SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
( X ) Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1997 ( ) 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 0-11883
Telebyte Technology, Inc.
(Exact name of registrant as specified in its charter)
Nevada 11-2510138
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
270 Pulaski Road, Greenlawn, New York 11740
(Address of principal executive) (Zip Code)
Registrant's telephone number, including area code (516) 423-3232
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
(Title of class)
Check whether the registrant (1) filed all reports to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 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.
__X__ Yes _____ No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ( X )
The registrant's revenues for its most recent fiscal year were $5,479,603.
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 11, 1998 was $3,431,589.
The number of shares of common stock outstanding at March 11, 1998 was
1,498,516.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): Yes _____; No __X__
<PAGE>
2
PART 1
Item 1. Business
Telebyte Technology, Inc. (herein either the "Company" or "Telebyte") designs,
manufactures, and markets electronic data communications products that operate
over copper and fiber cables. The Company's operations are in a single business
segment and, except for sales to foreign distributors, the Company does not
conduct any foreign operations. The Company was formed as a New York corporation
in 1983 and re-incorporated in Nevada in 1987.
Introduction
The Company's data communications equipment is used principally to provide
connectivity solutions and maintain data communications networks. Telebyte's
products effectively link computers to other computers and peripheral devices in
a manner that enables them to operate as a complete system. An example of
growing areas are Local Area Networks (LAN's), Internet access, data acquisition
systems, process control systems, and various peripheral devices such as
computerized time clocks, intelligent scales, and bar code reading equipment.
The Company's six principal data communications product categories are interface
converters, short haul modems, data communications test equipment, Local Area
Network (LAN) products, surge-lightning protectors and multiplexers. The Company
also sells a variety of data communications switching equipment and accessories.
In the large data communication marketplace, Telebyte focuses on the area of
"premises communication" or local networks. Telebyte addresses the needs of
customers that have computer systems with data communications applications
including distances whose range is from a few feet to a few miles. Accordingly,
Telebyte's products are used in data communication networks in facilities such
as industrial plants, factories, high rise office buildings, or campus like
environments. The transmission media used in these environments are "twisted
pair" copper wire and/or fiber optic cable. Fiber optic based products
represents a growing segment of the Company's product line.
The Company's products fill a variety of applications in the overall system plan
and are considered the "glue" to allow many different systems to function
properly. The Company's prospective market is increasing as the ubiquitous
personal computer (PC) embraces more applications. The Company endeavors to
maintain a broad product line by developing both improved versions of current
products and new products. Fiber optic products have been an increasingly
important factor in the Company's business and future product development will
continue to emphasize this area.
Business Developments for 1995, 1996 and 1997
In 1995 Telebyte devoted efforts to redesign a significant number of its core
short haul modems and interface converters to include a new display feature.
This display, incorporating liquid crystal technology and called DataSpy(R),
provides a window onto the data link thereby simplifying installation and
maintenance of the network. DataSpy(R) is a registered trademark of Telebyte. In
addition, Telebyte submitted a patent application to cover this feature. It is
expected that this feature will act as a significant product differentiation
between Telebyte and its competitors.
1995 saw large numbers of interface converters shipped to Intel and AT&T. A
system integrator, working for the U.S. government, took delivery of several
thousand modem abort timers. Also during 1995 the Company decided to exit the
video market which had become flooded with commodity products from Asia. This
competition caused margins to erode quickly and therefore the products did not
meet Telebyte's criteria for gross margin.
Many other companies availed themselves of Telebyte's ability to design special
products or modify existing products. This product "design-in" is expected to
produce additional volume sales as production begins for the programs, which
include these special Telebyte products.
<PAGE>
3
1996 was a year in which the Company took a more aggressive approach to
establishing itself by virtue of increased media attention. This was
accomplished by advertising, catalog mailings and trade show attendance and was
augmented by the single largest order for rack mounted interface converters, in
the Company's history, from a Government subcontractor.
Furthermore the Company's Internet activity began in 1996 with the establishment
of a Telebyte web site. Continuously being improved, this web site produced in
excess of 500,000 hits during 1997. This activity, coupled with increased
catalog distribution, news releases and advertising produced record sales
volumes for the Company in 1997. As an adjunct to these activities management
began an aggressive program of customer and prospect visits which produced an
increase in custom product design and manufacture. Many of these efforts are in
their initial phase with production orders expected in 1998. These custom
programs were initiated for Motorola, Intel, Foxboro and Hill-Rom.
Due to the poor sales of the neurocomputer and a deterioration of the
relationship between the Company and the owner of the neurocomputer technology,
Telebyte made the decision to terminate the relationship with that owner and
withdrew from the neurocomputer technology market. Consistent with this decision
was the decision to focus on growing the data communications product line.
Product development activities continued and the Company introduced its first
T1/E1 fiber optic modem in the fourth quarter. In addition, The Company began
the design of a new fiber optic product management platform for use by large
scale customers.
In 1997 the Company signed a fully paid license agreement with RAD Data
Communications for use of certain patents dealing with powering short haul
modems and interface converters.
Products
Telebyte's products compete in six different product areas of data
communications networks; Interface Converters, Short Haul Modems, Test
Equipment, LAN Products, Lightning Protection and Multiplexers.
Interface converters transform the characteristics of the electrical interface
of one device to enable it to become compatible with the electrical interface of
another. This terminology has been expanded to include media converters, LAN
transceivers and opto isolators. This conversion may also include modifying the
protocol and/or the physical medium, i.e., copper wire to fiber cable. As a
result, a data communications network can be established or expanded using
equipment which otherwise would be unable to transmit or receive data from each
other. Interface converters represented 41% of Telebyte's revenue in 1997, and
because the industry continues to develop new interface standards, the Company
anticipates that the market may require greater varieties of interface
converters, thereby expanding the available market for existing products and
creating opportunities for new products. Telebyte's line of interface converters
is available in most of the configurations now required by the market and
includes programmable devices. When the appropriate opportunity presents itself,
the Company will manufacture custom interface converters to meet a particular
customer's requirements.
Short haul modems differ from those modems which most people are familiar with,
those that operate over the dial-up telephone network. Short haul modem devices
provide the link over dedicated wires or optical fibers among computers and
accessory equipment such as terminals, printers, badge readers, scales, bar code
readers, and other computer controlled machines. Short haul modems are also used
in establishing communications between micro or personal computers and mini or
main frame computers.
<PAGE>
4
In 1997 the Company introduced its first HDSL modem. This device, based on High
Data Rate Subscriber Line technology will be the initial product of a line of
xDSL products to support high speed data transmission for Internet service. In
addition, the Company introduced its first wide temperature short haul modem for
industrial applications using the DIN Rail mounting system.
The role of the short haul modem has been expanded from coupling terminals to a
central processing unit to creating extensive computer to computer/peripheral
networks. The Company's short haul modem devices are designed to provide data
communications links ranging from relatively short distances to several miles.
The Company manufactures and sells a variety of short haul modems designed for
particular applications and the electrical environment of the user. For example,
Telebyte has three types of short haul modems, with transmission capabilities
that are suited for (i) factories or heavy manufacturing operations, (ii) light
manufacturing, and (iii) industrial office areas or general office locations.
Due to technological changes and innovations, the Company must develop new short
haul modem products on a continual basis to meet its customers' technical
requirements and to remain competitive in this market. Short haul modems
represented 22.5% of Telebyte's net sales in 1997.
The third most important product area by sales revenue is called Test Equipment.
This area consists of two distinctly different product groups, namely wireline
simulation and protocol analyzers. The wireline simulator is used in engineering
development and in production testing. This area is experiencing growth due to
the availability of new communications services such as ISDN (Integrated
Services Digital Network), HDSL (High Datarate Subscriber Line), ADSL
(Asymmetric Datarate Subscriber Line) and T1 (high-speed data services offered
by telephone companies). These services have created new product opportunities,
which are being satisfied by a host of companies for whom the Telebyte wireline
simulators have become a valuable piece of production test equipment to
guarantee their products comply with published specifications. These products
are also applicable to engineering product development and evaluation efforts to
determine the character and limitations of certain data communications and
transmission devices. New transmission technologies such as ATM (Asynchronous
Transfer Mode) are creating additional product opportunities for existing and
new wireline simulators.
In 1997 the Company began development of a Loop Interference Simulator, which
will allow users to simulate noise and other inteference which pervades the real
world of data communications. This companion product to the wireline simulator
is expected to have a synergistic effect on sales of this type of equipment.
The other area of test equipment is protocol analyzers which are used to analyze
and test the integrity of data communications networks. Telebyte's protocol
analyzer test equipment product line includes "plug-in" printed circuit boards
and stand alone units for use with IBM personal computers and compatible clones.
These items are supplied with the software necessary to enable the personal
computer user to monitor or emulate the data line with other devices in the data
communications network. This test equipment product assists in maintenance
because it can rapidly identify open leads, missing signals and other errors,
and intermittent problems can be tracked and stored in memory for later
analysis. During 1996 Telebyte initiated the development of a new protocol
analyzer to provide increased performance. This product, called the Model 905
Comscope, was released in the first quarter of 1997.
Test equipment was responsible for 11.3% of net sales in 1997. No other product
areas had sales that exceeded 10% of net sales in 1997.
Telebyte manufactures and sells a number of lightning and surge protectors which
prevent damage to data communications equipment that can be caused by high
voltage surges and transients, ground currents, and other lightning induced
electrical disturbances encountered on data communication circuits. In 1997 the
Company introduced lightning and surge suppression products packaged in the DIN
Rail format for sales to the factory automation market. In addition, the Company
designed and produced a large number of high capacity Ethernet protection
systems for Graybar Electric. The Company believes this area of business may
expand as more diverse systems are deployed.
<PAGE>
5
The Company's multiplexers allow data from a number of different devices to be
communicated simultaneously on the same circuit or channel. Telebyte's local
area multiplexers perform a task similar to its short haul modems, except that a
single communications link can support many users. Telebyte's multiplexer
products allow simultaneous data transfers over distances of up to 8,000 feet
for wire or 6,600 feet over fiber.
The Company generally manufactures and maintains an inventory of products based
upon historical levels of demand and sales forecasts. Most of its products are
standard or catalog items. On occasion, the Company produces custom products
manufactured to a customer's specifications or for a specific application.
The Company has not experienced a shortage of manufacturing materials or
components, and it purchases raw materials and supplies from domestic and
foreign sources. The Company does not depend upon any particular source of
supply, and not more than 15% of the purchases were from a single supplier. Raw
material and supplies are readily available from various sources.
The research and new product development budget for 1998 is $450,000 compared to
approximately $320,000 and $260,000 spent in 1997 and 1996, respectively. The
cost of research and development is not borne directly by the Company's
customers.
Federal, state, and local environmental laws and regulations have no material
impact on Telebyte or its business. The Company is subject to the governmental
regulations that apply to businesses generally.
Sales and Marketing
The Company markets its data communications products by promotional activities
such as the Internet, telephone sales, paid advertising, press releases, post
card decks, direct mail campaigns, and participating in trade shows. Telebyte
currently conducts its sales and marketing efforts through an in-house sales
staff and a network of distributors.
On the basis of continuing market research the Company believes that the most
effective way to increase its end user business, currently the largest source of
revenues, is to increase the circulation and content of its catalog, the
Datacom/Networking Cookbook. The Company distributed 100,000 catalogs in 1995,
200,000 in 1996 and more than 300,000 in 1997. In 1997 the Company again
employed a cover-wrap over the catalog cover with a return postcard in order to
capture qualified leads from mailings whose source was rented lists. The Company
continues to build its prospect database.
