-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VQeFIsqMM7Z24ZW7ahIu4qwoHrTXQC9A3H5GH5OdB80bLtxEfp7oym2dbD5rtZe0 0aZVpDUnEELCjkD0lucudg== 0000927016-02-004215.txt : 20020819 0000927016-02-004215.hdr.sgml : 20020819 20020819170351 ACCESSION NUMBER: 0000927016-02-004215 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BNS CO CENTRAL INDEX KEY: 0000014637 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 050113140 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05881 FILM NUMBER: 02742917 BUSINESS ADDRESS: STREET 1: 275 WEST NATICK ROAD CITY: WARWICK STATE: RI ZIP: 02886 BUSINESS PHONE: 401-244-4500 MAIL ADDRESS: STREET 1: 275 WEST NATICK ROAD CITY: WARWICK STATE: RI ZIP: 02886 10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-5881 ------ BNS Co. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 050113140 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 275 West Natick Road, Warwick, Rhode Island 02886 ----------------------------------------------------- (Address of principal executive offices and zip code) (401) 244-4500 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date, 2,937,350 of Class A common stock, 63,612 shares of Class B common stock, par value $0.01 per share, outstanding as of June 30, 2002. 1 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS* - ----------------------------- BNS Co. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands except per share data) (Unaudited)
For the Quarter For the Six Months Ended June 30 Ended June 30 --------------- --------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales ............................................ $ 15 $ -- $ 26 $ -- Cost of sales ........................................ 307 -- 615 -- Research and development expense ..................... 468 1,104 932 2,243 Selling, general and administrative .................. 2,528 2,555 4,390 5,146 Write-down of subsidiary net assets .................. 909 -- 909 -- -------- -------- -------- -------- Operating loss ....................................... (4,197) (3,659) (6,820) (7,389) Interest expense ..................................... 105 627 218 2,682 Other income, net .................................... 1,454 1,231 2,677 1,678 -------- -------- -------- -------- Loss from continuing operations before income taxes .. (2,848) (3,055) (4,361) (8,393) Income tax expense ................................... 61 -- 114 -- -------- -------- -------- -------- Loss before discontinued operations .................. (2,909) (3,055) (4,475) (8,393) Discontinued operations: Loss from operations, net of income taxes of $0, $540, $0 and $1,240 ...................................... -- (3,367) (46) (6,778) Gain on sale of business ............................. -- 47,492 -- 47,492 -------- -------- -------- -------- Income (loss) before extraordinary item ............ (2,909) 41,070 (4,521) 32,321 Extraordinary item - extinguishment of debt ........ -- 6,566 -- 6,566 -------- -------- -------- -------- Net income (loss) .................................. $ (2,909) $ 34,504 $ (4,521) $ 25,755 ======== ======== ======== ======== Income (loss) per share basic and diluted: Continuing operations .............................. $ (1.00) $ (1.06) $ (1.53) $ (2.98) Discontinued operations ............................ -- 15.34 (0.02) 14.45 Extraordinary item ................................. -- (2.28) -- (2.33) -------- -------- -------- -------- Net income (loss) per common share basic and diluted ............................................ $ (1.00) $ 12.00 $ (1.55) $ 9.14 ======== ======== ======== ========
* The accompanying notes are an integral part of the financial statements. 2 Item 1. FINANCIAL STATEMENTS* - ----------------------------- BNS Co. CONSOLIDATED BALANCE SHEETS (dollars in thousands)
June 30, December 31, 2002 2001 ---- ---- (unaudited) ASSETS Current assets: Cash ............................................................ $ 6,720 $ 10,095 Other receivables, net of $724 and $826 allowance at June 30 and December 31, respectively ...................... 412 1,272 Assets held for sale ............................................ 2,370 2,363 Assets related to discontinued operations ....................... 242 274 Prepaid expenses and other current assets ....................... 388 385 -------- -------- Total current assets ....................................... 10,132 14,389 Property, plant and equipment Land ............................................................ 426 415 Buildings and improvements ...................................... 105 105 Machinery & equipment ........................................... 1,351 1,244 -------- -------- 1,882 1,764 Less accumulated depreciation ................................... 566 420 -------- -------- 1,316 1,344 Other assets .................................................... 1,963 3,550 -------- -------- $ 13,411 $ 19,283 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities Accounts payable and accrued expenses ........................... $ 5,782 $ 7,141 Current portion of long-term debt ............................... 2,848 3,317 -------- -------- Total current liabilities ....................................... 8,630 10,458 Long-term liabilities ........................................... 3,188 3,676 Commitments and contingencies Shareowners' equity Preferred stock; $1.00 par value; authorized 1,000,000 shares; none issued ................................................... -- -- Common Stock: Class A, par value, $.01; authorized 30,000,000 shares; issued 2,937,350 shares in 2002 and 2,861,240 shares in 2001 .. 29 29 Class B, par value, $.01; authorized 2,000,000 shares; issued 63,612 shares in 2002 and 64,007 shares in 2001 ........ 1 1 Additional paid-in capital ...................................... 86,981 85,950 Retained deficit ................................................ (84,894) (80,373) Unamortized value of restricted stock awards .................... (168) -- Accumulated other comprehensive income (loss) ................... 99 (3) Treasury stock; 8,518 shares in 2002 and 2001, at cost .......... (455) (455) -------- -------- Total shareowners' equity ....................................... 1,593 5,149 -------- -------- $ 13,411 $ 19,283 ======== ========
* The accompanying notes are an integral part of the financial statements. 3 Item 1. FINANCIAL STATEMENTS* - ----------------------------- BNS Co. CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands)
For the Six Months Ended June 30, --------------------------------- 2002 2001 ---- ---- Cash Used in Operations: Net income (loss) ............................................. $ (4,521) $ 25,755 Extraordinary item - extinguishment of debt ................... -- 6,566 Adjustments to reconcile net loss to net cash used in operating activities from continuing operations: Depreciation and amortization .......................... 832 847 Changes in operating assets and liabilities ............ (596) 3,263 Minority interest ...................................... (764) (157) Write-down in the value of net assets of a subsidiary ........................................... 909 -- Changes in assets and liabilities related to discontinued operations .............................. (250) 1,187 Gain on sale of business ............................... -- (47,492) --------- --------- Net Cash Used in Operations ................................... (4,390) (10,031) --------- --------- Investment Activities: Capital expenditures .......................................... (107) (388) Proceeds from sales of business, net of expenses .............. -- 141,520 --------- --------- Net Cash Provided by (Used in) Investment Activities .......... (107) 141,132 Financing Transactions: Payment of notes payable ...................................... (469) (27,400) Proceeds from issuance of stock of subsidiary ................. 1,500 -- Payment of long-term senior notes ............................. -- (58,278) Distribution to stockholders .................................. -- (44,480) Equity distribution ........................................... -- 3,156 --------- --------- Net Cash Provided by (Used in) Financing Transactions ......... 1,031 (127,002) --------- --------- Effect of Exchange Rate Changes on Cash ....................... 91 -- --------- --------- Cash and Cash Equivalents: Increase (decrease) during the period ......................... (3,375) 4,099 Beginning balance ............................................. 10,095 8,882 --------- --------- Ending balance ................................................ $ 6,720 $ 12,981 ========= ========= Supplementary Cash Flow Information: Interest Paid .......................................... $ 199 $ 3,171 ========= ========= Taxes Paid ............................................. $ -- $ 230 ========= =========
* The accompanying notes are an integral part of the financial statements. 4 Item 1. FINANCIAL STATEMENTS* - ----------------------------- BNS Co. CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY (in thousands) For the Six Months Ended June 30, 2002
Unamortized Accumulated Additional value of other Total Common paid in Retained restricted comprehensive Treasury Shareowners' Shares Stock capital deficit stock awards income (loss) stock Equity ----- ----- ------- ------- ------------ ------------- ----- ------ Balance at January 1, 2002 .... 2,925 $30 $85,950 $(80,373) $ -- $ (3) $(455) $ 5,149 Net loss ...................... -- -- -- (1,612) -- -- -- (1,612) Foreign currency translation adjustment ...... -- -- -- -- -- (2) -- (2) ----- --- ------- -------- ----- ----- ----- ------- Balance at March 31, 2002 ..... 2,925 30 85,950 (81,985) -- (5) (455) 3,535 Net loss ...................... -- -- -- (2,909) -- -- -- (2,909) Foreign currency adjustment .................. -- -- -- -- -- 104 -- 104 Restricted stock awards ....... 75 -- 219 -- (219) -- -- -- Amortization of restricted stock awards ..... -- -- -- -- 51 -- -- 51 Acquisition of subsidiary minority interest ........... -- -- 812 -- -- -- -- 812 ----- --- ------- -------- ----- ----- ----- ------- Balance at June 30, 2002 ...... 3,000 $30 $86,981 $(84,894) $(168) $ 99 $(455) $ 1,593 ===== === ======= ======== ===== ===== ===== =======
* The accompanying notes are an integral part of the financial statements. 5 BNS Co. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands except per share data) 1. 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 Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2002 are not indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2001. In April 2001, the stockholders of Brown & Sharpe Manufacturing Company approved a number of transactions including: the sale of the Company's Metrology Business to Hexagon AB of Sweden ("Hexagon"), the sale of the Company's North Kingstown Facility to Precision Park Partners LLC, ("Precision Partners"), the change of the Company's name to BNS Co., and various stock-related transactions including a reverse stock split. Throughout this document, the "Company" refers to either Brown & Sharpe Manufacturing Company or BNS Co., as applicable. Due to a failure to reach mutual agreement on a number of issues, the Company did not complete the sale of its North Kingstown Facility to Precision Partners. In connection with the sale of the Metrology Business, Hexagon agreed to make an initial investment of $2,500 in BNS Co.'s software development subsidiary, Xygent Inc. ("Xygent"), in exchange for a 16.7% ownership interest. Additionally, Hexagon had committed, subject to certain conditions, to invest an additional $4,500 in Xygent over the next three years in return for additional equity ownership. $1,500 of this $4,500 was received, as scheduled, in April 2002. Since the sale of the Company's Metrology Business, the Company conducts its software development business through Xygent, which could ultimately lead to a sale or spin-off of that business. The Company continues to plan to sell its North Kingstown property and its real estate (a gravel pit) adjacent to the Heathrow Airport in the United Kingdom at later dates. The Company plans to make additional cash distributions to its shareholders when those two property sales have been completed. However, the amount of such future cash distributions is subject to later determination by the Company's Board of Directors, based on a number of factors as earlier disclosed in the Company's Proxy Statement dated March 30, 2001 for the Special Meeting of Stockholders held on April 27, 2001, legal requirements applicable to dividends and other subsequent developments including contingent and other retained liabilities. Subsequent to June 30, 2002, the Company entered into an agreement to sell its investment in Xygent Inc. for $3,000 to Hexagon AB, subject to certain closing adjustments. 2. Discontinued Operations - As mentioned above, the Company disposed of its Metrology Business, effective April 27, 2001. The financial statements for prior periods have been restated. 3. For the six months ended June 30, 2002, the Company has recorded an income tax provision of $114. This represents an income tax provision associated with the gravel royalty income earned in the United Kingdom. No other income tax provision has been recorded in this period. 6 BNS Co NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (dollars in thousands except per share data) 4. The following table sets forth the computation of basic and diluted loss per share:
For the For the Quarter Ended Six Months Ended June 30 June 30 ------------------ ------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Numerator: Loss from continuing operations ............... $(2,909) $ (3,055) $(4,475) $ (8,393) Income (loss) from discontinued operations .... -- 44,125 (46) 40,714 Extraordinary item ............................ -- (6,566) -- (6,566) ------- -------- ------- -------- Net income (loss) ............................. $(2,909) $ 34,504 $(4,521) $ 25,755 ======= ======== ======= ======== Denominator for basic earnings per Share: Weighted-average shares .................... 2,919 2,875 2,918 2,817 Effect of dilutive securities: Employee stock options and restricted stock .................................... -- -- -- -- ------- -------- ------- -------- Denominator for diluted earnings per share .... 2,919 2,875 2,918 2,817 Basic and diluted income (loss) per share from: Continuing operations ......................... $ (1.00) $ (1.06) $ (1.53) $ (2.98) Discontinued operations ....................... -- 15.34 (0.02) 14.45 Extraordinary item ............................ -- (2.28) -- (2.33) ------- -------- ------- -------- Basic and diluted income (loss) per share ..... $ (1.00) $ 12.00 $ (1.55) $ 9.14 ======= ======== ======= ========
