1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 0-17219
GENTNER COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
UTAH 87-0398877
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1825 RESEARCH WAY, SALT LAKE CITY, UTAH 84119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 975-7200
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date.
CLASS OF COMMON STOCK MAY 7, 1998
--------------------- -----------
$0.001 PAR VALUE 7,698,023 SHARES
Transitional Small Business Disclosure Format
(check one)
[ ] Yes [X] No
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GENTNER COMMUNICATIONS CORPORATION
INDEX
PAGE
NUMBER
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
March 31, 1998 (unaudited) and June 30, 1997 ..................................3
Statements of Operations
Three Months Ended March 31, 1998 and
1997 (unaudited) ..............................................................4
Statements of Operations
Nine Months Ended March 31, 1998 and
1997 (unaudited) ..............................................................5
Condensed Statements of Cash Flows
Nine Months Ended March 31, 1998 and
1997 (unaudited) ..............................................................6
Notes to Financial Statements .....................................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...............................................8
PART II - OTHER INFORMATION ..................................................................11
2
3
GENTNER COMMUNICATIONS CORPORATION
BALANCE SHEETS
(UNAUDITED)
MARCH 31, JUNE 30,
1998 1997
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents ................................................ $ 59,904 $ 63,992
Accounts receivable ...................................................... 1,703,461 1,682,254
Inventory ................................................................ 3,637,120 2,668,761
Other current assets ..................................................... 240,480 136,177
----------- -----------
Total current assets ............................................... 5,640,965 4,551,184
Property and equipment, net .................................................... 2,448,470 2,493,287
Related party note receivable .................................................. 132,345 139,000
Other assets, net .............................................................. 96,395 152,383
----------- -----------
Total assets ....................................................... $ 8,318,175 $ 7,335,854
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable ............................................................ $ 560,342 $ 722,997
Accounts payable ......................................................... 617,082 471,072
Accrued expenses ......................................................... 649,613 356,446
Current portion of long-term debt ........................................ 278,195 257,164
Current portion of capital lease obligations ............................. 243,961 254,951
----------- -----------
Total current liabilities .......................................... 2,349,193 2,062,630
Long-term debt ................................................................. 476,912 687,274
Capital lease obligations ...................................................... 808,702 784,354
----------- -----------
Total liabilities .................................................. 3,634,807 3,534,258
Shareholders' equity:
Common stock, 50,000,000 shares authorized, par value $.001, 7,697,368 and
7,663,405 shares issued and outstanding
at March 31, 1998 and June 30, 1997 .................................... 7,697 7,663
Additional paid-in capital ............................................... 4,449,059 4,423,482
Retained earnings (accumulated deficit) .................................. 226,612 (629,549)
----------- -----------
Total shareholders' equity ......................................... 4,683,368 3,801,596
----------- -----------
Total liabilities and shareholders' equity ......................... $ 8,318,175 $ 7,335,854
=========== ===========
See accompanying notes
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4
GENTNER COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1998 1997
----------- -----------
Net sales....................................... $ 4,208,908 $ 3,340,279
Cost of goods sold.............................. 2,045,970 1,751,973
----------- -----------
Gross profit.............................. 2,162,938 1,588,306
Operating expenses:
Marketing and selling..................... 846,125 936,304
General and administrative................ 546,045 590,199
Product development....................... 352,338 309,987
----------- -----------
Total operating expenses............ 1,744,508 1,836,490
Operating income (loss)............. 418,430 (248,184)
Other income (expense):
Interest income........................... 3,257 4,408
Interest expense.......................... (62,757) (49,571)
Other, net................................ 1,529 4,377
----------- -----------
Total other income (expense)........ (57,971) (40,786)
----------- -----------
Income (loss) before income taxes............... 360,459 (288,970)
Provision for income taxes...................... -- --
----------- -----------
Net income (loss)................... $ 360,459 $ (288,970)
=========== ===========
Basic earnings (loss) per common share.......... $ 0.05 $ (0.04)