While the catalog is the focus of the promotional activities, the Company also
uses other techniques in addition to those mentioned above. During 1996 the
Company established a Web site on the INTERNET that contains the Company's
complete catalog. This Web site, www.telebyteusa.com, is producing an increasing
number of inquiries which adds a large number of qualified leads to the
Company's database. In 1997 the web site had in excess of 55,000 unique
visitors.
Sales generated by all of these promotional activities are primarily to
end-users rather than resellers. Such end-users include OEM's (Original
Equipment Manufacturer), system integrators or installers and customers who may
be employing the product for their own specific use.
<PAGE>
6
The Company also uses distributors as resellers. At the end of 1997 the Company
had 20 domestic distributors of record. Domestic distributors do not have any
territorial exclusivity. In the domestic marketplace, the Company's sales to
end-users dominates its sales to distributors. The ratio of these sales were
3.72, 3.13 and 2.85 to 1 in 1997, 1996 and 1995, respectively. Internationally,
the Company uses 64 distributors. Some products are marketed through other
catalog distributors. Foreign sales represented approximately 14% in 1997, 10.6%
in 1996 and 11.8% in 1995 of net sales.
Domestic sales to end-users and domestic distributors are serviced by internal
sales representatives who are paid commissions on all sales from those
customers. At the end of 1997 the Company had 4 such representatives on its
staff. Foreign sales are under the direction of the President of the Company
with the help of an assistant. These sales are carried out by a network of
international distributors. For the most part these distributors are given
territorial exclusivity. In some countries new laws make exclusive sales
arrangements illegal and additional distributors are being added.
The Company does not depend upon the sales to any single customer or a limited
group of customers. There are no sales to a single customer during the last
three years exceeding 10% of net sales. Sales of products to the U.S. government
are not subject to renegotiations of profits or termination of contracts at the
U.S. government's election. For the most part such sales are covered by the
Company's General Service Administration (GSA) contract. The Company's sales are
not materially affected by seasonal factors.
Competition
There are a significant number of companies engaged in manufacturing and selling
data communications equipment in the same markets as the Company. Since
Telebyte's product line is diverse, it is difficult to define and enumerate its
competition. As a general matter, there are competitors that are larger and more
established than Telebyte, many with technical and capital resources, which the
Company does not possess, and more well-developed sales and marketing
capabilities.
The Company's principal competitors are RAD Data Communications, Ltd. (which is
based in Israel with local offices in New Jersey), Black Box (with headquarters
based in Pennsylvania), and Patton Electronics (based in Maryland), and a number
of small companies. Telebyte competes with these companies on the basis of
quality, price, breadth of product line, sales and marketing capability and
technological support, and innovation. The Company relies principally upon the
price/performance ratio of its converter, multiplexer, and surge protection
products. Telebyte also attracts market share by its ability to fill orders
quickly and provide technical support to its customers. The Company does not
have a significant market presence with its test equipment and data
communications accessories.
Historically, the Company has not relied upon patents, registered trademarks or
licenses to give it a competitive advantage.
Year 2000 Issue
The Company has evaluated the impact of the Year 2000 issue on its business and
does not expect to incur significant costs associated with Year 2000 compliance
and that Year 2000 issues will not have a material impact on the Company's
business results of operations or financial condition. The Company's software
systems and applications are currently Year 2000 compliant.
<PAGE>
7
Employees
As of December 31, 1997, the Company had 35 full-time employees. Of these
employees, two are executives, six are in sales, four in research and
engineering, four in administration, and the balance in manufacturing, shipping,
and related activities. The Company uses subcontractors and part-time help to
support its current operations. None of the employees are represented by a labor
union, and the Company considers its employee relations to be good.
Backlog
At December 31, 1997, the Company's backlog was $390,363 all of which the
Company expects to fill in fiscal 1998. Comparable backlog at December 31, 1996
was $119,780.
Item 2. Properties
Telebyte's executive office, plant, and manufacturing facility are located in a
20,000 square foot building on 3.2 acres, at 270 Pulaski Road, Greenlawn, New
York 11740. The Company purchased the land and building in September 1985. The
Company refinanced the existing mortgage in May 1988 and the property now
secures a mortgage loan payable on a fully self-amortizing basis over 20 years.
Interest under the mortgage is based on 2.75% over the bank's prime rate,
however, such rate cannot be less than 10% and will be recalculated on June 1,
2000. The outstanding principle balance of the mortgage loan, as of December 31,
1997, was $978,112. Management believes that all of its properties, plant, and
equipment are well maintained and adequate for its requirements.
Of the 20,000 square feet the Company has leased 5,000 square feet to a tenant.
Management believes that Telebyte's existing manufacturing facilities are
sufficient to support its present needs and anticipated growth, and the Company
does not foresee any significant capital expansion of its plant in Greenlawn.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Company is a party
or by which its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
Until September 2, 1992, the Company's common stock was listed on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") under
the symbol "TBTI." After that date the stock was moved to the Over The Counter
Bulletin Board since it no longer met the requirements of NASDAQ's minimum bid
price.
The following table sets forth the high and low bid prices for the common stock
for each fiscal quarter during 1997 and 1996 as reported by the National
Association of Securities Dealers, NASD. The bid and ask prices for the common
stock on March 11, 1998 were $ 3 5/8 and $ 4 1/16 respectively.
<PAGE>
8
1997 1996
---- ----
High Low High Low
First Quarter ............................ 1 5/16 13/16 7/8 3/4
Second Quarter ........................... 15/16 3/8 7/8 7/16
Third Quarter ............................ 1 1/2 7/16 7/8 23/32
Fourth Quarter ........................... 2 1/8 1 3/16 1 1/4 11/16
The above quotations reflect inter-dealer prices, and may not include retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions.
At March 11, 1998, there were approximately 321 holders of record of the
Company's common stock. Most of the shares of the common stock are held in
street name for a larger number of beneficial owners.
To date, Telebyte has not paid a cash dividend. The payment and amount of any
future dividends will necessarily depend upon conditions then existing,
including the Company's earnings, financial condition, working capital
requirements, and other factors. The Company does not anticipate paying any
dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Fiscal 1997 Compared to Fiscal 1996
Sales for the year ended December 31, 1997 increased by 32% to $5,479,603. The
sales increase was primarily a result of the increased sales and marketing
efforts begun by the Company in 1996.
An analysis of the gross margin for 1997 reveals that it was 53.9% as compared
to 52.5% for 1996. This was primarily a function of product mix which includes
newer products that have improved gross margins. Cost of sales increased by
$560,976 and is primarily attributed to the level of sales.
Selling, general, and administrative costs increased by $273,811. The increase
resulted primarily from increased promotional expenses of $134,000 related to
the printing and distribution of a much larger quantity of the Company's catalog
and other expenses associated with the Company's growth..
Research and development increased in 1997 to $319,996, or 5.8% of sales, from
$260,322, or 6.3% of sales in 1996. The increase illustrates to Company's
commitment to new product development.
Interest expenses of $114,909 in 1997 increased to 2.1% of sales as compared to
$113,033, or 2.7% in 1996.
<PAGE>
9
Interest income decreased by $4,211. The decrease in 1997 was due to lower
average levels of cash on hand during 1997. In 1997 the Company had rental
income of $48,195, equal to the 1996 rental income. For 1998 the Company expects
rental income of approximately $48,000.
The Company generated net income of $466,825 or $0.32 per share, 8.5% of sales,
compared to $30,455 or $.02 per share, .7% of sales, for 1996. The increase is
primarily attributed to the increased sales level during 1997 offset by
increases in inventory and receivables.
The Company believes that all of the market indications for the future of the
data communications market and for the Company's products are positive and will
increase for 1998; however there can be no assurance that this will happen.
Liquidity and Capital Resources
In 1997, the Company invested $37,397 in property and equipment, which was
financed through internally generated funds. The statements of cash flows
indicate that the Company generated $254,507 in 1997 compared to $107,760 in
1996 in cash from operations. The increase was primarily due to higher net
income during 1997.
Working capital increased as of December 31, 1997 by $333,650 to $2,210,200
compared with $1,876,550 at December 31, 1996. The current ratio decreased to
4.6 to 1 at December 31, 1997, compared to 6.2 to 1 at December 31, 1996.
The Company has renewed its line of credit, which now expires in July 1999,
based upon eligible accounts receivable, raw materials, and finished goods
inventories, for a maximum of $1,000,000 from Merrill Lynch. The line of credit
is available for general working capital purposes and to finance business
growth. As of December 31, 1997, there was no outstanding balance due under the
line of credit. During the past three years the Company's operations have
generated sufficient working capital to sustain its current levels of operations
and the Company believes that cash generated by the Company's operations,
current cash and cash equivalents, and the line of credit should supply the cash
resources to meet its cash needs for the next twelve months. The Company has no
commitments for any major capital expenditures in 1998.
Effect of Inflation
During the five-year period ending December 31, 1997, the Company was able to
decrease its costs of sales of its products to compensate for the effect of
inflation on the cost of components. This was accomplished by changes in
manufacturing methodology, namely, increasing the amount of product manufactured
on a sub-contractor basis.
Item 7. Financial Statements
See "Index to Financial Statements" beginning on page F-1 below.
Item 8. Changes in and Disagreements with Accountants in Accountin and
Financial Disclosures
Not applicable.
<PAGE>
10
Part III
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The following table sets forth certain information concerning Company's officers
and directors as of December 31, 1997. Telebyte's directors are elected to serve
until the next annual meeting of shareholders or until their successors are
elected and qualified. The executive officers are appointed annually by, and
serve at the pleasure of, the Board of Directors.
Name, age, and positions Business experience during past Director
held with the Company five years and principal occupation since
- ------------------------- ----------------------------------- --------
Joel A. Kramer, age 60,(1) Mr. Kramer has served as President 1983
President and Chairman of of the Company since August 1983,
the Board of Directors and Chairman of the Board since
February 1989.
Kenneth S. Schneider, Ph.D., Dr. Schneider has served as Treasurer 1983
age 52, Vice President, and Vice President, of the Company
Treasurer, Secretary, and since August 1983; and he was elected
Director Secretary in March 1991. Dr. Schneider
is a senior member of the Institute of
Electrical and Electronic Engineers.
Jamil Sopher, age 54 (2) Mr. Sopher is a Principal Financial 1996
Director Analyst with the World Bank where
he has been employed for 18 years.
Robert M. Kramer, age 57(3) Mr. Kramer is a private investor and has 1996
Director been since 1987. Prior thereto he held
the position of Vice President at Drexel
Burnham Lambert and Shearson-Lehman.
Michael Breneisen, age 33, Mr. Breneisen has served as Controller
Vice President, of the Company since July 1992 and
Chief Financial Officer Vice President since January 1997.
(1) Mr. Robert M. Kramer is the brother of Mr. Joel A. Kramer, the
President and Chairman of the Board of Directors of the Company.
(2) Mr. Sopher received a Bachelor of Science and MSEE from Cornell and an MBA
from Harvard.
(3) Mr. Kramer received a BSME from Polytechnic Institute, a MSME
from City College of NY and an MBA from the Wharton Graduate School.
Section 16 Compliance
Based upon a review of copies of the forms required to be filed under Section
16(a) of the Securities Exchange Act of 1934 or written representations from
officers and directors, the Company believes all officers and directors, and
greater than ten percent owners of the Company's common stock have complied with
Section 16(a.)
<PAGE>
11
Item 10. Executive Compensation
The following table sets forth the cash compensation paid or accrued during the
last three fiscal years to the executive officers of the Company whose cash
compensation exceeded $100,000. The table includes Company contributions on the
officer's behalf to the Company's 401(k) Plan.
