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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File Number 1-9014
CHYRON CORPORATION
(Exact name of registrant as specified in its charter)
New York 11-2117385
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5 Hub Drive, Melville, New York 11747
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 845-2000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 New York Stock Exchange
(Title of Class) Name of exchange on which registered
Chicago Stock Exchange
Name of exchange on which registered
Common Stock Purchase Warrants
expiring January 31, 1996 Chicago Stock Exchange
(Title of Class) Name of exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
None
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 periods 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. ( )
The aggregate market value of voting stock held by non-affiliates of
the Company on March 1, 1996 was $56,228,172.
The number of shares outstanding of the issuer's common stock, par
value $.01 per share, on March 1, 1996 was 93,615,708.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by a check mark whether the Registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Yes X NO
DOCUMENTS INCORPORATED BY REFERENCE
Item 10 (Directors and Executive Officers of the Registrant), Item 11
(Executive Compensation), Item 12 (Security Ownership of Certain
Beneficial Owners and Management) and Item 13 (Certain Relationships
and Related Transactions) will be incorporated into the Company's
Proxy Statement to be filed within 120 days of December 31, 1995 and
are incorporated herein by reference.
Exhibit index is located on page 43.
This document consists of 68 pages.
PART I
ITEM 1. BUSINESS
GENERAL INFORMATION REGARDING THE COMPANY
Chyron is currently subject to the reporting
requirements of the Securities Exchange Act of 1934,
as amended, and files reports with the Securities and
Exchange Commission ("SEC"). Publicly filed reports
and forms that contain information concerning Chyron
can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the New York regional office of
the SEC at 75 Park Place, New York, NY 10007.
Chyron Corporation ("Chyron" or the "Company") was
incorporated in the State of New York in April 1966
as The Computer Exchange, Inc. In 1975 its name was
changed to Chyron Corporation. Between the years
1982 and 1989, Chyron purchased all of the
outstanding shares of the common stock of Digital
Services Corporation ("DSC") and CMX Corporation.
DSC was a manufacturer of video special effects
systems for use in television and video production
applications. Development of DSC's products was
suspended in 1990. In 1989, CMX Corporation was
merged with and into Chyron and became a division
thereof. CMX sold and rented editing equipment to
the video and film industries and was a manufacturer
of computer assisted videotape editing equipment for
use by post-production facilities in support of
broadcast operations. Effective September 30, 1994,
the Company restructured its West Coast divisions,
including CMX, and, accordingly, discontinued the
unprofitable product lines of CMX and consolidated
the remaining CMX operations into the Chyron Graphics
division. See Note 3 to the Consolidated Financial
Statements. In December 1988, Chyron acquired Aurora
Systems ("Aurora") pursuant to the provisions of a
confirmed plan of reorganization in Aurora's first
Chapter 11 bankruptcy proceeding, which commenced in
California in 1988. Aurora developed and
manufactured electronic paint software systems for
use in video production applications. In June 1994,
Aurora was merged with and into Chyron and became a
division thereof. Certain product lines of the
Aurora division were also part of the West Coast
restructuring; the remaining operations of Aurora
were consolidated into Chyron Graphics. See Note 3
to the Consolidated Financial Statements.
The Company's commercial activities are organized in
three separate distribution channels: (1)
videoGraphics, the Company's core business of video
graphics and character generators; and electronic
editing systems including the remaining profitable
product lines of the previous Aurora and CMX
divisions; (2) pictureWare, the distribution network
for software products as well as new software
products derived and acquired through strategic
alliances; and (3) videoComputer group, the
distribution channel that sells through its OEM -
Original Equipment Manufacturer, VAR - Value Added
Resellers-and other dealer distribution channels, the
established CODI and PC Codi product along with other
hardware and software peripherals.
VIDEOGRAPHICS DIVISION
This division distributes through direct and dealer
sales Chyron's graphic and character generation
systems and electronic editing systems. The graphic
systems (infinit!, MAX!>, MAXINE!) utilize a digital
computer and electronic storage to permit an operator
to create images and use colors that can either be
superimposed upon images being broadcast (for
example, to identify a speaker on an interview
program or to display sports statistics during a
sporting event telecast) or be televised alone (for
example, to display election results, stock market
quotations, sports scores, commercial advertising and
broadcast promotional material) and that can be
compressed, expanded, zoomed, squeezed, stretched,
rotated, transposed and otherwise manipulated to
create numerous graphic effects.
Chyron's graphic and character generation systems
handles a wide variety of images, offers numerous
manipulative functions and represents one of the most
versatile "stand-alone" broadcast and video-oriented,
user-operated graphics systems available. These
equipment characteristics have, in the Company's
belief, enabled it to become the major supplier of
high performance titling and graphics equipment to
the major domestic television networks, domestic and
international broadcasting stations, production and
post-production houses, cable television distributors
and operators and the industrial video market,
encompassing a rapidly expanding list of corporate,
industrial, educational, professional and medical
users of video as a communications, training, and
multimedia-tool.
Chyron's videoGraphic division also distributes
Electronic Editing Systems. The Chyron videotape
editing equipment, previously sold under the CMX
name, includes compatible large-scale and low-cost
systems designed to improve tape editing by enhancing
creativity and improving user productivity. These
systems are designed to improve the editing process
through an interface enabling the editor to have
greater creative freedom and improved productivity.
These systems are designed to control all of the
equipment in the edit suite - video tape recorders,
video disks, switchers, digital video effects
equipment, time base correctors and audio equipment.
At present, the Company's editing equipment can
control over 200 different devices.
Editing systems are sold worldwide to video post
production facilities, broadcast operations, cable
originators, government video producers and corporate
video users.
PICTUREWARE DIVISION
Through Chyron's pictureWare division (previously
Aurora), Chyron designs, manufactures and sells
computer-based electronic paint and animation systems
and software to the video industry for applications
in broadcast, post-production and corporate video.
Chyron's pictureWare's principal product, known as
"Liberty", is a software package that runs on the
Silicon Graphics line of computer graphic
workstations. It provides the user with a rich array
of video graphic creation tools, such as painting,
compositing, morphing, titling, 3D transform,
layering, coloring cycle animation, rotoscoping and
cell animation. Liberty is resolution independent
and so can also be used to generate material for the
print medium in resolutions of up to 8,000 by 8,000
pixels.
VIDEOCOMPUTER DIVISION
The videoComputer division distributes via OEM's,
VAR's, and other distributors, Chyron's CODI, pc-CODI
board, and sketchpad. These compact text and graphic
generation systems provide real-time text, titling,
and logo generation operated remotely through a
computer as well as communication features
(sketchpad) for real-time on screen drawing.
The videoComputer products (CODI, pc-CODI, Sketchpad)
provide high performance at an affordable price.
These products are capable of displaying, RGB,
composite, and S-video formats.
MARKETING AND SALES SUPPORT PROGRAM AND CERTAIN
CUSTOMERS
Domestic sales of Chyron's equipment are made
directly to end users through in-house sales
personnel, dealers who receive a trade discount off
list price and independent representatives who
receive a commission. In certain territories the
same dealers sell all of the product categories,
while in other territories different dealers sell the
Company's individual products.
Foreign sales are made by international distributors
and representatives covering specific territories.
In certain foreign territories, independent
distributors have been granted the exclusive right to
sell certain of the Company's products. Since
January 1991, there has been no direct sales force or
sales offices located overseas, and export
distribution and support sales staff are based in
Melville, New York. Plans for 1996 include the
establishment of a sales office in Asia to service
customers in the Far East.
For additional information concerning customers and
export sales, see Note 18 to the Consolidated
Financial Statements.
SERVICE, TRAINING AND PRODUCT SUPPORT
Although many of Chyron's customers have their own
technically sophisticated service capabilities,
Chyron maintains a field engineering support
department that services products either at the
customer's location or at the Company's facilities.
Operations and technical training is offered to
customers. Service is provided both domestically and
internationally by the Company or its appointed
dealers. The Company provides sales and service
support to its distributors from time to time.
RESEARCH AND DEVELOPMENT
Chyron is engaged in ongoing research and development
activities in connection with new and existing
products. The Company's research and development
activities historically have been oriented toward the
total system, rather than hardware or software alone.
During 1995, 1994 and 1993, Chyron expensed
$4,105,000, $4,163,000 and $3,573,000, respectively,
for research and development and amortization of
capitalized software development costs in connection
with the development of new products and the
improvement, modification and enhancement of existing
products. The Company employed 41 persons in
research and development at December 31, 1995 and
1994 and 47 persons at December 31, 1993.
FACTORY OPERATIONS
Chyron's final assembly and system integration
operations are located in Melville, New York, in part
of a leased facility of 47,000 square feet.
Chyron (i) generally designs its system components
(including metal and electronic parts and components,
circuit boards and certain sub-assemblies) to its own
specifications, (ii) purchases such items and other
standard parts from outside suppliers, and (iii) then
final assembles such parts into its products. The
Company combines such assemblies with its internally-
developed software to produce its final products.
GOVERNMENT REGULATIONS
The United States Federal Communications Commission
has issued regulations relating to shielding
requirements for electromagnetic interface in
electronic equipment. The Company's products are in
compliance with these regulations.
COMPETITION
Chyron believes that the principal competitive
factors in sales of its equipment are the number and
variety of functions, ease of operation, reliability
and engineering support. The Company is aware of
several major and a few smaller companies currently
engaged in commercial production of graphics and
editing equipment and special effects equipment. The
major competitors are divisions of; Tektronix
Corporation, Sony Corporation, Dynatech, Scitex and
Discreet Logic. Many of these companies have
financial resources greater than those of the
Company. In the Company's opinion, its competitive
position is enhanced by its systems, which are
designed to be relatively easy to operate and are
compatible with other manufacturers' products. The
Company believes that its graphics and character
systems have established a fine record of performance
and reliability.
BACKLOG
The Company's backlog of orders at December 31, 1995
approximated $1.5 million. The Company believes
these orders to be firm and expects to fulfill the
entire amount of this backlog in 1996.
EMPLOYEES
As of December 31, 1995, Chyron employed 187 persons
on a full-time basis, including 30 in administration,
41 in research and development, 24 in field
engineering support, 40 in sales and marketing and 52
in production. None of these employees are
represented by a labor union. The Company considers
its relations with its employees to be good.
LICENSES, PATENTS, AND TRADEMARKS
Although Chyron holds certain patents, the Company
believes that patents are not a significant
competitive factor in the conduct of its operations
because of the rapid technological changes and
advances in the electronics industry. The success of
the Company's products has not depended on patent
protection, but rather on the quality of the
Company's products, proprietary technology, contract
performance and the technical competence and creative
ability of the Company's personnel to develop and
introduce saleable products.
The names Chyron, Scribe, Chyron Scribe, Chyron
Scribe Junior, Chyron SuperScribe, iNFiNiT!, MAX!>,
MAXINE!, CODI, I2, Intelligent Interface, Intelligent
Interface (I2), CMX, CMX AEGIS, CMX OMNI, Aurora,
Liberty, Aurora Freedom and Independence are
registered trademarks of the Company. The Company
also has rights in trademarks and service marks which
are not federally registered, including the Chyron
Care service mark. The Company uses such trademarks
in marketing its products and considers these
trademarks and its proprietary technology to be
valuable assets.
OTHER INFORMATION
On December 27, 1991, as amended March 10, 1992 and
January 31, 1994 (effective December 28, 1993),
Chyron entered into a Management Agreement (the
"Management Agreement") with Electronica whereby
Electronica, or a wholly-owned subsidiary thereof,
provided certain business and technical services to
the Company, including the expertise of certain
employees of Electronica. In consideration of the
services provided under the Management Agreement, the
Company paid annually to Electronica an amount equal
to 3% of Annual Consolidated Revenues (as defined in
the Management Agreement), but limited to $800,000 in
1993 as a result of an amendment to the Agreement in
December 1993. On March 10, 1992, Electronica
assigned the Management Agreement to Pesa.
Subsequent to the acquisition of Electronica by Sepa,
Pesa assigned its rights and obligations under the
Management Agreement to Sepa in July 1994. The
Management Agreement was subsequently amended and
restated to extend its expiration date to December
31, 1997, to reduce the annual maximum management fee
payable from 3% to 2.5% after December 31, 1994 and
to give the Company the option to prepay the
management fee for the period July 1, 1994 through
December 31, 1995 at a 25% discount from the
aggregate estimated yearly fees. In December 1995,
the Management Agreement with Sepa was terminated.
As a condition of the termination, Chyron agreed to
pay Sepa $2 million for fees due for the period
January 1, 1996 through December 31, 1997. This
resulted in savings of approximately $1 million for
the Company. The Management Agreement is
incorporated herein by reference and was filed as an
exhibit to the report on Form 10-K for the fiscal
year ended June 30, 1991, and the First Amendment and
the Assignment are incorporated herein by reference
and were filed as exhibits to the report on Form 10-K
for the six-month transition period ended December
31, 1991. The December 1993 amendment is
incorporated herein by reference and were attached as
exhibits to the report on Form 10-K for the fiscal
year ended December 31, 1993. The assignment of the
Management Agreement to Sepa and the Amended and
Restated Management Agreements are incorporated
herein by reference and were attached as exhibits to
the report on Form 10-K for the fiscal year ended
December 31, 1994. The Termination Agreement between
Chyron and Sepa is incorporated herein by reference
and is attached as an exhibit hereto.
