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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 26, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE TRANSITION PERIOD FROM TO .
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COMMISSION FILE NUMBER 1-12912
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CENTENNIAL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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)
(978) 988-8848
(Registrant's Telephone Number, Including Area Code)
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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 EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [ X ] NO [ ]
As of August 4, 1999, there were 3,161,229 shares of Common Stock, $.01
par value per share (the "Common Stock"), of the registrant outstanding.
1
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CENTENNIAL TECHNOLOGIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE NUMBER
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<S> <C>
Item 1. Financial Statements 3
Consolidated Balance Sheets at June 26, 1999 and March 31, 1999 3
Consolidated Statements of Income for three months ended 4
June 26, 1999 and June 27, 1998
Consolidated Statements of Cash Flows for three months ended 5
June 26, 1999 and June 27, 1998
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 23
</TABLE>
2
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PART I
ITEM 1. FINANCIAL STATEMENTS
CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
June 26, March 31,
1999 1999
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................$ 1,220 $ 4,922
Short-term investments....................................................... 5,385 2,500
Trade accounts receivable, net............................................... 3,877 3,726
Recoverable income taxes..................................................... 125 125
Inventories.................................................................. 3,008 3,049
Other current assets......................................................... 273 231
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Total current assets.............................................................. 13,888 14,553
Equipment and leasehold improvements.............................................. 4,477 3,967
Less: accumulated depreciation and amortization.............................. (1,777) (1,508)
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2,700 2,459
Other assets...................................................................... 90 92
Investment in former affiliate.................................................... 1,700 1,700
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Total assets......................................................................$ 18,378 $ 18,804
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses........................................$ 6,106 $ 7,072
Current portion of obligations under capital................................. 82 36
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Total current liabilities......................................................... 6,188 7,108
Long-term obligations under capital leases........................................ 273 --
Contingencies (Note 7)
Stockholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares
authorized, none issued...................................................... -- --
Common Stock, $.01 par value; 50,000,000 shares authorized, 3,167,000
issued and outstanding at June 26, 1999 and 2,569,000 issued and
outstanding at March 31, 1999................................................... 205 205
Additional paid-in capital........................................................ 84,205 84,200
Accumulated deficit............................................................... (72,466) (72,697)
Accumulated other comprehensive income............................................ (27) (12)
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Total stockholders' equity........................................................ 11,917 11,696
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Total liabilities and stockholders' equity........................................$ 18,378 $ 18,804
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
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June 26, June 27,
1999 1998
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<S> <C> <C>
Net sales.............................................. $ 6,681 $ 6,235
Cost of goods sold .................................... 4,556 4,590
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Gross profit................................... 2,125 1,645
Operating expenses:
Engineering, research and development............. 145 202
Selling, general and administrative expenses...... 1,844 1,408
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Operating income............................. 136 35
Other income, net...................................... 38 --
Net interest income.................................... 67 64
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Income before taxes.......................... 241 99
Income taxes........................................... 10 --
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Net income................................... $ 231 $ 99
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Net income per share -- basic........................... $ .07 $ .04
Net income per share -- diluted......................... $ .07 $ .04
Weighted average shares outstanding -- basic............ 3,167 2,312
Weighted average shares outstanding -- diluted........... 3,426 2,446
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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CENTENNIAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
June 26, June 27,
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 231 $ 99
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization........................... 269 264
Provision for loss on accounts receivable............... -- ( 22)
Provision for loss on inventory......................... ( 145) ( 279)
Change in operating assets and liabilities:
Accounts receivable................................ ( 151) ( 169)
Inventories........................................ 186 882
Other assets....................................... ( 40) 508
Income taxes payable............................... 10 --
Accounts payable and accrued expenses.............. ( 976) (1,488)
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Net cash used in operating activities.............. ( 616) ( 205)
Cash flows from investing activities:
Capital expenditures.................................... ( 150) ( 113)
Purchase of short-term investments...................... (2,885) --
Investment in former affiliates......................... -- 6
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Net cash used in investing activities.............. (3,035) ( 107)
Cash flows from financing activities:
Payments on equipment lease financing................... ( 41) ( 20)
Foreign currency translation of equity investment....... ( 10) --
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Net cash used in financing activities.............. ( 51) ( 20)
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Net decrease in cash and cash equivalents.................... (3,702) ( 332)
Cash and cash equivalents at beginning of period............. 4,922 5,358
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Cash and cash equivalents at end of period................... $ 1,220 $ 5,026
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Supplemental disclosure of cash flow information:
Acquisition of equipment through capital lease $ 360 $ --
transaction............................................... ------------ -----------
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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CENTENNIAL TECHNOLOGIES, INC.
NOTES TO UNAUDITED 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 exercises significant influence over operating and
financial policies are accounted for using the equity method. Other investments
are accounted for using the cost method. All significant intercompany balances
and transactions have been eliminated. Certain reclassifications have been made
to prior reported financial statements to conform to the fiscal 2000
presentation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all financial information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, these financial statements
include all adjustments (consisting only of normal recurring accruals) necessary
for a fair presentation of the results of operations for the interim periods
reported and of the financial condition of the Company as of the date of the
interim balance sheet. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
These financial statements should be read in conjunction with the Company's
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K for the fiscal period ended March 31, 1999 along with
any other filing with the Securities and Exchange Commission since March 31,
1999.
FISCAL YEAR
The Company's fiscal year begins on April 1. 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.
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.
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.
2. 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 June 26, 1999, substantially
all of the Company's cash, cash equivalents and short-term investments were held
by one financial institution. The Company primarily sells and grants credit to
domestic and foreign original equipment manufacturers and distributors. The
Company extends credit based on an evaluation of the customer's financial
condition and generally does not require collateral. The Company monitors its
exposure for credit losses and maintains allowances for anticipated losses. At
June 26, 1999 and March 31, 1999, the allowance for doubtful accounts was
$700,000 and $795,000, respectively.
6
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For the three months ended June 26, 1999, two customers represented 23% of
the Company's sales. For the first quarter of the prior year another customer
represented 32% of the Company's sales. For the quarter ended June 26, 1999
sales to this customer represented 5% of the Company's sales. During fiscal
1999, this customer engaged several contract manufacturers 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 these contract manufacturers for the
first quarter of fiscal 2000 and fiscal 1999 represented 15% and 3%,
respectively, of the Company's sales. 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.
Approximately 17% and 9% of the Company's sales for the three months ended
June 26, 1999 and June 27, 1998, respectively, were outside the United States,
primarily in several Western European countries. No one country comprised more
than 10% of the Company's sales.
3. EARNINGS PER SHARE
The Company computes basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standards ("SFAS") 128, "Earnings Per
Share," which the Company adopted as of March 31, 1998. 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.
On July 20, 1999, the Company's shareholders approved a one-for-eight
reverse stock split for shareholders of record as of the close of business on
July 22, 1999. In this report, all per share amounts and numbers of shares have
been restated to reflect a one-for-eight reverse stock split of the Company's
common stock, which was effective as of the opening of the stock market on July
23, 1999.
The following table sets forth the computation of earnings per share (in
thousands, except per share data). All shares issuable in connection with the
settlement of the Consolidated Litigation described in Note 7 are included in
the weighted average shares outstanding calculation as of July 20, 1998, the
date on which the Company's settlement of the Consolidated Litigation became
effective.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED JUNE 26, ENDED JUNE 27,
1999 1998
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(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BASIC EARNINGS PER SHARE
Numerator
Net earnings $ 231 $ 99
Denominator
Common shares outstanding 3,167 2,312
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Basic earnings per share $ .07 $ .04
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DILUTED EARNINGS PER SHARE
Numerator
Net earnings $ 231 $ 99
Denominator
Common shares outstanding 3,167 2,312
Stock options 259 134
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Shares used in computing diluted earnings
per share 3,426 2,446
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Diluted earnings per share $ .07 $ .04
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</TABLE>
7
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4. INVENTORIES
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
JUNE 26, MARCH 31,
1999 1999
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<S> <C> <C>
Raw material, primarily electronic components....... $ 1,745 $ 1,709
Work in process..................................... 320 399
Finished goods...................................... 943 941
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$ 3,008 $ 3,049
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</TABLE>
The Company maintains levels of inventories that it believes are necessary
based upon assumptions concerning its growth, mix of sales and availability and
pricing 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"), as to which 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, which
was included in other income in the second quarter of fiscal 1999, and the right
to retain and sell the Custom Inventory at issue. The Company sold a portion
of the Custom Inventory during fiscal 1999, and sold the remaining portions
of the Custom Inventory during the three months ended June 26, 1999 for
approximately $.8 million, which has been included in net sales.
5. INVESTMENT IN CENTURY ELECTRONICS MANUFACTURING, INC.
Since October 1996, the Company has held an equity interest in Century
Electronics Manufacturing, Inc. ("Century"), a contract manufacturer.
On February 4, 1998, Century redeemed a portion of the Company's debt and
equity holdings in Century in exchange for $9.7 million in cash, $4.0 million of
Century Series B Convertible Preferred Stock and the forgiveness of certain
interest. The Series B Convertible Preferred Stock is equivalent upon conversion
to approximately 7%, non-diluted, of Century's outstanding shares, is
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 in the third quarter of 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.
6. DEBT
On November 24, 1998, the Company entered into a credit agreement with Fleet
National Bank 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, and are secured by substantially all of
the Company's assets. At June 26, 1999 and March 31, 1999 the Company had no
outstanding borrowings under these credit facilities.
LEASES
In April, 1999, the Company entered into a five year lease for a new piece
of manufacturing equipment. Monthly payments under this lease of $6,318
commenced in April 1999.
8
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7. 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 were filed in or transferred to the United
States District Court for the District of Massachusetts. These complaints
asserted 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 asserted claims against some or all of the Company's Board of
Directors, and some complaints asserted 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,
were also 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 named the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and alleged 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 named the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and Mr. Ramaekers' employer, Jay Alix
& Co., and alleged 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, 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. The Company has issued 854,300 shares of common
stock pursuant to the Settlement Agreement. 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
9
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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").
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 43,125 shares of the Company's Common Stock and the payment to the
class of up to $50,000 for notice and administrative costs. The form of the
settlement agreement has been approved preliminarily by the Court, and notice to
class members of the proposed settlement will be provided. Thereafter, the Court
will rule on any objections to the settlement agreement and determine whether it
should be finally approved. 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.
8. 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.
Comprehensive loss is comprised of cumulative translation adjustments and was
$15,000 and $0 for the three months ended June 26, 1999 and June 27, 1998,
respectively.
9. SEGEMENTS 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.
10
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CENTENNIAL TECHNOLOGIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT
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
including those set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1999 under the heading "Risk Factors." 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.
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 following discussion and analysis should be read in conjunction with the
unaudited Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated condensed statements of
income data of the Company expressed as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JUNE 26, JUNE 27,
1999 1998
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<S> <C> <C>
Net sales......................................... 100.0% 100.0%
Cost of goods sold................................ 68.2 73.6
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Gross profit................................... 31.8 26.4
Operating expenses:
Engineering, research and development costs..... 2.2 3.2
Selling, general and administrative expenses.... 27.6 22.6
----------- -----------
Operating income ............................ 2.0 .6
Other income, net................................. .6 --
Net interest income............................... 1.0 1.0
----------- -----------
Income before taxes.......................... 3.6 1.6
Income taxes...................................... .1 --
----------- -----------
Net income................................... 3.5% 1.6%
----------- -----------
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</TABLE>
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QUARTER ENDED JUNE 26, 1999 AND JUNE 27, 1998
NET SALES.
Net sales increased 7% to $6.7 million in the quarter ended June 26, 1999
compared to $6.2 million in the same period a year ago. The increase in sales
was primarily due to a 25% increase in the volume of PC cards sold in fiscal
2000 as compared to fiscal 1999 partially offset by a 14% decline in the average
selling price of the Company's products during the same period. 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 component costs to increase for the remainder of fiscal 2000, which the
Company believes should reverse the downward trend in its average selling price.
There can be no assurance that if component costs rise the Company will be able
to increase its average selling price or that competitive pricing pressures will
not adversely affect the average selling price. The Company believes there may
be shortages of certain of its components, particularly with respect to flash
memory. Any such shortages could have a material adverse effect on the Company's
business, financial condition and results of operations.
For the three months ended June 26, 1999, two customers represented 23% of
the Company's sales. For the same period of the prior year another customer
represented 32% of sales. For the quarter ended June 26, 1999 sales to this
customer represented 5% of the Company's sales. During fiscal 1999, this
customer engaged several contract manufacturers 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 these contract manufacturers for the first quarter
of fiscal 2000 and fiscal 1999 represented 15% and 3%, respectively, of the
Company's sales. 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.
Sales outside of the United States represented 17% and 9% of sales for
the quarters ended June 26, 1999 and June 27, 1998, respectively.
COSTS OF GOODS SOLD.
Cost of goods sold remained unchanged at $4.6 million for the three months
ended June 26, 1999 compared to the same period a year ago. Gross margins were
32% for the quarter ended June 26, 1999 compared to 26% for the quarter ended
June 27, 1998. During the quarter ended June 26, 1999, the Company sold the
remaining portions of some customized inventory for approximately $0.8 million,
of which $145,000 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. The gross margins, excluding this sale of fully
reserved inventory, was 30%. The Company believes costs of certain of its
component memory devices will increase during fiscal 2000. There can be no
assurance the Company will be able to increase its average selling price to
offset such component cost increases which might adversely affect the Company's
gross margin.
ENGINEERING, RESEARCH AND DEVELOPMENT COSTS.