<TABLE>
Summary Compensation Table
Annual Compensation Long-Term
Compensation
Awards
Payouts
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Annual Restricted Stock Long-Term All Other
Principal Year Salary Bonus Compensation Stock Awards Options/SARs Incentive Payout Compensation
Position
($) ($) ($) (No.) (No.) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joel A. Kramer 1997 $111,631 $2,000 $16,629(1) 0 0 $16,629(2) $4,116
President, CEO 1996 $107,100 $4,300 $ 11,481(1) 0 0 $11,281(2) $3,203
& Director 1995 $105,497 $13,300 $11,367(1) 0 5,000 $9,281(2) $2,997
Kenneth S. 1997 $100,686 $2,000 $8,804(1) 0 0 $4,080(2) $2,819
Schneider
Sr. V.P. 1996 $95,599 $3,150 $7,256 (1) 0 0 $4,080(2) $2,819
Sales, Sec.,
Treas. & 1995 $95,153 $9,000 $6,619(1) 0 5,000 $4,080(2) $2,668
Director
<FN>
(1) Commissions - Mr. Kramer received a 2.5% commission of net sales to
customers not located within the United States. Mr. Schneider received a 0.5%
commission of net sales to customers located within the United States. The
amounts paid are set forth above under the caption entitled "Other Annual
Compensation".
(2) Deferred Compensation - see Long-Term Incentive Plans Table
below.
</FN>
</TABLE>
<TABLE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
Estimated Future Payouts under Non-Stock Price-Based Plans
------------------------------------------------------------
<CAPTION>
Number of Shares, Performance or Other
Units or Other Period Until Threshold Target Maximum
Maturation
Name Rights (#) Or Payout ($ or #) ($ or #) ($ or #)
- --------------------- ------------------ ----------------------- ----------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Joel A. Kramer June 11, 2002 $26,667(1) $26,667(1) $26,667(1)
Pres.,CEO & Director
Kenneth S. Schneider April 16, 2010 $26,667(1) $26,667(1) $26,667(1)
Sr.V.P. Sales,
Sec.,
Treas. & Director
<FN>
(1) In 1990 the Company entered into deferred compensation agreements with key
officers, pursuant to which the officers will receive a defined amount,
approximately 30% of their 1990 base salary, each year for a period 10 years
after reaching age 65. The deferred compensation plans are funded through life
insurance and are being provided for currently. The expense charged to
operations in 1997 for such future obligations was $16,742 ($12,662 and $4,080,
for Joel A. Kramer and Kenneth S. Schneider, respectively).
</FN>
</TABLE>
<TABLE>
Aggregate Option Grants in Last Fiscal Year
<CAPTION>
% of Total Options Exercise or
Number of Options Granted to Employees Base Price Expiration
Name Granted in Fiscal Year 1997 ($/Sh) Date
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joel A. Kramer 0 0 - -
Kenneth S. Schneider 0 0 - -
<PAGE>
12
</TABLE>
The following table sets forth information concerning each exercise of stock
options during fiscal 1997 by each of the named executive officers and fiscal
year-end value of unexercised options:
<TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
Number of Value of Unexercised
Number of Shares Value Unexercised Options at In-the-Money Options
Name Acquired on Exercise Realized ($) December 31, 1997 at December 31, 1996(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joel A. Kramer 0 0 10,000 (2) $19,050)
Kenneth S. Schneider 0 0 10,000 (2) $19,050
<FN>
(1) Calculation based upon the average of the high and low bid prices of the
Company's Common Stock from the National Quotation Bureau on December 31, 1997.
(2) All such options are currently exercisable.
</FN>
</TABLE>
Compensation Plans and Other Compensation
The Company adopted a Stock Option Plan (the "1993 Plan") under which options to
purchase 100,000 shares of the Company's common stock, par value $.01 per share
have been reserved. As of December 31, 1997, there were 75,000 shares available
for grants under the 1993 Plan. Pursuant to the 1993 Plan, the Company is
permitted to issue incentive stock options ("Incentive Stock Options") and
non-qualified stock options. Incentive Stock Options under the 1993 Plan are
intended to qualify for the tax treatment accorded under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code.")
All directors, officers or other key employees of the Company are eligible to
participate in the 1993 Plan. The 1993 Plan is administered by the Board of
Directors of the Company, which, to the extent it shall determine, may delegate
its power with respect to the administration of the 1993 Plan to a committee
consisting of not less than three directors.
Under the 1993 Plan, Incentive Stock Options to purchase shares of the Company's
common stock shall not be granted for less than 100 percent of the fair market
value of the common stock on the date the Incentive Stock Option is granted;
provided, however, that in the case of an Incentive Stock Option granted to any
person then owning 10 percent of the voting power of all classes of the
Company's stock, the purchase price per share subject to the Incentive Stock
Option may be not less than 110 percent of the fair market value of the stock on
the date of the grant of the option. Non-qualified stock options to purchase the
Company's common stock are granted at prices determined by the Company's Board
of Directors.
Options under the 1993 Plan may not have a term of more than 10 years; provided,
however, that an Incentive Stock Option granted to a person then owning more
than 10 percent of the voting power of all classes of the Company's stock may
not be exercisable more than 5 years after the date such option is granted. In
addition, the aggregate fair market value, determined at the time the option is
granted, of the stock with respect to which Incentive Stock Options are
exercisable for the first time by an employee in any calendar year under the
1993 Plan may not exceed $100,000.
The Company's 1983 Stock Option Plan terminated in 1994. No executive officers
or directors have any outstanding options under the 1983 Stock Option Plan.
The Company has an informal bonus plan in which officers and other key personnel
participate. The bonus award, if any, is fixed annually by the Board of
Directors. Bonuses were allocated and paid to executive officers under this plan
during fiscal 1997 and shown on the foregoing Summary Compensation Table.
<PAGE>
13
The Company maintains a deferred compensation plan under Internal Revenue Code
Section 401(k). All employees are eligible to participate; the Company
contributes 50% of the first 2% deferred by the employee Each employees may
voluntarily contribute up to 15% of annual compensation, or the maximum allowed
as determined by the Internal Revenue Code. Benefits are 100% vested and are
payable upon the employee's death, disability, retirement, termination, and
under certain financial circumstances. At December 31, 1997, $2,187 was
contributed to the plan for officers. All contributions are reflected in the
salary column in the Summary Compensation Table.
During 1997, the Company entered into employee agreements with Mr. Joel A.
Kramer and Kenneth S. Schneider pursuant to which Mr. Kramer will serve as
President and Mr. Schneider will serve as Vice President. The employment
agreements provide that Mr. Kramer will receive a minimum salary of $117,810 and
Mr. Schneider $105,155. During the employment period each of Mr. Kramer and Mr.
Schneider will be entitled upon termination expiration of the agreement under
certain circumstances (including a change of control) to certain severance
benefits. The initial term of the agreements is three years. The respective
agreements are fixed as exhibits hereto.
Except for life and medical insurance benefit programs, which are available to
all employees, the Company has no other compensation plans. Outside directors
receive a per meeting fee of $500, in addition to reimbursement of expenses for
attending each meeting. According to World Bank policy, Mr. Sopher cannot accept
the meeting fee. Item 11. Security Ownership of Certain Beneficial Owners and
Management The following table sets forth as of December 31, 1997 information
concerning (i) the shares held by each person or group known to own beneficially
more than 5% of the outstanding shares of common stock,(ii) shares owned by
directors and (iii) the shares owned by all directors and officers as a group.
Name and Address of ...... Number of Shares Percent of
Beneficial Owner ......... Beneficially Class
Kenneth S. Schneider ..... 293,038(1) 19.5%
270 Pulaski Road
Greenlawn, NY 11740
Joel A. Kramer ........... 272,635(1) 18.1%
270 Pulaski Road
Greenlawn, NY 11740
Jamil Sopher ............. 1,730 (4)
270 Pulaski Road
Greenlawn, NY 11740
Robert M. Kramer ......... 5,000(2) (4)
270 Pulaski Road
Greenlawn, NY 11740
Michael Breneisen ........ 36,900(3) 2.5%
270 Pulaski Road
Greenlawn, NY 11740
All officers and directors 603,303 40.5%
As a group (5 in number)
(1) Includes 10,000 shares issuable upon the exercise of stock options
granted under the Company's 1993 Stock Option Plan.
(2) Includes 5,000 shares issuable upon exercise of stock options granted
under the
Company's 1993 Stock Option Plan.
(3) Includes 5,750 shares issuable upon exercise of stock options granted
under the Company's 1987 Stock Option Plan.
(4) Less than 1%.
<PAGE>
14
Item 12. Certain Relationships and Related Transactions
None.
Item 13. Exhibits and Reports on Form 8-K(a)
Exhibits
3(a)The Company's Certificate of Incorporation under the State of Nevada was
filed as an Exhibit with the Proxy Statement filed in June 1987 (File No.
0-11883) and is incorporated by reference herein.
3(b)The By-laws of the Company as a Nevada corporation were filed as an Exhibit
on Form 8-K in third quarter of 1987 (File No. 0-11883) and are incorporated by
reference herein.
10(a)The Company's 1993 Stock Option Plan was filed as an Exhibit to the
Company's definitive 1994 proxy statement filed in May 1994 (File No. 0-11883),
and is incorporated by reference herein.
10(b)Commercial mortgage and consolidation agreement dated May 25, 1988 between
Home Federal Savings Bank and Telebyte Technology, Inc., filed as an Exhibit to
the Company's 1988 Annual Report on Form 10-K (File No. 0-11883) and is
incorporated by reference herein.
10(c)Deferred compensation agreements dated December 12, 1990 between Telebyte
Technology, Inc. and Joel A. Kramer and Kenneth S. Schneider, filed as an
Exhibit to the Company's 1990 Annual Report on Form 10-K (File No. 0-11883) and
is incorporated by reference herein.
10(e)$1,000,000 Revolving Line of Credit agreement dated June 23, 1994 between
Merrill Lynch and Telebyte Technology, Inc. and was filed as an exhibit on Form
10-KSB for the year ended December 31, 1994 (File No.
0-11883) and is incorporated by reference herein.
10(f) Employment agreements between Mr. Joel A. Kramer and Kenneth S. Schneider
dated August 1, 1997 and is attached herein.
(23) Consent of Grant Thornton LLP, independent certified public accountants.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter for the fiscal
year ended December 31, 1996.
<PAGE>
15
Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELEBYTE TECHNOLOGY, INC.
By: __________\s\_________________
Joel A. Kramer, President and
Chairman of the Board
(Principal Executive Officer)
By: ___________\s\________________
Michael Breneisen, Vice President of Finance
(Principal Financial and Accounting Officer)
Date: March 25, 1998
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant, and in the
capacities and on the dates indicated.
March 25, 1998 __________\s\_____________
Joel A. Kramer, Director
March 25, 1998 __________\s\_____________
Kenneth S. Schneider, Director
March 25, 1998 ___________\s\____________
Jamil Sopher, Director
March 25, 1998 ___________\s\____________
Robert M. Kramer, Director
<PAGE>
F1
Telebyte Technology, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1997 and 1996 F-3
Statements of Earnings for the years ended
December 31, 1997 and 1996 F-5
Statement of Shareholders' Equity for the years
ended December 31, 1997 and 1996 F-6
Statements of Cash Flows for the years ended
December 31, 1997 and 1996 F-7
Notes to Financial Statements F-8 - F-19
<PAGE>
F2
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Telebyte Technology, Inc.
We have audited the accompanying balance sheets of Telebyte Technology, Inc. as
of December 31, 1997 and 1996, and the related statements of earnings,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Telebyte Technology, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Melville, New York
March 6, 1998
<PAGE>
F3
Telebyte Technology, Inc.
