<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IAT MULTIMEDIA, INC.
(Name of Registrant as Specified in Its Charter)
Delaware 7371 13-3920210
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Identification No.)
Organization) Classification Code
Number)
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi, Switzerland
(011)(41)(56) 223-5022
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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Viktor Vogt
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi, Switzerland
(011)(41)(56) 223-5022
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
Malcolm I. Ross, Esq. Sheldon E. Misher, Esq.
Baker & McKenzie Bachner, Tally, Polevoy & Misher LLP
805 Third Avenue 380 Madison Avenue
New York, New York 10022 New York, New York 10017
(212) 751-5700 (212) 687-7000
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Approximate Date of Commencement Proposed Sale to the Public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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<PAGE>
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
==============================================================================================================================
Proposed Proposed Maximum Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Unit(1) Offering Price(1) Registration Fee
<S> <C> <C> <C> <C>
Units, each consisting of one share of Common Stock,
$.01 par value, and one Warrant ................... 3,565,000(2) $6.50 $ 23,172,500 $ 7,022
Common Stock, $.01 par value ....................... 3,565,000(3) 8.45 30,124,250 9,129
Unit Purchase Option(4) .......................... 310,000 .001 310 .10
Units, each consisting of one share of Common Stock,
$.01 par value, and one Warrant(5) .............. 310,000 10.73 3,326,300 1,008
Common Stock, $.01 par value(5) .................. 310,000 10.73 3,326,300 1,008
Total ........................................... $ 59,949,660 $ 18,167
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 465,000 Units subject to the Underwriter's over-allotment option.
(3) Issuable upon exercise of the Warrants.
(4) To be issued to the Underwriter.
(5) Issuable upon exercise of the Unit Purchase Option and/or the Warrants
issuable thereunder.
Pursuant to Rule 416 under the Securities Act of 1933, as amended, there
are also being registered such additional shares of Common Stock as may
become issuable pursuant to the anti-dilution provisions of the Warrants and
the Unit Purchase Option.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION -- DATED DECEMBER 23, 1996
PROSPECTUS
IAT MULTIMEDIA, INC.
3,100,000 Units consisting of 3,100,000 shares of
Common Stock and 3,100,000 Warrants
Each unit ("Unit") offered by IAT Multimedia, Inc., a Delaware corporation
(the "Company"), consists of one share of common stock, par value $.01 per
share (the "Common Stock"), and one redeemable warrant (the "Warrants"). The
components of the Units will not be transferable separately until , 1997
or such earlier date (the "Separation Date") as Royce Investment Group, Inc.
shall determine. Each Warrant entitles the holder to purchase one share of
Common Stock at an exercise price of $7.80, subject to adjustment, at any
time from the Separation Date until the fifth anniversary of the date of this
Prospectus. Commencing 15 months from the date of this Prospectus, the
Warrants are subject to redemption by the Company at a redemption price of
$.05 per Warrant on 30 day's written notice, provided the closing bid price
of the Common Stock equals or exceeds $16.00, subject to adjustment, for 20
consecutive trading days ending within five days of the notice of redemption.
See "Description of Securities."
Prior to this Offering, there has been no public market for the Units, the
Common Stock or the Warrants and there can be no assurance that such a market
will develop. The Company has applied for quotation of the Units, the Common
Stock and the Warrants on the Nasdaq National Market ("Nasdaq") under the
symbols , and , respectively. It is anticipated that the initial
public offering price will be between $5.50 and $6.50 per Unit. See
"Underwriting" for a discussion of factors considered in determining the
initial public offering price.
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The securities offered hereby involve a high degree of risk and immediate
substantial dilution. See "Risk Factors," which begin on page 11, and
"Dilution."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
Price to Underwriting Discounts Proceeds to
Public and Commissions (1) Company (2)
- -----------------------------------------------------------------------------
Per Unit .... $ $ $
Total( (3) . $ $ $
- -----------------------------------------------------------------------------
(1) Does not include additional compensation to be received by Royce
Investment Group, Inc. (the "Underwriter") in the form of (i) a non-
accountable expense allowance of $ , or $ per Unit ($ if the
over-allotment option is exercised in full) and (ii) an option,
exercisable over a period of four years commencing one year from the date
of this Prospectus, to purchase up to 310,000 Units at $9.90 per Unit
(the "Unit Purchase Option"). In addition, the Company has agreed to
indemnify the Underwriter against certain liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company,
including the Underwriter's non-accountable expense allowance.
(3) The Company has granted to the Underwriter a 45-day option to purchase up
to 465,000 additional Units on the same terms and conditions as set forth
above, solely to cover over-allotments, if any. If the over-allotment
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
The Units are being offered on a "firm commitment" basis by the
Underwriter when, as and if delivered and accepted by the Underwriter,
subject to its right to reject orders in whole or in part and subject to
certain other conditions. It is expected that delivery of the certificates
representing the Units will be made against payment at the offices of Royce
Investment Group, Inc., 199 Crossways Park Drive, Woodbury, New York, 11797,
on or about , 1997.
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ROYCE INVESTMENT GROUP, INC.
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The date of this Prospectus is , 1997
<PAGE>
PHOTOGRAPHS OF THE COMPANY'S PRODUCTS
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent certified public
accountants.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE UNITS, COMMON STOCK
AND/OR WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
The Company is organized under the laws of the State of Delaware.
Investors in the Units will be able to effect service of process in the
United States upon the Company and may be able to effect service of process
upon its directors. However, the Company is primarily a holding company which
holds stock in entities in Switzerland and Germany and all or a substantial
portion of the assets of the Company are located outside the United States.
In addition, all of the Company's four directors and all of its executive
officers are residents of foreign countries and all or a substantial portion
of the assets of such directors and officers are located outside of the
United States. As a result, it may not be possible for investors to enforce
judgments of U.S. courts predicated upon the civil liability provisions of
U.S. laws against the Company's, the foreign directors' and officers' assets.
The Company has been advised by its counsel, Baker & McKenzie, that there
is doubt as to the enforceability in Switzerland of judgments of U.S. courts,
against Multimedia's subsidiaries and against shareholders, directors,
officers and employees of Multimedia or its subsidiaries who are domiciled in
Switzerland. In addition, awards of punitive damages in actions brought in
the United States or elsewhere may be unenforceable in Switzerland.
The Company has been advised by its counsel, Dr. Schackow & Partner, that
there is doubt as to the enforceability in Germany in original actions or in
actions for enforcement of judgments of U.S. courts, of civil liabilities
predicated solely upon the laws of the United States against Multimedia's
subsidiaries and against shareholders, directors, officers and employees of
Multimedia or its subsidiaries who are domiciled in Germany. In addition,
awards of punitive damages in actions brought in the United States or
elsewhere may be unenforceable in Germany.
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Amounts and percentages appearing in this Prospectus may not total due to
rounding.
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Prospective investors are cautioned that the statements in this Prospectus
that are not historical facts may be "forward-looking statements" that are
subject to risks and uncertainties. Such forward-looking statements, include
statements regarding, among other items, the Company's growth strategy,
future products, sales, ability to market products and anticipated trends in
the Company's business. These forward-looking statements are based largely on
the Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of a number of factors including, but not limited to, the Company's
ability to successfully complete the development of its third generation
products, the ability to achieve market penetration, the need for additional
financing, intense competition in various aspects of its business, the
Company's ability to expand into the United States, its dependence on key
personnel, and other factors described in the Risk Factors section and
elsewhere herein.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in
this Prospectus. Except as otherwise noted, all information in this
Prospectus (i) gives effect to a 0.94697 for one reverse stock split effected
in December 1996 (the "Reverse Stock Split"), (ii) assumes an initial public
offering price of $6.00 per Unit, (iii) assumes no exercise of the
Underwriter's over- allotment option, the Warrants or the Unit Purchase
Option and (iv) gives effect to the automatic conversion, upon the
consummation of this Offering, of 1,875,000 shares of Series A Preferred
Stock, $.01 par value (the "Series A Preferred Stock") issued in Multimedia's
private placement in October 1996 (the "Private Placement"), into an equal
amount of shares of Common Stock. Unless the context otherwise requires,
"Multimedia" refers to IAT Multimedia, Inc. and the "Company" or "IAT" refers
to IAT Multimedia, Inc. and its subsidiaries. Investors should consider
carefully the information set forth under "Risk Factors." The Company's
functional currency is. the Swiss Franc. Foreign currency amounts in the
Company's Financial Statements (as hereinafter defined) have been converted
into U.S. dollars. See "Note 2 -- Consolidated Financial Statements of the
Company." For the convenience of the reader, certain other amounts have been
converted at the rate of SF 1.26 = $1.00 and DM 1.53 = $1.00, the exchange
rate at September 30, 1996. There can be no assurance that such amounts could
be converted at such rates. Certain terms used herein have the meanings
assigned to them in the Glossary.
THE COMPANY
The Company develops, manufactures and markets customizable high quality
visual communications systems for use in desktop computers which permit users
to hold multi-point video conferences in two or more locations, as well as
providing additional video, audio and data transfer features not available in
traditional video conferencing systems. Unlike traditional video conferencing
companies, the Company's focus is on high quality system solutions. The
Company believes that the needs of its target customers cannot be addressed
by currently available lower quality software-only products (including
Internet products) or by high quality traditional video conferencing
products. In addition to providing audio and video images of the other
participants in the tele-conference, the Company's systems are also capable
of simultaneously providing images and data in windows on the computer screen
which can be viewed by all participants in the video conference and permit
users at remote computer terminals to modify data and manipulate images
through the operation of apparatus, such as microscopes and video cameras.
These systems, which include both proprietary and third-party software and
hardware, are inter-operable with products from certain vendors and comply
with all relevant international standards, including H.320. The Company sells
its systems and kits to end-users in a variety of industries and to OEMs and
integrators. The Company has sold an aggregate of approximately 500 systems
and kits, including pilot projects, since 1990.
The Company's technology has been developed with companies which the Company
based on various agreements, considers to be its strategic partners ("Strategic
Partners"), including Deutsche Telekom ("DT"), Texas Instruments ("Texas
Instruments"), IBM Deutschland Informationssysteme GmbH ("IBM Germany") and
Olympus Optical Co. (Europe) GmbH ("Olympus"). The Company believes that its
technology can produce substantially higher quality image and video
transmissions, including reduced noise and artifacts, truer color representation
and higher frame rates, than other systems while using less of the computing
power of the host desktop computer, which permits other applications to continue
to operate without interruption. In addition, the Company's new generation of
systems currently being developed is based on a programmable digital signal
processor which provides flexibility for adapting to new algorithms, standards
or user requirements. The Company believes that the high image quality and other
features provided by the Company's systems will meet the requirements of various
professional users including tele-medicine (i.e., transferring microscope,
x-ray, video or other diagnostic images for evaluation by a physician at a
remote site) and tele-surveillance (i.e., remote viewing and control of
surveillance cameras and remote access control). In excess of $22 million was
invested in the Company by its stockholders and the Company has invested
approximately $13 million in the research, development and marketing of its
technology (including approximately $4 million in participations from the
Company's Strategic Partners). This investment does not include additional
amounts invested directly by the Company's Strategic Partners in the development
of their components used in the Company's systems.
4
<PAGE>
The Company believes that the multimedia communications market will be
divided between mass- market low quality software-only solutions and high
quality system solutions which principally utilize hardwired processors. The
Company believes that mass market solutions do not meet the needs of its
potential customers because of the lower quality image and video transmissions
and that hardwired processors are inflexible and difficult to adapt to new
algorithms and standards. In addition, the Company believes that its use of
programmable digital signal processors combined with its proprietary
technology offers a competitive advantage over competitors using hardwired
chips or software-only solutions. The Company is not aware of other companies
which offer similar customized complete systems at comparable prices.
The Company has developed two generations and is currently developing a third
generation of its technology. The first generation was developed using a large
number of computer boards and readily available components as the Company's
initial entry in the visual communications field and to assess customer needs.
The second generation, utilized in the Company's current systems, is
characterized by a substantially reduced number of computer boards and improved
capabilities. These systems use a combination of fully programmable digital
signal processors and less-flexible hardwired processors. The second generation
systems have inherently high prices per unit. For example, the Company's second
generation MFKS Vision and Live multifunctional communications systems ("MFKS")
have average prices of approximately $8,000 to $30,000 per system (depending on
capabilities). Third generation systems, which the Company expects to begin
shipping in 1997, utilize Texas Instruments' TMS320C80 programmable digital
signal processor (the "C8x") and are designed for commercial production with
target sales prices of approximately $1,500 to $8,000 per system for
corresponding MFKS systems. The Company believes that its third generation of
systems will be its first systems which have the potential for widespread
commercialization.
The Company's existing products include the MFKS Vision and Live multi-
functional communications system and the MIKS Interactive Kiosk ("MIKS").
MFKS is a high quality visual communications system which combines hardware
and software for use in desktop computers and permits users to hold
multi-point video conferences with simultaneous video, audio and data
transfer. MIKS is an electronic kiosk system which allows consumers to access
information stored in the electronic kiosk or in remote locations, including
high quality video, while allowing instant contact to a video conference with
a tele-consultant who has full access to the images and data seen by the
consumer.
The Company developed its MFKS systems jointly with DT. The Company offers
MFKS 128 systems which include software, two computer boards and two optional
computer boards and MFKS 384 systems which include six to nine computer
boards. These systems permit tele-conferencing and simultaneous full screen
video with a second smaller video window ("PIP"), audio and data
communications on a desktop computer and, in the case of MFKS 384 systems,
the ability to view two full-screen video windows simultaneously. The Company
believes that the combination of the tele-conference and additional functions
performed by its MFKS systems provide features required by professional users
and not generally available in existing tele-conferencing systems. MFKS
systems are currently used by DT for administrative tasks; by customers of
DeTeSystems, an integrator and affiliate of DT, for a variety of tasks in
different industries; by MAN Roland for tele-servicing of large, high-speed
printing presses; by Grundig for tele-surveillance in an underground subway
system; by the water quality control industry for visual water testing from
remote sites; and by hospitals for pilot projects in tele-microscopy and
tele-endoscopy.
The Company is jointly developing base hardware and software with Texas
Instruments and DT for its third generation MFKS system incorporating the C8x
which will allow for easier upgrades than systems using hardwired chips. These
new systems will provide all of the functions of the corresponding existing
second generation systems at substantially lower target prices. The third
generation MFKS 128 uses a single proprietary computer board while the third
generation MFKS 384 system only requires three computer boards. The Company
expects to release the third generation of MFKS systems in 1997 jointly with its
Strategic Partners. In addition to complete systems, the Company offers MFKS
kits utilizing its existing second generation technology to OEMs and integrators
and expects to begin offering kits utilizing its third generation technology in
1997. No assurance can be given that such systems or kits will be introduced on
a timely basis, if at all, or that such systems will be accepted by the market.
5
<PAGE>
The Company is presently working with Olympus to integrate MFKS systems
into tele-microscopes. These products are expected to allow physicians in
different locations to engage in a video conference while concurrently
reviewing microscopic slides, and in some models, to remotely operate the
microscope. The Company does not believe that the images from current visual
communications systems provide sufficient image quality to transmit pictures
of microscopic slides which would permit their use for diagnosis. The Company
believes that the high quality images produced by the MFKS system offer
images with resolutions and life-like colors sufficient for medical
diagnoses.
In addition, the Company is jointly developing with the Technical
University of Berlin proprietary wavelet data compression technology, which
the Company believes will almost eliminate the time delay in viewing still
images which are transmitted by visual communications systems and that this
reduction will make the Company's MFKS systems more attractive. The Company
believes that it will be able to offer wavelet compression in its MFKS
systems beginning in 1997 and that one of the first applications for this
technology will be in the tele-microscopes being jointly developed with
Olympus.
MIKS was jointly developed with DT and IBM Germany. MIKS consists of consumer
electronic kiosks, tele-consultant stations, an authoring system, a proprietary
database management system and related proprietary software. The Company
believes MIKS systems can enable companies to more efficiently utilize their
personnel and to rapidly collect market information on consumers using the
electronic kiosks. The authoring system reduces the cost and time to develop
menus and pages for electronic kiosk displays. The Company's proprietary
database management system allows rapid and accurate updating of information
stored in the electronic kiosks and collection of consumer data. The Company's
second generation MIKS system requires two desktop computers per electronic
kiosk and has an average price of approximately $45,000 per electronic
kiosk. To date, the Company has only installed pilot MIKS systems. The Company,
IBM and DT are jointly developing the third generation MIKS systems which will
reduce the hardware demands to only one desktop computer with two proprietary
computer boards per electronic kiosk. The Company has a target price for the
third generation MIKS system is approximately $20,000 per electronic kiosk and
expects to begin selling third generation MIKS systems in 1997. No assurance can
be given that such systems will be introduced on a timely basis, if at all, or
that such systems will be accepted by the market.
The Company's systems are flexible and can be configured in a variety of
ways to meet the requirements of specific customers. The Company, on a project
by project basis, designs systems which provide solutions on a customized
basis for the specific requirements of particular customers.
The Company currently markets its products, both through its own sales staff
and through certain of its Strategic Partners, primarily in Europe. A
substantial part of the potential market for the Company's products are in the
United States and entering into the United States market is a fundamental part
of the Company's strategy. The Company intends to expand its marketing efforts,
both by expanding its sales and marketing staff in Europe as well as
establishing an office and a sales and marketing staff in the United States
during 1997. The Company continually evaluates potential strategic partners for
additional applications and broader marketing of IAT's technology. The Company
may make a participation or acquisition for strategic reasons.
The Company was incorporated in Delaware in September 1996 as a holding
company for the existing business of IAT AG ("IAT AG") and IAT Deutschland GmbH
Interaktive Medien Systeme ("IAT Germany") which were organized in 1989 and
1991, respectively. IAT AG is a wholly-owned subsidiary of IAT and IAT Germany
is a 74.9% subsidiary of IAT AG. HIBEG, a wholly-owned subsidiary of the federal
state of Bremen, Germany which promotes business, is the holder of 25.1% of the
outstanding share capital of IAT Germany. The Company's executive offices are
located at Geschaftshaus Wasserschloss, Aarestrasse 17, CH-5300,
Vogelsang-Turgi, Switzerland and its telephone number is (011)(41)(56) 223-5022.
6
<PAGE>
THE OFFERING
Securities Offered ............ 3,100,000 Units, each Unit consisting of one
share of Common Stock and one Warrant. Each
Warrant entitles the holder to purchase one
share of Common Stock at an exercise price
of $7.80 subject to adjustment, at any time
from the Separation Date until the fifth
anniversary of the date of this Prospectus.
The Warrants are subject to redemption under
certain circumstances. See "Description of
Securities."
Common Stock Outstanding
Before the Offering ......... 6,250,000 shares(1)(2)
Common Stock Outstanding
After the Offering........... 9,350,000 shares(2)(3)
Use of Proceeds................ Net proceeds of the Offering are expected to
be approximately $15.5 million, assuming a
price per Unit of $6.00. The Company plans
to use approximately $6.0 million for
research and development, approximately $1.3
million for repayment of loans made by a
stockholder of the Company and payment of a
dividend on the Series A Preferred Stock and
$400,000 for payment to General Capital
pursuant to the provisions of the Marketing
Agreement (as defined herein). The remaining
approximately $7.8 million will be used for
working capital and general corporate
purposes including increases in sales staff
and expansion in the United States and possible
participations and acquisitions.
See "Risk Factors -- Benefits of the
Offering to Insiders," "Use of Proceeds,"
"Business -- Strategy" and "Certain
Transactions."
Dividends...................... The Company has never paid cash dividends on
its Common Stock and does not anticipate or
intend paying cash dividends in the
foreseeable future on its Common Stock. See
"Dividend Policy" and "Management's
Discussion and Analysis and Results of
Operations -- Liquidity."
Redemption of Warrants......... Commencing 15 months from the date hereof,
the Warrants are subject to redemption by
the Company at a redemption price of $.05
per Warrant on 30 days' written notice,
provided the closing bid price of the Common
Stock equals or exceeds $16.00, subject to
adjustment, for 20 consecutive trading days
ending within five days of the notice of
redemption. See "Description of Securities."
Quotation...................... The Company has applied for quotation of the
Units, the Common Stock and the Warrants on
the Nasdaq National Market.
Proposed Nasdaq National
Market Symbols
Units........................
Common Stock
Warrants.....................
Risk Factors................... This Offering involves a high degree of risk
and immediate substantial dilution. See
"Risk Factors" and "Dilution."
7
<PAGE>
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(1) Excludes (i) 1,875,000 shares of Common Stock issuable upon exercise of
warrants issued to the holders of Series A Preferred Stock (the "Investor
Warrants"), (ii) 473,485 shares of Common Stock issuable upon exercise of
warrants issued to certain stockholders of the Company (the "Stockholder
Warrants") and, (iii) 500,000 shares of Common Stock reserved for
issuance under the Company's 1996 Stock Option Plan, none of which have
been granted.
(2) Includes 500,000 shares of Common Stock which the existing stockholders
will deposit into escrow (the "Escrow Shares"). The Escrow Shares will be
subject to cancellation and will be contributed to the capital of the
Company if the Company does not attain certain earnings levels or the
market price of the Common Stock does not achieve certain levels. If such
earnings or market price levels are met, the Company will record a
substantial non-cash charge to operations, for financial reporting
purposes, as compensation expense relating to the value of the Escrow
Shares released to the Company's officers, directors and employees. See
"Risk Factors -- Future Charges to Operations" and "Principal
Stockholders -- Escrow Shares."
(3) Excludes (i) up to 930,000 shares of Common Stock issuable upon exercise
of the Underwriter's over-allotment option and the Warrants included
therein, (ii) 3,100,000 shares of Common Stock issuable upon exercise of
the Warrants which are components of the Units offered hereby, (iii)
620,000 shares of Common Stock issuable upon exercise of the Unit
Purchase Option and the Warrants included therein, (iv) 1,875,000 shares
of Common Stock issuable upon exercise of the Investor Warrants, (v)
473,485 shares of Common Stock issuable upon exercise of the Stockholder
Warrants and (vi) 500,000 shares of Common Stock reserved for issuance
under the Company's 1996 Stock Option Plan, none of which have been
granted.
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following historical financial data, except for the information
provided for the nine months ended September 30, 1995 and 1996, have been
derived from historical consolidated financial statements of the Company that
have been audited by Rothstein, Kass & Company, independent auditors (the
"Consolidated Financial Statements"). The historical financial data provided
for the nine months ended September 30, 1995 and 1996 are unaudited (the
"Consolidated Interim Financial Statements," and together with the
Consolidated Financial Statements, the "Financial Statements"), but in the
opinion of the Company's management contain all adjustments, consisting only
of normal recurring accruals, which are necessary for a fair presentation of
the information included herein. Multimedia was formed in September 1996 as a
holding company for the existing operations of IAT AG and IAT Germany.
The pro forma consolidated balance sheet data reflect the issuance of
1,875,000 shares of Series A Preferred Stock in October 1996 and the
conversion of the Series A Preferred Stock into 1,875,000 shares of Common
Stock and the as adjusted consolidated balance sheet data reflect the
Company's consolidated financial position as of September 30, 1996, giving
effect to the sale of the Units offered hereby at an assumed price per Unit
of $6.00, assuming no exercise of the Underwriter's Over-Allotment Option,
the application of the net proceeds therefrom, including the repayment of a
loan made by a stockholder of the Company in the amount of $1,182,000
(including loans received subsequent to September 30, 1996), the payment of
$500,000 ($100,000 of which was paid in October 1996) pursuant to the
Marketing Agreement, and the issuance of 1,875,000 shares of Common Stock
issuable upon the automatic conversion of all of the outstanding shares of
Series A Preferred Stock upon consummation of this Offering.
9
<PAGE>
The following summary consolidated financial information is derived from,
and should be read in conjunction with, the Consolidated Financial Statements
of the Company and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------ ------------------------
1994 1995 1995 1996
---------- ---------- ---------- ----------
(unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ................................. $ 1,053 $ 1,510 $ 768 $ 961
Cost of sales ............................. 700 968 516 690
------- ---------- ---------- ----------
Gross margin .............................. 353 542 252 271
------- ---------- ---------- ----------
Operating Expenses:
Research and development costs ............ 2,269 2,531 1,966 1,952
Less participations received .............. (2,207) (868) (585) (272)
------- ---------- ---------- ----------
Research and development costs, net ....... 62 1,663 1,382 1,680
Selling, general and administrative
expenses ................................. 1,538 2,640 1,969 2,198
------- ---------- ---------- ----------
Operating loss ............................ $(1,247) $(3,761) $(3,099) $(3,607)
======= ========== ========== ==========
Net loss .................................. $(1,335) $(3,730) $(3,162) $(3,733)
======= ========== ========== ==========
Net loss per common share ................. $ (0.33) $ (0.77) $ (0.71) $ (0.65)
Weighted average number of shares
outstanding .............................. 4,000 4,837 4,460 5,750
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1996
----------------- --------------------------------------
(unaudited)
--------------------------------------
As
Actual Actual Pro Forma Adjusted(1)
----------------- --------- ----------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Current assets .................. $ 1,489 $ 1,006 $ 2,506 $17,166
Working capital (deficiency) .... (1,106) (3,052) (1,552) 14,009
Total assets .................... 2,056 1,695 3,195 18,195
Total liabilities ............... 2,944 4,550 4,550 4,168
Stockholders equity (deficiency) (888) (2,855) (1,355) 14,027
</TABLE>
- ------
(1) Includes 500,000 Escrow Shares. See "Principal Stockholders -- Escrow
Shares." Excludes (i) 500,000 shares of Common Stock reserved for
issuance under the Company's 1996 Stock Option Plan, none of which have
been granted, (ii) 3,100,000 shares of Common Stock issuable upon
exercise of the Warrants which are components of the Units offered
hereby, (iii) 620,000 shares of Common Stock issuable upon exercise of
the Unit Purchase Option and the Warrants contained therein, (iv)
1,875,000 shares of Common Stock issuable upon exercise of the Investor
Warrants, (v) 473,485 shares of Common Stock issuable upon exercise of
the Stockholder Warrants and (vi) 930,000 shares of Common Stock issuable
upon exercise of the Underwriter's Over-Allotment Option and the Warrants
included therein.
10
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and an investment
in the Units offered hereby involves a high degree of risk. Prospective
investors are cautioned that the statements in this Prospectus that are not
historical facts may be forward-looking statements that are subject to risks
and uncertainties. Such forward- looking statements, including statements
regarding, among other items, the Company's growth strategy, future products,
sales, ability to market products and anticipated trends in the Company's
business. These forward- looking statements are based largely on the
Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of a number of factors including, but not limited to, the Company's
ability to successfully complete the development of its third generation
products, the ability to achieve market penetration, the need for additional
financing, intense competition in various aspects of its business, the
Company's ability to expand into the United States, its dependence on key
personnel, and other factors described in the Risk Factors sections set forth
below and elsewhere herein. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information contained in this
Prospectus will in fact take place or prove to be accurate. In addition to
the other information contained in this Prospectus (including the Financial
Statements and the notes thereto), prospective investors should carefully
consider the following risk factors before purchasing the Units offered
hereby.
History of Operating Losses and Going Concern. The Company incurred net
losses of approximately $1.3 million, $3.7 million and $3.7 million in the
years ended December 31, 1994 and December 31, 1995 and in the nine months
ended September 30, 1996, respectively. At September 30, 1996, the Company
had an accumulated deficit of approximately $10.9 million and a stockholder's
deficiency of approximately $2.9 million. While the Company's products have
been marketed for several years, the Company's products are still in the
development stage and have generated limited sales to date which has resulted
in operating losses. The Company is in the process of developing a third
generation of its products which it expects to release during 1997. However,
there can be no assurance that the products incorporating the Company's third
generation technology will be completed, will be released in a timely manner,
can be manufactured at the anticipated reduced costs, will be sold at the
reduced purchase price or will achieve market acceptance and penetration. In
the years ended December 31, 1994 and December 31, 1995 and the nine months
ended September 30, 1996, the Company made significant expenditures of
approximately $62,000, $1.7 million and $1.7 million for product development
and expects that it will be required to continue to invest heavily in product
development and marketing programs in order to be competitive in a rapidly
developing technology market and to capture market share in the segments of
the multimedia market in which it seeks to compete. As a result, the Company
may incur further losses in the future. There can be no assurance that the
Company will achieve profitable operations in any future period, if at all.
Multimedia's subsidiaries are subject to German and Swiss law, which
require, among other things, that companies which incur losses have to take
appropriate measures to ensure that the claims of the company's obligees are
covered by the assets of those companies. Such measures include, among
others, increasing paid-in capital or obtaining declarations from the
obligees which subordinate their claims. If those measures are not taken, the
board of directors of the subsidiaries must notify a judge in order to
commence bankruptcy proceedings which, under Swiss and German law, usually
leads to the dissolution of the corporate existence. Between May 1992 and
April 1993, in accordance with Swiss law, IAT AG underwent a financial
reorganization and has been obligated to take the measures described herein
on various occasions. While IAT AG and IAT Germany have successfully
undertaken these measures in the past, there can be no assurance that such
measures will not have to be undertaken in the future or that the corporate
existence of IAT AG and IAT Germany can be maintained. Failure to maintain
such corporate existence would have a material adverse effect on the Company.
See "Certain Transactions."
Potential investors should be aware that the report of the Company's
independent certified public accountants relating to the Company's December
31, 1995 Consolidated Financial Statements contains an explanatory paragraph
expressing substantial doubt about the Company's ability to continue as a
going concern as a result of the Company's recurring losses and working
capital and stockholder's deficits. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Note 8 -- Consolidated
Financial Statements of the Company."
11
<PAGE>
Dependence Upon Agreements. The Company's ability to develop, modify, market
and distribute its products derives in large part from its agreements with Texas
Instruments, DT, IBM Germany, Olympus. These agreements do not grant the Company
exclusive licenses, and the Company's Strategic Partners may, at any time,
develop products or technology which compete with those of the Company. In
addition, the Company's Strategic Partners may, under certain circumstances
grant licenses to other companies, including competitors of the Company, to
develop, sell and sublicense versions of the products developed in conjunction
with the Company. The Company intends to use the technology developed with its
Strategic Partners to design high quality systems which provide solutions
tailored to the requirements of particular customers of the Company. As a
result, the Company may need to collaborate with its Strategic Partners to
create solutions, which could require the Company to enter into new agreements
with its Strategic Partners. There can be no assurance that the Company will be
able to enter into such agreements in the future or that such agreements will
contain terms acceptable or beneficial to the Company.
The Company's agreements with its Strategic Partners generally have fixed
terms and, unless extended, many of the agreements may terminate during the
next year. There can be no assurance that these agreements will be extended
or renewed or if they are renewed that the terms will be acceptable or
beneficial to the Company. In addition, the Company may determine that
additional agreements with its existing Strategic Partners or future partners
may be necessary. Failure to extend or renew these agreements or enter into
new agreements could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Agreements with Strategic Partners."
Limited Proprietary Protection. The Company's success is heavily dependent
upon its proprietary technology. The Company currently has no patents and
relies primarily on copyright, trademark and trade secrets law, as well as
third-party non-disclosure agreements, to protect its intellectual property.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or independent development by others of similar technology.
In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do laws in the United
States. There can be no assurance that the protections afforded by the laws
of such countries will be adequate to protect the Company's proprietary
rights, the unenforceability of any of which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Litigation may be necessary to enforce the Company's intellectual property
rights or to protect the Company's trade secrets. There can be no assurance
that any such litigation would be successful. Any such litigation, whether or
not successful, could result in substantial costs and diversion of resources
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company has not been charged with infringement of any proprietary
rights of others; however, there can be no assurance that third parties will
not assert infringement and other claims against the Company or that such
claims will not be successful. From time to time, the Company may receive in
the future notice of claims of infringement of other parties' proprietary
rights. Many participants in the Company's industry have an increasing number
of patents and have frequently demonstrated a readiness to commence litigation
based on allegations of patent or other intellectual property infringement.
Third parties may assert exclusive patent, trademark, copyright and other
intellectual property rights to technologies that are important to the
Company. There can be no assurance that infringement or invalidity claims (or
claims for indemnification resulting from infringement claims) will not be
asserted or prosecuted against the Company or that any such assertion or
prosecution will not have a material adverse effect on the Company's business,
financial condition or results of operations. Regardless of the validity or
the successful assertion of any such claims, the Company could incur
significant costs and diversion of resources in defending such claims, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Furthermore, any party making such claims
could secure a judgment awarding substantial damages, as well as injunctive or
other equitable relief, which could effectively block the Company's ability to
make, use, sell, distribute or market its products and services in the United
States or abroad. Any such judgment could have a material adverse effect on
the Company's business, financial condition and results of operations. In
circumstances where claims relating to proprietary technology or information
are asserted against the Company, the Company may be required to seek licenses
to such intellectual property. There can be no assurance, however, that such
licenses would be available or, if avail-
12
<PAGE>
able, that such licenses could be obtained on terms that are commercially
reasonable and acceptable to the Company. The failure to obtain the necessary
licenses or other rights could preclude the sale, manufacture or distribution
of the Company's products and, therefore, could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business -- Intellectual Property."
Further Development; Need for Additional Financing. The Company's business
will continue to require additional expenditures for research and
development, sales and marketing, the expansion into the United States and,
to the extent losses continue, working capital. The Company intends to use a
portion of the proceeds of this Offering for the repayment of certain
stockholder loans, the payment of a dividend on the Series A Preferred Stock
and the payment of a fee pursuant to the Marketing Agreement. The Company
anticipates that the remaining proceeds of this Offering will be sufficient
to fund its operations through 1998. This estimate assumes substantial
increases in the Company's sales, completion of the Company's third
generation of products and acceptance of these products in the visual
communications market. There can be no assurance that the Company will be
able to achieve such increased sales. Failure to achieve such increase will
require the Company to seek additional funding prior to 1998. The Company's
existing bank lines of credit in the aggregate amount of approximately $2.2
million are due on demand and there can be no assurance that the Company's
lenders will continue to extend credit to the Company. In the event the
Company's sales do not increase substantially and in the event expected cash
flow generated from future operations is not sufficient to fund ongoing
operations, the Company will require additional financing. The Company has no
commitments to obtain additional financing and there can be no assurance that
such financing will be available on terms that are satisfactory to the
Company, or at all. Failure to obtain such additional financing on terms that
are satisfactory to the Company, or at all, could have a material adverse
effect on the Company's business, financial condition and results of
operations. Any additional equity financings may be dilutive to stockholders,
and debt financings, if available, may involve restrictive covenants. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Developing Market. The multimedia communications market has only recently
begun to develop, continues to be defined, is evolving rapidly and is
characterized by a large number of market entrants. Moreover, the Company
intends to market its technology and its products to the professional market
which is not currently utilizing visual communications systems. The Company
believes that this market requires high quality systems which provide
solutions tailored to its requirements and contain higher quality image and
video transmissions, including reduced noise and artifacts, true color
representation and higher frame rates, than traditional video conferencing
communications systems. Such market includes customers using tele-medicine
and tele- surveillance. The Company's success in this market will be
dependent in part upon its ability, and in certain cases, the ability of its
Strategic Partners, to convince potential customers that the Company's
products satisfy their needs and to purchase those products. In addition, the
Company has only released pilots of its MIKS Interactive Kiosk systems to
customers, such as supermarkets, airports and train stations, for evaluation,
and has not had any commercial sales of such product to date. There can be no
assurance that potential customers in this market will accept the Company's
technology and products, that the Company will be successful in creating
solutions tailored to the requirements of these potential customers or that a
market for the Company's products will become established. In addition, the
Company's future success will depend in large part on the continued expansion
of the multimedia communications market in general, the expansion of the
professional market specifically, the identification of customers with
technological requirements which can be met by the Company's systems in
particular and the acceptance of the Company's systems. As is typical in a
rapidly evolving industry, demand for and acceptance of products are subject
to a high level of uncertainty. Certain factors, including the
incompatibility of the Company's current visual communications systems with
certain vendors' video conferencing products, the level of technical skill
required by the operator of the Company's systems and the willingness on the
consumer's part to await the next generation of more advanced equipment may
limit demand for and acceptance of the Company's products. In addition, sales
of systems introduced into the multi-media communications market requires
intense effort over long periods of time.
Furthermore, new customers typically acquire a pilot system to evaluate
before purchasing systems. In many cases, customers need to purchase a number
of systems to meet their requirements and such purchases require the approval
of the customer's senior management or board of directors prior to the
purchase, which could lead to delays in the purchase or, in some cases,
eliminate decisions to purchase the Company's products. See "-- Dependence on
New Products and Rapidly Developing Technologies."
13
<PAGE>
Dependence on New Products and Rapidly Developing Technologies. While the
Company's products have been marketed for several years, the Company's
products have generated limited sales to date. The Company's second
generation MFKS 128 and MFKS 384 systems have prices of approximately $8,000
to $30,000, respectively. Because of the costs of manufacturing the second
generation and the resulting sales price, the Company does not believe that
it could achieve market penetration in the market for which its products are
intended. The Company expects to release the third generation of MFKS systems
in 1997 at target prices of approximately $1,500 per system ($1,000 to OEMs
in quantity) for the single board MFKS 128 system and approximately $8,000
per system ($3,500-$4,500 to OEMs depending on configuration) for the MFKS
384 system. To date, the Company has only installed pilots of its second
generation MIKS Interactive Kiosk systems which sell for approximately
$45,000 per electronic kiosk. The Company intends to introduce its third
generation of MIKS Interactive Kiosks during 1997 at a price of approximately
$20,000. In addition, the Company intends to use the technology developed
with its Strategic Partners and its basic MFKS Vision and Live and MIKS
Interactive Kiosk systems to design solutions tailored to the requirements of
particular customers of the Company. There can be no assurance that the third
generation of MFKS Vision and Live or MIKS Interactive Kiosk will be
completed, will be released in a timely manner, can be manufactured at the
anticipated reduced costs, will be sold at the reduced purchase price or will
achieve market acceptance and penetration. Furthermore, if the market for
these products is established, competitors of the Company may develop and
manufacture products similar to the Company's products and may be able to
manufacture competitive products which provide higher quality than the
Company's systems or can be manufactured at lower cost. See "-- Developing
Market."
In addition, the Company's systems are subject to rapid technological
change and product obsolescence. The Company has primarily focused on
developing its technology and products and believes that its future success
will depend in part upon its ability to develop and enhance its existing
products and develop new products and to meet such anticipated technological
changes. To the extent products developed by the Company are based upon
anticipated changes, sales for such products may be adversely affected if
other technology becomes accepted in the industry. If the Company does not
successfully introduce new products or enhanced versions of its current
products in a timely manner, any competitive position the Company has or may
develop could be lost and the Company's sales would be reduced. There can be
no assurance that the Company will be able to develop and introduce enhanced
or new products which satisfy a broad range of customer needs and achieve
market acceptance. See "Business -- Systems."
Supply. Certain critical components and parts used in the Company's
systems, including the C8x, are procured from a single source. The Company
believes that the C8x will substantially decrease the cost of the hardware
the Company uses in its third generation systems and is necessary to permit
the Company's systems to be sold at prices which create the potential for
market penetration. The C8x is only manufactured by Texas Instruments and the
Company does not have any other source for obtaining a programmable digital
signal processor which would provide the Company with the same functions at a
similar price. The Company obtains other parts and certain components only
from a single supplier of such parts or components, even where multiple
sources are available, to maintain quality control and enhance the working
relationship with suppliers. The Company does not have supply contracts with
any of its vendors and purchases are made with purchase orders. The failure
of a supplier, including Texas Instruments, to deliver on schedule, or at
all, would delay or interrupt the Company's delivery of systems and thereby
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Competition. The visual communications business is highly competitive. The
Company estimates that more than 100 companies world-wide offer products
which compete in its market segments and expects that whether or not the
Company is successful in capturing market share, the competition will
intensify in the future. The Company believes that the majority of its
competitors focus on low-cost products or closed device solutions such as
videophones. The Company believes that the principal competitive factors in
the visual communications industry are price, video and audio quality, the
ability to connect auxiliary devices such as video diskplayers, reliability,
service and support, and vendor and product reputation. The Company believes
that its ability to compete successfully will depend on a number of factors
both within and outside its control, including the adoption and evolution of
industry standards, the pricing policies of its competitors and suppliers,
the timing of the introduction of new systems and services by the Company and
others, the Company's ability to hire and retain employees, and industry and
general economic trends. The Company anticipates that in the near future the
visual
14
<PAGE>
communications market will continue to polarize with certain providers
focusing on capturing the mass consumer market with lower quality and less
costly software-only products or products based on hardwired chips while the
Company will continue to seek to provide hardware and software systems for a
more specialized and dedicated market. The Company intends to market its
technology and its products to professional customers who are not currently
utilizing video conferencing communications systems. If the market for these
products is established, competitors of the Company may begin to manufacture
products similar to the Company's products. In addition, while the Company
believes that it has created proprietary technology and advantages in
manufacturing its products and that a competitor would require significant
investment and the efforts of a highly-skilled team, there are no barriers
restricting competitors from entering into the market in which the Company's
intends to sell its products. While the Company believes the mass market
solutions do not meet the needs of its customers, the availability of these
products may have an adverse effect on the pricing of the Company's products.