Diluted loss per share is the same as basic loss per share in 2002 and 2001 because the computation of diluted earnings per share would have an antidilutive effect on loss per share calculations, and all options exercisable prior to the sale of the Metrology Business were exercised and are included in the basic calculation. Unvested restricted shares have an antidilutive effect and are not included in the calculation. 5. Comprehensive income (loss) for the quarter ended June 30, 2002 and 2001 amounted to $(2,805) and $54,264, respectively. Comprehensive income (loss) for the six months ended June 30, 2002 and 2001 amounted to $(4,419) and $39,970, respectively. Accumulated other comprehensive income (loss) at June 30, 2002 and December 31, 2001 is comprised of foreign currency translation adjustments of $99 and $(3), respectively. 6. Litigation - In July 2002, the Company and two former executives of the Company reached a final agreement and settled the compensation disputes between themselves. The terms of settlement include payment of a negotiated amount plus reasonable and properly documented legal and accounting fees and disbursements incurred by the former executives. At June 30, the Company had adequately provided for this contingency. 7. At June 30, 2002, the Company was a defendant in several legal claims that arose in the normal course of business. Based upon the information presently available to management, the Company believes that any liability for these claims would not have a material effect on the Company's results of operations or financial condition. 7 BNS Co NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (dollars in thousands except per share data) 8. Segment Information - Subsequent to the sale of the Metrology Business mentioned above, the Company conducts its business through its subsidiary Xygent, its only segment. 9. Executive Compensation - During the second quarter, the Company recorded an additional charge of $64 in SG&A in connection with a compensation arrangement, not yet finalized, with its CEO, who has a change in control agreement (where a change in control occurred upon the April, 2001 sale of assets to Hexagon). This increased the earlier charge recorded in connection with such arrangement to $1,400. 10. In April 2002, the Company granted restricted stock awards covering 75,715 shares of common stock to directors of the Company as a means of retaining and paying directors fees, thereby rewarding them for long-term performance and to increase their ownership in the Company. Shares awarded under the plan entitle the shareholders to all rights of common stock ownership except the shares may not be sold, transferred, pledged, assigned, or otherwise encumbered or disposed of during the restriction period. The shares granted shall vest on July 18, 2003, except for 5,715 shares which became fully vested in June 2002. The shares were recorded at the fair market value on the date of issuance as deferred compensation and the related amount is being amortized to operations over the vesting period. Compensation expense for the six months ended June 30, 2002, related to these shares of restricted stock was $51. 11. In April 2002, Xygent Inc. adopted the 2002 Equity Incentive Plan ("Plan") which will utilize stock options and other stock-based awards as part of its overall management incentive compensation programs to its eligible key employees. Under the provisions of this Plan, the aggregate number of shares of stock that may be delivered will be 30,300. No award may be granted under the Plan after April 8, 2012 but awards previously granted may extend beyond that date. The Plan permits the granting of stock options which qualify as incentive stock options under the Internal Revenue Code and non-statutory options which do not so qualify. On May 1, 2002, Xygent Inc. granted non-statutory stock options pursuant to the Plan. The options granted are 27,100 which are exercisable in installments of 40% at grant date and 3% on and after the last day of each month during the consecutive 20-month period beginning May 1, 2002 and ending December 31, 2003 at an exercise price of $13.50 per share. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company recorded no compensation cost related to these options during the period ended June 30, 2002. 12. Subsequent to June 30, 2002, the Company entered into an agreement to sell its investment in Xygent Inc. for $3,000 to Hexagon AB, subject to certain closing adjustments. As a result of this transaction, the Company has recorded a charge of $909 in continuing operations to reduce the carrying value of the Xygent Inc. net assets to the net realizable value (in a sale or otherwise). 13. Reclassification - Certain 2001 balances have been reclassified to conform with 2002 presentations. 8 BNS Co. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS -------------- Overview After completing the sale of its Metrology Business to Hexagon AB of Stockholm, Sweden ("Hexagon") on April 27, 2001, the Company's only actively conducted business is its Xygent development stage measuring software business, operated by its Xygent subsidiary, in which it held an 84% equity interest after the April 27, 2001 closing and then held 77%, after the making of Hexagon's second $1,500 of its four committed investments in April 2002, and the conversion to equity in Xygent of $1,500 of Xygent's intercompany debt to the Company. Subsequent to the end of the second quarter of 2002, the Company and Hexagon (through one of its subsidiaries) have entered into a securities purchase agreement (the "Hexagon Agreement") whereby Hexagon will acquire all of the Company's investment in Xygent for $3,000, of which $2,250 is to be paid at the closing and $750 is to be paid subsequent to closing subject to compliance with a Xygent equity value provision (the purchase of the Company's interest in Xygent under the Hexagon Agreement, the "Hexagon Transaction"). In the event that the Hexagon Transaction is not consummated, the Company will wind up Xygent. The Company holds its North Kingstown Facility, where it acts as landlord, and the adjoining acreage for sale and its Heathrow, U.K. real estate property for sale, each at the appropriate time, as determined by the Company's Board of Directors. The accompanying financial statements for the second quarter ended June 30, 2002 present the Metrology Business and the former Electronics Division as discontinued operations, but do not reflect the Hexagon Transaction. The financial statements for the prior period have been restated. The discussions below relate only to the Company's continuing operations that were continuing operations through the end of the second quarter (i.e. the Xygent operations) and refer to the Company's real estate assets to a limited extent, unless otherwise noted. Forward-Looking Statements This "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as other portions of this Report contain forward-looking statements concerning the Hexagon Transaction, the Company's cash burn rate or cash flow, as the case may be, retained liabilities, capital requirements, operations, economic performance and financial condition. In addition, forward-looking statements may be included in various other Company documents to be issued in the future and various oral statements by Company representatives to security analysts and investors from time to time. Such statements are not guarantees of future performance and are subject to various risks and uncertainties, including those set forth in "Risk Factors", and actual performance could differ materially from that currently anticipated by the Company. In addition, this "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto included elsewhere in this Form 10-Q. Results of Operations (dollars in thousands) (Three and Six Months ended June 30, 2002 compared to June 30, 2001) The Company had net revenue of $15 in the quarter ended June 30, 2002 and $26 in the six months ended June 30, 2002. There was no revenue in the three months and six months ended June 30, 2001. Although the Xact measuring software was officially released on April 24, 2001, the Company did not recognize any revenue until the fourth quarter of 2001. Operating loss for the three months ended June 30, 2002 of $4,197 was $538 greater than the three months ended June 30, 2001. For the six months ended June 30, 2002, the operating loss of $6,820 was $569 less than the six months ended June 30, 2001. The operating loss for the current quarter and the year-to-date period included a charge of $909 related to the reduction in the carrying value of the Xygent net assets to the net realizable value (in a sale or otherwise). Other than the above charge, the principal difference year over year in combined research and development expenses and selling, general and administrative expenses relate to the significant reduction in corporate staff and associated costs in 9 conjunction with the sale of the Metrology Business to Hexagon on April 27, 2001. The reduction in software R&D is due to the shift in resources after the sale of the Metrology Business to Hexagon to sales support for the introduction of XactMeasure, in addition to the change of treatment of a portion of these expenses to selling, general and administrative expenses after XactMeasure was released to the public on April 24, 2001. Charges to cost of sales for the three months and six months ended June 30, 2002 consist of amortization of capitalized software product development costs. Interest expense for the quarter ended June 30, 2002 of $105 is significantly lower than the quarter ended June 30, 2001 and principally reflects the reduced interest expense resulting from the repayment of the Company's U.S. bank debt and long-term senior notes following the sale of the Metrology Business. For the six months ended June 30, 2002 interest expense was $2,464 lower than the $2,682 for the corresponding period in 2001. Other income, net for quarter ended June 30, 2002, was $1,454 or $223 higher than the same quarter last year, primarily due to increased losses in Xygent affecting the minority interest. For the six months ended June 30, 2002 net other income is higher by $999 over the same period last year of $1,678. This is primarily due to the rental income from the North Kingstown Facility. Discontinued operations for the six months ended June 30, 2002 reflects additional closing expenses incurred in the sale of the Electronics Division. Discontinued operations for the quarter ended June 30, 2001 reflect the additional loss from operations of the Metrology Business and the Electronics Division. The extraordinary item in 2001 represents the prepayment penalty and related cost incurred in connection with the repayment of the long-term private placement senior notes following the sale of the Metrology Business. Liquidity and Capital Resources The Company had cash of approximately $6,720 at June 30, 2002, including approximately $850 cash held by Xygent. The Company is debt free, except for a $2,848 mortgage on the North Kingstown Facility. There is no assurance that the future months' expenses of the Company will not be greater than anticipated, or that its expected cash flow, assuming the Hexagon Transaction is consummated, subsequent to the sale of Xygent, will not thereafter be less than anticipated, and that a liquidity problem may not arise (see Risk Factors: There may not be adequate resources for funding the operation of the Company; Liquidity Risk). In addition, the Company has not sold the North Kingstown Facility, or adjoining acreage, or the Heathrow, U.K. property and, therefore, has not declared any dividend in any amount with respect to the anticipated proceeds from such sales. Given its limited resources and its general intentions with respect to payment of distributions to its shareholders out of a portion of the net proceeds of future sales of assets (principally its North Kingstown Facility, and adjoining acreage, and its Heathrow, U.K. real estate property), subject to later Board determination of the amounts based on a number of factors as earlier disclosed, legal requirements applicable to dividends and other subsequent developments, including contingent and other retained liabilities (and including present and future contingent liabilities related to tort-type claims arising out of sales of machine tools and hydraulic pumps by the Company prior to its discontinuance of those businesses by the early 1990's), the Company had decided not to use for Xygent any of its limited sources of funds beyond the $5,000 of Metrology Business sales proceeds that the Company had retained and disclosed that were committed for use in funding the development stage measuring software business activities of Xygent. The Company had satisfied this commitment in July 2002. With Xygent generating minimal sales in the first six months of 2002, although receiving continued technical acclaim for its developed measuring software, and with the continued unfavorable economic climate for technology in general and productivity enhancing software of the Xygent type in particular continuing in 2002, it was evident to the Company that Xygent would not reach break-even in 2002 with the funds that were available for this purpose at the end of April 2002. Further, it became evident to the Company that a restructuring and downsizing of Xygent by the Company did not appear to be a feasible alternative for the Company to undertake by itself, given the lack of funding available to the Company and other factors deemed relevant by the Company. Accordingly, the Company decided it was in the best interest of its stockholders not to invest more of its limited funds in Xygent and instead to enter into the Hexagon Agreement. Among other things, the Company believes that it would be better to have the Company realize a cash return on its investment in Xygent through a sale to Hexagon rather than winding-up Xygent, in which event there would be no assurance that the Company would realize any return on its investment in Xygent. Subsequent to the sale of Xygent, the Company's efforts to continue as a going concern would be negatively affected by any sale of its North Kingstown Facility and adjoining acreage (and any related distribution of all or a portion of the net sales proceeds, after providing for retained liabilities and satisfaction of legal requirements, to stockholders), as to which there can be no assurance that such sale can be completed. These conditions raise substantial doubt about the Company's ability to continue as a going concern. 