability plan and any
vacation program or policy) (a "Benefit Plan") in which the Executive
participates or which is applicable to the Executive immediately prior to the
Measurement Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan or
program, (ii) continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the Executive's
participation relative to other participants, than the basis existing
immediately prior to the Measurement Date or (iii) award cash bonuses to the
Executive in amounts and in a manner substantially consistent with past practice
in light of the Company's financial performance;
(d) a change by the Company in the location at which the
Executive performs his principal duties for the Company to a new location that
is both (i) outside a radius of 35 miles from the Executive's principal
residence immediately prior to the Measurement Date and (ii) more than 20 miles
from the location at which the Executive performed his principal duties for the
Company immediately prior to the Measurement Date; or a requirement by the
Company that the Executive travel on Company business to a substantially greater
extent than required immediately prior to the Measurement Date;
(e) the failure of the Company to obtain the agreement, in a
form reasonably satisfactory to the Executive, from any successor to the Company
to assume and agree to perform this Agreement, as required by Section 6.1;
(f) a purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of
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Section 3.2(a), which purported termination shall not be effective for purposes
of this Agreement; or
(g) any failure of the Company to pay or provide to the
Executive any portion of the Executive's compensation or benefits due under any
Benefit Plan within seven days of the date such compensation or benefits are
due, or any material breach by the Company of any employment agreement with the
Executive.
In addition, the termination of employment by the Executive for any reason
or no reason during the 30-day period beginning on the first anniversary of the
Change in Control Date shall be deemed to be termination for Good Reason for all
purposes under this Agreement.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Executive shall be conclusive, binding and final. The
Executive's right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
1.5 "Disability" means the Executive's absence from the full-time
performance of the Executive's duties with the Company for 180 consecutive
calendar days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
2. Term of Agreement. This Agreement, and all rights and obligations of
the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the Term, (b) the date 24
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (c) the fulfillment by the Company of all
of its obligations under Sections 4 and 5.2 and 5.3 if the Executive's
employment with the Company terminates within 24 months following the Change in
Control Date. "Term" shall mean the period commencing as of the Effective Date
and continuing in effect through March 31, 2001; provided, however, that
commencing on April 1, 2001 and each April 1 thereafter, the Term shall be
automatically extended for one additional year unless, not later than 90 days
prior to the scheduled expiration of the Term (or any extension thereof), the
Company shall have given the Executive written notice that the Term will not be
extended.
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3. Employment Status; Termination Following Change in Control.
3.1 Not an Employment Contract. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time. If the
Executive's employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 1.2.
3.2 Termination of Employment.
(a) If the Change in Control Date occurs during the Term, any
termination of the Executive's employment by the Company or by the Executive
within 24 months following the Change in Control Date (other than due to the
death of the Executive) shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"), given in accordance with Section 7.
Any Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the "Date of Termination") shall be the close of business on the date specified
in the Notice of Termination (which date may not be less than 15 days or more
than 120 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive's death, or the date
of the Executive's death, as the case may be.
(b) The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting any such fact or circumstance in enforcing the
Executive's or the Company's right hereunder.
(c) Any Notice of Termination for Cause given by the Company
must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination
for Cause being given (and
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prior to any termination for Cause being effective), the Executive shall be
entitled to a hearing before the Board of Directors of the Company at which he
may, at his election, be represented by counsel and at which he shall have a
reasonable opportunity to be heard. Such hearing shall be held on not less than
15 days prior written notice to the Executive stating the Board of Directors'
intention to terminate the Executive for Cause and stating in detail the
particular event(s) or circumstance(s) which the Board of Directors believes
constitutes Cause for termination. Any such Notice of Termination for Cause must
be approved by an affirmative vote of two-thirds of the members of the Board of
Directors.
(d) Any Notice of Termination for Good Reason given by the
Executive must be given within 90 days of the occurrence of the event(s) or
circumstance(s) which constitute(s) Good Reason.
