-----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, M4WY7N6BeHXs9pOIJy2PxoB0jQvsRO05PxjT0N5bTUJaE7qe/0wpfZZO5LXedZY0 kqHjst39BoALCgQ37ZfpLQ== 0000886903-98-000013.txt : 19980518 0000886903-98-000013.hdr.sgml : 19980518 ACCESSION NUMBER: 0000886903-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRONOS INC CENTRAL INDEX KEY: 0000886903 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE MACHINES, NEC [3579] IRS NUMBER: 042640942 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20109 FILM NUMBER: 98625906 BUSINESS ADDRESS: STREET 1: 400 FIFTH AVENUE CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6178903232 MAIL ADDRESS: STREET 1: 400 FIFTH AVE STREET 2: 400 FIFTH AVE CITY: WALTHAM STATE: MA ZIP: 02154 10-Q 1 QUARTERLY REPORT ON FORM 10-Q 04/04/98 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 4, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------------- ----------------------- Commission file number 0-20109 ---------------------------------------------------------- Kronos Incorporated - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2640942 - -------------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 Fifth Avenue, Waltham, MA 02154 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (781) 890-3232 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- ------- As of May 1, 1998, 8,294,986 shares of the registrant's Common Stock, $.01 par value, were outstanding. KRONOS INCORPORATED INDEX PART I. FINANCIAL INFORMATION Page Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Income for the Three Months and Six Months Ended April 4, 1998 and March 29, 1997 1 Condensed Consolidated Balance Sheets at April 4, 1998 and September 30, 1997 2 Condensed Consolidated Statements of Cash Flows for the Three Months and Six Months Ended April 4, 1998 and March 29, 1997 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit Index
PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) UNAUDITED Three Months Ended Six Months Ended --------- --------- --------- --------- April 4, March 29, April 4, March 29, 1998 1997 1998 1997 --------- --------- --------- --------- Net revenues: Product .......................... $ 30,111 $ 26,121 $ 59,872 $ 51,839 Service .......................... 16,361 13,282 31,173 24,674 --------- --------- --------- --------- --------- --------- --------- --------- 46,472 39,403 91,045 76,513 --------- --------- --------- --------- Cost of sales: Product .......................... 7,743 7,041 14,783 13,456 Service .......................... 10,494 8,813 20,623 16,785 --------- --------- --------- --------- 18,237 15,854 35,406 30,241 --------- --------- --------- --------- Gross profit ................. 28,235 23,549 55,639 46,272 Expenses: Sales and marketing .............. 15,878 13,835 31,929 26,579 Engineering, research and development 4,557 4,166 8,881 8,138 General and administrative ....... 3,317 2,745 6,412 5,253 Other (income) expense, net ...... (184) (75) (186) (112) --------- --------- --------- --------- 23,568 20,671 47,036 39,858 --------- --------- --------- --------- Income before income taxes ... 4,667 2,878 8,603 6,414 Provision for income taxes ......... 1,783 1,099 3,287 2,449 --------- --------- --------- --------- Net income ................... $ 2,884 $ 1,779 $ 5,316 $ 3,965 ========= ========= ========= ========= Net income per common share: Basic ........................ $ 0.35 $ 0.22 $ 0.65 $ 0.49 ========= ========= ========= ========= Diluted ...................... $ 0.34 $ 0.21 $ 0.63 $ 0.47 ========= ========= ========= ========= Average common and common equivalent shares outstanding: Basic ........................ 8,274,942 8,185,134 8,232,509 8,158,144 ========= ========= ========= ========= Diluted ...................... 8,527,857 8,439,627 8,484,485 8,418,489 ========= ========= ========= ========= See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) UNAUDITED April 4, September 30, 1998 1997 --------- --------- ASSETS Current assets: Cash and equivalents .................................................... $ 16,517 $ 20,698 Marketable securities ................................................... 24,451 15,530 Accounts receivable, less allowances for doubtful accounts of $1,000 at April 4, 1998 and $1,091 at September 30, 1997 .................... 36,965 38,817 Inventories ............................................................. 4,418 4,322 Deferred income taxes ................................................... 4,277 4,277 Other current assets .................................................... 7,515 6,539 --------- --------- Total current assets ............................................. 94,143 90,183 Equipment, net ............................................................. 16,414 17,038 Net investment in sales-type leases ........................................ 5,924 5,312 Excess of cost over net assets of businesses acquired ...................... 11,222 7,855 Other assets ............................................................... 8,724 7,726 --------- --------- Total assets ...................................................... $ 136,427 $ 128,114 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses ................................... $ 12,759 $ 13,217 Accrued compensation .................................................... 9,466 10,105 Federal and state income taxes payable .................................. 1,359 3,497 Unearned service revenue ................................................ 24,806 22,209 --------- --------- Total current liabilities ......................................... 48,390 49,028 Deferred income taxes ...................................................... 2,587 2,587 Unearned service revenue ................................................... 6,224 3,523 Other liabilities .......................................................... 435 503 Shareholders' equity: Preferred Stock, par value $1.00 per share: authorized 1,000,000 shares, no shares issued and outstanding Common Stock, par value $.01 per share: authorized 20,000,000 shares, 8,291,639 shares and 8,246,453 shares issued at April 4, 1998 and September 30, 1997, respectively ..................................... 83 82 Additional paid-in capital .............................................. 29,044 29,770 Retained earnings ....................................................... 50,362 45,045 Equity adjustment from translation ...................................... (697) (262) Cost of Treasury Stock (23 shares and 86,493 shares at April 4, 1998 and September 30, 1997, respectively) ........ (1) (2,162) --------- --------- Total shareholders' equity ........................................ 78,791 72,473 --------- --------- Total liabilities and shareholders' equity ........................ $ 136,427 $ 128,114 ========= =========
See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) UNAUDITED Six Months Ended --------------------- April 4, March 29, 1998 1997 -------- -------- Operating activities: Net income $ 5,317 $ 3,965 Adjustments to reconcile net income to net cash and equivalents provided by operating activities: Depreciation 3,571 3,023 Amortization of deferred software development costs and excess of cost over net assets of businesses acquired 3,010 2,149 Changes in certain operating assets and liabilities: Accounts receivable, net 1,637 965 Inventories (111) (677) Unearned service revenue 5,347 2,680 Accounts payable, accrued compensation and other liabilities (3,393) (1,814) Net investment in sales-type leases (812) (2,684) Other (828) (721) -------- -------- Net cash and equivalents provided by operating activities 13,738 6,886 Investing activities: Purchase of equipment (3,000) (5,124) Capitalization of software development costs (3,023) (2,552) (Increase) decrease in marketable securities (8,921) 3,795 Acquisitions of businsesses (4,360) (422) -------- -------- Net cash and equivalents used in investing activities (19,304) (4,303) Financing activities: Net proceeds from exercise of stock option and employee stock purchase plans 1,463 939 Purchase of treasury stock (27) (27) -------- -------- Net cash and equivalents provided by financing activities 1,436 912 Effect of exchange rate changes on cash and equivalents (51) 16 -------- -------- Increase (decrease) in cash and equivalents (4,181) 3,511 Cash and equivalents at the beginning of the period 20,698 10,795 -------- -------- Cash and equivalents at the end of the period $16,517 $14,306 ======== ========
See accompanying notes to condensed consolidated financial statements. KRONOS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - General The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, that management considers necessary for a fair presentation of the Company's financial position and results of operations as of and for the interim periods presented pursuant to the rules and regulations of the Securities and Exchange Commission. Certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures in these financial statements are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements for the fiscal year ended September 30, 1997. The results of operations for the three and six month periods ended April 4, 1998 are not necessarily indicative of the results for a full fiscal year. Certain amounts have been reclassified in fiscal 1997 to permit comparison with fiscal 1998. NOTE B - Fiscal Quarters The Company utilizes a system of fiscal quarters. Under this system, the first three quarters of each fiscal year end on a Saturday. However, the fourth quarter of each fiscal year will always end on September 30. Because of this, the number of days in the first quarter (95 days in fiscal 1998 and 89 days in fiscal 1997) and fourth quarter (88 days in fiscal 1998 and 94 days in fiscal 1997) of each fiscal year varies from year to year. The second and third quarters of each fiscal year will be exactly thirteen weeks long. This policy does not have a material effect on the comparability of results of operations between quarters. NOTE C - Earnings Per Share In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings per Share." SFAS No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts presented have been restated to conform to SFAS No. 128 requirements.