10 The accompanying consolidated financial statements for the period ending June 30, 2002 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As previously stated, the net assets of Xygent have been adjusted to the net realizable value. This adjustment resulted in a charge to operations of $909. Other than this adjustment, the financial statements do not include any adjustments relating to the recoverability and classification of assets for the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Cash Flow and Working Capital Net cash used in operations for the six months ended June 30, 2002 was $4,390. Net cash used in investing activities for the six months ended June 30, 2002 was $107. Net cash provided by financing activities for the six months period ended June 30, 2002 was $1,031. The Company continues to classify the North Kingstown Facility and the related mortgage as current as the Facility continues to be held for sale. Excluding this asset along with the related mortgage and the Electronics Division assets also held for sale, the Company had working capital of $1,738 at June 30, 2002, as compared with $4,611 at December 31, 2001. 11 RISK FACTORS After completing the sale of its Metrology Business to Hexagon AB of Stockholm, Sweden ("Hexagon") on April 27, 2001, the Company's only actively conducted business is its Xygent development stage measuring software business, operated by its Xygent subsidiary, in which it held an 84% equity interest after the April 27, 2001 closing and then held 77%, after the making of Hexagon's second $1,500 of its four committed investments in April 2002, and the conversion to equity in Xygent of $1,500 of Xygent's intercompany debt to the Company. Subsequent to the end of the second quarter of 2002, the Company and Hexagon have entered into a securities purchase agreement whereby Hexagon will acquire all of the Company's investment in Xygent for $3,000 as described above. The Company holds its North Kingstown Facility, where it acts as landlord, and the adjoining acreage for sale and its Heathrow, U.K. real estate property for sale, each at the appropriate time, as determined by the Company's Board of Directors. The principal risk remaining with respect to the Company's interest in the Xygent business are: (i) the risk that the Hexagon Transaction as described above might not close, (ii) the risk that the Company might not receive the full amount of the $750 portion of the sale price to be paid after the closing and (iii) the risk that the Company might have to make an indemnification payment to Hexagon with respect to the Company's representations and warranties concerning the business of Xygent set forth in the Hexagon Agreement. Risk of not having the Proposed Sale of the North Kingstown Facility under a Purchase and Sale Agreement. The Agreement dated as of March 2, 2001, as extended by amendments as of May 31, 2001 and as of September 28, 2001, for the proposed sale of the Company's North Kingstown Facility (and adjoining acreage) to Precision Park Partners LLC lapsed in late 2001, as the parties were not able to complete the transaction on the terms and conditions contemplated by the Agreement. The Company is in the process of renting out its former office headquarters space in the North Kingstown Facility. The Company is also continuing to work with the Rhode Island Department of Environmental Management to whom this Company had submitted the results of the recently completed Phase II environmental study on the Facility on October 2, 2001. The Company believes, based on discussions with its real estate consultant, that completion of leasing the former headquarters space at the North Kingstown Facility to a new tenant and completion of the environmental remediation work that appears to be necessary at the North Kingstown Facility should result in increasing the fair market value of the Facility for a future sale of the property, although there can be no assurance that either of these two matters will be completed successfully by the Company or that the Company's expectation as to future increased market value of the Facility will prove to be the case. (See "Environmental Risks" below.) Environmental Risks Subject to the sale of Xygent to Hexagon as discussed above, the nature of the Company's operations are not affected by environmental laws, rules and regulations. However, because the Company and its subsidiaries and predecessors, prior to the sale to Hexagon on April 27, 2001 (and prior to sales of other divisions made in prior years) have conducted heavy manufacturing operations and often in locations at which, or adjacent to which, other industrial operations were conducted, from time to time the Company is subject to environmental claims. As with any such operations that involved the use, generation, and management of hazardous materials, it is possible that prior practices, including practices that were deemed acceptable by regulatory authorities in the past, may have created conditions which could give rise to liability under current or future environmental laws. In addition, the Company receives claims from time to time for toxic tort-type injuries related to the use of certain materials in pumps sold by its hydraulic pump operators, which business was sold many years ago. Thus far the toxic claims have not resulted in any material exposure, but there is no assurance that this will be the result for all such future toxic claims. Because the law in this area is developing rapidly, such environmental laws are subject to amendment and widely varying degrees of enforcement, the Company may be subject to, and cannot predict with any certainty the nature and amount of potential environmental liability related to these operations or locations (including its North Kingstown Facility and property on which the Facility is located, where, after the sale to Hexagon, the Company is now solely the landlord) that the Company may face in the future. A recently completed Phase II environmental investigation on the North Kingstown Facility has revealed certain environmental problems on the property. The results of the investigation show some exceedances of environmental standards for certain contaminants in the soil under the property and minor groundwater issues. The Company has been advised by its technical consultants that these exceedances are minor and do not create any hazard to human health or the environment. The Company submitted the 12 results of the investigation to the Rhode Island Department of Environmental Management ("RIDEM") on October 2, 2001, May 14, 2002 and June 21, 2002 and has stated to RIDEM that it will address these exceedances in a timely and appropriate manner consistent with applicable law and regulation. The Company is now awaiting the decision of RIDEM on the appropriate remedies to be implemented to address such exceedances. The Company believes, based on the preliminary advice of its consultants, that the estimated costs of investigation and remediation of the identified exceedances, which have been accrued, approximate $500,000. However, it is possible that such estimated costs may be more significant. The Company is also investigating the prospects of obtaining environmental cost cap and liability insurance to limit its financial exposure relating to such remediation. Delisting of the Company's Class A Common Stock from the New York Stock Exchange The Company's Class A Common Stock was delisted from the New York Stock Exchange and commenced trading on the OTC Bulletin Board under the symbol "BNSXA" and was listed on the Boston Stock Exchange on February 11, 2002. There is no assurance that there will continue to be a sufficient number of securities firms prepared to make an active trading market in our stock and the public perception of the value of the Class A Common Stock could be materially adversely affected. The market price of the Company's Common Stock could decline as a result of sales of shares by the Company's existing stockholders, including sales following the consummation of the Hexagon Transaction. The market price of the Company's Common Stock could decline as a result of sales of shares by stockholders who had acquired shares during the period prior to April 27, 2001 when the Metrology Business was the Company's principal business, including option holders who became shareholders in connection with the April 27, 2001 closing under the Acquisition Agreement with Hexagon, sales by beneficiaries under the Company's Employee Stock Ownership Plan, which terminated as a result of the closing, sales by beneficiaries of the Company's 401(k) plan or beneficiaries of employee benefit plans of Hexagon which have received shares of stock of the Company previously held in accounts under the Company's employee benefit plans and sales of other shares by former employees of the Company. The market price of the Company's Common Stock could also decline as a result of the Hexagon Transaction. Auditor's Opinion The Company received a report from its independent auditors for the year ended December 31, 2001, containing an explanatory paragraph stating the Company's operating losses raise substantial doubt about the Company's ability to continue as a going concern. The Company may continue to receive a similar opinion from the auditors in the future. There may not be adequate resources for funding the operations of the Company; Liquidity Risk There is no assurance that the future months' expenses of the Company will not be greater than anticipated, or that the expected cash flow, subsequent to the sale of Xygent, will not thereafter be less than anticipated, and that a liquidity problem may not arise (see "Liquidity and Capital Resources" in the Management's Discussion and Analysis). In addition, the Company has not sold the North Kingstown Facility, or adjoining acreage, or the Heathrow, U.K property and, therefore, has not declared any dividend in any amount with respect to all or a portion of the anticipated proceeds for such asset sales, subject to later Board determination of the amounts based on a number of factors as earlier disclosed, legal requirements applicable to dividends and other subsequent developments, including contingent and other retained liabilities (and including present and future contingent liabilities related to tort-type claims arising out of sales of machine tools and hydraulic pumps by the Company prior to its discontinuance of those businesses by the early 1990's). 13 PART II - OTHER INFORMATION Item 1. N/A - ------- Item 2. N/A - ------- Item 3. NONE - ------- Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- The Annual Meeting of Stockholders of the Company was held on June 7, 2002. The Stockholders of the Company were asked to vote on the following items, and voted as follows: Proposal 1: Election of Two Directors to the Board of Directors Class A For Withheld ------- --- -------- Roger E. Levien 2,438,012 265,036 John M. Nelson 2,447,956 255,092 Class B ------- John M. Nelson 351,970 93,390 The following persons continued in office as directors for the term specified Director Term Ending -------- ----------- Kenneth Kermes 2003 Richard M. Donnelly 2003 Howard K. Fuguet 2004 J. Robert Held 2004 Henry D. Sharpe, III 2004 Proposal 2: To increase the number of shares deliverable under the Company's 1999 Equity Incentive Plan For Against Abstain Broker Non Vote --- ------- ------- --------------- 926,227 1,403,631 4,163 814,387 Proposal 3: To ratify the election of Ernst & Young LLP as the Company's independent accountants for fiscal year ending December 31, 2002 For Against Abstain --- ------- ------- 3,109,786 35,992 2,630 14 Item 5. OTHER INFORMATION. - -------------------------- Accompanying this Form 10-Q are the certificates of the Chief Executive Officer and Chief Financial Officer required by Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, copies of which are furnished as exhibits to this report. Item 6. EXHIBITS AND REPORTS ON FORM 8-K - ------------------------------------------- (a) Exhibits -------- 10.30 Stock Purchase Agreement, dated April 8, 2002, between Xygent Inc. and BNS Co. 10.31 2002 Stock Purchase Agreement, dated as of April 8, 2002, between Xygent Inc. and BNS Co. relating to the purchase of 13,206 shares of Common Stock of Xygent in connection of retirement of $1.5 million in intercompany debt (the "2002 SPA") 10.32 Omnibus Agreement, dated April 19, 2002, by and among Xygent Inc., Brown & Sharpe Inc., Hexagon Holdings, Inc. and Hexagon AB. 10.33 Xygent 2002 Equity Incentive Plan 99.1 Certification of Chief Executive Officer 99.2 Certification of Chief Financial Officer (b) Report on Form 8-K No Reports on Form 8-K were filed during the quarter ended June 30, 2002. BNS Co. By: /s/ Andrew C. Genor ------------------------------------- Andrew C. Genor President and Chief Financial Officer (Principal Financial Officer) August 19, 2002 15 EX-10.30 3 dex1030.txt STOCK PURCHASE AGREEMENT Exhibit 10.30 STOCK PURCHASE AGREEMENT This Agreement (the "Agreement") is entered into as of the 8th day of April, 2002 (the "Effective Date") by and between BNS Co., a Delaware corporation ("BNS"), and Xygent Inc., a Delaware corporation ("Xygent"). WITNESSETH: WHEREAS, as of the Effective Date, there are 400,000 authorized shares of Common Stock, par value $0.01 (the "Common Stock"), of which 120,048 shares are issued and outstanding, of which 20,048 shares are owned of record by Brown & Sharpe, Inc. (formerly known as Hexagon (Rhode Island), Inc.) ("Brown & Sharpe") and 100,000 are owned of record by BNS; WHEREAS, by action of even date herewith, Xygent has adopted the Xygent, Inc. 2002 Equity Incentive Plan (the "Plan") to provide an incentive to employees of and other providers of services to Xygent through the award of options to acquire Stock and other Stock-based incentives (each, an "Award"); WHEREAS, a total of 30,300 shares of Stock have been reserved for issuance under the Plan; and WHEREAS, it is the intent and agreement of Xygent, BNS and Brown & Sharpe that of the total of 30,300 shares of Stock reserved for issuance under the Plan, 11,000 shares of Stock (the "BNS Reserve") be made available to Xygent by BNS, such that the dilution resulting from the exercise of options for more than 19,300 shares will be borne solely by BNS, and not by Brown & Sharpe and BNS, on the terms and conditions hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, BNS and Xygent agree as follows: 1. Right of Purchase or Repurchase. From and after the Effective Date and until termination of this Agreement (the "Exercise Period"), Xygent shall have the right, exercisable as hereinafter set forth, to purchase and acquire from BNS shares of Stock up to, from time to time, the BNS Reserve. During the Exercise Period, Xygent may exercise its purchase right as follows: a. Number of Shares Purchasable. If, at the time of delivery of any Stock pursuant to an Award (the "Award Shares"), the total number of shares of Stock then actually issued and outstanding under the Plan (taking into account the Award Shares) exceeds 19,300 (the "Issuance Limit"), Xygent shall be entitled to purchase and acquire from BNS up to the lesser of (i) the amount of such excess (expressed in shares of Stock), or (ii) the BNS Reserve reduced by the number of shares of Stock, if any, previously acquired by Xygent from BNS pursuant to this Agreement and increased by the number of shares of Stock, if any, previously purchased by BNS from Xygent pursuant to Section 2 below. b. Purchase Price. The purchase price for any shares purchased by Xygent from BNS pursuant to this Agreement in connection with the issuance of Award Shares shall be the exercise price or other amount ("exercise price"), if any, paid by the Plan participant or beneficiary for the Award Shares. If, in connection with any delivery of Award Shares, the total number of shares purchasable by Xygent under Section 1(a) above is less than the total number of such Award Shares, the purchase price payable by Xygent to BNS shall be determined by ranking the Award Shares in the order of the exercise price, if any, paid for those shares, starting with the highest such price, and by assuming that the shares purchasable by Xygent under Section 1(a) above correspond to the Award Shares in the same order of ranking (i.e., starting with those with the highest exercise price). 