FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997 Commission File Number 1-9014
Chyron Corporation
(Exact name of registrant as specified in its charter)
New York 11-2117385
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5 Hub Drive, Melville, NY 11747
(Address of principal executive offices) (Zip Code)
(516) 845-2000
(Registrant's telephone number including area code)
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
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by a check mark whether the Registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock $.01 Par Value - 32,583,486 as of August 5, 1997
This document consists of 16 pages
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands except per share amounts)
(Unaudited)
1997 1996
Net sales............................... $ 21,897 $22,532
Cost of products sold................... 11,980 11,131
Gross profit............................ 9,917 11,401
Operating expenses:
Selling, general and administrative... 7,481 6,755
Research and development ............. 1,937 1,191
Non-recurring charges................. 2,407
Total operating expenses................ 11,825 7,946
Operating (loss)income.................. (1,908) 3,455
Interest and other expense, net......... 434 298
(Loss)income before provision for
income taxes.......................... (2,342) 3,157
Income taxes/equivalent (benefit)
provision............................. (810) 1,248
Net (loss) income....................... $ (1,532) $ 1,909
Net (loss) income per common share...... $ (.05) $ .06
Weighted average number of common and
common equivalent shares outstanding.. 32,569 32,746
See Notes to the Consolidated Financial Statements
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands except per share amounts)
(Unaudited)
1997 1996
Net sales............................... $ 40,098 $36,257
Cost of products sold................... 22,031 17,070
Gross profit............................ 18,067 19,187
Operating expenses:
Selling, general and administrative .. 14,708 10,461
Research and development ............. 3,448 2,299
Non-recurring charges................. 3,082
Total operating expenses................ 21,238 12,760
Operating (loss)income.................. (3,171) 6,427
Interest and other expense, net......... 764 422
(Loss)income before provision for
income taxes.......................... (3,935) 6,005
Income taxes/equivalent (benefit)
provision............................. (1,307) 2,216
Net (loss) income....................... (2,628) 3,789
Retained earnings - beginning of period. 9,997 1,343
Retained earnings - end of period....... $ 7,369 $ 5,132
Net (loss) income per common share...... $ (.08) $ .12
Weighted average number of common and
common equivalent shares outstanding.. 32,482 31,860
See Notes to the Consolidated Financial Statements
CHYRON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
(unaudited)
ASSETS
6/30/97 12/31/96
Current assets:
Cash and cash equivalents.............. $ 3,485 $ 4,555
Accounts and notes receivable.......... 21,619 25,237
Inventories............................ 23,361 23,502
Prepaid expenses....................... 2,377 865
Deferred tax asset..................... 7,676 6,015
Other.................................. 3,087 2,826
Total current assets................. 61,605 63,000
Property and equipment................... 12,416 12,701
Excess of cost over net tangible assets
acquired............................... 6,487 6,439
Investment in RT-SET..................... 2,161 2,161
Software development costs............... 4,050 2,176
Deferred tax asset....................... 4,911 4,709
Other.................................... 240 217
TOTAL ASSETS $91,870 $91,403
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.. $18,477 $15,828
Current portion of long-term debt...... 11,848 5,080
Capital lease obligations.............. 263 225
Total current liabilities............ 30,588 21,133
Long-term debt........................... 8,282 15,163
Capital lease obligations................ 43 118
Other.................................... 745 1,043
Total liabilities...................... 39,658 37,457
Commitments and contingencies
Shareholders' equity:
Preferred stock; par value without designation
Authorized - 1,000,000 shares, Issued - none
Common stock; par value $.01
Authorized - 150,000,000 shares
Issued and outstanding -
32,583,486 shares at June 30, 1997
32,384,635 shares at December 31, 1996. 326 324
Additional paid-in capital.............. 43,961 43,124
Retained earnings....................... 7,369 9,997
Cumulative translation adjustment....... 556 501
Total shareholders' equity............ 52,212 53,946
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $91,870 $91,403
See Notes to the Consolidated Financial Statements
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(In Thousands)
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
Net (loss)/income........................$(2,628) $ 3,789
Adjustments to reconcile net (loss)
income to net cash provided by operating
activities:
Non-recurring charges................. 1,924
Depreciation and amortization ........ 1,909 1,521
(Recognition) utilization of deferred
tax asset............................. (1,855) 485
Changes in operating assets and
liabilities:
Accounts and trade notes receivable... 3,707 (1,757)
Inventories........................... (745) (2,702)
Prepaid expenses ..................... (1,484) (726)
Other assets.......................... (282)
Accounts payable and accrued expenses. 1,709 737
Management fee payable................ (1,000)
Other liabilities..................... (271) 201
Net cash provided by operating
activities............................. 1,984 548
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Axis Holdings
Incorporated........................... (413)
Acquisition of Pro-Bel, Ltd............. (7,031)
Acquisitions of property and equipment.. (1,016) (972)
Capitalized software development ....... (756) (436)
Other................................... (155)
Net cash (used in) investing activities. (2,185) (8,594)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of capital lease obligations... (65) (110)
Proceeds from exercise of common stock
purchase warrants, net................. 239
Proceeds from exercise of stock options. 20
Payment of term loan.................... (1,000) (500)
Payments (borrowings) of revolving credit
agreements, net....................... 200 (5,644)
Proceeds from new credit facility, net.. 11,130
Net cash (used in) provided by financing
activities............................ (865) 5,135
Effect of foreign currency rate
fluctuations on cash and cash
equivalents........................... (4)
Change in cash and cash equivalents..... (1,070) (2,911)
Cash and cash equivalents at beginning of
period................................. 4,555 5,012
Cash and cash equivalents at end of
period.................................$ 3,485 $ 2,101
Noncash investing and financing activities:
On March 31, 1997, the Company acquired the issued and outstanding
shares of Axis Holdings Incorporated. The consideration in addition
to cash paid included the issuance of 173,913 shares of Chyron
Corporation common stock valued at $750,000 and notes payable of
$667,000. See Note 2 for further discussion.
CHYRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in conformity with generally accepted accounting
principles for interim financial reporting. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. These statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended December
31, 1996.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and six months
ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997.
2. INVESTMENT IN AXIS HOLDINGS INCORPORATED
On March 31, 1997, the Company acquired 100% of the capital stock of
Axis Holdings Incorporated ("Axis") located in Los Angeles,
California. Axis develops software in professional video and audio
tools created specifically for use on the Microsoft Windows NT
Operating System. The purchase consisted of $368,000 in cash paid
and professional fees, $667,000 in notes and 173,913 restricted
shares of Chyron common stock valued at $750,000.
As stated in the purchase agreement the principal portion of the
note is to be paid in two successive annual installments.