In September 1994, Chyron signed a distribution and
license agreement with Comunicacion Integral
Consultores, S.L., a Spanish limited company ("CIC"),
for the sole license and distribution rights through
December 31, 1997 to a software product, "Jaleo
Composite". Under this agreement the Company was
committed to a minimum royalty fee based on projected
sales. The distribution and license agreement is
incorporated herein by reference and was filed as an
exhibit with the report on Form 10-K for the fiscal
year ended December 31, 1994. Under the Termination
Agreement Chyron retained a non-exclusive license to
distribute Jaleo composite until March 31, 1996. In
November 1995, Chyron and CIC terminated the
aforementioned agreement. The Termination Agreement
between Chyron and CIC is incorporated herein by
reference and is attached as an exhibit hereto.
ITEM 2. PROPERTIES
Chyron has five facilities comprising approximately
66,000 square feet for factory and office space. The
Company leases two principal facilities; one for
manufacturing, development, marketing, executive
offices and support activities, consisting of 47,000
square feet in Melville, New York, and the other,
consisting of 15,000 square feet, in Santa Clara,
California for development, sales and support
activities. Separate sales and technical support
facilities are leased in three other locations in the
United States. See Note 15 to the Consolidated
Financial Statements. The Company believes its
facilities are adequate to meet expected sales
volumes for the immediate future.
ITEM 3. LEGAL PROCEEDINGS
Percival Hudgins & Company, Inc. v. Chyron
Corporation v. John Percival, pending in the United
States District Court, North District of Georgia
(Atlanta), Civil Action No. 1 95-CV-CAM.
This is a breach of contract action for an alleged
success fee by plaintiff ("Percival Hudgins") as an
investment banker. Plaintiff relies upon an
engagement letter, dated January 9, 1995, as
purportedly amended by a letter agreement dated
January 18, 1995. Plaintiff claims that it is
entitled to a fee in connection with the sale of
stock of Chyron by SEPA/PESA to the MWW Group.
Plaintiff seeks damages of approximately $600,000.
Chyron has answered, denied all material allegations,
and has asserted a third party claim against
plaintiff's principal, John Percival, who also was a
member of Chyron's Board of Directors. Chyron
believes that no success fee is payable pursuant to
the terms of the engagement letter because, among
other things, no transaction occurred as provided for
by the engagement letter, other conditions precedent
were not met, and the amendment relied upon by
plaintiff is unenforceable. The third party claim
again John Percival alleges that he breached his
fiduciary duties to Chyron and is liable for any
amounts that might be awarded to plaintiff, together
with counsel fees.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
There were no matters submitted to a vote by the
Company's security holders during the quarter ended
December 31, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDERS MATTERS
PRINCIPAL MARKET
Chyron's common stock is traded on the New York Stock
Exchange and the Chicago Stock Exchange under the
ticker symbol "CHY". The approximate number of
holders of record of the Company's common stock at
December 31, 1995 was 8,500. The approximate number
of shareholders, including those held by depository
companies for certain beneficial owners, is estimated
to be 16,000.
Pursuant to the Company's First Amended Joint Plan of
Reorganization, dated October 28, 1991, filed with
the U.S. Bankruptcy Court for the Eastern District of
New York, the Company issued 5,795,555 Common Stock
Purchase Warrants on January 20, 1992. These
warrants began trading on the Chicago Stock Exchange
under the ticker symbol "CHYWS.M". Each warrant
entitles its holder to purchase one share of the
Company's common stock at $0.20 per share. The
warrants expired on January 31, 1996. As of December
31, 1995, a total of 4,070,024 warrants were
exercised. During 1996, 1,138,523 warrants were
exercised.
STOCK AND WARRANT PRICE AND DIVIDEND INFORMATION
The following table sets forth the high and low stock and warrant
prices for 1995 and 1994:
STOCK PRICES WARRANT PRICES
HIGH LOW HIGH LOW
YEAR ENDED DECEMBER 31, 1995:
Quarter ended March 31, 1995 $ 3/4 $ 3/8 $13/32 $ 1/8
Quarter ended June 30, 1995 1 1/2 11/16 5/32
Quarter ended September 30, 1995 3 13/16 2 3/4 11/16
Quarter ended December 31, 1995 2 7/8 1 3/4 2 5/8 1 7/16
YEAR ENDED DECEMBER 31, 1994:
Quarter ended March 31, 1994 $ 3/4 $9/16 $ 5/8 $ 5/16
Quarter ended June 30, 1994 3/4 9/16 7/16 3/8
Quarter ended September 30, 1994 3/4 9/16 1/2 5/16
Quarter ended December 31, 1994 11/16 9/16 1/2 1/4
Due to the Company's need to conserve cash for future
working capital needs and growth, the Company does
not anticipate the payment of cash dividends in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share data and ratios)
FISCAL YEAR
YEARS ENDED SIX MONTHS ENDED ENDED
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1994 1993 1992 1991(1) 1991
INCOME STATEMENT DATA
Net sales
$53,971 $42,762 $37,391 $29,715 $13,205 $ 23,891
Net income (loss)(5)
$ 7,476 $(8,994) $ 1,276 $ 1,005 $ 6,667 $(19,771)
PER SHARE DATA (2)
Net income (loss)(5)
.08 (.10) .02 .01 - -
Cash dividends
- - - - - -
BALANCE SHEET DATA
Working capital(3)
$28,221 $12,103 $13,256 $11,692 $10,682 $ 20,104
Current ratio(3)
3.99 2.21 1.85 1.79 2.02 2.52
Total assets
$44,332 $28,644 $38,516 $35,623 $29,597 $50,737
Long-term debt(4)
$ 4,911 $ 4,829 $ 200 $ 3,000 $ 5,000 $ -
Shareholders' equity
(deficit)
$29,983 $13,776 $22,627 $17,882 $14,099 $ (2,568)
Weighted average number
of shares outstanding(2)
91,148 86,886 75,885 70,543 - -
(1) In connection with its acquisition by Pesa, Inc., the Company
changed its fiscal year end to December 31, beginning in 1991.
(2) For the years ended December 31, 1995, 1994, 1993 and 1992, fully
diluted earnings per share are not presented since such presentation
would not be materially different from primary earnings per share.
Per share data is not presented for the predecessor periods due to
the change in the capital structure of the Company upon its emergence
from its reorganization proceeding under Chapter 11 of the United
States Bankruptcy Code on December 27, 1991.
(3) June 30, 1991 calculation does not include liabilities subject to
settlement under Chapter 11 reorganization.
(4) The December 31, 1994, 1993, 1992 and 1991 amounts do not include
the Convertible Subordinated Notes issued to Pesa, Inc. as part of the
Chapter 11 reorganization. See Note 11 to the Consolidated Financial
Statements.
(5) Includes West Coast Restructuring Charge of $12.7 million for the
year ended December 31, 1994. See Note 3 to the Consolidated Financial
Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
COMPARATIVE PERFORMANCE YEAR ENDED DECEMBER 31, 1995
VS 1994
Sales increased to $54 million, or 26%, over the
prior year, primarily due to increases in the
Company's character generator lines. The Infinit!
product line showed the largest dollar growth at
$6.4 million, or 41%, with the Max line showing the
largest percentage growth at 65%, or $4.7 million.
Increases in sales also stem from increases in the
Company's Maxine product line which showed
improvements of $2.4 million, or 39%, over the prior
year. The growth in sales was seen both
domestically and abroad.
Gross margins increased $7.4 million as a result of
the 26% increase in sales. Gross margins as a
percentage of sales increased to 58% from 56% in
1994 mainly due to increased efficiencies in the
factory and management's efforts in cost reductions.
Selling, general and administrative (SG&A) expenses
increased by $2.8 million over the prior year. This
increase was primarily due to (a) legal and
investment banking fees of $443,000 incurred with
respect to the undertakings of the Special
Transaction Committee of the Board of Directors,
which had been appointed in connection with the
potential change in control of Chyron if Pesa sold
its shares, and (b) the accrual of severance
payments due to former management of $430,000.
Additional increases were seen due to increases in
costs related to the 26% increase in sales. These
increases were offset by costs cutting measures
instituted by the Company in conjunction with the
West Coast Restructuring in the prior year as is
seen by the decrease in SG&A expenses as a
percentage of sales from 33% in 1994 to 31% in 1995.
Research and development (R&D) expenses decreased in
1995 by $58,000. The decrease was mainly due to
benefits recognized as part of the Company's West
Coast Restructuring in the third quarter of 1994,
which eliminated costs related to the Company's
unprofitable product lines. Exclusive of 1994 costs
related to unprofitable product lines, R&D expenses
for 1995 increased $359,000, mainly due to
additional expenditures for new product development
to address emerging markets targeted by the Company
as well as the development of new features for the
Company's existing product line. R&D expense
includes the amortization of software development
costs, which increased $82,000 due to the release of
new options in 1995 for the Company's character
generator product lines.
Net interest expense increased by $11,000 over 1994
due to an increase in the average prime rate for the
period and additional interest expense related to
the Company's capital lease obligations entered into
in December of 1994. This increase was offset by
earnings on the Company's cash equivalents.
Income before provision for income taxes was $7.9
million for 1995, an increase of $16.9 million over
the $9 million loss in the prior year. Net income
for the current year includes a $2 million charge
related to the termination of the Company's
Management Agreement with Sepa, which is further
described in Note 2 to the Consolidated Financial
Statements, and a recapture of the prior year's
restructuring charge of $1.3 million. See details
of the changes in the West Coast Restructuring
Charge in Note 3 to the Consolidated Financial
Statements. Exclusive of the management fee charge
in 1995 and amounts related to the West Coast
Restructuring charge in both 1994 and 1995, the
income before provision for income taxes increased
$5 million due primarily to increases in net sales
and gross margins for 1995 coupled with increased
efficiencies and cost savings measures as well as
the benefit of the West Coast Restructuring
commencing in the third quarter of 1994.
Net income for 1995 increased to $7.5 million as
compared to a loss of $9 million in the prior year.
A total income tax provision of $470,000, or 6%, was
recorded in 1995 and included a tax benefit of
approximately $1.0 million which was recognized as
a result of the reduction in the valuation allowance
provided on deferred tax assets. The valuation
allowance was reduced because management believes
that the Company will generate sufficient future
taxable income from ordinary and recurring
operations to realize the deferred tax assets. At
December 31, 1995, the Company has recorded a
valuation allowance of approximately $5.4 million.
See further discussions regarding the income tax
provision, the valuation allowance and related items
in Note 13 to the Consolidated Financial Statements.
COMPARATIVE PERFORMANCE YEAR ENDED DECEMBER 31, 1994
VS 1993
Sales increased by 14%, which was attributable to
significant increases in sales across the range of
the Company's graphics products to broadcasters,
post production houses and users of corporate video
systems. Sales for the Company's three flagship
high-end products increased 27% with the Infinit
workstation showing a 29% volume growth, the entry
level Maxine a 50% volume growth and the
intermediate Max a 9% unit price improvement due to
the increased sale of featured options. The Codi
titling and logo generators had a 28% unit volume
growth, with an average system price improvement
over the prior year of 93%. In 1994, sales also
included a software license fee of $610,000 for use
of the source code of the Company's Liberty paint
and animation software.
Gross margins increased $3.3 million as a result of
a 14% increase in sales. Gross margins as a
percentage of sales increased to 56% from 55% in
1993 as a result of management's efforts to enhance
productivity in the factory and the benefits of the
West Coast restructuring.
SG&A expenses increased by $849,000, but decreased
as a percentage of sales from 36% in 1993 to 33% in
1994, primarily due to savings from the
consolidation of the Company's two Melville
facilities, reduction in staffing levels and the
West Coast restructuring, which in turn were offset
by an increase in costs related to the 14% increase
in sales, new marketing and advertising initiatives,
moving expenses and the write-off of the leasehold
improvements related to the consolidation of the
Company's two Melville facilities.
R&D expenses, including the amortization of
capitalized software development costs, increased by
$590,000 due to strategic initiatives in improving
the Company's profitable product lines.
Amortization of software development costs (included
in R&D) increased $167,000 as a result of the
release of new products and options since 1993.
As of September 30, 1994, Chyron's West Coast
operations, CMX and Aurora, reflected a continuing
trend of poor operating performance. Due to these
disappointing results, the lack of certain products
in the high growth sector of the market and the
strategic decision by Chyron's management to
redirect its product lines to a broader base market
and to reengineer its R&D focus, the Company
initiated a plan to restructure the West Coast
operations.
Consequently, as a major step in increasing the
Company's profitability as a whole, the Company
decided to eliminate unprofitable product lines such
as CMX 6000, Cinema, Gemini, LSI and the 3500 and
3600 series product lines, reduce the West Coast
workforce by 30% (or 12 employees), write-down to
estimated net realizable value certain assets
directly attributable to the unprofitable product
lines, write-off software costs that the Company
believed no longer fit its strategic initiative and
focus, dispose of certain assets, accrue losses for
the restructuring period of October 1, 1994 through
March 31, 1995 and downsize the Company's Santa
Clara, California facility.