2. Special Rule for Restricted Stock. If any shares of Stock delivered with respect to an Award are then or thereafter subject to a risk of forfeiture, Sections 1(a) and 1(b) above shall be applied at the time of delivery; provided, that if any of such shares is later forfeited to Xygent (a "Forfeited Share"), the following special rules shall apply. If, immediately prior to the forfeiture of any Forfeited Shares, the total number of shares of Stock then issued and outstanding under the Plan (including the Forfeited Shares) exceeds the Issuance Limit, Xygent shall offer for sale to BNS, and BNS shall have the right to purchase, that number of shares of Stock which equals the excess of the number of Forfeited Shares over the Issuance Limit. The purchase price payable by BNS to Xygent with respect to any Forfeited Share shall be the exercise or other purchase price, if any, that was paid to Xygent under the Plan for such Forfeited Share. If, in connection with any forfeiture of Forfeited Shares giving rise to a BNS repurchase right described in this Section 2, the total number of Forfeited Shares is less than the number of shares as to which BNS has a repurchase right, BNS' repurchase right shall be deemed to pertain to those Forfeited Shares as to which the original exercise or purchase price was lowest (including zero, if the Forfeited Shares included any that were awarded without the payment of any exercise or purchase price). For purposes of this Section 2, a share of Stock will be deemed to be subject to a risk of forfeiture if it would be deemed to be subject to a "substantial risk of forfeiture" under Section 83 of the Internal Revenue Code and the regulations thereunder (whether or not it was originally transferred subject to such a risk), and the term "forfeiture" shall have the same meaning as under Section 83 of the Internal Revenue Code and the regulations thereunder. Any shares of Stock repurchased by BNS pursuant to this Section 2 shall be subject to Xygent's purchase right set -2- forth in Section 1, provided that any repurchased shares will not increase the total BNS Reserve. 3. Required Notice. Xygent shall promptly notify BNS of any delivery of shares of Stock under the Plan that might give rise to a purchase right under Section 1 and of any forfeiture of shares that might give rise to a repurchase right under Section 2. Each such notice shall include information concerning the number of shares of Stock then or previously delivered or forfeited, the exercise or other purchase price, if any, with respect to such shares, and other details necessary to determine the rights of the parties hereto. A copy of the notice delivered to BNS under this Section will be sent to Xygent. 4. Exercise Period. The right of Xygent or BNS to purchase or repurchase any shares of Stock under this Agreement shall be exercisable only during the period commencing on the "accrual date" (as hereinafter defined) and ending on the earlier of (i) the date of termination of this Agreement, or (ii) the date which is ninety (90) days after the accrual date. The "accrual date" with respect to any right of Xygent to purchase shares of Stock under Section 1 is the later of (i) the delivery of shares of Stock under the Plan that gives rise to such right, or (ii) the effective date of notice under Section 3 from Xygent to BNS with respect to such delivery. The accrual date with respect to any right of BNS to repurchase shares of Stock under Section 2 is the date of the forfeiture of shares of Stock that gives rise to such right. Notwithstanding the first sentence of this Section 4, BNS' repurchase right with respect to any forfeiture of shares of Stock under the Plan shall in no event terminate earlier than thirty (30) days following the effective date of the required notice by Xygent to BNS with respect to such forfeiture. 5. Exercise of Right. At any time within the exercise period described at Section 4 above, Xygent or BNS, as the case may be, may exercise its right of purchase or repurchase by delivering notice to the other party accompanied by payment in full of the purchase or repurchase price, if any, in cash, cashier's or bank check, or other consideration acceptable to the selling party, whereupon the selling party shall promptly take all necessary steps to deliver to the exercising party the shares of Stock so purchased or repurchased. 6. Adjustment for Stock Splits, etc. The rights and obligations of the parties to this Agreement shall be appropriately adjusted to reflect any positive or reverse stock split, stock dividend or other change in capitalization affecting the Stock or the price of the Stock. 7. Notice. All notices or other communications to a party required or permitted hereunder will be in writing and will be delivered personally or by facsimile (receipt confirmed) to such party (or, in the case of an entity, -3- to an executive officer of such party) or will be given by certified mail, postage prepaid with return receipt requested, addressed as follows: For notice to BNS: BNS Co. 275 West Natick Road Warwick, Rhode Island 02886 Fax No: (401) 244-4525 Attention: Chief Executive Officer For notice to Xygent: Xygent Inc. 275 West Natick Road Warwick, Rhode Island 02886 Fax No: (401) 244-4525 Attention: President For notices to Brown & Sharpe: Brown & Sharpe, Inc. c/o Hexagon AB PO Box 1112 SE-131 26 Nacka Strand Sweden Fax: 46 8 601 2620 Attention: President All notices will be deemed given on the day when actually delivered as provided above (if delivered personally or by facsimile) or on the day shown on the return receipt (if delivered by mail). Any party may change their respective above-specified recipient and/or mailing address by notice to the other party given in the manner herein prescribed. 8. Term of Agreement; Merger, etc. of Xygent. a. Termination. This Agreement shall terminate upon the earliest to occur of the following: (i) any liquidation or dissolution of BNS unless in connection with such event BNS' rights and obligations hereunder are transferred to an acquiring or surviving entity or an affiliate thereof, or (ii) any merger, sale of all or substantially all assets, consolidation or sale of Stock effecting a change of control of Xygent, or any liquidation or dissolution of Xygent, unless in connection therewith outstanding Awards are assumed (or new awards substituted therefor) by an acquiring or surviving entity or an affiliate thereof and this agreement is likewise so assumed, or -4- (iii) the day after the last date that any Award which could be issued under the Plan could have been exercised. In the event of a liquidation or dissolution described in clause (i), unless such liquidation or dissolution shall occur after this Agreement has already terminated, BNS shall give Xygent adequate advance notice of the liquidation or dissolution and Xygent shall thereupon have the right to purchase from BNS, at a purchase price per share equal to the average per-share exercise price of all stock option Awards then outstanding, any number of shares of Stock held by BNS up to the maximum that Xygent could have purchased if all then outstanding stock option Awards had been exercised. If, upon or prior to an event described in clause (ii), outstanding Awards are accelerated and result in the delivery of shares of Stock that would entitle Xygent to purchase shares from BNS pursuant to Section 1 above, the notice and exercise provisions of this Agreement shall be deemed modified so as to enable Xygent (unless this Agreement shall earlier have terminated) to exercise its purchase right in advance of the transaction, subject to a return to BNS of any shares so purchased if the transaction is not consummated. If, in connection with an event described in clause (ii), outstanding shares of restricted Stock issued under the Plan are forfeited, the notice and exercise provisions of this Agreement shall likewise be deemed modified, and Xygent shall provide such adequate advance notice as is necessary, to ensure that BNS (unless this Agreement shall earlier have terminated) has the opportunity to exercise its repurchase right in advance of the transaction, subject to a return to Xygent of any shares so repurchased if the transaction is not consummated. b. Merger, etc. of Xygent. If, in connection with a merger, sale of all or substantially all assets, consolidation or sale or Stock affecting Xygent in connection with which outstanding Awards are assumed (or new awards substituted therefor) by an acquiring or surviving entity or an affiliate thereof (the "acquisition issuer"), the following special rules shall apply: (A) BNS' obligations under this Agreement shall be limited to those Awards that are outstanding immediately following the transaction (or equivalent awards issued in substitution therefor); (B) BNS' obligations hereunder shall be limited to the securities, if any, of the acquisition issuer that it receives in the transaction with respect to those shares of Stock held by BNS that would have been subject to Xygent's purchase right hereunder had the transaction not taken place and had all stock option Awards outstanding at the time of the transaction been exercised; and (C) if, in connection with the transaction, securities of an acquisition issuer are substituted for restricted Stock, such securities shall be treated as Stock for purposes of Section 2 above and Section 2 shall be applied (subject -5- to such adjustments as are necessary to reflect the transaction and the exchange of securities in connection therewith) in connection with any later forfeiture of such securities. 9. Transfer of the BNS Reserve Shares. Except as contemplated by this Agreement, BNS shall not dispose (whether by sale, assignment, gift, pledge, encumbrance or otherwise) of the shares then subject to the BNS Reserve unless the transferee of such shares agrees in writing to be bound by all of the provisions of this Agreement to which BNS is bound. 10. Binding Effect; Assignment. The rights and the interests of Xygent under this Agreement cannot be assigned without the prior written consent of BNS. Subject to the foregoing, this Agreement shall be binding upon each of BNS and Xygent and their respective successors and assigns. 11. Amendment and Waiver. Subject to Section 8, the parties hereto may amend, modify, terminate, waive or consent to any provision of this Agreement if such amendment, modification, termination, waiver or consent is set forth in a writing signed by the parties hereto. Notwithstanding the foregoing, Brown & Sharpe must consent (which consent will not be unreasonably withheld) to any amendment to this Agreement which affects the BNS Reserve, the number of shares which are Xygent may purchase under the Agreement, the purchase price (as set forth in Section 1(b)) or the repurchase option set forth in Section 2 with respect to restricted stock, or any amendment to this Section 11. 12. Headings; Counterparts. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. This Agreement may be executed in counterparts and all such counterparts shall constitute one and the same instrument. 13. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement and the subject matter hereof and all disputes arising under or based on this Agreement or the entering into or termination of this Agreement (any such dispute, a "Dispute") will be governed by and construed in accordance with the laws of the State of Rhode Island without regard to its conflicts of laws principles. Each of the parties irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Rhode Island for any Dispute, and each of the parties agrees not to commence any action, suit or proceeding relating to a Dispute except in such courts. Each of the parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of any Dispute in the courts of the State of Rhode Island and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. -6- Each party irrevocably waives all rights to a trial by jury with respect to any such action, suit or proceeding. 14. Specific Enforcement. Each party acknowledges that the other party would be irreparably damaged in the event that any of the covenants were not performed by it in accordance with their specific terms or were otherwise breached. Therefore, the parties agree that each party shall be entitled to an injunction or injunctions (without the requirement of having to post a bond) to prevent breaches of such covenants and to specifically enforce such covenants, in addition to any other remedy to which such party may be entitled to at law or in equity. 15. Severability. Should any part of this Agreement, for any reason, be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid portion eliminated. 