Engineering, research and development costs were $145,000 for the three
months ended June 26, 1999 compared to $202,000 for the quarter ended June 27,
1998. The lower engineering costs for the quarter ended June 26, 1999 are due
generally to lower engineering material costs. The Company expects engineering,
research and development costs to be higher in future quarters.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Selling, general and administrative expenses increased to $1.8 million for
the quarter ended June 26, 1999 compared to $1.4 million in the same period a
year ago. The $.4 million increase in expenses is attributed to $.5 million
refund in directors and officers liability insurance premiums on policies that
were rescinded in February 1997, which refund was recorded in the first quarter
of fiscal 1999 and higher operating costs due to an increase in personnel for
the quarter ended June 26, 1999. Selling, general and administrative expenses
are expected to continue to be higher during fiscal 2000.
OTHER INCOME.
Net interest income was $67,000 for the quarter ended June 26, 1999
compared to $64,000 for the quarter ended June 27, 1998.
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EARNINGS PER SHARE.
On July 20, 1999, the Company's shareholders approved a one-for-eight
reverse stock split of its common stock, which was effective as of the opening
of the stock markets on July 23, 1999. In this report, all per share amounts and
numbers of shares have been restated to reflect the reverse stock split. The
increase in the weighted average shares outstanding from the first quarter of
fiscal 1999 compared to the first quarter of fiscal 2000 reflects the pending
distribution of 854,300 shares in settlement of class action litigation which
became effective during the second quarter of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since the Company's inception, it has financed its operating activities
primarily from public and private offerings of equity securities, loans from
financial institutions and positive cash flows from operations.
The Company experienced significant losses from operations prior to fiscal
1999. 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. The Company can make no assurances that measures
taken to date or to be taken in the future will be sufficient to assure
profitability 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 June 26, 1999, working capital increased to approximately $7.7 million,
compared to working capital of $7.4 million at March 31, 1999, due principally
to positive operating income of $231,000, depreciation and amortization of
$269,000 offset by net capital expenditures of $150,000.
On November 24, 1998, the Company entered into a credit agreement with Fleet
National Bank 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 June 26, 1999 and March 31, 1999, the Company had no
outstanding borrowings under these credit facilities.
INVESTING TRANSACTIONS
Net capital expenditures amounted to $510,000 in the quarter ended June 26,
1999 compared to $113,000 in the quarter ended June 27, 1998. As of June 26,
1999, the Company had remaining obligations of $355,000 on equipment financing
leases.
The Company had no commitments as of June 26, 1999 for future capital
equipment expenditures in fiscal year 2000.
FINANCING TRANSACTIONS
In April 1999, the Company entered into a five-year lease for a new
piece of manufacturing equipment. Monthly payments under this lease of $6,318
commenced in April 1999.
INVESTMENT IN CENTURY ELECTRONICS MANUFACTURING, INC.
Since October 1996, the Company has held an equity interest in Century
Electronics Manufacturing, Inc. ("Century"), a contract manufacturer.
On February 4, 1998, Century redeemed a portion of the Company's debt and
equity holdings in Century in exchange for $9.7 million in cash, $4.0 million of
Century Series B Convertible Preferred Stock and the forgiveness of certain
interest. The Series B Convertible Preferred Stock is equivalent upon conversion
to approximately 7%, non-diluted, of Century's outstanding shares, is
non-
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voting, has no dividend, and has a liquidation preference of $4.0 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 in the third quarter of 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.
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 1 --Legal
Proceedings." The Company has been granted final approval of its proposed
settlement of these suits, has issued cash and stock in satisfaction of its
obligations to the class action plaintiffs in the Consolidated Litigation, and
believes that such lawsuits will be settled substantially in accordance with the
description contained in "Item 1 -- 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 Company has issued
854,300 shares of common stock pursuant to the Settlement Agreement.
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. An unfavorable outcome to the
Company in these matters could have a material adverse affect on the Company's
liquidity, business, financial condition and results of operations.
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
results may differ materially from those 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 Condition and Results of Operations -- Liquidity" for discussion of
these losses in prior periods.
DEPENDENCE ON MAJOR CUSTOMERS.
For the three months ended June 26, 1999, two customers represented 23% of
the Company's sales. For the first quarter of the prior year another customer
represented 32% of sales. For the first quarter of fiscal 2000 sales to this
customer represented 5% of the Company's sales. During fiscal 1999, this
customer engaged contract manufacturers 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 these contract manufacturers for the first quarter
of fiscal 2000 and fiscal 1999 represented 15% and 3%, respectively, of the
Company's sales. 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. 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
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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 may in the future 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 may 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:
<TABLE>
<S> <C>
- timing of receipt and delivery of - competitive pricing pressures
significant orders for the Company's products - increases in raw material costs
- costs associated with the expansion of operations - changes in customer and product mix
- production difficulties. - quality of the Company's products
- write-downs or write-offs of investments - exchange rate fluctuations
in other companies - market acceptance of new or enhanced versions
of the Company's products
</TABLE>
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:
<TABLE>
<S> <C>
- quarter-to-quarter operating results - industry conditions
- awards of orders to the Company - new product or product development
or its competitors announcements by the Company or its competitors
- changes in earnings estimates by analysts
</TABLE>
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.
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<PAGE>
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.
HISTORICAL SINGLE PRODUCT CONCENTRATION.
PC cards and related services constitute 100% of the Company's sales for
fiscal 1999 and the first quarter of fiscal 2000. 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:
<TABLE>
<S> <C>
- product quality and performance - order turnaround
- provision of competitive design capabilities - timely response to advances in technology
- adequate manufacturing capacity - production efficiency
- timing of new product introductions by the - number and nature of the Company's competitors
Company, its customers and its competitors in a given market
- price - general market and economic conditions
</TABLE>
In addition, market conditions are expected to lead to intensified price
competition for the Company's products and services, 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.
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<PAGE>
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.
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 - material planning
- product assembly - product test
- invoicing - 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 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
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<PAGE>
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 has only received a few
responses to date and has not found any issues with these responses. 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 Company believes its tertiary business information system is Year 2000
compliant. 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 has analyzed the responses received from its key suppliers and customers
and is following up with those who have not yet provided a formal response. The
Company received substantially all off its responses from its key suppliers and
has found these responses to indicate suppliers to be Year 2000 compliant. The
Company has only received a few responses from its Customers. There can be no
assurance that the Company will be successful in obtaining from these vendors or
customers such responses. 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.
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.
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<PAGE>
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 contingency plans during the
second quarter of 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.
RISKS OF INTERNATIONAL OPERATIONS AND EURO CURRENCY.
For the three months ended June 26, 1999 and June 27, 1998, the Company
derived approximately 17% and 9%, 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.
Beginning in 1999, 11 member countries of the European union established
fixed conversion rates between their existing sovereign currencies and adopted
the Euro as their common legal currency. During the three year transition, the
Euro will be available for non-cash transactions and legacy currencies will
remain legal tender. The Company is continuing to assess the Euro's impact on
its business. The Company is reviewing the ability of its accounting and
information systems to handle the conversion, the legal and contractual
implications of agreements, as well as pricing strategies. The Company expects
that any additional modifications to its operations and systems will be
completed on a timely basis and do not believe the conversion will have a
material adverse impact on its operations. However, there can be no assurance
that the Company will be able to modify successfully all systems and contracts
to comply with Euro requirements.
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
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<PAGE>
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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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.
20
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PART II- OTHER INFORMATION
ITEM 1. 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
whether reported results contained material misstatements, approximately 35
purported class action lawsuits were filed in or transferred to the United
States District Court for the District of Massachusetts. These complaints
asserted 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 asserted claims against some or all of the Company's Board of
Directors, and some complaints asserted 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,
were also 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 named the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and alleged 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 named the Company's former Interim Chief
Executive Officer, Lawrence J. Ramaekers, and Mr. Ramaekers' employer, Jay Alix
& Co., and alleged 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, 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. The Company has issued 854,300 shares of common
stock pursuant to the Settlement Agreement. 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.
21
<PAGE>
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").
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 43,125 shares of the Company's Common Stock and the payment to the
class of up to $50,000 for notice and administrative costs. The form of the
settlement agreement has been approved preliminarily by the Court, and notice to
class members of the proposed settlement will be provided. Thereafter, the Court
will rule on any objections to the settlement agreement and determine whether it
should be finally approved. 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.
ITEM 2. CHANGES IN SECURITIES
On April 30, 1999, the Company's Board of Directors adopted the following
two provisions to Article II of the Company's Amended and Restated Bylaws
relating to the conduct of stockholders meetings:
"Section 4. Special Meetings. Special meetings of the stockholders may
be called for any purpose or purposes, unless otherwise prescribed by statute or
by the Certificate of Incorporation, as amended, by the Chairman of the Board,
if any, or the President, and shall be called by the President or Secretary at
the request, in writing, of a majority of the Board of Directors. Such request
shall state the purpose of the proposed meeting. "
"Section 14. Limitations on Calling of Meetings. Meetings of the
stockholders may be called only as expressly provided for in the Certificate of
Incorporation of the Corporation, in these Bylaws or as otherwise required by
statute."
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
22
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The exhibits listed on the Exhibit Index filed as a part of
this Quarterly Report on Form 10-Q are incorporated herein by reference.
(b) Reports on Form 8-K. During the quarter ended June 26, 1999 the
Company filed no reports on Form 8-K.
ITEM
NO. DESCRIPTION
- --- -----------
3.1 Amended and Restated Bylaws of Centennial Technologies, Inc.
10.1 Lease Agreement by and between Centennial Technologies, Inc.
and Crocker Capital
27 Financial Data Schedule
23
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SIGNATURES
IN ACCORDANCE WITH SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, THE REGISTRANT CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CENTENNIAL TECHNOLOGIES, INC.
Dated: August 10, 1999 BY: /s/ L. MICHAEL HONE
---------------------------------
L. Michael Hone
President and Chief Executive Officer
Dated: August 10, 1999 BY: /s/ RICHARD J. PULSIFER
-----------------------------------
Richard J. Pulsifer
Chief Financial Officer
24
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED BYLAWS
OF
CENTENNIAL TECHNOLOGIES, INC.
ARTICLE I. OFFICES.
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
shall be at The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle, State of Delaware 19801.
SECTION 2. ADDITIONAL OFFICES. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II. MEETINGS OF STOCKHOLDERS.
SECTION 1. TIME AND PLACE. A meeting of stockholders for any purpose
may be held at such time and place within or without the State of Delaware as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
SECTION 2. ANNUAL MEETING. Annual meetings of stockholders, commencing
with the year 1995, shall be held on the second Tuesday in November if not a
legal holiday, or, if a legal holiday, then on the next secular day following,
at 10:00 a.m., or at such other date and time as shall, from time to time, be
designated by the Board of Directors and stated in the notice of the meeting. At
such annual meetings, the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meetings.
SECTION 3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting, stating the place, date, and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than ten (unless a longer
period is required by law) nor more than sixty days prior to the meeting.
SECTION 4. SPECIAL MEETINGS. Special meetings of the stockholders may
be called for any purpose or purposes, unless otherwise prescribed by statute or
by the Certificate of Incorporation, as amended, by the Chairman of the Board,
if any, or the President, and shall be called by the President or Secretary at
the request, in writing, of a majority of the Board of Directors. Such request
shall state the purpose of the proposed meeting.
SECTION 5. NOTICE OF SPECIAL MEETING. Written notice of a special
meeting, stating the place, date, and time thereof and the purpose or purposes
for which the
<PAGE>
meeting is called, shall be given to each stockholder entitled to vote at such
meeting not less than ten (unless a longer period is required by law) nor more
than sixty days prior to the meeting.
SECTION 6. LIST OF STOCKHOLDERS. The transfer agent or the officer in
charge of, the stock ledger of the Corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, at a
place within the city where the meeting is to be held, which place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present in
person thereat.
SECTION 7. PRESIDING OFFICER AND ORDER OF, BUSINESS.
(a) Meetings of stockholders shall be presided over by the Chairman of
the Board. If he is not present or there is none, they shall be presided over by
the President, or, if he is not present or there is none, by a Vice President,
or, if he is not present or there is none, by a person chosen by the Board of
Directors, or, if no such person is present or has been chosen, by a chairman to
be chosen by the stockholders owning a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote at the meeting
and who are present in person or represented by proxy. The Secretary of the
Corporation, or, if he is not present, an Assistant Secretary, or, if he is not
present, a person chosen by the Board of Directors, shall act as Secretary at
meetings of stockholders; if no such person is present or has been chosen, the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting who are present in
person or represented by proxy shall choose any person present to act as
secretary of the meeting.
(b) The following order of business, unless otherwise determined at the
meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
(1) Call of the meeting to order.
(2) Presentation of proof of mailing of the notice of the
meeting and, if the meeting is a special meeting, the
call thereof.
(3) Presentation of proxies.
(4) Announcement that a quorum is present.
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(5) Reading and approval of the minutes of the previous
meeting.
(6) Reports, if any, of officers.
(7) Election of directors, if the meeting is an annual
meeting or a meeting called for that purpose.
(8) Consideration of the specific purpose or purposes,
other than the election of directors, for which the
meeting has been called, if the meeting is a special
meeting.
(9) Transaction of such other business as may properly
come before the meeting.
(10) Adjournment.