The result of these measures was a restructuring
charge of $12.7 million for the West Coast
operations. The specific components of the
restructuring charge broken-out between asset write
downs and cash outlays were as follows:
Asset write downs:
Write down of assets to estimated
net realizable value $ 6,952
Write-off of software development
costs 1,991
Total non cash charges 8,943
Cash Outlays:
Accrued operating losses through
date of disposition 2,500
Loss on lease commitment 700
Accrued severance for reduction in
workforce 300
Other 273
$12,716
The cash outlays required by the restructuring have
been funded by the Company's profitable product
lines. Cash outlays for the six month restructuring
period were $3,773,000, of which $1,000,000 was made
by December 31, 1994. The loss on the lease was to
be funded over the remaining lease term of 31 months
subsequent to the restructuring period. (In 1995 a
sublease was obtained). The Company's graphics
division had been funding the operating losses of
CMX and Aurora out of its working capital since CMX
and Aurora began their trend of unprofitability.
Operating results as a result of the West Coast
restructuring were projected to benefit by a savings
of over $2 million for 1995, principally due to a
reduction in annual salaries and employee benefits
of $750,000, a decrease in depreciation and
amortization expense of $200,000 per year, a
reduction of overhead costs of approximately
$200,000 per year and a reduction in losses on
unprofitable product lines of approximately
$850,000 per year. The Company believes such
savings have been substantially realized.
Interest expense decreased as a result of the
reduction in the Company's secured credit facility
from $6,485,000 to $4,500,000 at December 31, 1994,
offset in part by the increase in the average prime
rate over the prior period.
Due to the West Coast restructuring charge of
$12,716,000, which included the disposition of
inventory related to unprofitable product lines, the
Company had a book and tax loss for 1994 and,
accordingly, there was no provision or benefit for
income taxes.
The operating loss of $8,469,000 would have been an
operating profit of $4,247,000 exclusive of the West
Coast restructuring charge of $12,716,000 compared
to $2,750,000 for 1993. This increase was mainly
attributable to the fact that the fourth quarter
losses of the West Coast operations of approximately
$1,000,000 were provided for in the $12,716,000 West
Coast restructuring charge taken in the quarter
ended September 30, 1994 and also due to the
increase in sales and gross margins in 1994.
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the
precise effect of inflation, the Company has
experienced increased costs of materials, supplies,
salaries and benefits and increased general and
administrative expenses. The Company attempts to
pass on increased costs and expenses by developing
more useful and cost effective products for its
customers that can be sold at more favorable profit
margins.
LIQUIDITY AND CAPITAL RESOURCES
On April 27, 1995, the Company entered into a two
year secured credit facility with the CIT Group for
$10,000,000. Based on projected working capital and
financial requirements, in February 1996, the
Company received a commitment letter from a
financial institution for a revolving credit
facility of $10 million and a term loan of $8
million. The revolving portion of the facility
matures 3 years from closing, while the term portion
matures 4 years from closing. See Note 17 to the
Consolidated Financial Statements for further
discussion.
The Company's current ratio was 3.99 and its working
capital was $28,221,000 at December 31, 1995.
At December 31, 1995, the Company had operating
lease commitments for equipment and factory and
office space totaling $3.7 million of which $563,000
is payable within one year. See Notes 2 and 15 to
the Consolidated Financial Statements.
SUBSEQUENT EVENTS
On February 29, 1996, the Company acquired a 19%
interest in Real Time Synthesized Entertainment
Technology, Ltd. ("RT-SET"), located in Tel Aviv,
Israel. RT-SET develops, markets and sells real
time virtual studio set software and proprietary
communications hardware that operate on Silicon
Graphics systems. Chyron purchased shares of RT-SET
Convertible Preferred Stock in exchange for 2.4
million shares of Chyron common stock valued at $6
million. Chyron was granted certain call option
rights which, when exercised, will result in the
Company owning up to a 51% interest in RT-SET.
Chyron and RT-SET will jointly market and distribute
RT-SET products and Chyron will provide
infrastructure for installation, service and support
functions.
On January 4, 1996, Chyron signed a Letter of Intent
to acquire Pro-Bel Limited ("Pro-Bel"), located in
the United Kingdom. Pro-Bel manufactures and
distributes video signal switching equipment and
systems. Under the terms of the Letter of Intent,
the consideration consists of approximately $12.1
million (8 million pounds sterling) in cash and
notes, of which a minimum of $6.8 million will be in
cash, and approximately $9 million (6 million pounds
sterling) of restricted Chyron Common Stock valued
at the average closing price of Chyron shares on the
New York Stock Exchange for a defined period
preceding the closing of the transaction. The
closing is expected to be completed in March 1996.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long Lived Assets and for Long
Lived Assets to be Disposed of." This accounting
standard, which is effective for financial
statements issued for fiscal years beginning after
December 15, 1995, is not expected to have a
material impact on the Company's results or
reporting.
In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock Based Compensation". This
accounting standard is effective for financial
statements issued for fiscal years beginning after
December 15, 1995. The Company plans to adopt SFAS
123 in 1996 through disclosure in the Notes to the
Consolidated Financial Statements.
Report of Independent Auditors
February 8, 1996, except as to Note 17, which is as
of February 29, 1996
To the Board of Directors and
Shareholders of Chyron Corporation
In our opinion, the consolidated financial
statements for the year ended December 31, 1995
listed in the index appearing under Item 14(a)(1)
and (2) on page 38 present fairly, in all material
respects, the financial position of Chyron
Corporation and its subsidiaries at December 31,
1995 and the results of their operations and their
cash flows for the year then ended in conformity
with generally accepted accounting principles.
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 audit. We conducted our audit of these
statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant
estimates made by management and evaluating the
overall financial statement presentation. We
believe that our audit provides a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Report of Independent Auditors
Shareholders and Board of Directors
Chyron Corporation and Subsidiary
We have audited the accompanying consolidated
balance sheet of Chyron Corporation and subsidiary
as of December 31, 1994 and the related consolidated
statements of operations, shareholders' equity, and
cash flows for each of the two years in the period
ended December 31, 1994. Our audits also included
the consolidated financial statement schedule for
each of the two years in the period ended December
31, 1994 listed in the Index at Item 14(a). These
financial statements and schedule are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements and schedule 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 consolidated financial
statements referred to above present fairly, in all
material respects, the consolidated financial
position of Chyron Corporation and subsidiary at
December 31, 1994, and the consolidated results of
their operations and their cash flows for each of
the two years in the period ended December 31, 1994,
in conformity with generally accepted accounting
principles. Also, in our opinion, the related
consolidated financial statement schedule referred
to above, when considered in relation to the basic
financial statements taken as a whole, presents
fairly in all material respects the information set
forth therein.
Ernst & Young LLP
Melville, New York
February 17, 1995
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands except per share amounts)
1995 1994 1993
Net sales.................... $53,971 $42,762 $37,391
Cost and expenses:
Manufacturing............... 22,746 18,912 16,816
Selling, general and
administrative............ 17,066 14,301 13,452
Research and development.... 4,105 4,163 3,573
Management fee.............. 2,911 1,139 800
West Coast restructuring
(recapture) charge........ (1,339) 12,716
Total costs and expenses..... 45,489 51,231 34,641
Operating income (loss)...... 8,482 (8,469) 2,750
Interest expense, net........ 536 525 714
Income (loss) before
provision for income taxes. 7,946 (8,994) 2,036
Income taxes/equivalent
provision.................. 470 760
Net income (loss)............ $ 7,476 $(8,994)$ 1,276
Earnings (loss) per common
share...................... $ .08 $ (.10)$ .02
Weighted average number of
common and common
equivalent shares
outstanding ............... 91,148 86,886 75,885
See Notes to the Consolidated Financial Statements.
CHYRON CORPORATION
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1995 AND 1994
(In thousands except share amounts)
ASSETS
1995 1994
Current assets:
Cash and cash equivalents.............. $ 5,012 $ 1,555
Accounts and notes receivable.......... 13,967 13,225
Inventories............................ 11,645 5,464
Prepaid expenses....................... 578 1,898
Deferred tax asset..................... 6,457
Total current assets................. 37,659 22,142
Property and equipment................... 3,300 3,646
Software development costs............... 1,716 2,520
Deferred tax asset....................... 1,403
Other assets............................. 254 336
TOTAL ASSETS $44,332 $28,644
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.. $ 8,120 $ 7,008
Management fee payable................. 1,000
Reserve for West Coast restructuring... 158 2,824
Capital lease obligations.............. 160 207
Total current liabilities............ 9,438 10,039
Loans payable............................ 4,741 4,500
Capital lease obligations................ 170 229
Convertible subordinated notes payable... 100
Total liabilities.................... 14,349 14,868
Commitments (See Note 15)
Shareholders' equity:
Preferred stock, par value without designation
Authorized - 1,000,000 shares, Issued - none
Common stock, par value $.01
Authorized - 150,000,000 shares
Issued and outstanding -
90,071,394 shares at December 31, 1995,
87,392,524 shares at December 31, 1994. 901 874
Additional paid-in capital.............. 27,739 19,035
Retained earnings/(accumulated deficit). 1,343 (6,133)
Total shareholders' equity................ 29,983 13,776
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.$44,332 $28,644
See Notes to the Consolidated Financial Statements.
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In Thousands)
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................... $7,476 $(8,994) $1,276
Adjustments to reconcile net income (loss)
to net cash provided by operations:
West Coast restructuring (recapture)
charge.............................. (1,339) 11,766
Depreciation and amortization............. 2,067 2,037 1,816
Income tax equivalent provision........... 354 608
Loss on abandonment of leasehold
improvements............................. 350
Changes in operating assets and liabilities:
Accounts and trade notes receivable....... (742) 567 (2,175)
Inventories............................... (6,181) 2,879 (894)
Prepaid expenses.......................... 1,320 (1,184) 141
Income taxes receivable................... 248
Accounts payable and accrued expenses..... 1,112 (1,913) 1,044
Management fee payable.................... 1,000
Reserve for West Coast restructuring...... (1,327)
Net cash provided by operating activities.. 3,740 5,508 2,064
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment...... (710) (660) (731)
Capitalized software development........... (207) (1,383) (1,741)
Sales of equipment held for lease.......... 112
Other...................................... 28 102 141
Net cash (used in) investing activities.... (889) (1,941) (2,219)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of capital lease obligations...... (106)
Payments of loans payable.................. (4,500) (1,985)
Net proceeds from new credit facility...... 4,741
Proceeds from exercise of common stock
purchase warrants......................... 471 43 61
Payments of Chapter 11 claims and other
reorganization items...................... (283) (96)
Net cash provided by (used in) financing
activities............................... 606 (2,225) (35)
Change in cash and cash equivalents........ 3,457 1,342 (190)
Cash and cash equivalents at beginning
of year.................................. 1,555 213 403
Cash and cash equivalents at end of year... $5,012 $1,555 $ 213
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid.............................. $ 555 $ 548 $ 945
Income taxes paid.......................... $ 116 $ 71 $ 27
See Notes to the Consolidated Financial Statements.
CHYRON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In thousands)
RETAINED
COMMON STOCK ADDITIONAL EARNINGS
$.01 PAR VALUE PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT)
Balance at December 31, 1992. 72,309 $723 $15,574 $1,585
Net income..................... 1,276
Exercise of warrants........... 304 3 58
Conversion of subordinated
notes......................... 14,000 140 2,660
Benefit of utilization of net
operating loss carryforward
under Fresh Start Reporting... 608
Balance at December 31, 1993.. 86,613 866 18,900 2,861
Net loss....................... (8,994)
Exercise of warrants........... 280 3 40
Conversion of subordinated
notes........................ 500 5 95
Balance at December 31, 1994... 87,393 874 19,035 (6,133)
Net income..................... 7,476
Income tax equivalent benefit
from reduction of deferred
tax assetvaluation allowance.. 6,800
Benefit of utilization of net
operating loss carryforward
under Fresh Start Reporting... 1,360
Exercise of warrants........... 2,178 22 449
Conversion of subordinated
notes......................... 500 5 95
Balance at December 31, 1995. $90,071 $901 $27,739 $1,343
See Notes to the Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONTROL OF REGISTRANT
On May 26, 1995, Pesa Inc., a Delaware Corporation
("Pesa"), sold 10,000,000 shares of common stock of
Chyron Corporation ("Chyron" or "the Company") to CC
Acquisition Company A, a Delaware limited liability
company ("CCACA"). On July 25, 1995, Pesa sold
49,414,732 shares to the entities listed below.
Additionally, on July 25, 1995, Sepa Technologies,
Ltd., a Georgia limited liability company ("Sepa"),
and an affiliate of Pesa, sold 5,000,000 shares to
the entities listed below.
The sales were made pursuant to two agreements
entered into on May 26, 1995: (1) CCACA and CC
Acquisition Company B, a Delaware limited liability
company ("CCACB"), and an affiliate of CCACA,
entered into a stock purchase agreement with Pesa
(the "Pesa Agreement") pursuant to which (i) CCACA
acquired 10,000,000 shares and (ii) CCACA and CCACB
agreed to acquire an additional 49,414,732 shares
and (2) CCACA entered into a stock purchase
agreement with Sepa (the "Sepa Agreement") pursuant
to which CCACA agreed to acquire 5,000,000 shares,
and the voting rights and right of first refusal to
an additional 9,000,000 shares. CCACA and CCACB are
collectively referred to herein as CCAC.
