SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1999
----------------
[ ] 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 0-13284
V BAND CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-2990015
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3 Westchester Plaza, Elmsford, New York 10523
----------------------------------------------------
(Address and zip code of principal executive office)
(914) 789-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares of Common Stock outstanding, as of January 31, 1999, was
5,428,621 shares.
<PAGE>
V BAND CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE THREE MONTHS ENDED JANUARY 31,1999
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets at January 31, 1999 (unaudited) and
October 31, 1998
Consolidated statements of operations for the three months ended
January 31, 1999 and 1998 (unaudited)
Consolidated statements of cash flows for the three months ended
January 31, 1999 and 1998 (unaudited)
Notes to consolidated financial statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1999 AND OCTOBER 31, 1998
(in 000's, except share data)
January 31, October 31,
1999 1998
-------- --------
ASSETS (unaudited)
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Current Assets:
Cash ...................................................... $ 630 $ 915
Accounts receivable, less allowance for doubtful
accounts of $292 in 1999 and $289 in 1998 ............. 2,867 2,813
Inventories, net .......................................... 3,701 4,241
Prepaid expenses and other current assets ................. 344 313
-------- --------
Total current assets ............... 7,542 8,282
-------- --------
Fixed Assets:
Furniture, fixtures, equipment and leasehold improvements . 7,831 7,811
Less: Accumulated depreciation and amortization ........... (7,516) (7,444)
-------- --------
Total fixed assets ................. 315 367
-------- --------
Other Assets .............................................. 149 158
-------- --------
TOTAL ASSETS .......................................... $ 8,006 $ 8,807
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt ........................................... $ 1,305 $ 1,425
Accounts payable .......................................... 2,245 2,434
Accrued wages ............................................. 910 842
Customer deposits ......................................... 1,480 1,389
Other accrued expenses .................................... 674 797
-------- --------
Total current liabilities ......... 6,614 6,887
-------- --------
Commitments and Contingencies (see notes)
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V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1999 AND OCTOBER 31, 1998
(in 000's, except share data)
(continued)
January 31, October 31,
1999 1998
-------- --------
(unaudited)
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Shareholders' Equity:
Common stock, $.01 par value; authorized 20,000,000 shares;
issued 7,147,943 shares ............................... 71 71
Capital in excess of par value ............................ 20,016 20,016
Deficit ................................................... (7,207) (6,639)
Cumulative translation adjustment ......................... 281 240
-------- --------
13,160 13,688
Less Treasury stock, ata cost; 1,719,322 shares............ (11,768) (11,768)
-------- --------
Total shareholders' equity ......... 1,392 1,920
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............ $ 8,006 $ 8,807
======== ========
</TABLE>
See notes to consolidated financial statements
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V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999
AND 1998 (unaudited) (in 000's, except
per share data)
1999 1998
------- -------
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Sales
Equipment .................................. $ 2,093 $ 3,228
Service .................................... 1,683 1,496
------- -------
Total sales ........................... 3,776 4,724
------- -------
Cost of Sales
Equipment .................................. 1,639 2,423
Service .................................... 1,066 986
------- -------
Total cost of sales ................... 2,705 3,409
------- -------
Gross profit .......................... 1,071 1,315
------- -------
Operating Expenses
Selling, general and administrative ........ 1,425 2,964
Research and development ................... 189 602
------- -------
Total operating expenses .............. 1,614 3,566
------- -------
Operating loss ........................ (543) (2,251)
Interest Expense ................................. (35) (50)
Other Income (Expense) ........................... 10 (21)
------- -------
Net loss .............................. $ (568) $(2,322)
======= =======
Net loss per basic and diluted common share ...... $ (.10) $ (.43)
======= =======
