Key Employee Agreement With John J. Mcdonald

KEY EMPLOYEE AGREEMENT


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To: John J. McDonald As of April 1, 1997
17 Smith Farm Trail
Lynnfield, MA 01940


The undersigned, Centennial Technologies, Inc., a Delaware corporation (the "Company"), hereby agrees with you as follows:


1. POSITION AND RESPONSIBILITIES.


1.1 You shall serve as the President or Executive Vice President of Sales of the Company, or in a comparable position with similar responsibilities, as designated by the Company's Board of Directors, and shall perform such functions as are customarily associated with such capacity from time to time at the Company's headquarters or such place or places as are appropriate and necessary in connection with such employment. It is expressly agreed that any change in your title between President and Executive Vice President of Sales shall not provide cause for this agreement to be terminated by either party.


1.2 You will, to the best of your ability, devote your full time and best efforts to the performance of your duties hereunder and the business and affairs of the Company. You agree to perform such duties consistent with your position as may be lawfully and reasonably assigned to you by the Company's Board of Directors from time to time. Such duties may include similar responsibilities with companies in which the Company has a majority ownership interest. If assuming such responsibilities would require you to move outside of the Greater Boston area, such responsibilties will only be required of you on terms mutually agreeable by you and the Company.


1.3 You will duly, punctually and faithfully perform and observe any and all lawful rules and regulations which the Company may now or shall hereafter establish governing the conduct of its business.


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2. TERM OF EMPLOYMENT.


2.1 The initial term of this Agreement shall be for one year, subject to earlier termination in accordance with Section 2.2 hereof. Thereafter, this Agreement may be renewed upon the written agreement of you and the Company.


2.2 The Company shall have the right to terminate your employment at any time either (a) immediately without prior written notice for "cause" (as defined herein), or (b) upon at least ten (10) days' written notice without cause. If the Company terminates your employment for cause, the Company shall be obligated to pay you an amount equal to your salary and vacation pay which is accrued and unpaid up to the date of such termination. If the Company terminates your employment without cause, the Company shall be obligated to pay you your Base Salary (as defined in EXHIBIT A attached hereto) for a period of time equal to the greater of (i) six months, or (ii) that period of time which commences on the date of such termination and ends with the expiration in the initial term of employment set forth in Section 2.1 (the "Severance Period"). The Company shall also continue in full force and effect for the Severance Period all health and insurance benefits that you enjoyed at the time of your termination without cause, and all other benefits which applicable law requires to be continued. Should you continue to be employed by the Company beyond the term of this Agreement without a mutually agreed upon renewal or modification of this Agreement, a six month severance provision for termination without cause as described above shall apply.


2.3 For purposes of Section 2.2 hereof, the term "cause" shall mean the following: (i) your involvement in any felony crime, material arrestable criminal offense (excluding road traffic offenses for which a fine or non-custodial penalty is imposed), or any crime in connection with your employment with the Company (including theft of Company assets); or (ii) material insubordination or your knowing or intentional failure to take actions permitted by law and necessary to implement strategies or policies of the Company and which are consistent with your positions and duties, following written warning of such material insubordination or unreasonable failure; or (iii) drunkenness or use of any drug or narcotic which adversely affects your job performance; or (iv) any knowing or intentional misrepresentation of significant information important to the operating condition of the Company; or (v) acting in material breach or contravention of any non-competition, non-disclosure or non-solicitation covenants hereof.


3. COMPENSATION. You shall receive the compensation and benefits set forth on Exhibit A hereto ("Compensation") for all services to be rendered by you hereunder and for your transfer of property rights, if any, pursuant to an agreement relating to proprietary information and inventions of even date herewith attached hereto and made a part hereof as EXHIBIT C between you and the Company (the "Proprietary Information and Inventions Agreement"). If you remain as a full-time employee of the Company until at least August 31, 1997, the Company


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will pay you, in a lump-sum payment within two (2) weeks following such date, a "stay bonus" equal to six (6) months' Base Salary. In the event you are terminated involuntarily and not for "cause" as described in Section 2.3 above prior to August 31, 1997, you will receive within two (2) weeks of such termination a pro-rated share of such "stay bonus" for that period between February 11, 1997 and August 31, 1997 that you remain employed by the Company. Furthermore, if you remain as a full-time employee of the Company until at least August 31, 1997, the Company will forgive in full those advances made to you during calendar year 1995 which remain outstanding as of the date of this agreement, which advances total $31,500 (the "Advances"). You understand and agree that the Company will make all necessary and appropriate payroll withholdings from all payments to be made to you under this paragraph, including, but not limited to, such withholdings from your "stay bonus" necessary to reflect the forgiveness the Advances as taxable compensation to you in calendar year 1997.