The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended Six Months Ended ------------------------- ------------------------- April 4,. March 29, April 4, March 29, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Net income (in thousands) ........................ $ 2,884 $ 1,779 $ 5,316 $ 3,965 =========== =========== =========== =========== Weighted average shares .......................... 8,274,942 8,185,134 8,232,509 8,158,144 Effect of dilutive securities: Employee stock options ........................... 252,915 254,493 251,976 260,345 ----------- ----------- ----------- ----------- Adjusted weighted average shares and assumed conversions ........................ 8,527,857 8,439,627 8,484,485 8,418,489 =========== =========== =========== =========== Basic earnings per share ............................ $ 0.35 $ 0.22 $ 0.65 $ 0.49 =========== =========== =========== =========== Diluted earnings per share .......................... $ 0.34 $ 0.21 $ 0.63 $ 0.47 =========== =========== =========== ===========
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements This discussion includes certain forward-looking statements about the Company's business and its expectations. Any such statements are subject to risk that could cause the actual results to vary materially from expectations. For a further discussion of the various risks that may affect the Company's business and expectations, see "Certain Factors That May Affect Future Operating Results" at the end of Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Revenues. Revenues for the second quarter of fiscal 1998 amounted to $46.5 million as compared with $39.4 million for the second quarter of the prior year. Revenues for the first six months of fiscal 1998 were $91.0 million as compared with $76.5 million for the first six months of the prior year. Revenue growth was 18% and 19% in the three and six month periods ended April 4, 1998, respectively, as compared to 19% for each of the comparable periods of the prior year. Product revenues for the second quarter of fiscal 1998 amounted to $30.1 million as compared with $26.1 million for the second quarter of the prior year. Product revenues for the first six months of fiscal 1998 were $59.9 million as compared with $51.8 million for the first six months of the prior year. Product revenue growth of 15% in the three and six month periods ended April 4, 1998, respectively, increased from 12% and 13% for comparable periods of the prior year. Product revenue growth in the three and six month periods ended April 4, 1998, was principally driven by customer demand for the Company's Windows and client/server products. Service revenues for the second quarter of fiscal 1998 amounted to $16.4 million as compared with $13.2 million for the second quarter of the prior year. Service revenues for the first six months of fiscal 1998 were $31.2 million as compared with $24.7 million for the first six months of the prior year. Service revenue growth of 23% and 26% in the three and six month periods ended April 4, 1998, respectively, decreased from 35% and 31% for comparable periods of the prior year. The growth in service revenues reflects an increase in the level of professional services accompanying new sales as well as an increase in maintenance revenue from expansion of the installed base. Revenue growth rates experienced in previous periods benefited from service revenue enhancement programs implemented by the Company through fiscal 1997. Management anticipates the growth in service revenue will continue to exceed the growth in product revenue over the remainder of this fiscal year. However, as the customer installed base continues to grow, management anticipates that service revenue growth rates will gradually become more consistent with product revenue growth rates. Gross Profit. Gross profit as a percentage of revenues were 61% in the three and six month periods ended April 4, 1998, as compared with 60% in the comparable periods of the prior year. The improvement in gross profit was evidenced in both product and service gross profit. Product gross profit as a percentage of product revenues of 74% and 75% in the three and six month periods ended April 4, 1998, respectively, increased from 73% and 74% for comparable periods of the prior year. The improvement in product gross profit in both periods is primarily attributable to an increased proportion of product revenues generated by software, which typically generates higher gross profit than other product. Service gross profit as a percentage of service revenues of 36% and 34% in the three and six month periods ended April 4, 1998, respectively, increased from 34% and 32% for comparable periods of the prior year. The improvement in service gross profit in both periods is primarily attributable to the growth in service revenues without a proportionate increase in service expenses. This has been accomplished by more fully leveraging service resources and improving the efficiency of the system implementation process. Management expects service gross profit as a percentage of service revenues to decrease during the third quarter as the Company invests in service organization personnel in response to increasing customer demand for its services. Expenses. Total operating expenses as a percentage of revenues were 51% and 52% in the three and six month periods ended April 4, 1998, respectively, as compared to 52% in the comparable periods of the prior year. Sales and marketing expenses as a percentage of revenues were 34% and 35% in the three and six month periods ended April 4, 1998, respectively, as compared to 35% in the comparable periods of the prior year. The slight decrease in sales and marketing expenses as a percentage of revenues is primarily attributable to the delay of various discretionary spending programs. Management expects to incur this spending over the remainder of the fiscal year. Engineering expenses as a percentage of revenues were 10% in the three and six month periods ended April 4, 1998, respectively, as compared to 11% in the comparable periods of the prior year. Engineering expenses of $4.6 million and $4.2 million in the second quarter of fiscal 1998 and 1997, respectively, are net of capitalized software development costs of $1.6 million and $1.4 million, respectively. Engineering expenses of $8.9 million and $8.1 million in the first six months of fiscal 1998 and 1997, respectively, are net of capitalized software development costs of $3.0 million and $2.6 million, respectively. The growth in engineering, research and development expenses results primarily from efforts to standardize products and the development of new products in the Windows and client/server environments. General and administrative expenses as a percentage of revenues amounted to 7% for all periods presented. Other (income) expense, net amounted to less than 1% of revenues for all periods presented. Other (income) expense, net is composed primarily of amortization of intangible assets related to acquisitions made by the Company which is offset by interest income earned on its investments. Income Taxes. The provision for income taxes as a percentage of pretax income was 38% for all periods presented. The Company's effective income tax rate may fluctuate between periods as a result of various factors, none of which is material, either individually or in aggregate, to the consolidated results of operations. Liquidity and Capital Resources Working capital as of April 4, 1998, amounted to $45.8 million as compared with $41.2 million at September 30, 1997. As of those dates, cash and equivalents and marketable securities amounted to $41.0 million and $36.2 million, respectively. Cash generated from operations increased to $13.7 million in the first six months of fiscal 1998 from $6.9 million in the first six months of the prior year, principally due to increased earnings and unearned service revenues as well as cash provided from the Company's lease portfolio. Cash provided from those sources was partially offset by the reduction in income tax obligations. During the second quarter of fiscal 1998 the Company invested approximately $4.4 million to acquire labor productivity technology and distribution rights in a dealer territory. The Company's investment in equipment in the first six months of the fiscal year decreased from its investment in the first six months of the prior year due to the timing of capital projects. The Company anticipates that investment in equipment in fiscal 1998 will be comparable to fiscal 1997. Cash generated from operations was more than sufficient to fund investments in equipment and capitalized software development costs. The Company expects to fund its investments in equipment and software development costs over the remainder of its fiscal year with available cash and operating cash flow generated in fiscal 1998. Certain Factors That May Affect Future Operating Results Except for historical matters, the matters discussed in this Quarterly Report on Form 10-Q are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). The Company desires to take advantage of the safe harbor provisions of the Act and is including this statement for the express purpose of availing itself of the protection of the safe harbor with respect to all forward looking statements that involve risks and uncertainties. The Company's actual operating results may differ from those indicated by forward looking statements made in this Quarterly Report on Form 10-Q and presented elsewhere by management from time to time because of a number of factors including the potential fluctuations in quarterly results, timing and market acceptance of new product introductions by the Company and its competitors, competitive pricing pressures, rapid technological change, new competitors entering the market, the dependence on alternate distribution channels, potential effects associated with the century change, the ability to attract and retain sufficient technical personnel, and the dependence on the Company's time and attendance product line and on key vendors, as further described below and in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997, which factors are specifically incorporated by reference herein. Potential Fluctuations in Quarterly Results. The Company's quarterly operating results may fluctuate as a result of a variety of factors, including the timing of the introduction of new products and product enhancements by the Company and its competitors, market acceptance of new products, mix of products sold, the purchasing patterns of its customers, competitive pricing pressure and general economic conditions. The Company historically has realized a relatively larger percentage of its annual revenues and profits in the fourth quarter and a relatively smaller percentage in the first quarter of each fiscal year, although there can be no assurance that this pattern will continue. In addition, while the Company has contracts to supply systems to certain customers over an extended period of time, substantially all of the Company's product revenue and profits in each quarter result from orders received in that quarter. If near-term demand for the Company's products weakens or if significant anticipated sales in any quarter do not close when expected, the Company's revenues for that quarter will be adversely affected. The Company believes that its operating results for any one period are not necessarily indicative of results for any future period. Product Development and Technological Change. The markets for time and attendance, labor management, and data collection systems are characterized by continual change and improvement in computer software and hardware technology. The Company's future success will depend largely on its ability to enhance its existing product lines and to develop new products and interfaces to third party products on a timely basis for the increasingly sophisticated needs of its customers. Although the Company is continually seeking to further enhance its product offerings and to develop new products and interfaces, there can be no assurance that these efforts will succeed, or that, if successful, such product enhancements or new products will achieve widespread market acceptance, or that the Company's competitors will not develop and market products which are superior to the Company's products or achieve greater market acceptance. Although management believes the Company has substantially completed the product transition from DOS and UNIX platforms to the Windows and client/server environments, the Company's revenue growth and results of operations in fiscal 1998 will depend in part on the continuing growth of sales of its Windows and client/server products. Competition. The time and attendance, labor management, and data collection industries are highly competitive. Competition is increasing as competitors in related industries, such as human resources and payroll, enter the market. Advances in software development tools have accelerated the software development process and, therefore, can allow competitors to penetrate certain of the Company's markets. Maintaining the Company's technological and other advantages over competitors will require continued investment by the Company in research and development and marketing and sales programs. There can be no assurance that the Company will have sufficient resources to make such investments or be able to achieve the technological advances necessary to maintain its competitive advantages. Increased competition could adversely affect the Company's operating results through price reductions and/or loss of market share. Dependence on Alternate Distribution Channels. The Company markets and sells its products through its direct sales organization, independent dealers and OEMs. For the fiscal year ended September 30, 1997, approximately 22% of the Company's revenue was generated through sales to dealers and OEMs. Reduction in the sales efforts of the Company's major dealers and/or OEMs, or termination or changes in their relationships with the Company, could have a material adverse effect on the results of the Company's operations. Year 2000. Many currently installed computer systems and software products will not function properly in the year 2000 and beyond. As a result, computer systems and/or software used by many companies may need to be upgraded to comply with such "year 2000" requirements. Significant uncertainty exists in the software industry concerning the potential effects associated with the century change. Although the Company currently offers software products that are designed to work properly in the year 2000 and beyond, there can be no assurance that the Company's software products contain all necessary date code changes. The Company has warranted, and may in the future warrant, to certain customers that its products will work in the year 2000 and beyond. In addition, the Company has initiated a program to assess the products offered by it, its internal operating systems, and third party products incorporated into or used to develop its products and to develop a timetable for correcting any issues, if necessary. The Company is currently developing a complete cost estimate but does not anticipate that costs associated with this program will be material. However, if the Company's program is not completed on a timely basis, if there is a failure of the products or systems of other companies on which the Company relies for use internally or in its products, if customer demand is reduced due to customers' concerns about year 2000 issues, or if the Company's own products fail in the year 2000 and beyond, there could be a material adverse effect on the Company's business, financial condition or results of operations. Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. (a) The 1998 Annual Meeting of Stockholders of Kronos Incorporated was held on January 30, 1998. (b) At the Annual Meeting, Messrs. Mark S. Ain, Richard J. Dumler and Samuel Rubinovitz were elected as Class III Directors for three-year terms expiring in 2001. In addition, the Directors whose terms of office continue after the meeting are two Class I Directors: Messrs. D. Bradley McWilliams and Lawrence Portner and one Class II Director: Messr. W. Patrick Decker. The tabulation of votes for each Director nominee was as follows: FOR WITHHELD --------- -------- Mark S. Ain 7,433,579 165,286 Richard J. Dumler 7,433,579 165,286 Samuel Rubinovitz 7,433,556 165,309 (c) The other items voted upon at the meeting were as follows:
BROKER FOR AGAINST ABSTAIN NON-VOTES --------- ------- ------- --------- (i) Approval of an amendment 7,017,025 459,955 100,464 21,421 to the Company's Restated Articles of Organization increasing the number of authorized shares of Common Stock from 12,000,000 to 20,000,000 shares (ii) Approval of an amendment to 4,648,625 1,817,736 212,071 920,433 the Company's 1992 Equity Incentive Plan (i) increasing from 1,237,500 to 2,237,500 (subject to Adjustments for certain changes in the Company's capitalization) the Number of shares available for Issuance under the Plan; (ii) Increasing from 75,000 to 100,000 (subject to adjustments for certain Changes in the Company's Capitalization) the number of shares for which Awards under the Plan may be granted in any calendar year to any one employee; and (iii) to continue the Plan. (iii) Ratification of the selection of 7,585,870 6,290 6,705 ----- Ernst & Young LLP
Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Restated Articles of Organization of the Registrant, as amended 10.1 1992 Equity Incentive Plan, as amended and restated 27.1 Financial Data Schedule (b) Reports of Form 8-K There were no reports on Form 8-K filed during the fiscal quarter ended April 4, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KRONOS INCORPORATED By /s/ Paul A. Lacy Paul A. Lacy Vice President of Finance and Administration (Duly Authorized Officer and Principal Financial Officer) May 15, 1998 KRONOS INCORPORATED EXHIBIT INDEX Exhibit Number Description 3.1 Restated Articles of Organization of the Registrant, as amended 10.1 1992 Equity Incentive Plan, as amended and restated 27.1 Financial Data Schedule EX-3.(I) 2 RESTATED ARTICLES OF ORGAN. OF THE REGISTRANT FEDERAL INDENTIFICATION NO. ______04-2640942______ The Commonwealth of Massachusetts - ------------ Examiner William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) - ------------ Name Approved We, ________________W. Patrick Decker_______________, * President/ and ________________Paul A. Lacy______________________, *Clerk/ of _______________Kronos Incorporated_____________________________, (Exact name of corporation) located at ______400 Fifth Avenue, Waltham, MA 02154______________, (Street address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered: _____________________________3____________________________________ (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the Articles of Organization were duly adopted at a meeting held on January 30, 19 98, by vote of: 7,017,025 shares of Common Stock of 8,207,008 shares outstanding, --------- ------------ ---------- (type, class & series, if any) C ___ ___ _________ shares of _________ of __________ shares outstanding, and P ___ (type, class & series, if any) ___ M ___ _________ shares of _________ of __________ shares outstanding, ___ (type, class & series, if any) R.A___ 1**being at least a majority of each type, class or series outstanding and entitled to vote thereon:/and of each type,class or series of stock whose rights are adversely affected thereby: *Delete the inapplicable words. **Delete the inapplicable clause. 1 For amendments adopted pursuant to Chapter 156B, Section 70. 2 For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on one side only of separate 8 1/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a _______ single sheet so long as each article requiring each addition P.C. is clearly indicated. To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is: - -------------------------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Common: Common: 12,000,000 $ .01 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Preferred: Preferred: 1,000,000 $ 1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Change the total authorized to: - -------------------------------------------------------------------------------- WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Common: Common: 20,000,000 $ .01 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Preferred: Preferred: 1,000,000 $ 1.00 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date: ________________________________. SIGNED UNDER THE PENALTIES OF PERJURY, this 10th day of February , 19 98 , S/ W. Patrick Decker ___________________________________________________________________, *President/ S/ Paul Lacy ____________________________________________________________________, *Clerk/. *Delete the inapplicable words. THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) =============================================================== I hereby approve the within Articles of Amendment and, the filing fee in amount of $ 8,000.00 having been paid, said articles are deemed to have been filed with me this 20th day of February__ 19 98. Effective date: _____________________________________________ S/William Francis Galvin WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION Photocopy of document to be sent to: Sally Wallace, Esq.___ Kronos Incorporated___ 400 Fifth Avenue_____ Waltham, MA 02154____ The Commonwealth of Massachusetts MICHAEL JOSEPH CONNOLLY Secretary of State Federal Identification ONE ASHBURTON PLACE, BOSTON, MASS. 02108 No. 04-2640942 -------------- RESTATED ARTICLES OF ORGANIZATION General Laws, Chapter 156B, Section 74 This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the restated articles or organization. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts. ---------- We, Mark S. Ain , President/and Paul A. Lacy , Clerk of . . . . . . . . . . . . . . Kronos Incorporated . . . . . . . . . . . . . . . . (Name of Corporation) located at . . . 62 Fourth Avenue, Waltham, MA 02154 . . . . . . . . . . . . . do hereby certify that the following restatement of the articles of organization of the corporation was duly adopted at a meeting held on April 16, 1992, by vote of . . 1,127,890 . . shares of ..Common Stock . . . . . . out of (Class of Stock) 1,234,798 . . shares outstanding, .20,152.. shares of . Series A. Preferred (Class of Stock) Stock . out of . 21,855 . shares outstanding, and . . . . . . . shares of . . . . . . . . . . out of . . . . . . . . . . . . . . . . . shares outstanding, being at least two-thirds of each class of stock outstanding and entitled to vote and of each class or series of stock adversely affected thereby: - 1. The name by which the corporation shall be known is: - Kronos Incorporated 2. The purposes for which the corporation is formed are as follows: - See Page 2A attached hereto. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of paper leaving a left hand margin of at least 1 inch for binding. Additions to more than one article may be continued on a single sheet so long as each article requiring each such addition is clearly indicated. 3. The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue is as follows: WITHOUT PAR WITH PAR VALUE ----------- -------------- CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE - -------------- ---------------- ---------------- --------- Preferred 1,000,000 $1.00 Common 12,000,000 $ .01 *4. If more than one class is authorized, a description of each of the different classes of stock with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each class thereof and any series now established: See Pages 4A through 4M attached hereto. *5. The restrictions, if any, imposed by the articles of organization upon the transfer of shares of stock of any class are as follows: None *6. Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders: See Pages 6A through 6G attached hereto. *If there are no such provisions, state "None". Article 2 - --------- Purposes (a) to develop, manufacture and market electrical, electronic and mechanical products of any kind, and to conduct research in connection with any of the foregoing. (b) to carry on any manufacturing, mercantile, selling, management, service or other business, operation or activity which may be lawfully carried on by a corporation organized under the Business Corporation Law of The Commonwealth of Massachusetts, whether or not related to those referred to in the foregoing paragraph. -2A- Continuation Sheet 4A --------------------- ARTICLE 4 PROVISIONS RELATING TO CAPITAL STOCK The capital stock of the Corporation shall consist of (i) 12,000,000 shares of Common Stock, $.01 par value per share and (ii) 1,000,000 shares of preferred stock, $1.00 par value per share, issuable in one or more series (the "Series Preferred Stock"), of which 21,855 shares shall be designated Series A Cumulative Convertible Preferred Stock (the "Series A Preferred"). SERIES PREFERRED STOCK AND COMMON STOCK - --------------------------------------- 1. The shares of Series Preferred Stock may be issued from time to time in one or more series. To the extent not inconsistent with the other provisions of this Article 4, the Board of Directors is authorized to establish and designate the different series, and to fix and determine the variations and the relative rights and preferences among the different series, provided that all shares of Series Preferred Stock shall be identical except for variations so fixed and determined among the different series to the extent permitted by Massachusetts General Laws, Chapter 156B, Section 26 and any successor to that Section. 2. The preferences, voting powers, qualifications, special or relative rights or privileges of the Common Stock, the Series Preferred Stock and the Series A Preferred are as follows: (a) Liquidation Preference. Upon any liquidation, dissolution or winding up of this Corporation, whether voluntary or involuntary and after provision for the payment of creditors, the holders of each series of Series Preferred Stock shall be entitled, before any distribution or payment is made upon any shares of Common Stock, to be paid the amount fixed and determined by the Board of Directors for such series plus (except as otherwise provided for any series of Series Preferred Stock) an amount equal to dividends accrued to the date of payment, and to no further payment. Except as otherwise provided for any series of Series Preferred Stock, in the event that the assets of this Corporation available for distribution to holders of Series Preferred Stock shall be insufficient to permit payment to such holders of such amounts, then all the assets of the Corporation then remaining shall be distributed among the series of Series Preferred Stock ratably on the basis of the relative aggregate liquidation preferences of each series and, -4A- within each such series, ratably among the holders of the shares of such series. The aggregate amount of payments to be made to holders of Series Preferred Stock upon any liquidation, dissolution or winding up of this Corporation may be fixed at any amount up to the full amount legally available for distribution to stockholders. After payment in full has been made to all holders of Series Preferred Stock, then, and only then, the remaining assets of this Corporation may be distributed to the holders of Common Stock. The holders of any series of Series Preferred Stock shall be entitled to participate in any such distribution to holders of Common Stock to the extent, if any, specified for such series by the Board of Directors. Except as otherwise provided for any series of Series Preferred Stock, neither the purchase or redemption by this Corporation of shares of any class or series of its capital stock in any manner permitted by the Restated Articles of Organization, nor the merger or consolidation of this Corporation with or into any other corporation or corporations, nor the sale or transfer by this Corporation of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of this Corporation for the purposes of this Article 4. (b) Dividend Preference. Holders of Series Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the purpose, dividends at such annual rate or rates, and no more, as are fixed for each series of Series Preferred Stock by the Board of Directors, payable in cash or in property or in shares of any series of Series Preferred Stock, or in Common Stock, or in any combination thereof. Holders of Series Preferred Stock may receive in the aggregate dividends equal to the full amount of funds legally available for the payment of dividends. Except as otherwise provided for any series of Series Preferred Stock, until all accrued dividends, if any, on all shares of Series Preferred Stock shall have been declared and set apart for payment, no dividend or distribution shall be made to holders of Common Stock, other than a dividend payable in Common Stock of this Corporation, nor shall any shares of Common