BALANCE SHEETS
December 31,
ASSETS 1997 1996
-------------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 730,284 $ 583,721
Accounts receivable, net of allowance of
$15,000 752,141 413,953
Inventories 1,221,768 1,078,111
Prepaid expenses and other 39,204 79,083
Deferred income taxes 80,000 80,000
----------- ----------
Total current assets 2,823,397 2,234,868
PROPERTY AND EQUIPMENT - AT COST,
less accumulated depreciation 1,120,435 1,170,035
OTHER ASSETS 169,632 43,352
---------- ----------
$4,113,464 $3,448,255
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
F4
Telebyte Technology, Inc.
BALANCE SHEETS (continued)
December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
------- --------
CURRENT LIABILITIES
Accounts payable $ 415,120 $ 198,023
Accrued expenses 146,577 94,743
Current maturities of long-term debt 51,500 65,552
----------- ---------
Total current liabilities 613,197 358,318
LONG-TERM DEBT, less current maturities 926,612 983,107
COMMITMENTS
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 9,000,000
shares authorized; 1,636,566 shares
issued; 1,481,766 shares outstanding in
1997 and 1996 16,366 16,366
Capital in excess of par value 2,751,988 2,751,988
Accumulated deficit (93,606) (560,431)
Treasury stock - 154,800 shares at cost,
in 1997 and 1996 (101,093) (101,093)
---------- -----------
2,573,655 2,106,830
--------- ---------
$4,113,464 $3,448,255
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
F5
Telebyte Technology, Inc.
STATEMENTS OF EARNINGS
Year ended December 31,
1997 1996
---------- --------
Net sales $5,479,603 $4,136,685
Cost of sales 2,526,358 1,965,382
--------- ---------
Gross profit 2,953,245 2,171,303
--------- ---------
Operating expenses
Selling, general and administrative 2,106,880 1,833,069
Research and development 319,996 260,322
---------- ----------
2,426,876 2,093,391
--------- ---------
Operating profit 526,369 77,912
---------- -----------
Other income (expense)
Interest income 14,170 18,381
Rental income 48,195 48,195
Interest expense (114,909) (113,033)
---------- ----------
(52,544) (46,457)
----------- -----------
Earnings before income taxes 473,825 31,455
Income tax provision 7,000 1,000
----------- ------------
NET EARNINGS $ 466,825 $ 30,455
========== ===========
Earnings per common share:
Basic $.32 $.02
=== ===
Diluted $.31 $.02
=== ===
Shares used in computing earnings
per common share:
Basic 1,481,766 1,489,958
========= =========
Diluted 1,503,154 1,502,018
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
F6
<TABLE>
Telebyte Technology, Inc.
STATEMENT OF SHAREHOLDERS' EQUITY
Years ended December 31, 1997 and 1996
<CAPTION>
Number of Capital in
shares Common excess of Accumulated Treasury
issued stock par value deficit stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 1,636,566 $16,366 $2,751,988 $(590,886) $ (85,945) $2,091,523
Purchase of treasury stock (15,148) (15,148)
Net earnings 30,455 30,455
---------- ----------- ------------- --------- ----------- ---------
Balance at December 31, 1996 1,636,566 16,366 2,751,988 (560,431) (101,093) 2,106,830
Net earnings 466,825 466,825
---------- ----------- ----------- -------- ----------- ----------
Balance at December 31, 1997 1,636,566 $16,366 $2,751,988 $ (93,606) $(101,093) $2,573,655
========= ====== ========= ========= ========== =========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
F7
Telebyte Technology, Inc.
STATEMENTS OF CASH FLOWS
Year ended December 31,
1997 1996
---------- -------
Cash flows from operating activities
Net earnings $ 466,825 $ 30,455
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 96,517 88,497
(Increase) decrease in operating assets
Accounts receivable (338,188) 50,735
Inventories (143,657) (114,207)
Prepaid expenses and other (95,921) 12,471
Increase (decrease) in operating liabilities
Accounts payable 217,097 64,956
Accrued expenses 51,834 (25,147)
--------- ---------
Net cash provided by operating activities 254,507 107,760
-------- --------
Cash flows from investing activities
Additions to property and equipment (37,397) (60,071)
--------- ---------
Net cash used in investing activities (37,397) (60,071)
--------- ---------
Cash flows from financing activities
Principal payments of long-term debt (70,547) (58,286)
Purchase of treasury stock - (15,148)
--------- ---------
Net cash used in financing activities (70,547) (73,434)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 146,563 (25,745)
Cash and cash equivalents at beginning of year 583,721 609,466
-------- --------
Cash and cash equivalents at end of year $ 730,284 $ 583,721
======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
F8
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Telebyte Technology, Inc. (the "Company") designs, manufactures and markets
electronic data communications products. The Company's products are
primarily sold to end-users, domestic dealers and distributors, foreign
dealers and distributors and original equipment manufacturers. The Company
does not depend upon sales to a single customer or a limited group of
customers and there were no sales to a single customer during the last two
years exceeding 10% of net sales. The Company operates in a single business
segment and has no foreign operations. Export sales were $778,000 and
$441,000 in 1997 and 1996, respectively.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
1. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
2. Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed on the straight-line basis over
the estimated useful lives of the assets, which are 35 years for
building and improvements and 5 years for equipment.
3. Income Taxes
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities and
loss carryforwards for which income tax benefits are expected to be
realized in future years. A valuation allowance has been established to
reduce the deferred tax assets as it is more likely than not that all,
or some portion, of such deferred tax assets will not be realized. The
effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.
<PAGE>
F9
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE A (continued)
4. Earnings Per Share
In 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share."
SFAS No. 128 replaced the calculation of 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 for
all periods have been presented, and, where appropriate, restated to
conform to the SFAS No. 128 requirements.
5. Stock-Based Compensation Plans
The Company maintains two fixed stock option plans, as more fully
described in Note G to the financial statements, accounted for using
the "intrinsic value" method pursuant to the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, recognizes no compensation expenses.
Therefore, the Company has elected the disclosure provisions only of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."
6. Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers
highly liquid cash investments with an original maturity of three
months or less to be cash equivalents. The Company paid interest of
$114,289 and $113,033 and income taxes of $200 and $1,000 in 1997 and
1996, respectively.
7. Revenue Recognition
Revenue is recognized from sales when a product is shipped. Service
fees are recognized upon the completion of the related service.
<PAGE>
F10
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE A (continued)
8. Use of Estimates and Fair Value of Financial Instruments
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The Company has estimated the fair value of financial instruments using
available market information and other valuation methodologies in
accordance with Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments." Management of the Company
believes that the fair value of financial instruments, consisting of
cash, accounts receivable and debt, approximate carrying value due to
the immediate or short-term maturity associated with its cash and
accounts receivable and the interest rates associated with its debt.
NOTE B - INVENTORIES
Inventories consist of the following at December 31:
1997 1996
----------- -------
Purchased components and materials $ 581,912 $ 519,645
Work in process 256,916 222,963
Finished goods 382,940 335,503
---------- ----------
$1,221,768 $1,078,111
========= =========
<PAGE>
F11
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1997 1996
--------- -------
Land $ 300,000 $ 300,000
Building and improvements 1,024,583 1,024,583
Equipment 552,222 514,825
---------- ----------
1,876,805 1,839,408
Less accumulated depreciation 756,370 669,373
---------- ----------
$1,120,435 $1,170,035
========= =========
NOTE D - DEBT
1. Line of Credit Facility
The Company has an agreement with a financial institution, expiring in
July 1999, which provides the Company with a line of credit facility of
up to $1,000,000 based on eligible accounts receivable and purchased
components and materials and finished goods inventories of the Company,
as defined in the agreement. Borrowings under the line of credit bear
interest at the bank's specified prime rate plus .75% (9.2% at December
31, 1997). There was no outstanding balance against this line at
December 31, 1997.
2. Long-Term Debt
The Company's first mortgage note is collateralized by land and
building and the other notes payable are collateralized by equipment.
The remaining unpaid mortgage note balance at December 31, 1997 is
payable in equal monthly installments of $12,484 (inclusive of interest
at 10%) with a maturity date of June 2008. The interest rate is
computed based on a 2.75% increment over the bank's prime interest
rate; however, such rate cannot be less than 10% and was recalculated
on July 1, 1997. During March 1998, the Company modified the mortgage
note agreement, reducing the existing interest rate to 9% and modifying
the adjustment formula to 3%
<PAGE>
F12
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE D (continued)
over the three-year Treasury bill rate. Financing and other costs
aggregating $85,122 incurred in connection with the acquisition of real
property and the refinancing of mortgage debt are stated at cost, net
of accumulated amortization of $48,247 and $44,047 at December 31, 1997
and 1996, respectively, and are included in "Other assets" in the
accompanying balance sheets. Amortization is provided on a
straight-line basis over the life of the mortgage note of 20 years.
Long-term debt is summarized as follows at December 31:
1997 1996
---------- ----------
First mortgage note payable to bank in
equal monthly installments, including
interest, through June 2008 .......... $ 978,112 $1,024,378
Notes payable to bank in equal monthly
installments, including interest at 9%
to 10%, through February 1998 ........ 24,281
---------- ----------
978,112 1,048,659
Less current maturities .................. 51,500 65,552
---------- ----------
$ 926,612 $ 983,107
========== ==========
Aggregate maturities of long-term debt as of December 31, 1997 are as follows:
1998 $ 51,500
1999 57,602
2000 64,427
2001 72,060
2002 80,598
Thereafter 651,925
-------
$978,112
========
<PAGE>
F13
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE E - EMPLOYEE BENEFIT PLANS
The Company sponsors an employee investment savings 401(k) plan to which
both the Company and employees contribute. Employer contributions of $7,417
and $7,094 were made to the plan in 1997 and 1996, respectively.
The Company maintains deferred compensation agreements with several key
officers, whereby the officers will receive a defined amount approximating
30% of their 1990 base salary for a period of 10 years after reaching age
65. The deferred compensation plans are funded through life insurance and
are being provided for currently. The expense charged to operations in 1997
and 1996 for such future obligations was approximately $16,700 and $13,400,
respectively.
NOTE F - INCOME TAXES
The provision for income taxes is summarized as follows:
1997 1996
--------- ------
Current
Federal $2,000
State 5,000 $1,000
----- -----
$7,000 $1,000
===== =====
<PAGE>
F14
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE F (continued)
The actual income tax expense differs from the Federal statutory rate as
follows:
1997 1996
-------------------------- ------------------
Amount % Amount %
Federal statutory rate $ 161,000 34.0% $ 10,700 34.0%
State income taxes, net of
Federal income tax benefit 3,000 .6 700 2.1
Officers' life insurance 7,000 1.5 5,200 16.6
Other 2,000 .4 300 1.2
Benefit of net operating loss
carryforward (166,000) (35.0) (15,900) (50.7)
-------- ----- ------- -----
$ 7,000 1.5% $ 1,000 3.2%
========== ====== ======== =======
At December 31, 1997, the Company has net operating loss carryforwards and
tax credits expiring from 1998 through 2007 of approximately $530,000 and
$29,000, respectively, available to reduce Federal and state income taxes
resulting from future operations.