On July 25, 1995, CCACA entered into an agreement
(the "Leubert Agreement") with Alfred O.P. Leubert
Ltd., a New York corporation ("Leubert"), pursuant
to which CCACA was granted a right of first refusal
to acquire 300,000 shares, which shares were
acquired by Leubert from Sepa and which reduced from
9,000,000 to 8,700,000 the Company's right of first
refusal to acquire shares as set forth in the Sepa
Agreement.
On July 25, 1995, CCACA and CCACB entered into an
assignment and assumption agreement (the "Assignment
Agreement") by and among CCACA, CCACB, WPG Corporate
Development Associates IV, L.P., a Delaware limited
partnership ("CDA"), WPG Corporate Development
Associates IV (Overseas), L.P., a Cayman Islands
exempt limited partnership ("CDAO"), WPG Enterprise
Fund II, L.P., a Delaware limited partnership
("WPGII"), Weiss, Peck & Greer Venture Associates
III, L.P., a Delaware limited partnership
("WPGIII"), Westpool Investment Trust plc., a public
limited company organized under the laws of England
("WIT"), Lion Investments Limited, a limited company
organized under the laws of England ("Lion") and
Charles M. Diker (such individual together with CDA,
CDAO, WPGII, WPGIII, WIT and Lion, the "WPG/Westpool
Investor Group") and certain other persons (such
persons together with the WPG/Westpool Investor
Group, the "Assignees"), pursuant to which (i) CCACA
assigned to the Assignees its rights under the Pesa
Agreement to acquire 20,000,000 shares, (ii) CCACA
assigned its rights under the Sepa Agreement to
acquire 5,000,000 shares, (iii) CCACA assigned its
right of first refusal to acquire 5,400,000 of the
9,000,000 shares as set forth in the Sepa Agreement
and the Leubert Agreement described above and (iv)
CCACB assigned its rights under the Pesa Agreement
to acquire 17,648,839 shares.
The closing, as contemplated by the Pesa Agreement
and the Sepa Agreement, occurred on July 25, 1995.
Consequently, CCAC beneficially owns in the
aggregate 21,765,892 shares and the WPG/Westpool
Investor Group beneficially owns in the aggregate
41,905,896 shares. Beneficial ownership does not
include 9,000,000 shares for which the voting rights
have been assigned to CCAC and the WPG/Westpool
Investor Group.
Name of Owner Number of Shares Date of Acquisition
CCACA 10,000,000 May 26, 1995
CCACB 11,765,892 July 25, 1995
CDA 17,770,615 July 25, 1995
CDAO 4,285,120 July 25, 1995
WPGII 4,415,557 July 25, 1995
WPGIII 3,671,545 July 25, 1995
WIT 6,984,311 July 25, 1995
Lion 3,308,366 July 25, 1995
C.M. Diker 1,470,382 July 25, 1995
Others 742,944 July 25, 1995
Pesa was a 100% owned subsidiary of a Spanish
Company, Pesa Electronica, S.A. ("Electronica"),
which in turn was 99% owned by a Spanish Company,
Amper, S.A. On June 24, 1994, Amper sold all of its
shares of stock of Electronica to Sepa. On August
2, 1994, Sepa acquired 14,000,000 shares of Chyron
common stock from certain foreign shareholders.
Consequently, Sepa directly and indirectly through
Pesa became the beneficial owner of 73,414,732
shares of Chyron common stock.
On October 5, 1994, Electronica filed for
receivership in Spain ("Suspension de Pagos"). The
proceedings are comparable to a Chapter 11
reorganization under the U.S. Bankruptcy laws.
2. RELATED PARTY TRANSACTIONS
Sepa, prior to the above described change in
control, was the beneficial owner of 73,414,732
shares of Chyron common stock. Consequent to such
ownership, Sepa had an amended and restated
management agreement with Chyron whereby Chyron
agreed to pay management fees to Sepa at 2.5% of
consolidated revenues through December 31, 1997.
The management fees under this agreement were
subject to an annual limitation of $1.5 million.
In July 1994, Chyron took advantage of an option to
prepay the management fee at a 25% discount from
the aggregate estimated yearly fees for the period
July 1, 1994 through December 31, 1995, resulting in
estimated aggregate total savings of $486,000 in
fees for the eighteen month period ending December
31, 1995.
In December 1995, Chyron and Sepa agreed to
terminate the Management Agreement upon payment to
Sepa of $2 million, which resulted in aggregate
savings for the Company of $1 million for the two
year period ending December 31, 1997. The $2
million was paid in equal installments in December
1995 and January 1996.
The Company shared certain trade show and facility
costs with Pesa and Electronica. Such services
amounted to $30,000, $303,000 and $127,000 for 1995,
1994 and 1993, respectively, and were billed to
these related parties under a usage based
allocation. During 1993, the Company also performed
certain development work for Electronica and sold to
it certain products that were billed under an arm's
length arrangement. These sales amounted to
$272,000.
As of December 31, 1994, the Company was indebted to
Sepa and its affiliates for $49,000, representing
the cost of services provided and interest accrued
on the Convertible Subordinated Notes. Also, the
Company had outstanding receivables due from
Electronica and its affiliates for equipment and
services at December 31, 1995 and 1994 amounting to
$483,000 and $685,000, respectively. In light of
Electronica's filing "Suspension de Pagos" in Spain,
reserves of $389,000 and $545,000, respectively,
have been provided for these receivables.
A director of the Company is a partner of a law firm
that rendered various legal services to the Company
for which the Company incurred costs of $273,000
during 1995.
3. WEST COAST RESTRUCTURING
During the third quarter of 1994, as the result of
continuing significant operating losses by the
Company's West Coast Operations and its inability to
meet revenue and operating targets, management
implemented a restructuring plan to eliminate a
substantial number of the CMX and Aurora product
lines and consolidate certain remaining products
into the Company's Graphics Operations, with only
certain product engineering capabilities remaining
on the West Coast. As a result, the Company
recorded a $12.7 million charge to operations during
the third quarter of 1994, resulting from headcount
reductions, consolidation costs, write-downs of
assets related to discontinued product lines and
accrual of estimated operating losses anticipated
during the disposition period. For 1995, operating
losses of $1,707,000 related to the discontinued
product lines were charged against the reserve for
West Coast restructuring.
During August 1995, the Company entered into an
agreement to sublease a portion of the office space
for the West Coast Operations. The subleasing
served to decrease future rent commitments and, as
a result, the Company reversed $356,000 of the
original $12.7 million charge to account for the
decrease in projected rent expense.
Additionally, during 1995, the Company sold certain
inventory that had been fully reserved for in the
original $12.7 million charge. The Company realized
a gain of $380,000 related to this inventory.
During December 1995, the Company recaptured
$603,000 of the original restructuring charge as a
result of lower than anticipated costs related to
the disposition period. As of December 31, 1995,
the amount of the Reserve for West Coast
Restructuring of $158,000 represented future rent
commitments through 1997.
A summary of activity for the year ended December
31, 1995 related
RESERVE FOR WEST COAST
WEST COAST RESTRUCTURING
RESTRUCTURING RECAPTURE
Balance at January 1, 1995 $2,824 $ 0
Current year operating loss 1,707
Sublease agreement 356 356
Realization on asset write-down 380
Recapture 603 603
Balance at December 31, 1995 $ 158 $1,339
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's business is organized under a group
concept that coordinates product development,
marketing, advertising, distribution and
procurement. The Company has a multi-product
approach for filling customer requirements for
equipment and systems used in video or film
production. Today these products include: graphics
and character generation systems and electronic
paint and animation systems and software. As a
result, the Company operates as one business
segment.
BASIS OF PRESENTATION
The consolidated financial statements include the
accounts of the Company and its wholly-owned
subsidiary, which is currently inactive. Certain
prior year amounts have been reclassified to conform
to the current year presentation.
ACCOUNTING ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on deposit
and amounts invested in a highly liquid money market
fund. Cash equivalents consist of short term
investments convertible into cash within 3 months or
less. The carrying amounts of cash and cash
equivalents approximate their fair value.
INVENTORIES
Inventories are stated at the lower of cost (first-
in, first-out basis) or market.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are carried at cost and are
depreciated on the straight-line method over
estimated useful lives of 3-10 years. Leasehold
improvements are amortized over the shorter of the
remaining life of the lease or the life of the
improvement.
REVENUE RECOGNITION
Revenue is recognized when finished products are
shipped.
INCOME TAXES
In connection with Chyron's emergence in 1991 from
its reorganization proceeding under Chapter 11 of
the United States Bankruptcy Code, the Company
adopted "Fresh Start Reporting" in accordance with
AICPA Statement of Position, "Financial Reporting by
Entities in Reorganization under the Bankruptcy
Code."
Fresh Start Reporting requires that the Company
report an income tax equivalent provision when there
is book taxable income and a pre-reorganization net
operating loss carryforward. This requirement
applies despite the fact that the Company's pre-
reorganization net operating loss carryforward would
eliminate (or reduce) the related income tax
payable. The current and future year benefit
related to the carryforward is not reflected in Net
Income, but instead is recorded as a direct increase
to Additional Paid-in Capital. The income tax
equivalent provision does not affect the Company's
tax liability.
The Company's deferred tax liability is determined
based on the differences between the financial
reporting and tax bases of assets and liabilities
and enacted tax rates that are expected to be in
effect for the years in which the differences are
expected to reverse. The deferred tax liability is
reduced by cumulative tax credits and losses carried
forward for tax purposes and by tax deductible
temporary differences (deferred tax assets). See
Note 13.
COMMON STOCK EQUIVALENTS
In December 1991, the Company issued to Pesa $5
million of Convertible Subordinated Notes ("Notes").
The Notes were convertible into shares of Chyron
common stock at a conversion price of $.20 per
share. As of December 31, 1995, all of the Notes
had been converted into shares. See Note 11.
In January 1992, shareholders of the Company, other
than Pesa, received one warrant for every two shares
of common stock held when the Company issued
5,795,555 Common Stock Purchase Warrants. Each
warrant entitled its holder to purchase one share of
the Company's common stock at $.20 per share. These
warrants expired on January 31, 1996. As of
December 31, 1995, a total of 4,070,024 Common Stock
Purchase Warrants had been exercised. In January
1996, an additional 1,138,523 warrants were
exercised.
During 1995, the Company's Board of Directors
granted 3,125,000 Incentive Stock Options to certain
employees for the purchase of Chyron common stock at
a purchase price ranging from $1.625 to $1.875.
Additionally, during 1995, 90,000 Non-Incentive
Stock Options were granted to members of the Board
of Directors at a purchase price of $1.875. The
purchase price of the stock options granted
represents the quoted closing market price at the
dates of the grant. The options vest over three
years and expire on July 25, 2000. During 1995 no
options were exercisable. See Note 12.
EARNINGS PER SHARE
Earnings per share are based on the weighted average
number of common shares outstanding during the
period plus, when dilutive, additional shares
issuable upon the assumed exercise of outstanding
Common Stock Purchase Warrants and outstanding
Incentive Stock Options. Fully diluted earnings per
share are not presented since such presentation
would not be materially different from primary
earnings per share.
5. ACCOUNTS AND NOTES RECEIVABLE
Trade accounts and notes receivable are stated net
of an allowance for doubtful accounts of $3,134,000
and $2,204,000 at December 31, 1995 and 1994,
respectively. The provision for doubtful accounts
amounted to $466,000, $729,000, and $547,000 for
1995, 1994 and 1993, respectively. The carrying
amounts of accounts and notes receivable are a
reasonable estimate of their fair value.
The Company periodically evaluates the credit
worthiness of its customers and determines whether
collateral (in the form of letters of credit or
liens on equipment sold) should be taken or whether
reduced credit limits are necessary. Credit losses
have consistently been within management's
expectations.
Accounts and notes receivable are principally due
from customers in, and dealers serving, the
broadcast video industry and non-broadcast display
markets. At December 31, 1995 and 1994, receivables
included approximately $2.7 million due from foreign
customers.
6. INVENTORIES
Inventories at December 31 consist of the following
(in thousands):
1995 1994
Finished goods $ 3,345 $ 1,811
Work-in-process 5,250 1,807
Raw material 3,050 1,846
$11,645 $ 5,464
7. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consist of the
following (in thousands):
1995 1994
Land ..................... $ 53 $ 53
Machinery and equipment... 4,441 3,881
Furniture and fixtures.... 1,501 1,348
Leasehold improvements.... 299 296
6,294 5,578
Less: Accumulated depreciation
and amortization 2,994 1,932
$3,300 $3,646
Machinery and equipment at December 31, 1995 and
1994 includes $473,000 and $436,000, respectively,
of assets held under capital lease obligations. See
Note 15.
Depreciation expense, which includes amortization of
the Company's capital lease assets was $1,054,000,
$1,106,000 and $785,000 in 1995, 1994 and 1993,
respectively.