Stock be repurchased, redeemed or otherwise retired. The holders of any series of Series Preferred Stock shall be entitled to participate in any dividend or distribution to holders of Common Stock to the extent, if any, specified for such series by the Board of Directors. (c) Voting Powers and Qualifications. Each share of Common Stock shall entitle the holder thereof to one vote on all matters presented to stockholders. The holders of Series Preferred Stock shall be entitled to vote separately as a class, or in combination with the holders -4B- of Common Stock as a single class, to the extent (if any), and in regard to such matters and transactions (if any), as the Board of Directors may specify in establishing any such series or as may be otherwise required by law. Matters and transactions as to which the Board of Directors, in establishing any series, may specify a separate class vote of holders of Series Preferred Stock or any series thereof may include, without limitation, the election of a specified number or percentage of the directors, changes in this Corporation's authorized capital stock, amendments to this Corporation's Restated Articles of Organization or By-laws, mergers, a sale of substantially all of the assets of this Corporation, and dissolution of this Corporation. The Board of Directors may specify the percentage of votes required to approve any matter or transaction requiring a separate vote of the Series Preferred Stock or any series thereof. As to matters and transactions as to which the Series Preferred Stock is entitled to vote in combination with holders of Common Stock as a single class, the Board of Directors, in establishing any such series, may specify that the voting power of each share of such series may be greater or less than the voting power of each share of Common Stock, provided that Series Preferred Stock shall have no more than ten votes per share, or such greater number as is equivalent to the number of shares of Common Stock into which such shares of Series Preferred Stock are convertible. (d) Additional Special or Relative Rights or Privileges. Holders of any series of Series Preferred Stock shall enjoy such additional special or relative rights or privileges vis-a-vis the holders of Common Stock as the Board of Directors (subject to the limitations imposed by this Article 4) may specify in the votes creating such series, including, without limitation, rights of redemption, sinking or purchase fund provisions and conversion rights. (e) Series A Preferred. The rights, preferences, privileges and restrictions granted to or imposed on the Series A Preferred and the Common Stock or the holders thereof are as follows: 1. Dividends. 1.1. The holders of the Series A Preferred shall be entitled to receive, out of funds legally available therefor, dividends at the rate of $2.025 per share per annum, payable quarterly beginning on June 30, 1988 and in preference and priority to any payment of any dividend on any class of stock or series thereof of the Corporation -4C- for such year. The right to such dividends on the Series A Preferred shall accrue and cumulate on the books of this Corporation as an obligation of the Corporation on a quarterly basis, whether or not declared, beginning on July 31, 1987, provided, however, that if the Series A Preferred is automatically converted pursuant to Section 4.2 hereof on or prior to July 1, 1988, the holders of the Series A Preferred shall not be entitled to receive any dividends which, on or prior to such date, have accrued pursuant to this section. No dividend shall be paid on any class of stock or series thereof in any year, other than dividends payable solely in Common Stock, until all accrued dividends have been declared and paid on the Series A Preferred. 1.2. Increase in Dividend. If the Corporation shall fail to pay any dividend when due in accordance with this Section 1 or if the Corporation shall fail to make a mandatory redemption of the Series A Preferred in accordance with Section 7 hereof, then the rate at which dividends are payable, and, if dividends are not paid, the rate at which they accrue and cumulate, shall be increased by $0.1125 per share for each quarter that such dividend shall remain unpaid or that such mandatory redemption shall not be made, and shall be increased by $0.05625 for each successive quarter; provided that the maximum dividend payable in any quarter shall not exceed $0.8375 per share. 2. Liquidation Preference. 2.1. In the event of any liquidation, dissolution, or winding up of the Corporation, either voluntary or involuntary, distributions to the stockholders of the Corporation shall be made in the following manner: The holders of the Series A Preferred shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of any class of stock or series thereof of the Corporation by reason of their ownership of such stock, the amount of $22.50 per share for each share of Series A Preferred then held by them, and, in addition, an amount equal to all accrued but unpaid dividends on the Series A Preferred held by them. If the assets and funds thus distributed among the holders of the Series A Preferred shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the Corporation so distributed shall be distributed ratably among the holders of the Series A Preferred in proportion to the aggregate preferential amount of all shares of Series A Preferred then held by them bears to the aggregate preferential -4D- amount of all shares of Series A Preferred outstanding as of the date of the distribution upon the occurrence of such event. After payment has been made to the holders of the Series A Preferred of the full amounts to which they shall be entitled as aforesaid, the holders of the Common Stock shall be entitled to share ratably in the remaining assets, based on the number of shares of Common Stock held by each of them. 3. Voting Rights. The holder of each share of Series A Preferred issued and outstanding shall be entitled to the number of votes per share as shall equal the number of shares of Common Stock into which each share of Series A Preferred is then convertible, and the holders of Series A Preferred shall be entitled to vote on all matters as to which the holders of Common Stock shall be entitled to vote, voting together with the holders of Common Stock as a single class. The holder of each share of Common Stock issued and outstanding shall be entitled to one vote per share of such Common Stock. 4. Conversion. The holders of the Series A Preferred have conversion rights as follows (the "Conversion Rights"): 4.1. Right of Conversion. Each share of Series A Preferred shall be convertible (at the option of the holder thereof) at any time after the date of issuance at the office of the Corporation or any transfer agent for the Series A Preferred into the number of shares of the Common Stock of the Company obtained by dividing $22.50 by the conversion price in effect at the time of conversion, determined as hereinafter provided (the "Conversion Price"). The initial Conversion Price shall be $22.50 per share. All calculations under this Section 4 shall be made to the nearest cent. 4.2. Automatic Conversion. Each share of Series A Preferred shall automatically be converted into shares of Common Stock at the then effective Conversion Price, at the option of the Corporation, upon the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation to the public generally at a price per share (prior to underwriting commissions and offering expenses) of not less than $35 per share (appropriately adjusted for any recapitalizations, stock splits, stock combinations and stock dividends) in which the aggregate proceeds received by the Corporation (after underwriting discounts and commissions) equal or exceed $7,500,000. In the event of such automatic conversion of the Series A Preferred, such conversion shall not be -4E- deemed to have occurred until the person(s) entitled to receive the Common Stock issuable upon such conversion of Series A Preferred has received from the Corporation all accrued and unpaid dividends owed on such person's Series A Preferred. 4.3. Mechanics of Conversion. No fractional shares of Common Stock shall be issued upon conversion of Series A Preferred. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. Before any holder of Series A Preferred shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A Preferred, and shall give written notice to the Corporation at such office that he elects to convert the same; provided, however, that in the event of an automatic conversion pursuant to Section 4.2, the outstanding shares of Series A Preferred shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent, and provided further that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Series A Preferred are either delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates provided that nothing contained herein shall require the holder to provide a surety or indemnity bond where the Common Stock issued is registered in the same name as the Series A Preferred surrendered for conversion. The Corporation shall, as soon as practicable after such delivery, or such agreement of indemnification in the case of a lost certificate, but in no event later than ten (10) business days after such delivery or agreement of indemnification, issue and deliver at such office to such holder of Series A Preferred, a certificate or certificates for the number of shares of Common Stock to which he shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock plus all accrued and unpaid dividends on such holder's Series A Preferred. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of -4F- such surrender of the shares of Series A Preferred to be converted, or in the case of automatic conversion on the date immediately prior to closing of the public offering (provided that all accrued and unpaid dividends have been paid prior to such date), and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. Upon conversion of only a portion of the number of shares covered by a certificate representing shares of Series A Preferred surrendered for conversion, the Corporation shall issue and deliver to the holder of the certificate so surrendered for conversion, at the expense of the Corporation, a new certificate covering the number of shares of Series A Preferred representing the unconverted portion of the certificate so surrendered. 4.4. Adjustment of Conversion Price for Subdivisions, Combinations, or Consolidation of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided (by stock split, or otherwise) into a greater number of shares of Common Stock, the Conversion Price then in effect shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Conversion Price then in effect shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. 4.5. Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger, consolidation or sale of assets transaction provided for elsewhere herein), provision shall be made so that the holders of the Series A Preferred shall thereafter be entitled to receive upon conversion of the Series A Preferred the number of shares of stock or other securities or property of the Company or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Series A Preferred after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series A Preferred) shall be applicable after that event in as nearly an equivalent manner as may be practicable. -4G- 4.6. No Impairment. The Company will not, by amendment of its Articles of Organization or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series A Preferred against impairment. 4.7. Reservation of Shares. The Company agrees that, so long as any share of Series A Preferred shall remain outstanding, the Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized capital stock, for the purpose of issue upon conversion of the Series A Preferred, the full number of shares of Common Stock then issuable upon exercise of all outstanding shares of Series A Preferred. 4.8. Validity of Shares. The Company agrees that it will from time to time take all such actions as may be requisite to assure that all shares of Common Stock which may be issued upon conversion of any share of the Series A Preferred will, upon issuance, be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof; and, without limiting the generality of the foregoing, the Company agrees that it will from time to time take all such action as may be requisite to assure that the par value per share, if any, of the Common Stock is at all times equal to or less than the then current Conversion Price of the Series A Preferred. 4.9. Notice of Adjustment. Upon each adjustment of the Conversion Price, the Company shall give prompt written notice thereof addressed to the registered holder of each share of the Series A Preferred at the address of such holder as shown on the records of the Company, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares issuable upon the conversion of his shares of Series A Preferred, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4.10. Notice of Capital Changes. If at any time: (a) the Company shall declare any dividend or distribution payable to the holders of its Common Stock; -4H- (b) the Company shall offer for subscription pro rata to the holders of Common Stock any additional shares of stock of any class or other rights; (c) there shall be any proposed capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or business organization; or (d) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall give the registered holders of the Series A Preferred written notice, by registered or certified mail, of the date on which a record shall be taken for such dividend, distribution or subscription rights or for determining stockholders entitled to vote upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up and of the date when any such transaction shall take place, as the case may be. Such notice shall also specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, as the case may be. Such written notice shall be given at least 20 days prior to the transaction in question and not less than 10 days prior to the record date with respect thereto. 4.11. Taxes. The Company will pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery of shares of the Series A Preferred or Common Stock upon conversion of the Series A Preferred. 5. Status of Converted Stock. In case any shares of any series of Series A Preferred shall be converted pursuant to Section 4 hereof, the shares so converted shall be restored to authorized and undesignated, but unissued shares of Series Preferred Stock of the Company. 