Many of the Company's current and potential competitors, have
significantly longer operating histories and/or significantly greater
managerial, financial, marketing, technical and other competitive resources,
as well as greater name recognition, than the Company. As a result, the
Company's competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements and may be able to devote
greater resources to the promotion and sale of their products and services.
There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. In addition, competition could
increase if new companies enter the market or if existing competitors expand
their service offerings. An increase in competition could result in material
price reductions or loss of market share by the Company and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
To remain competitive, the Company will need to continue to invest in
research and development and sales and marketing. There can be no assurance
that the Company will have sufficient resources to make such investments or
that the Company will be able to make the technological advances and
adaptions necessary to remain competitive. In addition, current and potential
competitors have established or may in the future establish collaborative
relationships among themselves or with third parties, including the Company's
Strategic Partners, to increase the visibility and utility of their products
and services. Accordingly, it is possible that new competitors or alliances
may emerge and rapidly acquire significant market shares. Such an eventuality
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Competition."
Risks Associated With Expanded Operations in the United States. As part of
its business strategy, the Company intends to seek opportunities to expand
the sale of its products into markets in the United States. The Company
believes that expansion into the United States markets is critical to the
Company's ability to continue to grow and to market its systems. Failure to
successfully expand into the United States market would have a material
adverse effect on the Company's business, financial condition and results of
operations. In marketing its systems in the United States, the Company will
likely face new competitors. There can be no assurance that the Company will
be successful in marketing or distributing systems in this market or that its
revenue generated in the United States will be adequate to offset the expense
of establishing and maintaining operations. In addition, in connection with
its expansion, the Company will be required to make substantial expenditures
for, among other things, office space, sales and marketing personnel and
distributors in the United States. Competition for such personnel is intense
and the Company will compete for qualified personnel with numerous other
employers, some of whom have greater financial and other resources than the
Company. There can be no assurance that the Company will be able to hire and
retain qualified employees in the United States. See "Business -- Strategy."
Foreign Markets. Substantially all of the Company's revenues in the years
ended December 31, 1994 and 1995 and in the nine months ended September 30,
1996 were generated from operations located in Germany and Switzerland. While
these countries have well developed economic markets, the average annual
growth has averaged 2.8% in 1994 and 1.9% in 1995 for Germany and 2.1% in
1994 and 0.8% in 1995 for Switzerland, respectively. Historically, all of the
Company's revenues have been denominated in Swiss Francs and Deutsche Marks
and the Company anticipates that it will continue to generate most of its
revenues in these currencies in the foreseeable future. Any fluctuations in
the value of the Swiss Franc or Deutsche Mark against the U.S. dollar that
15
<PAGE>
the Company is unable to offset through price adjustments could have a
material adverse effect on the Company's financial condition and results of
operations. Conducting an international business inherently involves a number
of other difficulties and risks, such as export restrictions, export controls
relating to technology, compliance with existing and changing regulatory
requirements, tariffs and other trade barriers, difficulties in staffing and
managing international operations, longer payment cycles, problems in
collecting accounts receivable, software piracy, political instability,
seasonal reductions in business activity in Europe during the summer months,
and potentially adverse tax consequences. There can be no assurance that one
or more of these factors will not have a material adverse effect on any
international operations established by the Company and, consequently, on the
Company's business, financial condition and results of operations. In
addition, the Company intends to have operations in the United States and in
other countries. There can be no assurance that transfers of funds to and
from those countries to Germany and Switzerland will not be taxable events
for the Company. The Company's results of operations, the market price of the
Units, the Common Stock and the Warrants offered hereby may be affected by
changes in German and Swiss policy, taxation and economic developments. See
"Exchange Rates."
Enforcement of Civil Liabilities. Multimedia is organized under the laws
of the State of Delaware. Investors in the Units will be able to effect
service of process in the United States upon the Company. However, the
Company is primarily a holding company which holds stock in entities in
Switzerland and Germany and all or a substantial portion of the assets of the
Company are located outside the United States. In addition, all of the
Company's four directors and all of its executive officers are residents of
foreign countries and all or a substantial portion of the assets of such
directors and officers are located outside of the United States. As a result,
it may not be possible for investors to enforce to effect service of process
upon Multimedia's directors and officers or to judgments of U.S. courts
predicated upon the civil liability provisions of U.S. laws against the
Company's, the foreign directors' and officers' assets.
The Company has been advised by its counsel, Baker & McKenzie, that there
is doubt as to the enforceability in Switzerland of judgments of U.S. courts,
against Multimedia's subsidiaries and against stockholders, directors,
officers and employees of Multimedia or its subsidiaries who are domiciled in
Switzerland. In addition, awards of punitive damages in actions brought in
the United States or elsewhere may be unenforceable in Switzerland.
The Company has been advised by its counsel, Dr. Schackow & Partner, that
there is doubt as to the enforceability in Germany in original actions or in
actions for enforcement of judgments of U.S. courts, of civil liabilities
predicated solely upon the laws of the United States against Multimedia's
subsidiaries and against stockholders, directors, officers and employees of
Multimedia or its subsidiaries who are domiciled in Germany. In addition,
awards of punitive damages in actions brought in the United States or
elsewhere may be unenforceable in Germany.
The market price of the Units, the Common Stock and the Warrants offered
hereby may be affected by the impossibility for investors to enforce
judgements of U.S. courts.
Dependence on Key Personnel. The Company's success depends upon the
contributions of its current executive officers including Dr. Viktor Vogt,
the Co-Chairman and Chief Executive Officer of the Company with whom the
Company intends to enter into an employment agreement. In addition, the
Company employs a number of highly specialized computer engineers who are an
integral part of the Company's operations. There can be no assurance that
these individuals will continue to devote sufficient time to the Company's
business. The loss of services of, or a material reduction in the amount of
time devoted to the Company by, certain of such individuals could adversely
affect the business of the Company. The Company intends to obtain key-man
insurance for its benefit in the amount of $2 million on Dr. Vogt. See
"Management" and "Certain Transactions."
Dependence on Major Customer. Approximately 86%, 87%, 68% and 87% of the
Company's revenues for the years ended December 31, 1993, 1994 and 1995 and
the nine months ended September 30, 1996, respectively have been received from
DT and its affiliates. The Company currently anticipates that DT and its
affiliates will remain large customers of the Company but there can be no
assurance that sales to DT and its affiliates will continue at their historic
levels. The Company's volume of sales to DT and its affiliates has dropped in
the third and fourth quarters of 1996 from the corresponding periods in the
prior year as these customers awaited the release of the Company's third
generation systems.The loss of sales or a significant reduction in sales to DT
and its affiliates could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Customers."
Risks Associated with Creating and Accessing New Distribution Channels. In
addition to marketing its products independently or jointly with certain of its
Strategic Partners, the Company's strategy for marketing its products
16
<PAGE>
is to license its products to OEMs and integrators who have access to a wide
range of competing products. The Company expects that its future success will
depend in large part upon these OEMs and integrators. The performance of
those OEMs and integrators will be outside the control of the Company, and
the Company is unable to predict the extent to which these organizations will
be successful in marketing and selling their products. The Company's failure
to establish relationships with OEMs and integrators could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Risk of System Defects; Product Liability Exposure. Systems developed by
the Company jointly with its Strategic Partners may contain significant
undetected errors when first installed on the premises of a customer or as
new versions are installed. Although the Company tests its systems before
installation, there can be no assurance that errors in the system will not be
found after customers begin to use the system. Any error in the Company's
products may result in decreased revenue or increased expenses because of
adverse publicity, reduced orders, product returns, uncollectible accounts
receivable, delays in collecting accounts receivable, and additional and
unexpected costs of further product development to correct the errors. Sale
of the Company's products involves the inherent risk of product liability
claims against the Company. The Company currently does not maintain product
liability insurance and believes that it cannot obtain such insurance except
at substantial cost. While no product liability claims have been made against
the Company in the past, there can be no assurance that such claims will not
arise in the future. Any substantial uninsured liability would have a
material adverse effect on the Company's operations, financial conditions and
results of operations.
Potential Fluctuations in Quarterly Results. The Company has experienced
fluctuations in its quarterly results of operations and anticipates that such
fluctuations will continue and could increase. The Company's quarterly
results of operations may vary significantly depending on a number of
factors, some of which are outside of the Company's control. These factors
include the timing of the introduction or acceptance of new products or new
generations offered by the Company or its competitors, changes in the mix of
products provided by the Company, changes in pricing strategies by the
Company and its competitors, changes in the markets served by the Company,
changes in the Company's operating expenses, capital expenditures and other
costs relating to the expansion of operations, changes in its personnel and
general economic conditions. In addition, fluctuations in exchange rates may
render the Company's products less competitive relative to local product
offerings or result in foreign exchange losses. In the future, the Company
may seek to implement hedging techniques with respect to its foreign currency
transactions but there can be no assurance that such hedging techniques will
be successful. The Company's revenue in the fourth quarter of each calendar
year has historically been higher due to the introduction of new products and
new generations of existing products in the second and third quarters of past
years, the extended time period required for the approval by management of a
customer for the purchase of the Company's products and perceived desire by
its customers to apply allocated budgets for the Company's products prior to
the end of the calendar year and the increase in business activity after the
summer months. Quarterly fluctuations depends, in part, on the timing of
introduction of new products by the Company and its competitors. The Company
expects its sales for the fourth quarter of 1996 not to be as high
proportionately as in past years as the Company's customers await the release
of the Company's third generation systems. Fluctuations in results of
operations may result in volatility in the price of the Units, the Common
Stock and the Warrants offered hereby.
A significant portion of the Company's expenses are fixed and difficult to
reduce in the event that revenue does not meet the Company's expectations,
thus magnifying the adverse effect of any revenue shortfall. Furthermore,
announcements by the Company or its competitors of new products, services or
technologies could cause customers to defer or cancel purchases of the
Company's products. Any such deferral or cancellations could have a material
adverse effect on the Company's business, financial conditions and results of
operations. Accordingly, revenue shortfalls can cause significant variations
in results of operations from quarter to quarter and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
As a result of the foregoing factors, it is possible that in some future
quarters the Company's results of operations will be below prior results or
the expectations of public market analysts and investors. In such event, the
price of the Units, the Common Stock and the Warrants offered hereby would
likely be materially and adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
17
<PAGE>
Benefits of the Offering to Insiders. The Company intends to use a portion of
the net proceeds of the Offering (i) to repay loans aggregating approximately
$1.2 million made to the Company by Volker Walther, a stockholder and a director
of the Company, (ii) to pay a $400,000 marketing fee payable to General Capital,
an affiliate of Vertical Financial Holdings ("Vertical") a stockholder of the
Company, pursuant to the Marketing Agreement, as amended, between Multimedia and
General Capital (the "Marketing Agreement"), (iii) to pay the salaries of its
executive officers and (iv) to make monthly payments of $12,000 to Vertical as
compensation for the services, the Co-Chairman of the Company nominated by
Vertical, pursuant to the provisions of the Stock Purchase Agreement among
Multimedia, IAT AG, IAT Germany and Vertical (the "Stock Purchase Agreement").
See "Use of Proceeds," "Management" and "Certain Transactions."
Control by Existing Stockholders; Potential Anti-takeover Provisions.
Upon completion of this Offering the Company's existing stockholders will
control approximately 66.85% of the outstanding Common Stock of the Company.
As a result, such stockholders will be able to elect all of the Company's
directors and otherwise control the Company's operations.
Furthermore, the Company and Vertical, one of the Company's stockholders,
have entered into an investor rights agreement (as defined herein), which
provides that so long as Vertical holds at least 10% of the Common Stock to
be issued upon conversion of the Series A Preferred Stock, Vertical has the
right, but not the obligation, to nominate two persons as nominees for
election to the Company's Board of Directors. So long as Vertical holds at
least 5% of such securities, it has the right, but not the obligation to
nominate one such person. The existence of such rights solidifies control
over the Company by its existing stockholders. Pursuant to the Investor
Rights Agreement, Vertical has nominated and the stockholders of the Company
have elected Jacob Agam as a director of the Company and may elect the second
director in the future. Pursuant to the Stock Purchase Agreement, Vertical
nominated and Mr. Agam was elected as the Co-Chairman of the Company. Mr.
Agam is a director of Vertical.
The Company is also subject to a Delaware statute regulating business
combinations, which could discourage, hinder or preclude an unsolicited
acquisition of the Company and could make it less likely that stockholders
receive a premium for their shares as a result of any such attempt. See
"Certain Transactions," "Principal Stockholders" and "Description of
Securities."
Possible Adverse Effects of Authorization of Preferred Stock. Multimedia's
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") authorizes the issuance of 500,000 shares of preferred stock,
par value $.01 per share ("Blank Check Preferred Stock"), on terms which may be
fixed by the Company's Board of Directors without further stockholder action.
The terms of any series of Blank Check Preferred Stock, which may include
priority claims to assets and dividends and special voting rights, could
adversely affect the rights of holders of the Common Stock. The issuance of the
Blank Check Preferred Stock, while providing flexibility in connection with
possible acquisitions, financing transactions and other corporate transactions,
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from acquiring, capital stock of the Company,
which may adversely affect the market price of the Common Stock. The Company has
no present plans to issue shares of Blank Check Preferred Stock. See "-- Control
by Existing Stockholders; Potential Anti-takeover Provisions" and "Description
of Capital Stock -- Preferred Stock."
Immediate and Substantial Dilution; Recent Sales of Securities to
Insiders. Investors participating in this Offering will incur immediate and
substantial dilution in net tangible book value of approximately $4.42 per
share, assuming an initial public offering price of $6.00 per Unit. During
1996, IAT AG and Multimedia have issued shares to their respective
stockholders to finance working capital needs. IAT AG issued 2,000 shares of
its capital stock to its existing stockholders (which were exchanged for
875,000 shares of Multimedia) at a purchase price equivalent to approximately
$1.76 per share of Common Stock of Multimedia. In October 1996, Multimedia
completed the private placement of the Series A Preferred Stock (the "Private
Placement") pursuant to which it sold 1,875,000 shares of Series A Preferred
Stock and the Investor Warrants for an aggregate purchase price of $1.5
million, or $.80 per share of Series A Preferred Stock (which will
automatically convert upon completion of this Offering into 1,875,000 shares
of Common Stock). In addition, in connection with the Private Placement, the
Company issued the Stockholder Warrants to purchase 473,485 shares of Common
Stock. The Investor Warrants and the Stockholder Warrants are exercisable
into an aggregate of 2,348,485 shares of Common Stock at an exercise price of
130% of the initial public offering price of the Common Stock. See
"Dilution." and "Certain Transactions -- Private Placement and Related
Transactions."
18
<PAGE>
Charge to Earnings in the Event of Release of Escrow Shares. Following
completion of this Offering, the Company will have outstanding 500,000 Escrow
Shares which will be released from escrow if the Company attains certain
earnings levels over the next one to three years or if the Common Stock
trades at certain levels for any 30 consecutive trading days, commencing 24
months after the consummation of this Offering. The Escrow Shares will not be
deemed to be outstanding for the purpose of calculating earnings per share
until either of such conditions is probable of being met. The position of the
Securities and Exchange Commission (the "Commission") with respect to such
escrow arrangements provides that in the event any shares are released from
escrow to the stockholders of the Company who are officers, directors,
employees or consultants of the Company, a non-cash compensation expense will
be recorded for financial reporting purposes. Accordingly, in the event of
the release of the Escrow Shares, the Company will recognize during the
period in which the earnings thresholds are probable of being met or such
stock levels achieved, a substantial non-cash charge to operations, which
will not be deductible for income tax purposes, equal to the then fair value
of such shares, which would have the effect of significantly increasing the
Company's loss or reducing or eliminating earnings, if any, at such time. The
recognition of such compensation expense may depress the market price of the
Company's securities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Principal Stockholders -- Escrow
Shares." Notwithstanding the foregoing discussion, there can be no assurance
that the Company's earnings or its stock price will attain the targets that
would enable the Escrow Shares to be released from escrow.
Dividend Policy. The Company has never declared or paid a cash dividend on
its Common Stock. The Company intends to retain its earnings, if any, for use
in its business and does not anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy."
No Public Market for Securities; Possible Volatility of Market Price;
Arbitrary Determination of Offering Price. Prior to this Offering, there has
not been any market for any of the Company's securities, and there can be no
assurance that an active trading market will develop or be sustained after
this Offering. The initial public offering price of the Units and the
exercise price and other terms of the Warrants have been determined by
negotiation between the Company and the Underwriter and are not necessarily
related to the Company's asset value, net worth, results of operations or any
other criteria of value and may not be indicative of the prices that may
prevail in the public market. In recent years, the stock markets in general,
and the shares of technology companies in particular, have experienced
extreme price fluctuations in response to such occurrences as quarterly
variations in operating results, changes in earnings estimates by analysts,
announcements concerning new products, strategic relationships or
technological innovations by companies in the visual communications market,
general conditions of such industry and other events or facts. This pattern
of extreme volatility in the stock market, which in many cases were unrelated
to the operating performance of, or announcements concerning, the issuers of
the affected stock may adversely affect the market price of the Units, the
Common Stock and the Warrants. See "Underwriting."
Potential Adverse Effect of Redemption of Warrants. Commencing 15 months
from the date of this Prospectus, the Warrants may be redeemed by the Company
at a redemption price of $.05 per Warrant upon not less than 30 days' prior
written notice if the closing bid price of the Common Stock equals or exceeds
$16.00 per share (subject to certain adjustments) for 20 consecutive trading
days ending within five days of the notice. Redemption of the Warrants could
force the holders to exercise the Warrants and pay the exercise price
therefor at a time when it may be disadvantageous for the holders to do so,
to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants or to accept the nominal redemption price
which, at the time the Warrants are called for redemption, is likely to be
substantially less than the market value of the Warrants. See "Description of
Securities -- Warrants."
Current Prospectus and State Registration to Exercise Warrants. Holders of
Warrants will only be able to exercise the Warrants if (i) a current
prospectus under the Securities Act relating to the securities underlying the
Warrants is then in effect and (ii) such securities are qualified for sale or
exempt from qualification under the applicable securities laws of the states
in which the various holders of Warrants reside. Although the Company has
undertaken and intends to use its best efforts to maintain a current
prospectus covering the securities underlying the Warrants following
completion of this Offering to the extent required by Federal securities
laws, there can be no assurance that the Company will be able to do so. The
value of the Warrants may be greatly reduced if a prospectus covering the
securities issuable upon the exercise of the Warrants is not kept current or
if the securities are not qualified, or exempt from qualification, in the
states in which the holders of Warrants reside.
19
<PAGE>
If and when the Warrants become redeemable by the terms thereof, the Company
may exercise its redemption right even if it is unable to qualify the
underlying securities for sale under all applicable state securities laws. As
indicated above, holders of Warrants called for redemption residing in states
where the underlying securities have not been qualified for sale would
generally still be able to sell their Warrants at the then market price
thereof. See "Description of Securities -- Warrants."
Possible Restrictions on Market-Making Activities in Company's
Securities. The Underwriter has advised the Company that it intends to make
a market in the Company's securities. Rule 10b-6 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), may prohibit the
Underwriter from engaging in any market-making activities with regard to the
Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to such solicitation by
the Underwriter of the exercise of Warrants until the later of the
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right that the Underwriter may have to receive a fee for
the exercise of Warrants following such solicitation. As a result, the
Underwriter may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable. Any temporary
cessation of such market-making activities could have an adverse effect on
the market price of the Company's securities. See "Underwriting."
Possible Delisting of Securities from the Nasdaq National Market. While
the Company's Units, the Common Stock and the Warrants meet the current
Nasdaq National Market listing requirements and are expected to be initially
included on the Nasdaq National Market, there can be no assurance that the
Company will meet the criteria for continued listing. Continued inclusion on
Nasdaq National Market generally requires that (i) the Company maintain at
least $4,000,000 in "net tangible assets" (total assets less total
liabilities and goodwill), (ii) the minimum bid price of the Common Stock be
$1.00 per share, (iii) there be at least 100,000 shares in the public float
valued at $1,000,000 or more, (iv) the Common Stock have at least two active
market makers and (v) the Common Stock be held by at least 400 holders.
On November 6, 1996, the Nasdaq National Market proposed changes to the
listing and maintenance requirements which, after a 30-day comment period and
consideration of changes to the proposals, will be submitted to the
Securities and Exchange Commission (the "Commission") for final approval. If
the current proposal is approved without modification, the Company's
qualification for continued listing on the Nasdaq National Market would
require that (i) the Company maintain at least $4,000,000 in "net tangible
assets," (ii) the minimum bid price of the Common Stock be $1.00 per share,
(iii) there be at least 750,000 shares in the public float, valued at least
$5,000,000 or more, (iv) the Common Stock have at least two active market
makers and (v) the Common Stock be held by at least 400 holders.
If the Company is unable to satisfy the Nasdaq National Market's
maintenance requirements, its securities may be delisted from the Nasdaq
National Market. In such event, trading, if any, in the Units, the Common
Stock and the Warrants would thereafter be conducted on the Nasdaq SmallCap
Market, subject to meeting the requirements for listing on the Nasdaq
SmallCap Market, or in the over-the-counter market in the so-called "pink
sheets" or the NASD's "Electronic Bulletin Board." Consequently, the
liquidity of the Company's securities could be impaired, not only in the
number of securities which could be bought and sold, but also through delays
in the timing of transactions, reduction in security analysts and the news
media's coverage of the Company and lower prices for the Company's securities
than might otherwise be attained.
Risks of Low-Priced Stock. If the Company's securities were delisted from
Nasdaq National Market and could not be quoted on Nasdaq SmallCap Market (see
"-- Possible Delisting of Securities from the Nasdaq National Market"), they
could become subject to Rule 15g-9 under the Exchange Act, which imposes
additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and "accredited
investors" (generally, individuals with net worths in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses).
For transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, such rule may
adversely affect the ability of broker-dealers to sell the Company's
securities and may adversely affect the ability of purchasers in this
Offering to sell any of the securities acquired hereby in the secondary
market.
Commission regulations define a "penny stock" to be, among others, any
non-exchange listed equity security that has a Market Price (as therein
defined) of less than $5.00 per share or with an exercise price of less than
20
<PAGE>
$5.00 per share, subject to certain exceptions. For any transaction involving
a penny stock, unless exempt, the rules require delivery, prior to any
transaction in a penny stock, of a disclosure schedule prepared by the
Commission relating to the penny stock market. Disclosure is also required to
be made about commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are quoted on the Nasdaq National
Market or the Nasdaq SmallCap Market and have certain price and volume
information provided on a current and continuing basis or meet certain
minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, it would remain subject to Section 15(b)(6) of the
Exchange Act, which gives the Commission the authority to prohibit any person
that is engaged in unlawful conduct while participating in a distribution of
a penny stock from associating with a broker-dealer or participating in a
distribution of a penny stock, if the Commission finds that such a
restriction would be in the public interest. If the Company s securities were
subject to the rules on penny stocks, the market liquidity for the Company's
securities could be severely adversely affected.
Shares Eligible for Future Sale; Effect of Outstanding Options and
Warrants. Future sales of Common Stock by existing stockholders pursuant to
Rule 144 under the Securities Act could have an adverse effect on the price
of the Company's securities. All of the 6,250,000 shares of Common Stock held
by existing stockholders are eligible for sale under Rule 144 beginning in
October 1998. Of the 6,250,000 shares of Common Stock outstanding, 500,000
are Escrow Shares. Currently, 5,827,040 of the 6,250,000 shares of Common
Stock outstanding are held by affiliates and will be subject to volume
limitations after October 1998. In addition, the existing stockholders have
agreed not to sell any shares of Common Stock for a period of two years from
the date of this Prospectus without the prior written consent of the
Underwriter. The Underwriter has demand and piggy-back registration rights
covering the securities underlying the Unit Purchase Option and Vertical has
demand and piggy-back registration rights covering the securities held by
Vertical. Sales of Common Stock, or the possibility of such sales, in the
public market may adversely affect the market price of the securities offered
hereby. See "Shares Eligible for Future Sale."
Upon completion of this Offering, the Company will have outstanding (i)
the Warrants to purchase an aggregate of 3,100,000 shares of Common Stock,
(ii) the Investor Warrants to purchase 1,875,000 shares of Common Stock,
(iii) the Stockholder Warrants to purchase 473,485 shares of Common Stock and
(iv) Unit Purchase Options to purchase an aggregate of 620,000 shares of
Common Stock, assuming exercise of the underlying Warrants. In addition, the
Company has reserved for issuance 500,000 shares of Common Stock in
connection with the 1996 Stock Option Plan, none of which have been granted.
The existence of these securities could have an adverse effect on the price
of the Company's outstanding securities. In addition, holders of such
warrants and options are likely to exercise them when, in all likelihood, the
Company could obtain additional capital on terms more favorable than those
provided by the warrants and options. Further, while these warrants and
options are outstanding, the Company's ability to obtain additional financing
on favorable terms may be adversely affected. See "Description of Securities"
and "Underwriting."
21
<PAGE>
USE OF PROCEEDS
The net proceeds of this Offering to the Company, after deducting
underwriting discounts and commissions and other estimated expenses of this
Offering payable by the Company, are expected to be approximately $15.5
million (approximately $18.0 million if the Underwriter's over-allotment
option is exercised in full), assuming an initial public offering price of
$6.00 per Unit. The Company intends to use the net proceeds as follows:
<TABLE>
<CAPTION>
Approximate
Amount of Net Proceeds
Percentage of Net Proceeds
--------------- --------------
<S> <C> <C>
Research and development ............................................... $ 6,000,000 38.7%
Repayment of certain shareholder loans(1) and payment of
dividend on Series A Preferred Stock(2) ............................. 1,300,000 8.4%
Payment under Marketing Agreement(3) ................................. 400,000 2.6%
Working capital and general corporate purposes including increases in
sales staff, expansion in the United States and possible participations
and acquisitions ...................................................... 7,800,000 50.3%
------------- ----------
Total ................................................................ $15,500,000 100.0%
============= ==========
</TABLE>
- ------
(1) Consist of loans in the aggregate amount of approximately $1.2 million
made to IAT AG by Volker Walther, a stockholder and a director of
Multimedia, during 1996 for working capital, bearing interest at
10% and maturing at the earlier of the consummation of this Offering or
June 30, 1997.
(2) The 1,875,000 shares of Series A Preferred Stock of which 890,152 were
issued to Vertical, will automatically convert into Common Stock upon
consummation of this Offering and were issued on October 24, 1996. The
Series A Preferred Stock has an annual dividend of $.056 per share (equal
to a 7% dividend per annum on the purchase price of such shares). The
dividend payable on the Series A Preferred Stock is approximately $20,000
at December 31, 1996.
(3) The Company will pay a $400,000 fee pursuant to the Marketing Agreement
to General Capital, an affiliate of Vertical, a stockholder of the
Company. See "Certain Transactions."
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this Offering based on the current status of its
business. Future events, including changes in competitive conditions and the
status of the Company's business from time to time, may make changes in the
allocation of the net proceeds of this Offering necessary or desirable. The
Company anticipates that the remaining proceeds of this Offering will be
sufficient to fund its operations through 1998. This estimate assumes
substantial increases in the Company's sales and assumes the completion of
the Company's third generation products and acceptance of these products in
the multimedia communications market. There can be no assurance that the
Company will be able to achieve such increased sales and failure to achieve
such increase will require the Company to seek additional funding prior to
1998. Pending application, the net proceeds will be invested in short-term,
interest-bearing investments. Any proceeds received upon exercise of the
Underwriter's over-allotment option or the Warrants will be added to working
capital. See "Certain Transactions."
The Company continually evaluates potential strategic partners for additional
applications and broader marketing of technology. The Company may make a
participation or acquisition for strategic reasons. The Company has not
identified any participations or acquisition candidates in the United States or
elsewhere.
A substantial part of the potential market for the Company's products are
in the United States and entering into the United States market is a
fundamental part of the Company's strategy. The Company intends to expand its
marketing efforts, both by expanding its sales and marketing staff in Europe
as well as establishing an office and a sales and marketing staff in the
United States during 1997.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate or intend paying cash dividends in the foreseeable future on its
Common Stock.
22
<PAGE>
EXCHANGE RATE
The following table sets forth, for the periods indicated, the noon
exchange rate as certified for custom purposes by the Federal Reserve Bank of
New York for the Deutsche Mark ("DM") and the Swiss Franc ("SF"),
respectively, per U.S. dollar. On December 18, 1996, such rate was DM
1.5545=$1.00 and SF 1.3317=$1.00, respectively.
<TABLE>
<CAPTION>
As of and for the
Year Ended December 31 As of and for the
----------------------------------------------------------------- Nine Months Ended
1993 1994 1995 September 30, 1996
-------------------- -------------------- -------------------- --------------------
DM SF DM SF DM SF DM SF
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exchange rate at end of period ...... 1.7395 1.4880 1.5495 1.3100 1.4345 1.1540 1.5270 1.2555
Average exchange rate during period(a) 1.6545 1.4781 1.6216 1.3367 1.4371 1.1820 1.4988 1.2213
Highest exchange rate during period . 1.7437 1.5401 1.7658 1.4861 1.5591 1.3141 1.5482 1.2742
Lowest exchange rate during period .. 1.5681 1.3848 1.4921 1.2441 1.3543 1.1670 1.4347 1.1569
</TABLE>
- ------
(a) The average of the exchange rates on the last day of each month during
the applicable period.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996, on an actual basis, on a pro forma basis giving effect
into the issuance of Series A Preferred Stock in October 1996, and the
conversion of the Series A Preferred Stock to 1,875,000 shares of Common
Stock and on an as adjusted basis to give effect to the sale of the Units
offered hereby at an assumed price per Unit of $6.00 (assuming no exercise of
the Underwriter's Over-Allotment Option), the application of the net proceeds
therefrom, including the repayment of a loan made by a stockholder of the
Company in the amount of $1,182,000 (including loans received subsequent to
September 30, 1996), and the issuance of 1,875,000 shares of Common Stock
issuable upon the automatic conversion of all the outstanding shares of
Series A Preferred Stock upon consummation of this Offering.
<PAGE>
<TABLE>
<CAPTION>
September 30, 1996
--------------------------------------------------
As
Actual Pro Forma Adjusted(2)
-------------- -------------- ---------------
<S> <C> <C> <C>
Loans payable - stockholders ............................ $ 1,394,000 $ 1,394,000 $ 1,012,000(1)
Preferred stock, par value $.01 per share; 2,375,000
shares authorized, 1,875,000 shares Series A issued and
outstanding(3) ....................................... -- -- --
Stockholders' equity:
Common stock, par value $.01 per share; 20,000,000
shares authorized, 4,375,000 shares issued and
outstanding, and 6,250,000 pro forma and 9,350,000
shares as adjusted ............................... 43,750 62,500 93,500
Capital in excess of par value .......................... 8,002,884 9,484,134 24,835,134
Accumulated deficit ..................................... (10,917,950) (10,917,950) (10,917,950)
Cumulative translation adjustments ...................... 16,089 16,089 16,089
-------------- -------------- ---------------
Total stockholders' equity ......................... (2,855,227) (1,355,227) 14,026,773
-------------- -------------- ---------------
Total capitalization .................................... $ (1,461,227) $ 38,773 $ 15,038,773
============== ============== ===============
</TABLE>
- ------
(1) Includes $920,000 of stockholder loans received and $120,000 of
stockholder loans repaid subsequent to September 30, 1996.
(2) The as adjusted column includes 500,000 Escrow Shares. See "Principal
Stockholders -- Escrow Shares." Excludes (i) 500,000 shares of Common
Stock reserved for issuance under the Company's 1996 Stock Option Plan,
none of which have been granted, (ii) 3,100,000 shares of Common Stock
issuable upon exercise of the Warrants which are components of the Units
offered hereby, (iii) 620,000 shares of Common Stock issuable upon
exercise of the Unit Purchase Option and the Warrants contained therein,
(iv) 1,875,000 shares of Common Stock issuable upon exercise of the
Investor Warrants, (v) 473,485 shares of Common Stock issuable upon
exercise of the Stockholder Warrants and (vi) 930,000 shares of Common
Stock issuable upon exercise of the Underwriter's Over-Allotment Option
and the Warrants included therein.
(3) Upon consummation of this Offering, 1,875,000 shares of Series A
Preferred Stock will be converted into an equal number of shares of
Common Stock and the shares of the Series A Preferred Stock will be
cancelled. Consequently, the Company will have 500,000 shares of Blank
Check Preferred Stock authorized.
23
<PAGE>
DILUTION
At September 30, 1996, the net tangible book value of the Company was
$(1,526,807) or $(.27) per share of Common Stock, after giving effect to the
exchange for Common Stock of Multimedia and the issuance of 1,875,000 shares
of Common Stock upon the conversion of the Series A preferred stock at the
equivalent of $.80 per share. The net tangible book value per share
represents the amount of the Company's total assets, less the amount of its
intangible assets and liabilities, divided by the number of shares of Common
Stock outstanding (exclusive of the Escrow Shares). After giving effect to
(i) the sale of Units offered hereby (assuming no exercise of the
Underwriter's Over-Allotment Option) at an assumed offering price of $6.00
per unit (assuming no value is attributable to the Warrants included
therein), (ii) after deducting the underwriting discounts and estimated
expenses of the Offering, and (iii) the repayment of loans made by a
stockholder of the Company in the amount of $1,182,000 (including loans
received subsequent to September 30, 1996), the payment of $500,000 ($100,000
of which was paid in October 1996) pursuant to the Marketing Agreement, and
the issuance of 1,875,000 shares of Common Stock issuable upon the automatic
conversion of all the outstanding shares of Series A Preferred Stock upon the
consummation of this Offering, the net tangible book value of the Company as
of September 30, 1996 would have been $14,015,193 or $1.58 per share. This
represents an immediate increase in net tangible book value of $1.85 per
share to existing stockholders and an immediate dilution in net tangible book
value of $4.42 per share to new investors in this Offering. The following
table illustrates this dilution on a per share basis:
<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price per Unit ................................. $6.00
Net tangible book value per share at September 30, 1996 ........ $ (0.27)
Increase in net tangible book value attributable to new
investors ..................................................... 1.85
----------
Pro forma net tangible book value after the Offering ........... 1.58
--------
Dilution to new investors ...................................... $4.42
========
</TABLE>
The following tables sets forth on an unaudited pro forma basis at
September 30, 1996, the difference between the number of shares of Common
Stock purchased from the Company, the total consideration paid and the
average price per share paid by the existing holders of Common Stock and by
the new investors, before deducting the underwriting discounts and
commissions and estimated offering expenses payable by the Company, at the
initial public offering price of $6.00 per Unit.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------ --------------------------
Non-Escrow Escrow Total Average Price
Shares Shares Number Percent Amount Percent Per Share
--------------------- ------------ --------- ----------- --------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Existing stockholders . 5,750,000 500,000 6,250,000 66.8% $ 9,546,634 33.9% 1.53
New investors ....... 3,100,000 -- 3,100,000 33.2% 18,600,000 66.1% 6.00
------------ --------- ----------- --------- ------------- ---------
Total .......... 8,850,000 500,000 9,350,000 100.0% $28,146,634 100.0%
============ ========= =========== ========= ============= =========
</TABLE>
The foregoing tables do not give effect to Common Stock issuable upon
exercise of outstanding warrants. See "Capitalization."
24
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following historical financial data, except for the information
provided for the years ended December 31, 1991 and 1992, respectively and for
the nine months ended September 30, 1995 and 1996, respectively, have been
derived from the Consolidated Financial Statements. Consolidated Interim
Financial Statements and the historical financial data for the years ended
December 31, 1991 and 1992, respectively are unaudited, but in the opinion of
the Company's management contain all adjustments, consisting only of normal
recurring accruals, which are necessary for a fair presentation of the
information included herein. Multimedia was formed in September 1996 as a
holding company for the existing business of IAT AG and IAT Germany.
The pro forma consolidated balance sheet data reflect the issuance of
Series A Preferred Stock in October 1996 and the conversion of the Series A
Preferred Stock to 1,875,000 shares of Common Stock and the as adjusted
consolidated balance sheet data reflect the Company's consolidated financial
position as of September 30, 1996, giving effect to the sale of the Units
offered hereby at an assumed price per Unit of $6.00 (assuming no exercise of
the Underwriter's Over-Allotment Option) the application of the net proceeds
therefrom, including the repayment of loans made by a stockholder of the
Company in the amount of $1,182,000 (including loans received subsequent to
September 30, 1996) from offering proceeds, the payment of $500,000 ($100,000
of which was paid in October 1996) pursuant to the Marketing Agreement and
the issuance of 1,875,000 shares of Common Stock issuable upon the automatic
conversion of all of the outstanding shares of Series A Preferred Stock upon
consummation of this Offering. The Company believes that the assumptions made
with respect to such transactions provide a reasonable basis on which to
present the financial information.
The following selected consolidated financial data is derived from, and
should be read in conjunction with, the Consolidated Financial Statements of
the Company and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
--------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- ----------- --------- --------- --------- --------- ---------
(unaudited) (unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales .......................... $ 635 $ 1,216 $ 1,963 $ 1,053 $ 1,510 $ 768 $ 961
Cost of sales ...................... 425 903 1,171 700 968 516 690
------- ----------- --------- --------- --------- --------- ---------
Gross margin ....................... 210 313 792 353 542 252 271
------- ----------- --------- --------- --------- --------- ---------
Operating Expenses:
Research and development costs ..... 699 434 1,828 2,269 2,531 1,966 1,952
Less participations received ....... -- -- (962) (2,207) (868) (585) (272)
------- ----------- --------- --------- --------- --------- ---------
Research and development expenses, net 699 434 866 62 1,663 1,382 1,680
Selling, general and administrative
expenses ......................... 2,498 2,009 1,193 1,538 2,640 1,969 2,198
------- ----------- --------- --------- --------- --------- ---------
Operating loss ..................... $(2,987) $(2,130) $(1,267) $(1,247) $(3,761) $(3,099) $(3,607)
======= =========== ========= ========= ========= ========= =========
Extraordinary item ................. $ -- $ 4,838(1) $ -- $ -- $ -- $ -- $ --
======= =========== ========= ========= ========= ========= =========
Net Income (loss) .................. $(3,155) $ 2,639 $(1,324) $(1,335) $(3,730) $(3,162) $(3,733)
======= =========== ========= ========= ========= ========= =========
Net Income (loss) per common share . $ (0.89) $ 0.74 $ (0.36) $ (0.33) $ (0.77) $ (0.71) $ (0.65)
Weighted average number of shares
outstanding. ..................... 3,563 3,563 3,647 4,000 4,837 4,460 5,750
</TABLE>
- ------
(1) Represents gain on restructuring.
25
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1991 1992 1993 1994 1995 September 30, 1996
--------- --------- -------- -------- --------- -------------------------------------
(unaudited)
-------------------------------------
As
Actual Actual Actual Actual Actual Actual Pro Forma Adjusted(1)
--------- --------- -------- -------- --------- --------- ----------- ------------
(unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets .................. $ 903 $ 527 $1,671 $1,308 $ 1,489 $ 1,006 $ 2,506 $17,166
Working capital (deficiency) .... (425) (1,125) 274 (865) (1,106) (3,052) (1,552) 14,009
Total assets .................... 1,815 974 2,065 1,771 2,056 1,695 3,195 18,195
Current liabilities ............. 1,328 1,652 1,397 2,173 2,595 4,058 4,058 3,156
Loan payable - stockholders ..... 4,072 112 91 336 349 492 492 1,012
Total liabilities ............... 5,400 1,764 1,488 2,509 2,944 4,550 4,550 4,168
Stockholders equity (deficiency) . (3,585) (790) 577 (738) (888) (2,855) (1,355) 14,027
</TABLE>
- ------
(1) Includes $500,000 Escrow Shares. See "Principal Stockholders -- Escrow
Shares". Excludes (i) 500,000 shares of Common Stock reserved for
issuance under the Company's 1996 Stock Option Plan, none of which have
been granted, (ii) 3,100,000 shares of Common Stock issuable upon
exercise of the Warrants which are components of the Units offered
hereby, (iii) 620,000 shares of Common Stock issuable upon exercise of
the Unit Purchase Option and the Warrants contained therein, (iv)
1,875,000 shares of Common Stock issuable upon exercise of the Investor
Warrants, (v) 473,485 shares of Common Stock issuable upon exercise of
the Stockholder Warrants and (vi) 930,000 shares of Common Stock issuable
upon exercise of the Underwriter Over-Allotment Option and the Warrants
included therein.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the consolidated financial condition and
results of operations of the Company should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements included elsewhere in this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors."