16. Entirety. This Agreement embodies the entire agreement among the parties and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof. [the remainder of the page is intentionally left blank] -7- IN WITNESS WHEREOF, BNS Co. and Xygent Inc. have caused this instrument to be executed by their respective officers thereunto duly authorized, all as of the date first set forth above. XYGENT INC. BNS Co. By: /s/ Andrew C. Genor By: /s/ Andrew C. Genor ------------------------ ------------------------ Name: Andrew C. Genor Name: Andrew C. Genor Title: President and CEO Title: President and CEO -8- EX-10.31 4 dex1031.txt 2002 STOCK PURCHASE AGREEMENT Exhibit 10.31 XYGENT INC. 2002 COMMON STOCK PURCHASE AGREEMENT This 2002 Common Stock Purchase Agreement, dated as of April 8, 2002, is made among Xygent Inc., a Delaware corporation (the "Company"), and BNS Co., a Delaware corporation (the "BNS"). The parties agree as follows: 1. Definitions; Certain Rules of Construction. Certain capitalized terms are used in this Agreement, if not defined elsewhere in the Agreement, with the specific meanings defined below in this Section 1. 1.1. "Person" means any present or future natural person or any corporation, association, partnership, limited liability company, limited liability partnership, joint venture, joint stock or other company, business trust, trust, organization, business or government or any governmental agency or political subdivision thereof. 1.2. "Stockholders' Agreement" means the Stockholders' Agreement, dated as of April 27, 2001 and in effect from time to time, among the Company, BNS and Brown & Sharpe, Inc. (formerly known as Hexagon (Rhode Island), Inc.) ("Brown & Sharpe"). 2. Authorization, Sale and Purchase of Common Stock. 2.1. Authorization of Common Stock. The Company has authorized the issuance and sale of up to 12,005 shares of Common Stock of the Company, par value $0.01 per share ("Common Stock"), to be issued under this Agreement at a purchase price per share equal to $124.95 (the "Purchase Price"). 2.2. Sale and Purchase of Common Stock. Subject to the terms and conditions of this Agreement and the Stockholders' Agreement, and on the basis of the representations and warranties set forth herein, the Company agrees to sell to BNS, and BNS agrees to purchase from the Company 12,005 shares of Common Stock (the "Shares") at a purchase price per share equal to the Purchase Price for a total purchase price of $1,500,024.75 (the "Total Purchase Price"). 2.3. The Closing. The purchase and sale of the Shares will take place on April 26, 2002 at the offices of the Company, 275 West Natick Road, Warwick, Rhode Island 02886, or at such other time or place as the parties may agree (the "Closing"). At the Closing, the Company will deliver to BNS a certificate or certificates, registered in BNS's name, representing the number of Shares against payment of the Total Purchase Price by the surrender to the Company for cancellation of $1,500,024.75 of the indebtedness owed by the Company to BNS. 3. Representations and Warranties of the Company. In order to induce BNS to enter into this Agreement and to purchase the Shares hereunder, the Company hereby represents and warrants that: 3.1. Organization and Authorization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all required corporate power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability thereof may be subject to the laws of general application relating to bankruptcy, insolvency, the relief of debtors and rules and laws governing specific performance, injunctive relief and other equitable remedies. The execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action of the Company. 3.2. Non-Contravention. The execution by the Company of this Agreement and the performance by the Company of the transaction contemplated hereby will not violate, conflict with, or result in a default under any provision of the Company's organizational documents. 3.3. Issuance of Shares. When issued in accordance with the terms of this Agreement, the Stockholders' Agreement, and the Certificate of Incorporation of the Company, as amended (the "Certificate of Incorporation"), the Shares will be duly authorized, validly issued and outstanding, fully paid and nonassessable. 3.4. Securities Laws. Assuming that BNS's representations and warranties contained in Section 4 are true and correct, the offer, issuance and sale of the Shares by the Company to BNS is exempt from the registration and prospectus delivery requirements of the 1933 Act, and is exempt from registration and qualification under the registration, permit or qualification requirements of all applicable state blue sky and securities laws. 4. Representations, Warranties and Certain Other Agreements of BNS. 4.1. Representations and Warranties. BNS hereby represents and warrants that: 4.1.1. Authorization. BNS has full power and authority to execute, deliver and perform this Agreement and to acquire the Shares. This Agreement constitutes the legal, valid and binding obligation of BNS, enforceable against BNS in accordance with its terms, except as enforceability thereof may be subject to the laws of general application relating to bankruptcy, insolvency, the relief of debtors and rules and laws governing specific performance, injunctive relief and other equitable remedies. 4.1.2. Non-Contravention. The execution by BNS of this Agreement and the performance by the Company of the transaction contemplated hereby will not violate, conflict with, or result in a default under any provision of BNS's organizational documents. 4.1.3. Purchase Entirely for Own Account. The Shares will be acquired for investment for BNS's own account, not as a nominee or agent and not with a view to the distribution of any part thereof. BNS has no present intention of selling, granting any participation in, or otherwise distributing, the Shares. BNS does not have any contract, undertaking, agreement or arrangement with any Person to sell or transfer, or grant any participation to such Person or to any third Person, with respect to any of the Shares. 4.1.4. Restricted Securities. BNS understands that the Shares may not be sold or transferred, or otherwise disposed of, without registration under the Securities Act of -2- 1933 as amended (the "1933 Act"), or an exemption therefrom, and that in the absence of an effective registration statement covering the Shares or an available exemption from registration under the 1933 Act, the Shares must be held indefinitely. In the absence of an effective registration statement covering the Shares, BNS will sell or transfer, or otherwise dispose of, the Shares to be acquired by BNS only in a manner consistent with its representations and agreements set forth herein and the terms and conditions set forth in the Stockholders' Agreement. 4.2. Legends. It is understood that the certificates evidencing the Shares may bear substantially the following legends: (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THESE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED." (b) Any legend required by (i) the Stockholders' Agreement or (ii) the laws of any applicable jurisdiction. 5. Conditions to BNS's Obligations at the Closing. The obligations of BNS under Section 2 to purchase the Shares at the Closing are subject to the fulfillment at or prior to the Closing of each of the following conditions (unless waived by BNS): 5.1. Representations and Warranties. The representations and warranties of the Company contained in Section 3 shall be true and correct on and as of the date of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing. 5.2. Performance. The Company shall have performed and complied in all material respects with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. 5.3. Compliance Certificate. If the Closing does not occur simultaneously with the execution of this Agreement, the Company shall deliver to BNS at the Closing a certificate signed on behalf of the Company by an officer of the Company certifying that the conditions specified in Sections 5.1 and 5.2 have been fulfilled. If the Closing occurs simultaneously with execution of this Agreement, the conditions specified in Section 5.1 and 5.2 shall be deemed to have been fulfilled. 5.4. Stockholders' Agreement. The requirements of Sections 6.1-6.3 of the Stockholders' Agreement shall have been met or waived in all respect prior to the Closing in connection with the transactions contemplated by this Agreement and the purchase and sale of the Shares. -3- 6. Conditions to the Company's Obligations at Closing. The obligations of the Company under Section 2 to sell Shares at the Closing are subject to the fulfillment at or prior to the Closing of each of the following conditions (unless waived by the Company): 6.1. Representations and Warranties. The representations and warranties of BNS contained in Section 4 shall be true and correct in all material respects on and as of the date of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing. 6.2. Payment of Purchase Price. BNS shall have delivered payment of the Total Purchase Price by acknowledging to the Company the cancellation of $1,500,024.75 of the indebtedness of the Company to BNS. 7. Notices. All notices or other communications to a party required or permitted hereunder will be in writing and will be delivered personally or by facsimile (receipt confirmed) to such party (or, in the case of an entity, to an executive officer of such party) or will be given by certified mail, postage prepaid with return receipt requested, addressed as follows: If to the Company, to: Xygent Inc., 275 West Natick Road, Warwick, Rhode Island 02886, Att: President. If to BNS, to: BNS Co., 275 West Natick Road, Warwick, Rhode Island 02886, Att: Chief Executive Officer. All notices will be deemed given on the day when actually delivered as provided above (if delivered personally or by facsimile) or on the day shown on the return receipt (if delivered by mail). Either party may change their respective above-specified recipient and/or mailing address by notice to the other party given in the manner herein prescribed. 8. Parties in Interest. All covenants, agreements, representations, warranties and undertakings in this Agreement made by and on behalf of any party hereto shall bind and inure to the benefit of the successors and assigns of such party. 9. Amendments and Waivers. No delay or omission on the part of any party hereto in exercising any right under this Agreement shall operate as a waiver of such right or any other right hereunder. No amendment, waiver or consent with respect to this Agreement shall be binding unless it is in writing and signed by each party hereto. No amendment will be effective unless it is approved by the Board of Directors of Xygent. 10. General. If any provision of this Agreement shall be found by any court of competent jurisdiction to be invalid or unenforceable, the parties hereby waive such provision to the extent that it is found to be invalid or unenforceable. Such provision shall, to the maximum extent allowable by law, be modified by such court so that it becomes enforceable, and, as modified, shall be enforced as any other provision hereof, all the other provisions hereof continuing in full force and effect. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation hereof. This Agreement and the Stockholders' Agreement constitute the entire understanding of the parties with respect to the subject matter hereof and supersede any and all prior understandings and agreements, whether -4- written or oral, with respect to such subject matter. This Agreement may be executed in counterparts, which together shall constitute one and the same instrument. This Agreement shall be governed by and construed in accordance with the laws (other than the conflict of laws rules) of the State of Rhode Island. [The rest of this page has been intentionally left blank.] -5- IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be executed by a duly authorized officer as of the date first above written. XYGENT INC. By: /s/ Andrew C. Genor ---------------------------------- Title: President and CEO BNS CO. By: /s/ Andrew C. Genor ---------------------------------- Title: President and CEO -6- EX-10.32 5 dex1032.txt OMNIBUS AGREEMENT Exhibit 10.32 OMNIBUS AGREEMENT AND CONSENT OF DIRECTORS OF XYGENT, INC. This Omnibus Agreement (the "Agreement") is made as of this 19th day of April, 2002 by and among Xygent Inc. (the "Company"), BNS Co. ("BNS"), Hexagon Holdings, Inc. ("Hexagon") and Brown & Sharpe, Inc. ("Brown & Sharpe") and Hexagon AB. WHEREAS the parties are party to various agreements relating to the Company (although not all parties hereto are party to each agreement); and WHEREAS the parties have come to a certain understandings relating to several issues relating to the Company and wish for these understandings to be reflected in the various existing agreements among the various parties and in the actions of their representatives as directors of the Company. NOW THEREFORE, the parties agree as follows: 1. Debt Conversion Shares to be Issued to BNS. With respect to the issuance of shares of common stock ("Common Stock") of the Company to BNS under the 2002 Common Stock Purchase Agreement between BNS and the Company (the "2002 SPA") in connection with the repayment of $1,500,000 of intercompany debt owed by the Company to BNS, the parties agree that, notwithstanding the provisions of the 2002 SPA (or any other agreement or action by them or their representatives as directors of the Company), BNS shall be issued under the 2002 SPA such whole number (rounded) of authorized but unissued shares of Common Stock as is calculated by dividing $1,500,000 by $113.58, resulting in the issuance of 13,206 shares to BNS (the sale and issuance of such shares to BNS by Xygent and the 2002 SPA, the "New Debt Conversion Transaction"). 1.1 The 2002 SPA is hereby amended to give effect in all respects to the New Debt Conversion Transaction. 1.2 The Consent of Hexagon and Brown & Sharpe, dated April 8, 2002, relating to 2002 SPA is hereby amended to consent in all respects to the New Debt Conversion. 1.3 Hexagon and Brown & Sharpe hereby waive any preemptive rights that they may have under the Stockholders' Agreement (the "Stockholders' Agreement"), dated as of April 27, 2001, by and among Xygent, BNS, Brown & Sharpe and Hexagon (pursuant to that certain Instrument of Accession, dated February 20, 2002) relating to the New Debt Conversion Transaction. 