Weighted average number of basic and diluted
shares outstanding ........................... 5,429 5,413
======= =======
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See notes to consolidated financial statements
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V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND 1998 (unaudited)
(in 000's)
1999 1998
-------- --------
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Cash Flows from Operating Activities
Net loss ..................................................... $ (568) $(2,322)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation .............................................. 73 126
Amortization of other assets .............................. 9 8
Provision for doubtful accounts ........................... 3 3
Waiver of Chief Executive Officer's compensation .......... -- 50
Changes in assets and liabilities:
Accounts receivable ................................... (57) 3,837
Inventories ........................................... 540 (974)
Prepaid expenses and other current assets ............. (31) 17
Other assets .......................................... -- --
Accounts payable and other current liabilities ........ (153) 881
Foreign currency translation adjustment ............... 41 7
------- -------
Net cash (used in) provided by operating activities (144) 1,633
------- -------
Cash Flows from Investing Activities
Capital expenditures ......................................... (21) (33)
------- -------
Net cash used in investing activities ............. (21) (33)
------- -------
Cash Flows from Financing Activities
Proceeds from short-term debt ................................ 3,075 5,800
Payments of short-tem debt ................................... (3,195) (7,404)
------- -------
Net cash used in financing activities ............. (120) (1,604)
------- -------
Net decrease in cash ............................................. (285) (4)
Cash at beginning of period ...................................... 915 336
------- -------
Cash at end of period ............................................ $ 630 $ 332
======= =======
Supplementary Disclosures
Income taxes paid ............................................ $ -- $ 4
======= =======
Interest paid ................................................ $ 35 $ 52
======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in 000's)
Note A -- Basis of Presentation
The accompanying consolidated financial statements include the accounts of V
Band Corporation and its wholly-owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the Company's audited financial statements for the fiscal year
ended October 31, 1998 as set forth in the Company's annual report on Form 10-K.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at January 31, 1999 and all periods
presented have been made.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company's ability to
continue as a going concern is uncertain based on the matters discussed below.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of assets or the amounts of liabilities
that might be necessary should the Company be unable to continue as a going
concern. The Company's continuation as a going concern is dependent upon the
Company's ability to return to profitability and to maintain compliance with its
amended bank covenants.
The Company has incurred recurring losses from operations. As a result of the
Company's results of operations, the bank amended the financial covenants of the
Credit Agreement (see Note D). The amended financial covenants require, among
other things, an improvement in the Company's results of operations during the
second fiscal quarter of 1999 and a return to profitability commencing in the
third quarter of 1999. The Company's operations are dependent upon the continued
availability of funding under the Credit Agreement. The continued availability
of funding under the Credit Agreement is dependent, in turn, upon the Company's
ability to satisfy the amended financial covenants set forth in the Credit
Agreement and upon the ability of the Company to generate sufficient revenue and
results from operations to support such funding. The Company is presently
seeking additional sales orders in order to improve the results of its
operations. There is no assurance that the Company will be able to improve the
results of its operations to satisfy the amended financial covenants.
Note B -- Significant accounting policies
Revenue recognition - Equipment revenue, for new system installations and
modifications to existing systems at customer locations, is recognized as the
product is shipped. For long-term contracts, equipment revenue is recognized
under the percentage of completion method. Service revenue, which includes
maintenance contract revenue and repairs, is recognized when the service has
been completed.