Overview
The Company develops, manufactures and markets customizable high quality
visual communications systems for use in desktop computers which permit users
to hold multi-point video conferences in two or more locations, as well as
providing additional video, audio and data transfer features not available in
traditional video conferencing systems. Unlike traditional video conferencing
companies, the Company's focus is on high quality system solutions. The
Company believes that the needs of its target customers cannot be addressed
by currently available lower quality software-only products (including
Internet products) or by high quality traditional video conferencing
products. In addition to providing audio and video images of the other
participants in the tele-conference, the Company's systems are also capable
of simultaneously providing images and data in windows on the computer screen
which can be viewed by all participants in the video conference and permit
users at remote computer terminals to modify data and manipulate images
through the operation of apparatus, such as microscopes and video cameras.
These systems, which include both proprietary and third-party software and
hardware, are inter-operable with products from certain vendors and comply
with all relevant international standards, including H.320. The Company sells
its systems and kits to end-users in a variety of industries and to OEMs and
integrators. The Company has sold an aggregate of approximately 500 systems
and kits, including pilot projects, since 1990.
The Company's technology has been developed with Strategic Partners,
including DT, Texas Instruments, IBM Germany and Olympus. The Company
believes that its technology can produce substantially higher quality image
and video transmissions, including reduced noise and artifacts, truer color
representation and higher frame rates, than other systems while using less of
the computing power of the host desktop computer, which permits other
applications to continue to operate without interruption. In addition, the
Company's new generation of systems currently being developed is based on a
programmable digital signal processor which provides flexibility for adapting
to new algorithms, standards or user requirements. The Company believes that
the high image quality and other features provided by the Company's systems
will meet the requirements of various professional users including
tele-medicine (i.e., transferring microscope, x-ray, video or other
diagnostic images for evaluation by a physician at a remote site) and
tele-surveillance (i.e., remote viewing and control of surveillance cameras
and remote access control via switched networks). In excess of $22 million
was invested in the Company by its stockholders and the Company has invested
approximately $13 million in the research, development and marketing of this
technology (including approximately $4 million in participations from the
Company's Strategic Partners). This investment in the Company's technology
does not include additional amounts invested directly by the Company's
Strategic Partners in the development of their components used in the
Company's systems.
The Company has developed two generations and is currently developing a
third generation of its technology. The first generation was developed using
a large number of computer boards and readily available components as the
Company's initial entry in the visual communications field and to assess
customer needs. The second generation, utilized in the Company's current
systems, is characterized by a substantially reduced number of computer
boards and improved capabilities. These systems use a combination of fully
programmable digital signal processors and less-flexible hardwired
processors. The second generation systems have inherently high prices per
unit. For example, the Company's second generation MFKS Vision and Live
systems have average prices of approximately $8,000 to $30,000 per system
(depending on capabilities). Third generation systems, which the Company
expects to begin shipping in 1997, utilize Texas Instruments' TMS320C80
programmable digital signal processor (the "C8x") and are designed for
commercial production with target sales prices of approximately $1,500 to
$8,000 per system for corresponding MFKS systems. The Company believes that
its third generation of systems will be its first systems which have the
potential for widespread commercialization.
27
<PAGE>
The Company currently markets its products, both through its own sales staff
and through certain of its Strategic Partners, primarily in Europe. A
substantial part of the potential market for the Company's products are in the
United States and entering in the United States market is a fundamental part of
the Company's strategy. The Company intends to expand its marketing efforts,
both by expanding its sales and marketing staff in Europe as well as
establishing an office and a sales and marketing staff in the United States
during 1997. The Company continually evaluates potential strategic partners for
additional applications and broader marketing of IAT's technology. The Company
may make a participation or acquisition for strategic reasons. The Company's
results of operations will be dependent upon the Company's ability to market its
products in the United States, to launch its third generation of products on a
timely basis and to achieve market acceptance and penetration.
The Company's revenues have quarterly fluctuations in which the fourth
quarter has historically reflected the highest quarterly revenues, as a
result of the perceived desire by its customers to deplete allocated budgets
for the Company's products prior to the end of the calendar year. There can
be no assurance that this trend will continue. Quarterly fluctuations depend
in part on the timing of introduction of new products by the Company and its
competitors. The Company expects its sales for the fourth quarter of 1996 not
to be as high proportionately as in past years as the Company's customers
await the release of the Company's third generation systems.
The Company anticipates the loss from operations for the fourth quarter of
1996 to be equivalent to the average quarterly loss during the nine months
period ended September 30, 1996.
Approximately 86%, 87%, 68% and 87% of the Company's revenues for the
years ended December 31, 1993, 1994, 1995 and the nine months ended September
30, 1996, respectively have been received from DT and its affiliates. The
Company's volume of sales to DT and its affiliates has dropped in the third
and fourth quarter of 1996 from the corresponding periods in the prior year
as these customers awaited the release of the Company's third generation
systems. The loss of sales or a significant reduction in sales to DT and its
affiliates could have an adverse effect on the financial condition, results
of operations and cash flows of the Company.
The Company's sales are made to customers principally in Switzerland and
Germany with revenues created in Deutsche Marks and Swiss Francs. The
Company's functional currency is the Swiss Franc.
RESULTS OF OPERATIONS
Nine Months ended September 30, 1996 and 1995
The average U.S. Dollar to Swiss Francs exchange rate was SF 1.20 = $1.00
in the nine months ended September 30, 1996 as compared to SF 1.18 = $1.00 in
the nine months ended September 30, 1995.
Revenues. The Company's revenues from the sale of multimedia systems products
for the nine months ended September 30, 1996 increased by approximately 25.1% to
$961,000 from $768,000 for the nine months ended September 30, 1995. The
increase in sales resulted primarily from an increase in the number of units
shipped partially offset by a decrease in unit sales price as the Company's
technology shifted and lower priced kits were introduced.
Cost of sales. Cost of sales for the nine months ended September 30, 1996
increased to $690,000 from $516,000 for the nine months ended September 30,
1995. The cost of sales as a percentage of sales increased to 71.8% for the
nine months ended September 30, 1996 from 67.2% for the nine months ended
September 30, 1995. Although the Company realized savings from purchasing
economies for the additional units produced, the savings were more than
offset due to the aforementioned decrease in the unit sales price for the
Company's products resulting in a higher cost of sales percentage in 1996.
Research and development costs. Research and development costs incurred
decreased by approximately .7% to $1,952,000 for the nine months ended
September 30, 1996 from $1,966,000 for the nine months ended September 30,
1995. Although there was no significant change in these costs, the Company
increased the number of employees involved in research and development to
complete their third generation of products. The increased payroll costs
resulting from the additional employees were offset by comparable decreases
in the material and outside contracting costs during 1996. Participations
received from Strategic Partners decreased to $272,000 for the nine months
ended September 30, 1996 compared to $585,000 for the nine months ended
September 30, 1995. The decrease in participations received was a result of
the completion of certain development projects for DT.
28
<PAGE>
Selling expenses. Selling expenses increased by approximately 23.1% to
$1,156,000 for the nine months ended September 30, 1996 from $939,000 for the
nine months ended September 30, 1995. This is a result of an increase in the
number of personnel in sales and marketing in an effort to create the demand
for the Company's product as well as help expand the product base of
applications for the Company's products.
General and administrative expenses. General and administrative expenses
increased by approximately 1.1% to $1,042,000 for the nine months ended
September 30, 1996 from $1,031,000 for the nine months ended in the year
ended September 30. 1995.
Interest. Interest expense increased by approximately 51.1% to $139,000
for the nine months ended September 30, 1996, from $92,000 for the nine
months ended September 30, 1995, principally due to the increase in
stockholder and bank loans.
Net Loss. Net loss for the nine months ended September 30, 1996 increased
by approximately 18.1% to $3,733,000 from $3,162,000 for the nine months
ended September 30, 1995. The loss increased as a result of the Company
commencing the marketing of the third generation of its products and a
decrease in research and development participations.
YEARS ENDED DECEMBER 31, 1995 AND 1994
The average exchange rate for U.S. Dollars declined substantially as
compared to the Swiss Franc by approximately 13.2% resulting in an increase
in all revenue and expense accounts in 1995 by this same percentage. The
average U.S. Dollar to Swiss Franc exchange rate was SF 1.18 = $1.00 in 1995
as opposed to SF 1.36 = $1.00 in 1994.
Revenues. The Company's revenues for the year ended December 31, 1995
increased by approximately 43.4% to $1,510,000 from $1,053,000 for the year
ended December 31, 1994, an increase of $457,000. Approximately $139,000 of
the increase was a result of the weakening of the U.S. Dollar against the
Swiss Franc. The remaining increase of approximately $318,000 was primarily a
result of an increase in the unit sales resulting from the introduction of
the second generation of products.
Cost of sales. Cost of sales for the year ended December 31, 1995
increased to $968,000 from $700,000 for the year ended December 31, 1994. The
cost of sales as a percentage of sales decreased to 64.1% for the year ended
December 31, 1995 from 66.4% for the year ended December 31, 1994 as a result
of purchase price savings due to larger quantities purchased in 1995.
Additionally the Company's fixed costs for plant and indirect labor and other
costs decreased as a percentage of sales.
Research and development. The increase in research and development costs
increased by approximately 11.5% to $2,531,000 for the year ended December
31, 1995 from $2,269,000 for the year ended December 31, 1994. The increase
was caused principally by the weakening in the U.S. Dollar versus the Swiss
Franc. The number of personnel engaged in research activities during the two
periods remained constant. Participations received decreased to $868,000
during the year ended December 31, 1995 from $2,207,000 received for the year
ended December 31, 1994 due to the lower number of projects in 1995 and the
completion of certain large projects in 1994 with DT.
Selling expenses. Selling expenses increased by approximately 71.3% to
$1,266,000 for the year ended December 31, 1995 from $739,000 for the year
ended December 31, 1994, an increase of $527,000. Approximately $100,000 of
this increase is due to the weakening of the U.S. Dollar compared to the
Swiss Franc. The remainder of the increase was due to an increase in
personnel costs, trade shows, advertising and other selling expenses.
General and administrative expenses. General and administrative expenses
increased by approximately 72.0% to $1,374,000 for the year ended December
31, 1995 from $799,000 for the year ended December 31, 1994, an increase of
$575,000. Approximately $106,000 of this increase is a result of the
weakening of the U.S. Dollar compared to the Swiss Franc. Personnel costs
were increased by approximately $220,000 with the remaining increase
resulting from an increase in professional fees, rents and other fixed costs
in addition to an increase in the capital stock tax paid in Switzerland.
29
<PAGE>
Interest. Interest expense increased by approximately 3.2% to $129,000 for
the year ended December 31, 1995 from $125,000 for the year ended December
31, 1994, principally due to the increase in bank loans.
Net Loss. Net loss for the year ended December 31, 1995 increased by
approximately 179.4% to $3,730,000 from $1,335,000 for the year ended
December 31, 1994. The loss increased principally due to the decrease in
research and development participations received in 1995, and the increase in
the selling, general and administrative expenses previously discussed.
YEARS ENDED DECEMBER 31, 1994 AND 1993
The average U.S. Dollar to Swiss Franc exchange rate was SF 1.36 = $1.00
in 1994 as compared to SF 1.48 = $1.00 in 1993.
Revenues. Revenues decreased by approximately 46.4% to $1,053,000 for the
year ended December 31, 1994 from $1,963,000 for the year ended December 31,
1993, a decrease of $910,000. The decrease was due to a combination of less
units sold as the Company was developing its second generation of products
along with substantially lower unit selling prices in 1994 since the
Company's products contained less hardware than in 1993.
Cost of Sales. Cost of sales for the year ended December 31, 1994
decreased to $700,000 from $1,171,000 for the year ended December 31, 1993.
The cost of sales as a percentage of sales increased to 66.4% for the year
ended December 31, 1994 from 59.6% for the year ended December 31, 1993. The
increase was a direct result of the fixed costs being a higher percentage of
the lower sales volume.
Research and development. Research and development costs increased by
approximately 24.1% to $2,269,000 for the year ending December 31, 1994 from
$1,828,000 for the year ended December 31, 1993, an increase of $441,000. The
increase was caused by the Company shifting their emphasis to research and
development in 1994 to create new and improved products. At the same time the
Company's participations received increased as a result of DT's demand for
new projects. During 1994 the Company's participations received reached
$2,207,000 as compared to $962,000 received in 1993.
Selling expenses. Selling expenses increased approximately 68.3% to
$739,000 for the year ended December 31, 1994 from $439,000 for the year
ended December 31, 1993, an increase of $300,000. The increase in selling
expenses was a result of an increase in personnel costs of approximately
$170,000, an increase in trade shows and advertising of approximately
$80,000, and the balance of the increase due to other selling expenses
including telephone, utilities and travel.
General and administrative expenses. General and administrative costs
increased by approximately 6.0% to $799,000 for the year ended December 31,
1994 from $754,000 for the year ended December 31, 1993. The increase was
principally due to an increase in the capital stock tax paid to Switzerland.
Interest. Interest expense increased by approximately 78.6% to $125,000
for the year ended December 31, 1994 from $70,000 for the year ended December
31, 1993, principally due to the increase in notes payable banks.
Net Loss. Net loss for the year ended December 31, 1994 increased by
approximately 0.8% to $1,335,000 from $1,324,000 for the year ended December
31, 1993.
INCOME TAXES
The Company, since inception, has not generated any taxable income. The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 ("FAS 109"). The Company has not realized any taxable
income or loss in the United States through September 30, 1996. At September
30, 1996 the Company has net operating loss carryforwards ("NOL") for Swiss
and German income tax purposes of approximately $13,373,000 and $1,251,000
respectively. The Swiss NOL's expire between 1996 and 2002, and the German
NOL's have no expiration date.
30
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of $3,052,000 and a
stockholders' deficiency of $2,855,000 at September 30, 1996. Net cash used
in operations was $3,231,000 and $3,252,000 for the year ended December 31,
1995 and the nine months ended September 30, 1996 respectively. The Company
generated cash of $491,000 from the collection of trade receivables during
the nine month period ended September 30, 1996 and used $280,000 for
increased inventories. The Company's audited financial statements for the
year ended December 31, 1995 contain an emphasis paragraph concerning the
Company's ability to continue as a going concern.
Since inception, the Company's expenses have significantly exceeded its
net sales, resulting in an accumulated deficit of $10,918,000 at September
30, 1996. The Company has funded its operations since inception through the
private placement of equity securities, loans from stockholders and research
and development participations. Through September 30, 1996 the Company had
raised approximately $14 million from private placements, including
approximately $6 million of loans and capital previously restructured, $1.4
million in stockholder loans and approximately $4.3 million in research and
development participation agreements. Additionally, the Company generated
capital through debt forgiveness from vendors of approximately $1.4 million
in 1992.
IAT AG has a line of credit and two loans with a Swiss bank for approximately
$1,520,000 in the aggregate, bearing interest at 7% per annum and of which
approximately $1,446,000 is outstanding as of September 30, 1996. IAT Germany
has a line of credit with a German bank for approximately $700,000 which is
outstanding as of September 30, 1996. This loan bears interest at 10.5% per
annum. In November 1996, IAT Germany has received a conditional grant from the
Senate Administration for the Economy and Business of the State of Berlin,
Germany whereby IAT Germany will be reimbursed approximately $130,000 for
development costs to be incurred subsequent to September 30, 1996. In compliance
with the conditions of this grant, IAT Germany intends to locate facilities with
respect to its wavelet research in Berlin and to fund a portion of this research
with the proceeds of this grant.
In October 1996, the Company received $1.5 million in connection with the
Private Placement of the Series A Preferred Stock. In addition, in October
and November 1996, the Company received loans from its stockholders
aggregating $920,000, and repaid an existing loan of $120,000 to a company
controlled by one of its principal stockholders. Research and development
participations have declined, and are expected to continue at a reduced rate
since the Company has developed the base technology for its third generation.
Research and development expenses however, are expected to continue at the
same rate in order to develop additional products and customized software
which are expected to generate additional revenues for the Company.
The Company's expenditures are exceeding its revenues by approximately
$400,000 per month, principally as a result of the continued research and
development related to new products and operating losses, therefore, the $1.5
million received upon the consummation of the Private Placement and the
additional stockholder loans may only be sufficient to cover the Company's
operations through January 1997. The Company intends to finance its research
and development, expansion of marketing activities and working capital with
the net proceeds of this Offering. Management believes that the proceeds of
this Offering should be sufficient to fund the Company's operations and its
working capital requirements due to the anticipated increased sales volume
through 1998. The Company's ability to become profitable is dependent on the
completion of the development of its third generation of products, a timely
release of the products and market penetration. The Company may need to raise
equity or debt financing. There can be no assurance that the Company will be
able to raise such financing on acceptable terms, if at all. In addition,
there can be no assurance that such financing will not be dilutive to the
existing stockholders. Failure to raise capital when needed could have a
material adverse effect on the financial condition and results of operations
of the Company.
ESCROW SHARES
The Company contemplates that the release of Escrow Shares, should it
occur, will result in a substantial non-cash compensation charge to
operations, based on the then fair market value of such shares. Such charge
could substantially increase the Company's loss or reduce or eliminate the
Company's net income, if any, for financial reporting purposes for the period
during which shares are or become probable of being released from escrow.
Although the amount of compensation expense recognized by the Company will
not effect the Company's total stockholders equity, it may depress on the
market price of the Company's securities. See "Principal Stockholders Escrow
Shares."
31
<PAGE>
BUSINESS
GENERAL
The Company develops, manufactures and markets customizable high quality
visual communications systems for use in desktop computers which permit users
to hold multi-point video conferences in two or more locations, as well as
providing additional video, audio and data transfer features not available in
traditional video conferencing systems. Unlike traditional video conferencing
companies, the Company's focus is on high quality system solutions. The
Company believes that the needs of its target customers cannot be addressed
by currently available lower quality software-only products (including
Internet products) or by high quality traditional video conferencing
products. In addition to providing audio and video images of the other
participants in the tele-conference, the Company's systems are also capable
of simultaneously providing images and data in windows on the computer screen
which can be viewed by all participants in the video conference and permit
users at remote computer terminals to modify data and manipulate images
through the operation of apparatus, such as microscopes and video cameras.
These systems, which include both proprietary and third-party software and
hardware, are inter-operable with products from certain vendors and comply
with all relevant international standards, including H.320. The Company sells
its systems and kits to end-users in a variety of industries and to OEMs and
integrators. The Company has sold an aggregate of approximately 500 systems
and kits, including pilot projects, since 1990.
The Company's technology has been developed with Strategic Partners,
including DT, Texas Instruments, IBM Germany and Olympus. The Company
believes that its technology can produce substantially higher quality image
and video transmissions, including reduced noise and artifacts, truer color
representation and higher frame rates, than other systems while using less of
the computing power of the host desktop computer, which permits other
applications to continue to operate without interruption. In addition, the
Company's new generation of systems currently being developed is based on a
programmable digital signal processor which provides flexibility for adapting
to new algorithms, standards or user requirements. The Company believes that
the high image quality and other features provided by the Company's systems
will meet the requirements of various professional users including
tele-medicine (i.e., transferring microscope, x-ray, video or other
diagnostic images for evaluation by a physician at a remote site) and
tele-surveillance (i.e., remote viewing and control of surveillance cameras
and remote access control via switched networks). In excess of $22 million
was invested in the Company by its stockholders and the Company has invested
approximately $13 million in the research, development and marketing of its
technology (including approximately $4 million in participations from the
Company's Strategic Partners). This investment in the Company's technology
does not include additional amounts invested directly by the Company's
Strategic Partners in the development of their components used in the
Company's systems.
The Company believes that the multimedia communications market will be
divided between mass-market low quality software-only solutions and high
quality system solutions which principally utilize hardwired processors. The
Company believes that mass market solutions do not meet the needs of its
potential customers because of the lower quality image and video
transmissions and that hardwired processors are inflexible and difficult to
adapt to new algorithms and standards. In addition, the Company believes that
its use of programmable digital signal processors combined with its
proprietary technology offers a competitive advantage over competitors using
hardwired chips or software-only solutions. The Company is not aware of other
companies which offer similar customized complete systems at comparable
prices.
The Company has developed two generations and is currently developing a
third generation of its technology. The first generation was developed using
a large number of computer boards and readily available components as the
Company's initial entry in the visual communications field and to assess
customer needs. The second generation, utilized in the Company's current
systems, is characterized by a substantially reduced number of computer
boards and improved capabilities. These systems use a combination of fully
programmable digital signal processors and less-flexible hardwired
processors. The second generation systems have inherently high prices per
unit. For example, the Company's second generation MFKS systems have average
prices of approximately $8,000 to $30,000 per system (depending on
capabilities). The Company's third generation systems, utilize Texas
Instruments' C8x programmable digital signal processor and are designed for
commercial production
32
<PAGE>
with target sales prices of approximately $1,500 to $8,000 per system for
corresponding MFKS systems. In 1996, the Company, partly in conjunction with
its Strategic Partners, began marketing these third generation systems and
expects to begin shipping them in 1997. The Company believes that its third
generation of systems will be its first systems which have the potential for
widespread commercialization.
The Company's existing products include the MFKS Vision and Live multi-
functional communications system and the MIKS Interactive Kiosk. MFKS is a
high quality visual communications system which combines hardware and
software for use in desktop computers and permits users to hold multi-point
video conferences with simultaneous video, audio and data transfer. MIKS is
an electronic kiosk system which allows consumers to access information
stored in the electronic kiosk or in remote locations, including high quality
video, while allowing instant contact to a video conference with a
tele-consultant who has full access to the images and data seen by the
consumer.
The Company's systems are flexible and can be configured in a variety of ways
to meet the requirements of specific customers. The Company, on a project by
project basis, designs systems which provide solutions on a customized basis for
the specific requirements of particular customers.
INDUSTRY
The driving force behind the growth of the video conferencing market was
the desire to achieve the effectiveness of face-to-face meetings with the
cost and convenience of the telephone. Video conferencing systems can improve
worker productivity and reduce costs by eliminating or reducing travel,
improving the timely exchange of information between dispersed work groups
and leveraging the use of scarce personnel resources located at a distance
from the person needing their expertise. Initial video conferencing products
were relatively expensive and typically required dedicated, high speed
transmission facilities, trained operators and special rooms, with customized
lighting and acoustics, resulting in low demand. In recent years, however,
the rapid growth and decreasing cost of world-wide switched digital telephone
services, technological improvements in both audio and video quality and the
availability of lower cost, easy to use turnkey communications systems have
led to greater use of video conferencing. Historically, the multimedia
communications market has been dominated by systems using hardwired
processors. Today, desktop video conferencing systems using hardwired
processors priced as low as $1,000 per unit have emerged. The Company
believes, however, that such low cost systems provide lower quality video and
still images and that, to reduce costs, many of such systems rely heavily on
the host computer's CPU reducing the systems ability to simultaneously run
other applications. Hardwired processors are inflexible and difficult to
adapt to changes in technology, standards or customer needs.
In recent years international industry standards intended to facilitate
interoperability among different vendors video conferencing systems without
additional special equipment or arrangements have appeared including the
current standard, H.320. While the implementation of emerging industry
standards and other technological improvements have helped to increase sales
of hardware-based video conferencing systems in recent years, the relatively
high price and limited interoperability of these systems have impeded the
widespread adoption of video conferencing as a mass communication medium. In
an effort to expand the availability of video conferencing as a
communications tool, a number of developers commenced efforts to develop
software-based video conferencing technology that did not require expensive
proprietary hardware. However, these systems often require intensive use of
the desktop computer's CPU which limits the ability of the computer to
simultaneously run other applications. For example, implementation of the
full H.320 video conferencing standard using a software-only solution
utilizing a Pentium CPU requires approximately 6 times the processing power
of a common 150 MHz Pentium. In most of these systems, tradeoffs have
been made to limit the demands on the CPU by keeping the picture size small
and accepting lower picture clarity and frame rate. The Company expects that
the mass market will be characterized by software bundled with operating
systems offered by companies such as Microsoft which will be enhanced by
shipments of desktop computers incorporating Intel's Pentium MMX software
interface which offer improved video processing.
The Company believes that mass market solutions do not meet the needs of
certain professional customers who demand better image clarity than is
currently available using software-only products, such as doctors who will
use visual communication systems to review microscope slides or other
diagnostic images. Depending on the application, these customers may demand
full-frame video, reduced noise and artifacts, truer color represen-
33
<PAGE>
tation and/or higher frame rates. In addition, many of these customers need
solutions which allow for data sharing and full remote operation of
applications. Software-only solutions require such a large portion of the
CPU's processing capacity for video conferencing that they have difficulty in
integrating these additional functions on their customers existing desktop
computers.
In addition, many customers, especially OEMs and integrators, are
concerned that their investment in visual communications technology will
become obsolete. Systems using programmable digital signal processors, such
as the C8x, may be attractive to OEMs and integrators because these systems
are relatively easy to reprogram to handle new algorithms and standards as
technology improves or to be customized to meet specialized customer needs.
Hardwired chips have limited lives as upgrades or other changes require that
a new chip be engineered and fabricated. Digital signal processors also
substantially reduce the burden on the CPU of the host computer allowing
other applications to run uninterrupted.
STRATEGY
The Company intends to continue to jointly develop with its Strategic
Partners innovative hardware and software alternatives to lower quality
software-only products. The Company is in the process of completing
development of its third generation of products and intends to continue to
develop newer generations of its products as technology or the needs of its
customers change. In addition, the Company seeks to identify new applications
for its technology.
The Company's strategy of joint development with its Strategic Partners
allows the Company to increase the effectiveness of its research and
development by taking advantage of the knowledge and resources of its
Strategic Partners (including skilled personnel, existing hardware and
software libraries and participations) by eliminating unnecessary duplicative
work and minimizing the Company's research and development expenditures.
The Company intends to target its technology and its products at the
professional market, including customers using tele-medicine and
tele-surveillance. The Company believes that these markets require high
quality systems which provide solutions tailored to their requirements and
contain higher quality image and video transmissions and other features than
traditional video conferencing communications systems. The Company's systems
are being designed to provide such high quality features and the Company
intends to actively promote its products to this market.
The Company currently markets its products, both through its own sales staff
and through certain of its Strategic Partners, primarily in Europe. A
substantial part of the potential market for the Company's products are in the
United States and entering in the United States market is a fundamental part of
the Company's strategy. The Company intends to expand its marketing efforts,
both by expanding its sales and marketing staff in Europe as well as
establishing an office and a sales and marketing staff in the United States
during 1997. The Company continually evaluates potential strategic partners for
additional applications and broader marketing of IAT's technolgy. The Company
may make a participation or acquisition for strategic reasons.
The Company's strategy will continue to follow a solution oriented
approach. In many cases, potential customers of the Company's products will
not need a standard system but will require a system designed specifically to
meet their specific needs. The Company intends to continue developing, on a
project by project basis, and in collaboration with its Strategic Partners,
systems which provide solutions on a customized basis for the specific
requirements of particular customers. See "Risk Factors -- Dependence Upon
Agreements," "-- Further Developing Need for Additional Financing," "--
Developing Market," "-- Dependence on New Products and Rapidly Developing
Technologies" and "-- Risk Associated with Expanded Operations in the United
States."
SYSTEMS
The Company's systems include both proprietary and third-party software
and hardware, and are inter- operable with products from certain vendors and
fully comply with all relevant international standards, including H.320. The
software includes compression algorithms and routines to control
video-conferencing, data transfer, transmission of still and moving video
images, remote control of other applications and customizable features to
meet the specific needs of customers. The hardware, consisting of a board or
boards for insertion into
34
<PAGE>
a host desktop computer includes a codec (a combination of a coder and
decoder for compressing the number of bytes representing audio or video
information and recovering the original bytes from the compressed bytes after
they have been transmitted), a video inlay or overlay, a video switch and
audio mixer. Compression algorithms and codecs reduce the number of bytes
necessary to represent a specific piece of information in order to reduce the
cost and time of transmitting data. However, the process of compression and
decompression results in the loss of some of the original data and can
introduce artifacts into the resulting image. The Company believes that its
proprietary combination of software and hardware offer high image quality,
including reduced noise and artifacts, truer color representation and high
frame rates while still allowing simultaneous transmission of other data and
audio signals.
The Company's systems are flexible and can be configured in a variety of
ways to meet the requirements of specific customers. The Company, on a
project by project basis, designs systems which provide solutions on a
customized basis for the specific requirements of particular customers. The
Company sells its systems and kits to end-users in a variety of industries
and to OEMs and integrators. The Company's existing systems include the MFKS
Vision and Live multifunctional communications system and the MIKS
Interactive Kiosk.
35
<PAGE>
The following graph sets forth the relationship between the Company's
technology and its products:
[Graphic indicating how the Company's base
technology is combined with the MFKS specific
hardware and software for MFKS based systems
and is combined with MIKS specific hardware and
software for MIKS systems.]
MKFS Vision and Live. The MFKS Vision and Live multifunctional
communications system, allows simultaneous video, audio and data
communications using the Company's software and hardware computer boards in
IBM compatible standard desktop computers. The following shows the major
elements of the MFKS Vision and Live system:
[Schematic depicting elements
of MFKS Vision and Live]
IAT offers MFKS 128 and MFKS 384 systems which communicate at speeds of up
to 128 kbps or up to 384 kbps, respectively, to match the communications
needs of its customers. IAT developed its MFKS systems jointly with DT. The
second generation of MFKS 128 consists of software, two computer boards (a
codec and an ISDN (or other network) connection) and two optional computer
boards and permits tele-conferencing and simultaneous full screen video with
a PIP, audio and data communications on a desktop computer. IAT's MFKS 384
systems consist of software and six to nine computer boards. MFKS 384 systems
offer all of the features of MFKS 128 systems plus the ability to view two
full-screen video windows simultaneously. The Company believes that its MFKS
systems offer substantially higher image quality, including reduced noise and
artifacts, truer color representation and higher frame rates, than
software-only products. MFKS systems fully implement all current relevant
international communications standards. While second generation MFKS systems
used a combination of hardwired chips and programmable digital signal
processors, IAT's third generation MFKS systems will exclusively use fully
programmable C8x digital signal processors, communicate using widely
available switched networks and are designed to work with ISDN or faster
lines. Use of fully programmable digital signal processors allows easier
upgrades and customization than systems using hardwired processors. The
Company believes that the combination of the tele-conference and additional
functions performed by its MFKS systems provide features not generally
available in existing tele-conferencing systems and will meet the
requirements of the professional users the Company intends to target. The
following charts set forth the features and development of the Company's MFKS
128 and MFKS 384 systems:
36
<PAGE>
<TABLE>
<CAPTION>
MFKS 128
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
First Generation Second Generation Third Generation
- -----------------------------------------------------------------------------------------------------------------------------------
Available 1991-92 1995-96 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Hardware Requirements Mandatory Mandatory
[GRAPHICS] [GRAPHICS] [GRAPHICS]
codec ISDN Codec +
codec codec ISDN SO Video Inlay +
SO Optional Video Switch +
[GRAPHICS] [GRAPHICS] Audio Mix +
Still Video
1st communi- video audio (Digital video/audio,
overlay cations switch mix in development)
Optional
[GRAPHICS]
2nd video audio
overlay switch mix
single board based
Minimum: 5 boards Minimum: 2 boards on C8x technology
Fully equipped Fully equipped
with options: 8 boards with options: 4 boards
- -----------------------------------------------------------------------------------------------------------------------------------
Operating System Windows 3.X Windows 3.X Windows 95 (32 bit)
Windows 95 (16 bit)
- -----------------------------------------------------------------------------------------------------------------------------------
Design and o Complete systems built o Complete systems o Complete systems
Architecture exclusively into PC's built into PC's built into PC's
o No kits o Kits o Kits
o No OEM's o No OEM's o OEM's & integrators can purchase:
- Evaluation kits
- Production license
- -----------------------------------------------------------------------------------------------------------------------------------
Software o Video conferencing, including o Videoconferencing with o Videoconferencing and
- full-frame picture data conferencing as
Control boards and PIP with in second
- features as in first generation PLUS
o Video conference generation PLUS: o Better still video
using ISDN o Data conferencing (wavelets/JPEG)
2 B-channels (T.120 standard) o Digital video/audio (MPEG)
(1 ISDN line) - application o Specialized application
(128 kbs) sharing software
- remote control - file transfer
laser disk - still video
- source switching o Specialized application
video/audio software
- application sharing
version 1
- -----------------------------------------------------------------------------------------------------------------------------------
Applications o Traditional video o Same as First o All types of
conferencing Generation PLUS telecommunications
o Pilot projects - Scientific works in including
o Office communications information technology - Tele-Medicine
- Tele-Support - Tele-Surveillance
- Tele-Microscopy pilots
- Tele-Commuting
- -----------------------------------------------------------------------------------------------------------------------------------
Approximate $1,500 ($1,000 for
Average Price $20,000 $8,000 OEM's in quantity)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
MFKS 384
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Second Generation Third Generation
- -----------------------------------------------------------------------------------------------------------------------------------
Available 1995-1996 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Hardware Requirements Mandatory Mandatory
[GRAPHICS] [GRAPHICS]
codec codec 1st overlay High-End ISDN High-End
Multimedia 3xS0 VGA board
[GRAPHICS] Including
Codec +
Communi- Inverse ISDN Video Inlay +
cations Multiplexer 3xS0 Hi Fi Audio +
Basic video
Optional Switch +
Basic audio mix
[GRAPHICS] (Digital video/
audio in
2nd video audio development)
overlay switch mix
[GRAPHICS] 3 boards high-end set based on
bus C8x technology
extension
box
Minimum: 6 boards
Fully equipped with options: 9 boards
- -----------------------------------------------------------------------------------------------------------------------------------
Design and Architecture o Complete systems in desktop PC o Complete systems in desktop PC
o No kits o Kits
o No OEM's o OEM's
- -----------------------------------------------------------------------------------------------------------------------------------
Operating System Windows 3.X Windows 95 (32 bit)
Windows 95 (16 bit)
- -----------------------------------------------------------------------------------------------------------------------------------
Software o Same as Second-Generation MFKS 128 o Same as Third-Generation MFKS 128
PLUS PLUS
- can control 6 ISDN B-channels - can control 6 ISDN B-channels
(3 ISDN lines) 384 kbps (3 ISDN lines) 384 kbps
- multiplexing - multiplexing
- 2 Full Screen Video Windows - 2 Full Screen Video Windows
- -----------------------------------------------------------------------------------------------------------------------------------
Applications o Tele-Service o All types of telecommunications
o Tele-Consulting including
o Tele-Medicine pilots - Tele-Service
- Tele-Medicine; including
tele-endoscopy
and tele-microscopy
- Tele-Security
- -----------------------------------------------------------------------------------------------------------------------------------
Approximate Average Price $30,000 $8,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
MFKS systems can be customized to meet customer needs. The basic MFKS
Vision & Live system can connect up to seven video sources including,
microscopes, endoscopes, video cameras, document cameras, and laser disc
players. It can display, send and receive images in two windows and grab
(memorize single frames) in both the send and receive windows. In addition,
the MFKS system allows for remote control of the remote computer and attached
devices. MFKS systems can be configured with up to five ISDN or other
high-speed connections (e.g. Ethernet LAN or T.1 telephone lines) to match
customers' desired video imaging speed and resolution requirements. All MFKS
systems have the ability to make multipoint and point to point connections.
The Company believes that the combination of the tele-conference and
additional functions performed by its MFKS systems provide features required
by professional users and not generally available in existing tele-
conferencing systems. MFKS systems are currently used by DT for
administrative tasks; by customers of DeTeSystems, an integrator and
affiliate of DT, for a variety of tasks in different industries; by MAN
Roland for tele-servicing of large, high-speed printing presses; by Grundig
for tele-surveillance in an underground subway system; by the water quality
control industry for visual water testing from remote sites; and by hospitals
for pilot projects in tele-microscopy and tele-endoscopy.
The Company is jointly developing with Texas Instruments and DT its third
generation MFKS system incorporating Texas Instrument's C8x programmable
digital signal processor which will allow for easier upgrades than systems
using hardwired chips. These new systems will provide all of the functions of
the corresponding existing second generation systems at a substantially lower
target prices. The third generation MFKS 128 uses a single proprietary
computer board while the third generation MFKS 384 system shrinks the
required hardware from six computer boards down to three. The Company expects
to release the third generation of MFKS systems in 1997 at target prices of
approximately $1,500 per system ($1,000 to OEMs in quantity) for the single
board MFKS 128 system and approximately $8,000 per system ($3,500-$4,500 to
OEMs depending on configuration) for the MFKS 384 system. The Company
believes that the third generation of MFKS is the first system that it has
manufactured which has the potential for market penetration. No assurance can
be given that such systems will be introduced on a timely basis, if at all,
or that such systems will be accepted by the market. See "Risk Factors --
Dependence on New Products and Rapidly Developing Technology."
The Company is presently working with Olympus to integrate MFKS systems
into tele-microscopes. These products are expected to allow doctors in
different locations to engage in a video conference while concurrently
reviewing microscopic slides, and in some models, to remotely operate the
microscope. The Company does not believe that the images from currently
available visual communications systems provide sufficient image quality to
transmit pictures of microscopic slides which would permit their use for
diagnosis. The Company believes that the high quality images produced by the
MFKS system offer images with resolutions and life-like colors sufficient for
medical diagnoses.
Wavelet Compression. The Company is jointly developing with Professor
Seiler of the Technical University of Berlin proprietary wavelet data
compression technology which offers up to 300 to 1 compression with scalable
data loss. The Company believes that the wavelet compression that it is
developing will almost eliminate the time delay in viewing still images which
are transmitted by visual communications systems and that this reduction will
make the Company's MFKS systems more attractive. The Company believes that it
will be able to offer wavelet compression in its MFKS systems beginning in
1997 and that one of the first applications for this technology will be in
the tele-microscopes being jointly developed with Olympus.
39
<PAGE>
MIKS Interactive Kiosk. The MIKS Interactive Kiosk was jointly developed
with DT and IBM Germany. As shown below, the MIKS Interactive Kiosk consists
of consumer electronic kiosks, tele-consultant stations, an authoring system
and related proprietary software.
[Schematic depicting elements of MIKS
Interactive Kiosk]
Electronic Kiosks can present consumers with access to information stored
in the electronic kiosk or in remote locations, including high quality video
while allowing instant contact to a video conference with a tele-consultant
who has full access to the images and data seen by the consumer. Routine
inquiries can be handled by the stored information allowing each
tele-consultant to service a number of electronic kiosks. The Company
believes the MIKS Interactive Kiosk system can enable companies to more
efficiently utilize their personnel and to rapidly collect market information
on consumers using the electronic kiosks.
The MIKS Interactive Kiosk system also includes a proprietary database
management system and an authoring system for electronic kiosks. An authoring
system is, in effect, a sophisticated word processor which can also handle
the development of menus and integration of audio and video data for the
electronic kiosks. The Company's authoring system substantially reduces the
cost and time to develop menus and pages for electronic kiosk displays. IAT
may offer this authoring system to end-users and designers for use with other
companies' electronic kiosk systems. The Company's proprietary database
management system allows rapid and accurate updating of information stored in
the electronic kiosks and collection of consumer data. The Company's existing
second generation MIKS system requires two desktop computers per electronic
kiosk and has an average price of approximately $45,000 per electronic kiosk.
The Company has only installed pilot MIKS systems.
IAT and certain of its Strategic Partners are jointly developing the third
generation MIKS Interactive Kiosk system which will reduce the hardware demands
to only one desktop computer with two proprietary computer boards per electronic
kiosk. The Company's target price for the third generation MIKS system is
approximately $20,000 per electronic kiosk. IAT expects to begin selling third
generation MIKS systems in 1997, but no assurance can be given that such systems
will be introduced on a timely basis, if at all, or that such systems will be
accepted by the market. See "Risk Factors -- Dependence on New Products and
Rapidly Developing Technology."