Installment payment amounts are contingent upon Axis achieving
certain revenue targets. Installments of $350,000 and $317,000 are
due on March 31, 1998 and March 31, 1999, respectively, provided
that the targeted shipments of the primary product associated with
the Axis division are realized on or before March 15, 1998. If the
Company does not achieve its target the installment payment will be
$250,000 and $417,000 due on March 31, 1998 and March 31, 1999,
respectively. Interest is to be paid at the rate of 6% per year and
is due with the annual installments.
Additionally, payments equal to 20% of cumulative net profits on the
Axis product line, in excess of $1 million, will be payable to the
sellers. The period for the calculation of cumulative net profits
is March 31, 1997 through December 31, 1999. Payments due for each
year will be made on or before April 30, of the next succeeding
year.
The acquisition was accounted for as a purchase in accordance with
APB 16. Accordingly, the costs of the acquisition were allocated to
the net assets acquired based on their estimated fair values. The
majority of the purchase price was capitalized as software
development costs and will be amortized over the estimated economic
life of the products, commencing when each product is available for
general release.
3. RESTATEMENT AND RECLASSIFICATION
On January 24, 1997, the Company's shareholders ratified a one-for-
three reverse stock split. Net income (loss) per share, weighted
average number of common and common equivalent shares outstanding,
common stock issued and outstanding, additional paid-in-capital and
all other common stock transactions presented in these consolidated
financial statements have been restated to reflect the one-for-three
reverse stock split. In addition, certain prior year amounts have
been reclassified to conform to current year presentation.
4. ACQUISITION OF PRO-BEL LIMITED
On April 12, 1996, the Company completed the acquisition of the
issued and outstanding shares of Pro-Bel Limited ("Pro-Bel"),
located in the United Kingdom. Pro-Bel manufactures and distributes
video signal and switching equipment and systems. The consideration
consisted of $6.9 million in cash, $5.3 million in notes, and
3,146,205 shares of restricted Chyron common stock valued at $6.9
million.
The acquisition of Pro-Bel was accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair values. The excess of
purchase price over the estimated fair value of net assets acquired
amounted to $7,276,000, which is being amortized over 12 years using
the straight line method.
The accompanying consolidated statements of operations include the
operating results of the Company and Pro-Bel since the date of the
acquisition. Actual unaudited consolidated operating results for
the six months ended June 30, 1997 and proforma unaudited
consolidated operating results for the six months ended June 30,1996
assuming the acquisition had been made as of January 1, 1996,
respectively, are summarized below (in thousands except per share
amounts).
Actual Proforma
June 30, June 30,
1997 1996
Net sales $40,098 $46,251
Net (loss) income $(2,628) $ 3,852
(Loss) earnings per share $ (.08) $ .12
These pro forma results have been prepared for comparative purposes
only and include adjustments as a result of applying purchase
accounting and conversion to generally accepted accounting
principles in the United States, such as additional depreciation
expense and cost of goods sold due to the step-up in the basis of
fixed assets and inventory, respectively, goodwill amortization, a
decrease in research and development due to the capitalization of
software development costs and increased interest expense on
acquisition debt adjusted for tax effect. The pro forma financial
information is not necessarily indicative of the operating results
that would have occurred if the acquisition had taken place on the
aforementioned date, or of future results of operations of the
consolidated entities.
5. ACCOUNTS AND NOTES RECEIVABLE
Trade accounts and notes receivable are stated net of an allowance
for doubtful accounts of $3,021,053 and $2,850,000 at June 30, 1997
and December 31, 1996, respectively.
6. INVENTORIES
Inventories consist of the following (in thousands):
June 30, December 31,
1997 1996
Finished goods $11,150 $12,879
Work-in-process 5,488 5,271
Raw material 6,723 5,352
$23,361 $23,502
7. NON-RECURRING CHARGES
For the six months ended June 30, 1997, the Company incurred non-
recurring charges totalling $3.1 million. Of these total charges,
$675,000 was related to the Company's planned secondary offering of
common stock which was terminated due to the market valuation of the
stock. The remainder ($2.4 million) related mainly to a
repositioning by the Company to address the domestic television
market's need for high definition and multichannel standard
definition digital equipment that complies with recent Federal
Communication Commission rulings. Included in this charge was a
write-down of inventory related to product lines which have been
discontinued as a result of a new market positioning strategy,
severance expense related to a staff reduction in the second
quarter, the write-off of software development projects related to
product not within the new strategy, the consolidation of certain
Chyron offices, the settlement of litigation dating back several
years and the write-off of costs related to a potential acquisition
that was abandoned due to the new strategy.
8. NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement on Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." This accounting standard is effective for
financial statements issued for fiscal years beginning after
December 15, 1997 and requires restatement of all prior-period
earnings per share data presented. Adoption of SFAS 128 will not
have a material impact on the calculation of earnings per share for
the periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITIONS
Results of Operations
Overview
This discussion should be read in conjunction with the Consolidated
Financial Statements including the Notes thereto:
Comparison of the Three Months Ended June 30, 1997 and 1996
Sales for the quarter ended June 30, 1997 decreased to $21.9
million, a decrease of $635,000, or 2.8%, over the $22.5 million
reported for the second quarter of 1996. Pro-Bel product line sales
increased by over 30% for the period, while Chyron graphic product
sales showed a decline of approximately 20%. Domestic sales
declined due mainly to customers opting to fill their graphic system
needs with the Company's lower end Chyron products based on the
recent Federal Communications Commission ("FCC") ruling requiring
broadcasters to utilize digital advanced television transmission
beginning in 1998 which should cause large future capital
expenditures by the broadcast industry. The decrease in Chyron
graphic product sales was driven mainly by a decrease in demand for
the high-end iNFiNiT product line, while sales of the Max, Maxine
and Codi lines showed increases. Overall, international sales
increased.
Gross profit decreased by $1.5 million, or 13.2% to $9.9 million for
the quarter ended June 30, 1997 from $11.4 million for the second
quarter of 1996. Such decrease was attributable to both the
decrease in sales for the second quarter of 1997 and a change in the
product mix. Gross margins as a percentage of sales decreased to
45.3% in 1997 from 50.6% in 1996 mainly as a result of the change in
the product mix and the decrease in the volume of Chyron graphics
sales. The inclusion of Pro-Bel products, which historically have
had lower gross margins than Chyron's gross margins, also
contributed to the decrease in gross margin.
Selling, general and administrative (SG&A) expenses increased by
$726,000 or 10.7%, to $7.5 million in the second quarter of 1997
compared to $6.8 million for the second quarter of 1996. Such
increase is due mainly to increases in Pro-Bel expenses based on
increased sales volume. SG&A expenses for the Chyron product lines
were relatively unchanged for the second quarter of 1997 as compared
to the same period in 1996.
Research and development (R&D) expenses increased for the second
quarter of 1997 over the 1996 second quarter by $746,000, or 62.6%.