<PAGE>
Note C -- Inventories
Inventories are summarized as follows:
January 31, October 31,
1999 1998
Finished goods ........................... $ 3,166 $ 3,812
Parts and components ..................... 3,044 3,339
------- -------
6,210 7,151
Less: Inventory reserves ................. (2,509) (2,910)
------- -------
$ 3,701 $ 4,241
======= =======
Note D -- Short-term debt
In May 1997, the Company entered into a Credit Agreement with National Bank of
Canada, (the "Credit Agreement") which expires in May 2000. The Credit Agreement
provided a revolving loan and letter of credit facility of up to $4 million. The
Company's obligations under the Credit Agreement are secured by a security
interest in all of the assets of V Band Corporation and its domestic
subsidiaries. Under the terms of the Credit Agreement, the Company is restricted
from paying dividends if an event of default has occurred and is continuing
thereunder. Due to the Company's results of operations for 1997, the Company
failed to satisfy the financial covenants set forth in the Credit Facility. On
February 9, 1998, National Bank of Canada waived the Company's failure to
satisfy those covenants at October 31, 1997 and amended the covenants for fiscal
year 1998. In addition, the interest rate on the outstanding borrowings was
modified to prime plus 2 percent effective February 1, 1998. The amended
financial covenants were not satisfied for the three-month period ended April
30, 1998. On June 4, 1998, National Bank of Canada waived the Company's failure
to satisfy those covenants at April 30, 1998 and amended the covenants for the
remainder of fiscal year 1998. The Company satisfied the amended financial
covenants for the three-month periods ended July 31, 1998, October 31, 1998 and
January 31, 1999, but was in violation of a non-financial covenant as of October
31, 1998. The prime rate was 7.75% at January 31, 1999. On February 18, 1999,
National Bank of Canada waived the non-financial covenant default, amended the
financial covenants for all periods through expiration, and reduced the
revolving loan and credit facility to $2 million.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (in 000's except per share data)
Results of Operations
Sales for the first quarter of 1999, ended January 31, 1999, of $3,776 were
$948, or 20%, lower than the $4,724 reported in the first quarter of 1998.
Equipment sales of $2,093 in the first quarter of 1999 decreased by $1,135, or
35%, from the equipment sales of $3,228 in the first quarter of 1998. This
decrease was primarily due to decreased demand for the Company's products. Sales
from the Company's service business increased to $1,683, or 13%, for the first
quarter of 1999 from $1,496 for the first quarter of 1998. This increase was
primarily due to new maintenance contracts entered into after the expiration of
warranty periods for installations of the Company's eXchange phone in previous
fiscal years and an increase in other customers serviced by the Company.
Gross profit margin was 28% for the first quarter of 1999 and 1998. The gross
profit margin for the equipment sales was 22% in the first quarter of 1999
compared to 25% for the same period in 1998. This decrease was primarily
attributable to price discounting required in competitive bidding for new
installations as well as additions to existing customer installations. The gross
profit margin for service sales was 37% for the first quarter of 1999 as
compared to 34% for the same period in 1998. The increase was attributable to
the increase in maintenance sales for the first quarter.
Operating expenses for the first quarter of 1999 were $1,614 or $1,952 lower
than the $3,566 reported for the first quarter of 1998. The decrease was
primarily attributable to the first quarter 1998 charge of $1,023 related to the
Company's restructuring of its operations, reductions in research and
development expenditures, and decreases in other operating expenses.
The net loss reported in the first quarter ended January 31, 1999 was $568, or
$.10 per share, compared to a net loss of $2,322, or $.43 per share, for the
first quarter of 1998. The loss was primarily attributable to the aforementioned
decrease in equipment sales and gross profit margin for the first quarter of
1999. The average shares outstanding for the quarter ended January 31, 1998
increased to 5,429 versus 5,413 for the same period in 1997.
Financial Condition
The Company's cash was $630 at January 31, 1999, a decrease of $285 from the
October 31, 1998 balance of $915. Short-term debt decreased $120 as a result of
payments made during the quarter. Inventory decreased $540 as the Company
substantially reduced new purchases and also rescheduled deliveries of goods
previously ordered from its subcontractors and suppliers.