6. Optional Redemption. (a) The Corporation may, at any time, redeem -4I- any or all shares of the Series A Preferred on a pro rata basis. If the Corporation so elects it shall issue a Notice of Redemption (the "Redemption Notice") to the holders of record of the Series A Preferred. The Redemption Notice shall set forth the Redemption Date, which shall be at least thirty (30) days after the date of the Notice of Redemption, the number of such holder's shares of Series A Preferred to be redeemed, and the applicable Redemption Amount. The Redemption Amount of the Series A Preferred shall be equal to the product of (a) the number of shares of Series A Preferred of the holder which are subject to redemption multiplied by the sum of (b) $27.00 plus (c) the aggregate of all accrued and unpaid dividends per share but in no event shall the total of the Redemption Amounts paid to the holders of the Series A Preferred be less than $750,000. The Redemption Date shall be as specified in the Redemption Notice. The Redemption Amount shall be paid in a lump sum payment on the Redemption Date. (b) The Corporation shall deposit the Redemption Amount in an escrow account with a state or national bank at least two (2) days prior to the Redemption Date and shall notify the holders of the Series A Preferred of such deposit immediately thereafter. Failure to make such deposit or notify the holders shall invalidate the Redemption Notice and no redemption under this Section 6 may be made until such failure is cured. The holders of the Series A Preferred shall have the right to convert their shares pursuant to Section 4 at any time prior to the Redemption Date. (c) The Redemption Amount set forth in this Section 6 shall be subject to equitable adjustment whenever there shall occur a stock split, dividend, combination, reclassification or other similar event involving the Series A Preferred. (d) Each holder of shares of Series A Preferred to be redeemed shall surrender his or her certificate or certificates representing such shares to the Corporation at the place designated in the Redemption Notice, and thereupon the applicable Redemption Amount for such shares as set forth in this Section 6 shall be paid to the order of the person whose name appears on such certificate or certificates and each surrendered certificate shall be cancelled and retired. (e) If any shares of Series A Preferred are not redeemed solely because a holder fails to surrender -4J- the certificate or certificates representing such shares as required by Section 6(d) hereof, then, from and after the Redemption Date, and except for the right to receive payment under this Section 6, such shares of Series A Preferred thereupon subject to redemption shall not be entitled to any further right as Series A Preferred, including but not limited to the conversion provisions set forth in Section 4 hereof. 7. Mandatory Redemption. (a) On August 31, 1991 the Corporation shall redeem fifty percent (50%) of all of the shares of the Series A Preferred then outstanding and on August 31, 1992 the Corporation shall redeem the balance of the shares of Series A Preferred (the date on which such shares are redeemed by the Corporation referred to herein as the "Mandatory Redemption Date"). The redemption price for each share of Series A Preferred redeemed pursuant to this Section 7 shall be $22.50 per share plus all accrued and unpaid dividends on such share, whether or not earned or declared, up to and including the date fixed for redemption (the "Redemption Price"). Each redemption of Series A Preferred shall be made so that the number of shares of Series A Preferred held by each registered owner shall be reduced in an amount which shall bear the same ratio to the total number of shares of the Series A Preferred being so redeemed as the number of shares of Series A Preferred then held by such registered owner bears to the aggregate number of shares of Series A Preferred then outstanding. (b) The Redemption Price set forth in this Section 7 shall be subject to equitable adjustment whenever there shall occur a stock split, dividend, combination, reclassification or other similar event involving the Series A Preferred. (c) At least 45 days before any Mandatory Redemption Date pursuant to Section 7(a), written notice (hereinafter referred to as the "Mandatory Redemption Notice") shall be mailed, postage prepaid, to each holder of record of the Series A Preferred which is to be redeemed, at its address shown on the records of the Corporation; provided, however, that the holders of Series A Preferred shall have the right to covert their shares pursuant to Section 4 at any time prior to the Mandatory Redemption Date; provided, further, that the Corporation's failure to give such Mandatory Redemption Notice shall in no way affect its obligation to redeem the shares of Series A Preferred as provided in Section 7(a) hereof. -4K- (d) Each holder of shares of Series A Preferred to be redeemed shall surrender his or her certificate or certificates representing such shares to the Corporation at the place designated in the Mandatory Redemption Notice, and thereupon the applicable Redemption Price for such shares as set forth in this Section 7 shall be paid to the order of the person whose name appears on such certificate or certificates and each surrendered certificate shall be cancelled and retired. (e) If any shares of Series A Preferred are not redeemed solely because a holder fails to surrender the certificate or certificates representing such shares pursuant to Section 7, then, from and after the Redemption Date, and except for the right to receive payment under this Section 7, such shares of Series A Preferred thereupon subject to redemption shall not be entitled to any further right as Series A Preferred, including but not limited to the conversion provisions set forth in Section 4 hereof. 8. Protective Provisions. The Corporation shall not, without the affirmative consent of the holders of shares representing at least 662/3% in voting power (90% in voting power with respect to Section 8(b) below) of the Series A Preferred then outstanding, acting separately as one class, given by written consent or by vote at a meeting called for such purpose for which notice shall have been given to the holders of the Series A Preferred: (a) in any manner authorize, create, or issue any class or series of capital stock (i) ranking, either as to payment of dividends, distribution of assets, or redemptions, prior to or on a parity with the Series A Preferred (other than the Series A Preferred itself), or (ii) that in any manner adversely affects the holders of Series A Preferred, or authorize, create, or issue any shares of any class or series or any bonds, debentures, notes, or other obligations convertible into or exchangeable for, or having optional rights to purchase, any shares having any such preference or priority or so adversely affecting the holders of Series A Preferred; (b) in any manner alter or change the designations or the powers, preferences, or rights, or the qualifications, limitations, or restrictions of the Series A Preferred; (c) reclassify the shares of Common Stock or any other shares of any class or series of capital stock hereafter created junior to the Series A Preferred into shares of any class or series of capital stock (i) -4L- ranking, either as to payment of dividends, distribution of assets, or redemptions prior to or on a parity with the Series A Preferred, or (ii) that in any manner otherwise adversely affects the holders of Series A Preferred; (d) sell or otherwise transfer all or substantially all of the Corporation's rights in its technology or intellectual property such that the Corporation no longer owns or has any right to such technology or intellectual property; (e) merge or consolidate with or into, or permit any subsidiary to merge with or into, any other corporation or corporations, or other entity or entities (in which merger or consolidation the shareholders of the Corporation receive distributions of cash or securities of another issuer as a result of such merger or consolidation). -4M- Article 6____________________________ Other Lawful Provisions 6.1 The Corporation may carry on any business, operation or activity referred to in Article 2 to the same extent as might an individual, whether as principal, agent, contractor or otherwise, and either alone or in conjunction or a joint venture or other arrangement with any corporation, association, trust, firm or individual. 6.2 The Corporation may carry on any business, operation or activity through a wholly or partly owned subsidiary. 6.3 The Corporation may be a partner in any business enterprise which it would have power to conduct by itself. 6.4 The Board of Directors may make, amend or repeal the By-laws of the Corporation in whole or in part, except with respect to any provision thereof which by law or the By-laws requires action by the stockholders and subject to the right of the stockholders entitled to vote with respect thereto to amend or repeal By-laws made by the Board of Directors as provided for in these Restated Articles of Organization. The affirmative vote of two thirds of the total number of votes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the adoption, amendment or repeal of By-laws by the stockholders of the Corporation. Subject to the provisions set forth herein, the Corporation reserves the right to amend, alter, repeal or rescind any provision contained in these Restated Articles of Organization in the manner now or hereafter prescribed by law. 6.5 Meetings of the stockholders may be held anywhere in the United States. 6.6 Except as otherwise provided by law, no stockholder shall have any right to examine any property or any books, accounts or other writings of the Corporation if there is reasonable ground for belief that such examination will for any reason be adverse to the interests of the Corporation, and a vote of the directors refusing permission to make such examination and setting forth that in the opinion of the directors such examination would be to the interests of the Corporation shall be prima facie evidence that such examination would be adverse to the interests of the Corporation. Every such examination shall be subject to such reasonable regulations as the directors may establish in regard thereto. 6.7 The directors may specify the manner in which the accounts of the Corporation shall be kept and may determine what constitutes net earnings, profits and surplus, what amounts, if -6A- any, shall be reserved for any corporate purpose, and what amounts, if any, shall be declared as dividends. Unless the Board of Directors otherwise specifies, the excess of the consideration for any share of its capital stock with par value issued by it over such par value shall be surplus. The Board of Directors may allocate to capital stock less than all of the consideration for any share of its capital stock without par value issued by it, in which case the balance of such consideration shall be surplus. All surplus shall be available for any corporate purpose, including the payment of dividends. 6.8 The purchase or other acquisition or retention by the Corporation of shares of its own capital stock shall not be deemed a reduction of its capital stock. Upon any reduction of capital or capital stock, no stockholder shall have any right to demand any distribution from the Corporation, except as and to the extent that the stockholders shall have provided at the time of authorizing such reduction. 6.9 (a) A director who has a financial, family or other interest in a contract or other transaction may be counted for purposes of establishing the existence of a quorum at a meeting of the board of directors (or of a committee of the board of directors) at which action with respect to the transaction is taken and may vote to approve the transaction and any related matters. (b) A contract or other transaction in which a director or officer has a financial, family or other interest shall not be void or voidable for that reason, if any one of the following is met: (1) The material facts as to the director's or officer's interest are disclosed or are known to the board of directors or committee of the board of directors acting on the transaction, and the board or committee authorizes, approves or ratifies the transaction by the affirmative vote of a majority of the disinterested directors (or, if applicable, the sole disinterested director) on the board of directors or committee, as the case may be, even though the disinterested directors be less than a quorum; or (2) The material facts as to the director's or officer's interest are disclosed or are known to the holders of the shares of the corporation's capital stock then entitled to vote for directors, and such holders, voting such shares as a single class, by a majority of the votes cast on the question, specifically authorize, approve or ratify the transaction; or (3) The transaction was fair to the corporation as of the time it was entered into by the corporation. -6B- A failure to meet any of the requirements in subparagraphs (1), (2) or (3) shall not create an inference that the transaction is void or voidable for that reason. (c) The directors shall have the power to fix from time to time their own compensation. 6.10 A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that exculpation from liability is not permitted under the Massachusetts Business Corporation Law as in effect at the time such liability is determined. No amendment or repeal of this paragraph 6.10 shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. 6.11 The Corporation shall have all powers granted to Corporations by the laws of The Commonwealth of Massachusetts, provided that no such power shall include any activity inconsistent with the Business Corporation Law or the general laws of said Commonwealth. 6.12 Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting if all stockholders entitled to vote on the matter consent to the action in writing and the written consents are filed with the records of the meetings of stockholders. Such consents shall be treated for all purposes as a vote at a meeting. 