The increase is due mainly to intensified efforts at Chyron and Pro-
Bel to address the FCC rulings described above in terms of new
product development. These increases are mainly the result of
increased headcount at both Chyron and Pro-Bel. Additional
increases are due to the inclusion of Axis Holdings Incorporated
("Axis") which was purchased on March 31, 1997. R&D includes the
net amortization of capitalized software which remained consistent
for both three month periods.
In an effort to position Chyron to meet the domestic television
markets need for high definition and multichannel standard
definition digital equipment that comply with the recent FCC rulings
described above, the Company underwent a repositioning which,
together with several other items, resulted in non-recurring charges
in the second quarter totalling $2,407,000.
Included in this charge was a write-down of inventory related to
product lines which have been discontinued as a result of a new
market positioning strategy, severance expense related to a staff
reduction in the second quarter, the write-off of software
development projects related to products not within the new
strategy, the consolidation of certain Chyron offices, the
settlement of litigation dating back several years and the write-off
of costs related to a potential acquisition that was abandoned due
to the new strategy.
The specific components of the non-recurring charge are as follows
(in thousands):
Non-cash outlays:
Write-down of inventory $700
Write-off of software development costs 205
Litigation settlement 88
Total non-cash charges 993
Cash outlays:
Severance 825
Write-off of acquisition costs 200
Litigation settlement 100
Other 289
Total $2,407
Cash outlays related to the non-recurring charges total $1.4
million, of which $436,000 was made by June 30, 1997.
Other expenses, which include interest income and expense and
foreign currency transaction gains and losses, increased to
$434,000, or 45.6%, compared to $298,000 for the second quarter of
1996. This increase is mainly a result of an increase in
outstanding debt for the quarter ended June 30, 1997 versus the
corresponding 1996 period. Interest rates remained relatively
consistent for both periods.
The Company incurred a loss before income taxes of $1.9 million
compared to income of $3.5 million for the same period in the prior
year. This loss was attributable mainly to the decrease in sales of
Chyron graphics products, the gross margin erosion as a result of
the product mix, increases in SG&A and the non-recurring charges
primarily attributable to Chyron's new market positioning strategy.
The Company recognized an $810,000 tax benefit for the second
quarter of 1997 compared to an income tax provision of $1.2 for the
second quarter of 1996. The tax benefit is primarily attributable
to the loss of $1.9 million before taxes while the provision was
based on pre-tax income of $3.5 million.
Comparison of the Six Months Ended June 30, 1997 and 1996
Sales for the six month period ended June 30, 1997 increased to
$40.1 million, an increase of $3.8 million, or 10.6%, over the $36.3
million reported for the first half of 1996. This increase was
attributable to the inclusion of Pro-Bel since its acquisition on
April 12, 1996 offset by a decrease in Chyron graphic product sales
of over 30%. Chyron graphic product sales increased for the Max,
Maxine and Codi lines, and decreased for the iNFiNiT product line.
Gross profit decreased to $18.1 million for the six months ended
June 30, 1997. The decrease of $1.1 million, or 6.2% over the $19.2
million reported for the first half of 1996, was attributable to a
change in the product mix from 1996 to 1997 as is also reflected in
the decline in gross margin percentages which decreased to 45.1% in
1997 from 52.9% in 1996. A shift in Chyron sales from the high end
iNFiNiT lines to the Max, Maxine and Codi lines, and the overall
decrease in Chyron graphic product sales contributed to the decrease
in both gross profit dollars and gross margin percentages. The
gross margin percentage decrease was also impacted by the fact that
1997 amounts include Pro-Bel products, (which historically have
lower gross margin percentages) for six months versus three in 1996.
SG&A expenses increased by $4.2 million in 1997, or 40.6%, to $14.7
million compared to $10.5 million for the first half of 1996. The
increase for the period is due mainly to the consolidation of Pro-
Bel and the additional depreciation and goodwill amortization as a
result of the application of the purchase accounting method on the
acquired assets. Additional increases were seen for Pro-Bel due to
an increase overall in sales volume, while Chyron SG&A expenses
remained relatively flat for the period.
R&D expenses increased for the first half of 1997 compared to 1996
by $1.1 million, or 50.0%. This increase is mainly attributable to
the inclusion of Pro-Bel expenditures for the full six month period
in 1997. Additional increases in R&D have been seen at both Chyron
and Pro-Bel as the Company has focused its attention on new product
development to address the FCC ruling described above. The
inclusion of Axis since March 31, 1997 has also added to the
increase in R&D expenditures. These increases were offset by the
net amortization of capitalized software cost included in R&D, which
decreased $248,000 for the six months ended June 30, 1997 versus the
same period in 1996.
For the six months ended June 30, 1997 non-recurring charges were
incurred by the Company which totaled $3.1 million. The bulk of
these charges ($2.4 million) were incurred during the second quarter
of 1997 and related to a repositioning by the Company to address the
anticipated effects of recent FCC rulings as described in the
Comparison of the Three Months Ended June 30, 1997 and 1996 above.
Additional non-recurring charges of $675,000 were incurred in the
first quarter of 1997 and were attributable to the Company's planned
secondary offering of common stock which was terminated due to the
market valuation of the stock.
Other expenses, which included interest income and expense and
foreign currency transaction gains and losses, increased to
$764,000, or by 81%, from $422,000 for the first half of 1996. This
increase is mainly a result of increased borrowings for the six
months ended 1997 versus 1996. Increases also stem from the
purchase of Pro-Bel in 1996 and Axis in 1997. Interest rates
remained relatively consistent for both six month periods.
The Company incurred a loss before income taxes of $3.9 million
compared to income of $6.0 million for the same period in the prior
year. This loss was attributable mainly to the decrease in sales of
Chyron graphics products, the gross margin erosion as a result of
the product mix, increased SG&A expenses and $3.1 million of non-
recurring charges as discussed above.
The Company recognized a $1.3 million tax benefit for the first half
of 1997 compared to an income tax provision of $2.2 for 1996. The
tax benefit was primarily attributable to the loss of $3.9 million
before taxes while the provision was based on pre-tax income of $6.0
million.
Liquidity and Capital Resources
On January 1, 1997, Pro-Bel entered into an agreement with Barclays
Bank PLC to obtain borrowing facilities totaling 3.0 million pounds
sterling ($5,048,000 converted at the June 30, 1997 exchange rate).
The facility is payable on demand and matures December 31, 1997.
This facility replaced former bank facilities which expired on
December 31, 1996. Upon maturity, the Company intends to replace
this borrowing facility with a similar one.
On March 28, 1996 and April 16, 1996, the Company entered into
agreements with a bank to obtain a revolving credit facility of $10
million and a term loan of $8 million, respectively. The revolving
portion of the facility matures 3 years from closing, while the term
portion matures 4 years from closing. The entire facility is
secured by the Company's properties and assets. This facility
replaced the $10,000,000 secured credit facility which was due to
expire on April 27, 1997. In April 1996, a portion of this new
credit facility was used to fund the acquisition of Pro-Bel.