The Company's losses for 1997, 1998 and the first quarter of 1999 have had a
substantial impact on its working capital and liquidity. On May 28, 1997 the
Company entered into a Credit Agreement (the "Credit Agreement") with National
Bank of Canada, New York Branch (the "Bank"). The Credit Agreement provides a $2
million credit facility to the Company secured by substantially all of the
assets of the Company and its domestic subsidiaries. As a result of the
Company's results of operations, the Bank amended the financial covenants of the
Credit Agreement. The Company's operations are dependent upon the continued
availability of funding under the Credit Agreement. The continued availability
of funding under the Credit Agreement is dependent, in turn, upon the Company's
ability to satisfy the amended financial covenants set forth in the Credit
Agreement. The amended financial covenants require, among other things, an
improvement in the Company's results of operations during the second fiscal
quarter of 1999 and a return to profitability in the third fiscal quarter of
1999. There is no assurance that the Company will be able to satisfy these
requirements.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Although the Company currently invoices its customers in US dollars or UK
pounds, exchange rates for these and other local currencies in countries where
the Company may operate in the future may fluctuate in relation to the US
dollar. Such fluctuations may have an adverse effect on the Company's earnings
or assets when local currencies are exchanged for US dollars. Any weakening of
the value of such local currency against the US dollar could result in lower
revenues and earnings for the Company. To date, gains and losses related to
foreign currency transactions and foreign currency translation have not been
material for the Company. Included in the Company's consolidated balance sheet
at October 31, 1998 are net assets of the Company's United Kingdom subsidiary of
$816,000. There has been no material change in this information during the first
fiscal quarter of 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.18 Agreement dated November 15, 1998 between the Company
and Thomas Hughes.
10.19 Agreement dated December 1, 1998 between the Company and
Nicholas Nestora.
10.20 Agreement dated December 1, 1998 between the Company and
Marc Teichman.
<PAGE>
V BAND CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
V BAND CORPORATION
(Registrant)
Date: March 17, 1999
/s/ Thomas E. Feil
------------------
Thomas E. Feil
Chairman & Chief Executive Officer
(Duly Authorized Officer)
Date: March 17, 1999
/s/ Robert O. Riiska
--------------------
Robert O. Riiska
Chief Financial Officer
(Principal Accounting Officer)
AGREEMENT
AGREEMENT dated as of the 15 day of November, 1998 by and
between V BAND CORPORATION, a New York corporation with a principal place of
business at 565 Taxter Road, Elmsford, NY 10523 and THOMAS HUGHES, an individual
with a residence at [ address deleted ] (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive is a key employee of the Company (as that
term is hereafter defined) and the Company desires to provide Executive with the
compensation benefits described in this Agreement as an inducement to his high
level of commitment to advance the best interests of the Company.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Supplemental Agreement. This Agreement is supplemental to
the Executive's employment arrangements with the Company, but replaces and
supersedes the Agreement dated as of January 17, 1998 (the "Prior Agreement") by
and between V Band Corporation and Executive. The prior Agreement and the rights
and obligations of the parties thereunder are hereby terminated.
2. Continuation and Termination of Executive's Employment. The
parties agree that Executive shall continue to serve as the President and Chief
Operating Officer of V Band Corporation until Executive's employment is
terminated, at the absolute discretion of V Band Corporation or Executive, by
giving the other party thirty (30) days prior written notice.
3. Reimbursement of Expenses. Executive shall be entitled to
the reimbursement of all reasonable out-of-pocket expenses incurred during the
course of his employment by V Band Corporation in accordance with the
reimbursement policies of V Band Corporation in effect on the date of this
Agreement.
4. Change of Control Payment. If a Change of Control (as
hereafter defined) of the Company occurs at any time during the period of
Executive's employment as President of the Company or within six (6) months
after the termination of Executive's employment as President of the Company, the
Company will pay the Executive the amount of $150,000. This payment will be made
to Executive in twelve (12) equal monthly installments, commencing thirty (30)
days after the date of the Change of Control of the Company. The Executive's
right to receive the payments provided by this Agreement are subject to the
following conditions:
(a) In the event that Executive elects to terminate his
employment by V Band Corporation, at his absolute discretion, he has provided
the Company with the notice required by Section 2 of this Agreement; and
(b) The Executive will not be entitled to receive any payments
after the date the Company terminates the Executive's employment for Cause (as
defined in Section 5 of this Agreement).
5. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
<PAGE>
"Cause" shall mean (a) fraud, criminal wrongdoing, or
intentional misconduct by the Executive, or (b) the willful failure to perform
the Executive's responsibilities during the term of his employment hereunder,
which failure continues for a period of fourteen (14) calendar days after the
Executive has received written notice of such failure.
"Change of Control" shall mean the occurrence of any of the
following events: (1) a "change of control of the Company that is required to be
reported to the Securities and Exchange Commission; (2) fifty percent (50%) or
more of the outstanding shares of the Company's Common Stock is acquired by one
person, group, or entity; (3) the consummation of a merger, consolidation, or
other business combination in which the holders of the Company's common stock
immediately preceding the consummation of such merger, consolidation, or other
business combination do not immediately after the consummation of such merger,
consolidation, or business combination hold more than fifty percent (50%) or
more of the voting securities of the surviving corporation of such transaction.
"Company" shall mean V Band Corporation and, in the event of a
merger, consolidation, or business combination, the corporation which is the
surviving corporation.
6. Miscellaneous.
(a) This Agreement and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with the
internal, substantive laws of the State of New York, without giving effect to
the conflicts of law provisions thereof.
(b) The Executive shall not have any right to
transfer, assign, hypothecate, or otherwise encumber any part or all of the
amounts payable hereunder.
(c) This Agreement may not be amended, altered, or
modified, except by a written instrument signed by the parties hereto, or their
respective successors, and may not be otherwise terminated except as provided
herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first written above.
V BAND CORPORATION
By: /s/Thomas Feil
---------------
Thomas Feil
Title: Chief Executive Officer
/s/Thomas Hughes
----------------
THOMAS HUGHES
AGREEMENT
AGREEMENT dated as of the 1st day of December, 1998 by and
between V Band Corporation, a New York Corporation with a principal place of
business at 565 Taxter Road, Elmsford, New York 10523 and Nicholas Nestora, an
individual with a residence at [address deleted] (the "Executive").
WITNESSETH
WHEREAS, Executive is a key employee of the Company (as that
term is hereinafter defined) and the Company desires to provide Executive with
the compensation benefits described in this Agreement as an inducement to his
high level of commitment to advance the best interests of the Company.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Supplemental Agreement. This Agreement is supplemental to
the Executive's employment arrangements with the Company.
2. Change of Control Payment. If a Change of Control (as
hereinafter defined) of the Company occurs at any time prior to December 31,
1999, the Company will pay the Executive the amount of $125,000. This payment
will be made to the Executive in twelve equal monthly installments, commencing
on the date of the Change of Control of the Company. The Executive's right to
receive the payments provided by this agreement are subject to the following
conditions:
a) The Executive will not be entitled to receive any
payments under the agreement if the Executive voluntarily terminates his
employment with the Company prior to the date of the change of control; and
b) The Executive will not be entitled to any payments
after the date the Company terminates the Executive's employment for Cause (as
defined in Section 3 of this Agreement).
3. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
a) "Cause" shall mean fraud, criminal wrongdoing, or
intentional misconduct by the Executive, or the willful or negligent failure to
perform the Executive's responsibilities, which failure continues for a period
of fourteen (14) calendar days after the employee has received documented,
written notice of such failures.
b) "Change of Control" shall mean the occurrence of
any of the following events: (1) a "change of control" of the Company that is
required to be reported to the Securities and Exchange Commission; (2) 50% or
more of the outstanding shares of the Company's Common Stock is acquired or
controlled by one person, group, or entity; (3) the consummation of a merger,
consolidation, or other business combination in which the holders of the
Company's Common Stock immediately preceding the consummation of such merger,
consolidation, or other business combination do not immediately after the
consummation of such merger, consolidation, or business combination hold 50% or
more of the voting securities of the surviving corporation of such transaction.
<PAGE>
c) "Company" shall mean V Band Corporation and, in
the event of a merger, consolidation, or business combination in which V Band
Corporation is not the surviving corporation, the corporation which is the
surviving corporation.