8. SOFTWARE DEVELOPMENT COSTS
Certain software development costs are capitalized
and amortized over their estimated economic life,
ranging from 3 to 5 years, commencing when each
product is available for general release. The
following amounts were capitalized, amortized, and
written off during the year ended December 31 (in
thousands):
1995 1994 1993
Amounts capitalized............... $ 207 $ 1,383 $1,741
Less: Amortization (included in
Research and Development). (1,013) (931) (764)
West Coast restructuring
write-down to net
realizable value......... (1,991)
Net (decrease) increase in
software development costs...... $ (806) $(1,539) $ 977
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31
consist of the following (in thousands):
1995 1994
Accounts payable............ $2,818 $3,389
Compensation (including
pension liability)........ 3,136 2,667
Other accrued items......... 2,003 792
Income taxes payable........ 163 160
$8,120 $7,008
The carrying amounts of accounts payable and accrued
expenses are a reasonable estimate of their fair
value.
10. LOANS PAYABLE
On April 27, 1995, the Company entered into a two
year credit facility for $10,000,000 with a
financial institution. This facility, among other
things, is secured by substantially all the
Company's accounts receivable and inventories.
Borrowings are limited to amounts computed under a
formula for eligible accounts receivable and
inventory. Interest is payable monthly at the prime
rate (8.5% at December 31, 1995) plus 2% per annum.
At December 31, 1995, the Company had $4,741,000
outstanding under such facility. The carrying
amount of notes payable is a reasonable estimate of
its fair value.
At December 31, 1994, the Company had $4.5 million
outstanding with another financial institution under
a secured revolving credit facility, which was
classified as long-term debt as the Company, on
February 1, 1995, had received a commitment for the
aforementioned two-year facility. Interest on the
former facility was payable monthly at prime plus 2%
per annum.
11. CONVERTIBLE SUBORDINATED NOTES PAYABLE
In 1991, the Company issued (to Pesa) 4-year
Convertible Subordinated Notes in the principal
amount of $5.0 million maturing on January 31, 1996
and bearing interest (payable annually in arrears)
at the prime rate, adjusted annually each December.
The Notes were convertible into 25,000,000 shares of
common stock of the Company at a conversion rate of
20 cents per share. As of December 31, 1995, all of
the Notes had been converted into shares of common
stock of the Company.
12. LONG-TERM INCENTIVE PLAN
In May 1995, the Company's shareholders approved the
Chyron Corporation Long-Term Incentive Plan ("the
Plan"). The Plan allows for a maximum of 5,000,000
shares of common stock to be available with respect
to the grant of awards under the Plan; any or all of
such common stock may be granted for awards of
Incentive Stock Options. During 1995, no options
were exercisable.
On July 25, 1995 and November 21, 1995, the Board of
Directors granted Incentive Stock Options for the
purchase of 2,975,000 and 150,000 of such shares to
certain employees, the purchase price per option
share is $1.625 and 1.875, respectively, the quoted
closing market price at the dates of grant.
Additionally, on July 31, 1995, the Board of
Directors granted Non-Incentive Stock Options to
members of the Board of Directors for the purchase
of 90,000 such shares, the purchase price being
$1.875 per option share, the quoted closing market
price at the date of this grant. The options vest
over three years at 33 1/3% per annum and expire on
July 25, 2000. On July 25, 1995, the Board of
Directors approved an amendment to the Plan to
provide that all Directors who are not officers of
the Company shall receive, on an annual basis on the
last trading date of each July, stock options for
10,000 shares of the Company's common stock, at an
exercise price equal to the quoted closing market
price of the stock on the date of grant; such
amendment is subject to shareholder approval at the
next annual meeting of shareholders.
13. INCOME TAXES
The provision for income taxes consists of the
following (in thousands):
1995 1994 1993
Current:
State.................... $ 50 $ $ 152
Tax equivalent provision. 420 608
$ 470 $ $ 760
The effective income tax rate differed from the
Federal statutory rate as follows (in thousands):
1995 1994 1993
Amount % Amount % Amount %
Federal income tax provision
(benefit) at statutory rate
$2,702 34.0 $(3,058)(34.0)$ 692 34.0
State income taxes, net of
federal tax benefit
33 .4 100 4.9
Benefit from post
reorganization temporary
differences on tax
equivalent provision
(1,351) (17.0)
Effect of valuation allowance
on deferred tax assets
(940) (11.8) 3,058 34.0
Other, net
26 .3 (32)(1.6)
$ 470 5.9% $ % $ 760 37.3%
The Company has deferred tax assets and deferred tax
liabilities as presented in the table below. The net
deferred tax assets are subject to a valuation
allowance, which was $5.4 and $14.5 million at
December 31, 1995 and 1994, respectively. This
valuation allowance is primarily attributable to a
pre-Chapter 11 reorganization net operating loss
carryforward and pre-Chapter 11 reorganization
deductible temporary differences. As a result of
current and projected future profitability, the
allowance was partially reduced in 1995.
Deferred tax assets (deductible temporary
differences) as of December 31, prior to the
allocation of the valuation allowance, consisted of
the following (in thousands):
1995 1994
Post-reorganization net
operating loss carryforward $ 280 $ 675
Pre-reorganization net
operating loss carryforward 7,250 8,670
Pre-reorganization deductible
temporary differences 4,555 3,972
Restructuring reserve 55 1,063
Other 2,000 1,500
Total deferred tax assets $14,140 $15,880
Deferred tax liabilities (taxable temporary
differences) as of December 31 consisted of the
following (in thousands):
1995 1994
Pre-reorganization taxable
temporary differences $ 85 $ 615
Software development costs 585 683
Other 210 152
Total deferred tax liabilities $ 880 $ 1,450
At December 31, 1995, the Company had net operating
loss carryforwards ("NOL") of approximately $22.1
million for tax purposes, expiring beginning with the
year 1996 through 2009. The U.S. Federal income tax
code provides that the amount of pre-Chapter 11
reorganization NOL's (approximately $21.3 million) at
December 31, 1995 that can be utilized will be
limited each year as a result of the change in
control of the Company at the end of 1991 and certain
other annual limitations. Post-Chapter 11
reorganization NOL's (approximately $.8 million at
December 31, 1995) are also subject to such
limitations, due to the change in control on July 25,
1995.
14. BENEFIT PLANS
The Company has a defined benefit pension plan (the
"Pension Plan") covering substantially all employees
meeting minimum eligibility requirements. Benefits
paid to retirees are based upon age at retirement,
years of credited service and average compensation.
Pension expense is actuarially determined using the
projected unit credit method. The Company's policy
is to fund the minimum contributions required under
the Employees Retirement Income Security Act. The
assets held by the Pension Plan at December 31, 1995
include government securities, corporate bonds and
mutual funds.
The net periodic pension cost and its components
under the provisions of SFAS No. 87 for the years
ending December 31 are as follows (in thousands):
1995 1994 1993
Service cost-benefits earned
during the period .......... $ 383 $437 $388
Interest cost on projected
benefit obligation.......... 292 312 290
Actual return on plan assets.. (227) (269) (217)
Net amortization and deferral. (15)
Net periodic pension cost..... $ 433 $480 $461
A reconciliation of the funded status of the Pension
Plan to the Company's balance sheet at December 31 is
as follows (in thousands):
1995 1994 1993
Accumulated pension benefit
obligation:
Vested..................... $2,265 $2,431 $2,036
Non-vested................. 79 63 87
Total........ ............. $2,344 $2,494 $2,123
Projected benefit obligation. 4,138 $4,532 $3,765
Plan assets at fair value.... 2,609 3,352 2,663
Projected benefit obligation in
excess of assets........... 1,529 1,180 1,102
Less items not yet recognized
in net periodic pension cost:
Unrecognized net gain (loss)
from past experience and
changes in assumptions...... 49 (35) (45)
Pension liability.............. $1,578 $1,145 $1,057
In each year presented, the expected long-term rate
of return on Pension Plan assets was 9%. The
weighted average discount rate used to determine the
accumulated benefit obligation was 8% in 1995 and
1994 and 9% in 1993. The rate of compensation
increase used was 6% for all years presented.
In 1994, the Company adopted a 401(k) Plan
exclusively for the benefit of participants and their
beneficiaries. All employees of the Company are
eligible to participate in the 401(k) Plan, except
non-resident aliens and employees who are members of
a union who bargain separately for retirement
benefits during negotiations. An employee may elect
to contribute a percentage of his or her current
compensation to the 401(k) Plan, subject to a
maximum of 20% of compensation or the Internal
Revenue Service annual contribution limit ($9,240 in
1995 and 1994), whichever is less. Total
compensation that can be considered for contribution
purposes is limited to $150,000.
The Company can elect to make a contribution to the
Plan on behalf of those participants who have made
salary deferral contributions. During 1995, the
Company contributed $29,000 to the Plan. During
1994, no contributions were made by the Company.
15. COMMITMENTS AND CONTINGENCIES
The Company is obligated under operating and capital
leases covering facility space and equipment as
follows (in thousands):
Operating Capital
1996 ............... $ 563 $ 183
1997 ............... 506 110
1998 ............... 374 58
1999 ............... 387 19
2000 ............... 401
2001 and thereafter 1,420
$3,651 $ 370
The operating leases contain provisions for
maintenance and escalations for real estate taxes.
Total rent expense was $496,000, $530,000 and
$822,000 for 1995, 1994 and 1993, respectively. The
cumulative imputed interest in the capital lease
obligation is $40,000.
As of December 31, 1995, the Company had letters of
credit outstanding totalling $28,000 which guaranteed
various trade activities. The contract amount of the
letters of credit is a reasonable estimate of their
fair value as the value for each is fixed over the
life of the commitment. The Company maintains a
total credit line of $100,000 specifically for
obtaining standby letters of credit.
There are several legal actions pending against the
Company. It is management's belief that none of
these actions have merit nor will any outcome
materially affect the financial position of the
Company.
16. NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long Lived Assets and for Long
Lived Assets to be Disposed of." This accounting
standard, which is effective for financial statements
issued for fiscal years beginning after December 15,
1995, is not expected to have a material impact on
the Company's results or reporting.
In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock Based Compensation". This
accounting standard is effective for financial
statements issued for fiscal years beginning after
December 15, 1995. The Company plans to adopt SFAS
123 in 1996 through disclosure in the Notes to the
Consolidated Financial Statements.
17. SUBSEQUENT EVENTS
On February 29, 1996, the Company acquired a 19%
interest in RT-SET, Ltd. ("RT-SET"), located in Tel
Aviv, Israel. RT-SET develops, markets and sells
real time virtual studio set software and proprietary
communications hardware that operate on Silicon
Graphics systems. Chyron purchased shares of RT-SET
Convertible Preferred Stock in exchange for 2.4
million shares of Chyron common stock valued at $6
million. Chyron was granted certain call option
rights which, when exercised, will result in the
Company owning up to a 51% interest in RT-SET.
Chyron and RT-SET will jointly market and distribute
RT-SET products and Chyron will provide
infrastructure for installation, service and support
functions.
On January 4, 1996, Chyron signed a Letter of Intent
to acquire Pro-Bel Limited ("Pro-Bel"), located in
the United Kingdom. Pro-Bel manufactures and
distributes video signal switching equipment and
systems. Under the terms of the Letter of Intent,
the consideration consists of approximately $12.1
million (8 million pounds sterling) in cash and
notes, of which a minimum of $6.8 million will be in
cash, and approximately $9 million (6 million pounds
sterling) of restricted Chyron Common Stock valued at
the average closing price of Chyron shares on the New
York Stock Exchange for a defined period preceding
the closing of the transaction. The closing is
expected to be completed in March 1996.
In February 1996, the Company received a commitment
letter from a bank to obtain a credit facility
totalling $18 million. The facility, which is
secured by the Company's properties and assets
consists of a revolving credit facility of $10
million and a term loan of $8 million. Borrowings
are limited to amounts computed under a formula for
eligible accounts receivable and inventory.
Additionally, an over-advance is available above the
borrowing formula in an amount not to exceed $2
million. Interest on the revolving credit facility
is equal to Prime or adjusted LIBOR plus 175 basis
points and is payable monthly. The revolving portion
of the facility will mature 3 years from the closing
of the loan. The term loan is payable in quarterly
installments of $500,000, commencing the first
quarter following the close of the loan. Interest on
the term loan is equal to Prime or adjusted LIBOR
plus 200 basis points and is payable monthly. The
term portion of the facility matures 4 years from the
date of the closing of the loan.
Management is targeting closing of the loan for March
1996. The closing is subject to the execution of a
loan and security agreement with customary closing
conditions. As a condition of terminating the loan
with the existing financial institution (see Note
10), the Company will have to pay certain penalties
which are estimated at $300,000.
18. OTHER INFORMATION
Customers for the Company's products include
broadcasters, video production and post-production
companies, cable television distributors and
operators, industrial users, governments and
governmental agencies and domestic and international
dealers serving the video production and display
industries for non-broadcast and broadcast markets.
Export sales are made through several international
distributors. Export sales are principally to
customers in Europe and Canada and amounted to
$7,511,000, $6,623,000 and $6,049,000, for 1995, 1994
and 1993, respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During 1995, the Company dismissed Ernst & Young, LLP
as its principal accountants and retained Price
Waterhouse LLP. On October 25, 1995, the Company
filed a Form 8-K related to the Change in the
Registrant's Certifying Public Accountants which is
incorporated herein by reference.