The tax effects of temporary differences which give rise to deferred tax
assets (liabilities) at December 31, 1997 and 1996, are summarized as follows:
1997 1996
----------- -------
Deferred tax assets
Net operating loss carryforwards $ 213,000 $ 379,000
Investment and other tax credit carryforwards 20,000 79,000
Inventory valuation 10,000 48,000
Allowance for doubtful accounts 6,000 6,000
Other 5,000
---------- ---------
Gross deferred tax assets 254,000 512,000
<PAGE>
F15
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE F (continued)
1997 1996
--------- ---------
Deferred tax liabilities
Excess tax over book depreciation $(152,000) $(153,000)
--------- ---------
Net deferred tax assets before
valuation allowance 102,000 359,000
Valuation allowance (22,000) (279,000)
--------- ---------
Net deferred tax assets $ 80,000 $ 80,000
========= =========
NOTE G - STOCK OPTION PLANS
In 1987, the Company adopted a plan which provided for the granting to
officers and key employees of the Company of incentive stock options, as
defined in the Internal Revenue Code, for the purchase of a maximum of
250,000 shares of the Company's common stock. Under the terms of the plan,
the options, which expire ten years after grant, are exercisable at a price
equal to the fair market value of the stock at the date of the grant. The
options become exercisable in four annual installments, the first
installment occurring within one year after the date of grant.
In 1994, the Company adopted the 1993 Stock Option Plan (the "1993 Plan"),
which provides for the granting to directors and key employees of the
Company of incentive stock options and nonqualified stock options for the
purchase of a maximum of 100,000 shares of the Company's common stock.
Under the terms of the 1993 Plan, the options, which expire ten years after
grant, are exercisable at a price equal to the fair market value of the
stock at the date of the grant for incentive stock options and at prices
determined by the Board of Directors for nonqualified stock options, and
become exercisable in accordance with terms established at the time of the
grant. At December 31, 1997, the Company had reserved 60,000 shares under
the 1993 Plan.
<PAGE>
F16
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE G (continued)
The following is a summary of activity with respect to stock options under
the plans:
Weighted average
Shares Price per share price per share
------ --------------- ---------------
Outstanding at January 1, 1996 76,750 .3125 to 2.04 .95
Granted 5,000 .79 .79
Expired (10,000) 1.03 to 2.04 1.54
-------
Outstanding at December 31, 1996 71,750 .3125 to 2.04 .86
Granted 5,000 .685 .685
Expired (15,000) .3125 to .90 .71
-------
Outstanding at December 31, 1997 61,750 .3125 to 2.04 .88
=======
Balance exercisable at 12/31/97 55,500 .3125 to 2.04 .88
=======
The following table summarizes significant ranges of outstanding and
exercisable options at December 31, 1997:
Options outstanding Options exercisable
Weighted Weighted Weighted
average average average
Ranges of remaining exercise exercise
exercise prices Shares life in years price Shares price
- --------------- ------ ------------- ----- ------ ------
under $1.00 41,750 4.5 $.56 38,000 $.55
$1.01 to $2.04 20,000 7 1.54 17,500 1.61
The weighted-average option fair value on the grant date was $.53 and $.28 for
options issued during the years ended December 31, 1997 and 1996, respectively.
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123"); it applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for the
Plans and does not recognize compensation expense for such Plans. If the
Company had elected to recognize compensation expense based upon the fair
value at the grant dates for awards under these plans consistent with the
methodology prescribed by SFAS No. 123, the Company's reported net
<PAGE>
F17
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE G (continued)
earnings and earnings per share would be reduced to the pro forma amount
indicated below for the years ended December 31:
1997 1996
------------ ---------
Net earnings
As reported $466,825 $ 30,455
Pro forma 466,273 29,055
Basic earnings per common share
As reported $.32 $.02
Pro forma .31 .02
Diluted earnings per common share
As reported $.31 $.02
Pro forma .31 .02
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related
to grants made before 1996. The fair value of these options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions for the years ended December 31,
1997 and 1996, respectively: expected volatility of 80% and 23%; risk-free
interest rates of 6.82% for both years; and expected term of seven years
for both years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the use of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective assumptions can materially
affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.
NOTE H - COMMITMENTS
Lease Commitments
The Company leases certain equipment used in its operations pursuant to
noncancellable operating leases expiring through August 2000. Rental
expense for such equipment was $13,774 and $17,015
<PAGE>
F18
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE H (continued)
in 1997 and 1996, respectively. The minimum rental commitments under these
noncancellable operating leases, at December 31, 1997, are summarized as
follows:
1998 $15,400
1999 6,000
2000 3,800
-------
$25,200
Employment Contracts
The Company has employment contracts with various officers with remaining
terms of approximately three years at amounts approximating their current
levels of compensation. The Company's remaining aggregate commitment at
December 31, 1997 under such contracts is approximately $576,000.
NOTE I - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
December 31,
1997 1996
Numerator
Net income $466,825 $30,455
======= ======
Denominator
Denominator for basic earnings per share
(weighted-average shares) 1,481,766 1,489,958
Effect of dilutive securities
Employee stock options) 21,388 12,060
--------- ---------
Denominator for diluted earnings per share
(adjusted weighted-average shares and
assumed conversions) 1,503,154 1,502,018
========= =========
Basic earnings per share $.32 $.02
=== ===
Diluted earnings per share $.31 $.02
=== ===
<PAGE>
F19
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997 and 1996
NOTE J - MAJOR SUPPLIERS
The Company purchased approximately 13% of its raw materials from one
supplier during the year ended December 31, 1997. The Company expects this
relationship with this supplier to continue for the foreseeable future. The
Company believes that similar products could be purchased from other
sources.
<PAGE>
F20
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 6, 1998, accompanying the financial
statements included in the Annual Report of Telebyte Technology, Inc. on Form
10-KSB for the year ended December 31, 1997. We hereby consent to the
incorporation by reference of said report in the Registration Statement of
Telebyte Technology, Inc. on Form S-8 (File No. 0-11883), effective March 29,
1996.
GRANT THORNTON LLP
Melville, New York
March 6, 1998
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of August 1, 1997, by and
between Telebyte Technology, Inc., a Nevada corporation (the "Company") and Joel
A. Kramer (the "Executive").
RECITALS:
1. The Company wishes to employ the Executive upon the terms and
subject to the conditions set forth in this Agreement.
2. The Executive is willing to serve in the employ of the Company upon
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and the Executive
hereby agree as follows:
1. EMPLOYMENT; DUTIES.
(a) The Company hereby employs the Executive as President, and
the Executive hereby accepts such employment.
(b) In his capacity as President, the Executive shall have
such responsibilities and duties consistent with his respective
position, and of such a nature as are usually associated with his
office as may be designated from time to time by the Board of Directors
of the Company (the "Board of Directors").
(c) The Executive shall faithfully and diligently discharge
his duties hereunder and use his best efforts to implement the policies
established by the Board of Directors. In the performance of his duties
and functions under this Agreement, the Executive shall devote such
time as is consistent with his position as President.
2. TERM.
(a) Initial Term. Unless renewed or sooner terminated as
provided herein, the initial term (the "Initial Term") of this
Agreement shall begin on the date hereof and shall continue for a
period of three (3) years.
(b) Renewal Term. After the expiration of the Initial Term,
this Agreement shall be deemed renewed for a successive three (3) year
term, and thereafter for successive two year terms (such three (3) year
term and each successive two (2) year term being hereinafter referred
to as a "Renewal Term"), unless the Company or the Executive gives
written notice to the other on or prior to the date which is one (1)
year prior to the end of the Initial Term or any Renewal Term, of the
election to terminate this Agreement at the end of the Initial Term or
the then current Renewal Term. The Initial Term and any Renewal Terms
shall be hereinafter collectively referred to as the "Employment Term".
3. COMPENSATION.
Salary. The Company shall pay the Executive an annual base
gross salary for the services to be rendered by him from the date
hereof at the annual rate of not less than $117,810, as determined by
the Board of Directors, payable in periodic installments in accordance
with the Company's regular payroll practices as in effect from time to
time ("Salary"). The Salary may be increased (but not decreased) from
time to time by the Board of Directors, and shall in any event be
subject to annual review at the meeting of the Board of Directors
immediately following the annual meeting of the shareholders of the
Company.
Incentive Compensation. The Executive shall be entitled to an annual
performance bonus as may be determined by the Board of Directors,
in its sole discretion.
4. BENEFITS.
(a) Benefit Plans. The Executive shall be entitled to
participate in and receive the benefits under any pension,
profit-sharing, bonus, stock purchase, stock option, stock bonus,
health, life, accident and disability insurance plans or programs and
any other employee benefit or fringe benefit plans, perquisites or
arrangements which the Company makes available generally to other
employees, including, without limitation, to the senior executive
officers of the Company, to the extent that the Executive is otherwise
eligible to participate in such plans or arrangements pursuant to the
provisions of such plans or arrangements as they may be in effect from
time to time, and, containing terms and benefits at least as favorable
to the Executive as those upon which any other senior executive officer
of the Company may have rights to participate in.
(b) Automobile. The Company shall provide the Executive with a
leased vehicle for use by the Executive. In addition, the Company shall
also pay for insurance, maintenance, fuel and other costs incurred by
the Executive in the use and maintenance of such a vehicle.
(c) Life Insurance; Medical Benefits.
(i) The Company shall, at its own cost and
expense, continue to maintain the present term life
insurance policy on the life of the Executive in the
amount of $500,000, payable to such beneficiary or
beneficiaries as the Executive may designate, and,
shall provide medical benefits at least equivalent to
those benefits which the Executive heretofore
received, for the period required herein.
(ii) In the event the present term life
insurance referred to in (c)(i) above is terminated,
and such termination is due to a default by the
Company under such policy or is otherwise the fault
of the Company, the Company shall obtain an
equivalent life insurance policy and maintain such
life insurance policy for the period required herein.
In the event the present term life insurance referred
to in (c)(i) above is terminated, and such
termination is not the result of any action or
inaction by the Company, the Company shall purchase
such term life insurance as shall be available at a
cost equivalent to the premium being paid for the
present term life insurance, and maintain the same
for the period required herein.
Vacation and Holidays. The Executive shall be entitled to four
(4) weeks paid vacation during each year of the Employment Term hereof.
To the extent the Executive shall not take four (4) weeks vacation
during any year, the unused time shall accrue and carry forward to
future years. Upon termination of the Executive's employment for any
reason, the Executive shall receive a cash payment for any accrued but
unused vacation up to a maximum of six months. The Executive shall be
entitled to such holidays and sick days as determined by the Company's
policy with respect to senior executive officers in effect on the date
hereof, and as amended.
(e) Expenses. The Company shall pay or reimburse the Executive
for all reasonable expenses actually incurred or paid by the Executive
in the performance of his services hereunder (including 100% of
reasonable travel and entertainment expenses), provided, that the
Executive submits expense statements or vouchers or such other
supporting information as the Company may reasonably require of the
Executive.
5. TERMINATION OF EMPLOYMENT.
Notwithstanding the provisions of paragraph 2 hereof, this
Agreement may be terminated as follows:
(i) Upon Notice. At the end of the
Employment Term with respect to which notice is given
by the Executive or the Company pursuant to paragraph
2(a) hereof.
(ii) Death. The Executive's employment
hereunder shall terminate automatically as of the
date of his death.
(iii) Disability. The Company may terminate
the Executive's employment hereunder after having
established the Executive's "Disability" (as defined
below), by giving the Executive written notice of its
intention to terminate the Executive's employment due
to such Disability. The date of Disability shall be
the day on which the Executive receives notice from
the Company in accordance with Section 8(f) hereof.