4. Benefits to Executive.
4.1 Stock Acceleration. If the Change in Control Date occurs during
the Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive,
not otherwise fully exercisable or automatically exercisable in full upon a
Change in Control, shall become immediately exercisable in full, (b) each
outstanding restricted stock award shall be deemed to be fully vested and no
longer subject to a right of repurchase by the Company and (c) notwithstanding
any provision in any applicable option agreement to the contrary, each such
option shall continue to be exercisable by the Executive (to the extent such
option was exercisable on the Date of Termination) for a period of six months
following the Date of Termination.
4.2 Compensation. If the Change in Control Date occurs during the
Term and the Executive's employment with the Company terminates within 24 months
following the Change in Control Date, the Executive shall be entitled to the
following benefits:
(a) Termination Without Cause or for Good Reason. If the
Executive's employment with the Company is terminated by the Company (other than
for Cause, Disability or Death) or by the Executive for Good Reason within 24
months following the Change in Control Date, then the Executive shall be
entitled to the following benefits:
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(i) the Company shall pay to the Executive in
a lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(1) the sum of (A) the Executive's base
salary through the Date of Termination, (B) the product of (x) the annual bonus
paid or payable (including any bonus or portion thereof which has been earned
but deferred) for the most recently completed fiscal year and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (C) the amount
of any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation or compensatory
time off pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (A), (B), and (C) shall be hereinafter referred to
as the "Accrued Obligations"); and
(2) the amount equal to (A) two and
one-half multiplied by (B) the sum of (x) the Executive's highest annual base
salary from the Company during the five-year period prior to the Change in
Control Date and (y) the Executive's highest annual bonus from the Company
during the five-year period prior to the Change in Control Date.
(ii) for 30 months after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date or, if more favorable to the Executive and his family,
in effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive a
particular type of benefits (e.g., health insurance benefits) from such employer
on terms at least as favorable to the Executive and his family as those being
provided by the Company, then the Company shall no longer be required to provide
those particular benefits to the Executive and his family;
(iii) to the extent not previously paid or
provided, the Company shall timely pay or provide to the Executive outplacement
assistance commensurate with the Executive's position as well as any other
amounts or benefits
10
<PAGE>
required to be paid or provided or which the Executive is eligible to receive
following the Executive's termination of employment under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); and
(iv) for purposes of determining eligibility
(but not the time of commencement of benefits) of the Executive for retiree
benefits to which the Executive is entitled, the Executive shall be considered
to have remained employed by the Company until 30 months after the Date of
Termination.
(b) Resignation without Good Reason; Termination for Death or
Disability. If the Executive voluntarily terminates his employment with the
Company within 24 months following the Change in Control Date, excluding a
termination for Good Reason, or if the Executive's employment with the Company
is terminated by reason of the Executive's death or Disability within 24 months
following the Change in Control Date, then the Company shall (i) pay the
Executive (or his estate, if applicable), in a lump sum in cash within 30 days
after the Date of Termination, the Accrued Obligations and (ii) timely pay or
provide to the Executive the Other Benefits.
(c) Termination for Cause. If the Company terminates the
Executive's employment with the Company for Cause within 24 months following the
Change in Control Date, then the Company shall (i) pay the Executive, in a lump
sum in cash within 30 days after the Date of Termination, the sum of (A) the
Executive's annual base salary through the Date of Termination and (B) the
amount of any compensation previously deferred by the Executive, in each case to
the extent not previously paid, and (ii) timely pay or provide to the Executive
the Other Benefits.
11
<PAGE>
4.3 Taxes.
(a) In the event that the Company undergoes a "Change in
Ownership or Control" (as defined below), the Company shall, within 30 days
after each date on which the Executive becomes entitled to receive (whether or
not then due) a Contingent Compensation Payment (as defined below) relating to
such Change in Ownership or Control, determine and notify the Executive (with
reasonable detail regarding the basis for its determinations) (i) which of the
payments or benefits due to the Executive (under this Agreement or otherwise)
following such Change in Ownership or Control constitute Contingent Compensation
Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), by the Executive with respect to such Contingent Compensation Payment
and (iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 30 days
after delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the "Executive Response") stating either (A) that he
agrees with the Company's determination pursuant to the preceding sentence or
(B) that he disagrees with such determination, in which case he shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company's initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this Section 4.3(a).
(b) For purposes of this Section 4.3, the following terms
shall have the following respective meanings:
(i) "Change in Ownership or Control" shall
mean a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 280G(b)(2) of the Code.