6.13 In determining what he reasonably believes to be in the best interests of the Corporation in the performance of his duties as a director, a director may consider, both in the consideration of tender and exchange offers, mergers, consolidations and sales of all or substantially all of the Corporation's assets and otherwise, such factors as the Board of Directors determines to be relevant, including, without limitation: (i) the long-term and short-term interests of the Corporation and its stockholders, including the possibility that these interests may be best served by the continued independence of the Corporation; (ii) whether the proposed transaction might violate federal or state laws; (iii) if applicable, not only the consideration being offered in a proposed transaction, in relation to the then current market price for the outstanding capital stock of the Corporation, but also to the market price for the capital stock -6C- of the Corporation over a period of years, the estimated price that might be achieved in a negotiated sale of the Corporation as a whole or in part or through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation's financial condition and future prospects; and (iv) the interests of the Corporation's employees, suppliers, creditors and customers, the economy of the state, region and nation, and community and societal considerations. In connection with any such evaluation, the Board of Directors is authorized to conduct such investigations and to engage in such legal proceedings as the Board of Directors may determine. 6.14 Subject to the rights of the holders of shares of any class or series of Preferred Stock, the Board of Directors of the Corporation is authorized from time to time to enact by resolution, without additional authorization by the stockholders of the Corporation, By-laws of the Corporation, in such form and with such additional terms as the Board of Directors may determine, with respect to the matters of corporate proceedings set forth below: (a) Regulation of the procedure for submitting nominations of persons to be elected directors, which shall be made only at a meeting of stockholders, including requirements that nominations of persons to be elected directors, other than nominations submitted on behalf of the incumbent Board of Directors, be (i) accompanied by a petition in support of such nominations signed by at least that number of holders of record of that percentage of shares of capital stock of the Corporation entitled to vote in the election of directors as are specified in such By-law (but a number of record holders not greater than 100 and a percentage of such shares not greater than 1%); and (ii) submitted to the clerk or other designated officer or agent of the Corporation at least that number of days before the meeting of the stockholders at which such election is to be held as is specified in such By-law (but not more than sixty days before such meeting). The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions prescribed by this paragraph 6.14 or any By-law adopted pursuant hereto, and if he so determines, he shall so declare to the meeting, and the defective nomination shall be disregarded. (b) Regulation of business to be conducted at meetings of stockholders, including requirements that only such business shall be conducted and only such proposals shall be acted upon as are directed by the Board of Directors or as are made by a -6D- stockholder who has submitted notice thereof to the clerk or other designated officer or agent of the Corporation at least that number of days before the meeting of stockholders at which such proposal is to be made as is specified in such By-law (but not more than sixty days before such meeting) setting forth such proposal, the reasons therefor, the identity of the stockholder or stockholders making such proposal, the number of shares of capital stock which are beneficially owned by them and any financial interest of such stockholders in such proposal as specified in such By-law. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that proposed business or a proposal was not made in accordance with the provisions prescribed by this paragraph 6.14 or any By-law adopted pursuant hereto, and if he so determines, he shall so declare to the meeting, and any such business shall not be transacted or any such proposal shall be disregarded. (c) Regulation of the order of business and conduct of stockholder meetings and the authority of the presiding officer and of the attendance at annual or special meetings of the stockholders of the Corporation, including the limitation of attendance through a ticket procedure pursuant to which persons who wish to attend such meetings would be required to provide written notice to the clerk or other designated officer or agent of the Corporation at least that number of days prior to the date of such meeting specified in such By-law (but not more than thirty days before such meeting) of their intent to attend in person, and the clerk or other designated officer or agent of the Corporation would issue a single admission ticket to each holder of shares of the stock of the Corporation entitled to vote at such meeting and to such other persons as the Board of Directors may direct, and admission to such meeting would be limited to holders of such tickets and officers and directors of, counsel to, and the auditors of, the Corporation and, to the extent authorized by the Board of Directors, the presiding officer at such meeting, employees or other agents of the Corporation. Application of any such By-law, if adopted, in any particular case would be permitted to be waived by the presiding officer at such meeting. In the event that any such By-law is adopted pursuant to this paragraph 6.14, such By-law may only be amended or repealed upon the affirmative vote of two thirds of the total number of votes then outstanding represented by shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, at any regular or special meeting of the stockholders, but only if notice of the proposed amendment or repeal was contained in the notice of such meeting. 6.15(A) After the consummation of an initial public offering of the Corporation's common stock registered with the -6E- Securities and Exchange Commission (the "Public Offering Time"), the directors of the Corporation, subject to the rights of the holders of shares of any class or series of Preferred Stock, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the By-laws of the Corporation, one class ("Class I") whose term expires at the first annual meeting of stockholders to be held after the Public Offering Time, and another class ("Class II") whose term expires at the second annual meeting of stockholders to be held after the Public Offering Time, and another class ("Class III") whose term expires at the third annual meeting of stockholders to be held after the Public Offering Time, with each class to hold office until its successors are elected and qualified. The classes shall be initially comprised of directors serving on the Board of Directors at the Public Offering Time, and the membership of each class shall be initially determined by the Board of Directors at such time. At each annual meeting of the stockholders of the Corporation after the Public Offering Time, the date of which shall be fixed by or pursuant to the By-laws of the Corporation, and subject to the rights of the holders of shares of any class or series of Preferred Stock, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Any director elected to fill a newly created directorship or any vacancy on the Board of Directors resulting from any death, resignation, removal or other cause shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. (B) After the Public Offering Time and subject to the rights of the holders of shares of any class or series of Preferred Stock, any director or directors may be removed from office at any time, but only for cause and only by the affirmative vote of 80% of the total number of votes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Any vacancy in the Board of Directors resulting from any such removal may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and any director so chosen shall hold office until the next election of the class for which such director shall have been chosen and until such director's successor shall be elected and qualified or until such director's earlier death, resignation or removal. For purposes of this subparagraph (B), "cause" shall mean the (1) conviction of a felony, (2) declaration of unsound mind by order of court, (3) gross dereliction of duty, (4) commission of an action involving moral turpitude, or (5) commission of an action -6F- which constitutes intentional misconduct or a knowing violation of law if such action in either event results both in an improper substantial personal benefit and a material injury to the Corporation. (C) In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal as possible. No decreases in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 6.16 Notwithstanding any other provisions of these Restated Articles of Organization or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, these Restated Articles of Organization or the By-laws of the Corporation), the affirmative vote of 80% of the total number of votes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class shall be required to amend or repeal, or to adopt any provision inconsistent with the purpose or intent of paragraphs 6.4, 6.9, 6.10 and 6.13 through 6.16 of Article 6 of these Restated Articles of Organization. -6G- *We further certify that the foregoing restated articles of organization effect no amendments to the articles of organization of the corporation as heretofore amended, except amendments to the following articles ....2,.3,.4.&.6............ ................................................................................ (*If there are no such amendments, state "None") Briefly describe amendments in space below: Article 2 The language describing the purposes of the corporation has been revised to delete paragraphs (c) and (d). Said paragraphs (c) and (d) now appear as paragraphs 6.2 and 6.1 respectively of Article 6. Article 3 The amount of authorized capital stock of the corporation has been increased to an aggregate of (i) 12,000,000 shares of Common Stock, $.01 par value per share, and (ii) 1,000,000 shares of Preferred Stock, $1.00 par value per share. Article 4 The capitalization of the corporation has been amended so that the number of authorized shares of (i) Common Stock, $.01 par value per share, has been increased from 2,500,000 shares to 12,000,000 shares and (ii) Preferred Stock, $1.00 par value per share, has been increased from 250,000 shares to 1,000,000 shares. The voting rights that the Board of Directors may grant to any series of the Corporation's Preferred Stock, $1.00 par value per share, have been increased from one (1) vote per share to up to ten (10) votes per share. Paragraph 5 of the Certificate of Designation of Series A Cumulative Convertible Preferred Stock has been amended to clarify that converted shares revert to the status of authorized and undesignated, but unissued shares of the corporation's Preferred Stock, $1.00 par value per share. Article 6 New provisions have been added to Article 6 and some existing provisions have been revised. New provisions added, include but are not limited to, provisions relating to (i) stockholder action by written consent, (ii) interested transactions, (iii) a staggered board of directors, (iv) supermajority voting requirements to amend certain provisions of these Restated Articles of Organization and (v) the ability of the corporation's directors to consider special factors when evaluating corporate action. IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 11th day of May in the year 19 92. ........................../S/ Mark S. Ain............................. President ........................../S/ Paul A. Lacy................................ Clerk EX-10.1 3 1992 EQTY. INCENTIVE PLAN, AS AMENDED AND RESTATED As amended through January 30, 1998 Exhibit A KRONOS INCORPORATED 1992 EQUITY INCENTIVE PLAN 1. PURPOSE The purpose of this Equity Incentive Plan (the "Plan") is to advance the interests of Kronos Incorporated (the "Company") by enhancing its ability to attract and retain employees and other persons or entities who are in a position to make significant contributions to the success of the Company and its subsidiaries through ownership of shares of the Company's common stock ("Stock"). The Plan is intended to accomplish these goals by enabling the Company to grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans or Supplement Grants, or combinations thereof, all as more fully described below. 2. ADMINISTRATION The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board will have authority, not inconsistent with the express provisions of the Plan and in addition to other authority granted under the Plan, to (a) grant Awards at such time or times as it may choose; (b) determine the size of each Award, including the number of shares of Stock subject to the Award; (c) determine the type or types of each Award; (d) determine the terms and conditions of each Award; (e) waive compliance by a Participant (as defined below) with any obligations to be performed by the Participant under an Award and waive any term or condition of an Award; (f) amend or cancel an existing Award in whole or in part (and if an award is canceled, grant another Award in its place on such terms as the Board shall specify), except that the Board may not, without the consent of the holder of an Award, take any action under this clause with respect to such Award if such action would adversely affect the rights of such holder; (g) prescribe the form or forms of instruments that are required or deemed appropriate under the Plan, including any written notices and elections required of Participants, and change such forms from time to time; (h) adopt, amend and rescind rules and regulations for the administration of the Plan; and (i) interpret the Plan and decide any questions and settle all controversies and disputes that may arise in connection with the Plan. Such determinations and actions of the Board, and all other determinations and actions of the Board made or taken under authority granted by any provision of the Plan, will be conclusive and will bind all parties. Nothing in this paragraph shall be construed as limiting the power of the Board to make adjustments under Section 7.3, Section 7.4 or Section 8.6. The Board may, in its discretion, delegate some or all of its powers with respect to the Plan to a committee (the "Committee"), in which event all references (as appropriate) to the Board hereunder shall be deemed to refer to the Committee. The Committee, if one is appointed, shall consist of at least two directors. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. On and after registration of the Stock under the Securities Exchange Act of 1934 (the "1934 Act"), the Board may delegate any or all of its powers under the Plan to a Committee, each member of which shall be an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and a "non-employee director" as defined in Rule 16b-3 promulgated under the 1934 Act. 3. EFFECTIVE DATE AND TERM OF PLAN The Plan will become effective on the date on which it is approved by the stockholders of the Company. Grants of Awards under the Plan may be made prior to that date (but after Board adoption of the Plan), subject to such approval of the Plan. No Award may be granted under the Plan after March 27, 2002, but Awards previously granted may extend beyond that date. 4. SHARES SUBJECT TO THE PLAN Subject to the adjustment as provided in Section 8.6 below, the aggregate number of shares of Stock that may be delivered under the Plan will be 2,237,500. If any Award requiring exercise by the Participant for delivery of Stock terminates without having been exercised in full, or if any Award payable in Stock or cash is satisfied in cash rather than Stock, the number of shares of Stock as to which such Award was not exercised or for which cash was substituted will be available for future grants. Stock delivered under the Plan may be either authorized but unissued Stock or previously issued Stock acquired by the Company and held in treasury. No fractional shares of Stock will be delivered under the Plan. 5. ELIGIBILITY AND PARTICIPATION Those eligible to receive Awards under the Plan ("Participants") will be persons in the employ of the Company or any of its subsidiaries ("Employees") and other persons or entities (including without limitation non-Employee directors of the Company or a subsidiary of the Company) who, in the opinion of the Board, are in a position to make a significant contribution to the success of the Company or its subsidiaries. A "subsidiary" for purposes of the Plan will be a corporation in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock. Subject to adjustment as provided in Section 8.6 below, the maximum number of shares of Stock with respect to which Awards may be granted to any employee under the Plan in any one calendar year shall not exceed 100,000 Shares. For the purpose of calculating such maximum number, (a) an Award shall continue to be treated as outstanding notwithstanding its repricing, cancellation or expiration and (b) the repricing of an outstanding option or the issuance of a new option in substitution for a cancelled option shall be deemed to constitute the grant of a new additional option separate from the original grant of the option that is repriced or cancelled. 6. TYPES OF AWARDS 6.1. OPTIONS (a) Nature of Options. An Option is an Award entitling the recipient on exercise thereof to purchase Stock at a specified exercise price. Both "incentive stock options," as defined in Section 422 of the Code (any Option intended to qualify as an incentive stock option being hereinafter referred to as an "ISO"), and Options that are not incentive stock options, may be granted under the Plan. ISOs shall be awarded only to Employees. (b) Exercise Price. The exercise price of an Option will be determined by the Board subject to the following: (1) The exercise price of an ISO shall not be less than 100% (110% in the case of an ISO granted to a ten-percent shareholder) of the fair market value of the Stock subject to the Option, determined as of the time the Option is granted. A "ten-percent shareholder" is any person who at the time of grant owns, directly or indirectly, or is deemed to own by reason of the attribution rules of section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its subsidiaries. (2) In no case may the exercise price paid for Stock which is part of an original issue of authorized Stock be less than the par value per share of the Stock. (3) The Board may reduce the exercise price of an Option at any time after the time of grant, but in the case of an Option originally awarded as an ISO, only with the consent of the Participant. (c) Duration of Options. The latest date on which an Option may be exercised will be the tenth anniversary (fifth anniversary, in the case of an ISO granted to a ten-percent shareholder) of the day immediately preceding the date the Option was granted, or such earlier date as may have been specified by the Board at the time the Option was granted. (d) Exercise of Options. An Option will become exercisable at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which all or any part of the Option may be exercised. Any exercise of an Option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any documents required by the Board and (2) payment in full in accordance with paragraph (e) below for the number of shares for which the Option is exercised. (e) Payment for Stock. Stock purchased on exercise of an Option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the Option (or in the case of an Option which is not an ISO, by the Board at or after grant of the Option), (i) through the delivery of shares of Stock which have been outstanding for at least six months (unless the Board expressly approves a shorter period) and which have a fair market value on the last business day preceding the date of exercise equal to the exercise price, or (ii) by delivery of a promissory note of the Option holder to the Company, payable on such terms as are specified by the Board, or (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment; provided, that if the Stock delivered upon exercise of the Option is an original issue of authorized Stock, at least so much of the exercise price as represents the par value of such Stock must be paid other than by the Option holder's promissory note. (f) Discretionary Payments. If the market price of shares of Stock subject to an Option (other than an Option which is in tandem with a Stock Appreciation Right as described in Section 6.2 below) exceeds the exercise price of the Option at the time of its exercise, the Board may cancel the Option and cause the Company to pay in cash or in shares of Common Stock (at a price per share equal to the fair market value per share) to the person exercising the Option an amount equal to the difference between the fair market value of the Stock which would have been purchased pursuant to the exercise (determined on the date the Option is canceled) and the aggregate exercise price which would have been paid. The Board may exercise its discretion to take such action only if it has received a written request from the person exercising the Option, but such a request will not be binding on the Board. 6.2. Stock Appreciation Rights. (a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an Award entitling the recipient on exercise of the Right to receive an amount, in cash or Stock or a combination thereof (such form to be determined by the Board), determined in whole or in part by reference to appreciation in Stock Value. In general, a Stock Appreciation Right entitles the Participant to receive, with respect to each share of Stock as to which the Right is exercised, the excess of the share's fair market value on the date of exercise over its fair market value on the date the Right was granted. However, the Board may provide at the time of grant that the amount the recipient is entitled to receive will be adjusted upward or downward under rules established by the Board to take into account the performance of the Stock in comparison with the performance of other stocks or an index or indices of other stocks. The Board may also grant Stock Appreciation Rights that provide, that following a Change in Control of the Company as defined in Appendix 1 hereto that the holder of such Right will be entitled to receive, with respect to each share of Stock subject to the Right, an amount equal to the excess of a specified value (which may include an average of values) for a share of Stock during a period preceding such Change in Control over the fair market value of a share of Stock on the date the Right was granted. (b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan. A Stock Appreciation Right granted in tandem with an Option which is not an ISO may be granted either at or after the time the Option is granted. A Stock Appreciation Right granted in tandem with an ISO may be granted only at the time the Option is granted. (c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are granted in tandem with Options, the following will apply: (1) The Stock Appreciation Right will be exercisable only at such time or times, and to the extent, that the related Option is exercisable and will be exercisable in accordance with the procedure required for exercise of the related Option. (2) The Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Option, except that a Stock Appreciation Right granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the Stock Appreciation Right. (3) The Option will terminate and no longer be exercisable upon the exercise of the related Stock Appreciation Right. (4) The Stock Appreciation Right will be transferable only with the related Option. (5) A Stock Appreciation Right granted in tandem with an ISO may be exercised only when the market price of the Stock subject to the Option exceeds the exercise price of such option. (d) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation Right not granted in tandem with an Option will become exercisable at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which all or any part of the Right may be exercised. Any exercise of an independent Stock Appreciation Right must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by any other documents required by the Board. 6.3. Restricted and Unrestricted Stock. (a) Nature of Restricted Stock Award. A Restricted Stock Award entitles the recipient to acquire, for a purchase price equal to par value, shares of Stock subject to the restrictions described in paragraph (d) below ("Restricted Stock"). (b) Acceptance of Award. A Participant who is granted a Restricted Stock Award will have no rights with respect to such Award unless the Participant accepts the Award by written instrument delivered or mailed to the Company accompanied by payment in full of the specified purchase price, if any, of the shares covered by the Award. Payment may be by certified or bank check or other instrument acceptable to the Board. (c) Rights as a Stockholder. A Participant who receives Restricted Stock will have all the rights of a stockholder with respect to the Stock, including voting and dividend rights, subject to the restrictions described in paragraph (d) below and any other conditions imposed by the Board at the time of grant. Unless the Board otherwise determines, certificates evidencing shares of Restricted Stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. (d) Restrictions. Except as otherwise specifically provided by the Plan, Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and if the Participant ceases to be an Employee or otherwise suffers a Status Change (as defined at Section 7.2(a) below) for any reason, must be offered to the Company for purchase for the amount of cash paid for the Stock, or forfeited to the Company if no cash was paid. These restrictions will lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares will lapse. (e) Notice of Election. Any Participant making an election under Section 83(b) of the Code with respect to Restricted Stock must provide a copy thereof to the Company within 10 days of the filing of such election with the Internal Revenue Service. (f) Other Awards Settled with Restricted Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that any or all the Stock delivered pursuant to the Award will be Restricted Stock. (g) Unrestricted Stock. The Board may, in its sole discretion, approve the sale to any Participant of shares of Stock free of restrictions under the Plan for a price which is not less than the par value of the Stock. 6.4. Deferred Stock. A Deferred Stock Award entitles the recipient to receive shares of Stock to be delivered in the future. Delivery of the Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Stock will take place. At the time any Award described in this Section 6 is granted, the Board may provide that, at the time Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the Participant's right to future delivery of Deferred Stock. 6.5. Performance Awards; Performance Goals. (a) Nature of Performance Awards. A Performance Award entitles the recipient to receive, without payment, an amount in cash or Stock or a combination thereof (such form to be determined by the Board) following the attainment of Performance Goals. Performance Goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the Performance Goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. (b) Other Awards Subject to Performance Condition. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 or any other provision of the Plan) that Performance Goals be met prior to the Participant's realization of any payment or benefit under the Award. 6.6. Loans and Supplemental Grants. (a) Loans. The Company may make a loan to a Participant ("Loan"), either on the date of or after the grant of any Award to the Participant. A Loan may be made either in connection with the purchase of Stock under the Award or with the payment of any Federal, state and local income tax with respect to income recognized as a result of the Award. The Board will have full authority to decide whether to make a Loan and to determine the amount, terms and conditions of the Loan, including the interest rate (which may be zero), whether the Loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the Loan is to be repaid and the conditions, if any, under which it may be forgiven. However, no Loan may have a term (including extensions) exceeding ten years in duration. (b) Supplemental Grants. In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and grant a cash award to the Participant ("Supplemental Grant") not to exceed an amount equal to (1) the amount of any federal, state and local income tax on ordinary income for which the Participant may be liable with respect to the Award, determined by assuming taxation at the highest marginal rate, plus (2) an additional amount on a grossed-up basis intended to make the Participant whole on an after-tax basis after discharging all the Participant's income tax liabilities arising from all payments under this Section 6. Any payments under this subsection (b) will be made at the time the Participant incurs Federal income tax liability with respect to the Award. 