40
<PAGE>
The following chart sets forth features and development of the MIKS
Interactive Kiosk:
<TABLE>
<CAPTION>
First Generation Second Generation Third Generation
- ---------------------- ------------------ ------------------------------------------ -----------------------------------
<S> <C> <C> <C>
Available 1993 1996 1997
- ---------------------- ------------------ ------------------------------------------ -----------------------------------
Hardware Requirements Prototype Only Pilot Systems Commercial Systems
for Electronic Kiosks - 2 desktop computers - 1 desktop computer with 2 boards
- ---------------------- ------------------ ------------------------------------------ -----------------------------------
- OS/2 operating system for MIKS software - Authoring Tool
Software - Windows 3.x for communications software - Data base updating software
- Communication software
- Multimedia software
- ---------------------- ------------------ ------------------------------------------ -----------------------------------
Applications o Test model o Fair Information Systems o Same as Second-Generation PLUS
o Citizen Information Systems o Tele-Ordering of shipping service
o Tele-Shopping o Tele-Banking
- ---------------------- ------------------ ------------------------------------------ -----------------------------------
Average Price per -- $45,000 $20,000
Electronic Kiosk
- ---------------------- ------------------ ------------------------------------------ -----------------------------------
</TABLE>
OEM. In addition to complete systems, the Company offers OEMs and
integrators MFKS kits utilizing its existing second generation technology and
expects to begin offering kits utilizing its third generation technology in
1997. OEMs and integrators install the Company's hardware and software in
their own systems. In addition to the MFKS kits described in the following
table, the Company also offers MIKS kits.
<TABLE>
<CAPTION>
Vision & Live Basic Vision & Live Universal Vision & Live Special
------------------ ------------------------- -------------------------- ------------------------------
<S> <C> <C> <C>
Low-Cost PC-Board based Mid-range ISA PC-Board High-end ISA PC-Board
Description on MFKS 128 based on MFKS 384 based on MFKS 384
------------------ ------------------------- -------------------------- -----------------------------
H.320 video conferencing
Features H.320 videoconferencing or JPEG still video with simultaneous JPEG still
o Communications encoding/decoding or optional MPEG1 decoding and video encoding/decoding or
optional wavelet high-quality and optional still video optional MPEG1 decoding
------------------ ------------------------------------------------------ -----------------------------
2 ISDN B-Channels o Up to 6 ISDN B-Channels (3 ISDN lines) 384 kbps
o ISDN (1 ISDN line) 128 kbps o Other network interfaces available
------------------ -------------------------- ----------------------------------------------------------
o Video Full-Screen Video Window with PIP 2 Full-Screen Video Windows
------------------ ------------------------------------------------------ -----------------------------
o Hi Fi Audio
o Others o Includes all drivers
------------------ ------------------------- -------------------------- -----------------------------
o Low-end solution for o Tele-Surveillance o Desktop Multimedia
desktop video o Tele-Security o POI/POS
Applications conferencing o Tele-Medicine o Medicine
------------------ ------------------------- -------------------------- -----------------------------
Availability 2nd Half of 1997 1996 1st Half 1997
------------------ ------------------------- -------------------------- -----------------------------
$3,500 plus license of
Cost (in quantity) Less than $1,000 $20,000 - $150,000 $4,500
------------------ ------------------------- -------------------------- -----------------------------
</TABLE>
The Company expects that a majority of its sales will come from OEMs and
integrators. The Company's sales will therefore be dependent on the sales
efforts of third parties which it cannot control. There can be no assurance
that such systems will be introduced on a timely basis, if at all, or that
such systems will be accepted by the market.
STRATEGIC PARTNERS
The Company's Strategic Partners have played an important role in the
development of the Company's technology and products and in some cases, have
been substantial customers of the Company's products. See "Risk Factors --
Dependence on Agreements" and "Business -- Customers."
41
<PAGE>
The Company and its Strategic Partners have conducted the research and
development of the Company's products pursuant to various contracts. Once
development of the Company's products is complete, it will enter into
marketing agreements with the relevant Strategic Partners. Cooperation with
its strategic partners enables the Company to take advantage of its partners'
knowledge, technology and resources.
Deutsche Telekom. DT is the Company's oldest Strategic Partner with a
relationship extending back to 1992. The Company and DT jointly developed and
contributed $3.1 million and $2.5 million, respectively, to the first and
second generations of the MFKS Vision and Live systems. The Company and DT
each have the right to market the MFKS Vision and Live Systems and other uses
of the technology developed in connection with this product. Approximately
86%, 87%, 68% and 87% of the Company's revenues for the years ended December
31, 1993, 1994 and 1995 and the nine months ended September 30, 1996,
respectively have been received from DT and its affiliates. The Company
continues to work with DT to develop parts of the third generation of MFKS
Vision and Live.
IBM Germany and Deutsche Telekom. The Company and DT made a strategic
alliance with IBM Germany to develop the MIKS Interactive Kiosk by expanding
the MFKS technology. Since the beginning of the development of the MIKS
Interactive Kiosk, the parties have each contributed one-third to the total
of research and development costs of $4.0 million. Currently, the partners
cooperate informally to supply components for new MIKS systems which can be
sold by any partner. The partners are negotiating a marketing agreement to
formalize this arrangement.
Texas Instruments. The Company is jointly developing base hardware and
software with Texas Instruments for its third generation MFKS Vision and Live
system incorporating the C8x chip. The Company believes that the C8x chip offers
the best price to value ratio for the demanding high quality multimedia systems
it builds for its customers in all of its markets. The Company expects that it
will continue to work with Texas Instruments to expand the range of the
Company's products utilizing the C8x. The Company expects that it will launch
the single board version of MFKS Vision and Live during 1997. Both parties have
the right to sell and license the board. TI and IAT are in negotiations to
define the role of each partner in marketing and supporting products based on
the C8x and supporting customers working on C8x products (OEMs). See "Risk
Factors -- Suppliers."
Olympus. In 1995, the Company began to collaborate with Olympus to combine
its MFKS Vision and Live technology with Olympus' expertise in microscopes to
produce systems for tele-microscopy and tele-endoscopy. Each of the Company
and Olympus have contributed to the development of these specialized systems.
Olympus will use its position in the microscopy business to market the MFKS
based tele-microscopy system jointly with the Company. To further enhance the
capabilities of the products developed with Olympus, the Company is jointly
developing wavelet compression technology with Dr. Seiler of the Technical
University of Berlin. See "Business -- Systems -- MFKS Multifunctional
Communications Systems -- Wavelet Compression."
RESEARCH AND DEVELOPMENT
The Company believes that research and development is vital to the success
of its business and intends to continue, and to devote substantial resources
to, its research and development efforts to improve its products and adapt to
the changing environment and the demands of its customers.
The Company's strategy of joint development with its Strategic Partners
allows the Company to increase the effectiveness of its research and
development by taking advantage of the knowledge and resources of its
Strategic Partners (including skilled personnel, existing hardware and
software libraries and participations) by eliminating unnecessary duplicative
work and minimizing the Company's research and development expenditures. The
Company's technology has been developed with Strategic Partners, including
DT, Texas Instruments, IBM Germany and Olympus. In excess of $22 million was
invested in the Company by its stockholders and the Company has invested
approximately $13 million in the research, development and marketing of its
technology (including approximately $4 million in participations from the
Company's Strategic Partners). This investment in the Company's technology
does not include additional amounts invested directly by the Company's
Strategic Partners in the development of their components used in the
Company's systems.
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To date, the Company has generally focused first on developing systems
which can be utilized by customers in the field to assess the needs of such
customers. IAT and its Strategic Partners have then refined these systems and
tried to reduce costs while continuing to upgrade the systems to take into
account changes in standards and technology. In addition, a key function with
development of a proprietary library of processing algorithms which can be
adapted to a variety of platforms. IAT is jointly developing with Texas
Instruments and DT its third generation of technology with the functionality
of the second generation systems plus additional features at a substantially
lower price. The Company views its third generation products as the first
products that it has produced that have the potential for market penetration.
Once IAT's third generation products are introduced, the Company's research
emphasis will shift from basic research and initial product development to
improvements in the Company's systems to meet the needs of specific customers
or groups of customers and to take into account advances in technology or
standards. However, IAT expects to continue to conducts research and
development jointly with its Strategic Partners who contribute to the costs
of research and development. "Risk Factors -- Dependence on New Products and
Rapidly Developing Technologies."
The Company is currently working with Olympus to integrate MFKS systems
into tele-microscopes and is jointly developing wavelet compression
technology with Professor Seiler of the Technical University of Berlin. See
"--Systems -- MFKS Vision and Live -- Wavelet Compression."
The Company is working to develop versions of MFKS systems and MIKS
Interactive Kiosks available as pure software products to take advantage of
Intel's Pentium MMX software interface. In addition, the Company is
conducting research on applying its technology to digital television area as
well as providing intranet capabilities for its systems. There can be no
assurance that the Company will be able to develop its business in these
areas, if at all.
MARKETING
The Company targets professional users who need the highest available
communications quality for demanding applications such as tele-medicine and
tele-surveillance. The Company believes that the needs of its target
customers cannot be addressed by currently available lower quality
software-only products (including Internet products) or by high quality
traditional video conferencing products. Depending on the application, these
customers may demand full frame video, reduced noise and artifacts, truer
color representation and/or higher frame rates. In addition, many of these
customers need solutions which allow for data sharing and full remote
operation of applications. The Company believes that its proprietary know-how
for combining hardware and software solutions in complete systems is unique.
The Company believes that its technology can produce substantially higher
quality image and video transmissions than other systems while using less of
the computing power of the general purpose CPU of the host desktop computer,
which permits other applications to continue to operate without interruption.
In addition, IAT targets OEMs and integrators and offers these customers
products with a range of compatibilities and prices. See "-- OEM." The
Company's use of programmable digital signal processors and proprietary
software offers full implementation of relevant standards and allows these
companies to preserve their investment in visual communications technology.
Systems using programmable digital signal processors, such as the C8x used in
the Company's third-generation systems, are attractive to OEMs and
integrators because these systems are relatively easy to reprogram to handle
new algorithms and standards as technology improves or to be customized to
meet specialized customer needs. Hardwired chips are not as flexible as
programmable digital signal processors as upgrades or other changes require
that a new chip be engineered and fabricated.
The Company currently markets its products, both through its own sales staff
and through certain of its Strategic Partners, primarily in Europe. IAT's sales
and marketing force of 10 persons is located primarily in Germany. A substantial
part of the potential market for the Company's products are in the United States
and entering into the United States market is a fundamental part of the
Company's strategy. The Company intends to expand its marketing efforts, both by
expanding its sales and marketing staff in Europe as well as establishing an
office and a sales and marketing staff in the United States during 1997. The
Company continually evaluates potential strategic partners for additional
applications and broader marketing of IAT's technology. The Company may make a
participation or acquisition for strategic reasons. Once development of the
Company's products is complete, it
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may enter into marketing agreements with the relevant Srategic Partners. IAT
contacts customers via its sales force, web site, articles, advertising, and
through certain of its Strategic Partners. In several cases the Company has
supplied MIKS Interactive Kiosks to fairs and exhibitions to gain customer
exposure.
Currently, purchase decision cycles for the Company's products are relatively
long because the technology is new and costs are relatively high. New customers
typically acquire a pilot system or systems to evaluate before purchasing a
number of systems. While the Company sells these pilot units in most cases, it
may lend evaluation units to certain accounts. In many cases, the customer
requires the approval of its senior management or the board of directors before
purchasing a number of the Company's systems. The Company is not aware of other
companies which offer similar customized complete systems at comparable prices.
The Company believes that the market for high end systems will expand and
purchase decision cycles will shorten once the price of introductory systems
decrease. Currently, the target price of a third generation MFKS system is
approximately $1,500 per unit and the Company has targeted a $1,000 per unit
price for a third-generation OEM kit. There can be no assurances whether or not
the Company will achieve such target prices.
CUSTOMERS
The Company believes that there are numerous potential uses by
professional users for its MFKS systems. MFKS systems are currently used by
DT for administrative tasks; by customers of DeTeSystems, an integrator and
affiliate of DT, for a variety of tasks in different industries; by MAN
Roland for tele-servicing of large, high-speed printing presses; by Grundig
for tele-surveillance in an underground subway system; by the water quality
control industry for visual water testing from remote sites; and by hospitals
for pilot projects in tele- microscopy and tele-endoscopy. The following
table sets forth certain of the Company's customers and their respective
industries:
DT and DeTeSystem ........ Telecom and Integrator
MAN Roland ............... Printing Presses
Olympus .................. Medical, Scientific and Industrial Devices
Grundig .................. Tele-surveillance
Kantonspolizei Zurich .... Police Department of Zurich, Switzerland
Approximately 86%, 87%, 68% and 87% of the Company's revenues for the
years ended December 31, 1993, 1994 and 1995 and the nine months ended
September 30, 1996, respectively have been received from DT and its
affiliates. The loss of sales or a significant reduction in sales to DT could
have a material adverse effect on the Company's business, financial condition
and result of operations. There can be no assurance that any of the customers
listed above will continue to purchase products from the Company in the
future.
INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon its proprietary
technology. The Company currently has no patents and relies primarily on
copyright, trademark and trade secrets law, as well as employee and third-
party non-disclosure agreements, to protect its intellectual property. There
can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or independent development by others of similar technology.
In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do laws in the United
States. There can be no assurance that the protections afforded by the laws
of such countries will be adequate to protect the Company's proprietary
rights, the unenforceability of any of which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Litigation may be necessary to enforce the Company's intellectual property
rights or to protect the Company's trade secrets. There can be no assurance
that any such litigation would be successful. Any such litigation, even if
successful, could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company has not been charged with infringement of any proprietary
rights of others; however, there can be no assurance that third parties will
not assert infringement and other claims against the Company or that
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such claims will not be successful. From time to time, the Company may
receive in the future notice of claims of infringement of other parties'
proprietary rights. Many participants in the Company's industry have an
increasing number of patents and have frequently demonstrated a readiness to
commence litigation based on allegations of patent or other intellectual
property infringement. Third parties may assert exclusive patent, trademark,
copyright and other intellectual property rights to technologies that are
important to the Company. There can be no assurance that infringement (or
claims for indemnification resulting from infringement claims) will not be
asserted or prosecuted against the Company or that any such assertion or
prosecution will not have a material adverse effect on the Company's
business, financial condition or results of operations. Regardless of the
validity or the successful assertion of any such claims, the Company could
incur significant costs and diversion of resources in defending such claims,
which could have a material adverse effect on the Company's business,
financial condition and results of operations. Furthermore, any party making
such claims could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief, which could effectively block the
Company's ability to make, use, sell, distribute or market its products and
services in the United States or abroad. Any such judgment could have a
material adverse effect on the Company's business, financial condition and
results of operations. In circumstances where claims relating to proprietary
technology or information are asserted against the Company, the Company may
seek licenses to such intellectual property. There can be no assurance,
however, that such licenses would be available or, if available, that such
licenses could be obtained on terms that are commercially reasonable and
acceptable to the Company. The failure to obtain the necessary licenses or
other rights could preclude the sale, manufacture or distribution of the
Company's products and, therefore, could have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company believes its MFKS Vision and Live and MIKS Kiosk trademarks are
important to the development of its business and will attempt to register them
as trademarks in the United States, Germany and elsewhere. The Company intends
to vigorously protect its trademarks.
COMPETITION
The visual communications business is highly competitive. The Company
estimates that more than 100 companies world-wide offer products which
compete in its market segments and expects that whether or not the Company is
successful in capturing market share, the competition will intensify in the
future. The Company believes that the majority of its competitors focus on
low-cost products or closed device solutions such as video phones. The
Company believes that the principal competitive factors in the visual
communications industry are price, video and audio quality, the ability to
connect auxiliary devices such as video disk players, reliability, service
and support, and vendor and product reputation. The Company believes that its
ability to compete successfully will depend on a number of factors both
within and outside its control, including the adoption and evolution of
industry standards, the pricing policies of its competitors and suppliers,
the timing of the introduction of new hardware and software systems and
services by the Company and others, the Company's ability to hire and retain
employees, and industry and general economic trends. The Company anticipates
that in the near future the visual communications market will continue to
polarize with certain providers focusing on capturing the mass consumer
market with lower quality and less costly software-only products or products
based on hardwired chips while the Company will continue to seek to provide
hardware and software systems for a more specialized and dedicated market.
The Company intends to market its technology and its products to professional
customers who are not currently utilizing video conferencing communications
systems. If the market for these products is established, competitors of the
Company may begin to manufacture products similar to the Company's products.
In addition, while the Company believes it has created proprietary technology
and advantages in manufacturing its products and that a competitor would
require significant investment and the efforts of a highly skilled team, there
are no barriers restricting competitors from entering into the market in
which the Company's intends to sell its products. While the Company believes
the mass market solutions do not meet the needs of its customers, the
availability of these products may have an adverse effect on the pricing of
the Company's products.
Many of the Company's current and potential competitors, have
significantly longer operating histories and/or significantly greater
managerial, financial, marketing, technical and other competitive resources,
as well as greater name recognition, than the Company. As a result, the
Company's competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements and may be able to devote
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greater resources to the promotion and sale of their products and services.
There can be no assurance that the Company will be able to compete
successfully with existing or new competitors. In addition, competition could
increase if new companies enter the market or if existing competitors expand
their service offerings. An increase in competition could result in material
price reductions or loss of market share by the Company and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
To remain competitive, the Company will need to continue to invest in
research and development and sales and marketing. There can be no assurance
that the Company will have sufficient resources to make such investments or
that the Company will be able to make the technological advances necessary to
remain competitive. In addition, current and potential competitors have
established or may in the future establish collaborative relationships among
themselves or with third parties, including the Company's Strategic Partners,
to increase the visibility and utility of their products and services.
Accordingly, it is possible that new competitors or alliances may emerge and
rapidly acquire significant market shares. Such an eventuality could have a
material adverse effect on the Company's business, financial condition and
results of operations.
SUPPLIERS AND PRODUCTION
The Company does not have supply contacts with any of its vendors and
purchases are made with purchase orders. Certain critical components and
parts used in the Company's systems, including the C8x, are procured from a
single source. The Company believes that the C8x will substantially decrease
the cost of the hardware the Company uses in its third generation products
and is necessary to permit the Company's systems to be sold at prices which
create the potential for market penetration. The C8x is only manufactured by
Texas Instruments and the Company does not have any other source for
obtaining a programmable digital signal processor which would provide the
Company with the same functions at a similar price. The Company obtains other
parts and certain components only from a single supplier of such parts or
components, even where multiple sources are available, to maintain quality
control and enhance the working relationship with suppliers. There can be no
assurance that the Company will be able to continue to obtain these parts
from these sources or that it can obtain alternatives from other terms on
terms acceptable to the Company. Any interruption in the supply of such parts
could have a short-term material adverse effect on the business and results
of operations of the Company.
The Company relies on third-party manufacturers located in Germany,
Switzerland and Finland to produce its products. To insure the quality of the
Company's systems, all of the Company's manufacturers have the demanding ISO
9000 quality certification. The Company contracts with such suppliers to
manufacture batches of products and does not have long-term contracts with
these companies. These manufacturers supply services to a variety of other
companies some of whom may be competitors of the Company. IAT's current
manufacturers specialize in relatively small batches of products. If the
Company's sales increase, it will have to examine the possibility of using
other manufacturers who specialize in larger batches. There can be no
assurance that the Company will be able to continue to obtain the services of
its existing manufacturers on terms acceptable to the Company or that it can
obtain alternatives from other terms on terms acceptable to the Company. Any
interruption in the supply of such parts could have a short-term material
adverse effect on the business and results of operations of the Company.
However, over the space of one to two quarters the Company believes that it
could identify and qualify alternate parts, with the except of C8x chips.
Over a longer-term the Company believes it could re-engineer its products to
use alternate parts.
AGREEMENTS WITH STRATEGIC PARTNERS
Texas Instruments. The Company's relationship with Texas Instruments is
evidenced by, among others, the MVP Cross License Agreement (the "MVP Cross
License Agreement") between IAT AG and Application Specific Product Group of
Texas Instruments France in 1994. The MVP Cross License Agreement expires in
2004 and can be extended for one year periods by written agreement. Pursuant
to the MVP Cross License Agreement, the Company was granted a worldwide,
non-transferable, non-assignable, non-exclusive, fully paid license to use,
modify, compile or otherwise develop as applicable certain software programs
relating to encoding and decoding pursuant to H.320, JPEG, H.261, G.728 and
G.722 standards and to make, have made, use, sell or otherwise dispose of
hardware and software products incorporating object code versions of such
software programs. Texas Instruments was granted a worldwide,
non-transferable, non-assignable, non-exclusive, fully paid license
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to use, modify, compile or otherwise develop as applicable certain software
programs relating to encoding and decoding pursuant to H.221, H.242, H.230
standards and to make, have made, use, sell or otherwise dispose of hardware
and software products incorporating object code versions of such software
programs. The Company has the obligation to keep the source code of these
programs confidential but may sublicense these programs provided that it
enters into a sublicense agreement on substantially the same terms as the MVP
Cross License Agreement. Either party to the MVP Cross License Agreement may
terminate this agreement upon written notice upon the occurrence of certain
events of default including the other party having a substantial change in
ownership such as to create a material conflict of interest.
On June 12, 1996, IAT AG and Texas Instruments entered into the Joint
Development and Cross License Agreement (the "Texas Instruments Agreement")
to reflect the changes in technology and to determine the parties rights and
obligations in light thereof. Pursuant to the Texas Instruments Agreement,
which expires on April 1, 1999, Texas Instruments and IAT AG agreed to
develop or acquire and deliver software and hardware products to each other
and to provide engineering support to each other. Subject to completing its
obligations, IAT AG is to receive a non-transferable, non-assignable,
non-exclusive license under Texas Instruments' copyrights and associated
trade secrets, solely to use, modify, compile or otherwise develop as
applicable software programs to provide quality Windows 95 video conferencing
implementation for personal computers and to make, have made, use and
sublicense use of object code versions of such software programs solely for
operation on the C8x. The license is fully paid except for T.123 Databeam
software which is royalty bearing and for which Texas Instruments negotiates
the royalty payable by IAT on a case by case basis and on a most favored
nations status. IAT AG may sublicense the programs it develops jointly with
Texas Instruments pursuant to the Texas Instruments Agreement but has the
obligation to keep the source code confidential. If Texas Instruments
licenses the use of its H.320 software library to a third party, it will pay
IAT AG the greater of 50% of the license fee or $20,000, provided, however,
that if Texas Instruments grants licenses to existing users of IAT AG's
systems, no royalty will be due to IAT AG. If Texas Instruments licenses to
third parties the use of the reference design produced by IAT AG, Texas
Instruments will pay IAT AG the greater of 35% of the license fee or $7,000.
If Texas Instruments sells evaluator kits defined as bundled hardware and
software as produced by IAT, Texas Instruments has to pay to IAT 10% of the
kit fee provided, however, that Texas Instruments has the right to provide
the kit without the fee or without separately identifying fees and in such
event no fees are due to IAT AG. The Texas Instruments Agreement may be
terminated by either party upon the same terms and conditions as stated in
the MVP Cross License Agreement described above.
Deutsche Telekom. In December 1992, IAT Germany and DT entered into the
Contract of the Communication Computer Development Community (the
"Development Agreement") to jointly develop software for MFKS on commercially
available boards. IAT Germany and DT were responsible for equal parts of the
development cost of these components which were used in first and second
generations of the MFKS system. The agreement provided that upon full
development of the components, the parties would enter into a licensing
agreement setting forth the rights to the jointly developed intellectual
property.
In March 1994, IAT AG and DT entered into a Licensing and General
Distribution Agreement (the "DT Licensing Agreement") which provides for a
framework within which both parties will endeavor to jointly launch and
exploit products developed pursuant to the Development Agreement. The DT
Licensing Agreement has an unspecified duration and may be terminated upon
breach by either party. Each party has the right to grant sublicenses upon
receipt of consent to the other party. If one party decides not to
participate in the joint exploitation of products, the other party shall be
given the possibility to exploit the product on its own. The DT Licensing
Agreement was intended to provide a framework within which to develop
products, and royalty payments are to be determined by the parties in the
future.
In October 1995, IAT AG and DT entered into the General Cooperation
Agreement Concerning Joint Further Development of IAT/Deutsche Telekom
Software Codec on the Basis of the Texas Instruments Parallel Processor
TMS320C8x (the "DT Cooperation Agreement"). The DT Cooperation Agreement
expires on December 31, 1996 and is the subject of extension negotiations. It
provides that the prototype of the codec developed pursuant to the
Development Agreement will be further refined and integrated with the C8x.
Each partner to the DT Cooperation Agreement bears the cost of the research
and development. To date, each partner has contributed $1.0 million to the
cost of research and development. The DT Cooperation Agreement further
provides that IAT
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AG transfers to DT all of its rights and obligations under the MVP Cross
License Agreement. Each party has the right to terminate the DT Cooperation
Agreement in whole or in part upon written notice if the other party does not
pursue the goals described in the DT Cooperation Agreement, the cost
projections provided for in the DT Cooperation Agreement are exceeded and the
completion deadlines are not met.
IBM Deutschland Informationssysteme GmbH and Deutsche Telekom. In December
1994, IAT AG, DT and IBM Germany entered into the Cooperation Contract
Covering the Development of Version 3 of the Multimedia Information and
Communication System MIKS (the "MIKS Agreement"). The MIKS Agreement
supersedes agreements between IAT AG, DT and IBM Germany with respect to
versions 1 and 2 of the MIKS Interactive Kiosk and expires on December 30,
1996. The Company believes the goals of the MIKS Agreement have been achieved
and does not intend to extend the agreement. The MIKS Agreement provides that
IAT AG, DT and IBM Germany will jointly develop the MIKS Interactive Kiosk as
a dual-board solution with each partner bearing one-third of the expenses of
this development. Pursuant to the MIKS Agreement, each party has the right to
use the jointly developed components and parts for their own use, to sell to
third parties for their internal usage and to allow third parties to utilize
components and parts for marketing as resellers. The MIKS Agreement provides
for the collection of royalties in the amount of 3,000 Deutsche Marks for
each component and nine (9%) percent of the sales per part used outside the
MIKS Interactive Kiosk. Each party is to receive one- third of the royalties
until the development costs have been recovered. The Company believes it is
possible that it may enter into a new agreement with DT and IBM Germany with
respect to MIKS but no assurance can be given that such an agreement will be
entered into on terms favorable to the Company, if at all.
Olympus Optical Co. (Europe) GmbH. In March 1996, IAT Germany entered into
a Cooperation Agreement with Olympus pursuant to which IAT Germany agreed to
provide Olympus with IAT Germany's resale price list and to allow Olympus to
resell IAT Germany's products to its customers. In addition, IAT Germany may
procure Olympus microscopes, including any and all accessories, at a resale
discount of 20% of the retail cost. IAT Germany and Olympus agree to provide
initial training for their respective employees in the use of their products
and to consider a long-term partnership.
EMPLOYEES
As of November 30, 1996, the Company had a total of 52 full-time employees
of which 36 and 16 are located in Germany and in Switzerland respectively. Of
these employees, 33 are employed in engineering and product development, 10
in sales and marketing, and 9 in managerial and administrative functions. The
Company's employees are not party to any collective bargaining agreements or
labor unions. The Company has not experienced any work stoppages and believes
that its relations with its employees are good.
PROPERTY
The Company does not own but leases approximately 6500 square feet of
office space and approximately 350 square feet of storage space in Turgi,
Switzerland, approximately 12,000 square feet of office and work space in
Bremen, Germany and approximately 430 square feet of office space in Berlin,
Germany. Acquisition of real property located in Switzerland by the Company
or any of its subsidiaries is severely restricted under Swiss law. However,
IAT does not intend to acquire real property in Switzerland and believes that
none of its facilities are material to its operations and believes that it
could find alternate space with minimal interruption to its operations.
LITIGATION
The Company's subsidiaries are parties to certain legal proceedings. The
Company believes that none of these proceedings is likely to have a material
adverse effect on the Company's financial position.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions of the
executive officers and directors of Multimedia:
Name Age Position
----------------- ----- --------------------------------------------------
Viktor Vogt ..... 48 Co-Chairman of the Board, Chief Executive Officer
and President
Jacob Agam ...... 41 Co-Chairman of the Board
Klaus Grissemann 53 Chief Financial Officer and Director
Volker Walther .. 35 Director
Franz Muller .... 45 Chief Technical Officer
Wilhelm Gudauski 46 Managing Director, IAT Germany
Dr. Viktor Vogt has served as the Co-Chairman of the Board, Chief
Executive Officer and President of Multimedia since its organization in
October 1996. Dr. Vogt is a co-founder and has served as Chief Executive
Officer and director of IAT AG and Managing Director of IAT Germany since
their formations in 1989 and 1990, respectively. He has also served as
Chairman of the Board of IAT AG since October 1996. Prior to 1988, Dr. Vogt
was Professor for mathematics and computer-science at the University of
Erlangen-Nurnberg, Germany. He was a pioneer scientist at the Academy for
Economics and Administration in Nurnberg in the implementation of computer
science in education and published several works in the fields of multimedia,
authoring and computer aided instruction (CAI) systems. Dr. Vogt received his
degree in Mathematics and Physics (Dr. rer. nat.) from Friedrich-Alexander
University in Erlangen in 1980.
Jacob Agam has served as the Co-Chairman of the Board of Multimedia since its
organization in October 1996. Mr. Agam is a founder and Chairman of the Board of
Orida Capital Ltd., ("Orida") a merchant banking and venture capital firm, since
its inception in 1993, and a director of Vertical, a principal shareholder of
the Company since 1995. Mr. Agam in his capacity as Chairman of Orida, spends a
portion of his business time providing services to companies other than IAT.
Orida provides services for Vertical pursuant to an agreement between Orida and
Vertical. Mr. Agam received a law degree from Tel Aviv University in 1984 and
his LLM in Securities and Corporate Finance from the University of Pennsylvania
in 1986.
Klaus Grissemann has served as Chief Financial Officer of Multimedia since
the organization of Multimedia in October 1996 and was elected to serve as a
director in December 1996. Mr. Grissemann joined IAT AG in 1989 as Chief
Financial Officer and was elected as a Director of IAT AG in 1993. From 1979
until 1988, Mr. Grissemann was Chief Financial Officer of Jaeger Le Coultre
AG, a Swiss watch manufacturer.
Volker Walther was elected to serve as a director of Multimedia in
December 1996. In 1996, Mr. Walther became Chief Executive Officer and
majority shareholder of Walther Glas GmbH, a glass manufacturing company in
Germany which produces car lights, household glassware and gift items where
he was general manager from 1993 to 1996 and buying manager from 1991 to
1993.
Wilhelm Gudauski joined IAT Germany in January 1994 as General Manager.
From 1988 until 1994, Mr. Gudauski has served as Managing Director for
Schlutersche Verlagsanstalt and Druckerei Hannover/Germany, publishing
houses, as head of on-line media.
Franz Muller joined IAT AG in 1991 to head its Research and Development
department and has been its Chief Technical Officer since 1994. From 1977
until 1991, Mr. Muller was employed by Siemens Germany where he was head of
research and development for mainframe computer systems from 1987 until 1991.
The Board of Directors of Multimedia has determined that, subsequent to
this Offering, it will elect two directors who are not affiliated with or
employed by the Company and who in the opinion of the Board of Directors do
not have a relationship which would interfere with the exercise of
independent judgement in carrying out the responsibilities of a director (the
"Independent Directors").
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Directors serve until the next annual meeting or until their successors
are elected and qualified subject to the provisions of the Investor Rights
Agreement (as defined herein) which provides that so long as Vertical holds
at least 10% of the Common Stock to be issued upon conversion of the Series A
Preferred Stock, Vertical has the right, but not the obligation, to nominate
two persons as members of the management state for election to Multimedia's
Board of Directors. So long as Vertical holds at least 5% of such securities,
it has the right, but not the obligation to nominate one such person. Mr.
Agam, the Co-Chairman of the Board is the person designated by Vertical and
elected to the Board of Directors. Vertical plans to nominate a second
director and the Board of Directors has determined that it will elect such
person to the Board of Directors. The existence of such rights solidified the
control over the Company by its existing stockholders. See "Certain
Transactions -- Private Placement and Related Transactions." Officers serve
at the discretion of the Board of Directors, subject to rights, if any, under
contracts of employment with the Company.
Board Committees
The Board of Directors has appointed Mr. Agam, Dr. Vogt and Mr. Grissemann
to the Underwriting Committee. Pursuant to the provisions of the Stock
Purchase Agreement, the Underwriting Committee shall consist of four members
with two members appointed by each of Vertical and Multimedia. Pending the
nomination of a second director by Vertical, Vertical has waived its right to
name a second member to the Underwriting Committee. Mr. Agam, as designated
by Vertical, serves as the Chairman of the Underwriting Committee. The
Underwriting Committee is vested with full and exclusive responsibility and
authority on behalf of Multimedia to select an underwriter and to negotiate
all of the terms and conditions of any such underwriting including, without
limitation, this Offering. In the event that the Underwriting Committee is
unable to produce a majority vote on any particular issue, such issue shall
be decided by a vote of the Board of Directors of Multimedia provided that
the resolution of any such issue by the Board of Directors shall not be
effectuated without the written consent of Vertical.
Multimedia intends to establish an Audit Committee, a Compensation
Committee and a Stock Option Committee. Upon the election of the Independent
Directors it is expected that the Independent Directors will be members of
the Compensation Committee with Mr. Agam and the sole members of the Audit
Committee and the Stock Option Committee.
Executive Compensation
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to Dr. Vogt, the Co-Chairman and
Chief Executive Officer of Multimedia and the three most highly compensated
executive officers other than Dr. Vogt whose annual salary and bonus exceeds
$100,000 (the "Named Executive Officers"), during the fiscal year ended
December 31, 1996:
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SUMMARY COMPENSATION TABLE
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ------------------------ -------------------------
Restricted
Other Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Award(s) SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------------ ------ ----------- -------- ------------ ------------ --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Viktor Vogt ............ 1996 133,845(1) -- 16,812(3) -- -- -- --
Co-Chairman and 10,329(4)
Chief Executive Officer
1995 133,845(1) 7,692 15,458(3) -- -- -- --
10,329(4)
1994 133,845(1) 11,538 15,462(3) -- -- -- --
9,701(4)
Klaus Grissemann(2) .... 1996 150,827 -- 9,738(4) -- -- -- --
Chief Financial Officer
1995 126,981 -- 4,058(4) -- -- -- --
1994 114,885 -- -- -- -- -- --
Franz Muller ........... 1996 96,700 -- 8,561(3) -- -- -- --
Chief Technical Officer 9,563(4)
1995 96,700 -- 5,952(3) -- -- -- --
9,563(4)
1994 89,700 -- 5,807(3) -- -- -- --
Wilhelm Gudauski ....... 1996 113,164 -- 7,600(3) -- -- -- --
Managing Director, 11,713(4)
IAT Germany
1995 106,196 -- 11,713(4) -- -- -- --
1994 99,560 -- 7,560(3) -- -- -- --
8,785(4)
</TABLE>
- ------
Compensation is paid in Swiss Francs or Deutsche Marks, as the case may be at
the exchange rate of $1.00 = 1.30 SF and $1.00 = 1.55 DM on December 8, 1996.
(1) Includes a non-accountable expense allowance of $9,230.
(2) Mr. Grissemann is not an employee of the Company. His services are
provided on a per diem basis by Grissemann Consulting S.A. See "--
Employment and Consulting Agreements."
(3) Pursuant to the pension system in existence in Switzerland, the Company
contributes these amounts to pension funds selected by the executive officer
from among several independent pension funds chartered by the government to
collect pension contributions and to make pension payments upon retirement.
In the case of Mr. Gudauski, the Company contributes those amounts to the
state mandated pension fund.
(4) Represents payments made by the Company for automobile leases for the
Named Executive Officers.
COMPENSATION OF DIRECTORS
Directors of Multimedia currently do not receive any compensation or
reimbursement of expenses in connection with their service on the Board of
Directors but the Company may establish compensation policies in the future.
Pursuant to the provisions of the Stock Purchase Agreement, Vertical is
entitled to receive a monthly payment of $5,000 prior to, and a monthly
payment of $12,000 subsequent to, the consummation of this Offering as
compensation for the services of the Co-Chairman of the Company nominated by
Vertical. Jacob Agam is the current nominee of Vertical. To date, the Company
has not made these payments but has accrued such payments and intends to make
such payments (including accrued payments) in the future.
Employment and Consulting Agreements
The Company and Dr. Vogt intend to enter into an employment agreement
pursuant to which Dr. Vogt agrees to serve as the Company's Co-Chairman,
Chief Executive Officer and President for an initial term of three years.
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<PAGE>
Mr. Grissemann is not an employee of the Company. His services are provided
on a per diem basis by Grissemann Consulting S.A. pursuant to an agreement (the
"Grissemann Agreement") dated September 1, 1992 and amended on December 19, 1994
between IAT AG and Grissemann Consulting S.A. The Grissemann Agreement has an
indefinite term and provides that Mr. Grissemann is responsible for the
administration and accounting of IAT AG and that the amount of his business time
which he is to devote to IAT AG's affairs is to be agreed among the parties but
will in no event be less than thirty percent of Mr. Grissemann's business time.
Grissemann Consulting S.A. is paid a per diem fee of SF 775 (approximately $596)
to be amended yearly in line with increases in salary of IAT AG's other
executive officers. In addition, the Grissemann Agreement provides that Mr.
Grissemann will be provided with an automobile at IAT AG's expense.
IAT AG and Franz Muller entered into an employment agreement on March 1, 1991
(the "Muller Agreement") pursuant to which Mr. Muller was appointed Director of
Product Development (Hardware), Technical Support of IAT AG. The Muller
Agreement has an indefinite term and provides for an annual salary of SF 110,110
(approximately $84,700) and may be terminated by either party upon three months
notice. In addition, the Muller Agreement contains a confidentiality provision
which extends beyond termination of the employment relationship. The Muller
Agreement was amended effective as of July 1, 1993 to provide that Mr. Muller
assigns to IAT AG any and all rights to work and computer programs which he
develops singly or in cooperation with others during the performance of his
duties.
IAT Germany and Wilhelm Gudauski entered into an employment agreement
effective on January 3, 1994 (the "Gudauski Agreement") pursuant to which Mr.
Gudauski was appointed Manager of Marketing and Sales. On July 12, 1994, Mr.
Gudauski became Managing Director of IAT Germany. The Gudauski Agreement has an
indefinite term and under German law, ends at the mandatory retirement age of
65. The Gudauski Agreement provides for an annual salary of DM 150,000
(approximately $96,774), certain benefits and the payment of an undetermined
bonus upon reaching certain goals to be agreed upon by the parties. The Gudauski
Agreement may be terminated by either party upon six months notice and provides
that Mr. Gudauski may not compete in Germany with IAT Germany for one year upon
termination during which period IAT Germany will be obligated to pay Mr.
Gudauski 70% of his salary, bonus and certain other benefits unless Mr. Gudauski
was terminated for cause.
1996 STOCK OPTION PLAN
The Company's Board of Directors has approved and stockholders have
approved the Company's 1996 Stock Option Plan (the "1996 Plan"). The 1996
Plan, which provides for a grant of a limited number of non- qualified and
incentive stock options in respect of up to 500,000 shares of Common Stock to
eligible employees and advisors, is designed to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to key employees, officers and advisors to the Company
and its subsidiaries and to promote the success of the Company's business.
Each option granted pursuant to the 1996 Plan is designated at the time of
grant as either an "incentive stock option" or as a "non-qualified stock
option." Grants to executive officers may be made only at the fair market
value of the underlying stock on the date of issuance. The issuance of
options at fair market value on grant date constitutes a performance goal
under Section 162(m) of the Internal Revenue Code. The following summary
description of the Plan is qualified in its entirety by reference to the Plan
itself, which is filed as an exhibit to the registration statement of which
this Prospectus is a part.
Administration of the Plan. The 1996 Plan will be administered by the
Stock Option Committee (the "Committee"), which will be appointed by the
Board of Directors. Only the Independent Directors may serve on the
Committee. The Committee determines who among those eligible will be granted
options, the time or times at which options will be granted, the number of
shares to be subject to each option, the duration of options, any conditions
to the exercise of options and the date or dates on, and the price at which,
options may be exercised.
The 1996 Plan may be amended by the Board without stockholder approval,
except that stockholder approval is required to (i) decrease the minimum
exercise price for incentive stock options ("ISOs"); (ii) extend the term of
the 1996 Plan beyond ten years; (iii) extend the maximum term of the options
granted under the 1996 Plan beyond ten years; (iv) withdraw the
administration of the 1996 Plan from the Committee; (v) expand
52
<PAGE>
the class of eligible participants; (vi) increase the aggregate number of
shares of Common Stock which may be issued pursuant to the provisions of the
1996 Plan; and (vii) change the material terms of the performance goal within
the meaning of Internal Revenue Code Section 162(m).