2. Shares to be Issued to Hexagon Holdings at the Additional Closing. In connection with the sale of Common Stock to Hexagon under the Stock Purchase Agreement (the "2001 SPA"), dated as of April 27, 2001, by and among BNS, Xygent and Hexagon (as assignee of Brown & Sharpe pursuant to that certain Assignment and Assumption Agreement, dated as of January 2002, between Hexagon and Brown & Sharpe), notwithstanding anything to the contrary in Section 1.02 of the 2001 SPA, the parties agree that at the next Additional Closing Date (as defined in the 2001 SPA), which will occur on or about April 29, 2002, the number of "Additional Shares" (as defined) of Common Stock of the Company to be purchased by Hexagon for $1,500,000 ($113.58 per share) shall be 13,206 shares, namely the same number of shares as is issued to BNS for $1,500,000 under Section 1 above (such purchase and sale at the April 29, 2002 Additional Closing, the "New Closing Amount"). 2.1 The parties agree that the 2001 SPA is hereby amended to give effect in all respects to the New Closing Amount; it being understood that the New Closing Amount shall only apply with respect to the April 29, 2002 Additional Closing. 3. Miscellaneous. This Agreement will be effective upon the signatures of the parties set forth below and the approval of the Board of Directors of Xygent by way of the Written Consent of Directors, attached as Annex A to this Agreement. This Agreement will be governed by the internal laws of the State of Rhode Island (without giving effect to its conflicts of laws). This Agreement may be executed in counterparts. Headings are included only for the convenience of the parties. [signature page to follow] -2- IN WITNESS WHEREOF, the undersigned parties have caused this instrument to be executed by their respective officers thereunto duly authorized, all as of the date first set forth above. XYGENT INC. BNS Co. By: /s/ Andrew C. Genor By: /s/ Andrew C. Genor ------------------- ----------------------- Name: Andrew C. Genor Name: Andrew C. Genor Title: President and CEO Title: President and CEO HEXAGON HOLDINGS, INC. BROWN & SHARPE, INC. By: /s/ Ola Rollen By: /s/ Jack Beagley ------------------- ----------------------- Name: Ola Rollen Name: Jack Beagley Title: Chairman Title: President and CEO HEXAGON AB (signing as guarantor of Hexagon Holdings, Inc. pursuant to the Acquisition Agreement dated November 16, 2000 between Hexagon AB and BNS Co., then named "Brown & Sharpe Manufacturing Company") By: /s/ Ola Rollen -------------------- Name: Ola Rollen Title: CEO [Directors' consent to follow] -3- Annex A Votes of Board of Directors of Xygent Inc. The undersigned, being all of the directors of Xygent Inc. ("Xygent"), having been elected by written consent of all of the stockholders of Xygent, do hereby adopt the following votes, representing corporate action, which shall have the same effect as votes duly adopted at a meeting of the Board of Directors: VOTED: That the form, terms and provisions of the Omnibus Agreement (the "Omnibus Agreement") between Xygent, BNS Co., Hexagon Holdings, Inc. and Brown & Sharpe, Inc. and Hexagon AB and the transactions contemplated thereby are hereby approved in all respects. VOTED: That upon execution and delivery of the Omnibus Agreement by an authorized officer of this Corporation and upon receipt of consideration payable thereunder for any shares of the Common Stock of this Corporation to be sold thereunder, that the officers of this Corporation are authorized and directed to issue and deliver to such person or entity purchasing such shares a stock certificate for such shares, which shares shall be fully paid and nonassessable, validly outstanding shares, and that in addition, upon issuance of such shares as are issued out of the authorized but unissued shares of the Company, an amount equal to their aggregate par value shall be credited to capital and the remainder of the consideration paid for such shares shall be credited to surplus. VOTED: That the proper officers are hereby authorized to execute all documents and take all action from time to time necessary or desirable to give effect to the foregoing votes. VOTED: That this Board recognizes that the transactions contemplated by the Omnibus Agreement had been previously approved by the Board but under different terms and that these Votes shall supersede such prior votes, to the extent that these votes are inconsistent with such prior votes. [The remainder of the page is intentionally left blank] A-1 In WITNESS WHEREOF the directors have executed this consent (in counterparts) as of this 19/th/ day of April, 2002. /s/ Andrew C. Genor - ---------------------------- Andrew C. Genor /s/ J. Robert Held - ---------------------------- J. Robert Held /s/ Howard K. Fuguet - ---------------------------- Howard K. Fuguet /s/ Ola Rollen - ---------------------------- Ola Rollen /s/ Gert Viebke - ---------------------------- Gert Viebke A-2 EX-10.33 6 dex1033.txt XYGENT 2002 EQUITY INCENTIVE PLAN Exhibit 10.33 XYGENT, INC. 2002 EQUITY INCENTIVE PLAN 1. PURPOSE The purpose of this Equity Incentive Plan (the "Plan") is to advance the interests of Xygent, Inc. (the "Company") and such companies as may from time to time be its subsidiaries by enhancing their ability to attract and retain employees and other individuals or entities who are in a position to make significant contributions to the success of the Company and such subsidiaries through awards based on the Company's common stock, par value $.01 per share ("Stock"), and/or through cash incentives. The Plan is intended to accomplish these goals by enabling the Company to grant awards ("Awards") in the form of Options, Stock Appreciation Rights, Restricted Stock or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Other Stock-Based Awards, or loans or supplemental grants, or combinations thereof, all as more fully described below. 2. ADMINISTRATION Except as provided in the following paragraph, the Plan will be administered by a committee of the Board of Directors of the Company (the "Board") designated for such purpose (the "Committee"). The Committee shall consist of at least two directors. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. During such times as any Stock is registered under the Securities Exchange Act of 1934 (the "1934 Act"), at least two members of the Committee shall be "non-employee directors" within the meaning of Rule 16b-3 promulgated under the 1934 Act and "outside directors" within the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the "Code") (the "Outside Directors"). If, during any such time, any member of the Committee is not an Outside Director or a non-employee director, a sub-committee (the "Sub-Committee") consisting solely of directors who are both non-employee directors and Outside Directors shall administer the Plan in connection with Awards to "officers" of the Company within the meaning of Section 16(b) of the 1934 Act or with respect to any Award intended to be exempt under Section 162(m)(3) of the Code. Any references to the Committee in this Plan shall also mean the Sub-Committee. If the Board so determines, it may administer the Plan directly rather than through a committee. In such event, all references to the Committee in this Plan (other than the committee composition and governance provisions of the immediately preceding paragraph) shall be deemed to refer to the Board. The Committee will have authority, not inconsistent with the express provisions of the Plan and in addition to other authority granted under the Plan, to (a) grant Awards at such time or times as it may choose; (b) determine the size of each Award, including the number of shares of Stock subject to the Award; (c) determine the type or types of each Award; (d) determine the terms and conditions of each Award, including provisions for accelerated vesting upon the achievement of Company stock price levels; (e) waive compliance by a holder of an Award with any obligations to be performed by such holder under the Award and waive any terms or conditions of an Award; (f) subject to the provisions of Section 6.1(b), amend or cancel an existing Award in whole or in part (and if an award is canceled, grant another Award in its place on such terms and conditions as the Committee shall specify), except that the Committee may not, without the consent of the holder of an Award, take any action under this clause with respect to such Award if such action would adversely affect the rights of such holder; (g) prescribe the form or forms of any instruments to be used under the Plan, including any written notices and elections required of Participants (as defined below), and change such forms from time to time; (h) adopt, amend and rescind rules and regulations for the administration of the Plan; and (i) interpret the Plan and decide any questions and settle all controversies and disputes that may arise in connection with the Plan. Such determinations and actions of the Committee, and all other determinations and actions of the Committee made or taken under authority granted by any provision of the Plan, will be conclusive and will bind all parties. Nothing in this paragraph shall be construed as limiting the power of the Committee to make adjustments under Section 7.3 or Section 8.6. In the case of any Award intended to be eligible for the performance-based compensation exception under Section 162(m), the Committee shall exercise its discretion consistent with qualifying the Award for such exception. 3. EFFECTIVE DATE AND TERM OF PLAN The Plan will become effective on the date on which it is approved by the stockholders of the Company. Awards may be made prior to such stockholder approval if made subject thereto. No Award may be granted under the Plan after April 8, 2012 (the 10th anniversary of the day before Board approval), but Awards previously granted may extend beyond that date. 4. SHARES SUBJECT TO THE PLAN (a) Number of Shares. Subject to adjustment as provided in Section 8.6, the aggregate number of shares of Stock that may be delivered under the Plan will be 30,300. If any Award requiring exercise by the Participant for delivery of Stock terminates without having been exercised in full, or if any Award payable in Stock or cash is satisfied in cash rather than Stock, the number of shares of Stock as to which such Award was not exercised or for which cash was substituted will be available for future grants. Shares of Restricted Stock that have been forfeited in accordance with the terms of the applicable Award and shares held back, in satisfaction of the exercise price or tax withholding requirements, from shares that would otherwise have been delivered pursuant to an Award shall also be available for future grants. The number of shares of Stock delivered under an Award shall be determined net of any previously acquired Shares tendered by the Participant in payment of the exercise price or of withholding taxes. (b) Shares to be Delivered. Stock delivered under the Plan may be either authorized but unissued Stock or previously issued Stock acquired and held by the Company. No fractional shares of Stock will be delivered under the Plan. -2- 5. ELIGIBILITY AND PARTICIPATION Each key employee of the Company or any of its subsidiaries (an "Employee") and each other individual or entity (other than employees of the Company or any of its subsidiaries, but including without limitation directors of the Company or a subsidiary of the Company) who, in the opinion of the Committee, is in a position to make a significant contribution to the success of the Company or its subsidiaries will be eligible to receive Awards under the Plan (each such Employee, other individual or entity receiving an Award, "a Participant"). Participants shall also include individuals who have accepted an offer of employment from the Company and who the Company reasonably believes will be key employees upon commencing employment with the Company (a "New Hire"). For purposes of the Plan, a "subsidiary" is any corporation (other than the employer corporation) that would be treated as a subsidiary of the Company for purposes of Section 424(f) of the Code. Eligibility for ISOs is further limited to those individuals whose employment status would qualify them for the tax treatment described in Sections 421 and 422 of the Code. 6. TYPES OF AWARDS 6.1 Options. (a) Nature of Options. An option ("Option") is an Award giving the recipient the right on exercise thereof to purchase Stock. Both "incentive stock options", as defined in Section 422(b) of the Code (any Option intended to qualify as an incentive stock option being hereinafter referred to as an "ISO"), and Options that are not ISOs, may be granted under the Plan. ISOs shall be awarded only to Employees. An Option awarded under the Plan shall be a non-ISO unless it is expressly designated as an ISO at time of grant. Once an ISO has been granted, no action by the Committee that would cause the Option to lose its status under the Code as an incentive stock option will be effective without consent of the Option holder. (b) Exercise Price. The exercise price of an Option will be determined by the Committee subject to the following: (1) The exercise price of an Option intended to be an ISO shall not be less than 100% of the fair market value of the Stock subject to the Option, determined as of the effective date of grant of the Option. (2) In no case may the exercise price paid for Stock which is part of an original issue of authorized Stock be less than the par value per share of the Stock. (c) Duration of Options. The latest date on which an Option may be exercised will be the tenth anniversary of the day immediately preceding the date the Option was granted, or such earlier date as may have been specified by the Committee at the time the Option was granted. (d) Exercise of Options; Vesting. An Option will become exercisable at such time or times, and on such conditions, as the Committee may specify. The Committee may at any time and from time to time accelerate the exercisability of an Option. Any exercise of an Option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any documents -3- required by the Committee and (2) payment in full in accordance with paragraph (e) below for the number of shares for which the Option is exercised. If desired the Committee may provide for vesting prior to the date the Option becomes exercisable. (e) Payment for Stock. Stock purchased on exercise of an Option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing his Option (or in the case of an Option which is not an ISO, by the Committee at or after the grant of the Option), (i) through the delivery of shares of Stock which have been held for at least six months (unless the Committee approves a shorter period) and which have a fair market value on the last business day preceding the date of exercise equal to the exercise price, (ii) by delivery of a promissory note of the Participant to the Company containing such terms as are specified by the Committee (provided that if the Stock delivered upon exercise of the Option is an original issue of authorized but unissued Stock, at least so much of the exercise price as represents the par value of the Stock shall be paid in cash), (iii) during any period in which the Stock is publicly traded, by use of a broker-assisted exercises program acceptable to the Company, or (iv) by any combination of the foregoing permissible forms of payment. 