12
<PAGE>
(ii) "Contingent Compensation Payment" shall
mean any payment (or benefit) in the nature of compensation that is made or
supplied (under this Agreement or otherwise) to a "disqualified individual" (as
defined in Section 280G(c) of the Code) and that is contingent (within the
meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or
Control of the Company.
(iii) "Gross-Up Payment" shall mean an amount
equal to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable withholding
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the
preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.
4.4 Mitigation. The Executive shall not be required to mitigate the
amount of any payment or benefits provided for in this Section 4 by seeking
other employment or otherwise. Further, except as provided in Section
4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4
shall not be reduced by any compensation earned by the Executive as a result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company or otherwise.
5. Disputes.
5.1 Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board of Directors of the Company and shall be in writing. Any denial by the
Board of Directors of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The
Board of Directors shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
13
<PAGE>
5.2 Expenses. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal, accounting and other fees and expenses which
the Executive may reasonably incur as a result of any claim or contest
(regardless of the outcome thereof) by the Company, the Executive or others
regarding the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment or benefits
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Code.
5.3 Compensation During a Dispute. If the Change in Control Date
occurs during the Term and the Executive's employment with the Company
terminates within 24 months following the Change in Control Date, and the right
of the Executive to receive benefits under Section 4 (or the amount or nature of
the benefits to which he is entitled to receive) are the subject of a dispute
between the Company and the Executive, the Company shall continue (a) to pay to
the Executive his base salary in effect as of the Measurement Date and (b) to
provide benefits to the Executive and the Executive's family at least equal to
those which would have been provided to them, if the Executive's employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Measurement Date, until such dispute is resolved either by mutual written
agreement of the parties or by an arbitrator's award pursuant to Section 5.1.
Following the resolution of such dispute, the sum of the payments made to the
Executive under clause (a) of this Section 5.3 shall be deducted from any cash
payment which the Executive is entitled to receive pursuant to Section 4; and if
such sum exceeds the amount of the cash payment which the Executive is entitled
to receive pursuant to Section 4, the excess of such sum over the amount of such
payment shall be repaid (without interest) by the Executive to the Company
within 60 days of the resolution of such dispute.
14
<PAGE>
6. Successors.
6.1 Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company expressly to
assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure
of the Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.
6.2 Successor to Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to the Executive or his family hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
7. Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable
nationwide overnight courier service, in each case addressed to the Company, at
7 Lopez Road, Wilmington, Massachusetts 01887, and to the Executive at Ness
Acre, Ness Acre Lane, Willason, South Wirral L63 2TJ, UNITED KINGDOM (or to such
other address as either the Company or the Executive may have furnished to the
other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give any notice, instruction or
other communication hereunder using any other means, but no such notice,
instruction
15
<PAGE>
or other communication shall be deemed to have been duly delivered unless and
until it actually is received by the party for whom it is intended.
8. Miscellaneous.
8.1 Employment by Subsidiary. For purposes of this Agreement, the
Executive's employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.
8.2 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
8.3 Injunctive Relief. The Company and the Executive agree that any
breach of this Agreement by the Company is likely to cause the Executive
substantial and irrevocable damage and therefore, in the event of any such
breach, in addition to such other remedies which may be available, the Executive
shall have the right to specific performance and injunctive relief.
8.4 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts, without regard to conflicts of law principles.
8.5 Waivers. No waiver by the Executive at any time of any breach
of, or compliance with, any provision of this Agreement to be performed by the
Company shall be deemed a waiver of that or any other provision at any
subsequent time.
8.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.
8.7 Tax Withholding. Any payments provided for hereunder shall be
paid net of any applicable tax withholding required under federal, state or
local law.
8.8 Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations
16
<PAGE>
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.
8.9 Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
CENTENNIAL TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
-----------------------------------
John C. Nugent
17
<PAGE>
Exhibit 10.24
March 31, 1999
Kathleen C. Little
50 Hosmer Street
Acton, MA 01720
Dear Kathleen:
The purpose of this letter agreement is to set forth our mutual
understanding and agreement with respect to: (i) your separation from the
Company; and (ii) the establishment of the terms of your severance and
separation from employment. We have agreed as follows:
1. Separation from Employment. Effective as of the close of business on
Friday, May 7, 1999 (your "separation date"), you will no longer be a
full-time employee of the Company, as the Company will terminate your
employment without cause, and you will relinquish as of that date any
positions that you hold with the Company.