=========== ===========
Diluted earnings (loss) per common share........ $ 0.04 $ (0.04)
=========== ===========
See accompanying notes
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5
GENTNER COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
-------------------------------------
1998 1997
------------ ------------
Net sales........................................ $ 11,934,700 $ 9,838,158
Cost of goods sold............................... 5,672,251 5,222,302
------------ ------------
Gross profit............................... 6,262,449 4,615,856
Operating expenses:
Marketing and selling...................... 2,352,336 2,747,481
General and administrative................. 1,891,539 1,488,153
Product development........................ 996,658 737,128
------------ ------------
Total operating expenses............. 5,240,533 4,972,762
Operating income (loss).............. 1,021,916 (356,906)
Other income (expense):
Interest income............................ 10,469 4,408
Interest expense........................... (187,108) (123,558)
Other, net................................. 10,883 (16,814)
------------ ------------
Total other income (expense)......... (165,756) (135,964)
------------ ------------
Income (loss) before income taxes................ 856,160 (492,870)
Provision for income taxes....................... -- --
------------ ------------
Net income (loss).................... $ 856,160 $ (492,870)
============ ============
Basic earnings (loss) per common share........... $ 0.11 $ (0.06)
============ ============
Diluted earnings (loss) per common share......... $ 0.11 $ (0.06)
============ ============
See accompanying notes
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6
GENTNER COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
-------------------------------------
1998 1997
------------ ------------
Cash flows from operating activities:
Cash received from customers..................................... $ 11,905,707 $ 9,727,056
Cash paid to suppliers and employees............................. (10,978,904) (8,918,092)
Interest received................................................ 10,469 1,227
Interest paid.................................................... (188,755) (124,382)
Income taxes refunded (paid)..................................... (900) 24,100
------------ ------------
Net cash provided by operating activities.................. 747,617 709,909
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment.............................. (243,730) (742,931)
Issuance of note receivable...................................... -- (139,745)
Decrease (increase) in other assets.............................. 17,987 (74,226)
------------ ------------
Net cash used in investing activities...................... (225,743) (956,902)
------------ ------------
Cash flows from financing activities:
Proceeds from stock option exercises............................. 25,611 --
Net borrowings (repayments) under line of credit................. (162,655) 196,329
Proceeds from issuance of long-term debt......................... -- 425,195
Principal payments of capital lease obligations.................. (199,586) (141,820)
Principal payments of long-term debt............................. (189,332) (153,522)
------------ ------------
Net cash (used in) provided by financing activities........ (525,962) 326,182
------------ ------------
Net (decrease) increase in cash........................................ (4,088) 79,189
Cash at the beginning of the year...................................... 63,992 213,763
------------ ------------
Cash at the end of the period.......................................... $ 59,904 $ 292,952
============ ============
Supplemental disclosure of cash flow information:
Property and equipment financed by capital leases................ $ 212,945 $ 417,698
============ ============
See accompanying notes
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GENTNER COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB of Regulation S-B.
Accordingly, certain information and footnote disclosures normally included in
complete financial statements have been condensed or omitted. These financial
statements should be read in conjunction with the financial statements and
footnotes thereto included in the Company's 1997 Annual Report and Form 10-KSB.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for interim periods are not necessarily
indicative of the results of operations to be expected for the full year.
2. EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share was calculated using the modified
treasury stock method. The weighted average number of common shares outstanding
was 8,129,428 and 7,662,375 respectively, for the three months ended March 31,
1998 and 1997. For the nine-month periods then ended, the amounts were 8,052,754
and 7,662,375, respectively. For the year ended June 30, 1997, stock options and
warrants to purchase common stock have been excluded from the presented
computation of per share amounts inasmuch as the effects are either immaterial
or antidilutive.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accountings Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. The Company has adopted
FAS 128. All earnings per share amounts for all periods have been presented, and
where necessary, restated to conform to the Statement 128 requirements.