SECTION 8. QUORUM AND ADJOURNMENTS. The presence in person or
representation by proxy of the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote
shall be necessary to, and shall constitute a quorum for, the transaction of
business at all meetings of the stockholders, except as otherwise provided by
statute or by the Certificate of Incorporation, as amended. If, however, a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat who are present in person or
represented by proxy shall have the power to adjourn the meeting from time to
time until a quorum shall be present or represented. If the time and place of
the adjourned meeting are announced at the meeting at which the adjournment is
taken, no further notice of the adjourned meeting need be given. Even if a
quorum shall be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat who are present in person or represented
by proxy shall have the power to adjourn the meeting from time to time for good
cause to a date that is not more than thirty days after the date of the original
meeting. Further notice of the adjourned meeting need not be given if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At any adjourned meeting at which a quorum is present in person or
represented by proxy, any business may be transacted that might have been
transacted at the meeting as originally called. If the adjournment is for more
than thirty days, or if, after the adjournment, a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote thereat.
SECTION 9. VOTING.
(a) At any meeting of the stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Certificate of Incorporation, as amended, each
stockholder of record shall be entitled to one vote for each share of capital
stock registered in his name on the books of the Corporation.
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(b) All elections shall be determined by a plurality vote, and, except
as otherwise provided by law or the Certificate of Incorporation, as amended,
all other matters shall be determined by a vote of a majority of the shares
present in person or represented by proxy and voting on such other matters.
SECTION 10. ACTION BY CONSENT. Any action required or permitted by law
or the Certificate of Incorporation, as amended, to be taken at any meeting of
stockholders may be taken without a meeting, without prior notice if a written
consent, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present or represented-by proxy and voted. Such
written consent shall be filed with the minutes of the meetings of stockholders.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing thereto.
SECTION 11. CONDUCT OF MEETINGS.
(a) RULES, REGULATIONS AND PROCEDURES. The Board of Directors of the
Corporation may adopt by resolution such rules, regulations and procedures for
the conduct of any meeting of stockholders of the Corporation as it shall deem
appropriate. Except to the extent inconsistent with such rules, regulations and
procedures as adopted by the Board of Directors, the officer of the Corporation
presiding at any meeting of stockholders shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such officer, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the Board of
Directors or prescribed by the officer of the Corporation presiding at the
meeting, may include, without limitation, the following: (i) the establishment
of an agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record of the Corporation, their duly authorized and constituted proxies or such
other persons as shall be determined; (iv) restrictions on entry to meeting
after the time fixed for the commencement thereof; and (v) limitations on the
time allotted to questions or comments by participants. Unless and to the extent
determined by the Board of Directors or the officer of the Corporation presiding
at the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
(b) CLOSING OF POLLS. The officer of the Corporation presiding at any
meeting of stockholders shall announce at the meeting when the polls for each
matter to be voted upon at the meeting will be closed. If no announcement is
made, the polls shall be deemed to have closed upon the final adjournment of the
meeting.
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<PAGE>
After the polls close, no ballots, proxies or votes or any revocations or
changes thereto may be accepted.
SECTION 12. NOMINATION OF DIRECTORS.
(a) Except for (i) any directors entitled to be elected by the holders
of preferred stock or any other securities of the Corporation (other than common
stock) and (ii) any directors elected in accordance with Section 2 of Article
III hereof by the Board of Directors to fill a vacancy, only persons who are
nominated in accordance with the procedures set forth in this Section 12 shall
be eligible for election as directors. Nomination for election to the Board of
Directors of the Corporation at a meeting of stockholders may be made (i) by or
at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation entitled to vote for the election of directors at such meeting
pursuant to timely notice thereof in writing to the Secretary in accordance with
the procedures set forth in this Section 12. To be timely, a stockholder's
notice must be received by the Secretary at the principal executive offices of
the Corporation as follows: (a) in the case of an election of directors at an
annual meeting of stockholders, not less than 70 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 20 days, or delayed by more than 70 days, from such anniversary date,
to be timely, a stockholder's notice must be so received not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the seventieth day prior to such annual meeting or the
tenth day following the day on which public announcement of the date of such
annual meeting is first made; or (b) in the case of an election of directors at
a special meeting of stockholders, not earlier than the ninetieth day prior to
such special meeting and not later than the close of business on the later of
the seventieth day prior to such special meeting or the tenth day following the
day on which public announcement of the date of such special meeting is first
made. The stockholder's notice to the Secretary shall set forth: (a) as to each
proposed nominee (i) such person's name, age, business address and, if known,
residence address, (ii) the principal occupation or employment of such person,
(iii) the class and number of shares of stock of the Corporation which are
beneficially owned by such person, and (iv) any other information concerning
such person that must be disclosed as to nominees in proxy solicitations
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(or any successor provision thereto); (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such stockholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such stockholder; and (c) as to the beneficial
owner, if any, on whose behalf the nomination is made (i) the name and address
of such beneficial owner and (ii) the class and number of shares of the
Corporation which are beneficially owned by such person. In addition, to be
effective, the stockholder's notice must be accompanied by the written consent
of the proposed nominee to serve as a director if elected. The
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<PAGE>
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation.
(b) The officer or the Corporation presiding at any meeting shall, if
the facts warrant, determine that a nomination was not properly made in
accordance with the provisions of this Section 12, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
(c) Nothing in the foregoing provision shall obligate the Corporation
or the Board of Directors to include in any proxy statement or other stockholder
communication distributed on behalf of the Corporation or the Board of Directors
information with respect to any nominee for directors submitted by a
stockholder.
SECTION 13. NOTICE OF BUSINESS AT ANNUAL MEETINGS.
(a) At any annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, (i) if such business relates to the election of
directors of the Corporation, the procedures in Section 12 must be complied with
and (ii) if such business relates to any other matter, the stockholder must have
given timely notice thereof in writing to the Secretary in accordance with the
procedures set forth in this Section 13. To be timely, a stockholder's notice
must be received by the Secretary at the principal executive offices of the
Corporation not less than 70 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; PROVIDED, HOWEVER, that in
the event that the date of the annual meeting is advanced by more than 20 days,
or delayed by more than 70 days, from such anniversary date, to be timely, a
stockholder's notice must be so received not earlier than the ninetieth day
prior to such annual meeting and not later than the close of business on the
later of the seventieth day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. The stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, and the name and address of the beneficial owner, if any, on
whose behalf the proposal is made, (c) the class and number of shares of the
Corporation which are beneficially owned by the stockholder and beneficial
owner, if any, and (d) any material interest of the
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stockholder or such beneficial owner, if any, in such business. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at any
annual meeting of stockholders except in accordance with the procedures set
forth in this Section 13; provided that any stockholder proposal which complies
with Rule 14a-8 of the proxy rules (or any successor provision) promulgated
under the Securities Exchange Act of 1934, as amended, and is to be included in
the Corporation's proxy statement for an annual meeting of stockholders shall be
deemed to comply with the requirements of this Section 13.
(b) The officer of the Corporation presiding at any meeting shall, if
the facts warrant, determine that business was not properly brought before the
meeting in accordance with the provisions of this Section 13, and if he should
so determine, he shall so declare to the meeting and such business shall not be
transacted.
SECTION 14. LIMITATIONS ON CALLING OF MEETINGS. Meetings of the
stockholders may be called only as expressly provided for in the Certificate of
Incorporation of the Corporation, in these Bylaws or as otherwise required by
statute.
ARTICLE III. DIRECTORS.
SECTION 1. GENERAL POWERS, NUMBER, AND TENURE. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and perform all lawful acts that are not by law, the
Certificate of Incorporation, as amended, or these Bylaws directed or required
to be exercised or performed by the stockholders. The number of directors shall
be determined by the Board of Directors; if no such determination is made, the
number of directors shall be one. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until the next annual meeting and
until his successor is elected and shall qualify. Directors need not be
stockholders.
SECTION 2. VACANCIES. If any vacancies occur in the Board of Directors,
or if any new directorships are created, they may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next annual
meeting of stockholders and until his successor is duly elected and shall
qualify. If there are no directors in office, any officer or stockholder may
call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation, as amended, or these Bylaws, at which meeting such
vacancies shall be filled.
SECTION 3. REMOVAL OR RESIGNATION.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, as amended, any director or the entire Board of Directors may be
removed, with or
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without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors.
(b) Any director may resign at any time by giving written notice to the
Board of Directors, the Chairman of the Board, if any, or the President or
Secretary of the Corporation. Unless otherwise specified in such written notice,
a resignation shall take effect on delivery thereof to the Board of Directors or
the designated officer. It shall not be necessary for a resignation to be
accepted before it becomes effective.
SECTION 4. PLACE OF MEETINGS. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
SECTION 5. ANNUAL MEETING. The annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order to constitute the meeting legally, provided a quorum
shall be present.
SECTION 6. REGULAR MEETINGS. Additional regular meetings of the Board
of Directors may be held without notice of such time and place as may be
determined from time to time by the Board of Directors.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President, or by two or more
directors on at least two days' notice to each director, if such notice is
delivered personally or sent by telegram, or on at least three days' notice if
sent by mail. Special meetings shall be called by the Chairman of the Board,
President, Secretary, or two or more directors in like manner and on like notice
on the written request of one-half or more of the number of directors then in
office. Any such notice need not state the purpose or purposes of such meeting,
except as provided in Article XI.
SECTION 8. QUORUM AND ADJOURNMENTS. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation, as amended. If a quorum is not present at any
meeting of the Board of Directors, the directors present may adjourn the meeting
from time to time, without notice other than announcement at the meeting at
which the adjournment is taken, until a quorum shall be present.
SECTION 9. COMPENSATION. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending directors' meetings as may from time
to time be fixed by the
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Board of Directors. The compensation of directors may be on such basis as is
determined by the Board of Directors. Any director may waive compensation for
any meeting. Any director receiving compensation under these provisions shall
not be barred from serving the Corporation in any other capacity and receiving
compensation and reimbursement for reasonable expenses for such other services.
SECTION 10. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting,
and without prior notice, if a written consent to such action is signed by all
members of the Board of Directors and such written consent is filed with the
minutes of its proceedings.
SECTION 11. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT.
The Board of Directors may participate in a meeting by conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such director at such meeting.
ARTICLE IV. COMMITTEES.
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of one or more directors, one of whom shall be designated as Chairman
of the Executive Committee. Each member of the Executive Committee shall
continue as a member thereof until the expiration of his term as a director or
his earlier resignation, unless sooner removed as a member or as a director.
SECTION 2. POWERS. The Executive Committee shall have and may exercise
those rights, powers, and authority of the Board of Directors as may from time
to time be granted to it by the Board of Directors to the extent permitted by
law, and may authorize the seal of the Corporation to be affixed to all papers
that may require it.
SECTION 3. PROCEDURE AND MEETINGS. The Executive Committee shall fix
its own rules of procedure and shall meet at such times and at such place or
places as may be provided by such rules or as the members of the Executive
Committee shall fix. The Executive Committee shall keep regular minutes of its
meetings, which it shall deliver to the Board of Directors from time to time.
The Chairman of the Executive Committee or, in his absence, a member of the
Executive Committee chosen by a majority of the members present, shall preside
at meetings of the Executive Committee; and another member chosen by the
Executive Committee shall act as Secretary of the Executive Committee.
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SECTION 4. QUORUM. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the affirmative vote of
a majority of the members present at any meeting at which there is a quorum
shall be required for any action of the Executive Committee; provided, however,
that when an Executive Committee of one member is authorized under the
provisions of Section 1 of this Article, that one member shall constitute a
quorum.
SECTION 5. OTHER COMMITTEES. The Board of Directors, by resolutions
adopted by a majority. of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such rights, power, and authority
as it shall prescribe. Each such committee shall consist of one or more
directors.
SECTION 6. COMMITTEE CHANGES. The Board of Directors shall have the
power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
SECTION 7. COMPENSATION. Members of any committee shall be entitled to
such compensation for their services as members of the committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any member
may waive compensation for any meeting. Any committee member receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
SECTION 8. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings
SECTION 9. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT.
The members of any committee designated by the Board of Directors may
participate in a meeting of such committee by conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such committee member at such meeting.
ARTICLE V. NOTICES.
SECTION 1. FORM AND DELIVERY. Whenever a provision of any law, the
Certificate of Incorporation, as amended, or these Bylaws requires that notice
be given to any director or stockholder, it shall not be construed to require
personal notice unless so specifically provided, but such notice may be given in
writing, by mail addressed to the address of the director or stockholder as it
appears on the
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records of the Corporation, with postage prepaid. These notices shall be deemed
to be given when they are deposited in the United States mail. Notice to a
director may also be given personally or by telephone or by telegram sent to his
address as it appears on the records of the Corporation.
SECTION 2. WAIVER. Whenever any notice is required to be given under
the provisions of any law, the Certificate of Incorporation, as amended, or
these Bylaws, a written waiver thereof signed by the person entitled to said
notice, whether before or after the time stated therein, shall be deemed to be
equivalent to such notice. In addition, any stockholder who attends a meeting of
stockholders in person or is represented at such meeting by proxy, without
protesting at the commencement of the meeting the lack of notice thereof to him,
or any director who attends a meeting of the Board of Directors without
protesting at the commencement of the meeting of the lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE VI. OFFICERS.
SECTION 1. DESIGNATIONS. The officers of the Corporation shall be
chosen by the Board of Directors. The Board of Directors may choose a Chairman
of the Board, a President, a Vice President or Vice Presidents, a Secretary, a
Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers, and
other officers and agents that it shall deem necessary or appropriate. All
officers of the Corporation shall exercise the powers and perform the duties
that shall from time to time be determined by the Board of Directors. Any number
of offices may be held by the same person, unless the Certificate of
Incorporation, as amended, or these Bylaws provide otherwise.