4. OTHER ACTIVITIES DURING EMPLOYMENT.


4.1 Except for any outside employments and directorships currently held by you as listed on EXHIBIT B hereto, if any, and except with the prior written consent of the Company's Board of Directors (which approval shall not be unreasonably withheld), you will not during the term of this Agreement undertake or engage in any other employment, occupation or business enterprise other than one in which you are an inactive investor.


4.2 You hereby agree that, except as disclosed on EXHIBIT B hereto, during your employment hereunder, you will not, directly or indirectly, engage (a) individually, (b) as an officer, (c) as a director, (d) as an employee, (e) as a consultant, (f) as an advisor, (g) as an agent (whether a salesperson or otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or other proprietor owning directly or indirectly more than one percent (1%) interest, in any firm, corporation, partnership, trust, association, or other organization which is engaged in any line of business engaged in or under demonstrable development by the Company (such firm, corporation, partnership, trust, association, or other organization being hereinafter referred to as a "Prohibited Enterprise"). You hereby represent that you are not presently engaged in any of the foregoing capacities described in (a) through (i) in any Prohibited Enterprise.


5. FORMER EMPLOYERS.


5.1 You represent and warrant that your employment by the Company will not conflict with and will not be constrained by any prior or current employment, consulting agreement or relationship whether oral or written. You represent and warrant that you do not possess confidential information arising out of any such employment, consulting agreement or relationship which, in your best judgment, would be utilized in connection with your employment by the Company.


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5.2 If, in spite of the second sentence of Section 5.1, you should find that confidential information belonging to any other person or entity might be usable in connection with the Company's business, you will not intentionally disclose to the Company or use on behalf of the Company any confidential information belonging to any of your former employers; but during your employment by the Company you will use in the performance of your duties all information which is generally known and used by persons with training and experience comparable to your own, all information which is common knowledge in the industry or otherwise legally in the public domain.


6. PROPRIETARY INFORMATION AND INVENTIONS. You agree to execute, deliver and be bound by the provisions of the Proprietary Information and Inventions Agreement attached hereto as EXHIBIT C and incorporated herein.


7. POST-EMPLOYMENT ACTIVITIES.


7.1 You shall not, for a period of one (1) year after the termination of your employment with the Company (for whatever reason), without the prior written consent of the Company, directly or indirectly do any business with or have any dealings whatsoever with any person, firm or company who was a client, customer, supplier, agent or distributor of the Company during the period of one (1) year prior to the end of your employment with the Company and with whom you have contact during the period of one (1) year prior to the end of your employment with the Company, nor shall you render services similar or reasonably related to those which you shall have rendered hereunder during such one (1) year period, to any person or entity whether now existing or hereafter established which directly competes with (or proposes or plans to directly compete with) the Company (a "Direct Competitor") in any line of business engaged in or under development by the Company. Nor shall you entice, induce or encourage any of the Company's other employees to engage in any activity which, were it done by you, would violate any provision of the Proprietary Information and Inventions Agreement which you have executed or this Section 7. As used in this Section 7.1, the phrase "any line of business engaged in or under development by the Company" shall be applied as at the date of termination of your employment with the Company.


7.2 For a period of one (1) year after the termination of your employment with the Company, the provisions of Section 4.2 hereof shall be applicable to you and you shall comply therewith. As applied to such one (1) year post-employment period, the term "any other line of business engaged in or under demonstrable development by the Company," as used in Section 4.2, shall be applied as at the date of termination of your employment with the Company.


7.3 No provision of this Agreement shall be construed to preclude you from performing the same services which the Company hereby retains you to perform for any person or entity which is not a Direct Competitor of the Company upon the expiration or termination of


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your employment (or any post-employment consulting arrangement) so long as you do not thereby violate any term of this Agreement or the Proprietary Information and Inventions Agreement.


7.4 After your employment with the Company ends, you are required to notify the Company promptly in writing if you receive any offer of employment that you wish to accept, if the employment might commence during the period of restriction described in Section 7.1 above. This notice should contain: (a) a complete description of the terms of the offer, including the position and the compensation provided and the responsibilities contemplated thereunder, and (b) confirmation of your intention to accept the offer if the Company so permits. After you have so notified the Company, the Company shall have fifteen (15) days to notify you of its election:


7.4.1. To release you from Section 7.1 hereof, but only as it applies to the employment position offered to you, as disclosed in your notice to the Company; or

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