PART III
Item 10 (Directors and Executive Officers of the
Registrant), Item 11 (Executive Compensation), Item
12 (Security Ownership of Certain Beneficial Owners
and Management) and Item 13 (Certain Relationships
and Related Transactions) will be incorporated in the
Company's Proxy Statement to be filed within 120 days
of December 31, 1995 and are incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) (1)FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Chyron Corporation
and subsidiary are included in Part II, Item 8:
Page
Report of Independent Auditors - current year 18
Report of Independent Auditors - prior years 19
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 21
Consolidated Balance Sheets - December 31, 1995 and 1994 22
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 23
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1995, 1994, and 1993 24
Notes to the Consolidated Financial Statements 25-37
(2)FINANCIAL STATEMENT SCHEDULES
The following Consolidated Financial Statement schedules of Chyron
Corporation and subsidiary is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts for the Years
Ended December 31, 1995, 1994 and 1993 45
All other schedules called for under Regulation S-X are not submitted
because they are not applicable or not required or because the
required information is not material or is included in the
Consolidated Financial Statements or notes thereto.
(3) FINANCIAL STATEMENT EXHIBITS
Page
See listing of exhibits to the Financial Statements in section
(c) below
(b) Reports on Form 8-K
A Form 8-K was filed on October 25, 1995 for the Change
in the Registrants' Certified Public Accountants........**********
(c) Exhibits
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession.
(a) First Amended Disclosure Statement pursuant to
Section 1125 of the Bankruptcy Code, dated
October 28, 1991 (with First Amended Plan
or Reorganization under Chapter 11 of the
Bankruptcy Code attached as
Exhibit A thereto)................................. ***
3. Articles of incorporation and by-laws.
(a) Restated Certificate of Incorporation of Chyron
Corporation.............................................. **
(b) Amended and Restated By-Laws of Chyron Corporation,
adopted February 17, 1995......................*********
4. Instruments defining rights of security holders, including
debentures.
(a) Warrant Agreement, dated January 3, 1992, between
Chyron Corporation and American Stock Transfer &
Trust Company, as warrant agent, incorporating the
form of warrant certificate as Exhibit
A thereto...........................................**
(b) Convertible Note Purchase Agreement, dated as of
December 27, 1991, between Chyron Corporation and
Pesa, Inc., incorporating the form of convertible note
as exhibit 1 thereto................................***
(c) Registration Rights Agreement, dated December 27,
1991, between Chyron Corporation and
Pesa, Inc...........................................***
(d) Registration Rights Agreement dated July 25, 1995
by and between Chyron Corporation and CC
Acquisition Company A, L.L.C., CC Acquisition Company
B, L.L.C., WPG Corporate Development Associates,
IV, L.P., WPG Corporate Development Associates IV
(Overseas), L.P., WPG Enterprise Fund II, L.P. Weiss,
Peck & Greer Venture Associates, III, L.P.,
Westpool Investment Trust PLC, Lion Investments
Limited, Charles Diker, Mint House Nominees Limited,
Pine Street Ventures, L.L.C., Isaac Hersly, Alan I.
Annex, Ilan Kaufthal, Z Four Partners L.L.C. and
A.J.L. Beare.
10. Material Contracts.
(a) Assignment and Assumption, dated July 1, 1994,
effective July 1, 1994, of Management Agreement dated
December 27, 1991 and Amended March 10, 1992, between
Chyron Corporation and Pesa, Inc. to Sepa Technologies
Ltd., Co.........................................*********
(b) Amended and Restated Management Agreement, dated
August 8, 1994, by and between Chyron Corporation
and Sepa Technologies Ltd., Co...................*********
(c) Distribution and License Agreement, dated September 22,
1994, between Chyron Corporation and Comunicacion Integral
Consultores, S.L.................................*********
(d) Termination Agreement, dated November 6, 1995
between Chyron Corporation and Comunicacion
Integral Consultores, S.L. 51
(e) Termination Agreement, dated December 12, 1995 between
Chyron Corporation and Sepa Technologies Ltd., Co. 57
(f) Amendment, dated March 10, 1992, to Management
Agreement dated December 27, 1991, between Chyron
Corporation and Pesa Electronica, S.A....................*
(g) Assignment, dated March 10, 1992, of Management
Agreement, dated December 27, 1991, and amendment
March 10, 1992, between Chyron Corporation
and Pesa Electronica, S.A., to Pesa, Inc.................*
(h) Amendment, dated January 31, 1994, effective
December 28, 1993, to Management Agreement dated
December 27, 1991 and Amendment March 10, 1992
between Chyron Corporation and Pesa, Inc..........********
(i) Revolving Credit Agreement, dated December 27,
1991, between Chyron Corporation and Extebank...........**
(j) Management Agreement, dated as of December 27,
1991, between Chyron Corporation and Pesa Electronica,
S.A.....................................................**
(k) Amendment, dated September 19, 1988, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and Isaac Hersly (previously
filed as Exhibit 8 to current report on Form 10-Q
dated November 6, 1987 and incorporated herein in
its entirety by reference thereto) ....................**
(l) Amendment, dated October 25, 1989, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and Isaac Hersly, as amended........**
(m) Amendment, dated October 21, 1991, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and Isaac Hersly, as amended...........**
(n) Amendment, dated February 23, 1994, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and Isaac Hersly, as amended.....********
(o) Resignation Agreement, dated July 12, 1994, between
Chyron Corporation and John A. Poserina..............*******
(p) Amendment, dated September 19, 1988, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and John A. Poserina (previously
filed as Exhibit 7 to current report on Form 10-K
dated November 6, 1987 and incorporated herein in its
entirety by reference hereto).............................**
(q) Amendment, dated October 25, 1989, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and John A. Poserina,
as amended................................................**
(r) Amendment, dated October 21, 1991, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and John A. Poserina,
as amended................................................**
(s) Amendment, dated September 19, 1988, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and Paul J. Rozzini (previously filed
as Exhibit 10 to current report on Form 10-K dated
November 6, 1987 and incorporated herein in its entirety
by reference thereto).....................................**
(t) Amendment, dated October 25, 1989, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and Paul J. Rozzini,
as amended................................................**
(u) Amendment, dated October 21, 1991, to
Employment Agreement, dated September 1, 1987, between
Chyron Corporation and Paul J. Rozzini,
as amended................................................**
(v) Resignation Agreement, dated March 12, 1993,
between Chyron Corporation and Alfred
O.P. Leubert............................................****
(w) Employment Agreement, dated March 10, 1993, between
Chyron Corporation and Paul
M. Yarmolich...........................................*****
(x) Employment Agreement, dated December 24, 1993,
between Chyron Corporation and Mark
C. Gray...............................................******
(y) Employment Agreement, dated March 31, 1994, between
Chyron Corporation and Patrick
A. Burns...........................................*********
(z) Employment Agreement, dated October 19, 1994,
effective November 1, 1994, between Chyron Corporation
and Peter J. Lance.................................*********
(aa) Employment Agreement, dated February 8, 1995,
between Chyron Corporation and
James F. Duca......................................*********
(bb) Employment Agreement, dated February 7, 1995,
between Chyron Corporation and Patricia
Arundell Lampe.....................................*********
(cc) Employment Agreement, dated July 26, 1995 between
Chyron Corporation and Michael Wellesley-Wesley. 62
(dd) Severance Agreement, dated October 25, 1995 between
Chyron Corporation and Peter J. Lance
(ee) License Agreement between Softimage, Inc. and
Chyron Corporation and Aurora Systems dated
February 23, 1993...................................********
(ff) Distribution Agreement between Softimage, Inc. and
Chyron Corporation and Aurora Systems dated
February 23, 1993...................................********
(gg) Research and Development, Update and Support
Agreement between Softimage, Inc. and Chyron Corporation
and Aurora Systems dated February 23, 1993..........********
_______________________
* Incorporated herein in its entirety by reference to the
Transition Report for the Period July 1, 1991 to
December 31, 1991 on Form 10-K dated March 30, 1992.
** Incorporated herein in its entirety by reference to the
Annual Report for the Fiscal Year Ended June 30, 1991
on Form 10-K dated January 31, 1992.
*** Incorporated herein in its entirety by reference to
the report on Form 8-K dated December 27, 1991.
**** Incorporated herein in its entirety by reference to the
report on Form 8-K dated March 12, 1993.
***** Incorporated herein in its entirety by reference to the
report on Form 8-K dated May 10, 1993.
****** Incorporated herein in its entirety by reference to the
report on Form 8-K dated January 19, 1994.
******* Incorporated herein its entirety by reference to the
report on Form 8-K dated July 22, 1994.
******** Incorporated herein in its entirety by reference
to the Annual Report for the fiscal year ended
December 31, 1993 or Form 10-K dated March 30, 1994.
********* Incorporated herein in its entirety by reference to
the Annual Report for the fiscal year ended
December 31, 1994 on Form 10-K dated March 24, 1995.
********** Incorporated herein in its entirety by reference
to the report or Form 8-K dated October 25, 1995.
(d) Financial Statement Schedules
SCHEDULE II
CHYRON CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
BALANCE AT CHARGE TO COSTS BALANCE
BEGINNING AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
Reserves and allowances
deducted from asset
accounts:
YEAR ENDED
DECEMBER 31, 1995
Uncollectible accounts $ 2,204 $ 745 $ 185 $ $ 3,134
Inventory reserves 12,515 1,153 1,435 12,233
Deferred tax assets 14,500 9,100 5,400
$29,219 $ 1,898 $ 185 $10,535 $20,767
YEAR ENDED
DECEMBER 31, 1994
Uncollectible accounts $ 2,624 $ 2,333 $ $ 2,753 $ 2,204
Inventory reserves 10,293 5,300 430 3,508 12,515
Deferred tax assets 11,500 3,100 100 14,500
$24,417 $ 7,633 $3,530 $6,361 $29,219
YEAR ENDED
DECEMBER 31, 1993
Uncollectible accounts $ 2,652 $ 547 $ $ 575 $ 2,624
Inventory reserves 10,897 363 70 1,037 10,293
Deferred tax assets 14,500 3,000 11,500
$28,049 $ 910 $ 70 $ 4,612 $24,417
UNDERTAKING
The Company undertakes to provide without
charge to each shareholder entitled to notice of
and to vote at the Annual Meeting of
Shareholders, to be held on May 15, 1996, at
which directors are to be elected, upon the
written request of any such shareholder, a copy
of the Company's Annual Report on Form 10-K, for
the year ended December 31, 1995, required to be
filed with the Securities and Exchange
Commission, including the financial statements
and the schedules thereto. The Company does not
undertake to furnish without charge copies of all
exhibits to its Form 10-K, but will furnish any
exhibit upon the payment of twenty ($.20) cents
per page or a minimum charge of $5.00. Such
written requests should be directed to Ms. Judy
Mauro, Director of Corporate Communications,
Chyron Corporation, 5 Hub Drive, Melville, New
York 11747. Each such request must set forth a
good faith representation that as of March 27,
1996 the person making the request was a
beneficial owner of securities entitled to vote
at the Annual Meeting of Shareholders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly
authorized.
Chyron Corporation
/s/ Michael Wellesley-Wesley
Michael Wellesley-Wesley
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities and
Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the
registrant and in the capacities on the date
indicated.
/s/ Sheldon Camhy Director March 13, 1996
(Sheldon Camhy)
/s/ Charles Diker Director March 13, 1996
(Charles Diker)
/s/ Wesley Lang Director March 13, 1996
(Wesley Lang)
/s/ Eugene Weber Director March 13, 1996
(Eugene Weber)
/s/ Patricia A. Lampe Chief Financial Officer March 13, 1996
(Patricia A. Lampe) and Treasurer
Commission File Number 0-9014
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________
EXHIBITS
filed with
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
_____________________________________
CHYRON CORPORATION
(Exact name of registrant as specified in its
charter)
TERMINATION AGREEMENT
This Termination Agreement, dated as of November 6,
1995, is by and between CHYRON CORPORATION
("CHYRON"), a New York corporation with offices at
5 Hub Drive, Melville, New York 11747, and
COMUNICACION INTEGRAL CONSULTORES, S.L., a Spanish
limited company having its principal office located
at c/.Balcones, 10, 3500 Las Palmas de GC, Spain
("CI").
WITNESSETH
WHEREAS, CHYRON and CI are party to an International
Distribution License Agreement dated as of September
22, 1994 (the "License Agreement");
WHEREAS, CHYRON and CI mutually agree to terminate
the License Agreement pursuant to the following
terms and conditions:
WHEREAS, CHYRON and CI look forward to a smooth and
orderly transition of the Jaleo product line from
Chyron to CI;
NOW, THEREFORE, for good and valuable consideration,
and intending to be legally bound thereby, CHYRON
and CI agree as follows:
1. TERMINATION
Except as otherwise provided herein below, the
License Agreement is hereby terminated effective as
of the date of this Termination Agreement. Except
as set forth below, neither CHYRON nor CI shall have
any continuing rights or obligations under the
License Agreement, provided however, that paragraphs
16 (Confidentiality), 17 (Intellectual Property
Rights), 18 (Warranties of CHYRON), 19 (Warranties
of CI), 20 (Limitation of Liabilities), and 21
(Indemnifications) are incorporated herein by
reference and shall survive this Termination
Agreement provided that nothing stated therein shall
permit CHYRON to continue to use the CI/Jaleo
Products and CI Documentation, following termination
except as provided in paragraph 4 herein.
2. TERMINATION PAYMENT
In consideration of the termination of the License
Agreement, and in full satisfaction of all
obligations of CHYRON under said License Agreement,
CHYRON shall pay to CI the aggregate sum of U.S.