SECTION 2. TERM OF, AND REMOVAL FROM, OFFICE. At its first regular
meeting after each annual meeting of stockholders, the Board of Directors shall
choose a President, a Secretary, and a Treasurer. It may also choose a Chairman
of the Board, a Vice President or Vice Presidents, one or more Assistant
Secretaries and/or Assistant Treasurers, and such other officers and agents as
it shall deem necessary or appropriate. Each officer of the Corporation shall
hold office until his successor is chosen and shall qualify. Any officer elected
or appointed by the Board of Directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the directors then in office.
Removal from office, however, shall not prejudice the contract rights, if any,
of the person removed. Any vacancy occurring in any office of the Corporation
may be filled for the unexpired portion of the term by the Board of Directors.
SECTION 3. COMPENSATION. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving a salary because he is also a director
of the Corporation.
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<PAGE>
SECTION 4. THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if
any, shall be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory, and management
functions and duties as may be assigned to him from time to time by the Board of
Directors. He shall, if present, preside at all meetings of stockholders and of
the Board of Directors.
SECTION 5. THE PRESIDENT.
(a) The President shall be the chief executive officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs, and property of the Corporation and
general supervision over its other officers and agents. In general, he shall
perform all duties incident to the office of President and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority to attend, act, and vote on behalf
of the Corporation at any meeting of the security holders of other corporations
in which the Corporation may hold securities. At any such meeting, the President
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities that the Corporation might have possessed arid
exercised if it had been present. The Board of Directors may from time to time
confer like powers upon any other person or persons.
SECTION 6. THE VICE PRESIDENT. The Vice President, if any, or in the
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election, shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
SECTION 7. THE SECRETARY. The Secretary shall attend all meetings of
the Board of Directors and the stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose. He shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board, or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix it to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of the Assistant Secretary. The Board of Directors may
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<PAGE>
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing thereof by his signature.
SECTION 8. THE ASSISTANT SECRETARY. The Assistant Secretary, if any, or
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
SECTION 9. THE TREASURER. The Treasurer shall have custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation in accord with the orders of the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the Chairman of the
Board, if any, the President, and the Board of Directors, whenever they may
require it or at regular meetings of the Board, an account of all his
transactions as Treasurer and of the financial condition of the Corporation.
SECTION 10. THE ASSISTANT TREASURER. The Assistant Treasurer, if any,
or in the event there shall be more than one, the Assistant Treasurers in the
order designated, or in the absence of any designation, in the order of their
election, shall, in the absence of the Treasurer or in the event of his
disability, perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
ARTICLE VII. INDEMNIFICATION.
Reference is made to Section 145 and any other relevant provisions of
the General Corporation Law of the State of Delaware. Particular reference is
made to the class of persons, hereinafter called "Indemnitees", who may be
indemnified by a Delaware corporation pursuant to the provisions of such Section
145, namely, any person, or the heirs, executors, or administrators of such
person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that such
person is or was a director, officer, employee, or agent of such corporation or
is or was serving at the request of such corporation as a director, officer,
employee, or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise. The
Corporation shall, and is hereby obligated to, in addition to any obligation
incurred pursuant to the
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Corporation's Certificate of Incorporation, indemnify the Indemnitees, and each
of them, in each and every situation where the Corporation is obligated to make
such indemnification pursuant to the aforesaid statutory provisions. The
Corporation shall indemnify the Indemnitees, and each of them, in each and every
situation where, under the aforesaid statutory provisions, the Corporation is
not obligated, but is nevertheless permitted or empowered, to make such
indemnification, it being understood that, before making such indemnification
with respect to any situation covered under this sentence, (i) the Corporation
shall promptly make or cause to be made, by any of the methods referred to in
Subsection (d) of such Section 145, a determination as to whether each
Indemnitee acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Corporation, and, in the case of
any criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful, and (ii) that no such indemnification shall be made unless
it is determined that such Indemnitee acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, in the case of any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful.
ARTICLE VIII. AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS.
SECTION 1. AFFILIATED TRANSACTIONS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors or committee thereof that authorizes
the contract or transaction or solely because his or their votes are counted for
such purpose if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by the vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof or the stockholders.
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<PAGE>
SECTION 2. DETERMINING QUORUM. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
ARTICLE IX. STOCK CERTIFICATES.
SECTION 1. FORM AND SIGNATURES.
(a) Every holder of stock of the Corporation shall be entitled to a
certificate stating the number and class, and series, if any, of shares owned by
him, signed by the Chairman of the Board, if any, or the President and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, and bearing the seal of the Corporation. The signatures and
the seal may be facsimiles. A certificate may be signed, manually or by
facsimile, by a transfer agent or registrar other than the Corporation or its
employee. In case any officer who has signed, or whose facsimile signature was
placed on, a certificate shall have ceased to be such officer before the
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
(b) All stock certificates representing shares of capital stock that
are subject to restrictions on transfer or to other restrictions may have
imprinted thereon any notation to that effect determined by the Board of
Directors.
SECTION 2. REGISTRATION OF TRANSFER. Upon surrender to the Corporation
or any transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment, or
authority to transfer, the Corporation or its transfer agent shall issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon the books of the Corporation.
SECTION 3. REGISTERED STOCKHOLDERS.
(a) Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person who is registered on its
books as the owner of shares of its capital stock to receive dividends or other
distributions and to vote or consent as such owner, and to hold liable for calls
and assessments any person who is registered on its books as the owner of shares
of its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to, or interest in, such shares on the part of any
other person.
(b) If a stockholder desires that notices and/or dividends shall be
sent to a name or address other than the name or address appearing on the stock
ledger maintained by the Corporation, or its transfer agent or registrar, if
any, the
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stockholder shall have the duty to notify the Corporation, or its transfer agent
or registrar, if any, in writing of his desire and specify the alternate name or
address to be used.
SECTION 4. RECORD DATE. In order that the Corporation may determine the
stockholders of record who are entitled to receive notice of, or to vote at, any
meeting of stockholders or any adjournment thereof or to express consent to
corporate action in writing without a meeting, to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board of Directors may, in advance, fix a date
as the record date for any such determination. Such date shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to the date of any other action. A determination of
stockholders of record entitled to notice of, or to vote at, a meeting of
stockholders shall apply to any adjournment of the meeting pursuant to Section 8
of Article II; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
SECTION 5. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Board of
Directors may direct that a new certificate be issued to replace any certificate
theretofore issued by the Corporation that, it is claimed, has been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen, or destroyed. When authorizing the
issuance of a new certificate, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of the lost,
stolen, or destroyed certificate, or his legal representative, to advertise the
same in such manner as it shall require, and/or to give the Corporation a bond
in such sum, or other security in such form, as it may direct as indemnity
against any claims that may be made against the Corporation with respect to the
certificate claimed to have been lost, stolen, or destroyed.
ARTICLE X. GENERAL PROVISIONS.
SECTION 1. DIVIDENDS. Subject to the provisions of law and the
Certificate of Incorporation, as amended, dividends upon the outstanding capital
stock of the Corporation may be declared by the Board of Directors at any
regular or special meeting, and may be paid in cash, in property, or in shares
of the Corporation's capital stock.
SECTION 2. RESERVES. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, as
amended, to determine whether any, and, if so, what part, of the funds legally
available for the payment of dividends shall be declared as dividends and paid
to the stockholders of the Corporation. The Board of Directors, in its sole
discretion, may fix a sum that may be set aside or reserved over and above the
paid-in capital of the. Corporation as a
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reserve for any proper purpose, and may, from time to time, increase, diminish,
or vary such amount.
SECTION 3. FISCAL YEAR. Except as from time to time otherwise provided
by the Board of Directors, the fiscal year of the Corporation shall end on June
30 of each year.
SECTION 4. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation, and the words "Corporate
Seal" and "Delaware".
ARTICLE XI. AMENDMENTS.
The Board of Directors shall have the power to alter and repeal there
Bylaws and to adopt new Bylaws by an affirmative vote of a majority of the whole
Board, provided that notice of the proposal to alter or repeal these Bylaws or
to adopt new Bylaws must be included in the notice of the meeting of the Board
of Directors at which such action takes place.
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Exhibit 10
Crocker Capital
Lease Agreement
Lease Number: 02067-299-0 1 Reference Date:_______________
- ----------------------------------------------------------
Lessee
- ----------------------------------------------------------
Name: Centennial Technologies, Inc.
Address: 7 Lopez Road
City: Willington State: MA
Phone: 978-988-8848 Zip: 01887
Lessee Billing Address: 7 Lopez Road
City: Willington State: MA
Phone: 978-988-8848 Zip: 01887
- ----------------------------------------------------------
- ----------------------------------------------------------
Equipment Supplier
- ----------------------------------------------------------
Name: Philips Electronic Manufacturing Technology
Address: 5110 McGinnis Ferry Rd.
----------------------------------------
City: Alpharetta State: GA
Phone: 770-751-4420 Zip: 30005
- ----------------------------------------------------------
Equipment Location
- ----------------------------------------------------------
Address: 7 Lopez Rd.
City: Willington State: MA
Phone: 978-988-8848 Zip: 01887
- ----------------------------------------------------------
Equipment is New |X| Used |_| and is described on Equipment Lease Schedule A
attached hereto and made a part hereof. Total Invoice Amount: $ 359,590.00
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Term of Number & Amount of Advance Rental Months Nonrefundable To be completed
Lease Rental Payments Payments Remaining Origination Fee By Lessor
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
60 60 Monthly rental payments of First month's payment Commence Date: ( )
Months $ 6,318.33 each $ 6,318.33 59 350.00 Expiration Date: ( )
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. LEASE. Crocker Capital (Lessor) leases to Lessee and Lessee hires from Lessor
the personal property set forth on Equipment Lease Schedule A attached hereto
(collectively "Equipment") on the terms and conditions of this Lease. Lessee
represents and warrants to Lessor that the Equipment is being leased and will be
used solely for commercial or business purposes and will not be used for
personal, family or household purposes. This Lease is dated for reference
purposes as of the Reference Date set forth above. UPON EXECUTION BY THE PARTIES
THIS LEASE WILL NOT BE SUBJECT TO CANCELLATION, TERMINATION, MODIFICATION,
REPUDIATION, EXCUSE OR SUBSTITUTION BY LESSEE.
2. LEASE TERM. The term of this Lease shall commence on the date of delivery of
the Equipment or any item thereof (the "Commencement Date") set forth in the
Equipment Acceptance Notice referred to in Paragraph 16 hereof and ends upon the
expiration of the number of months (following the Commencement Date) stated
above as the Term of Lease. Lessor is authorized to insert the Commencement Date
and the Expiration Date where indicated above.
3. RENT. Lessee shall pay Lessor total rental for the term of this Lease equal
to the number of months stated above as the Term of Lease multiplied by the
amount of the monthly rental payment stated above, plus such additional rentals
as may arise. Said additional rentals may include but shall not be limited to
interim rents which shall be due from the date the Vendor is paid by the Lessor
until Lessee's first monthly payment or for rentals due upon the expiration of
the lease term but prior to the redelivery of the personal property to Lessor by
the Lessee. The monthly rental payment stated above, is subject to increase, if
like Treasury rates on the date of Lessee's signed acceptance of the Equipment
are 25 basis points or more greater than the rates for like Treasury's on the
date Lessee signs this Lease. The increase shall be based upon the entire
increase in basis points. The first rental payment shall be due on the
Commencement Date and all subsequent rental payments shall be due in advance on
the same day of each successive month thereafter; provided, however, that if the
Commencement Date is not the 1st or the 15th day of a month, the remaining
rental payments shall be due in advance (a) on the 15th day of each successive
month thereafter if the Commencement Date occurs before the 15th day of the
month, or (b) if the Commencement Date occurs after the 15th day of the month,
on the 1st day of each successive month thereafter beginning with the 1st day of
the second full month following the Commencement Date. Any advance rental
payments other than the first rental payment shall be applied on the
Commencement Date to the last maturing rental payments due hereunder. Advance
rental payments shall not be refundable for any reason whatsoever. All rent
shall be paid irrespective of and without notice, demand, abatement. setoff,
deduction, counterclaim, recoupment, defense or other right which Lessee may
have against Lessor, the supplier of the Equipment or any other party, to Lessor
at its Corporate Office address set forth below or to such other place as Lessor
may from time to time designate in writing. A late charge of 10% will be
assessed on payments 10 days late as Indicated in Paragraph 9 hereof.
4. SELECTION OF EQUIPMENT; DISCLAIMER OF WARRANTIES. Lessee has selected both
the Equipment and the above supplier, from whom Lessee requests Lessor to order
the Equipment, and the method of shipment and installation of the Equipment.