6.2 Stock Appreciation Rights. (a) Nature of Stock Appreciation Rights. A Stock Appreciation Right ("Stock Appreciation Right" or "SAR") is an Award entitling the holder on exercise to receive an amount in cash or Stock or a combination thereof (such form to be determined by the Committee) determined in whole or in part by reference to appreciation, from and after the date of grant, in the fair market value of a share of Stock. SARs may be based solely on appreciation in the fair market value of Stock or on a comparison of such appreciation with some other measure of market growth such as (but not limited) to appreciation in a recognized market index. The date as of which such appreciation or other measure is determined shall be the exercise date unless another date is specified by the Committee. (b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan. (1) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are granted in tandem with Options, (A) the Stock Appreciation Right will be exercisable only at such time or times, and to the extent, that the related Option is exercisable and will be exercisable in accordance with the procedure required for exercise of the related Option and may be exercised only when the market price of the Stock, subject to the Option, exceeds the exercise price; (B) the Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Option, except that a Stock Appreciation Right granted with respect to fewer than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the Stock Appreciation Right; (C) the Option will terminate and no longer be exercisable upon the exercise of the related Stock Appreciation Right; and (D) the Stock Appreciation Right will be transferable only with the related Option. (2) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation Right not granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Committee may specify. Except as otherwise determined by the Committee, any period during which a Participant who is an Employee is on an unpaid leave of -4- absence (or other unpaid absence) from the Company shall toll the period of time over which a Stock Appreciation Right becomes exercisable. The Committee may at any time accelerate the time at which all or any part of the Right may be exercised. Any exercise of an independent Stock Appreciation Right must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by any other documents required by the Committee. 6.3 Restricted and Unrestricted Stock. (a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee may grant or sell shares of Stock in such amounts and upon such terms and conditions as the Committee shall determine subject to the restrictions described below ("Restricted Stock"). (b) Restricted Stock Agreement. The Committee may require, as a condition to an Award, that a recipient of a Restricted Stock Award enter into a Restricted Stock Award Agreement, setting forth the terms and conditions of the Award and making payment of the purchase price. In lieu of a Restricted Stock Award Agreement, the Committee may provide the terms and conditions of an Award in a notice to the Participant of the Award, in the resolution approving the Award, or in such other manner as it deems appropriate. The stock certificate representing the Restricted Stock shall be appropriately legended to reflect the applicable restrictions. (c) Transferability and Other Restrictions. Except as otherwise provided in this Section 6.3, the shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable period or periods established by the Committee and the satisfaction of any other conditions or restrictions established by the Committee (such period during which a share of Restricted Stock is subject to such restrictions and conditions is referred to as the "Restricted Period"). Except as the Committee may otherwise determine under Section 7.1 or Section 7.2, if a Participant dies or suffers a Status Change (as defined at Section 7.2(a)) for any reason during the Restricted Period, the Company may purchase the shares of Restricted Stock subject to such restrictions and conditions for the amount of cash paid by the Participant for such shares; provided, that if no cash was paid by the Participant such shares of Restricted Stock shall be automatically forfeited to the Company. During the Restricted Period with respect to any shares of Restricted Stock, the Company shall have the right to retain in the Company's possession any certificate or certificates representing such shares. (d) Removal of Restrictions. Except as otherwise provided in this Section 6.3, a share of Restricted Stock covered by a Restricted Stock grant shall become free from restrictions under the Plan upon completion of the Restricted Period, including the passage of any applicable period of time and satisfaction of any conditions to vesting. The Committee shall have the right at any time, in its sole discretion, immediately to waive or accelerate all or any part of the restrictions and conditions with regard to all or any part of the shares held by any Participant. (e) Notice of Election. Any Participant making an election under Section 83(b) of the Code with respect to Restricted Stock must give a copy of the election to the Company within ten days after filing with the Internal Revenue Service. -5- (f) Voting Rights, Dividends and Other Distributions. During the Restricted Period, Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights and shall receive all regular cash dividends paid with respect to such shares. Except as the Committee shall otherwise determine, any other cash dividends and other distributions paid to Participants with respect to shares of Restricted Stock, including any dividends and distributions paid in shares, shall be subject to the same restrictions and conditions as the shares of Restricted Stock with respect to which they were paid. (g) Other Awards Settled with Restricted Stock. The Committee may, at the time any Award described in this Section 6 is granted, provide that any or all of the Stock delivered pursuant to the Award will be Restricted Stock. (h) Unrestricted Stock. Subject to the terms and provisions of the Plan, the Committee may grant shares of Stock free of restrictions under the Plan in such amounts and upon such terms and conditions as the Committee shall determine. 6.4 Deferred Stock. A Deferred Stock Award ("Deferred Stock Award") is an unfunded and unsecured promise by the Company to deliver shares of Stock in the future ("Deferred Stock"). Delivery of the Stock will take place at such time or times, and on such conditions, as the Committee may specify. The Committee may at any time accelerate the time at which delivery of all or any part of the Stock will take place. At the time any Award described in this Section 6 is granted, the Committee may provide that any or all of the Stock delivered pursuant to the Award will be Deferred Stock. 6.5 Performance Awards. The Committee may, at the time an Award described in Sections 6.1, 6.2, 6.3, 6.4 or 6.7 is granted, impose the additional condition that performance goals must be met prior to the Participant's realization of any vesting, payment or benefit under the Award. In addition, the Committee may make awards entitling the Participant to receive an amount in cash upon attainment of specified performance goals (a "Cash Incentive"). Any Award or Cash Incentive made subject to performance goals as described in the preceding two sentences shall be a "Performance Award." The Committee will determine the performance measures, the period or periods during which performance is to be measured, and all other terms and conditions applicable to the Performance Award. The performance measures to which a Performance Award is subject may be related to personal performance, corporate performance, departmental performance, or any other category of performance established by the Committee, including the achievement of specified Company stock price levels. 6.6 Loans and Supplemental Grants. (a) Loans. The Company may make a loan to a Participant, either at the time of or after the grant to him or her of any Award. Such a loan may be made in connection with either the purchase of Stock under the Award or the payment of any federal, state, and local income tax in respect of income recognized as a result of the Award. The Committee will have full authority to decide whether to make such a loan and to determine the amount, terms and conditions of the loan, including the interest rate (which may be zero), whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven. However, no loan may have a term (including extensions) exceeding ten years in duration. -6- (b) Cash Grants. In connection with any Award, the Committee may at the time such Award is made or at a later date provide for and make a cash payment to the Participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax on ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the Participant's income tax liabilities arising from all payments under this Section 6, all based on such reasonable estimates of applicable tax rates as the Committee may determine. 6.7 Other Stock-Based Awards. (a) Nature of Awards. The Committee may grant other Awards under which Stock is or may in the future be acquired ("Other Stock-Based Awards"). Such awards may include, without limitation, debt securities convertible into or exchangeable for shares of Stock upon such conditions, including attainment of performance goals, as the Committee shall determine. Such convertible or exchangeable securities may have such terms and conditions as the Committee may determine at the time of grant. However, no convertible or exchangeable debt shall be issued unless the Committee shall have provided (by Company right of repurchase, right to require conversion or exchange, or other means deemed appropriate by the Committee) a means of avoiding any right of the holders of such debt to prevent a Company transaction by reason of covenants in such debt. (b) Purchase Price; Form of Payment. The Committee may determine the consideration, if any, payable upon the issuance or exercise of an Other Stock-Based Award. The Committee may permit payment by certified check or bank check or other instrument acceptable to the Committee or by surrender of other shares of Stock (excluding shares then subject to restrictions under the Plan). (c) Forfeiture of Awards; Repurchase of Stock; Acceleration or Waiver of Restrictions. The Committee may determine the conditions under which an Other Stock-Based Award shall be forfeited or, in the case of an Award involving a payment by the recipient, the conditions under which the Company may or must repurchase such Award or related Stock. At any time the Committee may in its sole discretion accelerate, waive, or, amend any or all of the limitations or conditions imposed under any Other Stock-Based Award. 7. EVENTS AFFECTING OUTSTANDING AWARDS 7.1 Death or Disability. Except as the Committee may otherwise determine, if a Participant dies or becomes permanently and totally disabled (as determined by the Committee), the following will apply: (a) All Options and Stock Appreciation Rights held by the Participant, or by a permitted transferee of the Participant, immediately prior to death or such permanent and total disability, to the extent then exercisable, may be exercised (i) in the case of an Option or Stock Appreciation Right then held by the Participant, by the Participant's executor or administrator or the person or persons to whom the Option or Right is transferred by will or the applicable laws of descent and distribution or the Participant's guardian, or (ii) in the case of an Option or Stock Appreciation Right then held by a permitted transferee of the Participant, by such permitted transferee, in either case at any time within the one year period ending with the first anniversary of the Participant's death or permanent and total disability, as the case may be (or such shorter or longer period as the Committee may determine), and -7- shall thereupon terminate. If such a Participant becomes permanently and totally disabled (as determined by the Committee) while holding an Option or Stock Appreciation Right and thereafter dies while the Option or Stock Appreciation Right is still exercisable, the Option or Stock Appreciation Right will be exercisable for one year from the date of death. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 7. All Options and Stock Appreciation Rights held by a Participant, or by a permitted transferee of a Participant, immediately prior to the Participant's death or permanent and total disability that are not then exercisable shall accelerate and become vested at such death or permanent and total disability. (b) All Restricted Stock held by the Participant or by a permitted transferee of the Participant must be transferred to the Company (and, in the event any certificates representing such Restricted Stock are held by the Company, such Restricted Stock will be so transferred without any further action by the Participant or permitted transferee in accordance with Section 6.3(c)). (c) Any payment or benefit under a Deferred Stock Award, Performance Award, Supplemental Grant, or Other Stock-Based Award to which the Participant or permitted transferee was not irrevocably entitled prior to death or such permanent and total disability will be forfeited and the Award canceled as of the time of death or such permanent and total disability. 