Dollars $500,000 payable as follows:
(a) CHYRON shall pay U.S. Dollars $250,000 to CI
upon the full execution of this Termination
Agreement;
(b) By no later than December 2, 1995 CHYRON shall
pay to CI U.S. Dollars $250,000; and
(c) If CHYRON fails to pay any payment due to CI
hereunder within the time specified for payment,
this Termination Agreement shall terminate
immediately and CHYRON shall have no further right
to distribute the CI/Jaleo Products. In such event,
CI shall have all rights and remedies available to
it in law and in equities for CHYRON'S breach
limited to the failure to pay said amount without
limiting CI's remedies for any other breach.
3. SUPPORT SERVICES AND SALES ASSISTANCE
To (i) minimize the risk of return of the CI/Jaleo
Products or cancellation of orders due to the
termination of the License and (ii) assure that the
reputation and good will of CHYRON and CI will not
be damaged for any failure to provide customer
service for the CI Products, CI shall provide
reasonable support services and sales assistance, at
a level consistent with the present relationship of
the parties and standard industry practice, to
CHYRON for CI/Jaleo Products which previously have
been sold by CHYRON under the License Agreement or
which may be sold by CHYRON under the terms and
conditions set forth in paragraph 4 herein, until
March 31, 1996.
4. NON-EXCLUSIVE LICENSE
4.1 CHYRON shall have a non-exclusive license to
distribute the CI/Jaleo Products that previously
have been subject to the License Agreement. The
CI/Jaleo Products shall be sold under such
trademarks, trade names, logos and designations.
The term of this non-exclusive license shall be from
the date hereof through March 31, 1996 for direct
customer sales and dealers in North America, and
through December 31, 1995 for Dealers worldwide
(excluding North America) (the "Expiration Dates").
The non-exclusive license shall be governed
according to the terms and conditions set forth on
Exhibit A. Immediately as of the Expiration Dates,
CHYRON shall have no further right to sell or
distribute the CI/Jaleo products except as otherwise
mutually agreed by CHYRON and CI in a writing
executed by both parties. In consideration of this
non-exclusive license CHYRON shall pay to CI 45% of
the net sales value of the CI/Jaleo Products sold
during the term of said non-exclusive license.
4.2 Immediately upon termination of the non-
exclusive license by either CI or CHYRON on March
31, 1996, CHYRON shall forthwith discontinue using
the trademarks, trade names, logos and designations
that CI uses for the CI/Jaleo Products, including
JALEO and COMUNICACION INTEGRAL or any word or
phrase confusingly similar thereto. CHYRON shall
deliver to CI, remove, convey or otherwise
obliterate all materials that refer to COMUNICACION
INTEGRAL or JALEO in connection with the CI/Jaleo
Products or its business. CHYRON shall provide CI
with a complete and accurate list of CHYRON's
customers for the CI Products. CHYRON also shall
return to CI all copies of the CI/Jaleo Products and
the CI Documentation in its possession, including
all updates, enhancements, new releases, new
versions and test copies. All sum due and owing to
CI shall be paid within ten (10) days of the date of
termination or expiration of the non-exclusive
license.
4.3 CHYRON agrees to provide in connection with
this Termination Agreement (i) a U.S. dealer list,
and (ii) an international dealer list, both of which
are attached hereto as Exhibit B.
5. CI agrees to use all good faith and reasonable
efforts to cooperate with CHYRON in collecting
payment for sales of CI/Jaleo Products.
6. MUTUAL RELEASE
CHYRON and CI, their affiliates, subsidiaries,
parent corporations, officers and directors, hereby
mutually agree to release each other, and their
parent corporations, subsidiaries, officers and
directors and employees, successors and assigns from
all actions, causes of actions, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses,
damages, judgements, incidents, executions, claims,
and demands whatsoever in law, admiralty, or equity,
which they may have against the other arising under
or relating to the License Agreement and expressly
waive any damages resulting therefrom, except to the
extent that provisions thereof are incorporated by
reference into this Termination Agreement and
provided, however, that nothing contained herein
shall relieve either party from any of its
obligations stated herein and any exhibits thereto.
7. PRESS RELEASES
Unless mutually approved of and agreed to in
writing, neither party shall issue any press release
or make any other disclosure relating to the
execution of this Termination Agreement, except that
either party may make any disclosure required to be
made by the party under applicable law (including
U.S. securities laws), provided that the party
determines in good faith that disclosure is
necessary and gives prior written notice to the
other party.
8. INJUNCTIVE RELIEF
The parties acknowledge that a breach by either
party of any provision of sections 16 and 17 of the
License Agreement, as incorporated herein by
reference and which survive this Termination
Agreement, will give rise to irreparable injury to
the other party not fully compensable in damages.
Accordingly, either party shall have the right to
seek injunctive relief, including both provisional
and permanent injunction, to prevent or restrain any
breach by the other party or its past or present
directors, officers, employees, independent
contractors, consultants, or other agents, in
addition to and not in limitation of any other
rights, remedies or damages (excluding punitive or
consequential damages) available at law or equity.
9. RELATIONSHIP OF PARTIES
Except as specifically provided herein, neither
party shall act or represent or hold itself out as
having authority to act as an agent or partner of
the other party, or in any way bind or commit the
other party to any obligations. The rights, duties,
obligations and liabilities of the parties shall be
several and not joint or collective and, except as
specifically provided herein, nothing contained in
this Termination Agreement shall be construed as
creating a partnership, joint venture, agency, trust
or other association of any kind, each party being
responsible only for its obligations as set forth in
this Termination Agreement.
10. INTERPRETATION
The heading and captions contained in this
Termination Agreement are for reference purposes
only and shall not affect in any way the meaning of
interpretation of this Agreement. In the event of
a conflict between the License Agreement and this
Termination Agreement, the Termination Agreement
shall control, provided that all provisions of the
License Agreement which shall survive termination
shall be construed in view of the terms and
conditions set forth herein.
11. GOVERNING LAW, JURISDICTION AND SERVICE OF
PROCESS
ALL QUESTIONS CONCERNING THE VALIDITY, OPERATION,
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT
ARE ALL DETERMINED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO NEW YORK'S
CONFLICT OF LAW RULES. EACH PARTY IRREVOCABLY
CONSENTS AND AGREES THAT ANY AND ALL LEGAL OR
EQUITABLE ACTIONS OR PROCEEDINGS ARISE UNDER OR IN
CONNECTION WITH THIS AGREEMENT SHALL BE SOLELY AND
EXCLUSIVELY BROUGHT IN STATE OF U.S. FEDERAL COURTS
SITTING IN THE STATE OF NEW YORK, USA. FOR PURPOSES
OF ANY ACTION BROUGHT BY CHYRON OR CI ARISING FROM
THIS AGREEMENT, CHYRON AND CI HEREBY IRREVOCABLY
SUBMIT TO THE PERSONAL JURISDICTION OF THE STATE OR
U.S. FEDERAL COURTS SITTING IN THE STATE OF NEW
YORK, USA. IF PERMITTED UNDER THE LAWS OF THE STATE
OF NEW YORK OR THE RULES OF SUCH STATE OR FEDERAL
COURT, BOTH PARTIES FURTHER IRREVOCABLY CONSENT TO
SERVICE OF PROCESS IN ANY ACTION OR PROCEEDINGS BY
THE DELIVERY OF COPIES THEREOF BY CONFIRMED
FACSIMILE TRANSMISSION, FOLLOWED BY EXPRESS OR
REGISTERED MAIL CONFIRMATION, TO THE OTHER PARTY AT
THE FACSIMILE NUMBER AND ADDRESS SET FORTH BELOW IN
PARAGRAPH 12, AND ANY SERVICE SHALL BECOME EFFECTIVE
FIVE (5) BUSINESS DAYS AFTER THE DATE AND FACSIMILE
IS TRANSMITTED OR THE CONFIRMATION IS MAILED,
WHICHEVER IS LATER.
12. NOTICE
Notice under this Termination Agreement will be in
writing; sent via U.S. Express Mail or private
express or mailgram service (internationally, by
express service or telegram), or by telefacsimile
(with receipt confirmed via telephone); will be
effective upon receipt at the address stated below;
and will be addressed as follows, unless the sending
party is notified in writing of a change of address,
in which event notice will be sent to the new
address.
CHYRON:
Isaac Hersly, President
Chyron Corporation
5 Hub Drive
Melville, New York 11747
(516) 845-2013 (Phone)
(516) 845-5210 (Fax)
cc: Ronald D. Lefton, Esq.
Camhy Karlinsky & Stein
1740 Broadway, 16th Floor
New York, New York 10019-4315
(212) 977-6600 (Phone)
(212) 977-8389 (Fax)
CI:
Jose N. Martin, President
Comunicacion Integral
c/Huelva, 8
28002 Madrid, Spain
(34) 1-413-7497 (Phone)
(34) 2-416-9914 (Fax)
cc: Ricardo Briz
Abogados y Asesores de Empresa
c/Velazquez, 4
28001 Madrid, Spain
(34) 1-577-2244 (Phone)
(34) 1-578-1683 (Fax)
Stephen Johnson
Kirkland and Ellis
153 East 53rd Street
New York, New York 10022-4675
(212) 446-4800 (Phone)
(212) 446-4900 (Fax)
IN WITNESS WHEREOF, CHYRON and CI have caused this
Termination Agreement to be executed by their
respective duly authorized representatives as of the
date first written above.
CHYRON CORPORATION
By: /s/ Isaac Hersly
Name: Isaac Hersly
Title: President
COMUNICACION INTEGRAL
CONSULTORES, S.L.
By: /s/ Jose N. Martin
Name: Jose N. Martin
Title: President
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, (the "Agreement"), dated
as of December 8, 1995, by and between CHYRON
CORPORATION, a New York corporation with offices
located at 5 Hub Drive, Melville, New York 11747
("Chyron"), and SEPA TECHNOLOGIES LTD., CO., a
Georgia limited liability company with an address at
c/o Dow, Lohnes & Albertson, One Ravinia Drive,
Suite 1600, Atlanta, GA 30346 ("Sepa").
WITNESSETH
WHEREAS, Chyron and Sepa are parties to the Amended
and Restated Management Agreement dated August 8,
1994 (the "Management Agreement"); and
WHEREAS, Chyron and Sepa mutually agree to terminate
the Management Agreement pursuant to the following
terms and conditions:
NOW, THEREFORE, in consideration of the premises and
representations contained herein, and intending to
be legally bound thereby, Chyron and Sepa agree as
follows:
1. Termination
The Management Agreement is hereby terminated
effective as of the date of this Agreement. Neither
Chyron nor Sepa shall have any continuing rights,
liabilities or obligations under the Management
Agreement.
2. Termination Payment
In consideration of the termination of the
Management Agreement, and in full satisfaction of
all obligations and liabilities of Chyron and Sepa
to each other under the Management Agreement, Chyron
shall pay to Sepa the aggregate sum of Two Million
U.S. Dollars ($2,000,000) payable as follows:
(a) Chyron shall pay the sum of $1,000,000 (U.S.)
to Sepa upon the full execution of this Agreement;
and
(b) On or before January 26, 1996 Chyron shall pay
to Sepa the sum of $1,000,000 (U.S.).
The funds shall be delivered by certified check or
by wire transfer of immediate available funds in
accordance with written instructions to be provided
by Sepa.
3. Mutual Release
Chyron and Sepa, their respective affiliates,
subsidiaries, parent corporations, officers and
directors, hereby mutually agree to release each
other, and their respective parent corporations,
subsidiaries, affiliates, shareholders, members,
officers, directors, managers, employees, agents,
successors, and assigns from all actions, causes, of
actions, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements,
promises, variances, repasses, damages, judgements,
incidents, executions, claims, and demands
whatsoever in law, admiralty, or equity, which they
may have against the other arising under or relating
to the Management Agreement and expressly waive any
damages resulting therefrom, except that nothing
contained in this Section 3 shall relieve either
party from any of its liabilities or obligations
stated under this Agreement.
4. Disclosure
Unless mutually approved of and agreed to in
writing, neither party shall issue any press release
or make any other disclosure relating to the
execution of this Agreement, except that either
party may make any disclosure required to be made by
the party under applicable law (including U.S.
securities laws) or by any court, provided that the
party determines in good faith that disclosure is
necessary and gives prior written notice to the
other party.
5. Further Actions
At any time and from time to time, each party
agrees, as its expense, to take such actions and to
execute and deliver such further documents or
instruments as may be reasonably necessary to
effectuate the purposes of this Agreement.
6. Submission to Jurisdiction
Each of the parties hereto irrevocably submits to
the jurisdiction of the courts of the State of New
York and of any Federal court located in the State
of New York in connection with any action or
proceeding arising out of or relating to this
Agreement.
7. Merger; Modification
This Agreement sets forth the entire understanding
of the parties with respect to the subject matter
hereof, supersedes all existing agreements
concerning such subject matter, and may be modified
only by a written instrument duly executed by each
party.
8. Notices
Any notice or other communication required or
permitted to be given hereunder shall be in writing
and shall be mailed by certified mail, return
receipt requested (or by the most nearly comparable
method if mailed from or to a location outside of
the United States) or by Federal Express, U.S.