Quarterly payments on the term loan portion of the facility are
funded by the Company's working capital.
On April 12, 1996, the Company issued promissory notes to the
shareholders of Pro-Bel for 3.5 million pounds sterling ($5.9
million converted at the June 30, 1997 exchange rate). The notes
are secured by an irrevocable letter of credit from a bank and limit
amounts available under the revolving credit facility described
above. The notes are due on or before April 15, 1998. At maturity,
the notes will be repaid with the letter of credit described above.
On March 31, 1997, the Company issued promissory notes to the
shareholders of Axis for $667,000. The notes are payable in two
annual installments beginning March 31, 1998. These payments will
be funded by the Company's working capital.
At June 30, 1997, the Company's current ratio was 2.01 to 1 and its
working capital was $31,017,000.
At June 30, 1997, the Company had operating lease commitments for
equipment, factory and office space totaling $12,169,000 of which
$969,000 is payable within one year.
PART II. OTHER INFORMATION
ITEMS 1., 2., 3. Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) On January 24, 1997, at a special meeting of shareholders, the
Company's shareholders' ratified a one-for-three reverse stock split
of its common stock which was effective February 10, 1997.
77,162,761 shares were voted for the proposal, 2,876,490 shares were
voted against the proposal and 169,212 shares abstained.
b) On May 14, 1997, the Company held its Annual Meeting of
Shareholders. At this meeting, the Company's shareholders re-
elected Sheldon D. Camhy, James Coppersmith, Charles M. Diker,
Donald P. Greenberg, Raymond Hartman, Isaac Hersly, Alan J.
Hirschfield, Wesley W. Lang, Jr., Eugene M. Weber, and Michael
Wellesley-Wesley to the Board of Directors. No less than 20,256,462
shares were voted for the election of each director, no more than
230,885 shares were voted against the election of each director, and
0 shares abstained. Additionally, the shareholders voted to amend
the Company's Long-Term Incentive Plan, increasing the number of
shares by 1,333,334 shares to an aggregate of 3,000,000 shares.
20,250,283 shares were voted for the proposal, 459,150 shares were
voted against the proposal, and 85,322 shares abstained.
ITEM 5. Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
(1) On June 5, 1997, the Company entered into an Employment
Agreement with Edward Grebow. Such agreement is attached as Exhibit
1 to this document.
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.
CHYRON CORPORATION
(Registrant)
August 11, 1997 /s/ Edward Grebow
(Date) Edward Grebow
Chief Executive Officer
and President
August 11, 1997 /s/ Patricia Lampe
(Date) Patricia Lampe
Chief Financial Officer
and Treasurer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made this 5th day of June,
1997 between CHYRON CORPORATION, a New York corporation (the
"Company"), having its principal offices at 5 Hub Drive, Melville,
New York 11747, and EDWARD GREBOW ("Grebow") an individual residing
at 1136 Fifth Avenue, New York 10128.
WITNESSETH:
WHEREAS, the Company desires to employ Grebow as its President and
Chief Executive Officer, and Grebow desires to become the Company's
President and Chief Executive Officer, subject to and upon the terms
and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual premises and
agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Nature of Employment; Term of Employment. The Company hereby
agrees to employ Grebow and Grebow agrees to serve the Company as
its President and Chief Executive Officer, upon the terms and
conditions contained herein, for a term commencing on the date
Grebow is contractually free under his present employment agreement
and assumes his duties hereunder but in no event later than July 1,
1997 (the "Commencement Date") and continuing until the third
anniversary date of the Commencement Date (the "Initial Termination
Date"). This Agreement shall automatically renew for a one year
period (the "Renewal Term") thereafter, unless either party notifies
the other in writing on or before 90 days prior to the Initial
Termination Date that it desires not to renew this Agreement for the
Renewal Term. The period during which Grebow is employed by the
Company pursuant to this Agreement (including the Renewal Term)
shall be referred to herein as the "Employment Term". In addition,
the Company agrees to have Grebow appointed as a member of the Board
of Directors of the Company and each of its subsidiaries, and to
each of the key committees thereof, except for the Company's Audit
Committee and Compensation and Stock Option Committee (the
"Compensation Committee") and to re-nominate him as a Director of
each of such boards and committees each year for so long as he is
the Chief Executive Officer of the Company.
2. Duties and Powers as Employee
(a) During the Employment Term, Grebow shall be employed by the
Company as President and Chief Executive Officer, which position is,
and shall remain at all times during the Employment Term, the senior
executive officer position of the Company. Grebow shall devote
substantially his full working time to his duties as President and
Chief Executive Officer of the Company. In performance of his
duties, Grebow shall report directly to and be subject to the
direction of the Board of Directors of the Company. As President
and Chief Executive Officer, Grebow shall have all the
responsibilities, duties and authority as are generally associated
with the position of President and Chief Executive Officer of a
public company, including full executive power over, and
responsibility for, managing, directing, and supervising all aspects
of the business of the Company worldwide and for all merger,
acquisition, financing transactions, all shareholder relations and
communications and presiding over all meetings of the Board of
Directors and shareholders. The Chief Executive Officer shall also
be responsible for developing the business plan and objectives of
the Company and managing the execution of such plan.
(b) Grebow shall be based and shall carry out his duties from
primarily a principal executive office of the Company located in
Melville, New York or another location that is within 35 miles of
Columbus Circle, New York City, New York. As President and Chief
Executive Officer, Grebow will be responsible for managing the
business activities of the Company worldwide and accordingly, shall
travel in accordance with the reasonable needs of the business which
may require him to conduct business for the Company in various
locations including, without limitation, New York, London, Europe,
and such other locations as he deems necessary, desirable or
appropriate.
(c) The Chief Executive Officer may engage in charitable,
community and personal business and investment activities and may
serve as a member of the board of directors of other companies
(public or private), so long as such activities do not materially
interfere with the performance of his duties on behalf of the
Company, do not have a negative impact on the reputation of the
Company and such outside directorship for other public companies do
not exceed two.
3. Compensation.
(a) As compensation for his services hereunder, the Company shall
pay Grebow, during the Employment Term, a salary (the "Base Salary")
payable in equal semi-monthly installments initially at the annual
rate of $400,000. Effective on each anniversary of the Commencement
Date during the Employment Term, Grebow's Base Salary shall be
increased to reflect increases in the Urban Consumer Price Index for
all Urban Consumers for the New York metropolitan area (or any
successor Consumer Price Index), based on data published by the
Bureau of Labor Statistics of the United States Department of Labor
for the period that corresponds with the preceding twelve month
period. In addition, Grebow shall be eligible for such further
increases in the Base Salary as may be determined in the sole
discretion of the Compensation Committee.