3. INVENTORY
Inventory is summarized as follows:
(Unaudited)
March 31, June 30,
1998 1997
---------- ----------
Raw Materials $1,018,583 $ 897,481
Work in progress 1,074,329 648,712
Finished Goods 1,544,208 1,122,568
---------- ----------
Total inventory $3,637,120 $2,668,761
========== ==========
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8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the three months ended March 31, 1998 increased 26%
compared to the same three-month period last year. This growth is primarily due
to a 36% increase in Teleconferencing operations (including both product and
service). Year-to-date sales increased 21% as compared to the same nine-month
period in the previous year. Year-to-date growth is also due to sales increases
in Teleconferencing operations.
Sales in Teleconferencing operations increased 36% comparing third
quarter of this fiscal year to the same quarter last year. This increase is due
to increased sales in the Company's Teleconferencing Service, which experienced
a 88% sales growth over the same quarter last fiscal year. This increase in
sales is a result of the Company expanding its sales staff, who are aggressively
marketing its conference calling service. Continued strong sales of
Teleconferencing products also contributed to Teleconferencing operations
growth. The Teleconferencing operations increased 47% comparing the nine-month
period ending March 31, 1998 to the same period last year. The Teleconferencing
Service sales increased 133% year-to-date as compared to the same period of the
prior year, due to the increase in product sales.
Broadcast sales increased 20% in the third quarter of this year as
compared to the third quarter of last year. While the domestic market for
telephone interface products may be shrinking due to radio and television
station consolidation, the Company has experienced sales growth internationally
for its telephone interface products. The Company's line of new telephone
hybrids has counteracted the effects of the shrinking domestic market. Telephone
hybrids are used to connect telephone line audio to professional audio
equipment. In Remote Management Systems (historically referred to as Remote Site
Control), the Company saw GSC3000 sales increase significantly when comparing
third quarters, year over year. GSC3000 monitors and adjusts the settings at one
or more remote sites using one networked system. Additionally, using the GSC3000
an engineer can manually adjust the settings at the remote site via a telephone
or a personal computer, if necessary. The growth in the Remote Management
Systems product line can be attributed to ongoing software improvements, the new
voice interface module for the GSC3000, and the increasing awareness of the
diverse applications for these products. The voice interface allows an engineer
to call the remote equipment from any telephone, check on its status, and make
adjustments using only the telephone. Sales in Broadcast operations increased 6%
year-to-date as compared to the same period last year. This increase is due to
the growth in Remote Management Systems.
Assistive Listening Systems products continue to show sales growth.
ALS sales grew 45% for the three-month period ended March 31, 1998 as compared
to the same period last year. This increase is a result of product enhancements
and additional OEM agreements with companies that want the Company to produce
their private label ALS products. ALS sales grew 40% for the nine-month period
ended March 31, 1998 as compared to the same period ending March 31, 1997. The
year-to-date growth is also due to product enhancements and additional OEM
agreements.
The Company's gross profit margin percentage was 51% for the third
quarter of this year, compared to 48% for the same quarter last year. This
increase is primarily due to price increases at the beginning of this fiscal
year, aggressive vendor pricing, new products with higher gross profit margins,
a different product mix, and a critical focus on improving manufacturing
processes. The Company's rapidly expanding conference calling service has a
lower gross profit margin than its manufacturing operations. As conference
calling becomes a higher percentage of total sales, this could negatively impact
the Company's overall gross profit margin. Year-to-date gross profit margin is
52% as compared to 47% for the same period last year. The increase in the
year-to-date gross profit margin is also due to price increases at the beginning
of this fiscal year, aggressive vendor pricing, new products with higher gross
profit margins, a different product mix, and a critical focus on improving
manufacturing processes.