Unless the Plan is terminated earlier by the Board of Directors, it will
terminate on the earlier of (i) the date when all shares of the Common Stock
reserved for issuance under the Plan have been acquired through the exercise
of options granted thereunder, (ii) January 2007 or (iii) such earlier date
as the Board of Directors may determine.
Shares Subject to the Plan. The 1996 Plan provides that options may be
granted with respect to a total of 500,000 shares of Common Stock. Under
certain circumstances involving a change in the number of shares of Common
Stock without receipt by the Company of any consideration therefor, such as a
stock split, stock consolidation or payment of a stock dividend, the class
and aggregate number of shares subject to options under the 1996 Plan will be
proportionally adjusted. In addition, if the Company is involved in a merger,
consolidation, dissolution or liquidation, the options granted under the 1996
Plan will be adjusted. If any option expires or terminates for any reason,
without having been exercised in full, the unpurchased shares subject to such
option will be available again for the purposes of the 1996 Plan.
Participation. Grants under the 1996 Plan may be granted to employees of
the Company and its subsidiaries and any other individual who, in the
judgment of the Committee, provides valuable and important services to the
Company. Non-employee directors are not eligible to participate in the 1996
Plan. No participant may receive, in the aggregate, options in respect of
more than 100,000 shares.
Option Price. The exercise price of each option will be determined by the
Committee. With respect to incentive stock options, the exercise price may
not be less than 100% of the fair market value of the shares of Common Stock
covered by the option on the date the option is granted. If an incentive
stock option is granted to an employee who owns over 10% of the total
combined voting power of all classes of the Company's stock, then the
exercise price may not be less than 110% of the fair market value of the
Common Stock underlying the option on the date the option is granted. The
exercise price of non-qualified stock options may be any price set by the
Committee; provided, however, that the exercise price of any grant to any
executive officer shall not be lower than the fair market value of the
underlying Common Stock on the date of grant. The issuance of options at fair
market value on the date of grant constitutes a performance goal under
Section 162(m) of the Internal Revenue Code. Accordingly, grants under the
Plan should qualify as performance-based compensation.
Term of Options. The Committee shall fix the term of each option, provided
that the maximum term of each option shall be ten years. Incentive stock
options granted to a person who owns over 10% of the total combined voting
power of all classes of the Company's stock shall expire not more than five
years after the date of grant. The 1996 Plan provides for the earlier
expiration of options held by a participant under certain terminations of
employment with the Company. The Committee will have discretion on a case by
case basis, with respect to any optionee whose employment is terminated for
any reason whatsoever, to accelerate the vesting of any options outstanding
on the date employment is terminated to permit the optionee to exercise the
option during the remaining term of such options. Shares purchased pursuant
to the exercise of options granted under the 1996 Plan must be paid for in
United States currency, or, at the Committee's discretion, in shares of the
Company's Common Stock already owned by the participant exercising the
options.
Restrictions on Transfer, Grant and Exercise. An option may not be
transferred other than to members of the holder's family, trusts and
charities. Any other transfers are permissible only upon prior written
approval of the Committee. Notwithstanding the above, the option agreement
accompanying the issuance of any incentive stock options shall limit the
transferability of such ISOs (as defined herein) to the extent required by
the then- applicable tax provisions governing the qualification of ISOs. The
aggregate fair market value (determined at the time the option is granted) of
the shares as to which a Grantee may first exercise incentive stock options
in any one calendar year may not exceed $100,000. The Committee may impose
any other conditions on the exercise of options it deems appropriate.
Federal Income Tax Consequences to the Company and the Participant.
Incentive Stock Options. ISOs: Options granted under the 1996 Plan which
constitute ISOs will, in general, be subject to the following Federal income
tax treatment:
53
<PAGE>
(i) The grant of an ISO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) A participant's exercise of an ISO will result in no Federal income
tax consequences to the Company.
(iii) A participant's exercise of an ISO will not result in ordinary
Federal taxable income to the participant, but may result in the imposition
of an increase of, or an increase in, the alternative minimum tax. A
participant's holding period for shares acquired upon the exercise of an ISO
will commence the day after acquisition. If shares acquired upon exercise of
an ISO are not disposed of within the same taxable year the ISO is exercised,
the excess of the fair market value of the shares at the time the ISO is
exercised over the option price is included in the participant's computation
of alternative minimum taxable income.
(iv) If shares acquired upon the exercise of an ISO are disposed of within
two years of the date of the option grant, or within one year of the date of
the option exercise, the participant will realize ordinary Federal taxable
income at the time of the disposition to the extent that the fair market
value of the shares at the time of exercise exceeds the option price, but not
in an amount greater than the excess, if any, of the amount realized on the
disposition over the option price.
(v) Short-term or long-term capital gain will be realized by the
participant at the time of such a disposition to the extent that the amount
of proceeds from the sale exceeds the fair market value at the time of the
exercise of the ISO.
(vi) Short-term or long-term capital loss will be realized by the
participant at the time of such a disposition to the extent that the option
price exceeds the amount of proceeds from the sale.
(vii) If a disposition is made as described in this section, the Company
will be entitled to a Federal income tax deduction in the taxable year in
which the disposition is made in an amount equal to the amount of ordinary
Federal taxable income realized by the participant.
(viii) If shares acquired upon the exercise of an ISO are disposed of
after the later of two years from the date of the option grant or one year
from the date of the option exercise, the participant will realize long-term
capital gain or loss in an amount equal to the difference between the amount
realized by the participant on the disposition and the participant's Federal
income tax basis in the shares, usually the option exercise price. In such
event, the Company will not be entitled to any Federal income tax deduction
with respect to the ISO.
Non-Qualified Stock Options. Non-Qualified Stock Options ("NQSOs"):
Options granted under the 1996 Plan which constitute NQSOs will, in general,
be subject to the following Federal income tax treatment:
(i) The grant of an NQSO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) The exercise of an NQSO will generally result in ordinary Federal
taxable income to the participant in an amount equal to the excess of the
fair market value of the shares at the time of exercise over the option
price.
(iii) A deduction from Federal taxable income will be allowed to the
Company in an amount equal to the amount of ordinary income recognized by the
participant.
(iv) Upon a subsequent disposition of shares, a participant will recognize
a short-term or long-term capital gain or loss equal to the difference
between the amount received and the tax basis of the shares, usually fair
market value at the time of exercise.
54
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS UNDERTAKEN PRIOR TO ORGANIZATION AND FORMATION OF THE COMPANY
Multimedia was formed in September 1996 as a holding company for the
existing business of IAT AG and IAT Germany which were organized in 1989 and
1991, respectively. IAT AG and IAT Germany incurred operating losses since
their inception. As a result, between May 1992 and April 1993, in compliance
with Swiss law, IAT AG underwent a financial reorganization. IAT AG filed and
was granted an application for a stay of payment with the applicable court in
Switzerland and eventually reached a court-approved agreement with its
unprivileged creditors to accept forgiveness of 90% of their claims and to be
paid the remaining 10%. In addition, IAT AG also altered its capital
structure in June 1993.
Since 1993 and in compliance with Swiss law, IAT AG took steps to
safeguard the interests of it's creditors and to raise capital to fund its
operations by obtaining unsecured subordinated loans not bearing interest and
having no specific maturity date from former stockholders of IAT AG and
current stockholders of Multimedia and by obtaining additional shareholders
equity by increasing the share capital of IAT AG, which according to Swiss
law is required to be fixed. The share capital was increased in various steps
from SF 3,000,000 to SF 10,000,000 between 1993 and 1996 except for one
instance where Robert Klein Handel & Co. GmbH was issued 1,500 shares of IAT
AG for total cash consideration of SF 1.875 million, ($1.56 million), the
7,000 additional shares were either paid for in cash on the basis of one
share for a cash payment of SF 1,000 or by converting loans into share
capital on the basis of one share for each SF 1,000 in loan forgiveness. In
October 1996, in connection with the formation of Multimedia, all of the
10,000 shares of IAT AG for which the shareholders of IAT AG had contributed
SF 10.275 million ($8.38 million) were exchanged (the "Exchange") for
4,375,000 shares of Common Stock of Multimedia and the Shareholder Warrant at
a purchase price equivalent to approximately $1.86 per share of Common Stock
of Multimedia.
In connection with the increase in share capital in July 1996, whereby IAT
AG issued 900 shares to Volker Walther, a director and stockholder of
Multimedia for total consideration of SF 900,000, bmp Management Consultants,
also a stockholder of Multimedia, was paid a finders fee by the Company of
approximately $60,000.
During the period from August to October 1996, Mr. Walther made several
unsecured subordinated loans to IAT AG in the aggregate amounts of SF 900,000
($720,000) and DM 700,000 ($462,000). These loans have an annual interest
rate of 10% and provide that they will be repaid at the earlier of the
consummation of this Offering or June 30, 1997.
On November 6, 1996, Klaus-Dirk Sippel, a principal stockholder of
Multimedia, made an unsecured subordinated loan to IAT AG in the amount of SF
650,000 ($520,000). A portion of this loan was used to repay an unsecured
non-interest bearing loan in the amount of SF 150,000 ($120,000) made in
February 1996 to IAT AG by Telefutura, a company controlled by Klaus-Dirk
Sippel. This loan has an annual interest rate of 8% and principal and accrued
interest are due and payable on January 1, 1998. In December 1996, Vertical
transferred 200,000 Investor Warrants it had purchased in the Private
Placement to Mr. Sippel.
In connection with the operations of IAT Germany, the capital was
increased in 1993 and 1995 from the initial DM 100,000 ($ ) to the current
DM 700,000 ($ ). In addition, on December 19, 1995, HIBEG, the 25.1%
shareholder of IAT Germany, made an unsecured subordinated loan to IAT
Germany in the amount of approximately DM 750,000 (the "HIBEG Loan"). The
HIBEG Loan bears interest at 5% per annum payable semi-annually and will be
increased to 10% per annum during the year when the retained earnings of IAT
Germany exceeds DM 87,500 (approximately $58,000). IAT Germany will be
required to make semi-annual payments of 10% of the principal starting on
June 30, 2000 until the principal is repaid in full.
In addition to the transactions listed above, Messrs. Sippel and Suter
have jointly and severally guaranteed two loans in the aggregate amount of SF
600,000 ($480,000) of two loans and each of Messrs. Sippel, Suter and
Holthuisen have jointly and severally guaranteed IAT AG's credit line in the
amount of SF 700,000 ($560,000) under IAT AG's credit agreement with Swiss
Bank Corporation for SF 1,900,000 ($1.52 million). Furthermore, IAT AG has
guaranteed one of two credit lines of IAT Germany from Volksbank Sottrum in
the amount of DM 700,000 (approximately $555,600) and HIBEG. Dr. Vogt and Mr.
Gudauski have each guaranteed the second credit line of IAT Germany from
Volksbank Sottrum in the amount of DM 350,000 (approximately $228,800). These
guarantees are offset by a lien on accounts receivable balances.
55
<PAGE>
PRIVATE PLACEMENT AND RELATED TRANSACTIONS
Simultaneously with the Exchange, pursuant to the Stock Purchase Agreement
between the Company, IAT AG, IAT Germany and Vertical dated October 24, 1996
(the "Stock Purchase Agreement"), the Company completed the Private Placement
and issued an aggregate of 1,980,000 shares of Series A Preferred Stock and
the Investor Warrants to Vertical, Behala Anstalt, Lupin Investments Services
Ltd., Henilia Financial Ltd. and Avi Suriel for an aggregate purchase price
of $1.5 million or $.76 per share of Series A Preferred Stock of Multimedia.
See "Principal Stockholders."
The Stock Purchase Agreement contains certain continuing obligations of
the Company. Pursuant to the Stock Purchase Agreement, Multimedia is
obligated to use all reasonable efforts to file a registration statement
containing this Prospectus no later than December 31, 1996. In addition,
Multimedia is obligated to establish an underwriting committee of its Board
of Directors consisting of four members with two members appointed by each of
Vertical and Multimedia. Vertical has the right to designate the Chairman of
the underwriting committee which is vested with full and exclusive
responsibility and authority on behalf of Multimedia to select an underwriter
and to negotiate all of the terms and conditions of any such underwriting
including, without limitation, this Offering. In the event that the
underwriting committee is unable to produce a majority vote on any particular
issue, such issue shall be decided by a vote of the Board of Directors of
Multimedia, provided, that the resolution of any such issue by the Board of
Directors shall not be effectuated without the written consent of Vertical.
The Stock Purchase Agreement further provides that, if on the effective
date of this Offering, the aggregate value of the shares of Common Stock (as
measured by the per share offering price of the shares of Common Stock
offered in this Offering) owned by non-management stockholders of Multimedia
(the "Non-Management Stockholders") is less than $15,000,000 (the amount of
such shortfall being hereinafter referred to as the "Shortfall"), Vertical
and Dr. Viktor Vogt, Klaus Grissemann, Wilhelm Gudauski, Franz Muller and
other members of management (the "Management Stockholders") shall, within
five business days of the consummation of this Offering, transfer to the
Non-Management Stockholders such additional number of shares of Common Stock
as shall have a value equal to the Shortfall, with Vertical contributing 60%
of the Shortfall and the Management Stockholders contributing 40% of the
shortfall, pro rata. Alternatively, if on the effective date of this
Offering, the aggregate value of the shares of Common Stock (as measured by
the per share offering price of the shares of Common Stock offered in this
Offering) owned by the Non-Management Stockholders is greater than
$25,000,000 (the amount of such excess amount being hereinafter referred to
as the "Excess Amount"), the Non-Management Stockholders shall, within five
business days of the consummation of this Offering, distribute, without any
further consideration, such number of shares of Common Stock as shall have a
value equal to (i) 60% of the Excess Amount to Vertical and (ii) 40% of the
Excess Amount to the Management Stockholders, pro rata according to their
respective stockholdings.
The Stock Purchase Agreement further provides that until October 24, 1999
Multimedia shall pay to Vertical monthly compensation to Vertical for the
services of the Co-Chairman of the Company nominated by Vertical each month
prior to the consummation of this Offering of $5,000 and for each month
subsequent to the consummation of this Offering of $12,000. Jacob Agam is the
current nominee of Vertical. To date, the Company has not made these payments
but has accrued such payments and intends to make such payments (including
accrued payments) in the future.
Multimedia further agreed that, for so long as Vertical shall hold the
Series A Preferred Stock (or Common Stock issued upon conversion thereof or
upon exercise of the Investor Warrant), without Vertical's consent, the
composition of the Board of Directors of IAT AG and IAT Germany shall be
identical to the composition of the Board of Directors of Multimedia;
provided, that consent shall not be withheld if required to comply with Swiss
law.
Multimedia has further agreed that it will cause IAT AG and IAT Germany
not to issue, and will not permit the issuance of, any shares of capital
stock (or any security convertible into shares of capital stock) of IAT AG or
IAT Germany, it being the intention of Multimedia and Vertical that IAT AG
shall remain a direct or indirect wholly-owned subsidiary of Multimedia and
IAT Germany shall remain a direct or indirect subsidiary of Multimedia.
56
<PAGE>
Amendment No. 1 to the Stock Purchase Agreement to be entered into by the
parties will provide that Vertical shall not enter into an agreement or make
any investment in an entity engaged in the visual communications business
prior to January 1, 1998 and that subsequent to January 1, 1998, Vertical,
prior to entering into an agreement or making any investment in an entity
engaged in the visual communications business will provide the Company the
opportunity to enter into such agreement or make such investment instead of
Vertical.
In connection with the Private Placement, the Company also entered into
the Investor Rights Agreement with Vertical (the "Investor Rights Agreement")
which provides that Vertical has the right, but not the obligation, to
nominate as a member of the management slate for election to the Company's
Board of Directors one or two persons for so long as Vertical will hold at
least 5% or 10%, respectively, of the Series A Preferred Stock (or at least
5% or 10%, respectively, of the Common Stock issuable upon conversion of the
Series A Preferred Stock or upon exercise of the Investor Warrants). The
Company agreed that one such person shall be elected Co-Chairman of the Board
of Directors of the Company. The Investor's Rights Agreement further provides
for one demand and two piggy-back registration rights with respect to the
Common Stock issuable upon conversion of the Series A Preferred Stock and the
exercise of the Investor Warrants.
In addition, also in connection with the Private Placement, the Company
entered into the Marketing Agreement with General Capital, an affiliate of
Vertical. The Marketing Agreement provides that General Capital will assist
the Company in connection with marketing its products worldwide, arranging
debt or equity financing for the Company's products to be purchased by its
customers, and arranging financing for the Company's operations, leasing
programs, joint ventures and distribution arrangements, in each case for the
further enhancement of the Company's marketing strategy. The Marketing
Agreement has a five year term and expires on October 26, 2001. Pursuant to
the Marketing Agreement, the Company paid $100,000 at the closing of the
Private Placement and is obligated to pay $300,000 at such time as the
Company's consolidated stockholders' equity exceeds $6,000,000 and an
additional $100,000 payable at such time as the Company's consolidated
stockholders' equity exceeds $8,000,000, provided that the current
liabilities of the Company used to determine the consolidated stockholders'
equity of the Company shall not exceed $3,500,000 and, to the extent it
exceeds $3,500,000 any such additional amounts shall not reduce such
stockholders' equity. The consummation of this Offering will trigger the
$400,000 payment which will be made with the proceeds of this Offering. The
Marketing Agreement further provides that Multimedia will provide General
Capital with certain technical and other information relating to its business
and operations as is reasonable and necessary for General Capital to market
the Company's products. In addition, Multimedia will provide General Capital
with the necessary sales promotion materials to market the Company's products
and Multimedia shall make its management available to General Capital and
prospective customers at such reasonable times and locations as is necessary
for General Capital to market Multimedia's products. In connection with these
provisions, General Capital agrees that, during the term of the Marketing
Agreement and for a period of five years following such term, it shall not
disclose to any third party any trade secrets or other confidential
information for any purpose other than the performance of its duties under
the Marketing Agreement and upon the prior written approval of Multimedia.
General Capital further agreed that during the term of the Marketing
Agreement and for a period of two years thereafter it shall not directly or
indirectly own, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with the
business of Multimedia as such business exists within any geographical area
in which Multimedia conducts its business. Either party may terminate the
Marketing Agreement at any time after June 30, 1997 if the Company's working
capital does not exceed $4,000,000 by such date, provided, however, that in
the event that the Company's working capital exceeds such amount by June 30,
1997, the Marketing Agreement will not be terminable by either party.
Amendment No. 1 to the Marketing Agreement to be entered into by the
parties will provide that General Capital, during the term of the Marketing
Agreement and for a period of three years thereafter shall not directly or
indirectly own, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with the
business of Multimedia without any geographical limitation.
REVERSE STOCK SPLIT
In connection with the Reverse Stock Split effected by the Company in
December 1996, the outstanding capital stock of the Company was reduced from
an aggregate of 6,600,000 shares to 6,250,000 resulting in 4,375,000 shares
of Common Stock and 1,875,000 shares of Series A Preferred Stock outstanding.
57
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ESCROW SHARES
In connection with this Offering, the existing stockholders will deposit
500,000 shares of Common Stock into escrow. See "Principal Stockholders --
Escrow Shares."
EMPLOYMENT AGREEMENTS
The Company has entered into written employment and consulting agreements
with Grissemann Consulting S.A., Franz Muller and Wilhelm Gudauski and
intends to enter into written employment agreements with Dr. Vogt
concurrently with the completion of this Offering. See "Management --
Employment and Consulting Agreements."
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
Common Stock prior to this Offering and as adjusted to give effect to the
sale of the 3,100,000 Units offered hereby by (i) each director of
Multimedia, (ii) each of the Named Executive Officers, (iii) all executive
officers and directors of the Company as a group, and (iv) each person known
by the Company to own beneficially more than five percent of the outstanding
Common Stock.
<TABLE>
<CAPTION>
Number of Shares Beneficially Percentage of Shares
Owned Beneficially Owned
------------------------------ ------------------------
Name and Address Before After Before After
of Beneficial Owner(1) Offering Offering Offering Offering
- ------------------------------------------- ----------- --------------- ---------- ----------
<S> <C> <C> <C> <C>
Viktor Vogt(2) .......................... 775,382 775,382(3) 12.41% 8.29%
Jacob Agam(4) ........................... -- -- -- --
Klaus Grissemann(2) ..................... 189,395 189,395(5) 3.03% 2.03%
Volker Walther(6) ....................... 890,750 890,750 14.25% 9.53%
Franz Muller(2) ......................... 94,697 94,697(7) 1.52% 1.01%
Wilhelm Gudauski(2) ..................... 142,046 142,046(8) 2.27% 1.52%
All executive officers and directors of the
Company as a group 6 persons ........... 2,092,270 2,092,270 33.48% 22.38%
Vertical Financial Holdings(4)(9) ....... 890,152 1,580,304(10) 14.24% 15.74%
Behala Anstalt(11) ...................... 296,402 592,804(12) 4.74% 6.15%
Lupin Investments Services Ltd.(13) ..... 296,402 592,804(14) 4.74% 6.15%
Henilia Financial Ltd.(15) .............. 297,347 594,694(16) 4.76% 6.16%
Klaus-Dirk Sippel(17) ................... 707,059 1,105,923(18) 11.31% 11.34%
Richard Suter(19) ....................... 572,687 771,551(20) 9.16% 8.08%
Robert Klein Handel GmbH & Co.
KG(21) ................................. 455,438 455,438 7.29% 4.87%
</TABLE>
- ------
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them. See "Certain
Transactions."
(2) The address of all directors and officers is c/o IAT Multimedia Co.,
Geschaftshaus Wasserschloss, Aarestrasse 17, CH-5300 Vogelsang-Turgi,
Switzerland.
(3) Includes 62,030 shares of Common Stock which are held in escrow but in
respect of which Dr. Vogt retains the power to vote. See "-- Escrow
Shares."
(4) Jacob Agam, the Co-Chairman of the Company, is a director of Vertical.
Pursuant to an agreement between Orida and Vertical Orida has the right
to receive a portion of the profits from the sale of the shares held by
Vertical. Mr. Agam is the Chairman and a significant owner of Orida. Mr.
Agam disclaims beneficial ownership of the shares held by Vertical.
(5) Includes 15,151 shares of Common Stock which are held in escrow but in
respect of which Mr. Grissemann retains the power to vote. See "--
Escrow Shares."
(6) Volker Walther's address is Pestalozziweg 8, D-34439, Willebadessen,
Germany. Includes 156,188 shares held by Walther Glas GmbH of which Mr.
Walther is a majority shareholder. Also includes 58,765 and 12,495
shares of Common Stock which are held in escrow but in respect of which
Mr. Walther and Walther Glas GmbH, respectively, retain the power to
vote. See "-- Escrow Shares."
(7) Includes 7,575 shares of Common Stock which are held in escrow but in
respect of which Mr. Muller retains the power to vote. See "-- Escrow
Shares."
(8) Includes 11,364 shares of Common Stock which are held in escrow but in
respect of which Mr. Gudauski retains the power to vote. See "-- Escrow
Shares."
(9) The address of Vertical is Hombrechtikerstrasse 61, CH-8640 Rapperswil,
Switzerland.
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(10) Includes 690,152 shares of Common Stock issuable upon exercise of an
equal amount of Investor Warrants beneficially owned by Vertical and
exercisable within 60 days. Also includes 71,212 shares of Common Stock
which are held in escrow but in respect of which Vertical retains the
power to vote. See "-- Escrow Shares."
(11) The address of Behala Anstalt is Heiligkreuz 6, PL-9490 Vaduz,
Liechtenstein.
(12) Includes 296,402 shares of Common Stock issuable upon exercise of an
equal amount of Investor Warrants beneficially owned by Behala Anstalt
and exercisable within 60 days. Also includes 23,712 shares of Common
Stock which are held in escrow but in respect of which Behala Anstalt
retains the power to vote. See "-- Escrow Shares."
(13) The address of Lupin Investments Services Ltd. is P.O. Box 3186,
Tortola/BVI, Road Town, Tortola, British Virgin Islands.
(14) Includes 296,402 shares of Common Stock issuable upon exercise of an
equal amount of Investor Warrants beneficially owned by Lupin
Investments Services Ltd. and exercisable within 60 days. Also includes
23,712 shares of Common Stock which are held in escrow but in respect of
which Lupin Investments Services Ltd. retains the power to vote. See "--
Escrow Shares."
(15) The address of Henilia Financial Ltd. is 35A Regent Street, Belize City,
Belize.
(16) Includes 297,347 shares of Common Stock issuable upon exercise of an
equal amount of Investor Warrants beneficially owned by Henilia
Financial Ltd. and exercisable within 60 days. Also includes 23,788
shares of Common Stock which are held in escrow but in respect of which
Henilia Financial Ltd. retains the power to vote. See "-- Escrow
Shares."
(17) The address of Klaus-Dirk Sippel is Tannenweg 2, CH-5415 Nussbaumen,
Switzerland. In October 1996, Mr. Sippel sold 76,941 shares to Mr.
Jurgen Henning. While Mr. Sippel does not have any voting or dispositive
power with respect to these shares, the agreement between Messrs. Sippel
and Henning provides that Mr. Sippel will share in the proceeds of the
sale of Mr. Henning's shares.
(18) Includes 398,864 shares of Common Stock issuable upon exercise of an
equal amount of Shareholder Warrants beneficially owned by Klaus-Dirk
Sippel and exercisable within 60 days. Also includes 56,565 shares of
Common Stock which are held in escrow but in respect of which Mr. Sippel
retains the power to vote. See "-- Escrow Shares."
(19) Richard Suter's address is Lendikerstrasse 25, CH-8484 Weisslingen,
Switzerland.
(20) Includes 198,864 shares of Common Stock issuable upon exercise of an
equal amount of Shareholder Warrants beneficially owned by Richard Suter
and exercisable within 60 days. Also includes 45,815 shares of Common
Stock which are held in escrow but in respect of which Mr. Suter retains
the power to vote. See "-- Escrow Shares."
(21) Robert Klein Handel GmbH & Co. KG's address is Perlengraben 2, D-50676
Koln.
ESCROW SHARES
The existing stockholders of the Company will deposit an aggregate of
500,000 shares of Common Stock into escrow. The Escrow Shares are not
assignable or transferable. Of the Escrow Shares,
(i) 166,666 shall be released from escrow if, for the fiscal year ending
December 31, 1997, the Company's minimum revenues (the "Minimum Revenues")
equals or exceeds $5.5 million;
(ii) 166,666 Escrow Shares (or, if the conditions set forth in (i) above
was not met, 333,332 Escrow Shares) shall be released, if, for the fiscal
year ending December 31, 1998, the Minimum Revenues equals or exceeds $8.0
million;
(iii) 166,668 Escrow Shares (or, if the conditions set forth in either (i)
or (ii) were not met, the remaining Escrow Shares) shall be released if, for
the fiscal year ending December 31, 1999, the Minimum Revenues equals or
exceeds $12.0 million and the Company's income before provision for taxes
(the "Minimum Pretax Income") equals or exceeds $1.0 million; and
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(iv) all of the Escrow Shares will be released from escrow if one or more
of the following conditions is/are met:
(a) the average of the closing bid prices of the Company's Common Stock
for any 30 consecutive trading days commencing 24 months after the Effective
Date exceeds $13.00 per share; or
(b) the Company is acquired by or merged into another entity during the
period set forth in (a) above in a transaction in which the value of the per
share consideration received by the stockholders of the Company (after giving
effect to the release from escrow) on the date of such transaction exceeds
$13.00 per share.
The Minimum Revenues and Minimum Pretax Income Amounts set forth above
shall be (i) derived solely from the business currently owned and operated by
the Company and shall not give effect to any operations relating to business
or assets acquired in the future; (ii) calculated exclusive of any
extraordinary earnings including, but not limited to, any charge to income
resulting from the release of the Escrow Shares and (iii) audited by the
Company's independent public accountants.
Any money, securities, rights or property distributed in respect of the
Escrow Shares shall be received by the escrow agent, including any property
distributed as dividends or pursuant to any stock split, merger,
recapitalization, dissolution or total or partial liquidation of the Company
(the "Escrow Property"). On March 31, 2000, any remaining Escrow Shares, as
well as any dividends or other distributions made with respect thereto, will
be canceled and contributed to the capital of the Company. The Company
expects that the release of the Escrow Shares to officers, directors,
employees and consultants of the Company will be deemed compensatory and,
accordingly, will result in a substantial charge to operations, which would
equal the then fair market value of such shares. Such charges could
substantially increase the loss or reduce or eliminate the Company's net
income for financial reporting purposes for the period during which such
shares are, or become probable of being, released from escrow. Although the
amount of compensation expense recognized by the Company will not affect the
Company's total stockholder's equity, it may have a negative effect on the
market price of the Company's securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 4 of the
Notes to the Company's Financial Statements.
The Minimum Revenues and Minimum Pretax Income amounts and closing bid
price levels set forth above were determined by negotiation between the
Company and the Underwriters and should not be construed to imply or predict
any future earnings by the Company or any increase in the market price of its
securities.
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DESCRIPTION OF SECURITIES
The authorized capital stock of Multimedia consists of 20,000,000 shares
of Common Stock, par value $.01 per share, 2,375,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"), including 500,000
shares of Blank Check Preferred Stock. Prior to this Offering, Multimedia had
issued and outstanding 4,375,000 shares of its Common Stock and 1,875,000
shares of Series A Preferred Stock. Upon consummation of this Offering,
Multimedia will have issued and outstanding an aggregate of 9,350,000 shares
of its Common Stock including 1,875,000 shares of Common Stock issued upon
automatic conversion of all of the outstanding Series A Preferred Stock. Upon
conversion of the Series A Preferred Stock, all of the Series A Preferred
Stock will be cancelled.
UNITS
Each Unit consists of one share of Common Stock and one Warrant. Each
Warrant entitles the holder thereof to purchase one share of Common Stock.
The Common Stock and Warrants comprising the Units are transferable
separately immediately upon issuance.
COMMON STOCK
Holders of Common Stock have the right to cast one vote for each share
held of record on all matters submitted to a vote of the stockholders,
including the election of directors. Holders of Common Stock are entitled to
receive such dividends, pro rata, based on the number of shares held, when,
as and if declared by the Board of Directors, from funds legally available
therefor, subject to the rights of holders of any outstanding preferred
stock. Multimedia has never paid cash dividends on its Common Stock and does
not anticipate or intend paying cash dividends in the foreseeable future on
its Common Stock. In the event of the liquidation, dissolution or winding up
of the affairs of Multimedia, all assets and funds of Multimedia remaining
after the payment of all debts and other liabilities, subject to the rights
of the holders of any outstanding Preferred Stock, shall be distributed to
the holders, pro rata on a per share basis, among the holders of the Common
Stock. Holders of Common Stock are not entitled to preemptive, subscription,
cumulative voting or conversion rights, and there are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding
shares of Common Stock are, and the shares of Common Stock included in the
Units offered hereby will be, when issued, fully paid and non-assessable.
WARRANTS
Each Warrant entitles the registered holder to purchase one share of
Common Stock at an exercise price of $7.80, subject to adjustment at any time
from the Separation Date until 5:00 P.M., New York City time, on , 2002.
Commencing 15 months from the date of this Prospectus, the Warrants are
redeemable by the Company on 30 days' written notice at a redemption price of
$.05 per Warrant provided the closing price of the Common Stock for any 20
consecutive trading days ending within five days of the notice of redemption
equals or exceeds $16.00 per share. "Closing price" shall mean the closing
bid price if listed in the over-the-counter market on Nasdaq or otherwise or
the closing sale price if listed on the Nasdaq National Market or a national
securities exchange. All Warrants must be redeemed if any are redeemed.
The Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement") among Multimedia, the Underwriter and American Stock Transfer &
Trust Company, as warrant agent, and will be evidenced by warrant
certificates in registered form. The Warrants provide for adjustment of the
exercise price and for a change in the number of shares issuable upon
exercise to protect holders against dilution in the event of a stock
dividend, stock split, combination or reclassification of the Common Stock or
upon issuance of shares of Common Stock at prices lower than the market price
of the Common Stock, with certain exceptions.
The exercise price of the Warrants was determined by negotiation between
Multimedia and the Underwriter and should not be construed to be predictive
of or to imply that any price increases in Multimedia's securities will
occur.
A Warrant may be exercised upon surrender of the Warrant certificate on or
prior to its expiration date (or earlier redemption date) at the offices of
American Stock Transfer & Trust Company, the warrant agent, with the
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form of "Election to Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full
exercise price (by certified or bank check payable to the order of
Multimedia) for the number of shares with respect to which the Warrant is
being exercised. Shares issued upon exercise of Warrants and payment in
accordance with the terms of the Warrants will be fully paid and non-
assessable.
The Warrants do not confer upon the Warrantholder any voting or other
rights of a stockholder of Multimedia. Upon notice to the Warrantholders,
Multimedia has the right to reduce the exercise price or extend the
expiration date of the Warrants.
UNIT PURCHASE OPTIONS
Upon the closing of this Offering, Multimedia has agreed to sell for
nominal consideration to the Underwriter or its designees the Unit Purchase
Options to purchase up to 310,000 Units. These Units will be identical to the
Units offered hereby except that the Warrants included in the Unit Purchase
Options will not be subject to redemption by Multimedia unless, at the time
the Warrants are called for redemption, the Unit Purchase Options have been
exercised and the underlying warrants are outstanding. The Unit Purchase
Options cannot be transferred, sold, assigned or hypothecated for two years,
except to any officer of the Underwriter or members of the selling group or
their officers. The Unit Price Options are exercisable during the four-year
period commencing one year from the date of this Prospectus at an exercise
price of $9.90 per Unit (165% of the initial public offering price) subject
to adjustment in certain events to protect against dilution. The holders of
the Unit Purchase Options have certain demand and piggy-back registration
rights. See "Underwriting."
PREFERRED STOCK
SERIES A PREFERRED STOCK
Dividends. The holders of the Series A Preferred Stock are entitled to
receive mandatory preferential dividends at the rate of $.056 per share (as
adjusted for stock splits, combinations or similar events) during the one
year period from October 4, 1996 to October 24, 1997, which dividends shall
be accrued and shall be paid, in cash, upon the earlier of (i) the
consummation of this Offering at which time all shares of Series A Preferred
Stock will automatically convert at the then-effective Conversion Rate (as
defined below) or (ii), in the event this Offering is not consummated, on
October 24, 1997.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Multimedia, either voluntary or involuntary, the holders of the
Series A Preferred Stock are entitled to receive, prior and in preference to
any distribution of any of the assets of Multimedia to any holders of Common
Stock, an amount per share equal to $.080 (as adjusted for stock splits,
combinations or similar events) for each outstanding share of Series A
Preferred Stock plus any accrued or declared but unpaid dividends (the
"Liquidation Preference"). If, upon the occurrence of such an event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock shall be insufficient to permit the payment to such holders of the full
Liquidation Preference, then the entire assets and funds of Multimedia
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock such that an equal amount shall be
paid with respect to each outstanding share of Series A Preferred Stock.
Redemption. Multimedia is obligated to redeem the Series A Preferred Stock
at the Liquidation Preference upon the written request of the holders of any
outstanding shares of Series A Preferred Stock at any time following October
4, 1998. If, at any time after December 31, 1997, Multimedia has not
consummated this Offering, Multimedia may redeem all, but not less than all,
of the outstanding shares of Series A Preferred Stock at the Liquidation
Preference. To the extent that Multimedia does not have funds legally
available to fund any required redemption of shares of Series A Preferred
Stock, Multimedia shall use its commercially reasonable best efforts to raise
sufficient capital to fund such required redemption within 60 days of the
date such redemption is required to be made. To the extent that Multimedia is
unable to raise sufficient capital to fund such required redemption within
such period, Multimedia shall commence, as of the 61st day following the date
such redemp-
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tion is required to be made, a rights offering of Multimedia's Common Stock
to all of Multimedia's shareholders of an adequate number of shares at a
purchase price per share equal to its then fair market value such that the
total dollar amount to be raised from such rights offering will equal or
exceed the dollar amount needed by Multimedia to fund such required
redemption.
Conversion. Each share of Series A Preferred Stock is convertible, at the
option of the holder thereof at any time after the date of issuance of such
share. Each share of Series A Preferred Stock shall be convertible into the
number of fully paid and nonassessable shares of Common Stock equal to a
fraction, the numerator of which is the "Conversion Value" per share of such
Series A Preferred Stock and the denominator of which is the "Conversion
Price" per share in effect for such Series A Preferred Stock at the time of
conversion. The number of shares of Common Stock into which each share of
Series A Preferred Stock is convertible is hereinafter collectively referred
to as the "Conversion Rate" for such series. The Conversion Price of each of
the Series A Preferred Stock is subject to adjustment to protect against
certain antidilutive events. The initial Conversion Price per share of Series
A Preferred Stock is $.80, subject to adjustment for stock splits,
combinations or similar events affecting the Series A Preferred Stock. The
Conversion Value per share of Series A Preferred Stock is $.80. As of the
date of this Prospectus, each share of Series A Preferred Stock will convert
into 1,875,000 shares of Common Stock upon the consummation of this Offering.
Voting Rights. Except with respect to the election of members of
Multimedia's Board of Directors, the Series A Preferred Stock are entitled to
vote on all matters as to which the holders of Common Stock are entitled to
vote with each share of Series A Preferred Stock having that number of votes
equal to the number of shares of Common Stock into which it is then
convertible.
Status of Converted Stock. Upon consummation of this Offering and the
conversion of the Series A Preferred Stock, the shares so converted shall be
canceled by Multimedia. See "-- Preferred Stock."
Right to Elect Certain Directors. Provided that there are at least five
directors, for so long as the holders of Series A Preferred Stock hold at
least 5% of Multimedia's Series A Preferred Stock (or 5% of the Common Stock
issued upon conversion of the Series A Preferred Stock or upon exercise of
any warrants held by such holder), the holders of the Series A Preferred
Stock voting as a separate class, shall have the right to elect one
individual to Multimedia's Board of Directors and so long as the holders of
at least 10% of Multimedia's Series A Preferred Stock (or 10% of the Common
Stock issued upon conversion of the Series A Preferred Stock or upon exercise
of any warrants held by such holder), such holders voting as a separate
class, shall have the right to elect two individuals to Multimedia's Board of
Directors, including one member who shall be elected as Co-Chairman of the
Board of Directors. The Series A Directors shall be elected at the same time
as the election of the other members of the Board of Directors. In the event
of the resignation or removal of a Series A Directors, a special meeting
shall be convened at which elections shall be held for the election of a
substitute Series A Director, provided that such holders may act by unanimous
consent in lieu of such meeting.
Covenants. So long as any shares of Series A Preferred Stock are
outstanding, Multimedia shall not without first obtaining the written consent
of the holders of at least two-thirds of the then outstanding shares of
Series A Preferred Stock, among other things, sell all or substantially all
of the assets of Multimedia, merge in any transaction in which more than 50%
percent of the voting power of Multimedia is disposed of, engage in any
spin-out, distribution or sale of any business unit of Multimedia, increase
or decrease the total number of authorized shares of Series A Preferred Stock
or amend the terms of the Series A Preferred Stock so as to affect adversely
the Series A Preferred Stock, authorize or issue any other equity security
having a preference over, or being on a parity with the Series A Preferred
Stock with respect to dividends, redemption or liquidation, redeem or
repurchase any outstanding equity securities of the Company, to issue shares
of Common Stock to employees, advisors, consultants or outside directors if
the cumulative total number of shares of Common Stock so issued exceeds
748,000, increase the authorized number of directors of Multimedia to more
than five members, liquidate, dissolve or otherwise wind up the affairs of
Multimedia, enter into any transactions with affiliates of Multimedia except
on arms-length terms or pay any dividend on or any distribution with respect
of any shares of capital stock other than the dividends paid on the Series A
Preferred Stock in accordance with its terms.
BLANK CHECK PREFERRED STOCK
The Company is authorized to issue up to 500,000 shares of Preferred
Stock. The Board of Directors has the authority to issue this Preferred Stock
in one or more series and to fix the number of shares and the relative
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rights, conversion rights, voting rights and terms of redemption (including
sinking fund provisions) and liquidation preferences, without further vote or
action by the stockholders. If shares of Preferred Stock with voting rights
are issued, such issuance could affect the voting rights of the holders of
the Company's Common Stock by increasing the number of outstanding shares
having voting rights, and by the creation of class or series voting rights.