2. Severance Payment. The Company shall provide you with severance pay
equivalent to your regular base salary (less all applicable federal,
state, or local tax withholding, F.I.C.A., and any other applicable
payroll deductions) through November 7, 1999, in accordance with the
Company's regular pay practices. Such payments shall be made in
installments corresponding to the regular pay periods of the Company
and shall be mailed to you at 50 Hosmer Street, Acton, MA 01720. In
addition, the Company will continue to offer you health insurance
benefits on the terms currently offered to you and in effect at the
time of execution of this agreement until the earlier of (i) the date
on which you are eligible to participate in a health insurance plan
offered by your next employer, or (ii) November 7, 1999.
3. Monetary Consideration. In consideration of this letter agreement and
your General Release, the Company has offered and you have accepted to
act as a part-time employee of the Company, commencing November 8,
1999 and terminating on the earlier of (i) at the close of business on
March 31, 2002, or (ii) the day on which you have exercised all stock
options which you will hold, if any, on November 8, 1999. In this
position, you shall provide advice and assistance to the Company from
time to time, as directed by management, for which you shall be paid
at a rate of one hundred dollars ($100) per quarter (less all
applicable federal, state or local tax withholding, F.I.C.A., and any
other applicable payroll deductions) payable to you in accordance with
the Company's bi-weekly payroll payment policies, but for which you
shall receive no other benefits, except that your rights to
participate in the Company's 1994 Stock Option Plan shall continue
throughout the period of your part-time employment and except those
benefits provided for below and/or are required by law. You
acknowledge that you are not
<PAGE>
otherwise entitled to the benefits described in this paragraph
pursuant to the Employment Agreement or any other agreement or
understanding. The parties understand and agree that your role as a
part-time employee of the Company as provided under this paragraph
does not preclude you from seeking or securing any full-time or other
part-time employment after your separation date.
4. Compensation Received to Date. On or before your separation date, you
will be paid all compensation to which you are entitled for services
rendered to the Company through your separation date, including any
bonus earned for the Company's fiscal year ending March 31, 1999. You
agree that you will make no claims for further compensation from the
Company of any type, including bonus payments, commission payments,
and vacation pay, except such sums as are provided for in this letter
agreement.
5. Outplacement Assistance. In further consideration of this letter
agreement and your general release, the Company shall provide you with
three (3) months of outplacement assistance services at a provider of
such services selected by the Company. You acknowledge that you are
not otherwise entitled to the benefits described in this paragraph
pursuant to the Employment Agreement or any other agreement or
understanding.
6. Transfer of Responsibilities and Continuing Cooperation. You shall
cooperate fully with the Company and its personnel on an as needed and
as required basis to provide an orderly transfer of your duties and
responsibilities and to provide continuing assistance in connection
with on-going litigation and investigation matters. This cooperation
includes timely compliance with all reasonable requests for
information and other materials. This cooperation also includes timely
compliance with all reasonable requests for information and assistance
in connection with any and all on-going Company litigation,
investigations, and legal inquiries. The Company agrees to reimburse
you for any reasonable travel costs and expenses, including meals and
lodging, incurred by you in connection with such compliance, and to
make available to you upon reasonable request and notice pertinent
records and documents related to such litigation, investigations and
legal inquiries, which you agree will be used solely in relation
thereto and for no other purpose. To the extent that you require legal
representation in connection with these efforts that cannot be
practically provided by the Company's counsel, the Company will
reimburse you for any reasonable attorneys' fees and expenses related
thereto.
<PAGE>
7. Confidentiality. You agree that you will not, without the Company's
prior written consent, reveal or disclose to any person or entity
outside of the Company or use for your own benefit or for the benefit
of any other person or entity, any confidential information concerning
the business or affairs of the Company, or concerning the Company's
customers, clients, or employees ("Confidential Information"). You
further agree that you will refer all requests by any third party or
the media regarding the Company, your employment, or your termination
to the Company's General Counsel.