LESSEE MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING LESSOR'S PURCHASE OF THE
EQUIPMENT. LESSEE SHOULD CONTACT THE SUPPLIER FOR A DESCRIPTION OF ANY SUCH
RIGHTS. LESSOR MAY MODIFY OR RESCIND ANY SUCH CONTRACT WITHOUT CONSENT OF OR
LIABILITY TO LESSEE. LESSEE ACKNOWLEDGES THAT LESSOR HAS NO EXPERTISE OR SPECIAL
FAMILIARITY ABOUT OR WITH RESPECT TO THE EQUIPMENT AND IS NOT RESPONSIBLE FOR
INSTALLATION, ADJUSTMENT OR SERVICING THEREOF. LESSEE AGREES THAT THE EQUIPMENT
IS OF A SIZE, DESIGN AND CAPACITY SELECTED BY LESSEE. LESSEE IS SATISFIED THAT
THE EQUIPMENT IS SUITABLE FOR LESSEE'S PURPOSES. LESSOR MAKES NO REPRESENTATION
OR WARRANTY WITH RESPECT TO THE SUITABILITY OR DURABILITY OF THE EQUIPMENT FOR
THE PURPOSES AND USES OF LESSEE, THE CONDITION, MATERIAL, PERFORMANCE, QUALITY
OR VALUE OF THE EQUIPMENT, OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT THERETO, AND HEREBY DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING, WITHOUT LIMITATION, THOSE OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND FREEDOM FROM INTERFERENCE AND INFRINGEMENT. LESSOR
FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE EQUIPMENT WILL COMPLY
WITH OR SATISFY THE REQUIREMENTS OF ANY LAW, RULE, REGULATION, SPECIFICATION OR
CONTRACT OR THAT ANY GOVERNMENTAL AGENCY HAS APPROVED THE USE OF THE EQUIPMENT.
LESSEE IS LEASING THE EQUIPMENT "AS IS." If the Equipment is not delivered, is
not timely delivered, is not properly installed, does not operate as represented
or warranted by the supplier or manufacturer, does not comply with the
requirements of any law, regulation, rule, specification or contract pertaining
thereto, infringes any trademark, patent or copyright, contains any defect
(latent or otherwise) or is unsatisfactory for any reason, Lessee shall make any
claim on account thereof solely against the supplier or manufacturer and shall
nevertheless pay Lessor all rentals payable under this Lease and shall not
assert against Lessee's obligations any such claims as a defense, counterclaim,
setoff or otherwise. Non-delivery, mis-installation, non-compliance with
warranty or other such event shall not shift risk of loss, theft, destruction or
damage of the Equipment to Lessor. Lessee shall not make any claim against
Lessor for, and in no event shall Lessor have any liability for, any damages,
including, without limitation, any loss of anticipated profits or consequential
or indirect damages, whether foreseeable or unforeseeable, suffered by Lessee in
connection with any of the foregoing or otherwise arising out of or relating to
this Lease. So long as Lessee is not in breach of this Lease, Lessor hereby
assigns to Lessee without recourse (solely for the purpose of making and
prosecuting any such claim, at Lessee's sole cost and expense) any rights which
Lessor may have against the supplier or manufacturer for breach of warranty or
representation respecting any item of Equipment. All proceeds of any recovery by
Lessee from the supplier or manufacturer of an item of Equipment shall first be
used to repair or replace the affected item of Equipment.
LESSEE ACKNOWLEDGES AND AGREES THAT NEITHER THE SUPPLIER, MANUFACTURER, NOR ANY
SALESMAN OR OTHER AGENT OF THE SUPPLIER OR MANUFACTURER IS AN AGENT OF LESSOR,
AND THAT NONE OF THE ABOVE IS AUTHORIZED TO WAIVE OR ALTER ANY TERM, PROVISION
OR CONDITION OF THIS LEASE, OR MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT
TO THIS LEASE OR THE EQUIPMENT LEASED HEREUNDER. Lessee further acknowledges and
agrees that Lessee, in executing this Lease, has relied solely on the terms,
provisions and conditions contained herein, and any other statements,
warranties, or representations, if any, by the supplier, manufacturer or any
salesman or other agent of the supplier or manufacturer, have not been relied
upon and shall not in any way affect Lessee's obligation to pay the rent and
otherwise perform as set forth in this Lease.
The terms of this Paragraph 4 have been specifically bargained for between
Lessor and Lessee. Lessee hereby acknowledges that Lessor would not enter into
this Lease but for Lessee's agreement to the terms of this Paragraph 4. KCL
(Lessee Initial)
5. NET LEASE; NO ABATEMENT OF RENT. This Lease is a net lease, All costs and
expenses incurred in connection with the Equipment, including, without
limitation, repair, maintenance, insurance and personal property taxes, are the
responsibility of Lessee. Lessee shall not be entitled to any abatement of rent
or other payments due hereunder or any reduction thereof under any circumstance
or for any reason whatsoever.
6. COMMERCIAL RISK. Lessee bears all risk that the Equipment may become unusable
for any reason, including without limitation, loss, theft, destruction, damage,
<PAGE>
defect, GOVERNMENT REGULATION, PROHIBITION, IMPRACTICABILITY OF USE,
OBSOLESCENCE OR COMMERCIAL FRUSTRATION. No inability to use the Equipment shall
result in termination of this Lease or relieve Lessee from any of its
obligations hereunder. _______________ (Lessee Initial)
7. NONREFUNDABLE ORIGINATION FEE. Lessee shall pay Lessor the Nonrefundable
Origination Fee stated above when Lessee signs this Lease. This fee covers
Lessor's administrative expenses in originating this Lease. It is not
refundable. It will not be used to satisfy any of Lessee's obligations,
indebtedness or liability under this Lease.
8. LOCATION. The Equipment shall be delivered to and thereafter kept at the
Equipment Location stated above. Lessee shall not remove the Equipment from the
Equipment Location without Lessor's prior written consent.
9. LATE CHARGES. It would be impractical or extremely difficult to fix the
amount of extra expenses involved in handling a delinquent payment if any rental
installment or property tax payment is not paid when due. Accordingly, Lessee
agrees to pay to Lessor, to cover extra expenses incurred by Lessor in handling
the delinquent payment, a late payment charge of 10% of the installment due,
which Lessee agrees is a reasonable estimate of the extra expenses Lessor will
incur if there is a late payment. The late payment charge will be imposed if any
or all of a monthly installment or property tax payment is not received by
Lessor within 10 days after the date on which it is due. Nothing in this
Paragraph shall limit Lessor's rights under the Lease, or otherwise, to compel
prompt performance hereunder or any other rights or remedies contained in this
Lease. ______________ (Lessee Initial)
10. RISK OF LOSS AND DAMAGE ON LESSEE. At all times and under all circumstances,
until return of the Equipment to Lessor, Lessee shall bear the entire risk of
loss, theft, destruction or damage of the Equipment from any cause whatsoever.
No loss, theft, destruction or damage of the Equipment, whether or not insured,
shall relieve Lessee of the obligation to pay rent or of any other obligation
under this Lease. In the event of loss, theft, destruction or damage of any kind
to the Equipment or to any item of Equipment, Lessee at its sole cost and
expense at the option of Lessor shall immediately: (a) place the affected
Equipment in good condition or repair; (b) replace the same with like Equipment
in good condition and repair, in which case good title must be vested in Lessor,
free and clear of all liens, claims and encumbrances; or (c) pay the Lessor an
amount equal to all unpaid rent due and the present value of all unpaid rent to
become due under this Lease with respect to the affected Equipment plus the
Residual Value of the affected Equipment ("Residual Value" of any item of
Equipment being the value of the Equipment on the last day of the term of this
Lease as estimated by Lessor in the condition described in Paragraph 18) and
upon Lessor's receipt of such payment, Lessee shall be entitled to whatever
interest Lessor may have in said item AS IS, where is, and without warranty
express or implied by Lessor as to any matter whatsoever. All proceeds of
insurance received by Lessor as a result of such loss, theft, destruction or
damage shall, where applicable, be applied as Lessor may elect toward
reimbursement of Lessee for the replacement or repair of the Equipment or the
payment of the obligations of Lessee under this Lease. Nothing in this Lease
shall shift any risk of loss, theft, destruction or damage of the Equipment from
the supplier to extent supplier bears such risk by contract or law.
11. INSURANCE. Lessee shall at all times during the term of this Lease at its
sole cost and expense keep the Equipment insured against all risks of damage,
destruction, loss or theft from any cause whatsoever for not less than the full
replacement cost thereof. Lessee shall also at all times during the term of this
Lease at its own expense carry comprehensive general liability insurance (and
comprehensive automobile liability insurance with respect to any Equipment
leased pursuant thereto which is a vehicle) including general (and auto) blanket
contractual coverage, with a severability of interest endorsement or its
equivalent, covering liability for bodily injury, including death, and property
damage resulting from the purchase, ownership, leasing, maintenance, use,
operation or return of the Equipment. Lessor and any assignee (as defined in
Paragraph 17 below) shall each be named as loss payee with respect to insurance
for damage or loss of Equipment and shall each be named additional insured on
the liability insurance. Lessee shall deliver to Lessor the original policy or
policies of insurance, certificates of insurance, or other evidence satisfactory
to Lessor of the payment of the premium therefor. Lessee shall provide Lessor
with such proof of insurance to evidence the extension, renewal or replacement
of insurance which is going to expire or be canceled at least thirty (30) days
before the date of expiration or cancellation of such insurance. All such
insurance shall provide for at least thirty (30) days advance written notice to
Lessor before any cancellation or material modification thereof. Such policies
of insurance shall be satisfactory to Lessor as to coverage, amount and insurer
but Lessor shall have no duty to ascertain the existence of or to examine such
policies or to advise Lessee if the policies do not comply with the requirements
hereof or to require any change in the coverage, amount or issuer of such
insurance. Lessee hereby irrevocably appoints Lessor as Lessee's
attorney-in-fact to make claim for, adjust or settle any such claim, receive
payment of, and execute or endorse all documents, checks or drafts received in
payment under any such insurance policy. Lessee assigns to Lessor all of its
rights, title, and interest to any insurance policies insuring the Equipment and
directs any insurer to pay all the proceeds directly to Lessor. The proceeds of
any public liability or property damage insurance shall be payable first to or
for the benefit of Lessor or assignee to the extent of its liability, if any,
and the balance, if any, to or for the benefit of Lessee. The proceeds of
insurance on the Equipment shall be payable solely to Lessor or assignee and
shall be applied as provided in Paragraph 10 above.
12. LIENS AND TAXES. Lessee shall keep the Equipment free and clear of all
levies, liens and encumbrances except for any security interests granted by
Lessor. In addition to rent payable under this Lease, Lessee shall pay all
assessments, license fees, taxes (including income, gross receipts, sales, use,
excise, personal property, ad valorem, stamp, documentary and other taxes) and
all other governmental charges, fees, fines or penalties whatsoever, whether
levied, assessed or imposed on Lessor, Lessee , the Equipment or otherwise
relating to the Equipment or the use, possession, purchase, registration,
rental, delivery, leasing, ownership or operation of the Equipment, and on or
relating to this Lease provided, however, that the foregoing shall not include
taxes imposed on Lessor's net income. Lessor shall report the Equipment to the
appropriate taxing authority for personal property tax purposes. Lessee shall
file all required returns and all other reports relating to taxes and furnish
copies to Lessor at its request. Lessee shall also pay all taxes arising out of
Lessee's exercise of any purchase option relating to this Lease (including sales
tax). Without limiting the foregoing, Lessee acknowledges its obligation to pay
personal property taxes on the Equipment. Personal property tax statements shall
be mailed by Lessor to Lessee. Lessee shall within ten (10) days following the
date of such mailing deliver or cause to be received at Lessor's address
Lessee's check payable to Lessor in the amount of such tax. Lessor has the right
to bill Lessee for the personal property taxes in advance of the payment date
for said taxes.
13. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to perform any
act or to make any payment required herein, Lessor shall have the right, but
shall not be obligated, to perform such act or make such payment. In the case of
Lessee's failure to obtain insurance, Lessor may obtain insurance protecting
Lessor and the interest of Lessor only. All costs and expenses so incurred by
Lessor, together with interest thereon at the rate of 10% per annum from the
date of payment by Lessors plus an administrative fee of S25.00, shall be
immediately repayable by Lessee to Lessor as additional rental for the
Equipment. No performance or payment by Lessor shall waive or release any
default or obligation of Lessee.
14. OWNERSHIP. Title to and ownership of the Equipment shall at all times remain
with Lessor. Lessee shall have no right, title or interest therein or thereto
except as expressly set forth in this Lease. Lessee, at its sole cost and
expense, will protect and defend Lessor's title to and ownership of the
Equipment and will keep the Equipment free and clear from and give Lessor
immediate notice of any and all claims, demands, liens, encumbrances and legal
processes of Lessee's creditors and other persons. The Equipment is and shall at
all times be and remain personal property regardless of any attachment or
affixation of the Equipment to any real property or any improvements thereon. If
requested by Lessor prior to or at any time during the term hereof with respect
to an item of Equipment, Lessee will obtain and deliver to Lessor at Lessee's
sole cost and expense waivers of interest or liens in recordable form
satisfactory to Lessor, from all persons claiming any interest in the real
property on which such item is installed or located. Lessor may display notice
of its ownership of the Equipment by affixing to each item of Equipment an
identifying stencil or plate or any other indicia of ownership. Lessee shall not
alter, deface, cover or remove any such indicia of ownership.
15. INDEMNIFICATION. Lessee assumes liability for, and shall and does hereby
indemnify and hold harmless Lessor, its agents, employees, officers, directors,
successors and assigns from and against, any and all liabilities, claims, costs,
and expenses, including reasonable attorney's fees, of every kind and nature
(including, without limitation, for property damage, wrongful death or personal
injury and for trademark, patent or copyright infringement) arising out of or
relating to the use, condition (including latent and other defects and whether
or not discoverable by Lessee or Lessor), operation, ownership, selection,
delivery, leasing or return of any item of Equipment, regardless of where, how
and by whom operated, any failure on the part of Lessee to perform or comply
with any conditions of this Lease or any loss by Lessor of the benefit of any
accelerated depreciation or Investment Tax Credit, or the right to claim the
same, with respect to the Equipment. Without limiting the foregoing, this
indemnification shall extend to claims made by any person, including Lessee, its
agents and employees, and shall apply whether the liabilities, claims, etc. are
based on negligence (passive or active) of Lessor or another, breach of
warranty, strict liability, products liability or otherwise. The indemnities and
assumptions of liabilities and obligations provided for in this Paragraph and
Lessee's indemnities elsewhere in this Lease shall continue in full force and
effect notwithstanding the expiration, cancellation or other termination of this
Lease. Lessee is an independent contractor. Nothing contained in this Lease
shall authorize Lessee or any other person to operate any item of Equipment so
as to incur or impose any liability or obligation for or on behalf of Lessor.