If the Board of Directors authorizes the issuance of shares of Preferred
Stock with conversion rights, the number of shares of Common Stock
outstanding could potentially be increased by up to the authorized amount.
Issuances of Preferred Stock could, under certain circumstances, have the
effect of delaying or preventing a change in control of the Company and may
adversely affect the rights of holders of Common Stock. Also, Preferred Stock
could have preferences over the Common Stock (and other series of preferred
stock) with respect to dividend and liquidation rights. The Company currently
has no plans to issue any Preferred Stock.
INVESTOR WARRANTS AND SHAREHOLDER WARRANTS
Each of the Investor Warrants and the Shareholders Warrants entitle the
holder to purchase one share of Common Stock at an exercise price per share
equal to 130% of the initial public offering price at any time or from time
to time during the ten year period following the consummation of this
Offering, but not later than 5:00 P.M., New York City time, on December 31,
2006. Each of the Investor Warrants and the Shareholders Warrants provide for
adjustment of the exercise price and for a change in the number of shares
issuable upon exercise to protect holders against dilution in the event of a
stock dividend, stock split, combination or reclassification of the Common
Stock or upon issuances of shares of Common Stock at prices lower than the
market price of the Common Stock, with certain exceptions.
Each of the Investor Warrants and the Shareholder Warrants may be
exercised upon surrender of the certificate evidencing the Investor Warrant
or the Shareholder Warrant on or prior to its expiration date at the offices
of the Company or the Transfer Agent (as defined below), with the form of
"Election to Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full
exercise price (by certified or bank check payable to the order of the
Company) for the number of shares with respect to which the Investor Warrant
or Shareholder Warrant is being exercised. Shares issued upon exercise of
Investor Warrants or Shareholder Warrants and payment in accordance with the
terms of the Investor Warrants or Shareholders Warrants will be fully paid
and non-assessable.
The Investor Warrants or the Shareholder Warrants do not confer upon the
holders of the Investor Warrants or the Shareholder Warrants any voting or
other rights of a stockholder of the Company.
Upon exercise of the Investor Warrants or the Shareholder Warrants, the
holders of the Common Stock issued upon such exercise will have registration
rights as set forth in the Investor's Rights Agreement. See "Certain
Transactions -- Private Placement and Related Transactions."
TRANSFER AGENT
American Stock Transfer & Trust Company serves as Transfer Agent for the
shares of Common Stock and Warrant Agent for the Warrants.
BUSINESS COMBINATION PROVISIONS
The Company is subject to the "business combination" statute of the
Delaware Law, an anti-takeover law enacted in 1988. In general, Section 203
of the Delaware Law prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless (a) prior to such date the board
of directors of the corporation approved either the "business combination" or
the transaction which resulted in the stockholder becoming an "interested
stockholder," (b) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (i) by
persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer,
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or (c) on or subsequent to such date the "business combination" is approved
by the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3 % of the outstanding
voting stock which is not owned by the "interested stockholder." A "business
combination" includes mergers, stock or asset sales and other transactions
resulting in a financial benefit to the "interested stockholders." An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. Although Section 203 permits the Company to elect
not to be governed by its provisions, the Company to date has not made this
election. Upon closing of this Offering and the registration of its shares of
Common Stock under the Exchange Act, the restrictions imposed by such statute
will apply to the Company and, as a result of the application of Section 203,
potential acquirers of the Company may be discouraged from attempting to
effect an acquisition transaction with the Company, thereby possibly
depriving holders of the Company s securities of certain opportunities to
sell or otherwise dispose of such securities at above-market prices pursuant
to such transactions.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering the Company will have 9,350,000 shares of
Common Stock outstanding. Of these shares outstanding, the 3,100,000 shares
of Common Stock included in the Units offered hereby will be freely
transferable without restriction or further registration under the Securities
Act, unless purchased by affiliates of the Company as that term is defined in
Rule 144 under the Securities Act ("Rule 144") described below. All of the
6,250,000 shares of Common Stock held by existing stockholders are eligible
for sale under Rule 144 beginning in October 1998. Of the outstanding shares
of Common Stock, 500,000 shares are Escrow Shares. Currently 5,827,000 of the
6,250,000 shares of Common Stock outstanding are held by affiliates and will
be subject to volume limitations after October 1998. In addition, holders of
the outstanding shares of Common Stock have agreed not to sell or otherwise
dispose of any shares of Common Stock, without the Underwriter's prior
written consent for a period of two years after the consummation of this
Offering. See "Underwriting."
In addition, the Investor Warrants, the Shareholder Warrants and the
2,348,485 shares of Common Stock issuable upon exercise of the Investor
Warrants and the Shareholders Warrants are also "restricted securities" and
may not be sold publicly unless they are registered under the Securities Act
or are sold pursuant to Rule 144 on another exemption from registration. None
of such warrants or shares will be eligible for sale in the public market
pursuant to Rule 144 until October 1998.
Upon completion of this Offering, the Company will have outstanding in
addition to the securities referred to above, (i) the Warrants to purchase an
aggregate of 3,100,000 shares of Common Stock and (ii) the Unit Purchase
Options to purchase an aggregate of 620,000 shares of Common Stock, assuming
exercise of the underlying Warrants. In addition, the Company has reserved
for issuance 500,000 shares of Common Stock in connection with the 1996 Stock
Option Plan.
In general under Rule 144, a person (or persons whose shares are
aggregated), including persons who may be deemed to be "affiliates" of the
Company as that term is defined under the Securities Act, is entitled to sell
within any three-month period a number of restricted shares beneficially
owned for at least two years that does not exceed the greater of (i) 1% of
the then outstanding shares of Common Stock or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding
such sale. Sales under Rule 144 are also subject to certain requirements as
to the manner of sale, notice and the availability of current public
information about the Company. However, a person who is not an affiliate and
has beneficially owned such shares for at least three years is entitled to
sell such shares without regard to the volume or other resale requirements.
Vertical has demand and piggy-back registration rights covering the
securities held by it. In addition, the Underwriters also have demand and
piggy-back registration rights with respect to the securities underlying the
Unit Purchase Options. See "Underwriting."
Prior to this Offering, there has been no market for any securities of the
Company, and no predictions can be made of the effect, if any, that sales of
Common Stock or the availability of Common Stock for sale will have on the
market price of such securities prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices.
67
<PAGE>
UNDERWRITING
Royce Investment Group, Inc., the Underwriter, has agreed, subject to the
terms and conditions of the Underwriting Agreement between the Company and
the Underwriter (the "Underwriting Agreement"), to purchase from the Company
the 3,100,000 Units offered hereby on a firm commitment basis, if any are
purchased.
The Underwriter has advised the Company that it proposes to offer the
Units to the public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers who are members of the National
Association of Securities Dealers, Inc. (the "NASD"), at such price less a
concession of not in excess of $ per Unit, of which a sum not in excess of
$ may in turn be reallowed to other dealers who are members of the NASD.
After the commencement of the Offering, the public offering price, the
concession and the reallowance may be changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter a non-accountable expense allowance
equal to 2.5% of the gross proceeds derived from the sale of the Units
offered hereby, including any Units purchased pursuant to the Underwriter's
over-allotment option, $50,000 of which has been paid to date.
The Company has granted to the Underwriter an option exercisable during
the 45-day period commencing on the date of this Prospectus, to purchase from
the Company at the public offering price set forth on the cover page of this
Prospectus less underwriting discounts and commissions, up to 465,000
additional Units for the purpose of covering over-allotments, if any, made in
connection with the sale of the Units.
All of the Company's current stockholders and all officers and directors
of the Company have agreed not to sell, assign, transfer or otherwise dispose
publicly of any of their shares of capital stock for a period of 24 months
from the date of this Prospectus without the prior written consent of the
Underwriter.
The Company has agreed not to solicit Warrant exercises other than through
the Underwriter. Upon any exercise of the Warrants after the first
anniversary of the date of this Prospectus, the Company will pay the
Underwriter a fee of 6% of the aggregate Warrant exercise price, if (i) the
market price of the Company's Common Stock on the date the Warrants are
exercised is greater than the then exercise price of the Warrants, (ii) the
exercise of the Warrants was solicited by a member of the NASD, (iii) the
Warrants are not held in a discretionary account, (iv) disclosure of
compensation arrangements was made both at the time of the Offering and at
the time of exercise of the Warrants and (v) the solicitation of exercise of
the Warrant was not in violation of Rule 10b-6 promulgated under the
Securities Exchange Act of 1934, as amended. Rule 10b-6 may prohibit the
Underwriter from engaging in any market making activities with regard to the
Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to any solicitation by the
Underwriter of the exercise of Warrants until the later of the termination of
such solicitation activity or the termination (by waiver or otherwise) of any
right that the Underwriter may have to receive a fee for the exercise of
Warrants following such solicitation. As a result, the Underwriter may be
unable to provide a market for the Company's securities during certain
periods while the Warrants are exercisable.
The Company has agreed to sell to the Underwriter and its designees, for
nominal consideration, the Unit Purchase Option to purchase up to 310,000
Units, substantially identical to the Units offered hereby, except that the
Warrants included therein are not subject to redemption by the Company
unless, on the redemption date, the Unit Purchase Option has been exercised
and the underlying warrants are outstanding. The Unit Purchase Option will be
exercisable during the four-year period commencing one year from the date of
this Prospectus at an exercise price of $ per Unit, subject to adjustment
in certain events, and is not transferable for a period of one year from the
date of this Prospectus except to officers of the Underwriter or to members
of the selling group. The Company has agreed to register during the four-year
period commencing one year from the date of this Prospectus, on two separate
occasions, the securities issuable upon exercise thereof under the Securities
Act, the initial such registration to be at the Company's expense and the
second at the expense of the holders. The Company has also granted certain
piggy-back registration rights to holders of the Unit Purchase Option. The
Unit Purchase Option includes a provision permitting the holders to elect a
cashless exercise.
During the five-year period from the date of this Prospectus, in the event
the Underwriter originates a financing or a merger, acquisition, joint
venture, strategic introduction or other similar transaction to which the
Company is a party, the Underwriter will be entitled to receive a finder's
fee in consideration of the origination of such transaction. The fee is based
upon a percentage of the consideration paid in the transaction.
68
<PAGE>
The Underwriter has informed the Company that it does not expect sales to
discretionary accounts to exceed 5% percent of the total number of the Units
offered hereby.
Prior to this Offering, there has been no public market for any of the
securities offered hereby. Accordingly, the offering price of the Units
offered hereby and the terms of the Warrants have been determined by
negotiation between the Company and the Underwriter and are not necessarily
related to the Company's asset value, net worth or other established criteria
of value. Factors considered in determining such prices and terms, in
addition to prevailing market conditions, include the history of and the
prospects for the industry in which the Company competes, the present state
of the Company's development and its future prospects, an assessment of the
Company's management, the Company's capital structure, the general condition
of the securities markets and such other factors as were deemed relevant.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Baker & McKenzie, New York, New York. Certain legal matters
related to this Offering will be passed upon for the Underwriter by Bachner,
Tally, Polevoy & Misher LLP, New York, New York. Baker & McKenzie, New York,
New York will rely, without independent verification, on the opinion of Baker
& McKenzie, Zurich and Dr. Schackow & Partners, Bremen as to matters of Swiss
and German law, respectively.
EXPERTS
The consolidated financial statements of IAT Multimedia, Inc. included in
this Prospectus and Registration Statement have been so included in reliance
on the report of Rothstein, Kass & Company, P.C., independent certified
public accountants, given on the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company is not a reporting company under the Exchange Act. The Company
has filed a Registration Statement on Form S-1 under the Securities Act with
the Securities and Exchange Commission (the "Commission") in Washington, D.C.
with respect to the Units offered hereby. This Prospectus, which is part of
the Registration Statement, does not contain all of the information set forth
in the Registration Statement and the exhibits thereto. For further
information with respect to the Company and the Units offered hereby,
reference is hereby made to the Registration Statement and such exhibits,
which may be inspected without charge at the office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and at 500 West Madison (Suite 1400), Chicago, Illinois 60661.
Copies of such material may also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
69
<PAGE>
GLOSSARY
"Bytes" means a sequence of binary digits or bits which represents one piece
of information such as a single letter. A byte is the unit of information
processed by a computer.
"Codec" means a combination of a coder and decoder. A coder uses a
compression algorithm to reduce the number of bytes needed to represent an
audio or video segment. A decoder recovers the original raw bytes from the
compressed bytes generated by the coder. In video and audio compression, the
recovery does not need to be exact; a good approximation of the original
information is appropriate for practical purposes.
"Compression algorithm" means a set of procedures (usually specified by
mathematical equations) that reduce the number of bytes necessary to
represent some piece of information, such as a video or audio segment.
"Compression ratio" means the average number of bytes at the input of codec
that will produce one byte at the output of the coder. The higher the ratio
the lower the necessary channel speed to transmit the information, and
therefore the lower the transmission cost.
"CPU" means central processing unit.
"ISDN" means integrated services digital network, an international switched
digital communication network that provides multiples of 64 Kbps per channel,
up to a maximum of 2 Mbps. ISDN is available in most countries from local
telephone service providers and, in some cases, others.
"Integrator" means a company which assembles third party components in
systems.
"Kbps" means kilobits per second, 1 Kbps equals 1,000 bits per second.
"LAN" means Local Area Network, often a company computer network confined to
one physical location.
"Mbps" means megabits per second, 1 Mbps equals 1,000,000 bits per second.
"OEM" means original equipment manufacturer. Such manufacturers often acquire
components from outside suppliers which are then combined with the
manufacturer's proprietary knowledge, hardware and/or software.
"WAN" means Wide Area Network, often an enterprise computer network which
ties a company's various physical locations together.
70
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
-------------
Independent Auditors' Report ................................ F-2
Consolidated Financial Statements
Consolidated Balance Sheets ............................ F-3
Consolidated Statements of Operations .................. F-4
Consolidated Statements of Stockholders' Equity
(Deficit) ............................................ F-5
Consolidated Statements of Cash Flows .................. F-6
Notes to Consolidated Financial Statements ............. F-7 - F-12
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
IAT Multimedia, Inc.
We have audited the accompanying consolidated balance sheets of IAT
Multimedia, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of IAT
Multimedia, Inc. and Subsidiaries as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 8
to the consolidated financial statements, the Company has sustained recurring
losses which raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also
described in Note 8. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Rothstein, Kass & Company, P.C.
Roseland, New Jersey
November 15, 1996 except for Notes 1 and 12
for which the date is December 18, 1996
F-2
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------ September 30,
1994 1995 1996
------------- ------------- ---------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash ............................................ $ 13,821 $ 198,879 $ 13,384
Accounts receivable, less allowance for doubtful
accounts of $0 in 1994 and 1995 and $3,600 at
September 30, 1996 ........................... 788,312 600,904 179,348
Inventories ..................................... 318,224 476,487 707,044
Other current assets ............................ 187,810 212,330 106,102
------------- ------------- ---------------
Total current assets .......................... 1,308,167 1,488,600 1,005,878
Equipment, less accumulated depreciation .......... 459,534 544,471 517,773
Other assets:
Intangible assets ............................... 3,165 23,335 11,580
Deferred registration costs ..................... -- -- 160,000
------------- ------------- ---------------
$ 1,770,866 $ 2,056,406 $ 1,695,231
============= ============= ===============
Liabilities and Stockholders' Deficit
Current liabilities:
Notes payable, banks ............................ $ 1,542,761 $ 1,616,669 $ 2,142,521
Accounts payable and other current liabilities .. 630,442 978,480 1,013,937
Loans payable, stockholders ..................... -- -- 902,000
------------- ------------- ---------------
Total current liabilities ..................... 2,173,203 2,595,149 4,058,458
------------- ------------- ---------------
Loans payable, stockholders, net of current portion 335,878 348,913 492,000
------------- ------------- ---------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.01 par value, authorized
2,375,000 shares, none issued
Common stock, $.01 par value, authorized
20,000,000 shares, issued and outstanding
1,750,000 3,500,000 and 4,375,000 shares,
respectively ................................. 17,500 35,000 43,750
Capital in excess of par value .................. 2,685,203 6,472,051 8,002,884
Accumulated deficit ............................. (3,454,792) (7,184,969) (10,917,950)
Cumulative translation adjustments .............. 13,874 (209,738) 16,089
------------- ------------- ---------------
Total stockholders' deficit ................... (738,215) (887,656) (2,855,227)
------------- ------------- ---------------
$ 1,770,866 $ 2,056,406 $ 1,695,231
============= ============= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
--------------------------------------------- -----------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -----------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net sales .................................... $ 1,962,681 $ 1,053,148 $ 1,510,076 $ 767,801 $ 961,257
Cost of sales ................................ 1,171,103 699,701 967,909 515,774 689,952
-------------- -------------- -------------- -------------- --------------
Gross margin ................................. 791,578 353,447 542,167 252,027 271,305
-------------- -------------- -------------- -------------- --------------
Operating expenses:
Research and development costs:
Expenses incurred ....................... 1,828,441 2,269,191 2,531,093 1,966,255 1,952,079
Less participations received ............ 962,028 2,206,888 868,335 584,550 272,071
-------------- -------------- -------------- -------------- --------------
Research and development costs, net . 866,413 62,303 1,662,758 1,381,705 1,680,008
Selling expenses ........................... 439,437 739,385 1,265,697 938,955 1,156,324
General and administrative expenses ........ 753,574 798,766 1,374,379 1,030,646 1,041,894
-------------- -------------- -------------- -------------- --------------
2,059,424 1,600,454 4,302,834 3,351,306 3,878,226
-------------- -------------- -------------- -------------- --------------
Operating loss ............................... (1,267,846) (1,247,007) (3,760,667) (3,099,279) (3,606,921)
-------------- -------------- -------------- -------------- --------------
Other income (expense):
Interest expense ........................... (70,164) (124,776) (128,804) (91,535) (138,922)
Other income ............................... 13,515 36,586 30,127 28,941 12,862
Minority interest in net loss of subsidiaries -- -- 129,167 -- --
-------------- -------------- -------------- -------------- --------------
(56,649) (88,190) 30,490 (62,594) (126,060)
-------------- -------------- -------------- -------------- --------------
Net loss ..................................... $(1,324,495) $(1,335,197) $(3,730,177) $(3,161,873) $(3,732,981)
============== ============== ============== ============== ==============
Loss per share of common stock ............... $ (0.36) $ (0.33) $ (0.77) $ (0.71) $ (0.65)
============== ============== ============== ============== ==============
Weighted average number of common shares
outstanding ................................. 3,647,124 4,000,000 4,837,243 4,460,443 5,750,000
============== ============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Capital in Cumulative
------------------------ Excess of Accumulated Translation
Shares Amount Par Value Deficit Adjustments Total
------------- --------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993 .............. 1,312,500 $ 13,125 $ 2,041,670 $ (2,849,895) $ 4,762 $ (790,338)
Common stock canceled in accordance with
corporate reorganization .............. (1,312,500) (13,125) (2,041,670) 2,054,795 -- --
Change in cumulative translation adjustments -- -- -- -- (11,092) (11,092)
Issuance of common stock ............... 1,750,000 17,500 2,685,203 -- 2,702,703
Net loss ............................... -- -- -- (1,324,495) -- (1,324,495)
------------- --------- ------------ -------------- ------------ ------------
Balances, December 31, 1993 ............ 1,750,000 17,500 2,685,203 (2,119,595) (6,330) 576,778
Change in cumulative translation adjustments -- -- -- -- 20,204 20,204
Net loss ............................... -- -- -- -- (1,335,197) (1,335,197)
------------- --------- ------------ -------------- ------------ ------------
Balances, December 31, 1994 ............ 1,750,000 17,500 2,685,203 (3,454,792) 13,874 (738,215)
Issuance of common stock ............... 1,750,000 17,500 3,786,848 -- -- 3,804,348
Change in cumulative translation adjustments -- -- -- -- (223,612) (223,612)
Net Loss ............................... -- -- -- (3,730,177) -- (3,730,177)
------------- --------- ------------ -------------- ------------ ------------
Balances, December 31, 1995 ............ 3,500,000 35,000 6,472,051 (7,184,969) (209,738) (887,656)
Issuance of common stock (unaudited) ... 875,000 8,750 1,530,833 -- -- 1,539,583
Change in cumulative translation adjustments
(unaudited) ........................... -- -- -- -- 225,827 225,827
Net loss (unaudited) ................... -- -- -- (3,732,981) -- (3,732,981)
------------- --------- ------------ -------------- ------------ ------------
Balances, September 30, 1996 (unaudited) . 4,375,000 $ 43,750 $ 8,002,884 $(10,917,950) $ 16,089 $(2,855,227)
============= ========= ============ ============== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
------------------------------------------------- --------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss ....................... $(1,324,495) $(1,335,197) $(3,730,177) $(3,161,873) $(3,732,981)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation ................ 127,862 152,413 194,274 149,333 166,659
Minority interest ........... -- -- (129,167) -- --
(Increase) decrease in cash
attributable to changes in
assets and liabilities:
Accounts receivable ........ (1,088,284) 448,460 291,512 206,450 491,199
Inventories ................ (141,730) (23,611) (111,089) (64,303) (279,871)
Other current assets ....... 3,747 18,282 (409) (1,149) (15,859)
Accounts payable and other
current liabilities ...... (113,699) (13,116) 253,707 86,663 118,475
-------------- -------------- -------------- -------------- --------------
Net cash used in operating
activities ..................... (2,536,599) (752,769) (3,231,349) (2,784,879) (3,252,378)
-------------- -------------- -------------- -------------- --------------
Net cash used in investing
activities, purchases of
equipment ...................... (87,043) (169,435) (243,706) (153,340) (168,855)
-------------- -------------- -------------- -------------- --------------
Cash flows from financing
activities:
Proceeds from (repayments of)
loans payable, stockholders . (708,638) 321,124 (130,524) (470,566) 1,117,708
Deferred registration costs .... -- -- -- -- (160,000)
Proceeds from issuance of
common stock ................ 2,702,703 -- 3,804,348 3,369,565 1,539,583
Issuance of common stock of a
subsidiary to a minority
interest .................... -- -- 129,167 -- --
Proceeds from (repayments of)
short-term bank loan ........ 570,609 501,507 (39,475) 129,914 682,485
-------------- -------------- -------------- -------------- --------------
Net cash provided by financing
activities ..................... 2,564,674 822,631 3,763,516 3,028,913 3,179,776
-------------- -------------- -------------- -------------- --------------
Effect of exchange rate changes on
cash ........................... (19,347) (4,261) (103,403) (98,208) 55,962
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in cash .. (78,315) (103,834) 185,058 (7,514) (185,495)
Cash, beginning of period ........ 195,970 117,655 13,821 13,821 198,879
-------------- -------------- -------------- -------------- --------------
Cash, end of period .............. $ 117,655 $ 13,821 $ 198,879 $ 6,307 $ 13,384
============== ============== ============== ============== ==============
Supplemental disclosures of cash
flow information, cash paid
during the period for interest . $ 66,544 $ 124,776 $ 128,804 $ 93,852 $ 128,281
============== ============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND ORGANIZATION:
IAT Holdings, Inc. was incorporated under the laws of Delaware in
September 1996 and changed its name to IAT Multimedia, Inc. ("IAT") in
December 1996. During October 1996, IAT issued 4,375,000 shares of its common
stock for 100% of the outstanding shares of common stock of IAT AG, a
corporation organized under the laws of Switzerland, in a transaction
accounted for as a pooling of interests. IAT develops, produces and sells
desktop video conferencing communications systems mainly in Germany and
Switzerland, and grants credit to a variety of businesses.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation -- The consolidated financial statements
include the accounts of IAT, its wholly-owned subsidiary IAT AG, Switzerland,
and a 74.9% owned subsidiary, IAT Deutschland GmbH Interaktive Mediem Systeme
("IAT GmbH"), Bremen (collectively the "Company"). All intercompany accounts
and transactions have been eliminated.
Inventories -- Inventories are valued at the lower of cost, on the
first-in, first-out method (FIFO), or market.
Revenue Recognition -- Revenues from the sale of communications systems
are recognized upon shipment to customers. Revenues from the rental of
communications systems are recognized on a straight-line basis over the
rental time period.
Use of 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 reporting period. Actual results could differ from those
estimates.
Equipment -- Equipment is stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives:
Telecommunications equipment 4 years
Office and data processing equipment 8 years
Deferred Registration Costs -- The Company has incurred costs relating to
its proposed public offering (Note 8). If the offering is successful, these
costs will be charged to capital in excess of par value, otherwise, the costs
will be charged to operations.
Foreign Currency Translation -- The Company has determined that the local
currency of its Switzerland subsidiary, Swiss Francs, is the functional
currency. The financial statements of the subsidiaries have been translated
into U.S. dollars in accordance with Statement of Financial Accounting
Standards No. 52 (SFAS No. 52), "Foreign Currency Translation". SFAS No. 52
provides that all balance sheet accounts are translated at year-end rates of
exchange (1.31, 1.15 and 1.25 Swiss Francs for each U.S. Dollar at December
31, 1994, 1995 and September 30, 1996, respectively), except for equity
accounts which are translated at historical rates. Income and expense
accounts are translated at the average of the exchange rates in effect during
the period. The resulting translation adjustments are included as a separate
component of stockholders' deficit, whereas gains or losses arising from
foreign currency transactions are included in results of operations.
Fair Value of Financial Instruments -- The fair value of the Company's
assets and liabilities which qualify as financial instruments under Statement
of Financial Accounting Standards No. 107 approximate the carrying amounts
presented in the consolidated balance sheets.
Stock Options -- In October 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No 123, "Accounting
for Stock-Based Compensation" ("SFAS"). SFAS 123 requires compensation
expense to be recorded (i) using the new fair value method or (ii) using
existing account-
F-7
<PAGE>
ing rules prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations with pro forma disclosure of what net income and earnings per
share would have been had the Company adopted the new fair value method. The
Company intends to continue to account for its stock based compensation plans
in accordance with the provisions of APB 25.
Income Taxes -- The Company complies with Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes", which
requires an asset and liability approach to financial reporting for income
taxes. Deferred income tax assets and liabilities are computed based on
differences between financial reporting and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future,
based on enacted tax laws and rates applicable to the period in which the
differences are expected to reverse. Valuation allowances are established,
when necessary, to reduce the deferred income tax assets to the amount
expected to be realized.
Research and Development Costs -- Research and development expenditures
conducted for internal purposes are expensed as incurred. The expenditures
include the following cost elements directly relating to research and
development: materials costs, equipment and facilities depreciation,
personnel costs, contract services and certain general and administrative
expenses. Software development costs incurred subsequent to establishment of
technological feasibility have not been material.
Loss Per Common Share -- Loss per share of common stock is based upon the
weighted average number of shares outstanding, including common stock
equivalents. Shares of common stock to be placed in escrow upon completion of
the proposed public offering described in Note 12, which are common stock
equivalents, have been excluded from the calculation of loss per share. The
weighted average includes shares and common stock equivalents issued within
one year of the Company's proposed initial public offering (IPO) with an
issue price less than the anticipated IPO price (see Notes 8 and 12). In
addition, all shares have been adjusted to reflect the reverse stock split
discussed in Note 12.
Unaudited Consolidated Financial Statements -- The unaudited interim
consolidated financial statements included herein have been prepared in
accordance with generally accepted accounting principles. In the opinion of
management, the unaudited consolidated financial statements include all
adjustments of a normal and recurring nature, which are necessary for a fair
presentation. The results of operations for the nine months are not
necessarily indicative of the results expected for the full year.
Minority Interest in Consolidated Subsidiary -- The Company records
minority interest in its consolidated subsidiary at the cost of the
investment, adjusted for the applicable income (loss) from operations. Losses
from operations, however, will be recorded only to the extent of the original
investment and previously recognized equity in earnings, if any.
Research and Development Participation Agreements -- The Company has entered
into various agreements relating to the joint development of the Company's
products. In accordance with these agreements, the Company and its counterparts
each have rights for the use of the developed technology. Reimbursed research
and development costs for the years ended December 31, 1993, 1994, 1995 and the
nine months ended September 30, 1995 and 1996 were $962,028, $2,206,888,
$868,335, $584,550 and $272,071, respectively.
F-8
<PAGE>
NOTE 3. INVENTORIES:
Inventories consist of the following:
December 31,
------------------------------ September 30,
1994 1995 1996
---------- ---------- ---------------
(unaudited)
Raw Materials......... $159,544 $343,814 $569,503
Finished Goods ....... 158,680 132,673 137,541
---------- ---------- ---------------
$318,224 $476,487 $707,044
========== ========== ===============
NOTE 4. EQUIPMENT:
Equipment consists of the following:
December 31,
-------------------------- September 30,
1994 1995 1996
----------- ----------- ---------------
(unaudited)
Telecommunications equipment $ 35,771 $ 82,802 $ 96,502
Office equipment ............ 391,737 439,309 521,450
Furniture and fixtures ...... 699,482 817,090 802,812
----------- ----------- ---------------
1,126,990 1,339,201 1,420,764
Less accumulated depreciation 667,456 794,730 902,991
----------- ----------- ---------------
$ 459,534 $ 544,471 $ 517,773
=========== =========== ===============
NOTE 5. NOTES PAYABLE, BANKS:
Notes payable, banks consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------- September 30,
1994 1995 1996
------------ ------------ -------------
(unaudited)
<S> <C> <C> <C>
Notes payable to Swiss Bank, bearing interest at 7% per
annum, due on demand and guaranteed by certain of the
stockholders of IAT .................................. $1,331,739 $1,365,457 $1,446,200
Notes payable to German banks, bearing interest at
10.5% per annum, due on demand, collateralized by
account receivable balances and guaranteed by the
stockholders of IAT GmbH ............................. 211,022 251,212 696,321
------------ ------------ -------------
$1,542,761 $1,616,669 $2,142,521
============ ============ =============
</TABLE>
F-9
<PAGE>
NOTE 6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES:
Accounts payable and other current liabilities consist of the following:
December 31,
-------------------------- September 30,
1994 1995 1996
---------- ---------- -------------
(unaudited)
Accounts payable, trade .. $284,587 $416,663 $ 462,305
Value added taxes ....... 124,978 173,798 32,864
Payroll taxes ........... 100,977 143,393 104,666
Other current liabilities 119,900 244,626 414,102
---------- ---------- -------------
$630,442 $978,480 $1,013,937
========== ========== =============
NOTE 7. LOANS PAYABLE, STOCKHOLDERS:
Loans payable, stockholders consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------ September 30,
1994 1995 1996
---------- ---------- -------------
(unaudited)
<S> <C> <C> <C>
Unsecured loan payable to minority stockholder of IAT
GmbH, bearing interest at 5% per annum and adjustable
to 10% based upon the attainment of retained earnings
of IAT GmbH, as defined. Semi-annual principal payments
at 10% of outstanding principal balance commence June
30, 2000. The loan is subordinated to all other
creditor claims, except for amounts due from IAT GmbH
to IAT AG ............................................. $348,913 $ 492,000
Unsecured loans payable to IAT AG stockholders, bearing
interest at 10% per annum. The loans are due the
earlier of June 30, 1997 or the completion of an IPO.
The loans are subordinated to all other creditor claims
(Note 12) ............................................. 902,000
Unsecured loan payable to IAT AG stockholder. The loan
was converted to common stock during 1995 ............. $335,878
-------- ---------- -------------
335,878 348,913 1,394,000
Less current portion ................................... 902,000
---------- ---------- -------------
$335,878 $349,913 $ 492,000
========== ========== =============
</TABLE>
NOTE 8. UNCERTAINTY -- ABILITY TO CONTINUE AS A GOING CONCERN:
The consolidated financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of
business. The Company has sustained recurring losses and has working capital
and stockholders' deficits. The Company's subsidiaries are subject to German
and Swiss law, which require, among other things, that companies which incur
losses have to take appropriate measures to ensure that the claims of the
Company's subsidiaries' obligees are covered by the assets of those
respective subsidiaries. Such measures include, among others, increasing
paid-in capital or obtaining declarations from the obligees which
subordinates their claims. If those measures are not taken, the board of
directors of the subsidiaries must notify a judge in order to commence
bankruptcy proceedings which, under Swiss and German law, usually leads to
the dissolution of the corporate existence. As of September 30, 1996
(unaudited) the Company's subsidiaries have not filed for bankruptcy.
Continuation of the Company as a going concern is dependent on its ability to
resolve its liquidity problems and attain profitable operations. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Management plans to raise equity capital and execute a letter of intent
with an underwriter for an IPO on a Form S-1 Registration Statement.
F-10
<PAGE>
NOTE 9. DEPENDENCE UPON KEY RELATIONSHIPS:
Approximately $1,686,000, $915,000, $1,032,000, $532,000 and $833,000 of
the Company's revenues for the years ended December 31, 1993, 1994, 1995 and
for the nine months ended September 30, 1995 (unaudited) and 1996
(unaudited), respectively, were attributable to sales to one customer or
affiliates of the customer. Sales for the years ended December 31, 1993,
1994, 1995 and the nine months ended September 30, 1995 and 1996,
respectively are from customers located in Switzerland and Germany. At
December 31, 1994 and 1995 and September 30, 1996 substantially all of the
Company's assets and liabilities were located in Germany and Switzerland.
The Company purchases several parts used in the production of its products
from certain vendors, even where multiple sources are available in an effort
to maintain quality control. The loss of any of these vendors could have a
material adverse effect on the Company's operations until the Company can
redesign its products or find an alternative source.
NOTE 10. INCOME TAXES:
For the years ended December 31, 1993, 1994 and 1995 and the nine months
ended September 30, 1995 (unaudited) and 1996 (unaudited), income taxes
computed at the statutory federal rates differ from the Company's effective
rate due to the change in the deferred tax asset valuation allowance. The
Company, since inception, has not generated taxable income within any taxing
jurisdiction in which the Company operates.
At December 31, 1995 and September 30, 1996 (unaudited), the Company has
net operating loss carryforwards ("NOL") for Swiss and German income tax
purposes of approximately $11,336,000 and $537,000 and $13,373,000 and
$1,251,000, respectively. The Swiss NOLs expire between 1996 and 2002, and
the German NOLs have no expiration date. As a result, at December 31, 1994,
1995 and September 30, 1996 (unaudited), the Company recorded deferred tax
assets of approximately $2,564,000, $3,669,000 and $4,638,000, respectively
and valuation allowances in the same amounts relating principally to Swiss
and German NOLs.
SFAS 109 requires that the Company record a valuation allowance when it is
"more likely than not that some portion or all of the deferred tax asset will
not be realized". The ultimate realization of this deferred tax asset depends
on the ability to generate sufficient taxable income in the future.
NOTE 11. COMMITMENTS AND CONTINGENCIES:
The Company has entered into operating leases for the use of office,
manufacturing facilities and equipment. Rent expense for the years ended
December 31, 1993, 1994 and 1995 and the nine months ended September 30, 1995
(unaudited) and 1996 (unaudited) was approximately $238,000, $196,000,
$306,000, $218,000 and $304,000 respectively.
Aggregate approximate future minimum rental payment under these operating
leases are as follows:
Year Ending December 31,
------------------------
1996 $ 379,000
1997 339,000
1998 226,000
1999 204,000
-------------
$1,148,000
=============
The Company currently does not maintain product liability insurance, and
believes that it cannot obtain such insurance except at substantial cost.
While no product liability claims have been made against the Company, there
can be no assurance that such claims will not arise in the future. Any
substantial uninsured liability would have a material adverse effect on the
results of operations, cash flows or financial position of the Company.
The Company is a party to various legal actions, the outcome of which, in
the opinion of management, will not have a material adverse effect on results
of operations, cash flows or financial position of the Company.
F-11
<PAGE>
NOTE 12. SUBSEQUENT EVENTS:
During October 1996, the Company issued 1,875,000 shares of Series A
Convertible Preferred Stock, par value $.01 per share (Series A), for
$1,500,000. The Series A stock is initially convertible into 1,875,000 shares
of the Company's common stock, however, will automatically convert upon the
consummation of the Company's proposed IPO under the Securities Act of 1933,
as amended. Each share of Series A has voting rights equivalent to a common
stockholder on an as converted basis. The Company is required to pay a
dividend at a rate of $.056 per share for the first year and $.80 per share
for each year thereafter. At any time after December 31, 1997, the Company
has the option to redeem all outstanding shares of Series A, and the
preferred stockholder has the option to require the Company to purchase all,
or a portion, of the Series A shares at any time following the second
anniversary of purchase, for an amount equal to the liquidation preference,
as defined, currently $0.80 per share. In addition, the Company issued
warrants to purchase 1,875,000 shares of common stock. The warrants are
exercisable at a per share price equal to 130% of the IPO price per share,
and expire at the earlier of the ten year anniversary date of the IPO, or
December 31, 2006.
In connection with the sale of the Series A shares, the Company entered
into a marketing agreement, with an affiliate of a Series A stockholder, to
assist with marketing the Company's products worldwide, and to arrange
financing for the Company's operations, leasing programs and distribution
arrangements. The agreement terminates in October 2001. Compensation under
the agreement is as follows:
$100,000 payable on the signing of the contract, $300,000 payable at such
time as the Company's consolidated stockholders' equity exceeds $6
million, and an additional $100,000 payable at such time the Company's
consolidated stockholders' equity exceeds $8 million, as defined. The
agreement may be terminated at any time after June 30, 1997, if the
Company's working capital does not exceed $4 million.
In connection with the issuance of the Company's common stock to certain
former IAT AG stockholders, the Company issued warrants to purchase an
aggregate of 473,485 shares of the Company's common stock. The warrants are
exercisable at a per share price equal to 130% of the IPO price per share,
and expire at the earlier of the ten year anniversary date of the IPO, or
December 31, 2006.
During October and November 1996, certain stockholders loaned the Company an
aggregate of $920,000 bearing interest ranging from 8% to 10% per annum. The
Company will repay $400,000 of this loan from proceeds of the proposed IPO and
the remaining balance is due on January 1, 1998. The loan is subordinated to all
other creditor claims. In addition, approximately $120,000 of a stockholder loan
received during the nine months ended September 30, 1996 was repaid.
In December 1996, the Company signed a letter of intent with an investment
banking firm for the purpose of underwriting an IPO.
Certain of the Company's stockholders have agreed to place an aggregate of
500,000 shares of the Company's common stock in escrow. These shares will not
be assignable or transferable (but may be voted) until such time as they are
released from escrow based upon the Company meeting certain annual revenue
and or income levels or the common stock attaining certain price levels. All
reserved shares remaining in escrow on March 31, 2000 will be forfeited and
contributed to the Company's capital. In the event the Company attains any of
the earnings thresholds or stock prices providing for the release of escrow
shares to the stockholders, the Company will recognize compensation expense
at such time based on the fair market value of the shares.
In December 1996, the Company's board of directors and stockholders
approved the adoption of the Company's 1996 Stock Option Plan (the "1996
Plan"). The 1996 Plan provides for a grant of a limited number of
non-qualified and incentive stock options in respect of up to 500,000 shares
of Common Stock to eligible employees and advisors. The 1996 Plan is
administered by the Stock Option Committee consisting of the independent
directors of the Company. Each option granted pursuant to the 1996 Plan is
designated at the time of grant as either an incentive stock option or as a
non-qualified stock option.
In December 1996, the Board of Directors and stockholders of the Company
approved a reverse stock split whereby .947 shares of the common stock and
preferred stock were issued for each share outstanding at that time. All
share information in the consolidated financial statements have been restated
to reflect such stock split. In addition, the Company increased the amount of
authorized Preferred Stock $.01 par value, to 2,375,000 shares.
F-12
<PAGE>
=============================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in
this Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or by the
Underwriter. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities offered hereby by anyone in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so
or to anyone to whom it is unlawful to make such offer, or solicitation.
TABLE OF CONTENTS
Page
-----------
Prospectus Summary ............................................. 4
Risk Factors ................................................... 11
Use of Proceeds ................................................ 22
Dividend Policy ................................................ 22
Exchange Rates ................................................. 23
Capitalization ................................................. 23
Dilution ....................................................... 24
Selected Financial Data ........................................ 25
Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 27
Business ....................................................... 32
Management ..................................................... 49
Certain Transactions ........................................... 55
Principal Stockholders ......................................... 59
Description of Securities ...................................... 62
Shares Eligible for Future Sale ................................ 67
Underwriting ................................................... 68
Legal Matters .................................................. 69
Experts ........................................................ 69
Additional Information ......................................... 69
Glossary ....................................................... 70
Index to Financial Statements .................................. F-1
Until , 1997, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is an addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
=============================================================================
=============================================================================
IAT MULTIMEDIA, INC.