8. Return of Property. On your separation date, you will return to the
Company all property of the Company that is in your possession or
under your control, including, without limitation, any and all files,
documents and other information with respect to the Company's
management, operations or customers, including all files, documents,
or other information containing Confidential Information.
Notwithstanding the foregoing, you may retain the fax/printer that the
Company purchased on your behalf presently located in your home.
9. Non-Disparagement. You further agree that you will not, at any time
after the date hereof, make any remarks or comments, orally or in
writing, to customers, potential customers, regulators or others,
which or who have, or could reasonably be anticipated to have,
business dealings with the Company, or to the media, which remarks or
comments reasonably could be construed to be derogatory or disparaging
to the Company or any of its shareholders, officers, directors,
employees, attorneys or agents, or which reasonably could be
anticipated to be damaging or injurious to the Company's reputation or
good will or to the reputation or good will of any person associated
with the Company.
10. Remedies of the Company. You acknowledge that the restrictions
contained in paragraphs 7 and 9 of this letter agreement are
reasonable and necessary for the protection of the legitimate
interests of the Company, that any violation of those restrictions
would cause substantial injury to the Company, and that the Company
would not have entered into this letter agreement without your
agreement to be bound by those restrictions. In addition, you
recognize and agree that the Company's remedy at law for material
breaches of those restrictions is inadequate, that the damages for any
material breach thereof would be irreparable, and that the Company
shall be entitled to preliminary and permanent injunctive relief and
specific performance thereof, in addition to any remedies it may have
for monetary damages or other relief. You further recognize and agree
that the covenants contained in paragraphs 7 and 9 shall be construed
as independent of any other provision of this letter agreement and
that the existence of any claim or cause of
<PAGE>
action by you against the Company shall not constitute a defense to
the enforcement by the Company of said covenants.
11. Breach of Agreement. You understand and agree that any material breach
of your obligations under this letter agreement will immediately
render the Company's obligations and agreements hereunder null and
void, and all payments pursuant to paragraph 3 hereof shall
immediately cease and you shall repay to the Company forthwith all
sums you have been paid or sums paid on your behalf pursuant to
paragraph 3.
12. References. In response to inquiries from your prospective employers,
the Company shall state that it is the policy of the Company to verify
only dates of employment and titles. Upon receipt from you of a
proposed letter of reference, the Company agrees to execute and
deliver such a letter to you, so long as such letter is acceptable to
the Company in its exercise of reasonable judgment.
13. General Release. In consideration of the good and valuable
consideration set forth in this letter agreement, the receipt and
sufficiency of which consideration you hereby acknowledge, and except
for the rights granted under this separation agreement and any
indemnification rights that you may have pursuant to the By-Laws of
the Company and as provided by law, which rights, if any, are
specifically excepted from the scope of this release, you, for
yourself and your heirs, legal representatives, beneficiaries, assigns
and successors in interest, hereby knowingly and voluntarily release,
remise and forever discharge the Company and its successors, assigns,
former, current or future shareholders, officers, directors,
employees, agents, attorneys and representatives, whether in their
individual or official capacities, from any and all actions or causes
of action, suits, debts, claims, complaints, contracts, controversies,
agreements, promises, damages, claims for attorneys' fees, punitive
damages or reinstatement, judgments and demands whatsoever, in law or
equity, you ever had from the beginning of the world to this date,
including, without limitation, any claims under Title VII of the Civil
Rights Act of 1964, 42 U.S.C.(Section).2000e et seq.; the Employee
Retirement Income Security Act of 1974, as amended, 29
U.S.C.(Section).1000 et seq., Massachusetts General Laws, Chapter
151B; the Americans with Disabilities Act, 42 U.S.C.(Section).12101 et
seq.; claims for breach of contract or based on tort; and any other
statutory, regulatory or common law causes of action. You hereby
acknowledge and understand that this is a General Release.
14. Acknowledgment. You acknowledge and agree that you understand the
meaning of this letter agreement, that you freely and voluntarily
enter into it and the General
<PAGE>
Release contained herein, and that the Company has advised you to
consult an attorney of your choosing prior to signing this letter
agreement. You agree that no fact, evidence, event, or transaction
occurring before the execution of this letter agreement, which is
currently unknown to you, but which may hereafter become known to you,
shall affect in any manner the final and unconditional nature of the
agreements and releases set forth herein.