7.2 Termination of Service (Other Than By Death or Disability). If (i) a Participant who is an Employee ceases to be an Employee for any reason other than death or permanent and total disability (as defined above), (ii) there is a termination (other than by reason of death or permanent and total disability or satisfactory completion of the project or service as determined by the Committee) of the consulting, service or similar relationship in respect of which a non-Employee Participant was granted an Award hereunder or (iii) a New Hire's offer of employment is terminated prior to the New Hire commencing employment with the Company or the New Hire does not commence his or her employment with the Company within two months after receipt of an Award hereunder (such termination of the employment or other relationship being hereinafter referred to as a "Status Change"), then, except as the Committee may otherwise determine, the following will apply: (a) All Options and Stock Appreciation Rights held by the Participant, or by the Participant's transferee, that were not exercisable immediately prior to the Status Change shall terminate at the time of the Status Change. Any Options or Rights that were exercisable immediately prior to the Status Change will continue to be exercisable for a period of three months (or one year in the case of retirement at or after age 60 with the consent of the Company), and shall thereupon terminate, unless the Award provides by its terms for immediate termination in the event of a Status Change or unless the Status Change results from a discharge for cause which in the opinion of the Committee casts such discredit on the Participant as to justify immediate termination of the Award. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 7. For purposes of this paragraph, in the case of a Participant who is an Employee, a Status Change shall not be deemed to have resulted by reason of (i) a sick leave or other bona fide leave of absence approved for purposes of the Plan by the Committee, so long as the Employee's right to reemployment is guaranteed either by statute or by contract, or (ii) a transfer of employment between the Company and a subsidiary or between subsidiaries, or to the employment of a corporation (or a parent or subsidiary corporation of such corporation) issuing or assuming an option in a transaction to which Section 424(a) of the Code applies. A Status Change will be deemed to have occurred, in the case of an employee Participant, upon termination of the -8- Participant's employment with the Company and its Subsidiaries (whether or not the Participant continues in the service of the Company or its Subsidiaries in some capacity other than that of an employee of the Company or its Subsidiaries) and in the case of any other Participant, when the service relationship in respect of which the Award was granted terminates (whether or not the Participant continues in the service of the Company or its Subsidiaries in some other capacity). (b) All Restricted Stock held by the Participant at the time of the Status Change must be transferred to the Company (and, in the event the certificates representing such Restricted Stock are held by the Company, such Restricted Stock will be so transferred without any further action by the Participant) in accordance with Section 6.3(c) above. (c) Any payment or benefit under a Deferred Stock Award, Performance Award, Supplemental Grant, or Other Stock-Based Award to which the Participant was not irrevocably entitled prior to the Status Change will be forfeited and the Award canceled as of the date of such Status Change. 7.3 Certain Corporation Transactions. (a) In the event of a consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the complete liquidation of the Company or the sale or transfer of substantially all of the Company's assets (a "Covered Transaction"), all outstanding Options will terminate as of the effective date of the Covered Transaction unless assumed in accordance with paragraph (d) below. (b) Subject to paragraphs (c) and (d) below, the Committee may, in its sole discretion, prior to the effective date of the Covered Transaction, (1) accelerate the exercisability of any outstanding Option or SAR, in whole or in part, (2) remove the restrictions from each outstanding share of Restricted Stock, (3) cause the Company to make any payment and provide any benefit under each outstanding Deferred Stock Award, Performance Award, and Supplemental Grant which would have been made or provided with the passage of time had the transaction not occurred and the Participant remained an employee, or (4) forgive all or any portion of the principal of or interest on a loan. (c) If an outstanding Award is subject to performance or other conditions (other than conditions relating to the mere passage of time and continued employment) which will not have been satisfied at the time of the Covered Transaction, the Committee may, in its sole discretion, remove such conditions. If it does not do so however, such Award will terminate, because the conditions have not been satisfied, immediately prior to consummation of the Covered Transaction notwithstanding paragraphs (a) and (b) above. (d) With respect to an outstanding Award held by a Participant who, following the Covered Transaction, will be employed by or otherwise providing services to a corporation which is a surviving or acquiring corporation in such transaction or an affiliate of such a corporation, the Committee may arrange to have such surviving or acquiring corporation or affiliate either assume the Award or grant to the Participant a replacement award, in either case on such terms as the Committee deems appropriate under the circumstances. In the case of an assumed or substitute Option intended to be an Incentive Stock Option, the requirements of Section 424 (a) of the Code shall be satisfied except as otherwise provided by the Committee. -9- 8. GENERAL PROVISIONS 8.1 Documentation of Awards. Awards will be evidenced by such written instruments, if any, as may be prescribed by the Committee from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company, or certificates, letters or similar instruments, which need not be executed by the Participant but acceptance of which will evidence agreement to the terms thereof. 8.2 Rights as a Stockholder, Dividend Equivalents. Except as specifically provided by the Plan, the receipt of an Award will not give a Participant rights as a stockholder; the Participant will obtain such rights, subject to any limitations imposed by the Plan or the instrument evidencing the Award, only upon the issuance of Stock. However, the Committee may, on such conditions as it deems appropriate, provide that a Participant will receive a benefit in lieu of cash dividends that would have been payable on any or all Stock subject to the Participant's Award had such Stock been outstanding. Without limitation, the Committee may provide for payment to the Participant of amounts representing such dividends, either currently or in the future, or for the investment of such amounts on behalf of the Participant. 8.3 Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulation have been complied with, (c) if the outstanding Stock is at the time listed or traded on or by means of any stock exchange, The Nasdaq National Market, or any other bulletin board or exchange mechanism (any of the foregoing, an "exchange") until the shares to be delivered have been listed or authorized to be listed on such exchange upon official notice of issuance (or other requirements for the trading of such shares by means of such exchange have been satisfied), and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act and may require that the certificates evidencing such Stock bear an appropriate legend restricting transfer. If, at the time any shares of Stock are to be delivered pursuant to the Plan, the Stock is not publicly traded (or is publicly traded but the Company or shareholders of the Company are subject to one or more agreements restricting sales or other dispositions of the Stock), the Committee may require, as a condition to any such delivery of Stock pursuant to the Plan, that the Participant or other person to whom such shares are to be delivered first execute a shareholder agreement, a stock transfer agreement or similar agreement as the Committee may determine. If an Award is exercised by a permitted transferee of by the Participant's legal representative, the Company will be under no obligation to deliver Stock pursuant to such exercise until the Company is satisfied as to the authority of such transferee or representative. -10- 8.4 Tax Withholding. The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Stock may be delivered, the Committee will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such requirements, prior to the delivery of any Stock or removal of restrictions thereon. If and to the extent that such withholding is required, the Committee may permit the Participant or such other person to elect at such time and in such manner as the Committee provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Stock having a value calculated to satisfy the withholding requirement. The Committee may make such share withholding mandatory with respect to any Award at the time such Award is made to a Participant. The Committee may also, but need not, permit a Participant to tender previously owned shares of Stock in satisfaction of tax withholding requirements on any Award. If at the time an ISO is exercised the Committee determines that the Company could be liable for withholding requirements with respect to the exercise or with respect to a disposition of the Stock received upon exercise, the Committee may require as a condition of exercise that the person exercising the ISO agree (a) to provide for withholding under the preceding paragraph of this Section 8.4, if the Committee determines that a withholding responsibility may arise in connection with the exercise, (b) to inform the Company promptly of any disposition (within the meaning of Section 424(c) of the Code) of Stock received upon exercise, and (c) to give such security as the Committee deems adequate to meet the potential liability of the Company for other withholding requirements and to augment such security from time to time in any amount reasonably deemed necessary by the Committee to preserve the adequacy of such security. 8.5 Transferability of Awards. No ISO or, unless otherwise permitted by the Committee, other Award (other than an Award in the form of an outright transfer of cash or Unrestricted Stock) may be transferred other than by will or by the laws of descent and distribution or, during a Participant's lifetime, exercised other than by the Participant (or in the event of the Participant's incapacity, the person or persons legally appointed to act on the Participant's behalf). 8.6 Adjustments in the Event of Certain Transactions. (a) In the event of a stock dividend, stock split or combination of shares, re-capitalization or other change in the Company's capitalization, or other distribution to holders of Stock other than normal cash dividends, after the effective date of the Plan, the Committee will make any appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4(a), Section 4(b), and Section 6.5. (b) In any event referred to in paragraph (a), the Committee will also make any appropriate adjustments to the number and kind of shares of Stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change. The Committee may also make such adjustments to take into account material -11- changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, if it is determined by the Committee that adjustments are appropriate to avoid distortion in the operation of the Plan. (c) In the case of ISOs or Awards intended to qualify for the "performance-based compensation" exception under Section 162(m)(4)(C) of the Code, the adjustments described in (a) and (b) will be made only to the extent consistent with continued qualification of the Option or other Award under Section 422 of the Code or Section 162(m) of the Code, as the case may be. 8.7 Employment or Other Rights, Etc. Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued retention by the Company or any subsidiary as an Employee or otherwise, or affect in any way the right of the Company or subsidiary to terminate an employment, service or similar relationship at any time. Except as specifically provided by the Committee in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment, service or similar relationship even if the termination is in violation of an obligation of the Company or any of its subsidiaries to the Participant. 8.8 Deferral of Payments. The Committee may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8.9 Past Services as Consideration. Where a Participant purchases Stock under an Award for a price equal to the par value of the Stock the Committee may determine that such price has been satisfied by past services rendered by the Participant. 9. EFFECT, AMENDMENT AND TERMINATION Neither adoption of the Plan nor the grant of Awards to a Participant will affect the Company's right to grant to such Participant awards that are not subject to the Plan, to issue to such Participant Stock as a bonus or otherwise, or to adopt other plans or arrangements under which Stock may be issued to Employees or other persons. The Committee may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards, provided that (except to the extent expressly required or permitted by the Plan) no such amendment will, without the approval of the stockholders of the Company, effectuate a change for which stockholder approval is required in order for the Plan to continue to qualify for the award of ISOs under Section 422 of the Code or for the award of performance-based compensation under Section 162(m) of the Code, where the compensation is intended by the Committee to so comply. 10. GOVERNING LAW The Plan shall be construed in accordance with the General Corporation Law of the State of Delaware. -12- EX-99.1 7 dex991.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER Exhibit 99.1 CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as chief executive officer of BNS Co. (the "Company") does hereby certify that to the undersigned's knowledge: 1) the Company's Form 10-Q for the quarter ended June 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Company's Form 10-Q for the quarter ended June 30, 2002 fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Andrew C. Genor ----------------------------------- Andrew C. Genor Chief Executive Officer Dated: August 19, 2002 EX-99.2 8 dex992.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER Exhibit 99.2 CERTIFICATION PURSUANT TO SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as chief financial officer of BNS Co. (the "Company") does hereby certify that to the undersigned's knowledge: 1) the Company's Form 10-Q for the quarter ended June 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Company's Form 10-Q for the quarter ended June 30, 2002 fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Andrew C. Genor ----------------------------------- Andrew C. Genor Chief Financial Officer Dated: August 19, 2002 -----END PRIVACY-ENHANCED MESSAGE-----