16. EQUIPMENT ACCEPTANCE. Lessee shall take delivery of and immediately inspect
the Equipment. Lessee, at its sole cost and expense, shall pay all
transportation, packing, taxes, duties, installation, testing and other charges
in connection with the delivery and installation of the Equipment, except as
otherwise agreed in writing by Lessor. Acceptance of the Equipment may not be
revoked regardless of the difficulty of discovery of non-conformity or other
problem, and regardless of whether acceptance is based on the assumption that
any non-conformity would be seasonably cured. (Lessor shall have no such cure
obligation.) Upon acceptance of the Equipment, Lessee shall immediately complete
and execute the Equipment Acceptance Notice supplied by Lessor. Delay in
delivery of Equipment ordered shall not affect the validity of this Lease.
Lessee's execution of the Equipment Acceptance Notice shall conclusively
establish that the Equipment is acceptable to Lessee for all purposes of this
Lease. If for any reason the Equipment has not been delivered, installed and
accepted by Lessee within 60 days after it is ordered by Lessor or Lessee fails
to accept the Equipment and execute the Equipment Acceptance Notice within ten
(10) days following delivery of the Equipment, Lessor may, at Lessor's option,
terminate Lessor's obligations under this Lease and Lessee shall, on demand of
Lessor, pay Lessor all amounts paid or owing by Lessor in respect of the
purchase of such Equipment and indemnify and hold Lessor harmless from any and
all liabilities, claims, costs and expenses to the manufacturer or supplier of
the Equipment or any other party arising out of or relating to the Equipment or
this Lease. Upon payment Lessor shall release, remise and quitclaim such item to
Lessee, AS IS, where is, and without warranty express or implied by Lessor as to
any matter whatsoever. Lessee shall upon such payment be subrogated to Lessor's
claim, if any, against the manufacturer or any other supplier thereof.
<PAGE>
17. ASSIGNMENT. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE SHALL NOT BY
OPERATION OF LAW OR OTHERWISE (A) ASSIGN, PART WITH POSSESSION, ABANDON,
TRANSFER, PLEDGE, HYPOTHECATE, OR OTHERWISE DISPOSE OF THE EQUIPMENT OR THIS
LEASE OR ANY INTEREST IN THIS LEASE OR THE EQUIPMENT OR (B) SUBLET OR LEND THE
EQUIPMENT OR PERMIT IT TO BE USED BY ANYONE OTHER THAN LESSEE OR LESSEE'S
EMPLOYEES. LESSOR MAY ASSIGN OUTRIGHT OR GRANT A SECURITY INTEREST IN THIS
LEASE, THE RENTAL PAYMENTS DUE HEREUNDER OR THE EQUIPMENT IN WHOLE OR IN PART
WITHOUT NOTICE TO OR CONSENT OF LESSEE, AND LESSOR'S ASSIGNEE, SECURED PARTY OR
SUCCESSOR THERETO ("ASSIGNEE") MAY REASSIGN THE LEASE, RENTAL PAYMENTS OR
EQUIPMENT, AND MAY REASSIGN, FORECLOSE OR REALIZE UPON ITS SECURITY INTEREST
THEREIN WITHOUT NOTICE TO OR CONSENT OF LESSEE. LESSEE ACKNOWLEDGES THAT NO SUCH
ASSIGNMENT, GRANT OF SECURITY INTEREST, REASSIGNMENT OR TRANSFER IN CONNECTION
WITH A REALIZATION UPON A SECURITY INTEREST SHALL MATERIALLY CHANGE ITS DUTIES
OR MATERIALLY INCREASE ITS BURDEN OR RISK. Each such assignee shall have all of
the rights of Lessor hereunder but shall neither assume nor have any of the
obligations of Lessor under this Lease. Lessee shall recognize each such
assignment, security interest or transfer and in the event of any assignment of
rental payments under this Lease and written notice to Lessee, Lessee shall
unconditionally pay directly to any assignee all rentals and other sums due or
to become due under this Lease. LESSEE SHALL NOT ASSERT AGAINST ANY ASSIGNEE,
AND WAIVES AS AGAINST ANY ASSIGNEE, ANY CLAIM, DEFENSE, COUNTERCLAIM OR SETOFF
WHICH LESSEE MAY HAVE AGAINST LESSOR OR ANY OTHER PERSON. Any such assignment,
security interest or transfer shall be subject to Lessee's right to possess and
use the Equipment so long as Lessee is not in default under this Lease. Subject
to the foregoing, this Lease inures to the benefit of and is binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
KCL (Lessee Initial)
18. RETURN OF EQUIPMENT. Upon expiration of the term of this Lease, unless
Lessee shall have duly exercised any purchase option with respect to this Lease,
Lessee will at its sole cost and expense deliver the Equipment (in the same
condition as when delivered to Lessee, reasonable wear and tear resulting from
authorized use thereof alone excepted) to Lessor's office listed below which is
nearest Lessee's non-billing address designated above, or to any location within
a one-hundred mile radius of such Lessor's office, as designated by Lessor in
writing, for such disposition as Lessor may determine. Lessee shall also, after
default, on demand from Lessor, return the Equipment in such condition to Lessor
at any such location; no such return shall constitute termination or
cancellation of this Lease unless Lessor shall agree so in writing. Lessee and
Lessor agree that any such return location is reasonably convenient to both
parties.
19. USE, REPAIR AND ALTERATIONS. Lessee shall use the Equipment in a careful
manner and shall comply with all insurance policies, operating procedures,
warranties, laws, rules and regulations relating to the possession, use or
maintenance of the Equipment. Lessee, at its sole cost and expense, shall keep
the Equipment in good condition, working order and repair and shall furnish all
parts, mechanisms and devices required therefor. Lessee shall not without
Lessor's prior written consent make any alterations, additions or improvements
to the Equipment or make any repairs to the Equipment which might result in a
mechanic's, materialman's, garageman's or other lien on the Equipment. Lessee
shall not permit the Equipment to be used by unqualified operators or serviced
or repaired by persons not authorized by the manufacturer. All additions,
replacement parts, accessions, repairs and improvements made or placed upon the
Equipment, whether or not authorized by Lessor, shall become part of the
Equipment and belong to Lessor. Lessor may during regular business hours inspect
the Equipment wherever the Equipment may be located. Lessee shall promptly
notify Lessor of all details arising out of any change in location of Equipment,
any alleged encumbrances and any accident allegedly resulting from the use or
operation of the Equipment.
20. EVENT OF DEFAULT. Lessee shall be in default under this Lease upon the
happening of any of the following events ("Events of Default"): (a) Lessee shall
fail to pay rent or any other amount required herein within ten (10) days after
the same becomes due and payable; (b) Lessee shall fail to comply with Paragraph
11 hereof or shall breach any negative covenant of this Lease; (c) Lessee shall
fail to perform any other provision hereof within five (5) days after Lessor
shall have demanded performance thereof in writing; (d) Any warranty,
representation or statement heretofore, now or hereafter made or furnished to
Lessor by or on behalf of Lessee or any guarantor of, or person furnishing
collateral for, this Lease (a "Guarantor") is false or misleading in any
material respect when made or furnished; (e) The attempted sale or encumbrance
by Lessee of any of the Equipment; (f) With respect to Lessee or a Guarantor:
dissolution, death, termination of existence, discontinuance of its business,
insolvency, business failure, bulk transfer of assets or appointment of a
receiver or custodian of all or any part of its property; (g) Assignment for the
benefit of creditors by Lessee or a Guarantor or the commencement of any
proceedings under any bankruptcy, reorganization or arrangement laws by or
against Lessee or a Guarantor; (h) Attachment or levy against any of Lessee's or
a Guarantor's property and the attachment or levy is not released within
forty-eight (48) hours; (i) Lessee defaults under any other lease or contract
heretofore, now or hereafter entered into between Lessor and Lessee; (j) Any
default occurs under the California Uniform Commercial Code or under any
agreement now or hereafter securing this Lease; or (k) A Guarantor revokes or
attempts to revoke any guaranty of this Lease.
21. REMEDIES OF LESSOR Upon the occurrence of any Event of Default and at any
time thereafter, Lessor may without demand or notice to Lessee and without
terminating or otherwise affecting Lessee's obligations hereunder exercise one
or more of the following remedies, as Lessor in its sole discretion shall elect:
(a) Declare the entire balance of rent for the remaining term of this Lease to
be immediately due and payable and recover such rental and all other rental and
sums due hereunder; (b) Require Lessee to assemble the Equipment and make it
available to Lessor at the location specified in Paragraph 18; (c) Take and hold
possession of the Equipment and render the Equipment unusable, and for this
purpose enter and remove the Equipment from any premises where the same may be
located without liability to Lessee for any damage caused thereby; (d) Sell or
lease the Equipment or any part thereof at public or private sale (and Lessor
may be a purchaser at such sale) for cash, on credit or otherwise, without
representations or warranties, and upon such other terms as shall be acceptable
to Lessor; and for such purposes of sale or lease, use lessee's name, voice,
signature, photograph or likeness, in any manner and for any purpose, including
but not limited to, advertising or selling, or soliciting purchases of, any or
all of the equipment, products, merchandise, goods or services; (e) Use and
occupy the premises of Lessee for the purpose of taking, holding,
reconditioning, displaying, selling or leasing the Equipment, without cost to
Lessor or liability to Lessee; (f) Proceed by appropriate action either at law
or in equity to enforce either performance by Lessee of the covenants of this
Lease or to recover damages for the breach of such covenants; or (g) Exercise
any and all rights accruing to a lessor under any applicable law upon a default
by a lessee. If notice is required by law, any written notice to Lessee of any
such sale or lease, given not less than five (5) days prior to the date thereof,
shall constitute reasonable notice to Lessee. Any sale or lease of the Equipment
by Lessor after default shall be free and clear of any rights or interests of
Lessee. Without limiting any of the foregoing remedies, Lessor may immediately
recover the following from Lessee: (A) all unpaid rentals, late charges and
other sums due or which would have become due as of the date the Equipment is
re-sold or re-leased, if Lessor obtains possession of the Equipment after
default, or as of the date of the award or recovery calculation if Lessee does
not obtain possession, (B) the present value of all unpaid rentals to become due
from the date specified in the preceding clause through the Expiration Date; (C)
any and all costs or expenses paid or incurred by Lessor in connection with the
repossession, holding, repair, reconditioning and subsequent sale, lease or
other disposition of the Equipment, including but not limited to attorney's fees
and costs, whether or not litigation is commenced, (D) the Residual Value of any
item of Equipment which Lessee fails to return to Lessor as provided above or
converts or destroys, or which Lessor does not or is unable to repossess, (E)
all other costs or expenses paid or incurred by Lessor at any time in connection
with the execution, delivery, administration, amendment and enforcement or
exercise of any of the Lessor's rights and remedies under this Lease, including
but not limited to attorney's fees and costs, whether or not litigation is
commenced, and taxes imposed by any governmental agency, (F) any actual or
anticipated loss of federal or state tax benefits to Lessor (as determined by
Lessor) resulting from Lessee's default or Lessor's repossession or disposition
of the Equipment, and (G) any and all other damages proximately caused by
Lessee's default. If Lessor obtains possession of any Equipment after default,
the amount Lessor shall be entitled to recover shall be reduced by the lesser
of(l) the present value of the rent due for the portion of the term of this
Lease remaining at the point in time the Equipment is re-sold or re-leased, or
(2) either (a) the proceeds received by Lessor on the re-sale of the Equipment,
less the re-sold Equipment's Residual Value or (b) the invoice value used for
the release of the equipment less the re-leased equipment's residual value.
Lessor shall not be obligated to sell, lease, or otherwise dispose of any item
of repossessed Equipment under this Lease if it would impair the sale, lease, or
other disposition by Lessor of similar equipment. Lessee shall be liable for any
deficiency suffered by Lessor, and unless otherwise required by law, Lessor
shall not be required to account to Lessee for any surplus or profit.
All rights and remedies of Lessor under this Lease are in addition to all rights
and remedies contained in any other agreement, instrument or document or
available to Lessor at law or in equity. All such rights and remedies are
cumulative and not exclusive and may be exercised successively, concurrently and
repeatedly. No default by Lessee or action by Lessor, including repossession,
sale or re-leasing of Equipment, shall result in or constitute a cancellation or
termination of this Lease unless Lessor so notifies Lessee in writing, and no
termination hereof shall release or impair any of Lessee's obligations
hereunder. No exercise of any right or remedy shall constitute an election of
remedies and preclude exercise of any other right or remedy. LESSEE WAIVES ANY
AND ALL RIGHTS TO NOTICE AND TO A JUDICIAL HEARING WITH RESPECT TO THE
REPOSSESSION OF THE EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY
LESSEE. FOR PURPOSES OF LESSOR'S RIGHTS AND REMEDIES UNDER THIS LEASE, ANY
PRESENT VALUE CALCULATION FOR A FUTURE SUM SHALL BE DETERMINED USING THE
DISCOUNT RATE OF THE FEDERAL RESERVE BANK OF SAN FRANCISCO WHICH IS IN EFFECT AS
OF THE COMMENCEMENT DATE. LESSEE AND LESSOR AGREE THAT SUCH RATE TAKES INTO
ACCOUNT THE FACTS AND CIRCUMSTANCES SURROUNDING THIS LEASE, AND THAT SUCH RATE
IS REASONABLE. KCL (Lessee Initial)
22. NO PURCHASE OPTION. Lessee shall have no option to purchase or otherwise
acquire title or ownership to any item of Equipment unless such option is
granted in a separate written agreement executed by Lessor.