(b) In addition to the Base Salary, and subject to the discretion
of the Compensation Committee, Grebow shall receive, as incentive
compensation, an annual bonus (the "Incentive Bonus") based upon
achievement of objective targeted performance goals (the "Target
Goals") determined each year by the Compensation Committee in
consultation with Grebow. In the event one hundred percent (100%)
of the Target Goals are achieved, the Incentive Bonus shall be an
amount equal to 50% of the Base Salary (the "Target Bonus"). The
Target Goals shall be divided into the following categories: (i)
objective fixed financial criteria (the "Fixed Criteria") which
shall account for two-thirds of the Target Bonus, and (ii)
subjective non-financial criteria (the "Subjective Criteria") which
shall account for one-third of the Target Bonus. In the event that
less than one hundred percent (100%) of the Target Goals are
achieved, then Grebow shall receive as an Incentive Bonus an amount
equal to that percentage of the Fixed Criteria achieved multiplied
by two-thirds of the Target Bonus, and such additional amounts with
respect to the achievement of particular items included among the
Subjective Criteria as shall have been established by the
Compensation Committee in consultation with Grebow each applicable
year. The Compensation Committee, in its sole discretion, may
increase the amounts payable to Grebow as an Incentive Bonus upon
his exceeding the Target Goals. The Incentive Bonus shall be paid
to Grebow within thirty (30) days after completion of the Company's
annual audit. For calendar year 1997 and any other year in which
Grebow is employed for less than 12 months, the Target Goals shall
be determined and the Incentive Bonus shall be paid on a
proportional basis for that portion of the year in which Grebow is
employed by the Company. Notwithstanding the foregoing, Grebow
shall be entitled to receive a minimum of $50,000 (the "Guaranteed
Bonus") for calendar year 1997 and for each year thereafter as an
Incentive Bonus.
(c) The Company hereby grants Grebow options (the "Options") to
purchase 500,000 shares of common stock of the Company, par value
$.01 per share (the "Common Stock"), with an exercise price equal to
the closing price for a share of Common Stock as reported on the New
York Stock Exchange ("NYSE") for the date of this Agreement. The
Options shall be treated as incentive stock options to the extent
permitted by law and the remainder shall be treated as non-incentive
stock options. The Options shall vest 1/3 upon the Commencement
Date, 1/3 on the 12 month anniversary of the Commencement Date and
the remaining 1/3 on the 24 month anniversary of the Commencement
Date. The Options shall have a term of seven (7) years from the
date of grant. The Options shall be subject to the terms of the
Company 1995 Stock Option Plan and shall be memorialized in a stock
option grant certificate to be issued by the Company.
(d) The Company also hereby grants Grebow options ("Incentive
Options") to purchase 200,000 shares of Common Stock with an
exercise price equal to the closing price for a share of the Common
Stock as reported on the NYSE for the date of this Agreement. The
Incentive Options shall vest upon the sixth anniversary of the
Commencement Date, provided that Grebow is employed by the Company
on such date, or on such earlier date as any of the following events
shall occur: (i) the Incentive Options shall vest as to 100,000
shares when the average closing price of a share of Common Stock as
reported by the NYSE for any consecutive 30 trading days during the
Employment Term is $7.50 or greater; (ii) the remaining Incentive
Options shall vest when the average closing price of a share of
Common Stock as reported by the NYSE for any consecutive 30 trading
days during the Employment Term is $10.00 or greater; or (iii) all
of the Incentive Options shall vest if the Company's earnings per
share equal or exceed an aggregate of $.66 from the current
operations of the Company, excluding (x) any extraordinary items
that may have increased or decreased such earnings per share, (y)
the effects of any recapitalization, mergers, acquisitions or stock
splits, and (z) any impact on earnings from the granting, vesting or
exercise of options to or by any party, for any four (4) consecutive
quarterly periods reported by the Company on its Form 10-Q (or Form
10-K if the period includes a fourth quarter) for such periods
during the Employment Term. the Incentive Options shall have a term
of seven (7) years from the date of grant. The Incentive Options
shall be subject to the terms of the Company's 1995 Stock Option
Plan and shall be memorialized in a stock option grant certificate
to be issued by the Company.
(e) Notwithstanding any provision of the Company's 1995 Stock
Option Plan to the contrary, any unvested portions of the Options
and Incentive Options shall become immediately and fully vested to
the extent provided in Section 9 and 10 below. The Company shall
maintain the effectiveness of a Registration Statement on Form S-8
with respect to the shares underlying the Options and Incentive
Options and shall facilitate a cashless exercise procedure with
respect to such options.
4. Expenses; Vacation; Insurance; Other Benefits.
(a) Grebow shall be entitled to reimbursement for reasonable
travel and other out-of-pocket expenses reasonably incurred in the
performance of his duties hereunder, upon submission and approval of
written statements and bills in accordance with the then regular
procedures of the Company. The Company acknowledges that the duties
of President and Chief Executive Officer will necessitate Grebow
traveling regularly between New York, London, Europe, the Pacific
Rim, and other areas where the Company conducts or intends to
conduct business, and will reimburse Grebow for all costs and
expenses reasonably incurred in connection therewith, including
first class airfare.
(b) Grebow shall entitled to four (4) weeks paid vacation time per
annum in accordance with the regular procedures of the Company
governing senior executive officers as determined from time to time
by the Company's Board of Directors.
(c) The Company acknowledges that Grebow has a portable flexible
premium adjustable universal life insurance policy issued by
Metropolitan Life Insurance company with a $1,102,500 face amount
and that the premiums on which (currently $9,013) have been paid by
Grebow's prior employer. The Company will make the required premium
payments during the Employment Term on January 2 of each year during
the Employment Term as follows: an amount not to exceed $15,022 for
1998; an amount not to exceed $15,773 for 1999; an mount not to
exceed $16,561 for 2000; and an amount not to exceed $17,399 for
2001. The Company shall pay Grebow a gross-up payment necessary to
cover any federal tax liability he incurs in connection with the
payment of such premiums by the Company.
(d) So long as Grebow is employed by the Company, the Company
shall lease an automobile with a retail purchase price not exceeding
$40,000 for Grebow's exclusive use. The Company shall pay for all
rental, maintenance, operating and insurance costs and taxes for
such automobile.
(e) Grebow shall be entitled to participate in all employee
benefit plans, programs and arrangements of the Company now or
hereafter made available to senior executives of the Company
(including, without limitation, each retirement plan, supplemental
and excess retirement plans, annual and long-term incentive
compensation plans, stock option and purchase plans, group life
insurance, accident and death insurance, medical and dental
insurance, sick leave, pension plans, disability plans and fringe
benefit plans) on a basis which is no less favorable than is made
available to any other senior executives of the Company.