Express Mail, or similar overnight delivery or
courier service or delivered (in person or by
telecopy, or similar telecommunications equipment)
against receipt to the party to whom it is to be
given at the address of such party set forth below
(or to such other address as the party shall have
furnished in writing in accordance with the
provisions of this Section 8):
Chyron:
Mr. Michael Wellesley-Wesley, CEO
Chyron Corporation
5 Hub Drive
Melville, New York 11747
Fax #: (516) 845-5210
with a copy (which copy shall not constitute notice)
to:
Daniel I. DeWolf, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway
New York, New York 10019
Fax #: (212) 977-8389
Sepa:
Mr. Miguel S. Moraga
Treasurer and Chief Financial Officer
Sepa Technologies Ltd., Co.
c/o Pesa, Inc.
35 Pinelawn Road, Suite 99E
Melville, New York 11747
Fax #: (516) 845-5023
with a copy (which copy shall not constitute notice)
to:
John C. Jost, Esq.
Dow Lohnes & Albertson
1255 Twenty-Third Street, N.W.
Washington, D.C. 20037
Fax #: (202) 857-2900
Any notice or other communication given by certified
mail (or by such comparable method) shall be deemed
given at the time of certification thereof (or
comparable act) except for a notice changing a
party's address which will be deemed given at the
time of receipt thereof. Any notice given by other
means permitted by this Section 8 shall be deemed
given at the time of receipt thereof.
9. Waiver
Any waiver by any party of a breach of any terms of
this Agreement shall not operate as or be construed
to be a waiver of any other breach of that term or
of any breach of any other term of this Agreement.
The failure of a party to insist upon strict
adherence to any term of this Agreement on one or
more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
10. Binding Effect
The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties, and
their respective successors and assigns.
11. Separability
If any provision of this Agreement is found by a
court of competent jurisdication to be invalid,
illegal, or unenforceable, the balance of this
Agreement shall remain in effect, and if any
provision is inapplicable to any person or
circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
12. Headings
The headings of this Agreement are soley for
convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
13. Counterparts; Governing Laws
This Agreement may be executed in any number of
counterparts (and by facsimile), each of which shall
be deemed an original, but all of which together
shall constitute one and the same instrument. It
shall be governed by, and construed in accordance
with, the laws of the State of New York, without
giving effect to the rules governing the conflicts
of laws.
IN WITNESS WHEREOF, Chyron and Sepa have caused this
Agreement to be executed by their respective duly
authorized representatives as of the date first
written above.
CHYRON CORPORATION
By: /s/ Michael Wellesley-Wesley
Name: Michael Wellesley-Wesley
Title: CEO
SEPA TECHNOLOGIES
By: /s/ Miguel S. Moraga
Name: Miguel S. Moraga
Title: CFO and Treasurer
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made this
26th day of July, 1995 between CHYRON CORPORATION,
a New York corporation (the "Company"), having its
principal offices at 5 Hub Drive, Melville, New York
11747, and MICHAEL WELLESLEY-WESLEY ("MWW"), an
individual with an address at Seacroft Harbor Point,
325 Centre Island Road, Centre Island, New York
11771, United States.
WITNESSETH
WHEREAS, the Company desires to employ MWW and MWW
desire to be employed by the Company as its Chief
Executive Officer, upon the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual
premises and agreements contained herein, and
intending to be legally bound hereby, the parties
hereto agree as follows:
1. Nature of Employment; Term of Employment.
The Company hereby employees MWW and MWW agrees to
serve the Company as its Chief Executive Officer,
upon the terms and conditions contained herein, for
a term commencing as of the 1st day of the month
immediately subsequent to the date MWW obtains his
H-1 visa or other appropriate United States work
visa (e.g., November 1, 1995) (the "Commencement
Date") and continuing until August 1, 1996 (the
"Employment Term").
1. Duties and Powers as Employee
(a) During the Employment Term, MWW shall be
employed by the Company as Chief Executive Officer,
which position is the senior executive officer of
the Company. MWW shall devote substantially his
full working time to his duties as Chief Executive
Officer of the Company. In performance of his
duties, MWW shall be subject to the direction of the
Board of Directors of the Company. As Chief
Executive Officer, MWW shall be responsible for
managing, directing, and supervising all aspects of
the business of the Company worldwide. The Chief
Executive Officer shall be responsible for
developing the business plan and objectives of the
Company and managing the execution of such plan.
Without limiting the generality of the authority of
the Chief Executive Officer, the Chief Executive
Officer has the right to hire and terminate any
employee of the Company.
(b) The Chief Executive Officer will be responsible
for managing the business activities of the Company
worldwide. The Chief Executive Officer shall be
required to travel in accordance with the needs of
the business and shall conduct business from various
locations including, without limitations, New York,
Europe, and such other locations as the Chief
Executive Officer deems necessary, desirable, or
appropriate. The parties recognize, however, that
any services performed by the Chief Executive
Officer in New York State will be pursuant to an
assignment in New York State on a temporary basis.
2. Compensation
(a) As compensation for his services hereunder, the
Company shall pay MWW, during the Employment Term,
a salary (the "Base Salary") payable in equal semi-
monthly installments at the annual rate of $250,000.
(b) In addition to the salary provided herein and
subject to the discretion of the Compensation and
Stock Option Committee (the "Compensation
Committee"), MWW shall receive, as incentive
compensation, an annual bonus (the "Incentive
Bonus"). The objectives and goals upon which the
Incentive Bonus shall be based shall be determined
by the Compensation Committee. Assuming the
objectives and goals set by the Compensation
Committee are met, the Incentive Bonus shall be an
amount up to 20% of the annual Base Salary.
Notwithstanding the foregoing, such Incentive Bonus
shall be granted solely in the discretion of the
Compensation Committee and may be increased or
decreased at any time by the Compensation Committee.
Such bonus shall be paid to MWW within thirty (30)
days after completion of the Company's annual audit.
(c) MWW may be granted stock options in the
Company, on an annual basis, pursuant to the Chyron
Stock Option Plan, at the discretion of the
Company's Compensation Committee.
(d) The compensation payable to MWW for his
services hereunder shall be appropriately
apportioned based on the place where such services
are performed. The amount of such compensation
allocable to services performed by MWW in the United
States (and New York) shall be determined by
multiplying such compensation by a fraction, the
numerator of which is total number of days worked
and spent by MWW in the United States (and New York)
in earning such compensation during the appropriate
period, and the denominator of which is the total
number of days worked and spent by MWW worldwide in
earning such compensation during the appropriate
period.
(e) On or before November 1, 1995, the Company
shall pay MWW a one-time bonus payment of $62,500,
which bonus payment is in consideration of services
performed on behalf of the Company, from time-to-
time, prior to the Commencement Date.
3. Expenses; Vacation; Insurance; Other Benefits
(a) MWW shall be entitled to reimbursement for
reasonable travel and other out-of-pocket expenses
necessarily incurred in the performance of his
duties hereunder, upon submission and approval of
written statements and bills in accordance with the
then regular procedures of the Company. The Company
acknowledges that the duties of Chief Executive
Officer will necessitate MWW traveling regularly
between New York, London, Europe, the Pacific Rim,
and other areas where the Company conducts or
intends to conduct business, and will reimburse MWW
for all costs and expenses reasonably incurred in
connection therewith.
(b) MWW shall be entitled to four (4) weeks
vacation time per annum in accordance with the
regular procedures of the Company governing senior
executive officers as determined from time to time
by the Company's Board of Directors.
(c) So long as MWW is employed by the Company, the
Company shall provide MWW with term life insurance
in the face amount of Five Hundred Thousand Dollars
($500,000). MWW shall cooperate in submitting to
any physical exams that may be required by any
appropriate provider of insurance.
(d) So long as MWW is employed by the Company, the
Company shall provide MWW with an automobile
allowance of One Thousand Dollars ($1,000) per month
to cover the costs of leasing an automobile,
insurance, and the maintenance of such automobile.
4. Representations and Warranties of Employee
MWW represents and warrants to the Company that (a)
MWW is under no contractual or other obligation
which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder,
or the other rights of the Company hereunder and (b)
MWW is under no physical or mental disability that
would hinder his performance of his duties under
this Agreement.
5. Non-Competition
MWW agrees that he will not (a) during the period he
is employed by the Company engage in, or otherwise
directly or indirectly be employed by, or act as a
consultant to lender to, or be a director, officer,
employee, owner, or partner of, any other business
or organization that is or shall then be competing
with the Company, and (b) for a period of one (1)
year after he ceases to be employed by the Company,
directly or indirectly compete with or be engaged in
the same business as the Company, or be employed by,
or act as consultant or lender to, or be a director,
officer, employee, owner, or partner of, any
business or organization which, at the time of such
cessation, competes with or is engaged in the same
business as the Company, except that in each case
the provisions of this Section 6 will not be deemed
breached merely because MWW owns not more than five
percent (5%) of the outstanding common stock of a
corporation, if, at the time of its acquisition by
MWW, such stock is listed on a national securities
exchange, is reported on NASDAQ, or is regularly
traded in the over-the-counter market by a member of
a national securities exchange.
6. Patents; Copyrights
Any interest in patents, patent applications,
inventions, copyrights, developments, and processes
("Such Inventions") which MWW now or hereafter
during the period he is employed by the Company may
own or develop relating to the fields in which the
Company may then be engaged shall belong to the
Company; and forthwith upon request of the Company,
MWW shall execute all such assignments and other
documents and take all such other action as the
Company may reasonably request in order to vest in
the Company all his right, title, and interest in
and to such Inventions, free and clear of all liens,
charges and encumbrances.
7. Confidential Information
All confidential information which MWW may now
possess or may obtain during the Employment Term
relating to the business of the Company shall not be
published, disclosed, or made accessible by him to
any other person, firm, or corporation during the
Employment term or any time thereafter without the
prior written consent of the Company. MWW shall
return all tangible evidence of such confidential
information to the Company prior to or at the
termination of his employment.
8. Termination
(a) Except as set forth in Sections 9(b), (c), and
(d) below, if on or after the Commencement Date and
prior to the end of the Employment Term, MWW is
terminated by the Company for any reason whatsoever,
regardless of whether such termination is for cause
or without cause, MWW shall be entitled to receive
as severance compensation his Base Salary at the
rate provided in Section 3 for the period of six (6)
months following the date on which termination shall
take effect.
(b) In the event that MWW shall be physically or
mentally incapacitated or disabled or otherwise
unable fully to discharge his duties hereunder for
a period of six (6) months, then this Agreement
shall terminate upon thirty (30) days' written
notice to MWW, and no further compensation shall be
payable to MWW, except for any accrued but unpaid
Base Salary and/or Incentive Bonus to the date of
termination, and payments provided under any
disability insurance policy, if any.
(c) In the event that MWW shall die, then this
Agreement shall terminate on the date of MWW's
death, and no further compensation shall be payable
to MWW, except for any accrued but unpaid Base
Salary and/or Incentive Bonus to the date of
termination, and the payments provided under the
insurance policy referred to in Section 4(c) hereof.
(d) In the event that MWW shall continue to be
employed by the Company after the end of the
Employment Term and this Agreement has not been
formally extended, and thereafter MWW is terminated
by the Company for any reason whatsoever, regardless
of whether such termination is for cause or without
cause, then MWW shall be entitled to receive as
severance compensation his Base Salary at the rate
provided in Section 3 for a period of four (4)
months following the date on which termination shall
take effect.
9. Survival
The covenants, agreements, representations, and
warranties contained in or made pursuant to this
Agreement shall survive MWW's termination of
employment, irrespective of any investigation made
by or on behalf of any party.
10. Modification
This Agreement sets forth the entire understanding
of the parties with respect to the subject matter
hereof, supersedes all existing agreements between
them concerning such subject matter, and may be
modified only by a written instrument duly executed
by each party.
11. Notices
Any notice or other communication required or
permitted to be given hereunder shall be in writing
and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to
the party to whom it is to be given at the address
of such party set forth in the preamble of this
Agreement (or to such other address as the party
shall furnished in writing in accordance with the
provisions of this Section 12). Notice to the
estate of MWW shall be sufficient if addressed to
MWW as provided in this Section 12. Any notice or
other communication given by certified mail shall be
deemed given at the time of certification thereof,
except for a notice changing a party's address which
shall be deemed given at the time of receipt
thereof.
12. Waiver
Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or
be construed to be a waiver of any other breach of
such provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any
waiver must be in writing.
13. Binding Effect
MWW's rights and obligations under this Agreement
shall not be transferable by assignment or
otherwise, such rights shall not be subject to
encumbrance or the claims of MWW's creditors, and
any attempt to do any of the foregoing shall be
void. The provisions of this Agreement shall be
binding upon and inure to the benefit of MWW and his
heirs and personal representatives, and shall be
binding upon and inure to the benefit of the Company
and its successors and those who are its assigns
under Section 10.
14. Headings
The headings in this Agreement are solely for the
convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
15. Counterparts; Governing Laws
This Agreement may be executed in any number of
counterparts (and by facsimile), each of which shall
be deemed an original, but all of which together
shall constitute one and the same instrument. It
shall be governed by, and construed in accordance
with, the laws of the State of New York, without
giving effect to the rules governing the conflicts
of the laws.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first written above.
CHYRON CORPORATION
By:
Name: Daniel I. DeWolf
Title: Secretary
Michael Wellesley-Wesley