7. EVENTS AFFECTING OUTSTANDING AWARDS 7.1. Death. If a Participant dies, the following will apply: (a) All Options and Stock Appreciation Rights held by the Participant immediately prior to death, to the extent then exercisable, may be exercised by the Participant's executor or administrator or the person or persons to whom the Option or Right is transferred by will or the applicable laws of descent and distribution, at any time within the one year period ending with the first anniversary of the Participant's death (or such shorter or longer period as the Board may determine) and shall thereupon terminate. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 7. Except as otherwise determined by the Board, all Options and Stock Appreciation Rights held by a Participant immediately prior to death that are not then exercisable shall terminate at death. (b) Except as otherwise determined by the Board, all Restricted Stock held by the Participant must be transferred to the Company (and, in the event the certificates representing such Restricted Stock are held by the Company, such Restricted Stock will be so transferred without any further action by the Participant) in accordance with Section 6.3 above. (c) Any payment or benefit under a Deferred Stock Award, Performance Award, or Supplemental Grant to which the Participant was not irrevocably entitled prior to death will be forfeited and the Award canceled as of the time of death, unless otherwise determined by the Board. 7.2. Termination of Service (Other Than By Death). If a Participant who is an Employee ceases to be an Employee for any reason other than death, or if there is a termination (other than by reason of death) of the consulting, service or similar relationship in respect of which a non-Employee Participant was granted an Award hereunder (such termination of the employment or other relationship being hereinafter referred to as a "Status Change"), the following will apply: (a) Except as otherwise determined by the Board, all Options and Stock Appreciation Rights held by the Participant that were not exercisable immediately prior to the Status Change shall terminate at the time of the Status Change. Any Options or Rights that were exercisable immediately prior to the Status Change will continue to be exercisable for a period of three months (or such longer period as the Board may determine), and shall thereupon terminate, unless the Award provides by its terms for immediate termination in the event of a Status Change or unless the Status Change results from a discharge for cause which in the opinion of the Board casts such discredit on the Participant as to justify immediate termination of the Award. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 7. For purposes of this paragraph, in the case of a Participant who is an Employee, a Status Change shall not be deemed to have resulted by reason of (i) a sick leave or other bona fide leave of absence approved for purposes of the Plan by the Board, so long as the Employee's right to reemployment is guaranteed either by statute or by contract, or (ii) a transfer of employment between the Company and a subsidiary or between subsidiaries, or to the employment of a corporation (or a parent or subsidiary corporation of such corporation) issuing or assuming an option in a transaction to which section 424(a) of the Code applies. (b) Except as otherwise determined by the Board, all Restricted Stock held by the Participant at the time of the Status Change must be transferred to the Company (and, in the event the certificates representing such Restricted Stock are held by the Company, such Restricted Stock will be so transferred without any further action by the Participant) in accordance with Section 6.3 above. (c) Any payment or benefit under a Deferred Stock Award, Performance Award, or Supplemental Grant to which the Participant was not irrevocably entitled prior to the Status Change will be forfeited and the Award canceled as of the date of such Status Change unless otherwise determined by the Board. 7.3. Change in Control. Notwithstanding any other provision of the Plan or of any Award to the contrary, in the event of a Change in Control as defined in Appendix 1 the following will apply: (a) Each outstanding Option and Stock Appreciation Right will immediately become exercisable in full unless otherwise expressly provided at the time of grant. (b) Each outstanding share of Restricted Stock will immediately become free of all restrictions and conditions. (c) Conditions on Deferred Stock Awards, Performance Awards and Supplemental Grants which relate only to the passage of time and continued employment will be removed. Performance or other conditions (other than conditions relating only to the passage of time and continued employment) will continue to apply unless otherwise provided in the instrument evidencing the Awards or in any other agreement between the Participant and the Company or unless otherwise agreed to by the Committee. 7.4. Certain Corporate Transactions. Subject to Section 7.3, in the event of a consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of substantially all the Company's assets or a dissolution or liquidation of the Company (a "covered transaction"), all outstanding Awards will terminate as of the effective date of the covered transaction, and the following rules shall apply: (a) Subject to paragraphs (b) and (c) below, the Board may in its sole discretion, prior to the effective date of the covered transaction, (1) make each outstanding Option and Stock Appreciation Right exercisable in full, (2) remove the restrictions from each outstanding share of Restricted Stock, (3) cause the Company to make any payment and provide any benefit under each outstanding Deferred Stock Award, Performance Award, and Supplemental Grant which would have been made or provided with the passage of time had the transaction not occurred and the Participant not suffered a Status Change (or died), and (4) forgive all or any portion of the principal of or interest on a Loan. (b) If an outstanding Award is subject to performance or other conditions (other than conditions relating only to the passage of time and continued employment) which will not have been satisfied at the time of the covered transaction, the Board may in its sole discretion remove such conditions. If it does not do so, however, such Award will terminate as of the date of the covered transaction notwithstanding paragraph (a) above. (c) With respect to an outstanding Award held by a Participant who, following the covered transaction, will be employed by or otherwise providing services to a corporation which is a surviving or acquiring corporation in such transaction or an affiliate of such a corporation, the Board may, in lieu of or in addition to any action described in paragraph (a) above, arrange to have such surviving or acquiring corporation or affiliate grant to the Participant a replacement award which, in the judgment of the Board, is substantially equivalent to the Award. 8. GENERAL PROVISIONS 8.1. Documentation of Awards. Awards will be evidenced by such written instruments, if any, as may be prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company, or certificates, letters or similar instruments, which need not be executed by the Participant but acceptance of which will evidence agreement to the terms thereof. 8.2. Rights as a Stockholder, Dividend Equivalents. Except as specifically provided by the Plan, the receipt of an Award will not give a Participant rights as a stockholder; the Participant will obtain such rights, subject to any limitations imposed by the Plan or the instrument evidencing the Award, upon actual receipt of Stock. However, the Board may, on such conditions as it deems appropriate, provide that a Participant will receive a benefit in lieu of cash dividends that would have been payable on any or all Stock subject to the Participant's Award had such Stock been outstanding. Without limitation, the Board may provide for payment to the Participant of amounts representing such dividends, either currently or in the future, or for the investment of such amounts on behalf of the Participant. 8.3. Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to remove restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulation have been complied with, (c) if the outstanding Stock is at the time listed on any stock exchange, until the shares to be delivered have been listed or authorized to be listed on such exchange upon official notice of notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act and may require that the certificates evidencing such Stock bear an appropriate legend restricting transfer. If an Award is exercised by the Participant's legal representative, the Company will be under no obligation to deliver Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative. 8.4. Tax Withholding. The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Stock may be delivered, the Board will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Stock. If and to the extent that such withholding is required, the Board may permit the Participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Stock having a value calculated to satisfy the withholding requirement. If at the time an ISO is exercised the Board determines that the Company could be liable for withholding requirements with respect to a disposition of the Stock received upon exercise, the Board may require as a condition of exercise that the person exercising the ISO agree (a) to inform the Company promptly of any disposition (within the meaning of section 424(c) of the Code) of Stock received upon exercise, and (b) to give such security as the Board deems adequate to meet the potential liability of the Company for the withholding requirements and to augment such security from time to time in any amount reasonably deemed necessary by the Board to preserve the adequacy of such security. 8.5. Nontransferabilty of Awards. Except as otherwise provided in a specific Award agreement, no Award (other than an Award in the form of an outright transfer of cash or Unrestricted Stock) may be transferred other than by will or by the laws of descent and distribution, and during an employee's lifetime an Award requiring exercise may be exercised only by the Participant (or in the event of the Participant's incapacity, the person or persons legally appointed to act on the Participant's behalf.) 8.6. Adjustments in the Event of Certain Transactions. (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution to common stockholders other than normal cash dividends, after the effective date of the Plan, the Board will make any appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above. (b) In any event referred to in paragraph (a), the Board will also make any appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change. The Board may also make such adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, if it is determined by the Board that adjustments are appropriate to avoid distortion in the operation of the Plan. 8.7. Employment Rights, Etc. Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued retention by the Company or any subsidiary as an Employee or otherwise, or affect in any way the right of the Company or subsidiary to terminate an employment, service or similar relationship at any time. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment, service or similar relationship even if the termination is in violation of an obligation of the Company to the Participant. 8.8. Deferral of Payments. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8.9. Past Services as Consideration. Where a Participant purchases Stock under an Award for a price equal to the par value of the Stock the Board may determine that such price has been satisfied by past services rendered by the Participant. 9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION Neither adoption of the Plan nor the grant of awards to a Participant will affect the Company's right to grant to such Participant awards that are not subject to the Plan, to issue to such Participant Stock as a bonus or otherwise, or to adopt other plans or arrangements under which Stock be issued to Employees. The Board may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards, provided that (except to the extent expressly required or permitted by the Plan) no such amendment will, without the approval of the stockholders of the Company, effectuate a change for which stockholder approval is required in order for the Plan to continue to qualify for the award of ISOs under section 422 of the Code and to continue to qualify under Rule 16b-3 promulgated under Section 16 of the 1934 Act. Appendix 1 "Change in Control" shall be deemed to have occurred if: (a) any `person' as such term is used in Sections 13(d) and 14(d) of the 1934 Act (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (iv) any Company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company) is or becomes the `beneficial owner' (as defined in Section 13(d) of the 1934 Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of such person, directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company's then outstanding securities (other than as a result of acquisition of such securities from the Company); or (b) during any period of two consecutive years (not including any period prior to the effective date of the Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a) of this definition) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof. EX-27.1 4 FDS --
5 This schedule contains summary financial information extracted from the Condensed Consolidated Financial Statements of the Corporation for the three months ended April 4, 1998 and is qualified in its entirety by reference to such financial statements. 0000886903 Kronos Inc. 1,000 U.S. Dollars 6-mos 6-mos Sep-30-1998 Sep-30-1997 Oct-01-1997 Oct-01-1996 Apr-04-1998 Mar-29-1997 1 1 16,517 14,306 24,451 18,200 37,965 30,581 1,000 907 4,418 4,832 94,143 74,341 44,080 37,700 27,666 20,720 136,427 110,391 48,390 38,880 0 0 0 0 0 0 83 82 78,708 65,795 136,427 110,391 59,872 51,839 91,045 76,513 14,783 13,456 35,406 30,241 47,036 39,858 237 173 0 0 8,603 6,414 3,287 2,449 5,316 3,965 0 0 0 0 0 0 5,316 3,965 0.65 0.49 0.63 0.47
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