(f) The Company shall provide supplemental nonqualified payments
to Grebow equal to the difference between (i) those pension benefits
which Grebow would have received had he remained employed at Morgan
Guaranty Trust Company ("Morgan") until his normal retirement date
under the plan in effect on October 1, 1985 and (ii) the sum of
vested accrued benefits at the date of the termination of his
employment at Morgan, The Bowery Savings Bank, CBS, Inc. and Tele-TV
Systems, respectively. These payments shall only be for the period
covered by the Employment Term or until the termination of Grebow's
employment. Such supplemental payments will be payable at the
normal retirement date at Morgan in an annuity form or at Grebow's
election in a comparable lump sum amount at the termination of his
employment with the Company determined by a mutually acceptable
actuary or a lump sum payable to a trustee for Grebow's benefit
under an irrevocable "rabbi trust" arrangement. The actuary shall
use the same assumptions in calculating the lump sum as are required
under Section 417(e) of the Internal Revenue Code of 1986 at the
time of Grebow's termination of employment.
(g) The Company shall pay up to $15,000 for the fees and expenses
of Grebow's counsel incurred in connection with entering into this
Agreement.
(h) The Company shall enter into an indemnification agreement with
Grebow in the form attached hereto and maintain, and Grebow shall be
covered under, customary and appropriate directors and officers
insurance policies. Grebow's rights to such coverage and indemnity
shall survive and continue following any termination of employment
as to the period of his employment.
(i) Grebow has requested insurance disability coverage providing
for disability payments of 70% of his Base Salary and has a
personal, portable policy issued by Paul Revere Life Insurance
Company providing for a portion of such payments. The Company will
provide for disability coverage during the Employment Term for 70%
of Base Salary and make a cash payment to Grebow (including a gross-
up payment to cover any federal tax liability incurred by Grebow
upon receiving such amounts) sufficient to pay premiums on Grebow's
Paul Revere policy and any other policy necessary to assure the 70%
level of payments.
5. Representations and Warranties of Employee. Grebow represents
and warrants to the Company that (a) as of the Commencement Date,
Grebow is under no contractual or other obligation which is
inconsistent with the execution of this Agreement, the performance
of his duties hereunder, or the other rights of the Company
hereunder, and (b) Grebow is under no physical or mental disability
that would hinder his performance of duties under this Agreement.
6. Non-Competition.
(a) Grebow agrees that he will not (i) during the period he is
employed by the Company engage in, or otherwise directly or
indirectly be employed by, or act as a consultant or lender to, or
be a director, officer, employee, owner, member or partner of, any
other business or organization that is or shall then be competing
wit the Company, and (ii) for a period of one (1) year after he
ceases to be employed by the Company directly compete with or be
engaged in the same business as the Company (collectively,
"Competing Business"), or be employed by, or act as consultant or
lender to, or be a director, officer, employee, owner, member or
partner of any business or organization which, at the time of such
cessation, is a Competing Business, except that in each case the
provisions of this Section 6 will not be deemed breached merely
because (x) Grebow owns not more than five percent (5%) of the
outstanding common stock of a corporation, if, at the time of its
acquisition by Grebow, such stock is listed on a national securities
exchange, is reported on NASDAQ, or is regularly traded in the over-
the-counter market by a member of a national securities exchange,
(y) Grebow is passive investor in any fund in which he has no
investment discretion, or (z) Grebow is a senior executive at a
company whose business lines include a Competing Business, provided
that Grebow has broad management responsibilities of a senior
executive at such company over overall business operations and is
not employed to run the Competing Business, and further provided
that such Competing Business does not constitute more than 20% of
the revenues of such company. For example, Grebow would not breach
this covenant not to compete by virtue of his being employed as a
senior executive of a company such as SONY Corporation or Phillips
Corporation, or any affiliate of either, whose business and
operations include a Competing Business with revenues less than 20%
of the revenues of the business entity or division of his employer,
provided that he exercises broad management responsibilities over
all such businesses and operations of his employer and other
executives have primary responsibility for the management of any
such Competing Business.
(b) It is the intent of the parties to this Agreement that the
provisions of this Section 6 shall be enforced to the fullest extent
permissible under the laws and pubic policies applied in each
jurisdiction in which enforcement is sought. If any particular
provisions or portions of this Section 6 shall be adjudicated to be
invalid or unenforceable, such provisions or portions thereof shall
be deemed amended to the minimum extent necessary to render such
provision or portion valid and enforceable, such amendment to apply
only with respect to the operation of such provisions or portions in
the particular jurisdiction in which such adjudication is made.
(c) The parties acknowledge that damages and remedies at law for
any breach of this Section 6 will be inadequate and that the Company
shall be entitled to specific performance and other equitable
remedies (including injunction) and such other relief as a court or
tribunal may deem appropriate in addition to any other remedies the
Company may have.
7. Patents; Copyrights. Any interest in patents, patent
applications, inventions, copyrights, developments, and processes
("Such Inventions") which Grebow now or hereafter during the period
he is employed by the Company may own or develop relating to the
fields in which the Company may then be engaged shall belong to the
Company; and forthwith upon request of the Company, Grebow shall
execute all such assignments and other documents and take all such
other action as the Company may reasonably request in order to vest
in the Company all his right, title, and interest in and to Such
Inventions, free and clear of all liens, charges and encumbrances.
The Company will reimburse Grebow for any reasonable fees and
expenses (including fee and expenses of counsel) incurred by Grebow
in connection with executing such assignments and documents and
taking any such action at the request of the Company.
8. Confidential Information. All confidential information which
Grebow may now possess or may obtain during the Employment Term
relating to the business of the Company shall not be published,
disclosed, or made accessible by him to any other person, firm, or
corporation during the Employment Term or any time thereafter
without the prior written consent of the Company; provided that the
foregoing shall not apply to information which is not unique to the
Company or which is generally known to the industry or the public,
other than as a result of Grebow's breach of this covenant, and
shall not preclude Grebow from disclosing any such information to
the extent such disclosure is required by law, disclosure would in
the reasonable judgement of Grebow be in the best interest of the
Company or is reasonably necessary in order to defend Grebow or to
enforce Grebow's rights under this Agreement in connection with any
action or proceeding to which the Company or its affiliates is a
party. Grebow shall return all tangible evidence of such
confidential information to the Company prior to or at the
termination of his employment.