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9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations (continued)
Operating expenses for the quarter decreased 5% when comparing the
same periods of this year to last year. One of the most significant portions of
this decline came in Sales & Marketing expenses, which decreased 10% comparing
third quarter this year to third quarter last year. Year-to-date operating
expenses grew 5% when comparing the same periods of this year to last year.
Growth in year-to-date operating expenses resulted from the severance package
associated with the departure of the Company's prior President and Chief
Executive Officer (the "CEO Severance Package"), and increased expenses in the
Product Development area.
Sales and Marketing third quarter expenses decreased 10% over the
prior year's third quarter. This decrease is primarily due to the Company
bringing all advertising development and expenditures in house. Additionally,
last year, the Company had significant advertising expenses associated with a
national campaign for its conference calling service. There was also a decrease
of 14% when comparing year-to-date expenses for this year to the same period
last year. This decrease is also due to the reduction of advertising expenses,
as well as the closing of the Company's California and New Jersey offices.
Third quarter General and Administrative expenses are down 7%
compared to the same period last year. This third quarter decrease is primarily
due to the reduction of personnel. The year-to-date expenses are up 27% when
comparing fiscal 1998 to the same period last year. The year-to-date increase is
due to the CEO Severance Package, and the Company's move to an expanded facility
in November 1996. This facility is about twice the size of the Company's former
facility, which has resulted in an increase in occupancy costs. The increase is
also due to the Company writing off certain deferred expenses associated with
the Company's warrants that expired in September of 1997.
Product Development expenses increased 14% in the third quarter of
this fiscal year compared to the third quarter last year. This increase is a
result of increased personnel and product compliance activities. It also
increased 35% year-to-date, compared to last year-to-date. This increase is
essentially due to hiring additional engineers to facilitate product
development.
Interest expense for the quarter is up 27% compared to the same
quarter last year. This increase is due to higher debt balances at the end of
the third quarter of 1998 as compared to the end of the third quarter of 1997.
The facility expansion was financed through leases and notes that were
established in the third and fourth quarters of last fiscal year. Interest
expense increased 51% for the nine-month period ending March 31, 1998 as
compared to the same period last year. This increase was also due to increased
debt balances to finance the facility expansion.
Financial Condition and Liquidity
The Company's current ratio increased from 2.21:1 on June 30, 1997 to
2.40:1 on March 31, 1998. This increase in current ratio was caused primarily by
an increase in inventory. Inventory increased because of raw material purchases
and elevated levels of work-in-process for a new product line that the Company
began shipping in April of 1998. That new product is the AP800, an
audioconferencing system which combines echo cancellation, audio processing,
microphone mixing and audio network control in one unit. The Company expects the
inventory to decrease as orders for the AP800 are filled. Other factors
affecting the current ratio include a decrease in the outstanding balance on the
Company's line-of-credit account.
The Company has an outstanding line of credit of $2.0 million, which
is secured by the Company's accounts receivable. The interest rate on the line
is a variable interest rate (anywhere from three to five basis points
9
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity (continued)
over the London Interbank Offered Rate (LIBOR)). As of March 31, 1998 the
outstanding balance was $560,000 and the interest rate was 9.68%. This line has
a one-year term, expiring in December of 1998.
The Company continues to experience strong operating cash flows.
Increasing sales and profitability have contributed to positive operating cash
flows. As sales continue to increase, the Company expects to achieve its
business plan through a combination of internally generated funds and short-term
or long-term borrowings, if necessary.
Forward Looking Statements and Risk Factors
To the extent any statement presented herein deals with information
that is not historical, such statement is necessarily forward looking. As such,
it is subject to occurrence of many events outside of the Company's control.
Please see a detailed list of the risk factors that are outlined in the
Company's 1997 Annual Report and Form 10-KSB.
10
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits Required by Item 601 of Regulation S-B
The following exhibit is hereby incorporated by reference from the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1989. The exhibit
number shown as appeared in the 1989 Form 10-K as originally filed.