For purposes of this Agreement, "Disability" means
the Executive's inability to perform substantially
his duties and responsibilities to the Company by
reason of a physical or mental incapacity or
infirmity (i) for a continuous period of one hundred
and twenty (120) days, not including any permitted
vacation days, holidays or sick days; or (ii) for a
cumulative period of one hundred and twenty (120)
days in any twelve month period, not including
permitted vacation days, holidays or sick days; or
(iii) at such earlier time as the Executive submits
medical evidence satisfactory to the Company that the
Executive has a physical or mental disability or
infirmity that will likely prevent the Executive from
substantially performing his duties and
responsibilities for one hundred and twenty (120)
days or longer. In the event of any disagreement
between the Executive and the Company, as to whether
the Executive is physically or mentally incapacitated
so as to constitute a "Disability" hereunder, the
question of such incapacity shall be submitted to an
impartial and reputable physician selected by mutual
agreement of the Company and the Executive, or
failing such agreement, selected by two physicians
(one of whom shall have been selected by the Company,
and the other by the Executive), and the
determination of the question of such incapacity by
such physician shall be final and binding upon the
Company, as the case may be, and the Executive. The
Company shall pay the fees and expenses of such
physician, and the Executive shall submit to any
medical examinations reasonably necessary to enable
such physician to make a determination as to whether
the Executive's incapacity constitutes a Disability
hereunder.
(iv) Cause. The Company shall have the right
to terminate the Executive's employment for "Cause".
For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure by the
Executive to perform substantially his duties to the
Company (other than any such failure resulting from
his Disability) within a reasonable period of time
after a written demand for substantial performance is
delivered to the Executive by the Board of Directors,
which demand specifically identifies the manner in
which the Board of Directors, believes that the
Executive has not substantially performed his duties;
(ii) the willful misconduct by the Executive in the
performance of his duties to the Company; (iii) the
grossly negligent performance by the Executive of his
duties to the Company, if such grossly negligent
performance is determined by the Board of Directors,
to have had or to be reasonably likely to have a
material adverse effect on the business, assets,
prospects or financial condition of the Company, or
(iv) material breach by the Executive of Section 7
hereof.
(v) Termination For Good Reason. The
Executive may terminate his employment under this
Agreement for "Good Reason." For purposes of this
Agreement, "Good Reason" shall mean, without the
Executive's express written consent, (i) a
substantial alteration in the nature or status of the
Executive's responsibilities from those contemplated
by Section 1(a) or the assignment to the Executive of
any duties inconsistent with the Executive's status
as , or (ii) a reduction in the Executive's
compensation from that contemplated by Section 3(a)
(as the same may be increased from time to time).
(vi) Transfer Event. The Executive shall
have the right to terminate this Agreement upon
thirty days prior written notice to the Company, or
any successor of the Company, as the case may be, in
the event of a "Transfer Event" (as defined below).
For purposes of this Agreement, "Transfer Event"
means:
(A) a transfer of substantially all of the
assets of the Company, (B) a change in control of the
board of directors of the Company pursuant to which
any single Person or two or more Persons acting in
concert (other than one or more Affiliates of the
Company on the date hereof) acquires control of such
board of directors or (C) the Transfer of at least
51% or more of the voting equity interests in the
Company (or any parent of the Company), whether by
sale, merger, consolidation or otherwise, to any
single Person or two or more Persons acting in
concert; provided that two or more Persons shall be
considered to be acting in concert for purposes of
clauses (B) and (C) hereof only if such Persons would
have been considered to be acting in concert as a
"group" for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended, for such
purposes treating voting equity interests of the
Company held or acquired by such Persons as if such
voting equity interests were equity securities in
respect of which a Schedule 13D would be required to
be filed with the Securities and Exchange Commission
and as if the requisite percentage and other
threshold conditions to such filing were satisfied;
provided, further, that a "Transfer Event" shall not
include a pledge of the voting equity interests in
the Company to the holders of debt financing or any
refinancing thereof (but not a Transfer arising from
the exercise of such holders rights under such
pledge). For purposes of this Section 5(a)(vi):
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
governmental body.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common
control with such Person.
"Transfer" means sell, transfer, convey, lease and/or deliver (other tenses
of the term have similar meaning) or sale, transfer, assignment,
conveyance, lease and/or delivery, as indicated by the context.
(b) In the event that this Agreement is terminated pursuant to
Section (a) above, the Executive shall be released from any further
obligations under Section 1 hereof, and the Company shall be released
from any further obligations hereunder, except for obligations accrued
to the date of termination. Termination of this Agreement pursuant to
Section 5(a) and shall in no way abrogate or relieve the Executive of
his obligations under Section 7 hereof.
EFFECT OF TERMINATION.
(a) Upon and following termination of the Executive's
employment because of death as provided in subsection 5(a)(ii) above,
the Company shall (i) continue to pay to the Executive's spouse the
amount of the Executive's Salary as provided in Section 3(a) at the
rate in effect immediately prior to termination of his employment, for
a period of one (1) year from the date of termination of the
Executive's employment, (ii) continue to provide medical benefits
equivalent to the medical benefits contemplated in Section 4(a) hereof
for the Executive's spouse for a period of one (1) year from the date
of termination of the Executive's employment, and (iii) continue to
provide an automobile as contemplated in Section 4(b) hereof, to the
Executive's spouse for a period of twelve (12) months from the date of
termination of the Executive's employment.
(b) Upon and following termination of the Executive's
employment because of Disability as provided in subsection 5(a)(iii)
above, the Company shall (i) continue to pay the Executive, or, in the
event of the death of the Executive, his spouse in the event of her
death subsequent to that of the Executive's, as the case may be, the
amount of the Executive's Salary as provided in Section 3(a) at the
rate in effect immediately prior to termination of his employment, for
a period of twelve (12) months, less the amount of any disability
payments made by the Company or any Company plan, (ii) continue to
provide medical benefits equivalent to the medical benefits
contemplated in Section 4(a) hereof and to maintain the term life
insurance contemplated in Section 4(c) hereof for a period of one year
from the date of termination of the Executive's employment, and (iii)
continue to provide an automobile as contemplated in Section 4(b)
hereof for a period of twelve (12) months from the date of termination
of the Executive's employment.
(c) In the event Executive's employment is terminated by the
Executive for Good Reason or upon the occurrence of a Transfer Event,
or by the Company other than for death, Disability or Cause, the
Company shall make a lump sum payment to the Executive of the Salary
for the remainder of the Employment Term (or in the event of the
subsequent death of the Executive to his spouse) and, shall continue to
provide medical benefits equivalent to the medical benefits
contemplated in Section 4(a) hereof, and to maintain the term life
insurance contemplated by Section 4(c) hereof for such period.
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a termination by the Company of the
Executive's employment hereunder, or the termination by the Executive
of his employment for Good Cause or upon the occurrence of a Transfer
Event, the Executive shall not be required to seek other employment in
mitigation of his damages, nor shall the possibility or fact of any
other such employment and the compensation which the Executive might
reasonably be expected to receive, actually receives, or to which the
Executive becomes entitled, by reason thereof, be considered as
mitigating his damages.
7. COVENANTS.
(a) In view of the fact that the Company is engaged in
specialized businesses, which businesses are conducted throughout the
world, and the information, research and marketing data developed by
the Company or any of its subsidiaries or affiliates are confidential,
the Executive agrees that, during his employment and for a period of
one (1) year from the termination of his employment with the Company,
he will not (i) directly or indirectly engage in the business
substantially conducted by the Company at the date of such termination,
either for himself or for any person, employer, business or other
entity in competition with the Company, (ii) engage in any such
business on his own account, or (iii) become interested in any such
business, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, employee, trustee,
consultant or in any other relationship or capacity; provided, however,
that ownership of less than 5% of any class of outstanding securities
of a company registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended, shall not be deemed to constitute
engaging, participating in, or becoming interested in any such
business.
(b) During his employment and for a period of one (1) year
thereafter, the Executive and any entity controlled by the Executive
shall not, directly or indirectly, (i) make any false or malicious
statement, oral or written, which is injurious to the business,
reputation or operations of the Company, its officers or directors, as
applicable, or which may interfere with the good will of the Company or
its relations with its customers and suppliers, or (ii) solicit,
interfere with, hire, offer to hire or induce any person who is an
officer, employee or agent of the Company to discontinue his or her
relationship with the Company or any subsidiary or affiliate of the
Company, or to accept employment by any other entity or person.
(c) The Executive agrees to keep secret and retain in the
strictest confidence all confidential matters which relate to the
Company, including, without limitation, customer lists, trade secrets,
pricing policies and other confidential business affairs of the Company
and any of its subsidiaries or affiliates ("Confidential Information")
learned by him from the Company or any of its subsidiaries affiliates
and not to disclose any such Confidential information to anyone outside
the Company or any of its affiliates, whether during or after his
period of service with the Company, except in the course of performing
his duties hereunder; provided, however, Confidential Information shall
not include information that (i) is known generally by the public on
the date of the Executive's termination, (ii) has otherwise come into
the public domain without a breach by the Executive, under this
Agreement, or (iii) is required to be disclosed pursuant to applicable
Federal, state or local laws or judicial process. Upon request by the
Company, the Executive agrees to deliver promptly to the Company upon
termination of his employment, or at any time thereafter as the Company
may request, all Company memoranda, notes, records, reports, manuals,
drawings, designs, computer files in any media and other documents (and
all copies thereof) containing such Confidential Information and all
property of the Company or any of its subsidiaries or affiliates which
the Executive may then possess or have under his control.
(d) The Executive agrees that all processes, technologies and
inventions, including new contributions, improvements, formats,
packages, programs, systems, machines, compositions of matter
manufactured, developments, applications and discoveries which are
related in any manner to the business (commercial or experimental) of
the Company during the term of the Executive's employment, whether
patentable or not, conceived, developed, invented or made by the
Executive, or by the Executive jointly with others during the term of
his employment with the Company, or by the Company or its affiliates or
on their behalf (collectively, "New Developments"), shall belong to the
Company, and, the Company shall have the sole right to all proceeds
arising from or related to such New Developments. The Executive shall
further: (a) promptly disclose such New Developments to the Company;
(b) assign to the Company, without additional compensation, all patent
or other rights to such New Developments for the United States and
foreign countries; (c) sign all papers necessary to carry out the
foregoing; and (d) give testimony in support of his inventorship, all
at the sole cost and expense of the Company.
(e) If the Executive commits a material breach of any of the
provisions of this Section 7, the Company shall have the right and
remedy to have the provisions of this Agreement specifically enforced
by any court of competent jurisdiction, it being acknowledged and
agreed to by the Executive that any such breach will cause irreparable
injury to the Company and that money damages will not provide an
adequate remedy to the Company. Such rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies
available to the Company at law or in equity. The provisions of this
Section 7 shall survive the expiration or termination of this
Agreement.
(f) Although the restrictions contained in this Section 7 are
considered to be fair and reasonable in the circumstances, it is
recognized that restrictions of the nature contained in this Section 7
may fail for technical reasons; accordingly, if any of such
restrictions shall be adjudged to be void or unenforceable for whatever
reason, but would be valid if part of the wording thereof were deleted,
or the period thereof reduced or the area dealt with thereby reduced in
scope, the restrictions contained in this Section 7 shall apply, at the
election of the Company, with such modifications as may be necessary to
make them valid, effective and enforceable, in the particular
jurisdiction in which such restrictions are adjudged to be void or
unenforceable.
8. MISCELLANEOUS.
This Agreement or any rights or obligations hereunder may not
be assigned by any of the parties hereto without the prior written
consent of the other parties; provided, however, that this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of the Company upon any sale of all or substantially all of the
Company's assets, or upon any merger or consolidation of the Company
with or into any other corporation, all as though such successors and
assigns of the Company and their respective successors and assigns were
the Company, as the case may be.
(b) This Agreement and the relationships of the parties in
connection with the subject matter of this Agreement shall be construed
and enforced according to the laws of the State of New York without
giving effect to the conflict of laws rules thereof.
This Agreement contains the full and complete agreement of the
parties relating to the employment of the Executive hereunder and
supersedes all prior agreements, arrangements or understandings,
whether written or oral, relating thereto. Neither this Agreement, nor
any provision hereof, may be amended, modified, waived or supplemented
by written instrument signed by the parties hereto, and a written
waiver of any of the provisions shall be valid and effective only if
signed by each of the parties hereto and shall be valid and effective
only in the instance for which given.