9. Termination.
(a) If on or after the Commencement Date and prior to the end of
the first two (2) years of the Employment Term, Grebow is terminated
by the Company without cause or Grebow resigns for Good Reason, as
defined below, he shall be entitled to receive his (i) Base Salary
for a period of eighteen (18) months following the date of
termination and the monthly pro rata portion of the Guaranteed Bonus
from the last accrual date of the Guaranteed Bonus, or the
Commencement Date if the Guaranteed Bonus has not yet accrued,
through the end of the eighteen (18) month period; this amount shall
be paid in equal semi-monthly installments during the eighteen (18)
months following the date of termination; (ii) all Options that have
not vested as of the date of termination shall immediately vest as
of such date, and (iii) all Incentive Options shall vest if the
criteria for vesting set forth in Section 3(d) hereof is achieved at
any time during the 6 months following the date of termination;
provided, however, if such criteria for vesting is not met during
such time, then the Incentive Options which have not vested shall be
cancelled. If Grebow is terminated without cause or Grebow resigns
for Good Reason during the third year of the Employment Term or
during the Renewal Term, then Grebow shall receive (i) his base
Salary for a period of (12) months from the date of termination and
the monthly pro rata portion of the Guaranteed Bonus from the last
accrual date of the Guaranteed Bonus through the end of the twelve
(12) month period; this amount shall be paid in equal semi-monthly
installments during the twelve (12) months following the date of
termination; (ii) all Options that have not vested as of the date of
termination shall immediately vest as of such date, and (iii) all
Incentive Options shall vest if the criteria for vesting set forth
in Section 3(d) hereof is achieved at any time during the 6 months
following the date of termination; provided, however, if such
criteria for vesting is not met during such time, then the Incentive
Options which have not vested shall be cancelled. In addition, in
either case, the Company shall also continue to maintain for Grebow
all benefits provided under this Agreement for the remaining term of
the Agreement, and shall pay in a lump sum, within five (5) business
days following the date of termination (i) any accrued but unpaid
compensation to the date of termiantion, including any Incentive
Bonus amount accrued but unpaid in respect of any prior fiscal year,
and (ii) any previously incurred but unreimbursed business expenses
and other amounts due under Section 4 of this Agreement.
(b) Notwithstanding anything herein contained, if on or after the
date hereof and prior to the end of the Employment Term, Grebow is
terminated "For Cause" (as defined below) then the Company shall
have the right to give notice of termination of Grebow's services
hereunder as of a date to be specified in such notice, and this
Agreement shall terminate on the date so specified. Termination
"For Cause" shall mean that Grebow shall: (i) be convicted of a
felony crime, (ii) willfully commit any act or willfully omit to
take any action in bad faith and to the material detriment of the
Company, (iii) intentionally violate the federal securities laws and
such violation cannot be corrected and such action was not in the
advice of the Company's securities counsel, (iv) commit an act of
active and deliberate dishonesty or fraud against the Company, (v)
fail to follow a reasonable instruction of the Board of Directors
which results in a material detriment to the Company, or (vi)
willfully breach any material term of this Agreement and fail to
correct such breach within ten (10) days after receipt of written
notice thereof. In the event that this Agreement is terminated "For
Cause", then Grebow shall be entitled to receive an amount, payable
in a lump sum within 5 business days following from the date of
termination, equal to the sum of (i) any accrued but unpaid
compensation to the date of termination, including any Incentive
Bonus amount accrued but unpaid with respect of any prior fiscal
year, (ii) a monthly pro rata portion of the Guaranteed Bonus from
the last accrual date of the Guaranteed Bonus, or the Commencement
Date if the Guaranteed Bonus has not yet accrued, through the date
of termination, and (iii) any previously incurred but unreimbursed
business expenses and other amounts due under Section 4 of this
Agreement through the date of termination. All Options and
Incentive Options which have not vested as of the date of
termination shall be cancelled.
(c) In the event that Grebow shall be physically or mentally
incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of six (6) consecutive months, then
this Agreement shall terminate upon thirty (30) days' written notice
to Grebow, and no further compensation shall be payable to Grebow,
except that Grebow shall be entitled to receive an amount, payable
in a lump sum payment within five (5) business days following the
date of termination, equal to the sum of (i) any accrued but unpaid
compensation to the date of such termination, including any
Incentive Bonus amount accrued but unpaid in respect of any prior
fiscal year, (ii) a monthly pro rata portion of the Guaranteed Bonus
from the last accrual date of the Guaranteed Bonus, or the
Commencement Date if the Guaranteed Bonus has not yet accrued,
through the date of termination, and (iii) any previously incurred
but unreimbursed business expenses and other amounts due under
Section 4 of this Agreement through the date of termination. The
Options which have not vested by the date of termination shall vest
on a pro rata basis equal to 13,888 shares for each month elapsed
since the last vesting date of the Options through the date of
termination. The Incentive Options which have not vested as of the
date of termination shall vest if the criteria for vesting set forth
in Section 3(d) hereof is achieved at any time during the 30 days
following the dae of termination; if such criteria for vesting is
not met during such time period, then the Incentive Options which
have not vested shall be cancelled. Grebow shall also be entitled
following such termination to receive payments provided under the
disability program and insurance policies required under Section
4(i) hereof.
(d) In the event that Grebow shall die, then this Agreement shall
terminate on the date of Grebow's death, Grebow's estate shall be
entitled to receive hereunder an amount payable in a lump sum within
five (5) business days following the date of termination, equal to
the sum of (i) any accrued but unpaid compensation to the date of
termination, including any Incentive Bonus amount accrued but unpaid
in respect of any prior fiscal year, (ii) a monthly pro rata portion
of the Guaranteed Bonus from the last accrual date of the Guaranteed
Bonus, or the Commencement Date if the Guaranteed Bonus has not yet
accrued, through the date of termination, and (iii) any previously
incurred but unreimbursed business expenses and other amounts due
under Section 4 of this Agreement through the date of termination.
In addition, Grebow's estate shall receive the Base Salary for one
year following the date of termination, which shall be paid in equal
semi-monthly installments during the one year following the date of
termination. Grebow's family shall be entitled to continued
participation in the Company's group health plans on the same basis
made available to Grebow's family hereunder during his lifetime for
a period of one year from the date of termination. The Options
which have not vested by the date of termination shall vest on a pro
rata basis equal to 13,888 shares for each month elapsed since the
last vesting date of the Options through the date of termination.
The Incentive Options which have not vested as of the date of
termination shall vest if the criteria for vesting set forth in
Section 3(d) hereof is achieved at any time during the 30 days
following the date of termination; if such criteria for vesting is
not met during such time period, then the Incentive Options which
have not vested shall be cancelled.
(e) In the event Grebow desires to resign voluntarily as President
and Chief Executive Officer, Grebow covenants to provide the Company
with not less than 90 days' written notice of any such voluntary
resignation; and further Grebow covenants to cooperate in good faith
fully in order to facilitate a smooth transfer of authority during
the period from notice of resignation to the date of termination.
In the event that this Agreement is terminated pursuant to this
Section 9(e), then Grebow shall be entitled to receive an amount,
payable in a lump sum within five (5) business days following the
date of termination, equal to the sum of (i) any accrued but unpaid
compensation, including any Incentive Bonus amount accrued but
unpaid in respect of any prior fiscal year, to the date of
termination, (ii) a monthly pro rata portion of the Guaranteed Bonus
from the last accrual date of the Guaranteed Bonus, or the
Commencement Date if the Guaranteed Bonus has not yet accrued,
through the date of termination, and (ii) any previously incurred
but unreimbursed business expenses and other amounts due under
Section 4 of this Agreement through the date of termination. All
Options and Incentive Options that have not vested as of such date
shall be cancelled.