EXHIBIT
NUMBER DESCRIPTION
3.1*+ Articles of Incorporation and all amendments thereto
through March 1, 1998. (Page 10)
The following exhibit is hereby incorporated by reference from the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1989. The exhibit
number shown as appeared in the 1989 Form 10-K as originally filed.
EXHIBIT
NUMBER DESCRIPTION
3.1*+ Amendment to Articles of Incorporation, dated July 1, 1991.
The following exhibit is hereby incorporated by reference from the Company's
Form 10-KSB for the fiscal year ended June 30, 1993. The exhibit number shown as
appeared in the 1993 Form 10-KSB as originally filed.
EXHIBIT
NUMBER DESCRIPTION
3*+ Bylaws, as amended on August 24, 1993. (Page 16)
The following document is filed as an Exhibit to this Form 10-QSB.
EXHIBIT
NUMBER DESCRIPTION
10 Severance Agreement between Russell D. Gentner and the
Company, dated as of December 12, 1997.
* Denotes exhibits specifically incorporated in this Form 10-KSB by reference to
other filings pursuant to the provisions of Rule 12B-32 under the Securities
Exchange Act of 1934.
+ Denotes exhibits specifically incorporated into this Form 10-KSB by reference
(and their page location in such filing), pursuant to Regulation S B, Section
228. These documents are located under File No. 0-17219 and are located at the
Securities and Exchange Commission, Public Reference Branch, 450 5th St., N.W.,
Washington, DC 20549.
11
12
(b) Reports on Form 8-K
None
12
13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GENTNER COMMUNICATIONS CORPORATION
/s/ Susie Strohm
------------------------------------
Susie Strohm
Vice President, Finance
Date: May 7, 1998
1
EXHIBIT 10
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is entered into effective
as of the 12th day of December, 1997, by and between Gentner Communications
Corporation, a Utah corporation (the "Company"), and Russell D. Gentner, a
resident of the State of Utah ("Mr. Gentner").
WHEREAS, Mr. Gentner has been the Chairman of the Board of Directors
("Chairman"), President, Chief Executive Officer of the Company, and a Director
of the Company; and
WHEREAS, the Board of Directors of the Company and Mr. Gentner have
negotiated the terms and conditions of Mr. Gentner's departure from all Company
offices and the Board of Directors, on the terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Resignation from All Offices. Mr. Gentner hereby resigns as President
and Chief Executive Officer of the Company, as of the date hereof. Mr. Gentner
will resign as a Director and as Chairman effective the date of the Closing (as
defined below).
2. Severance Package. In connection with the termination of Mr.
Gentner's relationship with the Company, the Company has delivered or will
deliver at or prior to the Closing, the following items described in this
Section 2:
2.1 Mr. Gentner has received $38,261.30 in salary between the date of
this Agreement and the Closing. At the Closing, he will receive an additional
$15,692.64 in salary ("Additional Salary"); thereafter, he will receive no
further salary or bonus from the Company;
2.2 Mr. Gentner will retain his split dollar life insurance policy
and the Company will release its lien thereon as of the Closing;
2.3 The Company will transfer to Mr. Gentner the title to the 1993
Nissan Pathfinder that the Company currently provides to Mr. Gentner;
2.4 The Micron lap top computer issued and the cellular phone and
electronic organizer previously issued to Mr. Gentner as an employee, all right,
title and interest thereto to pass automatically to Mr. Gentner at the Closing
without further action of the parties; and
2.5 The parties agree that the value of the items set forth in
Sections 2.3 and 2.4 is $13,000.00.
3. Acknowledgment of Payments. Mr. Gentner acknowledges that, as of the
date hereof, he has received full and complete payment to him of all salary,
benefits, accrued vacation days, insurance payments, and other entitlements
earned by Mr. Gentner in connection with his employment through December 12,
1997 except for normal employee withholdings. Mr. Gentner further acknowledges
that he is not entitled to any other payments from the Company, except as set
forth herein. The Company acknowledges that Mr. Gentner is not obligated to the
Company for further payments or the return of Company property to which he is
not entitled.