23. GENERAL PROVISIONS. (a) NOTICES. Any notice, request or demand to Lessee
provided for in this Lease shall be deemed given when delivered to Lessee or
when
<PAGE>
mailed (U.S. mail first class postage prepaid) or delivered to Lessee's address
stated above, or to such other address as may then appear for Lessee on the
records of Lessor. Any notice to Lessor shall be given by mailing (U.S. mail
first class postage prepaid) or delivering such notice to Lessor's address
stated above, or at such other address as may have been designated by written
notice to Lessee, and shall be deemed given when received. (b) STATUTORY FINANCE
LEASE. Lessor shall be entitled to all rights, but not subject to any
obligations or liabilities, of a finance lessor under the California Uniform
Commercial Code, regardless of whether this Lease qualifies as a finance lease
or whether such rights are expressly set out herein. (c) CONSTRUCTION. This
Lease shall be governed by and construed in accordance with the laws of the
State of California. Paragraph headings are for convenience only, and shall not
be used in any manner to construe, limit, define or interpret any term or
provision of this Lease. Time is of the essence in the performance by Lessee
under this Lease. The singular includes the plural. If more than one Lessee has
executed this Lease, the term Lessee shall refer to each and all of them, and
their obligations hereunder shall be joint and several. (d) FURTHER ASSURANCES.
Lessee shall execute and deliver to Lessor or cause to be executed and delivered
to Lessor, upon Lessor's request, all instruments and assurances as Lessor deems
necessary for the confirmation, protection or perfection of this Lease, Lessor's
interest in the Equipment or any security interest in any property securing this
Lease or any guaranty of this Lease and Lessor's rights with respect thereto.
Lessor may execute such instruments or assurances on behalf of Lessee. Lessor
may file or record this Lease or a financing statement with respect to this
Lease so as to give notice to any interested parties. Any such filing or
recording shall not be deemed evidence of any intent to create a security
interest under the Uniform Commercial Code. Lessor is authorized to insert in
this Lease and in any financing statements or other documents executed in
connection herewith the serial numbers or other identification data of any
Equipment. (e) SEVERABILITY. If any provision of this Lease or the application
thereof to any party or circumstance is held to be invalid, void, illegal or
unenforceable, the remainder of this Lease and the application of such provision
to other parties or circumstances shall not be affected thereby and shall remain
in full force and effect, the provisions of this Lease being severable in any
such instance. (f) ATTORNEY'S FEES. Lessee shall pay reasonable attorney's fees
and all other costs and expenses incurred by Lessor in the administration or
enforcement of this Lease, whether or not litigation is commenced. (g)
NON-WAIVER. Waiver by Lessor of any provision hereof in one instance shall not
constitute a waiver as to any other instance. Lessor's failure at any time to
require strict performance by Lessee of any of the provisions hereof shall not
waive or diminish Lessor's right thereafter to demand strict compliance
therewith or with any other provision. Waiver of any default shall not waive any
other default. (h) FINANCIAL STATEMENT/TAX TREATMENT. Lessor assumes no
liability and makes no representations as to the treatment by Lessee of this
Lease, the Equipment or the rental payments for accounting, financial statement
or tax purposes. Lessee is advised to consult its attorney or accountant with
respect thereto. (i) LESSOR'S CONSENT. Wherever Lessor's consent is required in
this Lease, such consent may be granted or withheld in Lessor's sole discretion.
(j) VENUE IN ORANGE COUNTY. All actions or proceedings relating directly or
indirectly to this Lease shall, at the option of Lessor, be litigated in the
courts located in Orange County, California. Lessee consents to the jurisdiction
of any such court. Lessee waives any and all rights Lessee may have to transfer
or change the venue of any such action or proceeding from any such court. (k)
BAD CHECKS. Receipt of any check, draft, order, or other item on account of any
rent or other obligation under this Lease will NOT be considered payment thereof
until such check or other item is honored when presented for payment. Without
limiting and in addition to any other provision hereof. Lessor shall have all
statutory rights to recover exemplary or other damages if any check or other
item is not honored when presented for payment. (l) FINANCIAL INFORMATION;
ADDITIONAL DOCUMENTS. Lessee agrees during the term of this Lease to furnish
Lessor: (a) a fiscal year end financial statement including balance sheet and
profit and loss statement within one hundred twenty (120) days of the close of
each fiscal year, (b) any other information normally provided by Lessee to the
public and (c) such other financial data or information relative to this Lease
or the Equipment as Lessor may from time to time request. (m) MISCELLANEOUS.
After careful consideration of all facts and circumstances concerning the
Equipment, Lessor and Lessee agree that the Equipment has a remaining economic
life which extends beyond the Expiration Date. Deposit of Lessee's funds shall
not constitute an acceptance of an offer to lease by Lessor. No agreement or
representation has been made by Lessor, its agents or representatives, that
Lessee's credit will be approved by Lessor. Lessee acknowledges receipt of a
fully executed copy of this Lease.
NOTE: Lessee acknowledges that no agreement or representation other than
contained in this lease has been made by Lessor, its agents or representatives.
This lease contains the entire and final agreement between Lessor and Lessee
with respect to the Equipment and the subject matter of this Lease. The terms
and provisions of this lease may not be waived, altered, or amended except by a
separate written agreement signed by Lessor and Lessee. The undersigned
Lessee(s) attest(s) that they have read all documents which are part of this
Lease, and is/are fully aware of all the terms and conditions contained herein.
The undersigned agree(s) to all the terms and conditions set forth above hereof,
and in witness thereof hereby execute(s) this NON-CANCELABLE lease. The
person(s) signing this Lease represent(s) that they are authorized to sign on
behalf of Lessee. This Lease shall not be binding upon Lessor or become
effective unless and until Lessor accepts the same in the State of California.
Name of Lessee: Centennial Technologies, Inc.
By: /s/ Kathleen C. Little Title: VP Finance
- ----------------------------------------------------------------
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Date: 3/22/99
- ----------------------------------------------------------------
CROCKER CAPITAL
By: Title: Manager
- ----------------------------------------------------------------
Date:
- ----------------------------------------------------------------
Corporate Offices: 1201 Dove Street Suite 600, Newport Beach, CA 92660
(949) 223-8800
LIANA P. COLBERT
Notary Public
My Commission Expires October 30,2003
<PAGE>
CROCKER CAPITAL
1201 DOVE STREET STE. 600, NEWPORT BEACH, CA 92660 (714) 223-8800
- --------------------------------------------------------------------------------
EQUIPMENT LEASE SCHEDULE A
LEASE NO.: 02067-299-01
LESSOR: Crocker Capital
LESSEE: Centennial Technologies. Inc.
REFERENCE DATE:_____________
Equipment Leased (the Equipment), is described as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Quantity Item Model Number Serial Number
<S> <C> <C> <C>
2 PSA-Philips Service Agreement Full Extended Warranty-One Year
1 GEM Emerald (1308/20)
1 GEM Topaz (1309/10)
4 Nozzle Type 33 (2962/73)
2 Internal Tray Feeder (9469.900.00408)
1 Glass Calibration Kit (1912/00)
1 Side Illumination Unit (2969/77)
1 Comp. Alignment Camera for max. 15mm comp (2969/71)
1 Front Illumination Unit (2969/78)
1 Fine Pitch Camera (32mm comp)/Front Lighting for Topaz (2969/90)
1 GPP 3.0 (2213/02)
1 Basic PPS 3.0 (2220/03)
1 Optimizer 3.0 (2221/03)
1 Extended PPS 3.0 (2222/03)
4 8mm Feeder, 2mm Pitch, 7" Reel (2903/70)
20 8mm Feeder, 4mm Pitch, 7" Reel (2903/71)
5 12mm Feeder, 15" Reel (2903/81)
10 16mm Feeder, 15" Reel (2903/20)
3 24mm Feeder, 15" Reel (2903/30)
10 32mm Feeder, 15" Reel (2903/40)
2 44mm Feeder, 15" Reel (2903/50)
1 PPS Training, 4 Days (O2OTRAIN.013)
1 Emerald Comprehensive User Training, 4 Days (O2OTRAIN.501)
1 Emerald On-Line Programming Training, 4 Days (O2OTRAIN.502)
1 Topaz Comprehensive User Training, 4 Days (O2OTRAIN.601)
1 Topaz On-Line Programming Training, 4 Days (O2OTRAIN.602)
1 Emerald Operator Training, 2.5 Days (O2OTRAIN.510)
1 Topaz Operator Training, 2.5 Days (O2OTRAJN.610)
- -------------------------------------------------------------------------------------------------------
</TABLE>
This schedule is attached to and made part of that Lease Agreement referenced
above.
LESSEE: LESSOR:
Centennial Technologies, Inc. Crocker Capital
By: /s/ Kathleen C. Little By:
---------------------------- ----------------------------
Title: VP Finance Title: Manager
---------------------------- ----------------------------
Date: 2/24/99 Date:
---------------------------- ----------------------------
Note: Use full legal name(s). Signature(s) must be only those duly
authorized corporate officers, partners or proprietors, with
title indicated.
<PAGE>
EQUIPMENT ACCEPTANCE NOTICE
Lessee Instructions:
1. Read this Equipment Acceptance Notice.
2. Sign this Equipment Acceptance Notice when you have received the
Equipment and all statements below are correct.
3. Keep a copy for your records.
4. Immediately mail the signed original to Crocker Capital.
TO: Crocker Capital ("Lessor")
FROM: Centennial Technologies, Inc. ("Lessee")
RE: Equipment Acceptance Notice regarding Equipment referenced in Lease
Agreement No. 02067-299-01 Dated ______________ between Lessor and Lessee.
The undersigned Lessee acknowledges that:
1. The undersigned has received delivery of and fully inspected the
Equipment.
2. The Equipment is in full compliance with the terms of the Lease
Agreement.
3. The Equipment has not been delivered nor installed on a trial basis.
4. The Equipment is in good condition (operating and otherwise) and
repair.
5. The undersigned accepts the Equipment, AS IS and WHERE IS.
6. Lessor shall not be responsible for any third-party service
contracts or other agreements, and that default under such
agreements (if any) shall in no way affect the undersigned's
responsibility for payment in accordance with the Lease Agreement.
7. This Equipment Acceptance Notice must be signed by Lessee and
returned to Lessor before the vendor's invoice can be processed for
payment.
8. Lessor has fully and satisfactorily performed all covenants to be
performed by Lessor under the Lease Agreement.
THE UNDERSIGNED CONFIRMS THAT THE LESSOR HAS MADE NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, OF DESIGN, CONDITION, WORKMANSHIP, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, FREEDOM FROM INTERFERENCE AND INFRINGEMENT OR
OTHERWISE CONCERNING THE EQUIPMENT.
LESSEE FURTHER ACKNOWLEDGES DELIVERY OF THE EQUIPMENT ON THE FOLLOWING
DATE _____________, WHICH IS THE COMMENCEMENT DATE OF THE LEASE TERM AS SET
FORTH IN THE LEASE AGREEMENT.
THIS EQUIPMENT ACCEPTANCE NOTICE IS FINAL AND MAY NOT BE REVOKED, REGARDLESS OF
THE DIFFICULTY OF DISCOVERY OF NON-CONFORMITY OR OTHER PROBLEM, AND REGARDLESS
OF WHETHER ACCEPTANCE IS BASED ON THE ASSUMPTION THAT ANY NON-CONFORMITY WOULD
BE SEASONABLY CURED. LESSOR SHALL HAVE NO SUCH CURE OBLIGATION.
LESSEE: Centennial Technologies, Inc.
By: /s/ Kathleen C. Little
------------------------------
Title: VP Finance
------------------------------
Date:
------------------------------
Note: Use full legal name(s). Signature(s) must be only those duly authorized
corporate officer, partner or proprietor, with title indicated.
<PAGE>
CERTIFIED COPY OF CORPORATE RESOLUTION TO LEASE
I, Donald R. Peck. Secretary of Centennial Technologies Inc., a corporation,
and keeper of its records, do hereby certify that the following is a true and
correct copy of a Resolution duly adopted by the Board of Directors of said
corporation, on the 8th day of March, 1999.
Resolved, that this corporation, Centennial Technologies Inc., lease from
Crocker Capital, hereinafter referred to as Lessor, such items of personal
property, and upon such terms and conditions, as the officer or officers
hereinafter authorized, in their discretion, may deem necessary or advisable.
Resolved Further, that Kathleen C. Little the VP Finance or N/A the N/A acting
together with either N/A the N/A of this corporation (the officer or officers,
or officers acting in combination, authorized to act pursuant hereto being
hereinafter designated as "authorized officers") be, and they hereby are,
authorized, directed and empowered, in the name of this corporation, to execute
and deliver to Lessor and Lessor is requested to accept, any lease that may be
required by Lessor in connection with such leasing of personal property.