15. Miscellaneous. This letter agreement shall be construed in accordance
with the laws of the Commonwealth of Massachusetts. A waiver of any
breach of or failure to comply fully with any provision of this letter
agreement by either party shall not operate or be construed as a
waiver of any subsequent breach thereof or failure to comply. If any
portion or provision of this letter agreement shall to any extent be
deemed invalid or unenforceable, the remainder of this letter
agreement, or the application of such portion or provision in
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each portion and
provision of this letter agreement shall be valid and enforceable to
the fullest extent permitted.
To avoid any possible misunderstanding, the Company intends this letter
agreement to be a comprehensive statement of the terms of your separation from
employment. This letter agreement supersedes any prior understanding or
statement made to you by the Company regarding your positions with the Company
or your arrangements with the Company for the period after your separation from
employment. For the same reason, any modifications of the terms set forth in
this letter agreement must be in writing and signed by you and by me on behalf
of the Company.
<PAGE>
Please indicate your agreement to the terms of this letter agreement by
signing and dating the last page of the enclosed copy of this letter agreement,
and return it to me.
Sincerely,
/s/ L. Michael Hone
L. Michael Hone
President and Chief Executive Officer
AGREED TO AND EXECUTED UNDER SEAL THIS 31st day of March, 1998.
/s/ Kathleen C. Little
---------------------------
Kathleen C. Little
<PAGE>
Exhibit 21
Centennial Technologies, Inc.
Schedule of Subsidiaries
As of March 31, 1999
<TABLE>
<CAPTION>
Name of Entity Location % Ownership
-------------- -------- -----------
<S> <C> <C>
Centennial Capital Corporation Massachusetts 100%
Centennial Technologies International United Kingdom 100%
Limited
Centennial Technologies Canada, Inc. Canada 100%
Intelligent Truck Project, Inc. Massachusetts 100%
</TABLE>
<PAGE>
Exhibit 24.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-75335, No. 333-75331, No. 333-75329, No. 033-89154) pertaining
to the 1999 Employee Stock Purchase Plan, 1994 Formula Stock Option Plan, 1994
Stock Option Plan, and Post-Effective Amendment No. 1 to the 1994 Stock Option
Plan and the 1994 Stock Option Plan, respectively, of our report dated May 6,
1999, with respect to the consolidated financial statements and schedule of
Centennial Technologies, Inc. included in the Annual Report (Form 10-K) for the
year ended March 31, 1999.
Ernst & Young LLP
Boston, Massachusetts
June 2, 1999
<PAGE>
Exhibit 24.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-75335, No. 333-75331, No. 333-75329,
No. 033-89154) pertaining to the 1999 Employee Stock Purchase Plan,
1994 Formula Stock Option Plan, 1994 Stock Option Plan, and Post-Effective
Amendment No. 1 to the 1994 Stock Option Plan, respectively of Centennial
Technologies, Inc. of our report dated May 15, 1998 relating to the financial
statements and financial statement schedules, for the twelve months ended
March 31, 1998 and the nine months ended March 31, 1997 which appear in this
Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 3,1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 4,922
<SECURITIES> 2,500
<RECEIVABLES> 4,521
<ALLOWANCES> 795
<INVENTORY> 3,049
<CURRENT-ASSETS> 14,553
<PP&E> 3,967
<DEPRECIATION> 1,508
<TOTAL-ASSETS> 18,804
<CURRENT-LIABILITIES> 7,108
<BONDS> 0
0
0
<COMMON> 205
<OTHER-SE> 11,491
<TOTAL-LIABILITY-AND-EQUITY> 18,804
<SALES> 27,633
<TOTAL-REVENUES> 27,633
<CGS> 18,968
<TOTAL-COSTS> 18,968
<OTHER-EXPENSES> 7,747
<LOSS-PROVISION> 170
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,862
<INCOME-TAX> 56
<INCOME-CONTINUING> 2,806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,806
<EPS-BASIC> .12
<EPS-DILUTED> .12
</TABLE>