4. Confidential Information. Mr. Gentner acknowledges that he is bound
by an obligation of confidentiality to the Company. To the extent that Mr.
Gentner possesses materials containing confidential information of the Company
he has, or as of the Closing will, return such materials to the Company.
5. Inventions. Mr. Gentner hereby assigns all "employment inventions",
if any, to the Company that he has developed in the course of this employment by
the Company. Mr. Gentner will execute all instruments as may be reasonably
requested by the Company to give full effect to the assignment set forth in this
section. For purposes hereof, "employment inventions" shall have the meaning set
forth in Section 34-39-2 of the Utah Employment Inventions Act.
2
6. Covenant Not to Compete.
6.1 Mr. Gentner agrees that from the date hereof through June 30,
1998 (the "Non-Compete Period"), he will not compete with the Company. For
purposes hereof, "compete" means owning, managing, operating or controlling, or
participating in the ownership, management, operation or control, or being
connected with or having any interest in, as a stockholder, director, officer,
employee, agent, consultant, sole proprietor, partner or otherwise, of any
business (other than the Company) which markets and sells the following products
or services: teleconferencing echo cancellation products including products
directly competing with the AP-800, broadcast telephone products, remote site
control products, assistive listening products, and conference calling services
(each, a "Competing Business"). Provided, however, that this prohibition shall
not apply to ownership of less than one percent (1%) of the voting stock in
companies whose stock is traded on a national securities exchange or in the over
the counter market. Additionally, during the Non-Compete Period, Mr. Gentner
agrees that he will not solicit employees of the Company for the purpose of
inducing them to leave the Company's employ. During the Non-Compete Period, Mr.
Gentner agrees that he will not solicit the Company's customers, sales
representatives, and dealers for the purpose of providing them with products or
services competing with those of the Company described above.
6.2 Mr. Gentner may not use the name "Gentner" as a part of the name,
"dba", "aka", or otherwise, in any Competing Business. However, in the event the
Company ceases to use the name "Gentner" in the name of the Company and as a
brand name, Mr. Gentner may freely use the name "Gentner" at any time subsequent
to 24 months after the Company ceases final use of the name. In the event that
Mr. Gentner thereafter uses the name the Company may not revert to the use of
the name "Gentner". In addition, Mr. Gentner hereby grants to the Company an
irrevocable license to the use of the name "Gentner". Such license shall cover
any and all intellectual property rights that Mr. Gentner may have in the name
"Gentner", including common law or registered trademarks, whether now existing
or hereafter obtained. The Company agrees that it will only use the "Gentner"
name in association with products and services of a high quality.
7. Release of Claims.
7.1 Mr. Gentner, on behalf of himself and each of his partners,
affiliates, associates, agents, representatives, predecessors, successors, and
assigns, past, present, and future, hereby releases and forever discharges the
Company and each of its respective affiliates, associates, officers, directors,
shareholders, employees, attorneys, accountants, insurers, agents,
representatives, predecessors, successors, and assigns, past, present, and
future, from any and all legal claims, demands, liens, agreements, contracts,
covenants, actions, suits, causes of action, obligations, controversies, debts,
costs, expenses, damages, judgments, orders, and liabilities of whatever kind or
nature in law, equity, or otherwise, whether now known or unknown, suspected or
unsuspected, concealed or hidden, of any kind or nature whatsoever arising from
his separation from the Company, employment by the Company, service as a
director and officer of the Company, and for which Mr. Gentner had actual
knowledge.
7.2 The Company on behalf of itself, board of directors, officers,
its employees, attorneys, accountants, insurers, associates, agents,
representatives, predecessors, successors, and assigns, past present, and
future, hereby releases and forever discharges Mr. Gentner from any and all
legal claims, demands, liens, agreements, contracts, covenants, actions, suits,
causes of action, obligations, controversies, debts, costs, expenses, damages,
judgments, orders, and liabilities of whatever kind or nature in law, equity, or
otherwise, arising from Mr. Gentner's service to the Company as an employee,
officer, director or shareholder, and of which the Board of Directors had actual
knowledge.