Resolved Further, that the authorized officers be, and they hereby are,
authorized, directed and empowered, in the name of this corporation, to do or
cause to be done all such further acts and things as they shall deem necessary,
advisable, convenient, or proper in connection with the execution and delivery
of any such lease and in connection with or incidental to carrying of the same
into effect, including, without limitation on the scope of the foregoing, the
execution, acknowledgment, and delivery of any and all instruments and documents
which may reasonably be required by Lessor under or in connection with any such
lease.
Resolved Further, that Lessor is authorized to act upon this resolution until
written notice of its revocation is delivered to Lessor, and that the authority
hereby granted shall apply with equal force and effect to the successors in the
office of the officers herein named.
I, Donald R. Peck, Secretary of Centennial Technologies, Inc., a corporation,
incorporated under the laws in the State of MA do hereby certify that the
foregoing is a full, true and correct copy of resolutions of the Board of
Directors of the said corporation which was duly and regularly called and held
in all respects as required by law, and the by-laws of the said corporation, at
the office thereof on the 8th day of March, 1999, at which meeting a majority of
the Board of Directors of said corporation was present and voted in favor of
said resolution.
I further certify that said resolutions are still in full force and effect and
have not been amended or revoked and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for this corporation
by virtue of the said resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and affixed
the corporate seal of the said corporation, this 22nd day of March, 1999.
Authorized Signatures:
By: /s/ Kathleen C. Little Affix Corporate
------------------------------- Seal Here
Title: VP Finance
----------------------------
Corporate Secretary: /s/ Donald R. Peck
------------------
Donald R. Peck
LIANA P. COLBERT
Notary Public
My commission Expires October 30,2003
<PAGE>
INSURANCE VERIFICATION
LESSEE: Centennial Technologies. Inc.
7 Lopez Rd.
Willington, MA 01887
INSURANCE INFORMATION: Lease Agreement Number: 02067-299-01
-----------------
INSURANCE CO.: Atlantic Mutual
--------------------------
TO AGENT: Riedman Insurance
--------------------------
ADDRESS: 45 East Avenue
--------------------------
Rochester, NY, 14604-2286
--------------------------
PHONE #: 716-232-4424 FAX#: 716-232-5813
------------------ ---------------------
REFERENCE POLICY #: 486304148
------------------
EFFECTIVE DATE: 6/30/98 EXPIRATION DATE: 6/30/99
------------------ -----------
LOSS PAYEE & ADDITIONAL INSURED:
CROCKER CAPITAL OR ITS ASSIGNEES
1201 DOVE STREET STE. 600
NEWPORT BEACH, CA 92660
EQUIPMENT LEASE AGREEMENT EXECUTED BY US REQUIRES THAT WE CARRY INSURANCE
INDEMNIFYING THE LESSOR AGAINST ANY LOSS, DAMAGE OR DESTRUCTION OF THE EQUIPMENT
DESCRIBED HEREIN VALUED AT $359,590.00.
ALSO, WE REQUIRE CASUALTY INSURANCE, LIABILITY COVERAGE; BODILY INJURY AND
PROPERTY DAMAGE, $1,000,000 COMBINED SINGLE LIMIT.
PLEASE ISSUE A CERTIFICATE OF INSURANCE AND FAX A COPY TO CROCKER
CAPITAL ATTN: DENA J. HEALD (949) 223-8811 BEFORE PUTTING THE
ORIGINAL IN THE MAIL.
BY: /s/ Kathleen C. Little
----------------------
TITLE: VP Finance
------------------
<PAGE>
CROCKER CAPITAL
1201 DOVE STREET STE. 600, NEWPORT BEACH, CA 92660 (949) 223-8800
- --------------------------------------------------------------------------------
PURCHASE OPTION
The undersigned Lessor and Lessee agree with reference to Lease Agreement No.
02067-299-01 as follows:
Lessee shall have the option (on the terms and conditions contained herein) to
purchase all, but not less than all, of Lessor's right, title and interest in
and to the Equipment covered by the above-referenced Lease between Lessor and
Lessee, AS IS, in its then condition and at its then location, on the last day
of the term of the Lease. The option herein granted shall terminate, without
notice, upon the earlier of:
1. The occurrence of an event of default under the Lease and the
continuance of such default for ten (10) days,
2. Repossession of the Equipment, or
3. Sixty (60) days prior to the last day of the term of the Lease.
The option may not be assigned by Lessee. It shall be a condition precedent to
Lessee's right to exercise the option that:
a. All amounts due under the Lease have been paid,
b. All amounts to become due under the Lease or this Purchase
Option have been prepaid,
c. Lessee is not in default under the Lease, and
d. No event has occurred which, with the giving of notice or the
passage of time, or both, would constitute an event of default
under the Lease.
This option shall be exercised by delivery of written notice to Lessor by Lessee
of Lessee's exercise of this option not earlier than 120 days prior to, nor
later than 60 days prior to, the last day of the term of the Lease together with
payment to Lessor of the purchase price of said Equipment as set forth below and
payment to Lessor all sales and other taxes applicable to Lessee's purchase of
the Equipment.
If litigation arises in connection with the option, the prevailing party shall
be entitled to recover its attorneys' fees. Time is of the essence hereof.
The purchase price under this option is: Fair Market Value
LESSEE: LESSOR:
Centennial Technologies, Inc. Crocker Capital
By: /s/ Kathleen C. Little By:
- ------------------------------------- ---------------------------------------
Title: VP Finance Title: Manager
- ------------------------------------- ---------------------------------------
Date: 3/22/99 Date:
- ------------------------------------- ---------------------------------------
Note: Use full legal name(s).
Signature(s) must be only those
duly authorized corporate
officers, partners or
proprietors, with title
indicated.
<PAGE>
PAYMENT INSTRUCTION LETTER
LESSEE NAME: Centennial Technologies, Inc.
LEASE NO.: 02067-299-01
TOTAL INVOICE AMOUNT: $359,590.00
LESSEE'S PAYMENT AT THIS TIME: not applicable
Please attach a check made payable to Crocker Capital ("Crocker
Capital") in the amount of $ 0.00. Of the total amount received,
$2,500.00 is a NON-REFUNDABLE APPLICATION FEE. If the Lessee decides
for any reason not to complete this transaction, Crocker Capital
will retain the entire amount of the Non-refundable Application Fee.
Crocker Capital is under no obligation to execute the lease. If Crocker
Capital chooses not to proceed, all funds will be returned to Lessee, less
the Lease Origination Fee plus costs incurred, provided that if Crocker
Capital's decision not to proceed is based on Lessee's misstatement of
credit information the Non-refundable Application Fee plus costs incurred
will be retained by Crocker Capital.
If and when Crocker Capital executes this Lease, the enclosed funds will
be applied as follows:
1. Lease Origination Fee ............................ 350.00
2. First Month's Payment ............................ 6,318.33
--------
SUBTOTAL ......................................... 6,668.33
LESS ANY MONIES ALREADY PAID OR NET OUT .......... (6,668.33)
TOTAL ............................ 0.00
LESSEE: LESSOR:
Centennial Technologies, Inc. Crocker Capital
By: /s/ Kathleen C. Little By:
---------------------------------- ----------------------------------
Kathleen C. Little
Title: VP Finance Title: Documentation Manager
------------------------------- -------------------------------
Date: 3/22/99 Date:
-------------------------------- --------------------------------
<PAGE>
UNIFORM COMMERCIAL CODE
13418
STATEMENTS OF CONTINUATION, PARTIAL RELEASE, ASSIGNMENT, ETC.- FORM UCC-3
INSTRUCTIONS MASSACHUSETTS
1. PLEASE TYPE this form. Fold only along perforation for mailing.
2. Remove Secured Party and Debtor copies and send other 3 copies with
interleaved carbon paper to the filing officer.
3. Enclose filing fee.
4. If the space provided for any item(s) on the form is inadequate the
item(s) should be continued on additional sheets, preferably 6" x 8" or 8"
x 10". Only one copy of such additional sheets need be presented to the
filing officer with a set of three copies of Form UCC-3. Long schedules of
collateral, etc. may be on any size paper that is convenient for the
secured party.
5. At the time of filing, filing officer will return third copy as an
acknowledgement.
- --------------------------------------------------------------------------------
This STATEMENT is presented to a filing officer for filing pursuant to the
Uniform Commercial Code.
- --------------------------------------------------------------------------------
1 Debtor(s) (Last Name First) and address(es)
Centennial Technologies, Inc.
7 Lopez Road
Willington, MA 01887
- --------------------------------------------------------------------------------
2 Secured Party(ies) and address(es)
Crocker Capital
1201 Dove Street, Suite #600
Newport Beach, CA 92660
- --------------------------------------------------------------------------------
3 Maturity date (if any):
- --------------------------------------------------------------------------------
For Filing Officer
(Date, Time, Number, and Filing Office)
- --------------------------------------------------------------------------------
This statement refers to original Financing Statement No. Dated _______, 19___
- --------------------------------------------------------------------------------
A. Continuation ..... |_|
The original financing statement between the foregoing Debtor and Secured Party,
bearing the file number shown above, is still effective.
- --------------------------------------------------------------------------------
B. Partial Release ...|_|
From the collateral described in the financing statement bearing the file number
shown above, the Secured Party releases the following:
- --------------------------------------------------------------------------------
C. Assignment ..............|_|
The Secured Party certifies that the Secured Party has assigned to the Assignee
whose name and address is shown below. Secured Party's rights under the
financing statement bearing the file number shown above in the following
property:
- --------------------------------------------------------------------------------
D. Other: ...............|XXX|
(Such as "amendment")
Amendment
- --------------------------------------------------------------------------------
E. TERMINATION .........|_|
The Secured Party of record no longer claims a security interest under the
Financing Statement
- --------------------------------------------------------------------------------
Ref. Lease # 02067-299-01
/s/ Kathleen C. Little (Debtor)
- ------------------------------------ -----------------------------------
(Signature of Debtor, if required)
Dated: , 19 By:
------------------------- ------ --------------------------------
(Signature of Secured Party)
FILING OFFICER COPY-ALPHABETICAL MASSACHUSETTS
<PAGE>
N
UNIFORM COMMERCIAL CODE - FINANCING STATEMENT - FORM
INSTRUCTIONS
1. PLEASE TYPE this form. Fold only along perforation for mailing.
2. Remove Secured Party and Debtor Copies and send other 3 copies to the filing
officer. Enclose filing fee.
3. When filing is to be with more than one office, Form UCC-2 may be placed over
this set to avoid double typing.
4. If the space provided for any item(s) on the form is inadequate the item(s)
should be continued on additional sheets one copy of such additional sheets
need be presented to the filing officer with a set of three copies of the
financing [ILLEGIBLE] indentures, etc., may be on any size paper that is
convenient for the secured party.
5. If collateral is crops or goods which are or are to become fixtures, describe
generally the real estate and give [ILLEGIBLE]
6. When a copy of the security agreement is used as a financing statement, it is
requested that it be accompanied by forms, without extra fee.
7. At the time of original filing, filing officer should return third copy as an
acknowledgment. At a later time, secured legend and use third copy as a
Termination Statement.
This FINANCING STATEMENT is presented to a filing officer for filing pursuant to
the Uniform Commercial Code
- --------------------------------------------------------------------------------
1 Debtor(s) (Last Name First) and address(es)
Centennial Technologies, Inc.
7 Lopez Road
Willington, MA 01887
- --------------------------------------------------------------------------------
2 Secured Party(ies) and address(es)
Crocker Capital
1201 Dove Street, Ste. #600
Newport Beach, CA 92660
- --------------------------------------------------------------------------------
3 [ILLEGIBLE]
- --------------------------------------------------------------------------------
For Filing Of [ILLEGIBLE]
- --------------------------------------------------------------------------------
4 This financing statement covers the following types (or items) of property:
Ref. Lease # 02067-299-01 see attached schedule "A"
- --------------------------------------------------------------------------------
5 [ILLEGIBLE]
- --------------------------------------------------------------------------------
This financing statement is filed in connection with a lease of goods between
secured party, as lessor, and debtor, as lessee, pursuant to section 9408 of the
uniform commercial code, together with all present and future accessories,
parts, repairs, replacements, substitutions, attachments, modifications,
renewals, additions, improvements, up-grades and accessions, at, to or upon such
items of property.
- --------------------------------------------------------------------------------
Check |X| if covered:
|_| Proceeds of Collateral are also covered
|_| Products of Collateral are also covered
- --------------------------------------------------------------------------------
Filed with:.....................................................................
- --------------------------------------------------------------------------------
- -------------------------------------- -----------------------------
By: /s/ Kathleen C. Little By:
---------------------------------- --------------------------
Signature(s) of Debtor(s) Signature(s)[ILLEGIBLE]
FILING OFFICER COPY - ALPHABETICAL
STANDARD FORM - UNIFORM COMMERCIAL CODE - FORM UCC-1
STATE OF MASSACHUSETTS
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-26-1999
<EXCHANGE-RATE> 1
<CASH> 1,220
<SECURITIES> 5,385
<RECEIVABLES> 3,877
<ALLOWANCES> 0
<INVENTORY> 3,008
<CURRENT-ASSETS> 13,888
<PP&E> 4,477
<DEPRECIATION> 1,777
<TOTAL-ASSETS> 18,378
<CURRENT-LIABILITIES> 6,188
<BONDS> 0
0
0
<COMMON> 205
<OTHER-SE> 11,712
<TOTAL-LIABILITY-AND-EQUITY> 18,378
<SALES> 6,681
<TOTAL-REVENUES> 6,681
<CGS> 4,556
<TOTAL-COSTS> 4,556
<OTHER-EXPENSES> 1,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 241
<INCOME-TAX> 10
<INCOME-CONTINUING> 231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