If any provision of this Agreement is held to be invalid or
enforceable by any judgment of a tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgment,
and this Agreement shall be carried out as near to its original terms
and intent as possible.
All provisions of this Agreement which, by their nature,
should survive termination of this Agreement, including, but not
limited to, Section 7, shall survive said termination.
All notices, requests and demands given to or made upon the
respective parties hereto shall be deemed to have been received five
(5) business days after the date of mailing when mailed by certified
mail, postage prepaid, or one business day after the date of delivery
by a recognized overnight delivery service, or, upon receipt of
confirmation of transmission when sent by telecopier, addressed to the
parties at their addresses set forth below or to such other addresses
furnished by notice given in accordance with this subsection (f): (a)
if to the Company, to Telebyte Technologies, Inc., 270 Pulaski Road,
Greenlawn, New York 11740, Telecopier No.: (516) 385-8184 Attention:
Board of Directors, and (b) if to the Executive, at his address set
forth on the signature page hereof.
No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
(h) The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or
construction of this Agreement.
This Agreement may be signed in any number of counterparts,
each of which shall be deemed an original, but when taken together as a
whole shall constitute one and the same instrument.
The Company may withhold from any amounts payable under this
Agreement, any federal, state and local income taxes, social security
taxes and other taxes and deductions as required by applicable law.
(k) (i) The Executive and the Company agree and consent that
(A) any controversy or claim arising out of or relating to this
Agreement, its scope, or the breach or interpretation of any provision
hereof shall be settled by arbitration before a panel of three (3)
arbitrators and otherwise in accordance with the rules then obtaining
of the American Arbitration Association; (B) such arbitration shall be
held in the City of Happaugue, County of Suffolk and State of New York;
(C) the award in any such arbitration shall be final, binding and
conclusive; and (D) judgment on any award of any such arbitration,
including, but not limited to specific performance, may be entered in
any court having jurisdiction thereof. Notice of any arbitration shall
be sufficient if given in accordance with Section 8(f) hereof.
(ii) In connection with any proceeding by the
Executive to recover payments allegedly due and not paid to the
Executive under Sections 3 or 6 hereof, the prevailing party with
respect to the claim for payment of such amounts shall be entitled to
reimbursement for reasonable counsel's fees and reasonable
disbursements.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
TELEBYTE TECHNOLOGY, INC.
By: ____________\s\_______________
Name: Joel A. Kramer
Title: President
___________\s\_______________
Joel A. Kramer
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of August 1, 1997, by and
between Telebyte Technology, Inc., a Nevada corporation (the "Company") and
Kenneth S. Schneider (the "Executive").
RECITALS:
1. The Company wishes to employ the Executive upon the terms and
subject to the conditions set forth in this Agreement.
2. The Executive is willing to serve in the employ of the Company upon
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements hereinafter set forth, the Company and the Executive
hereby agree as follows:
1. EMPLOYMENT; DUTIES.
(a) The Company hereby employs the Executive as Vice
President, Treasurer and Secretary, and the Executive hereby accepts
such employment.
(b) In his capacity as Vice President, Treasurer and
Secretary, the Executive shall have such responsibilities and duties
consistent with his respective position, and of such a nature as are
usually associated with his office as may be designated from time to
time by the Board of Directors of the Company (the "Board of
Directors").
(c) The Executive shall faithfully and diligently discharge
his duties hereunder and use his best efforts to implement the policies
established by the Board of Directors. In the performance of his duties
and functions under this Agreement, the Executive shall devote such
time as is consistent with his position as Vice President, Treasurer
and Secretary.
2. TERM.
(a) Initial Term. Unless renewed or sooner terminated as
provided herein, the initial term (the "Initial Term") of this
Agreement shall begin on the date hereof and shall continue for a
period of three (3) years.
(b) Renewal Term. After the expiration of the Initial Term,
this Agreement shall be deemed renewed for a successive three (3) year
term, and thereafter for successive two year terms (such three (3) year
term and each successive two (2) year term being hereinafter referred
to as a "Renewal Term"), unless the Company or the Executive gives
written notice to the other on or prior to the date which is one (1)
year prior to the end of the Initial Term or any Renewal Term, of the
election to terminate this Agreement at the end of the Initial Term or
the then current Renewal Term. The Initial Term and any Renewal Terms
shall be hereinafter collectively referred to as the "Employment Term".
3. COMPENSATION.
Salary. The Company shall pay the Executive an annual base
gross salary for the services to be rendered by him from the date
hereof at the annual rate of not less than $105,159, as determined by
the Board of Directors, payable in periodic installments in accordance
with the Company's regular payroll practices as in effect from time to
time ("Salary"). The Salary may be increased (but not decreased) from
time to time by the Board of Directors, and shall in any event be
subject to annual review at the meeting of the Board of Directors
immediately following the annual meeting of the shareholders of the
Company.
Incentive Compensation. The Executive shall be entitled to
an annual performance bonus as may be determined by the Board of
Directors, in its sole discretion.
4. BENEFITS.
(a) Benefit Plans. The Executive shall be entitled to
participate in and receive the benefits under any pension,
profit-sharing, bonus, stock purchase, stock option, stock bonus,
health, life, accident and disability insurance plans or programs and
any other employee benefit or fringe benefit plans, perquisites or
arrangements which the Company makes available generally to other
employees, including, without limitation, to the senior executive
officers of the Company, to the extent that the Executive is otherwise
eligible to participate in such plans or arrangements pursuant to the
provisions of such plans or arrangements as they may be in effect from
time to time, and, containing terms and benefits at least as favorable
to the Executive as those upon which any other senior executive officer
of the Company may have rights to participate in.
(b) Automobile. The Company shall provide the Executive with a
leased vehicle for use by the Executive. In addition, the Company shall
also pay for insurance, maintenance, fuel and other costs incurred by
the Executive in the use and maintenance of such a vehicle.
(c) Life Insurance; Medical Benefits.
(i) The Company shall, at its own cost and
expense, continue to maintain the present term life
insurance policy on the life of the Executive in the
amount of $250,000, payable to such beneficiary or
beneficiaries as the Executive may designate, and,
shall provide medical benefits at least equivalent to
those benefits which the Executive heretofore
received, for the period required herein.
(ii) In the event the present term life
insurance referred to in (c)(i) above is terminated,
and such termination is due to a default by the
Company under such policy or is otherwise the fault
of the Company, the Company shall obtain an
equivalent life insurance policy and maintain such
life insurance policy for the period required herein.
In the event the present term life insurance referred
to in (c)(i) above is terminated, and such
termination is not the result of any action or
inaction by the Company, the Company shall purchase
such term life insurance as shall be available at a
cost equivalent to the premium being paid for the
present term life insurance, and maintain the same
for the period required herein.
Vacation and Holidays. The Executive shall be entitled to four
(4) weeks paid vacation during each year of the Employment Term hereof.
To the extent the Executive shall not take four (4) weeks vacation
during any year, the unused time shall accrue and carry forward to
future years. Upon termination of the Executive's employment for any
reason, the Executive shall receive a cash payment for any accrued but
unused vacation up to a maximum of six months. The Executive shall be
entitled to such holidays and sick days as determined by the Company's
policy with respect to senior executive officers in effect on the date
hereof, and as amended.
(e) Expenses. The Company shall pay or reimburse the Executive
for all reasonable expenses actually incurred or paid by the Executive
in the performance of his services hereunder (including 100% of
reasonable travel and entertainment expenses), provided, that the
Executive submits expense statements or vouchers or such other
supporting information as the Company may reasonably require of the
Executive.
5. TERMINATION OF EMPLOYMENT.
Notwithstanding the provisions of paragraph 2 hereof, this
Agreement may be terminated as follows:
(i) Upon Notice. At the end of the
Employment Term with respect to which notice is given
by the Executive or the Company pursuant to paragraph
2(a) hereof.
(ii) Death. The Executive's employment
hereunder shall terminate automatically as of the
date of his death.
(iii) Disability. The Company may terminate
the Executive's employment hereunder after having
established the Executive's "Disability" (as defined
below), by giving the Executive written notice of its
intention to terminate the Executive's employment due
to such Disability. The date of Disability shall be
the day on which the Executive receives notice from
the Company in accordance with Section 8(f) hereof.
For purposes of this Agreement, "Disability" means
the Executive's inability to perform substantially
his duties and responsibilities to the Company by
reason of a physical or mental incapacity or
infirmity (i) for a continuous period of one hundred
and twenty (120) days, not including any permitted
vacation days, holidays or sick days; or (ii) for a
cumulative period of one hundred and twenty (120)
days in any twelve month period, not including
permitted vacation days, holidays or sick days; or
(iii) at such earlier time as the Executive submits
medical evidence satisfactory to the Company that the
Executive has a physical or mental disability or
infirmity that will likely prevent the Executive from
substantially performing his duties and
responsibilities for one hundred and twenty (120)
days or longer. In the event of any disagreement
between the Executive and the Company, as to whether
the Executive is physically or mentally incapacitated
so as to constitute a "Disability" hereunder, the
question of such incapacity shall be submitted to an
impartial and reputable physician selected by mutual
agreement of the Company and the Executive, or
failing such agreement, selected by two physicians
(one of whom shall have been selected by the Company,
and the other by the Executive), and the
determination of the question of such incapacity by
such physician shall be final and binding upon the
Company, as the case may be, and the Executive. The
Company shall pay the fees and expenses of such
physician, and the Executive shall submit to any
medical examinations reasonably necessary to enable
such physician to make a determination as to whether
the Executive's incapacity constitutes a Disability
hereunder.
(iv) Cause. The Company shall have the right
to terminate the Executive's employment for "Cause".
For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure by the
Executive to perform substantially his duties to the
Company (other than any such failure resulting from
his Disability) within a reasonable period of time
after a written demand for substantial performance is
delivered to the Executive by the Board of Directors,
which demand specifically identifies the manner in
which the Board of Directors, believes that the
Executive has not substantially performed his duties;
(ii) the willful misconduct by the Executive in the
performance of his duties to the Company; (iii) the
grossly negligent performance by the Executive of his
duties to the Company, if such grossly negligent
performance is determined by the Board of Directors,
to have had or to be reasonably likely to have a
material adverse effect on the business, assets,
prospects or financial condition of the Company, or
(iv) material breach by the Executive of Section 7
hereof.
(v) Termination For Good Reason. The
Executive may terminate his employment under this
Agreement for "Good Reason." For purposes of this
Agreement, "Good Reason" shall mean, without the
Executive's express written consent, (i) a
substantial alteration in the nature or status of the
Executive's responsibilities from those contemplated
by Section 1(a) or the assignment to the Executive of
any duties inconsistent with the Executive's status
as , or (ii) a reduction in the Executive's
compensation from that contemplated by Section 3(a)
(as the same may be increased from time to time).
(vi) Transfer Event. The Executive shall
have the right to terminate this Agreement upon
thirty days prior written notice to the Company, or
any successor of the Company, as the case may be, in
the event of a "Transfer Event" (as defined below).