(f) If Grebow's employment with the Company shall terminate as a
result of the Company's election not to extend the Employment Term
as provided for Section 1 hereof or the Renewal Term expires without
the Company and Grebow having entered into a new agreement for his
employment after the Renewal Term at least ninety (90) days prior to
the end of the Renewal Term, Grebow shall be entitled to receive an
amount, payable in a lump sum within five (5) business days
following the date of termination, equal to the sum of (i) any
accrued but unpaid compensation to the date of termination,
including any Incentive Bonus amount accrued but unpaid in respect
of a prior fiscal year, (ii) any previously incurred but
unreimbursed business expenses and other amounts due under Section
4 of this Agreement though the date of termination and (iii) one
month's Base Salary for each year of service to the Company. In
addition, for a period following such termination date ending on the
earlier of the date of commencement of his employment by another
employer or one year from the end of the Employment Term, Grebow
shall be entitled to continued life insurance, disability and group
health plan coverage, but not any supplemental pension benefits, on
the same basis made available hereunder during the Employment Term.
(g) For purposes of this Agreement, "Good Reason" shall mean any
material breach by the Company of its obligations hereunder which
are not cured within 10 days following the Company's receipt of
written notice from Grebow detailing such breach. The parties agree
that a material breach shall include, but not be limited to, (i) any
reduction in Grebow's duties, authority, status, reporting
relationship or responsibilities (whether or not accompanied by a
change in title), (ii) any reduction in, or failure to pay, any
compensation or other benefit payable to or provided for Grebow
hereunder, and (iii) any requirement that Grebow's principal place
of employment be other than at the Company's principal executive
offices in Melville, NY or if the Company's principal executive
offices are relocated more than 35 miles from Columbus Circle, New
York, New York.
(h) Grebow shall not be required to mitigate amounts payable
pursuant to this Section 9 hereof by seeking other employment or
otherwise and the amounts payable to Grebow hereunder in connection
with his termination of employment shall not be reduced by amounts
earned by, or paid to, Grebow following his termination of
employment, except to the extent certain benefits terminate upon re-
employment as provided in Section 9(f) above.
10. Change-of-Control.
(a) In the event there is a Change-of-Control of the Company, as
defined below, all payments to be paid under this Agreement, both
those accrued and unpaid and those to accrue over the remainder of
the Employment Term, shall accelerate and become immediately due and
payable to Grebow and all Options and Incentive Options that have
not vested shall immediately vest. "Change-of-Control" shall mean:
(i) any "person" as such term is used in Section 3(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") (other than
a current stockholder that owns 5% or more of the Company's
outstanding common stock or an affiliate of such 5% or greater
stockholder (collectively, the "Controlling Shareholders") and other
than the Company, any trustee, or other fiduciary holding securities
under any employee benefit plan of the Company) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the
Company's then outstanding securities, or the Controlling
Shareholders collectively increase their ownership from the current
level to more than 75% of the combined voting power of the Company's
then outstanding securities;
(ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation;
(iii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of, or the Company sells or disposes of,
all or substantially all of the Company's assets;
(iv) the Company becomes a privately-held company without Grebow's
prior approval; or
(v) the securities of the Company are no longer regularly traded
on a national securities exchange, the Nasdaq National Market System
or the Nasdaq SmallCap Market as a result of any event or
circumstance over which Grebow has no control or as to which Grebow
has not given his prior approval.
(b) If any amount payable or other benefit receivable by Grebow
hereunder or under any other agreement or arrangement with the
Company or its affiliates is deemed to constitute a "Parachute
Payment" (which, for this purpose, shall mean any payment deemed to
constitute a "Parachute Payment" as defined in section 280G of the
Internal Revenue Code of 1986 (the "Code"), alone or when added to
any other amount payable or paid to or other benefit receivable or
received by Grebow which is deemed to constitute the Parachute
Payment, and would result in the imposition on Grebow of an excise
tax under section 4999 of the Code or any successor statute or
regulation, then, in addition to any other benefits to which Grebow
is entitled under this Agreement, Grebow shall be paid by the
Company an amount (the "Gross-Up Amount") in cash equal to the sum
of the excise taxes (and any associated interest and penalties)
payable by Grebow by reason of receiving the Parachute Payments plus
the amount necessary to put Grebow in the same after-tax position s
if no such excise taxes, interest and penalties under section 280G
of the Code had been imposed with respect to the Parachute Payment.
Whether a payment or benefit results in the imposition of an excise
tax and the amount of any payment under this Section 10(b) shall be
determined by a nationally recognized certified public accounting
firm designated by the Company. All fees and expenses of such
accounting firm shall be paid by the Company. Payment of the Gross-
Up Amount shall be made when any such amount is required to be paid
to the Internal Revenue Service or other appropriate taxing
authority.
11. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall
survive Grebow's termination of employment, irrespective of any
investigation made by or on behalf of any party.
12. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements between them concerning
such subject matter, and may be modified only by a written
instrument duly executed by each party.
13. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be
mailed by certified mail, return receipt requested, or delivered
against receipt to the party to whom it is to be given at the
address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have finished in
writing in accordance with the provisions of this Section 13).
Notice to the estate of Grebow shall be sufficient if addressed to
Grebow as provided in this Section 13. Any notice or other
communications given by certified mail shall be deemed given at the
time of certification thereof, except for a notice changing a
party's address which shall be deemed given at the time of receipt
thereof.
14. Legal Fees. In the event a dispute arises between the Company
and Grebow which is resolved either through arbitration or the
judicial process, then the court or the arbitration panel may award
to the winning party such party's reasonable attorneys' fees and
expenses incurred in connection with the dispute from the losing
party.
15. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to
be a waiver of any other breach of such provision of this Agreement.
The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered
a waive or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
Any waiver must be in writing.
16. Binding Effect. Grebow's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such
rights shall not be subject to encumbrance or the claims of Grebow's
creditors, and any attempt to do any of the foregoing shall be void.
The provisions of this Agreement shall be binding upon and inure to
the benefit of Grebow and his heirs and personal representatives,
and shall be binding upon and inure to the benefits of the Company
and its successors and its assigns.
17. Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
18. Counterparts; Governing Law. This Agreement may be executed
in any number of counterparts (and by facsimile), each of which
shall be deemed an original, but all of which together shall
constitute one and the same instrument. It shall be governed by,
and construed in accordance with, the laws of the State of New York,
without giving effect to the rules governing the conflicts of laws.
19. Disclosure. The Company shall provide Grebow with a
reasonable opportunity to review any press release concerning his
joining the Company and the parties shall jointly decide when to
release such announcement, subject to advise of counsel.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
CHYRON CORPORATION
/s/ Michael Wellesley-Wesley
Name: Michael Wellesley-Wesley
Title: Chairman
/s/ Edward Grebow
Edward Grebow
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