8. Closing and Conditions to Closing.
8.1 The "Closing" of the matters described herein shall occur at
the offices of Jones, Waldo, Holbrook & McDonough, P.C. on April 15, 1998 at
5:00 P.M., or such other date and time mutually agreeable to the parties.
8.2 The Company's conditions to Closing are as follows:
8.2.1 execution and delivery of this Agreement;
8.2.2 the simultaneous closing of the transactions
described in and contemplated by that certain Stock and Options
Purchase Agreement between Mr. Gentner and E. Christine Gentner, as
the "Seller" thereunder, and Edward Dallin Bagley as the
"Purchaser" thereunder (the "Purchase
3
Agreement"), pursuant to which Mr. Gentner (and E. Christine
Gentner, as applicable) will sell all Shares and Options (as
defined therein) held by them in the Company to Purchaser;
8.2.3 receipt of Mr. Gentner's resignation from the Board
of Directors dated as of the date hereof; and
8.2.4 approval of this Agreement by the Board of Directors
of the Company.
8.3 Mr. Gentner's conditions to Closing are as follows:
8.3.1 execution and delivery of this Agreement;
8.3.2 the simultaneous closing of the transactions set
forth in the Purchase Agreement;
8.3.3 delivery of a payroll check for the Additional
Salary;
8.3.4 delivery of the title or other mutually acceptable
instruments for the Nissan Pathfinder described in Section 2.3,
above;
8.3.5 execution and delivery of the Written Consent of the
Compensation Committee of the Board of Directors; and
8.3.6 a letter from the Company Vice President for Finance
stating that the Company's lien described in Section 2.2, above, is
released.
9. Post-Separation Actions. The parties desire to provide for an
amicable separation and, accordingly, covenant and agree that after the date
hereof they shall not do anything to disparage or impair the business or
business reputation of the other party. In this regard, the parties have agreed
to the statement attached hereto as Exhibit A. The preceding sentences shall not
preclude either party from making legally required disclosures. The parties
agree that liquidated damages of $5,000 per incident shall apply to a breach of
this Section.
10. Miscellaneous.
10.1 Non-Assignment of Claims. Mr. Gentner and the Company
represent and warrant that they have not assigned or transferred or attempted to
assign or transfer to anyone any right, suit, demand, action, or cause of action
based upon or arising out of or pertaining to or concerning or connected with
any of the matters or things released herein. Each party shall indemnify and
hold harmless the other from and against any and all actions or causes of action
based upon or arising in connection with any such assignment or transfer or any
attempted assignment or transfer or any such action or other matter.
10.2 Notices. All notices and other communications given hereunder
shall be deemed to have been duly given when delivered in person, by mail
(registered or certified postage prepaid, return receipt requested) by telefax,
or by overnight courier, to the respective parties, as follows
To the Company: Gentner Communications Corporation
1825 Research Way
Salt Lake City, UT 84119
Fax: 801-977-0087
Attention: Frances Flood, President
With a copy to: Jones, Waldo, Holbrook & McDonough, P.C.
170 South Main St., Suite 1500
Salt Lake City, UT 84101-1644
Fax: 801-328-0537
Attention: Ronald S. Poelman, Esq.
4
To Mr. Gentner: Russell D. Gentner
2534 Lark Spur Drive
Park City, UT 84068
Fax: 435-649-2610
With a copy to: Tesch, Thompson & Vance, L.C.
314 Main St., Suite 201
Park City, UT 84060-3390
Fax: 435-649-2561
Attention: Joseph Tesch, Esq.
Notice shall be deemed given on the date of delivery in person, on the date
indicated on the return receipt in the case of notice by mail, and on the date
of receipt of a correct electronic acknowledgment in the case of notice by
telefax. Any party may change its address for notice by a notice duly given as
aforesaid.