4. Miscellaneous.
a) This Agreement and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with the
internal substantive laws of the State of New York, without giving effect to the
conflicts of law provisions thereof.
b) The Executive shall not have any right to
transfer, assign, hypothecate or otherwise encumber any part or all of the
amounts payable hereunder.
c) This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto, or their
respective successors, and may not be otherwise terminated except as provided
herein.
d) Once change of control occurs as outlined in this
Agreement, and payments have begun, executive shall not be entitled to receive
any payment under the Severance Agreement dated June 18, 1998, a copy of which
is attached hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
V BAND CORPORATION
By: /s/Thomas E. Feil
-----------------
Thomas E. Feil
Chairman & CEO
/s/ Nicholas Nestora
--------------------
Nicholas Nestora
AGREEMENT
AGREEMENT dated as of the 1st day of December, 1998 by and
between V Band Corporation, a New York Corporation with a principal place of
business at 565 Taxter Road, Elmsford, New York 10523 and Marc Teichman, an
individual with a residence at [address deleted] (the "Executive").
WITNESSETH
WHEREAS, Executive is a key employee of the Company (as that
term is hereinafter defined) and the Company desires to provide Executive with
the compensation benefits described in this Agreement as an inducement to his
high level of commitment to advance the best interests of the Company.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Supplemental Agreement. This Agreement is supplemental to
the Executive's employment arrangements with the Company.
2. Change of Control Payment. If a Change of Control (as
hereinafter defined) of the Company occurs at any time prior to December 31,
1999, the Company will pay the Executive the amount of $90,000. This payment
will be made to the Executive in twelve equal monthly installments, commencing
on the date of the Change of Control of the Company. The Executive's right to
receive the payments provided by this agreement are subject to the following
conditions:
a) The Executive will not be entitled to receive any
payments under the agreement if the Executive voluntarily terminates his
employment with the Company prior to the date of the change of control; and
b) The Executive will not be entitled to any payments
after the date the Company terminates the Executive's employment for Cause (as
defined in Section 3 of this Agreement).
3. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
a) "Cause" shall mean fraud, criminal wrongdoing, or
intentional misconduct by the Executive, or the willful or negligent failure to
perform the Executive's responsibilities, which failure continues for a period
of fourteen (14) calendar days after the employee has received documented,
written notice of such failures.
b) "Change of Control" shall mean the occurrence of
any of the following events: (1) a "change of control" of the Company that is
required to be reported to the Securities and Exchange Commission; (2) 50% or
more of the outstanding shares of the Company's Common Stock is acquired or
controlled by one person, group, or entity; (3) the consummation of a merger,
consolidation, or other business combination in which the holders of the
Company's Common Stock immediately preceding the consummation of such merger,
consolidation, or other business combination do not immediately after the
consummation of such merger, consolidation, or business combination hold 50% or
more of the voting securities of the surviving corporation of such transaction.
<PAGE>
c) "Company" shall mean V Band Corporation and, in
the event of a merger, consolidation, or business combination in which V Band
Corporation is not the surviving corporation, the corporation which is the
surviving corporation.
4. Miscellaneous.
a) This Agreement and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with the
internal substantive laws of the State of New York, without giving effect to the
conflicts of law provisions thereof.
b) The Executive shall not have any right to
transfer, assign, hypothecate or otherwise encumber any part or all of the
amounts payable hereunder.
c) This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto, or their
respective successors, and may not be otherwise terminated except as provided
herein.
d) Once change of control occurs as outlined in this
Agreement, and payments have begun, executive shall not be entitled to receive
any payment under the Severance Agreement dated June 18, 1998, a copy of which
is attached hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
V BAND CORPORATION
By: /s/Thomas E. Feil
-----------------
Thomas E. Feil
Chairman & CEO
/s/Marc Teichman
----------------
Marc Teichman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
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0
0
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