For purposes of this Agreement, "Transfer Event"
means:
(A) a transfer of substantially all of the
assets of the Company, (B) a change in control of the
board of directors of the Company pursuant to which
any single Person or two or more Persons acting in
concert (other than one or more Affiliates of the
Company on the date hereof) acquires control of such
board of directors or (C) the Transfer of at least
51% or more of the voting equity interests in the
Company (or any parent of the Company), whether by
sale, merger, consolidation or otherwise, to any
single Person or two or more Persons acting in
concert; provided that two or more Persons shall be
considered to be acting in concert for purposes of
clauses (B) and (C) hereof only if such Persons would
have been considered to be acting in concert as a
"group" for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended, for such
purposes treating voting equity interests of the
Company held or acquired by such Persons as if such
voting equity interests were equity securities in
respect of which a Schedule 13D would be required to
be filed with the Securities and Exchange Commission
and as if the requisite percentage and other
threshold conditions to such filing were satisfied;
provided, further, that a "Transfer Event" shall not
include a pledge of the voting equity interests in
the Company to the holders of debt financing or any
refinancing thereof (but not a Transfer arising from
the exercise of such holders rights under such
pledge). For purposes of this Section 5(a)(vi):
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
governmental body.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common
control with such Person.
"Transfer" means sell, transfer, convey, lease and/or deliver (other tenses
of the term have similar meaning) or sale, transfer, assignment,
conveyance, lease and/or delivery, as indicated by the context.
(b) In the event that this Agreement is terminated pursuant to
Section (a) above, the Executive shall be released from any further
obligations under Section 1 hereof, and the Company shall be released
from any further obligations hereunder, except for obligations accrued
to the date of termination. Termination of this Agreement pursuant to
Section 5(a) and shall in no way abrogate or relieve the Executive of
his obligations under Section 7 hereof.
EFFECT OF TERMINATION.
(a) Upon and following termination of the Executive's
employment because of death as provided in subsection 5(a)(ii) above,
the Company shall (i) continue to pay to the Executive's spouse the
amount of the Executive's Salary as provided in Section 3(a) at the
rate in effect immediately prior to termination of his employment, for
a period of one (1) year from the date of termination of the
Executive's employment, (ii) continue to provide medical benefits
equivalent to the medical benefits contemplated in Section 4(a) hereof
for the Executive's spouse for a period of one (1) year from the date
of termination of the Executive's employment, and (iii) continue to
provide an automobile as contemplated in Section 4(b) hereof, to the
Executive's spouse for a period of twelve (12) months from the date of
termination of the Executive's employment.
(b) Upon and following termination of the Executive's
employment because of Disability as provided in subsection 5(a)(iii)
above, the Company shall (i) continue to pay the Executive, or, in the
event of the death of the Executive, his spouse in the event of her
death subsequent to that of the Executive's, as the case may be, the
amount of the Executive's Salary as provided in Section 3(a) at the
rate in effect immediately prior to termination of his employment, for
a period of twelve (12) months, less the amount of any disability
payments made by the Company or any Company plan, (ii) continue to
provide medical benefits equivalent to the medical benefits
contemplated in Section 4(a) hereof and to maintain the term life
insurance contemplated in Section 4(c) hereof for a period of one year
from the date of termination of the Executive's employment, and (iii)
continue to provide an automobile as contemplated in Section 4(b)
hereof for a period of twelve (12) months from the date of termination
of the Executive's employment.
(c) In the event Executive's employment is terminated by the
Executive for Good Reason or upon the occurrence of a Transfer Event,
or by the Company other than for death, Disability or Cause, the
Company shall make a lump sum payment to the Executive of the Salary
for the remainder of the Employment Term (or in the event of the
subsequent death of the Executive to his spouse) and, shall continue to
provide medical benefits equivalent to the medical benefits
contemplated in Section 4(a) hereof, and to maintain the term life
insurance contemplated by Section 4(c) hereof for such period.
Notwithstanding anything to the contrary contained in this
Agreement, in the event of a termination by the Company of the
Executive's employment hereunder, or the termination by the Executive
of his employment for Good Cause or upon the occurrence of a Transfer
Event, the Executive shall not be required to seek other employment in
mitigation of his damages, nor shall the possibility or fact of any
other such employment and the compensation which the Executive might
reasonably be expected to receive, actually receives, or to which the
Executive becomes entitled, by reason thereof, be considered as
mitigating his damages.
7. COVENANTS.
(a) In view of the fact that the Company is engaged in
specialized businesses, which businesses are conducted throughout the
world, and the information, research and marketing data developed by
the Company or any of its subsidiaries or affiliates are confidential,
the Executive agrees that, during his employment and for a period of
one (1) year from the termination of his employment with the Company,
he will not (i) directly or indirectly engage in the business
substantially conducted by the Company at the date of such termination,
either for himself or for any person, employer, business or other
entity in competition with the Company, (ii) engage in any such
business on his own account, or (iii) become interested in any such
business, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, employee, trustee,
consultant or in any other relationship or capacity; provided, however,
that ownership of less than 5% of any class of outstanding securities
of a company registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended, shall not be deemed to constitute
engaging, participating in, or becoming interested in any such
business.
(b) During his employment and for a period of one (1) year
thereafter, the Executive and any entity controlled by the Executive
shall not, directly or indirectly, (i) make any false or malicious
statement, oral or written, which is injurious to the business,
reputation or operations of the Company, its officers or directors, as
applicable, or which may interfere with the good will of the Company or
its relations with its customers and suppliers, or (ii) solicit,
interfere with, hire, offer to hire or induce any person who is an
officer, employee or agent of the Company to discontinue his or her
relationship with the Company or any subsidiary or affiliate of the
Company, or to accept employment by any other entity or person.
(c) The Executive agrees to keep secret and retain in the
strictest confidence all confidential matters which relate to the
Company, including, without limitation, customer lists, trade secrets,
pricing policies and other confidential business affairs of the Company
and any of its subsidiaries or affiliates ("Confidential Information")
learned by him from the Company or any of its subsidiaries affiliates
and not to disclose any such Confidential information to anyone outside
the Company or any of its affiliates, whether during or after his
period of service with the Company, except in the course of performing
his duties hereunder; provided, however, Confidential Information shall
not include information that (i) is known generally by the public on
the date of the Executive's termination, (ii) has otherwise come into
the public domain without a breach by the Executive, under this
Agreement, or (iii) is required to be disclosed pursuant to applicable
Federal, state or local laws or judicial process. Upon request by the
Company, the Executive agrees to deliver promptly to the Company upon
termination of his employment, or at any time thereafter as the Company
may request, all Company memoranda, notes, records, reports, manuals,
drawings, designs, computer files in any media and other documents (and
all copies thereof) containing such Confidential Information and all
property of the Company or any of its subsidiaries or affiliates which
the Executive may then possess or have under his control.
(d) The Executive agrees that all processes, technologies and
inventions, including new contributions, improvements, formats,
packages, programs, systems, machines, compositions of matter
manufactured, developments, applications and discoveries which are
related in any manner to the business (commercial or experimental) of
the Company during the term of the Executive's employment, whether
patentable or not, conceived, developed, invented or made by the
Executive, or by the Executive jointly with others during the term of
his employment with the Company, or by the Company or its affiliates or
on their behalf (collectively, "New Developments"), shall belong to the
Company, and, the Company shall have the sole right to all proceeds
arising from or related to such New Developments. The Executive shall
further: (a) promptly disclose such New Developments to the Company;
(b) assign to the Company, without additional compensation, all patent
or other rights to such New Developments for the United States and
foreign countries; (c) sign all papers necessary to carry out the
foregoing; and (d) give testimony in support of his inventorship, all
at the sole cost and expense of the Company.
(e) If the Executive commits a material breach of any of the
provisions of this Section 7, the Company shall have the right and
remedy to have the provisions of this Agreement specifically enforced
by any court of competent jurisdiction, it being acknowledged and
agreed to by the Executive that any such breach will cause irreparable
injury to the Company and that money damages will not provide an
adequate remedy to the Company. Such rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies
available to the Company at law or in equity. The provisions of this
Section 7 shall survive the expiration or termination of this
Agreement.
(f) Although the restrictions contained in this Section 7 are
considered to be fair and reasonable in the circumstances, it is
recognized that restrictions of the nature contained in this Section 7
may fail for technical reasons; accordingly, if any of such
restrictions shall be adjudged to be void or unenforceable for whatever
reason, but would be valid if part of the wording thereof were deleted,
or the period thereof reduced or the area dealt with thereby reduced in
scope, the restrictions contained in this Section 7 shall apply, at the
election of the Company, with such modifications as may be necessary to
make them valid, effective and enforceable, in the particular
jurisdiction in which such restrictions are adjudged to be void or
unenforceable.
8. MISCELLANEOUS.
This Agreement or any rights or obligations hereunder may not
be assigned by any of the parties hereto without the prior written
consent of the other parties; provided, however, that this Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of the Company upon any sale of all or substantially all of the
Company's assets, or upon any merger or consolidation of the Company
with or into any other corporation, all as though such successors and
assigns of the Company and their respective successors and assigns were
the Company, as the case may be.
(b) This Agreement and the relationships of the parties in
connection with the subject matter of this Agreement shall be construed
and enforced according to the laws of the State of New York without
giving effect to the conflict of laws rules thereof.
This Agreement contains the full and complete agreement of the
parties relating to the employment of the Executive hereunder and
supersedes all prior agreements, arrangements or understandings,
whether written or oral, relating thereto. Neither this Agreement, nor
any provision hereof, may be amended, modified, waived or supplemented
by written instrument signed by the parties hereto, and a written
waiver of any of the provisions shall be valid and effective only if
signed by each of the parties hereto and shall be valid and effective
only in the instance for which given.
If any provision of this Agreement is held to be invalid or
enforceable by any judgment of a tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected by such judgment,
and this Agreement shall be carried out as near to its original terms
and intent as possible.
All provisions of this Agreement which, by their nature,
should survive termination of this Agreement, including, but not
limited to, Section 7, shall survive said termination.
All notices, requests and demands given to or made upon the
respective parties hereto shall be deemed to have been received five
(5) business days after the date of mailing when mailed by certified
mail, postage prepaid, or one business day after the date of delivery
by a recognized overnight delivery service, or, upon receipt of
confirmation of transmission when sent by telecopier, addressed to the
parties at their addresses set forth below or to such other addresses
furnished by notice given in accordance with this subsection (f): (a)
if to the Company, to Telebyte Technologies, Inc., 270 Pulaski Road,
Greenlawn, New York 11740, Telecopier No.: (516) 385-8184 Attention:
Board of Directors, and (b) if to the Executive, at his address set
forth on the signature page hereof.
No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
(h) The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or
construction of this Agreement.
This Agreement may be signed in any number of counterparts,
each of which shall be deemed an original, but when taken together as a
whole shall constitute one and the same instrument.
The Company may withhold from any amounts payable under this
Agreement, any federal, state and local income taxes, social security
taxes and other taxes and deductions as required by applicable law.
(k) (i) The Executive and the Company agree and consent that
(A) any controversy or claim arising out of or relating to this
Agreement, its scope, or the breach or interpretation of any provision
hereof shall be settled by arbitration before a panel of three (3)
arbitrators and otherwise in accordance with the rules then obtaining
of the American Arbitration Association; (B) such arbitration shall be
held in the City of Happaugue, County of Suffolk and State of New York;
(C) the award in any such arbitration shall be final, binding and
conclusive; and (D) judgment on any award of any such arbitration,
including, but not limited to specific performance, may be entered in
any court having jurisdiction thereof. Notice of any arbitration shall
be sufficient if given in accordance with Section 8(f) hereof.
(ii) In connection with any proceeding by the
Executive to recover payments allegedly due and not paid to the
Executive under Sections 3 or 6 hereof, the prevailing party with
respect to the claim for payment of such amounts shall be entitled to
reimbursement for reasonable counsel's fees and reasonable
disbursements.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
TELEBYTE TECHNOLOGY, INC.
By: __________\s\___________________
Name: Joel A. Kramer
Title: President
__________\s\__________________
Kenneth S. Schneider
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