10.3 Entire Agreement. This Agreement constitutes the final
agreement of the parties hereto in relation to the matters set forth herein and
supersedes any prior written or oral negotiation, correspondence, or
understandings relating to the matters contemplated herein.
10.4 Successors and Assigns. This Agreement shall be the obligation
of Pledgor and shall be binding upon its respective heirs, personal
representatives, successors, and permitted assigns. This Agreement may only be
assigned with the consent of all of the parties hereto.
10.5 Attorneys' Fees. If any action is brought by either party to
enforce the terms of this Agreement, the prevailing party shall be entitled to
reimbursement from the non-prevailing party for all expenses incurred in
connection with such action, including reasonable attorneys' fees.
10.6 Further Assurances. The parties intend this Agreement to be a
complete and final settlement of all matters between them. Accordingly, each
party agrees to execute such further documents and to take such further actions
as may be necessary or desirable to finally and fully settle all matters which
have arisen or which may subsequently arise between them.
10.7 Equitable Remedies. Each party acknowledges and agrees that
the breach or threatened breach of certain provisions of this Agreement would
cause irreparable harm for which damages at law would be an inadequate remedy.
Accordingly, each party hereby agrees that, in any such instance, the threatened
or injured party shall be entitled to seek injunctive or other equitable relief
in addition to any other remedy to which he (or it) may be entitled, including
money damages. Moreover, other than the right to seek immediate injunctive
relief, the parties agree that all disputes and alleged breaches of this
agreement shall first be submitted to binding arbitration Salt Lake City, Utah,
in accordance with the applicable rules and regulations of the American
Arbitration Association.
10.8 Severability. If any provision of this Agreement is found to
be unenforceable by a court of competent jurisdiction, the remaining provisions
shall nevertheless remain in full force and effect.
10.9 Entire Agreement. This Agreement constitutes the full and
complete understanding of the parties hereto with respect to the subject matter
covered herein and supersedes all prior oral or written understandings and
agreements with respect thereto. No modification or amendment to this Agreement
shall be effective unless it is contained in a written document that is signed
by both parties.
10.10 Governing Law., This Agreement shall be governed and
construed in accordance with the laws of the State of Utah.
IN WITNESS WHEREOF, the parties have each signed this Agreement
either personally or by his (or its) duly authorized representative.
GENTNER COMMUNICATIONS CORPORATION
/s/ Russell D. Gentner By: /s/ Frances M. Flood
- --------------------------------- --------------------------------
Russell D. Gentner Frances M. Flood, President
5
EXHIBIT A
Gentner Communications Announces Change in Board of Directors
Salt Lake City, Utah -- Gentner Communications announced today that former Chief
Executive Officer and President, Russell D. Gentner has resigned his position as
Chairman and member of the Board of Directors, and is no longer associated with
the Company in any way.
Mr. Gentner's resignation is effective immediately. A board meeting is scheduled
in the near future.
Gentner Communications Corporation develops and manufactures audio solutions for
the broadcast, teleconferencing, and assistive listening markets. Gentner's
mission is to help build synergistic relationships between people who are
geographically separated by providing customers with total audio solutions. The
Company has a wide product and service mix featuring telephone interface
products, audio conferencing products, assistive listening systems, and a
nationwide conference calling service, 1-800-LETS-MEET(TM).
CONTACT:
Frances M. Flood, President
801-974-3651
fflood@gentner.com
5
1
3-MOS
JUN-30-1998
JAN-01-1998
MAR-31-1998
59,904
0
1,703,461
0
3,637,120
5,640,965
2,448,470
0
8,318,175
2,349,193
0
0
0
7,697
4,675,671
8,318,175
4,208,908
4,213,694
2,045,970
1,744,508
0
0
62,757
360,459
0
360,459
0
0
0
360,459
0.05
0.04