3,100,000 UNITS
CONSISTING OF 3,100,000 SHARES OF
COMMON STOCK AND 3,100,000
WARRANTS
------
PROSPECTUS
------
ROYCE INVESTMENT GROUP, INC.
, 1997
=============================================================================
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and By-Laws of the Registrant provide
that the Registrant shall indemnify any person to the full extent permitted
by the General Corporation Law of the State of Delaware (the "GCL"). Section
145 of the GCL, relating to indemnification, is hereby incorporated herein by
reference.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Registrant eliminates the personal liability of
directors to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director with certain limited exceptions set
forth in Section 102(a)(7).
Reference is made to Section 6 of the Underwriting Agreement (Exhibit 1.1)
which provides for indemnification by the Underwriter of the Registrant and
its directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered (other than
underwriting discounts and commissions and the Underwriter's non-accountable
expense allowance of $ ) are as follows:
Amount
------------------
SEC Registration Fee .................................. $18,167
NASD Filing Fee ....................................... 6,495
Nasdaq Filing Fees .................................... *
Printing and Engraving Expenses ....................... *
Accounting Fees and Expenses .......................... *
Legal Fees and Expenses ............................... *
Blue Sky Fees and Expenses ............................ *
Transfer Agent's Fees and Expenses .................... *
Miscellaneous Expenses ................................ *
------------------
Total ................................................. $ *
==================
- ------
* To be completed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with its organization in October 1996, the Registrant
exchanged 4,620,000 of its Common Stock and warrants to purchase 500,000
shares of Common Stock for all of the issued and outstanding stock of IAT AG,
a corporation organized under the laws of Switzerland. Since its
organization, the Registrant has sold and issued the following unregistered
securities:
In October 1996, the Registrant sold 1,980,000 shares of Series A
Preferred Stock and warrants to purchase 1,980,000 shares of Common Stock to
Vertical Financial Holdings, Behala Anstalt, Henilia Financial Limited, Lupin
Investment Services Ltd. and Avi Suriel.
The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities
Act of 1933, as amended, pursuant to Section 4(2) thereof. The sale of
securities was without the use of an underwriter, and the certificates
evidencing the shares bear a restrictive legend permitting the transfer
thereof only upon registration of the shares or an exemption under the
Securities Act of 1933, as amended.
In December 1996, the Registrant effected a reverse stock split resulting
in a reduction of its outstanding stock from 4,620,000 shares of Common Stock
to 4,375,000 shares and from 1,980,000 shares of Series A Preferred Stock to
1,875,000 shares. The Registrants outstanding Warrants were similarly
effected.
II-1
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 By-laws of the Registrant
4.1 Form of Warrant Agreement
4.2 Form of Underwriter's Unit Purchase Option
4.3 Warrant issued to Vertical Financial Holdings (one in a series of warrants with identical terms)
4.4 Warrant issued to Stockholders (one in a series of warrants with identical terms)
4.5 Form of Escrow Agreement
*5.1 Opinion of Baker & McKenzie
10.1 IAT Multimedia, Inc. 1996 Stock Option Plan
10.2 Stock Purchase Agreement, dated as of October 4, 1996, by and among IAT Multimedia, Inc. (formerly known
as IAT Holdings, Inc.), IAT AG, IAT Deutschland, GmbH, Vertical Financial Holdings, and the stockholders
of IAT AG
10.3 Investor's Rights Agreement, dated as of October 24, 1996, by and between IAT Multimedia, Inc. (formerly
known as IAT Holdings, Inc.) and Vertical Financial Holdings
10.4 Marketing Agreement, dated as of October 24, 1996, by and between IAT Multimedia, Inc. (formerly known
as IAT Holdings, Inc.) and General Capital
10.5 Contract of the Communications Computer Development Community (EGKR), dated August 12, 1992, by and between
IAT Deutschland GmbH and Deutsche Bundespost Telekom Siegen Telecommunications Office, SfE EKOM
10.6 Cooperation Contract Covering the Development of Version 3 of the Multimedia Information and Communications
System MIKS, dated December 16, 1994, by and among The Deutsche Bundespost Telekom, IBM Deutschland
Informationssysteme GmbH and IAT Schwiez AG
10.7 General Cooperation Agreement Concerning Joint Further Development of the IAT/Deutsche Telekom Software
Codec on the Basis of the Texas Instruments Parallel Processor TMS320C8x, dated October 16, 1995, by and
between Deutsche Telekom AG and IAT Schweiz AG
10.8 Extension of Agreement Concerning MIKS Version 3, dated July 30, 1996, by and among IBM Deutschland
Informationssysteme GmbH, Deutsche Telekom AG and IAT AG
10.9 Licensing and General Distribution Agreement, dated as of April 11, 1994, by and between Deutsche Bundespost
Telekom and IAT AG
10.10 Program License Agreement, dated November 10, 1993, by and between Texas Instruments Deutschland GmbH
and IAT AG Geschaeftshaus Wasserschloss
10.11 Form of MVP Cross License Agreement by and between the Texas Instruments France and IAT AG
10.12 Form of Joint Development and Cross License Agreement by and between Texas Instruments, Inc. and IAT AG
10.13 Wavelet Data Compression for the Transmission of High-Quality Still Video Images, dated as of May 15,
1996, by and between IAT AG and Prof. Dr. R. Seiler
10.14 Cooperation Agreement, dated March 18, 1996, by and between Olympus Optical (Europe) GmbH and IAT Deutschland
GmbH
II-2
<PAGE>
10.15 Loan Agreement between IAT Deutschland GmbH and Bremer Bank
10.16 Directly Enforceable Minimum Guarantee for Securing All Claims Under the Banking Relationship among IAT
AG, IAT Deutschland GmbH and Bremer Bank
10.17 Loan Agreement for Current Account Credit Lines between IAT Deutschland GmbH and Volksbank Sottrum eG
10.18 Agreement, dated September 1, 1992, by and between Grissemann Consulting SA and IAT AG
10.19 Addendum to the Agreement of September 1, 1992, dated December 14, 1994, by and between Grissemann Consulting
SA and IAT AG
10.20 Management Contract, dated December 14, 1995, by and between IAT GmbH and Mr. Wilhelm Gudauski
10.21 Employment Contract, dated as of July 1, 1993, by and between IAT AG and Mr. Franz Muller
*10.22 Amendment No. 1 to Stock Purchase Agreement, dated as of October 4, 1996, by and among IAT Multimedia,
Inc. (formerly known as IAT Holdings, Inc.), IAT AG, IAT Deutschland GmbH Vertical Financial Holdings,
and the stockholders of IAT AG.
*10.23 Amendment No. 1 to Marketing Agreement, dated as of October 24, 1996, by and between IAT Multimedia, Inc.
(formerly known as IAT Holdings, Inc.) and General Capital.
10.24 Letters of Consent, dated December , 1996
21.1 List of Subsidiaries of Registrant
*23.1 Consent of Baker & McKenzie included in Exhibit 5.1
23.2 Consent of Rothstein Kass & Company
23.3 Consent of Dr. Schackow & Partners
24.1 Power of Attorney included on Page II-5
27.1 Financial Data Schedules
</TABLE>
- ------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
the registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereto.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York on the 20th of December, 1996.
IAT MULTIMEDIA, INC.
By: /s/ Viktor Vogt
-------------------------------
Viktor Vogt
Chief Executive Officer and
President
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of 1993, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated. Each person whose signature to this
Registration Statement appears below hereby appoints Viktor Vogt or Jacob
Agam as his attorney-in-fact to sign on his behalf, individually and in the
capacities stated below, and to file (i) any and all amendments and post-
effective amendments to this Registration Statement and (ii) any registration
statement relating to the same offering pursuant to Rule 462(b) under the
Securities Act of 1933, which amendment or amendments or registration
statement may make such changes and additions as such attorney-in-fact may
deem necessary or approximate.
<TABLE>
<CAPTION>
Signature Title Date
----------------------- ------------------------------------------------- --------------------
<S> <C> <C>
/s/ Viktor Vogt
- ------------------------ Co-Chairman of the Board of Directors and Chief
Viktor Vogt Executive Officer and President
(Principal Executive Officer) December 20, 1996
/s/ Jacob Agam
- ------------------------
Jacob Agam Co-Chairman of the Board of Directors December 20, 1996
/s/ Klaus Grissemann
- ------------------------ Chief Financial Officer and Director
Klaus Grissemann (Principal Accounting and Financial Officer) December 20, 1996
/s/ Volker Walther
- ------------------------
Volker Walther Director December 20, 1996
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 Amended and Restated Certificate of Incorporation of the Registrant
3.3 By-laws of the Registrant
4.2 Form of Warrant Agreement
4.3 Form of Underwriter's Unit Purchase Option
4.4 Warrant issued to Vertical Financial Holdings (one in a series of warrants with identical terms)
4.5 Warrant issued to Stockholders (one in a series of warrants with identical terms)
4.6 Form of Escrow Agreement
*5.1 Opinion of Baker & McKenzie
10.1 IAT Multimedia, Inc. 1996 Stock Option Plan
10.2 Stock Purchase Agreement, dated as of October 4, 1996, by and among IAT Multimedia, Inc. (formerly known
as IAT Holdings, Inc.), IAT AG, IAT Deutschland, GmbH, Vertical Financial Holdings, and the stockholders
of IAT AG
10.3 Investor's Rights Agreement, dated as of October 24, 1996, by and between IAT Multimedia, Inc. (formerly
known as IAT Holdings, Inc.) and Vertical Financial Holdings
10.4 Marketing Agreement, dated as of October 24, 1996, by and between IAT Multimedia, Inc. (formerly known
as IAT Holdings, Inc.) and General Capital
10.5 Contract of the Communications Computer Development Community (EGKR), dated August 12, 1992, by and between
IAT Deutschland GmbH and Deutsche Bundespost Telekom Siegen Telecommunications Office, SfE EKOM
10.6 Cooperation Contract Covering the Development of Version 3 of the Multimedia Information and Communications
System MIKS, dated December 16, 1994, by and among The Deutsche Bundespost Telekom, IBM Deutschland
Informationssysteme GmbH and IAT Schwiez AG
10.7 General Cooperation Agreement Concerning Joint Further Development of the IAT/Deutsche Telekom Software
Codec on the Basis of the Texas Instruments Parallel Processor TMS320C8x, dated October 16, 1995, by and
between Deutsche Telekom AG and IAT Schweiz AG
10.8 Extension of Agreement Concerning MIKS Version 3, dated July 30, 1996, by and among IBM Deutschland
Informationssysteme GmbH, Deutsche Telekom AG and IAT AG
10.9 Licensing and General Distribution Agreement, dated as of April 11, 1994, by and between Deutsche Bundespost
Telekom and IAT AG
10.10 Program License Agreement, dated November 10, 1993, by and between Texas Instruments Deutschland GmbH
and IAT AG Geschaeftshaus Wasserschloss
10.11 Form of MVP Cross License Agreement by and between the Texas Instruments France and IAT AG
10.12 Form of Joint Development and Cross License Agreement by and between Texas Instruments, Inc. and IAT AG
10.13 Wavelet Data Compression for the Transmission of High-Quality Still Video Images, dated as of May 15,
1996, by and between IAT AG and Prof. Dr. R. Seiler
10.14 Cooperation Agreement, dated March 18, 1996, by and between Olympus Optical (Europe) GmbH and IAT Deutschland
GmbH
10.15 Loan Agreement between IAT Deutschland GmbH and Bremer Bank
10.16 Directly Enforceable Minimum Guarantee for Securing All Claims Under the Banking Relationship among IAT
AG, IAT Deutschland GmbH and Bremer Bank
10.17 Loan Agreement for Current Account Credit Lines between IAT Deutschland GmbH and Volksbank Sottrum eG
10.18 Agreement, dated September 1, 1992, by and between Grissemann Consulting SA and IAT AG
10.19 Addendum to the Agreement of September 1, 1992, dated December 14, 1994, by and between Grissemann Consulting
SA and IAT AG
10.20 Management Contract, dated December 14, 1995, by and between IAT GmbH and Mr. Wilhelm Gudauski
10.21 Employment Contract, dated as of July 1, 1993, by and between IAT AG and Mr. Franz Muller
*10.22 Amendment No. 1 to Stock Purchase Agreement, dated as of October 4, 1996, by and among IAT Multimedia,
Inc. (formerly known as IAT Holdings, Inc.), IAT AG, IAT Deutschland GmbH Vertical Financial Holdings,
and the stockholders of IAT AG.
*10.23 Amendment No. 1 to Marketing Agreement, dated as of October 24, 1996, by and between IAT Multimedia, Inc.
(formerly known as IAT Holdings, Inc.) and General Capital.
10.24 Letters of Consent, dated December , 1996
21.1 List of Subsidiaries of Registrant
*23.1 Consent of Baker & McKenzie included in Exhibit 5.1
23.2 Consent of Rothstein Kass & Company
23.3 Consent of Dr. Schackow & Partners
24.1 Power of Attorney included on Page II-5
27.1 Financial Data Schedules
</TABLE>
<PAGE>
3,100,000 Units
(each Unit consisting of one share of Common Stock, par
value $.01 per share and one redeemable warrant to purchase
one share of Common Stock)
IAT MULTIMEDIA, INC.
UNDERWRITING AGREEMENT
Royce Investment Group, Inc. , 1997
As Representative of the Several Underwriters
199 Crossways Park Drive
Woodbury, New York 11797
IAT Multimedia, Inc., a Delaware corporation ( "IAT" or the "Company"),
proposes to issue and sell to the underwriters named in Schedule A (the
"Underwriters") of this Underwriting Agreement (the "Agreement"), for whom you
are acting as representative (the "Representative"), an aggregate of 3,100,000
Units, each unit being hereinafter referred to as a "Unit" and consisting of one
share of Common Stock, par value $.01 per share, ("Shares") and one redeemable
warrant ("Warrants") to purchase one share of Common Stock at a price of $___ at
any time from the Separation Date (as defined in the Warrant Agreement dated the
date hereof among the Company, the Representative and American Stock Transfer &
Trust Company to __________, 2002. The Warrants are subject to redemption, in
certain instances commencing 15 months from the date of this Agreement. In
addition, IAT proposes to grant to the Underwriters (or, at its option, the
Representative, individually) the option referred to in Section 2(b) to purchase
all or any part of an aggregate of 465,000 additional Units. Unless the context
otherwise indicates, the term "Units" shall include the 465,000 additional Units
referred to above.
The aggregate of 3,100,000 Units to be sold by IAT, together with all or
any part of the 465,000 Units which the Underwriters have the option to
purchase, and the Shares and the Warrants comprising such Units, are herein
called the "Units." The Common Stock of IAT to be outstanding after giving
effect to the sale of the Shares is herein called the "Common Stock." The Shares
and Warrants included in the Units (including the Units which the Underwriters
have the option to purchase) are herein collectively called the "Securities."
You have advised IAT that you and the other Underwriters desire to
purchase, severally, the Units, and that you have been authorized by the
Underwriters to execute this agreement on their behalf. IAT confirms the
agreements made by it with respect to the purchase of the Units by the several
Underwriters on whose behalf you are signing this Agreement, as follows:
<PAGE>
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Underwriters that:
(a) A registration statement (File No. 333- ) on Form S-1 relating to
the public offering of the Units, including a form of prospectus subject to
completion, copies of which have heretofore been delivered to you, has been
prepared by IAT in conformity with the requirements of the Securities Act
of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the
Act and one or more amendments to such registration statement may have been
so filed. After the execution of this Agreement, IAT will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if IAT relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Units that shall identify the
Preliminary Prospectus (as hereinafter defined) that it supplements
containing such information as is required or permitted by Rules 434, 430A
and 424(b) under the Act or (B) if IAT does not rely on Rule 434 under the
Act a prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in
such registration statement), with such changes or insertions as are
required by Rule 430A under the Act or permitted by Rule 424(b) under the
Act and in the case of either clause (i)(A) or (i)(B) of this sentence, as
have been provided to and approved by the Representative prior to the
execution of this Agreement, or (ii) if such registration statement, as it
may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Representative prior to the execution of
this Agreement.
As used in this Agreement, the term "Registration Statement" means
such registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits thereto
and including any information omitted therefrom pursuant to Rule 430A under
the Act and included in the Prospectus (as hereinafter defined); the term
"Preliminary Prospectus" means each prospectus subject to completion filed
with such registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is declared
effective); the term "Prospectus" means (A) if IAT relies on Rule 434 under
the Act, the Term Sheet relating to the Units that is first filed pursuant
to Rule 424(b)(7) under the Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements; (B) if IAT does not
rely on Rule 434 under the Act, the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act or (C) if IAT does not
rely on Rule 434 under the Act and if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus included in
the Registration Statement; except that if such registration statement or
prospectus is amended or such prospectus is supplemented, after the
effective date of such registration statement and prior to the Option
Closing Date (as hereinafter defined), the terms "Registration Statement"
and "Prospectus" shall include such registration statement and prospectus
as so amended, and the term "Prospectus" shall include the prospectus as so
supplemented, or both, as the case may be; and the term "Term Sheet" means
any term sheet that
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<PAGE>
satisfies the requirements of Rule 434 under the Act. Any reference to the
"date" of a Prospectus that includes a Term Sheet shall mean the date of
such Term Sheet.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to and
on the Closing Date (as hereinafter defined) or the Option Closing Date, as
the case may be, (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make statements
therein not misleading; provided, however, that IAT makes no
representations, warranties or agreements as to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and
in conformity with, written information furnished to IAT by or on behalf of
the Underwriters specifically for use in the preparation thereof. It is
understood that the statements set forth in the Prospectus on page 2 with
respect to stabilization, under the heading "Underwriting" and the identity
of counsel to the Underwriters under the heading "Legal Matters" constitute
the only information furnished in writing by or on behalf of the several
Underwriters for inclusion in the Registration Statement and Prospectus, as
the case may be.
(c) Each of IAT and IAT AG ("IAT AG") and IAT Deutschland GmbH
Interactive Media Systeme ("IAT Germany" and together with IAT AG, the
"Subsidiaries"), has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority corporate and other to own its
properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good
standing in all other jurisdictions in which the nature of its business or
the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect IAT's or any
of the Subsidiaries' business, properties or financial condition.
(d) The authorized, issued and outstanding capital stock of IAT as of
__________, 1996 is as set forth in the Prospectus under "Capitalization";
the shares of issued and outstanding capital stock of IAT set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, no options,
warrants, or other rights to purchase, agreements or other obligations to
issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of IAT have been granted or entered into by IAT;
and the capital stock conforms to all statements relating thereto contained
in the Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when issued and
delivered pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights of any
security holder of IAT. Neither the filing of the Registration Statement
nor the offering or sale of the Units as contemplated in this Agreement
gives rise to any rights, other than those which have been waived or
satisfied, for or
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<PAGE>
relating to the registration of any shares of Common Stock, except as
described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of IAT
enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form
filed as an exhibit to the Registration Statement. The shares of Common
Stock issuable upon exercise of the Warrants have been reserved for
issuance upon the exercise of the Warrants and when issued in accordance
with the terms of the Warrants and Warrant Agreement, will be duly and
validly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights and no personal liability will attach to the ownership
thereof. The Warrant Agreement has been duly authorized and, when executed
and delivered pursuant to this Agreement, will have been duly executed and
delivered and will constitute the valid and legally binding obligation of
IAT enforceable in accordance with its terms. The Warrants and the Warrant
Agreement conform to the respective descriptions thereof in the
Registration Statement and Prospectus.
The Shares and the Warrants contained in the Unit Purchase Option have
been duly authorized and, when duly issued and delivered, such Warrants
will constitute valid and legally binding obligations of IAT enforceable in
accordance with their terms and entitled to the benefits provided by the
Unit Purchase Option. The Shares included in the Unit Purchase Option (and
the shares of Common Stock issuable upon exercise of such Warrants) when
issued and sold, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
(f) This Agreement, the Unit Purchase Option, the Warrant Agreement,
the Escrow Agreement and the Merger and Acquisition Agreement have been
duly and validly authorized, executed and delivered by IAT. IAT has full
power and lawful authority to authorize, issue and sell the Units to be
sold by it hereunder on the terms and conditions set forth herein, and no
consent, approval, authorization or other order of any governmental
authority is required in connection with such authorization, execution and
delivery or with the authorization, issue and sale of the Units or the Unit
Purchase Option, except such as may be required under the Act or state
securities laws.
(g) IAT does not own, directly or indirectly, any capital stock or
other equity ownership or proprietary interests in any other corporation,
association, trust, partnership, joint venture or other entity other than
the Subsidiaries.
(h) Except as described in the Prospectus, neither the Company nor any
of the Subsidiaries is in violation, breach or default of or under, and
consummation of the transactions herein contemplated and the fulfillment of
the terms of this Agreement will not conflict with, or result in a breach
or violation of, any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon
-4-
<PAGE>
any of the property or assets of IAT or any of the Subsidiaries pursuant to
the terms of any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which IAT or any of the Subsidiaries is a
party or by which IAT or any of the Subsidiaries may be bound or to which
any of the property or assets of IAT or any of the Subsidiaries is subject,
nor will such action result in any violation of the provisions of the
articles of incorporation or the by-laws (or other organizational
documents) of IAT or any of the Subsidiaries, as amended, or any statute or
any order, rule or regulation applicable to IAT or any of the Subsidiaries
of any court or of any regulatory authority or other governmental body
having jurisdiction over IAT or any of the Subsidiaries.
(i) Subject to the qualifications stated in the Prospectus, each of
IAT and the Subsidiaries has good and marketable title to all properties
and assets described in the Prospectus as owned by it, free and clear of
all liens, charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to its business; all of the
material leases and subleases under which IAT or any of the Subsidiaries is
the lessor or sublessor of properties or assets or under which IAT or any
of the Subsidiaries hold properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, IAT and each of the Subsidiaries is not in
default in any material respect with respect to any of the terms or
provisions of any of such leases or subleases, and no claim has been
asserted by anyone adverse to rights of IAT or any of the Subsidiaries as
lessor, sublessor, lessee or sublessee under any of the leases or subleases
mentioned above, or affecting or questioning the right of IAT or any of the
Subsidiaries to continued possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to
in the Prospectus; and IAT and each of the Subsidiaries owns or leases all
such properties described in the Prospectus as are necessary to their
operations as now conducted and, except as otherwise stated in the
Prospectus, as proposed to be conducted as set forth in the Prospectus.
(j) Rothstein, Kass & Company, P.C., who have given their reports on
certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are incorporated in the
Prospectus, are with respect to the Company, independent public accountants
as required by the Act and the Rules and Regulations.
(k) The financial statements, together with related notes, set forth
in the Prospectus (or if the Prospectus is not in existence, the most
recent Preliminary Prospectus) present fairly the financial position and
results of operations and changes in cash flow position of IAT and the
Subsidiaries on the basis stated in the Registration Statement, at the
respective dates and for the respective periods to which they apply. Said
statements and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is
consistent during the periods involved. The information set forth under the
captions "Dilution", "Capitalization", and "Selected Financial Data" in the
Prospectus fairly present, on the basis stated in the Prospectus, the
information included therein. The pro forma financial information filed as
part of the Registration Statement or included in the Prospectus (or such
preliminary prospectus) has been prepared in accordance with the
Commission's rules and guidelines with
-5-
<PAGE>
respect to pro forma financial statements, and includes all adjustments
necessary to present fairly the pro forma financial condition and results
of operations at the respective dates and for the respective periods
indicated and all assumptions used in preparing such pro forma financial
statements are reasonable.
(l) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), neither IAT
nor any of the Subsidiaries has incurred any liabilities or obligations,
direct or contingent, not in the ordinary course of business, or entered
into any transaction not in the ordinary course of business, which is
material to the business of IAT or any of the Subsidiaries, and there has
not been any change in the capital stock of, or any incurrence of
short-term or long-term debt by, the Company or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or
any adverse change or any development involving, so far as the Company can
now reasonably foresee a prospective adverse change in the condition
(financial or other), net worth, results of operations, business, key
personnel or properties of it which would be material to the business or
financial condition of IAT or any of the Subsidiaries and neither IAT nor
any of the Subsidiaries has become a party to, and neither the business nor
the property of IAT or any of the Subsidiaries has become the subject of,
any material litigation whether or not in the ordinary course of business.
(m) Except as set forth in the Prospectus, there is not now pending
or, to the knowledge of IAT, threatened, any action, suit or proceeding to
which IAT or any of the Subsidiaries is a party before or by any court or
governmental agency or body, which might result in any material adverse
change in the condition (financial or other), business prospects, net
worth, or properties of IAT or any of the Subsidiaries, nor are there any
actions, suits or proceedings related to environmental matters or related
to discrimination on the basis of age, sex, religion or race; and no labor
disputes involving the employees of IAT or any of the Subsidiaries exist or
are imminent which might be expected to adversely affect the conduct of the
business, property or operations or the financial condition or results of
operations of IAT or any of the Subsidiaries.
(n) Except as disclosed in the Prospectus, IAT and each of the
Subsidiaries have filed all necessary income and franchise tax returns with
all federal, state, local and foreign governmental agencies and have paid
all taxes shown as due thereon; and there is no tax deficiency which has
been or to the knowledge of IAT might be asserted against IAT or any of the
Subsidiaries.
(o) IAT and each of the Subsidiaries have sufficient licenses, permits
and other governmental authorizations currently required for the conduct of
their business or the ownership of their properties as described in the
Prospectus and are in all material respects complying therewith. To the
best knowledge of IAT, none of the activities or business of IAT or any of
the Subsidiaries are in violation of, or cause IAT or any of the
Subsidiaries to violate, any law, rule, regulation or order of the United
States, Switzerland or Germany or any state, county or locality, or of any
agency or body of the United States, Switzerland or Germany or of any
-6-
<PAGE>
state, county or locality, the violation of which would have a material
adverse impact upon the condition (financial or otherwise), business,
property, prospective results of operations, or net worth of IAT or any of
the Subsidiaries.
(p) IAT and the Subsidiaries own or possess the right to use all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Prospectus as being necessary for the conduct
of their respective businesses, and neither IAT nor any of the Subsidiaries
is aware of any claim to the contrary or any challenge by any other person
to the rights of IAT and the Subsidiaries with respect to the foregoing.
IAT's and the Subsidiaries' business as now conducted does not and will not
infringe or conflict with in any material respect patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses or other
intellectual property or franchise right of any other person. Except as
described in the Prospectus, no claim has been made against IAT or any of
the Subsidiaries alleging the infringement by IAT or any of the
Subsidiaries of any patent, trademark, service mark, trade name, copyright,
trade secret, license in or other intellectual property right or franchise
right of any person.
(q) IAT and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as are customary in the businesses in which they are engaged; and neither
IAT nor any of the Subsidiaries has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue their respective businesses at a cost that would not
have a material adverse affect upon the condition (financial or otherwise),
business, property, prospective results of operations, or net worth of IAT
or any of the Subsidiaries.
(r) Neither IAT nor any of the Subsidiaries has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments or contributions
required or allowed by applicable law. IAT's and the Subsidiaries' internal
accounting controls and procedures are sufficient to cause IAT and the
Subsidiaries to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(s) On the Closing Dates (hereinafter defined) all transfer or other
taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid
in connection with the sale and transfer of the Units to the several
Underwriters hereunder will have been fully paid or provided for by IAT and
all laws imposing such taxes will have been fully complied with.
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<PAGE>
(t) All contracts and other documents of IAT or any of the
Subsidiaries which are, under the Rules and Regulations, required to be
filed as exhibits to the Registration Statement have been so filed.
(u) Neither IAT nor any of the Subsidiaries has taken nor will take,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Units hereby.
(v) Neither IAT nor any of the Subsidiaries has entered into any
agreement pursuant to which any person is entitled either directly or
indirectly to compensation from IAT or any of the Subsidiaries for services
as a finder in connection with the proposed public offering.
(w) Except as previously disclosed in writing by IAT to the
Representative, no officer, director or stockholder of IAT or any of the
Subsidiaries has any affiliation or association with any member of the
National Association of Securities Dealers Inc. ("NASD").
(x) Neither IAT nor any of the Subsidiaries is, nor upon receipt of
the proceeds from the sale of the Units will be, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, and
the rules and regulations thereunder.
(y) Neither IAT nor any of the Subsidiaries has distributed nor will
they distribute prior to the First Closing Date (as hereinafter defined)
any offering material in connection with the offering and sale of the Units
other than the Preliminary Prospectus, Prospectus, the Registration
Statement or the other materials permitted by the Act, if any.
(z) There are no business relationships or related-party transactions
of the nature described in Item 404 of Regulation S-K involving IAT or any
of the Subsidiaries and any person described in such Item that are required
to be disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and that have not been
so disclosed.
(aa) IAT and each of the Subsidiaries have complied with all
provisions of Section 517.075 Florida Statutes relating to doing business
with the government of Cuba or with any person or affiliate located in
Cuba.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties, and agreements herein
contained, IAT agrees to issue and sell to the Underwriters, and each such
Underwriter agrees, severally and not jointly, to buy from IAT at $_______
per Unit, at the place and time hereinafter specified, the number of Units
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<PAGE>
set forth opposite the names of the Underwriters in Schedule A attached
hereto (the "First Units") plus any additional Units which such
Underwriters may become obligated to purchase pursuant to the provisions of
Section 9 hereof. The First Units shall consist of 3,100,000 Units to be
purchased from IAT.
Delivery of the First Units against payment therefor shall take place
at the offices of Royce Investment Group, Inc., 199 Crossways Park Drive,
Woodbury, N.Y. (or at such other place as may be designated by agreement
between you and IAT) at 10:00 a.m., New York time, on _____________, 1997,
or at such later time and date as you may designate, such time and date of
payment and delivery for the First Units being herein called the "First
Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and
agreements herein contained, IAT hereby grants an option to the several
Underwriters to purchase all or any part of an aggregate of an additional
465,000 Units at the same price per Unit as the Underwriters shall pay for
the First Units being sold pursuant to the provisions of subsection (a) of
this Section 2 (such additional Units being referred to herein as the
"Option Units"). This option may be exercised within 45 days after the
effective date of the Registration Statement upon notice by the
Representative to IAT advising as to the amount of Option Units as to which
the option is being exercised, the names and denominations in which the
certificates for such Option Units are to be registered and the time and
date when such certificates are to be delivered. Such time and date shall
be determined by the Representative but shall not be earlier than four nor
later than ten full business days after the exercise of said option, nor in
any event prior to the First Closing Date, and such time and date is
referred to herein as the "Option Closing Date." Delivery of the Option
Units against payment therefor shall take place at the offices of Royce
Investment Group, Inc., 199 Crossways Park Drive, Woodbury, N.Y. The number
of Option Units to be purchased by each Underwriter, if any, shall bear the
same percentage to the total number of Option Units being purchased by the
several Underwriters pursuant to this subsection (b) as the number of Units
such Underwriter is purchasing bears to the total number of the First Units
being purchased pursuant to subsection (a) of this Section 2, as adjusted,
in each case by the Representative in such manner as the Representative may
deem appropriate. The option granted hereunder may be exercised only to
cover overallotments in the sale by the Underwriters of First Units
referred to in subsection (a) above. In the event IAT declares or pays a
dividend or distribution on its Common Stock, whether in the form of cash,
shares of Common Stock or any other consideration, prior to the Option
Closing Date, such dividend or distribution shall also be paid on the
Option Units on the Option Closing Date.
(c) IAT will make the certificates for the securities comprising the
Units to be purchased by the Underwriters hereunder available to you for
checking at least two full business days prior to the First Closing Date or
the Option Closing Date (which are collectively referred to herein as the
"Closing Dates"). The certificates shall be in such names and denominations
as you may request, at least two full business days prior to the Closing
Dates.
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<PAGE>
Time shall be of the essence and delivery at the time and place specified
in this Agreement is a further condition to the obligations of each
Underwriter.
Definitive certificates in negotiable form for the Units to be
purchased by the Underwriters hereunder will be delivered by IAT to you for
the accounts of the several Underwriters against payment of the respective
purchase prices by the several Underwriters, by certified or bank cashier's
checks in New York Clearing House funds, payable to the order of IAT.
In addition, in the event the Underwriters exercise the option to
purchase from IAT all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to
or upon the order of IAT by certified or bank cashier's checks payable in
New York Clearing House funds at the offices of Royce Investment Group,
Inc., 199 Crossways Park Drive, Woodbury, New York, 11797 (or such other
place as may be designated by agreement between you and IAT) at the time
and date of delivery of such Units as required by the provisions of
subsection (b) above, against receipt of the certificates for such Units by
the Representative for the respective accounts of the several Underwriters
registered in such names and in such denominations as the Representative
may request.
It is understood that you, individually and not as Representative of
the several Underwriters, may (but shall not be obligated to) make any and
all payments required pursuant to this Section 2 on behalf of any
Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Units to be purchased by such
Underwriter or Underwriters. Any such payment by you shall not relieve any
such Underwriter or underwriters of any of its or their obligations
hereunder. It is also understood that you individually rather than all of
the Underwriters may (but shall not be obligated to) purchase the Option
Units referred to in subsection (b) of this Section 2, but only to cover
overallotments.
It is understood that the several Underwriters propose to offer the
Units to be purchased hereunder to the public upon the terms and conditions
set forth in the Registration Statement, after the Registration Statement
becomes effective.
3. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
(a) IAT will use its best efforts to cause the Registration Statement
to become effective as promptly as possible. If required, IAT will file the
Prospectus or any Term Sheet that constitutes a part thereof and any
amendment or supplement thereto with the Commission in the manner and
within the time period required by Rules 434 and 424(b) under the Act. Upon
notification from the Commission that the Registration Statement has become
effective, IAT will so advise you and will not at any time, whether before
or after the effective date, file the Prospectus, Term Sheet or any
amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously have been advised and furnished with a copy
or to which you or your counsel shall have objected in writing or which is
not in
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compliance with the Act and the Rules and Regulations. At any time prior to
the later of (A) the completion by all of the Underwriters of the
distribution of the Units contemplated hereby (but in no event more than
nine months after the date on which the Registration Statement shall have
become or been declared effective) and (B) 25 days after the date on which
the Registration Statement shall have become or been declared effective,
IAT will prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or Prospectus
which, in your opinion, may be necessary or advisable in connection with
the distribution of the Units.
As soon as IAT is advised thereof, IAT will advise you, and confirm
the advice in writing, of the receipt of any comments of the Commission, of
the effectiveness of any post-effective amendment to the Registration
Statement, of the filing of any supplement to the Prospectus or any amended
Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order
or threat thereof suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Units for
offering in any jurisdiction, or of the institution of any proceedings for
any of such purposes, and will use its best efforts to prevent the issuance
of any such order, and, if issued, to obtain as soon as possible the
lifting thereof.
IAT has caused to be delivered to you copies of each Preliminary
Prospectus, and IAT has consented and hereby consents to the use of such
copies for the purposes permitted by the Act. IAT authorizes the
Underwriters and dealers to use the Prospectus in connection with the sale
of the Units for such period as in the opinion of counsel to the several
Underwriters the use thereof is required to comply with the applicable
provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a Prospectus is required under
the Act to be delivered in connection with sales by an underwriter or
dealer of any event of which IAT has knowledge and which materially affects
IAT or the securities of IAT, or which in the opinion of counsel for IAT or
counsel for the Underwriters should be set forth in an amendment of the
Registration Statement or a supplement to the Prospectus in order to make
the statements therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required to be delivered to a
purchaser of the Units or in case it shall be necessary to amend or
supplement the Prospectus to comply with law or with the Rules and
Regulations, IAT will notify you promptly and forthwith prepare and furnish
to you copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably
request, in order that the Prospectus, as so amended or supplemented, will
not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus,
in the light of the circumstances under which they are made, not
misleading. The preparation and furnishing of any such amendment or
supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters, except that in case any Underwriter is required, in
connection with the sale of the Units to deliver a
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<PAGE>
Prospectus nine months or more after the effective date of the Registration
Statement, IAT will upon request of and at the expense of the Underwriter,
amend or supplement the Registration Statement and Prospectus and furnish
the Underwriter with reasonable quantities of prospectuses complying with
Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations and
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations thereunder in connection with the offering and
issuance of the Units.
(b) IAT will use its best efforts to qualify to register the Units for
sale under the securities or "blue sky" laws of such jurisdictions as the
Representative may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with
such laws, provided IAT shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent of
service of process in any jurisdiction in any action other than one arising
out of the offering or sale of the Units. IAT will, from time to time,
prepare and file such statements and reports as are or may be required to
continue such qualification in effect for so long a period as the
Underwriters may reasonably request.
(c) If the sale of the Units provided for herein is not consummated
for any reason caused by the Company, IAT shall pay all costs and expenses
incident to the performance of IAT's obligations hereunder, including but
not limited to, all of the expenses itemized in Section 8, including the
accountable expenses of the Representative.
(d) IAT will use its best efforts to (i) cause a registration
statement under the Exchange Act to be declared effective concurrently with
the completion of this offering and will notify the Representative in
writing immediately upon the effectiveness of such registration statement,
and (ii) if requested by the Representative, to obtain a listing on the
Pacific Stock Exchange and to obtain and keep current a listing in the
Standard & Poors or Moody's Industrial OTC Manual.
(e) For so long as IAT is a reporting company under either Section
12(g) or 15(d) of the Exchange Act, IAT, at its expense, will furnish to
its stockholders an annual report (including financial statements audited
by independent public accountants), in reasonable detail and at its
expense, will furnish to you during the period ending five (5) years from
the date hereof, (i) as soon as practicable after the end of each fiscal
year, a balance sheet of IAT and any of its subsidiaries as at the end of
such fiscal year, together with statements of income, surplus and cash flow
of IAT and any of its subsidiaries for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent accountants; (ii) as soon as practicable after the end of each
of the first three fiscal quarters of each fiscal year, consolidated
summary financial information of IAT for such quarter in reasonable detail;
(iii) as soon as they are available, a copy of all reports (financial or
other) mailed to security holders; (iv) as soon as they are available, a
copy of all non-confidential reports and financial statements furnished to
or filed with the Commission or any securities exchange or automated
quotation
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system on which any class of securities of IAT is listed; and (v) such
other information as you may from time to time reasonably request.
(f) In the event IAT has an active subsidiary or subsidiaries, such
financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of IAT and its subsidiary or
subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) IAT will deliver to you at or before the First Closing Date two
signed copies of the Registration Statement including all financial
statements and exhibits filed therewith, and of all amendments thereto, and
will deliver to the several Underwriters such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the several Underwriters may
reasonably request. IAT will deliver to you or upon the order of the
several Underwriters, from time to time until the effective date of the
Registration Statement, as many copies of any Preliminary Prospectus filed
with the Commission prior to the effective date of the Registration
Statement as the Underwriters may reasonably request. IAT will deliver to
the Underwriters on the effective date of the Registration Statement and
thereafter for so long as a Prospectus is required to be delivered under
the Act, from time to time, as many copies of the Prospectus, in final
form, or as thereafter amended or supplemented, as the Underwriters may
from time to time reasonably request. IAT, not later than (i) 5:00 p.m.,
New York City time, on the date of determination of the public offering
price, if such determination occurred at or prior to 12:00 noon, New York
City time, on such date or (ii) 6:00 p.m., New York City time, on the
business day following the date of determination of the public offering
price, if such determination occurred after 12:00 noon, New York City time,
on such date, will deliver to the Underwriters, without charge, as many
copies of the Prospectus and any amendment or supplement thereto as the
Underwriters may reasonably request for purposes of confirming orders that
are expected to settle on the First Closing Date.
(h) IAT will make generally available to its security holders and to
the registered holders of its Warrants and deliver to you as soon as it is
practicable to do so but in no event later than 90 days after the end of
twelve months after its current fiscal quarter, an earnings statement
(which need not be audited) covering a period of at least 12 consecutive
months beginning after the effective date of the Registration Statement,
which shall satisfy the requirements of Section 11(a) of the Act.
(i) IAT will apply the net proceeds from the sale of the Units for the
purposes set forth under "Use of Proceeds" in the Prospectus, and will file
such reports with the Commission with respect to the sale of the Units and
the application of the proceeds therefrom as may be required pursuant to
Rule 463 under the Act.
(j) IAT will, promptly upon your request, prepare and file with the
Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in
the reasonable opinion of Bachner,
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Tally, Polevoy & Misher LLP, counsel to the several Underwriters, may be
reasonably necessary or advisable in connection with the distribution of
the Units, and will use its best efforts to cause the same to become
effective as promptly as possible.
(k) IAT will reserve and keep available that maximum number of its
authorized but unissued securities which are issuable upon exercise of the
Warrants and the Unit Purchase Options outstanding from time to time.
(l) The Company will deliver to the Representative agreements to the
effect that for a period of 24 months from the First Closing Date, no
officer, director or existing stockholder of IAT (such officers, directors
and stockholders being herein referred to as the "Principal Stockholders"),
will directly or indirectly, offer, sell (including any short sale), grant
any option for the sale of, acquire any option to dispose of, or otherwise
dispose of any securities of IAT. In order to enforce this covenant, IAT
shall impose stop-transfer instructions with respect to the securities
owned by the Principal Stockholders until the end of such period.
(m) Prior to completion of this offering, IAT will make all filings
required, including registration under the Exchange Act, to obtain the
listing of the Units, Common Stock, and Warrants on the Nasdaq National
Market (or a listing on such other market or exchange as the Underwriters
consent to), and will effect and maintain such listing for at least five
years from the date of this Agreement.
(n) IAT and each of the Principal Stockholders represents that it or
he has not taken and agree that it or he will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Units, Shares or the Warrants or to
facilitate the sale or resale of the Securities.
(o) On the Closing Date and simultaneously with the delivery of the
Units, IAT shall execute and deliver to you, individually and not as
representative of the Underwriters, the Unit Purchase Options. The Unit
Purchase Options will be substantially in the form of the Representative's
Unit Purchase Option filed as an Exhibit to the Registration Statement.
(p) During the 18 month period commencing on the date of this
Agreement, IAT will not, without the prior written consent of the
Representative, grant options to purchase shares of Common Stock at an
exercise price less than the greater of (i) the initial public offering
price of the Units (without allocating any value to the Warrants) or (ii)
the fair market value of the Common Stock on the date of grant. During the
six month period commencing on the date of this Agreement, IAT will not,
without the prior written consent of the Representative, grant options to
any current officer of IAT[, or to any individual who will become an
officer of IAT upon the First Closing Date]. During the three year period
from the First Closing Date, IAT will not, without the prior written
consent of the Representative, offer or sell any of its securities pursuant
to Regulation S under the Act.
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<PAGE>
(q) IAT will not, without the prior written consent of the
Representative, grant registration rights to any person which are
exercisable sooner than 13 months from the First Closing Date.
(r) Dr. Viktor Vogt shall be Co-Chairman of the Board, Chief Executive
Officer and President of IAT and Klaus Grissemann shall be the Chief
Financial Officer and a director of IAT on the Closing Dates. IAT has
obtained key person life insurance in an amount of not less than $2 million
on the life of Dr. Viktor Vogt and such other individuals as designated by
the Representative, and will use its best efforts to maintain such
insurance during the three year period commencing with the First Closing
Date. In the event that Dr. Vogt's employment with IAT is terminated prior
to three years following the First Closing Date, IAT will obtain a
comparable policy on the life of his successor for the balance of the three
year period. For a period of thirteen months from the First Closing Date,
the compensation of the executive officers of IAT shall not be increased
from the compensation levels disclosed in the Prospectus.
(s) So long as any Warrants are outstanding, IAT shall use its best
efforts to cause post-effective amendments to the Registration Statement to
become effective in compliance with the Act and without any lapse of time
between the effectiveness of any such post-effective amendments and cause a
copy of each Prospectus, as then amended, to be delivered to each holder of
record of a Warrant and to furnish to each Underwriter and dealer as many
copies of each such Prospectus as such Underwriter or dealer may reasonably
request. IAT shall not call for redemption any of the Warrants unless a
registration statement covering the securities underlying the Warrants has
been declared effective by the Commission and remains current at least
until the date fixed for redemption. In addition, for so long as any
Warrant is outstanding, IAT will promptly notify the Representative of any
material change in the business, financial condition or prospects of IAT or
any of the Subsidiaries.
(t) Upon the exercise of any Warrant or Warrants after ___________,
1998, IAT will pay Royce Investment Group, Inc., in its individual capacity
and not as Representative of the Underwriters, a fee (the "Solicitation
Fee") of 6% of the aggregate exercise price of the Warrants if (i) the
market price of IAT's Common Stock is greater than the exercise price of
the Warrants on the date of exercise; (ii) the exercise of the Warrant was
solicited by a member ("Member") of the National Association of Securities
Dealers, Inc., (iii) the Warrant is not held in a discretionary account;
(iv) the disclosure of compensation arrangements has been made in documents
provided to customers, both as part of the original offering and at the
time of exercise, and (v) the solicitation of the Warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of
1934, as amended. IAT agrees not to solicit the exercise of any Warrants
other than through Royce Investment Group, Inc. and will not authorize any
other dealer to engage in such solicitation without the prior written
consent of Royce Investment Group, Inc. The Solicitation Fee shall only be
payable to the extent that the Representative (or Member) who solicited the
exercise of any warrant is designated in writing by the holder of the
warrant as having solicited the exercise of such warrant.
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(u) For a period of five (5) years from the Effective Date IAT (i) at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) IAT's financial statements for each
of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of IAT's 10-Q quarterly report
and the mailing of quarterly financial information to stockholders and (ii)
shall not change its accounting firm without the prior written consent of
the Chairman or the President of the Representative.
(v) As promptly as practicable after the Closing Date, IAT will
prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute at least four of such volumes to the
individuals designated by the Representative or counsel to the
Underwriters.
(w) For a period of five years from the First Closing Date (i) the
Representative shall have the right, but not the obligation, to designate a
director to the Board of Directors of IAT and (ii) IAT shall engage a
public relations firm acceptable to the Underwriter.
(x) IAT shall, for a period of six years after date of this Agreement,
submit which reports to the Secretary of the Treasury and to stockholders,
as the Secretary may require, pursuant to Section 1202 of the Internal
Revenue Code, as amended, or regulations promulgated thereunder, in order
for IAT to qualify as a "small business" so that stockholders may realize
special tax treatment with respect to their investment in IAT.
(y) Except for the use of net proceeds from the sale of the Units for
the repayment of up to an aggregate of $1,250,000 of outstanding loans owed
to Mr. Klaus-Dirk Sippel and Mr. Volker Walther, none of the net proceeds
from the sale of the Units will be used to repay any obligations owed by
IAT to any Principal Stockholder.
4. Conditions of Underwriters' Obligation. The obligations of the several
Underwriters to purchase and pay for the Units which they have respectively
agreed to purchase hereunder, are subject to the accuracy (as of the date
hereof, and as of the Closing Dates) of and compliance with the representations
and warranties of IAT herein, to the performance by IAT of its obligations
hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and you
shall have received notice thereof not later than 10:00 A.M., New York
time, on the date on which the amendment to the registration statement
originally filed with respect to the Units or to the Registration
Statement, as the case may be, containing information regarding the initial
public offering price of the Units has been filed with the Commission, or
such later time and date as shall have been agreed to by the
Representative; if required, the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto shall
have been filed with the Commission in the manner and within the time
period required by Rule 434 and 424(b) under the Act; on or prior to the
Closing Dates no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
or a similar purpose
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shall have been instituted or shall be pending or, to your knowledge or to
the knowledge of IAT, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Bachner, Tally, Polevoy &
Misher LLP, counsel to the several Underwriters;
(b) At the First Closing Date, you shall have received the opinions,
addressed to the Underwriters, dated as of the First Closing Date, of Baker
& McKenzie, New York, counsel for IAT, and, with respect to matters of
foreign law, the opinion of Baker & McKenzie, Zurich, counsel for IAT AG
and Dr. Schackow & Partners, Bremen, counsel for IAT Germany, in form and
substance satisfactory to counsel for the Underwriters, to the effect that:
(i) Each of IAT and Subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, with full corporate power
and authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and is duly
qualified or licensed to do business as a foreign corporation and is
in good standing in each jurisdiction in which the ownership or
leasing of its properties or conduct of its business requires such
qualification;
(ii) to the best knowledge of such counsel, (a) each of IAT and
the Subsidiaries has obtained, or is in the process of obtaining, all
licenses, permits and other governmental authorizations necessary to
the conduct of its business as described in the Prospectus, (b) such
licenses, permits and other governmental authorizations obtained are
in full force and effect, and (c) each of IAT and the Subsidiaries is
in all material respects complying therewith;
(iii) the authorized capitalization of IAT as of
_________________, 1996 is as set forth under "Capitalization" in the
Prospectus; all shares of IAT's outstanding stock requiring
authorization for issuance by IAT's board of directors have been duly
authorized, validly issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock of IAT have not been issued in
violation of the preemptive rights of any shareholder and the
shareholders of IAT do not have any preemptive rights or other rights
to subscribe for or to purchase, nor are there any restrictions upon
the voting or transfer of any of the Stock; the Common Stock, the
Warrants, the Unit Purchase Option and the Warrant Agreement conform
to the respective descriptions thereof contained in the Prospectus;
the Shares have been, and the shares of Common Stock to be issued upon
exercise of the Warrants and the Unit Purchase Option, upon issuance
in accordance with the terms of such Warrants, the Warrant Agreement
and Unit Purchase Option have been duly authorized and, when issued
and delivered, will be duly and validly issued, fully paid,
non-assessable, free of preemptive rights and no personal liability
will attach to the ownership thereof; all prior sales by IAT of IAT's
securities have been made in compliance with or under an exemption
from registration under the Act and applicable state securities laws
and no shareholders of IAT have any rescission rights with respect to
Company securities; a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the
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Warrants and Unit Purchase Option and to the best of such counsel's
knowledge, neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated by this Agreement gives
rise to any registration rights or other rights, other than those
which have been waived or satisfied for or relating to the
registration of any shares of Common Stock;
(iv) this Agreement, the Unit Purchase Option, the Warrant
Agreement, the Escrow Agreement and the Merger and Acquisition
Agreement have been duly and validly authorized, executed and
delivered by IAT and, assuming due execution by each other party
hereto or thereto, each constitutes a legal, valid and binding
obligation of IAT enforceable against IAT in accordance with its
respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law);
(v) the certificates evidencing the shares of Common Stock are in
valid and proper legal form; the Warrants will be exercisable for
shares of Common Stock of IAT in accordance with the terms of the
Warrants and at the prices therein provided for; at all times during
the term of the Warrants the shares of Common Stock of IAT issuable
upon exercise of the Warrants have been duly authorized and reserved
for issuance upon such exercise and such shares, when issued upon such
exercise in accordance with the terms of the Warrants and at the price
provided for, will be duly and validly issued, fully paid an
non-assessable;
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which either IAT or any of the
Subsidiaries is a party which could materially adversely affect the
business, property, financial condition or operations of either IAT or
any of the Subsidiaries; or which question the validity of the
Securities, this Agreement, the Warrant Agreement, the Unit Purchase
Option, the Escrow Agreement or the Merger and Acquisition Agreement,
or of any action taken or to be taken by either IAT or any of the
Subsidiaries pursuant to this Agreement, the Warrant Agreement, the
Unit Purchase Option, the Escrow Agreement or the Merger and
Acquisition Agreement; and no such proceedings are known to such
counsel to be contemplated against either IAT or any of the
Subsidiaries; there are no governmental proceedings or regulations
required to be described or referred to in the Registration Statement
which are not so described or referred to;
(vii) To our knowledge, neither IAT nor any of the Subsidiaries
has received notice of any claim or challenge regarding its ownership
of or its other rights to or under any patents, trademarks, service
marks, trade names, licenses, inventions or any other rights described
in the Prospectus. To our knowledge (i) no claim has been made against
IAT or any of the Subsidiaries alleging infringement by IAT or any of
the Subsidiaries of any patent, trademark, service mark, trade name,
trade secret, license in or other intellectual property or franchise
right of any person, (ii) no legal or governmental proceedings are
pending relating to the foregoing, other than review of pending patent
applications, and (iii) no such proceedings are currently threatened
by governmental authorities or others;
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(viii) Neither IAT nor any of the Subsidiaries is in violation of
or default under, nor will the execution and delivery of this
Agreement, the Unit Purchase Option, the Warrant Agreement, the Escrow
Agreement or the Merger and Acquisition Agreement, and the incurrence
of the obligations herein and therein set forth and the consummation
of the transactions herein or therein contemplated, result in a breach
or violation of, or constitute a default under the certificate or
articles of incorporation or by-laws (or other organizational
documents), in the performance or observance of any material
obligations, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness or in any contract,
indenture, mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which IAT or any of the Subsidiaries is a
party or by which IAT's or any of the Subsidiaries' properties may be
bound or in violation of any material order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality
or court, domestic or foreign;
(ix) the Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations;
(x) such counsel has participated in the preparation of the
Registration Statement and the Prospectus and nothing has come to the
attention of such counsel to cause such counsel to have reason to
believe that the Registration Statement or any amendment thereto at
the time it became effective or as of the Closing Dates contained any
untrue statement of a material fact required to be stated therein or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus or any supplement thereto contains any untrue statement of
a material fact or omits to state a material fact necessary in order
to make statements therein, in light of the circumstances under which
they were made, not misleading (except, in the case of both the
Registration Statement and any amendment thereto and the Prospectus
and any supplement thereto, for the financial statements, notes
thereto and other financial information and schedules contained
therein, as to which such counsel need express no opinion);
(xi) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and
other documents are accurate and fairly present the information
required to be shown, and such counsel is familiar with all contracts
and other documents referred to in the Registration Statement and the
Prospectus and any such amendment or supplement or filed as exhibits
to the Registration Statement, and such counsel does not know of any
contracts or documents of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
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(xii) no authorization, approval, consent, of license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or
delivery of the Units by IAT, in connection with the execution,
delivery and performance of this Agreement by IAT or any of the
Subsidiaries or in connection with the taking of any action
contemplated herein, or the issuance of the Unit Purchase Option or
the Securities underlying the Unit Purchase Option, other than
registrations or qualifications of the Units under applicable state or
foreign securities or Blue Sky laws and registration under the Act;
(xiii) the statements in the Registration Statement under the
captions "Business", "Use of Proceeds", "Management", and "Description
of Securities" have been reviewed by such counsel and insofar as they
refer to descriptions of agreements, statements of law, descriptions
of statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respects;
(xiv) the Units, the Common Stock and the Warrants have been duly
authorized for quotation on the Nasdaq National Market; and
(xv) to such counsel's knowledge, there are no business
relationships or related-party transactions of the nature described in
Item 404 of Regulation S-K involving IAT or any of the Subsidiaries
and any person described in such Item that are required to be
disclosed in the Prospectus and which have not been so disclosed.
Such opinions shall also cover such matters incident to the
transactions contemplated hereby as the Representative or counsel for
the Underwriters shall reasonably request. In rendering such opinions,
such counsel may rely upon certificates of any officer of IAT or the
Subsidiaries or public officials as to matters of fact; and may rely
as to all matters of law other than in the case of the opinion of
counsel for IAT, the law of the United States, the State of Delaware
or of the State of New York and, in the case of the opinion of counsel
for IAT AG, the laws of Switzerland, and in the case of the opinion of
counsel for IAT Germany, the laws of Germany, upon opinions of counsel
satisfactory to you, in which case the opinions shall state that they
have no reason to believe that you and they are not entitled to so
rely.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by Bachner, Tally, Polevoy &
Misher LLP, counsel to the several Underwriters, and you shall have
received from such counsel a signed opinion, dated as of the First Closing
Date, together with copies thereof for each of the other Underwriters, with
respect to the validity of the issuance of the Units, the form of the
Registration Statement and Prospectus (other than the financial statements
and other financial data contained therein), the execution of this
Agreement and other related matters as you may reasonably require. IAT and
each of the Subsidiaries shall have furnished to counsel for the several
Underwriters such documents as they may reasonably request for the purpose
of enabling them to render such opinion.
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(d) You shall have received a letter prior to the effective date of
the Registration Statement and again on and as of the First Closing Date
from Rothstein, Kass & Company, P.C., independent public accountants for
IAT, substantially in the form approved by you, and including estimates of
IAT's revenues and results of operations for the period ending at the end
of the month immediately preceding the effective date and results of the
comparable period during the prior fiscal year.
(e) At the Closing Dates, (i) the representations and warranties of
IAT contained in this Agreement shall be true and correct with the same
effect as if made on and as of the Closing Dates and IAT and each of the
Subsidiaries shall have performed all of its obligations hereunder and
satisfied all the conditions on its part to be satisfied at or prior to
such Closing Date; (ii) the Registration Statement and the Prospectus and
any amendments or supplements thereto shall contain all statements which
are required to be stated therein in accordance with the Act and the Rules
and Regulations, and shall in all material respects conform to the
requirements thereof, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; (iii) there shall have been, since the respective dates as of
which information is given, no material adverse change, or any development
involving a prospective material adverse change, in the business,
properties, condition (financial or otherwise), results of operations,
capital stock, long-term or short-term debt or general affairs of IAT or
any of the Subsidiaries from that set forth in the Registration Statement
and the Prospectus, except changes which the Registration Statement and
Prospectus indicate might occur after the effective date of the
Registration Statement, and IAT and each of the Subsidiaries shall not have
incurred any material liabilities or entered into any agreement not in the
ordinary course of business other than as referred to in the Registration
Statement and Prospectus; and (iv) except as set forth in the Prospectus,
no action, suit or proceeding at law or in equity shall be pending or
threatened against IAT or any of the Subsidiaries which would be required
to be set forth in the Registration Statement, and no proceedings shall be
pending or threatened against IAT or any of the Subsidiaries before or by
any commission, board or administrative agency in the United States,
Switzerland, Germany or elsewhere, wherein an unfavorable decision, ruling
or finding would materially and adversely affect the business, property,
condition (financial or otherwise), results of operations or general
affairs of IAT or any of the Subsidiaries, and (v) you shall have received,
at the First Closing Date, a certificate signed by each of the Co-Chairman
of the Board, Chief Executive Officer and President and the principal
financial or accounting officer of IAT, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (e).
(f) Upon exercise of the option provided for in Section 2(b) hereof,
the obligations of the several Underwriters (or, at its option, the
Representative, individually) to purchase and pay for the Option Units
referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
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(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of IAT, shall be contemplated by the Commission, and
any reasonable request on the part of the Commission for additional
information shall have been complied with to the satisfaction of
Bachner, Tally, Polevoy & Misher LLP, counsel to the several
Underwriters.
(ii) At the Option Closing Date there shall have been delivered
to you as Representative the signed opinions of Baker & McKenzie, New
York, counsel for IAT, Baker & McKenzie, Zurich, counsel for IAT AG
and Dr. Schackow & Partners, Bremen, foreign counsel for the
Subsidiaries, dated as of the Option Closing Date, in form and
substance satisfactory to Bachner, Tally, Polevoy & Misher LLP,
counsel to the several Underwriters, together with copies of such
opinions for each of the other several underwriters, which opinions
shall be substantially the same in scope and substance as the opinions
furnished to you at the First Closing Date pursuant to Section 4(b)
hereof, except that such opinions, where appropriate, shall cover the
Option Units.
(iii) At the Option Closing Date there shall have been delivered
to you a letter in form and substance satisfactory to you from
Rothstein, Kass & Company, P.C., dated the Option Closing Date and
addressed to the Underwriters confirming the information in their
letter referred to in Section 4(d) hereof and stating that nothing has
come to their attention during the period from the ending date of
their review referred to in said letter to a date not more than five
business days prior to the Option Closing Date, which would require
any change in said letter if it were required to be dated the Option
Closing Date.
(iv) At the Option Closing Date there shall have been delivered
to you a certificate of the Co-Chairman of the Board, Chief Executive
Officer and President and the principal financial or accounting
officer of IAT, dated the Option Closing Date, in form and substance
satisfactory to Bachner, Tally, Polevoy & Misher LLP, counsel to the
several Underwriters, substantially the same in scope and substance as
the certificate furnished to you at the First Closing Date pursuant to
Section 4(e) hereof.
(v) All proceedings taken at or prior to the Option Closing Date
in connection with the sale and issuance of the Option Units shall be
satisfactory in form and substance to you, and you and Bachner, Tally,
Polevoy & Misher LLP, counsel to the several Underwriters, shall have
been furnished with all such documents, certificates, and opinions as
you may request in connection with this transaction in order to
evidence the accuracy and completeness of any of the representations,
warranties or statements of IAT and each of the Subsidiaries or its
compliance with any of the covenants or conditions contained herein.
(g) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing
Date, for members of the NASD to execute transactions (as principal or
agent) in the Units, Common Stock or the
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Warrants and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the Representative
or IAT, shall be contemplated by the Commission or the NASD. IAT represents
that at the date hereof it has no knowledge that any such action is in fact
contemplated by the Commission or the NASD. IAT and each of the
Subsidiaries shall have advised the Underwriters of any NASD affiliation of
any of its officers, directors, stockholders or their affiliates.
(h) If any of the conditions herein provided for in this Section shall
not have been fulfilled as of the date indicated, this Agreement and all
obligations of the several Underwriters under this Agreement may be
cancelled at, or at any time prior to, each Closing Date by the
Representative. Any such cancellation shall be without liability of the
Underwriters to IAT.
5. Conditions of the Obligations of IAT. The obligation of IAT to sell and
deliver the Units is subject to the condition that at the Closing Dates, no stop
orders suspending the effectiveness of the Registration Statement shall have
been issued under the Act or any proceedings therefor initiated or threatened by
the Commission.
If the condition to the obligations of IAT provided for in this Section
have been fulfilled on the First Closing Date but are not fulfilled after the
First Closing Date and prior to the Option Closing Date, then only the
obligation of IAT to sell and deliver the Units on exercise of the option
provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) IAT agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the
Act against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all
attorneys' fees), to which such Underwriter or such controlling person may
become subject, under the Act or otherwise, and will reimburse, as
incurred, such Underwriters and such controlling persons for any legal or
other expenses reasonably incurred in connection with investigating,
defending against or appearing as a third party witness in connection with
any losses, claims, damages or liabilities, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in (A) the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, (B) any
blue sky application or other document executed by the Company or any of
the Subsidiaries specifically for that purpose or based upon written
information furnished by the Company or any Subsidiaries filed in any state
or other jurisdiction in order to qualify any or all of the Units under the
securities laws thereof (any such application, document or information
being hereinafter called a "Blue Sky Application"), or arise out of or are
based upon the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact
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required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that IAT will not be liable in any such
case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company or
any Subsidiaries by or on behalf of the Underwriters specifically for use
in the preparation of the Registration Statement or any such amendment or
supplement thereof or any such Blue Sky Application or any such preliminary
Prospectus or the Prospectus or any such amendment or supplement thereto.
This indemnity will be in addition to any liability which IAT may otherwise
have.
(b) Each Underwriter severally, but not jointly, will indemnify and
hold harmless IAT, each of its directors, each nominee (if any) for
director named in the Prospectus, each of its officers who have signed the
Registration Statement, and each person, if any, who controls IAT within
the meaning of the Act, against any losses, claims, damages or liabilities
(which shall, for all purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation and all attorneys' fees)
to which IAT or any such director, nominee, officer or controlling person
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto (i) in reliance upon and in conformity with written information
furnished to IAT by you or by any Underwriter through you specifically for
use in the preparation thereof and (ii) relates to the transactions
effected by the Underwriters in connection with the offer and sale of the
Units contemplated hereby. This indemnity agreement will be in addition to
any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
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defense thereof other than reasonable costs of investigation. The
indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the action with
counsel reasonably satisfactory to the indemnified party; provided that if
the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by
the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Representative, it is advisable for the Representative or such Underwriters
or controlling persons to be represented by separate counsel (in which case
the indemnifying party shall not have the right to assume the defense of
such action on behalf of such Underwriter or such controlling person, it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for all such
Underwriters and controlling persons, which firm shall be designated in
writing by you). No settlement of any action against an indemnified party
shall be made without the consent of the indemnifying party, which shall
not be unreasonably withheld in light of all factors of importance to such
indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under the Act in
any case in which (i) any Underwriter makes claim for indemnification pursuant
to Section 6 hereof but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of any Underwriter,
then IAT and each person who controls IAT, in the aggregate, and any such
Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) in either such case (after
contribution from others) in such proportions that all such Underwriters are
responsible in the aggregate for that portion of such losses, claims, damages or
liabilities represented by the percentage that the underwriting discount per
Unit appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon, and IAT shall be responsible for the remaining portion,
provided, however, that (a) if such allocation is not permitted by applicable
law then the relative fault of IAT and the Underwriters and controlling persons,
in the aggregate, in connection with the statements or omissions which resulted
in such damages and other relevant equitable considerations shall also be
considered. The relative fault shall be determined by reference to, among other
things, whether in the case of an untrue statement of a material fact or the
omission to state a material fact, such statement or omission relates to
information supplied by the Company or any of the
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Subsidiaries, or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. IAT and the Underwriters agree that it would not be just
and equitable if the respective obligations of IAT and the Underwriters to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters in the
aggregate were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the first sentence of this Section 7 and (b) that the contribution of each
contributing Underwriter shall not be in excess of its proportionate share
(based on the ratio of the number of Units purchased by such Underwriter to the
number of Units purchased by all contributing Underwriters) of the portion of
such losses, claims, damages or liabilities for which the Underwriters are
responsible. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls IAT within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then any
Underwriter and each person who controls any Underwriter shall be entitled to
contribution from IAT, its officers, directors and controlling persons to the
full extent permitted by law. The foregoing contribution agreement shall in no
way affect the contribution liabilities of any persons having liability under
Section 11 of the Act other than IAT and the Underwriters. No contribution shall
be requested with regard to the settlement of any matter from any party who did
not consent to the settlement; provided, however, that such consent shall not be
unreasonably withheld in light of all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of the
Units to the Underwriters is consummated, IAT will pay all costs and
expenses incident to the performance of this Agreement by the Company
including, but not limited to, the fees and expenses of counsel to the
Company and of the Company 's accountants; the costs and expenses incident
to the preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), Preliminary Prospectus and the
Prospectus, as amended or supplemented, or the Term Sheet, the fee of the
NASD in connection with the filing required by the NASD relating to the
offering of the Units contemplated hereby; the fees and expenses of
investigative reports regarding IAT, the Subsidiaries and certain officers
and directors of IAT; all expenses, including reasonable fees and
disbursements of counsel to the Underwriters, in connection with the
qualification of the Units under the state securities or blue sky laws
which the Representative shall designate; the cost of printing and
furnishing to the several Underwriters copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Agreement Among Underwriters, Selling Agreement, Underwriters'
Questionnaire, Underwriters' Power of Attorney and the Blue Sky Memorandum,
any fees relating to the listing of the Units, Common Stock and Warrants on
the Nasdaq National Market or any other securities exchange, the cost of
printing the certificates representing the securities comprising the Units,
the fees of the transfer agent and
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warrant agent the cost of publication of at least three "tombstones" of the
offering (at least one of which shall be in national business newspaper and
one of which shall be in a major New York newspaper) and the cost of
preparing at least four hard cover "bound volumes" relating to the
offering, in accordance with the Underwriters' request. IAT shall pay any
and all taxes (including any transfer, franchise, capital stock or other
tax imposed by any jurisdiction) on sales to the Underwriters hereunder.
IAT will also pay all costs and expenses incident to the furnishing of any
amended Prospectus or of any supplement to be attached to the Prospectus as
called for in Section 3(a) of this Agreement except as otherwise set forth
in said Section.
(b) In addition to the foregoing expenses IAT shall at the First
Closing Date pay to Royce Investment Group, Inc., in its individual rather
than representative capacity, a non-accountable expense allowance of
$_______ of which $_______ has been paid. In the event the overallotment
option is exercised, IAT shall pay to Royce Investment Group, Inc. at the
Option Closing Date an additional amount equal to 3% of the gross proceeds
received upon exercise of the overallotment option. In the event the
transactions contemplated hereby are not consummated by reason of any
action by the Representative (except if such prevention is based upon a
breach by the Company or any Subsidiary of any covenant, representation or
warranty contained herein or because any other condition to the
Underwriters' obligations hereunder required to be fulfilled by the Company
or any of the Subsidiaries is not fulfilled) IAT shall be liable for only
the amount (not less than $50,000) paid by the Company to the
Representation prior to such determination. In the event the transactions
contemplated hereby are not consummated by reason of any action of the
Company or any Subsidiary or because of a breach by the Company or any
Subsidiary of any covenant, representation or warranty herein, IAT shall be
liable for the accountable expenses of the Representative, including legal
fees, up to a maximum of $100,000.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Representative or from any other
person for services as a finder in connection with the proposed offering,
and IAT agrees to indemnify and hold harmless the Representative and the
other Underwriters, against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include,
but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which the Representative or such other Underwriter or
person may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
the claim of any person (other than an employee of the party claiming
indemnity) or entity that he or it is entitled to a finder's fee in
connection with the proposed offering by reason of such person's or
entity's influence or prior contact with the indemnifying party.
9. Substitution of Underwriters.
If any Underwriters shall for any reason not permitted hereunder cancel
their obligations to purchase the First Units hereunder, or shall fail to take
up and pay for the number of First Units set forth opposite their respective
names in Schedule A hereto upon tender of such First Units in accordance with
the terms hereof, then:
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(a) If the aggregate number of First Units which such Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of First Units, the other Underwriters shall be obligated severally,
in proportion to their respective commitments hereunder, to purchase the
First Units which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(b) If any Underwriter or Underwriters so default and the agreed
number of First Units with respect to which such default or defaults occurs
is more than 10% of the total number of First Units, the remaining
Underwriters shall have the right to take up and pay for (in such
proportion as may be agreed upon among them) the First Units which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If
such remaining Underwriters do not, at the First Closing Date, take up and
pay for the First Units which the defaulting Underwriter or Underwriters
agreed but failed to purchase, the time for delivery of the First Units
shall be extended to the next business day to allow the several
Underwriters the privilege of substituting within twenty-four hours
(including nonbusiness hours) another underwriter or underwriters
satisfactory to IAT. If no such underwriter or underwriters shall have been
substituted as aforesaid, within such twenty-four hour period, the time of
delivery of the First Units may, at the option of IAT, be again extended to
the next following business day, if necessary, to allow IAT the privilege
of finding within twenty-four hours (including nonbusiness hours) another
underwriter or underwriters to purchase the First Units which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted
Underwriters to take up the First Units of the defaulting Underwriter or
Underwriters as provided in this Section, (i) IAT or the Representative
shall have the right to postpone the time of delivery for a period of not
more than seven business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and IAT agrees promptly to file
any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary, and (ii) the respective
numbers of First Units to be purchased by the remaining Underwriters or
substituted Underwriters shall be taken at the basis of the underwriting
obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the First Units
agreed to be purchased by the defaulting Underwriters or substitute another
underwriter or underwriters as aforesaid, IAT shall not find or shall not
elect to seek another underwriter or underwriters for such First Units as
aforesaid, then this Agreement shall terminate.
If, following exercise of the option provided in Section 2(b) hereof,
any Underwriter or Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase Option Units at the Option
Closing Date, or shall fail to take up and pay for the number of Option
Units, which they become obligated to purchase at the Option Closing Date
upon tender of such Option Units in accordance with the terms hereof, then
the remaining Underwriters or substituted Underwriters may take up and pay
for the Option Units of the defaulting Underwriters in the manner provided
in Section 9(b) hereof. If the remaining
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Underwriters or substituted Underwriters shall not take up and pay for all
such Option Units, the Underwriters shall be entitled to purchase the
number of Option Units for which there is no default or, at their election,
the option shall terminate, the exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any nondefaulting
Underwriter to IAT, provided that the provisions of this Section 9 shall
not in any event affect the liability of any defaulting Underwriter to IAT
arising out of such default.
10. Effective Date.
The Agreement shall become effective upon its execution except that you
may, at your option, delay its effectiveness until 11:00 A.M., New York time on
the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the Registration
Statement as you in your discretion shall first commence the initial public
offering by the Underwriters of any of the Units. The time of the initial public
offering shall mean the time of release by you of the first newspaper
advertisement with respect to the Units, or the time when the Units are first
generally offered by you to dealers by letter or telegram, whichever shall first
occur. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 3(c), 6, 7, 8, 13, 14, 15 and
16 shall remain in effect notwithstanding such termination.
11. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 13, 14, 15 and
16 hereof, may be terminated at any time prior to the First Closing Date,
and the option referred to in Section 2(b) hereof, if exercised, may be
cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made
by the Underwriters for the resale of the Units agreed to be purchased
hereunder by reason of (i) the Company or any of the Subsidiaries having
sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or government action, order or decree; (ii) trading in securities on
the New York Stock Exchange, the American Stock Exchange, the Nasdaq
SmallCap Market or the Nasdaq National Market having been suspended or
limited; (iii) material governmental restrictions having been imposed on
trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New
York state authorities; (v) an outbreak of international hostilities or
other national or international calamity or crisis or change in economic or
political conditions having occurred; (vi) a pending or threatened legal or
governmental proceeding or action relating generally to IAT's or any of the
Subsidiaries' business, or a notification having been received by either
IAT or any of the Subsidiaries of the threat of any such proceeding or
action, which could materially adversely affect IAT or any of the
Subsidiaries; (vii) except as contemplated by the Prospectus, IAT or any of
the Subsidiaries is merged or consolidated into or acquired by another
company or group or there exists a binding
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legal commitment for the foregoing or any other material change of
ownership or control occurs; (viii) the passage by the Congress of the
United States or by any state legislative body or federal or state agency
or other authority of any act, rule or regulation, measure, or the adoption
of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive,
which is reasonably believed likely by the Representative to have a
material impact on the business, financial condition or financial
statements of the Company or the market for the securities offered pursuant
to the Prospectus; (ix) any adverse change in the financial or securities
markets beyond normal market fluctuations having occurred since the date of
this Agreement, or (x) any material adverse change having occurred, since
the respective dates of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of IAT or any of its Subsidiaries, financial or otherwise,
whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11 or in Section
10, IAT shall be promptly notified by you, by telephone or telegram,
confirmed by letter.
12. Unit Purchase Option.
At or before the First Closing Date, IAT will sell to the Underwriters, or
their designees for a consideration of $310, and upon the terms and conditions
set forth in the form of Unit Purchase Option annexed as an exhibit to the
Registration Statement, a Unit Purchase Option to purchase an aggregate of
310,000 Units. In the event of conflict in the terms of this Agreement and the
Unit Purchase Option, the language of the Unit Purchase Option shall control.
13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties and
other statements of IAT or its Principal Stockholders, where appropriate, and
the undertakings set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriters, IAT or any of its officers or directors or any controlling
person and will survive delivery of and payment of the Units and the termination
of this Agreement.
14. Notice.
Any communications specifically required hereunder to be in writing, if
sent to the Underwriters, will be mailed, delivered and confirmed to them at
Royce Investment Group, Inc., 199 Crossways Park Drive, Woodbury, New York
11797, with a copy sent to Bachner, Tally, Polevoy & Misher LLP, 380 Madison
Avenue, New York, New York 10017, attention: Steven Fishman, Esq., or if sent to
IAT, will be mailed, delivered and confirmed to it at Geschaftschaus
Wasserschloss, Aarestrasse 17, CH-5300 Vogelsang-Turgi, Switzerland, Attention:
Dr. Viktor Vogt.
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15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
several Underwriters, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or any of the several
Underwriters, and directors of IAT, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Units. All of the obligations of the
Underwriters hereunder are several and not joint.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance with, the
laws of the State of New York applicable to agreements made and to be entirely
performed within New York.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between IAT and the several Underwriters in accordance with its terms.
Very truly yours,
IAT MULTIMEDIA, INC.
By:________________________
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
ROYCE INVESTMENT GROUP, INC.
By:________________________
For itself and as Representative of the
several Underwriters
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SCHEDULE A
Underwriter Number of Units to be Purchased
- ----------- -------------------------------
Royal Investment Group, Inc.
Total Units: 3,100,000
=========
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IAT HOLDINGS, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
IAT Holdings, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify:
1. The name of the Corporation is IAT Holdings, Inc. The date of filing of
the original Certificate of Incorporation (the "Original Certificate of
Incorporation") with the Secretary of State of the State of Delaware was
September 27, 1996.
2. Such amendments and additions made by this Amended and Restated
Certificate of Incorporation are set forth herein and have been duly adopted
pursuant to the provisions of Sections 242 and 245 under the General Corporation
Law of the State of Delaware by obtaining a written consent of stockholders
holding a majority of each class of outstanding common stock and having provided
written notice to those stockholders who did not consent in writing in
accordance with Section 228.
3. The Certificate of Incorporation is hereby amended and restated in its
entirety to read as follows:
ARTICLE ONE
The name of the Corporation is IAT Multimedia, Inc. (the "Company").
ARTICLE TWO
The registered office of the Corporation is to be located at 1013 Centre
Road in the City of Wilmington, in the County of New Castle, in the State of
Delaware. The name of its registered agent at that address is Corporation
Service Company.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
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ARTICLE FOUR
A. (i) Reverse Stock Split. Upon the filing of this Amended and Restated
Certificate Incorporation with the Secretary of State of the State of Delaware
(the "Effective Time"), (i) each share of common stock, par value $.01 per share
authorized in the Original Certificate of Incorporation ("Old Common"), of the
Corporation issued and outstanding or held in treasury immediately prior to the
Effective Time shall be automatically reclassified as and converted into .94697
of share of new Common Stock of the Corporation, par value $.01 per share ("New
Common") and (ii) each share of series A preferred stock, par value $.01 per
share authorized in the Original Certificate of Incorporation ("Old Series A
Preferred"), of the Corporation issued and outstanding or held in treasury
immediately prior to the Effective Time shall be automatically reclassified as
and converted into .94697 of share of new Series A Preferred Stock of the
Corporation, par value $.01 per share ("New Series A Preferred").
Each stock certificate that, prior to the Effective Time, represented
shares of Old Common or Old Series A Preferred shall, from and after the
Effective Time, without the necessity of presenting the same for exchange,
represent the respective number of shares of New Common or New Series A
Preferred converted pursuant hereto.
(ii) Classes of Stock. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is
22,375,000 shares. 20,000,000 shares shall be Common Stock, par value $.01 per
share, 500,000 shares shall be Preferred Stock, par value $.01 per share, and
1,875,000 shares shall be Series A Convertible Preferred Stock, par value $.01
per share (the "Series A Preferred Stock").
B. Preferred Stock.
1. Rights, Preferences and Restrictions of Preferred Stock The Preferred
Stock may be issued from time to time in one or more series. The Board of
Directors of the Corporation is hereby expressly authorized to provide, by
resolution or resolutions duly adopted by it prior to issuance, for the creation
of each such series and to fix the designation and the powers, preferences,
rights, qualifications, limitations and restrictions relating to the shares of
each such series. The authority of the Board of Directors with respect to each
series of Preferred Stock shall include, but not be limited to, determining the
following:
(a) the designation of such series, the number of shares to constitute
such series and the stated value if different from the par value thereof;
(b) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of
such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any such
dividends shall
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be cumulative, and, if so, from what dates, the conditions and dates upon
which such dividends shall be payable, and the preference or relation which
such dividends shall bear to the dividends payable on any shares of stock
of any other class or any other series of Preferred Stock;
(d) whether the shares of such series shall be subject to redemption
by the Corporation, and, if so, the times, prices and other conditions of
such redemption;
(e) the amount or amounts payable upon shares of such series upon, and
the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the
assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and the
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or other
corporate purposes and the terms and provisions relating to the operation
thereof;
(g) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of
Preferred Stock or any other securities and, if so, the price or prices or
the rate or rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of conversion or
exchange;
(h) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or
the making of other distributions on, and upon the purchase, redemption or
other acquisition by the Corporation of, the Common Stock or shares of
stock of any other class or any other series of Preferred Stock;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of
Preferred Stock or of any other class; and
(j) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions, thereof.
The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series any time outstanding. All shares of
any one series of Preferred Stock shall be identical in all respects with
all other shares of such series, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereof shall be cumulative.
2. Rights, Preferences and Restrictions of Series A Preferred Stock.
A. Dividend Provisions. (a) The holders of shares of Series A Preferred
Stock shall
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be entitled to receive, out of funds legally available therefor, mandatory
preferential dividends at the rate of $.056 per share (as adjusted for stock
splits, combinations or similar events) during the one year period following the
date upon which any shares of Series A Preferred Stock were first issued (the
"Purchase Date"), which dividends shall be accrued and shall be paid, in cash,
upon the earlier of (i) closing of the Corporation's sale of its Common Stock in
a firm commitment underwritten public offering pursuant to a registration
statement on Form S-1 or F-1 (or any equivalent successor form) under the
Securities Act of 1933, as amended, or (ii) the first annual anniversary of the
Purchase Date. For each annual period following the one year anniversary of the
Purchase Date, the holders of shares of Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, mandatory
preferential dividends at the rate of $.080 per share (as adjusted for stock
splits, combinations or similar events), which dividends shall be accrued and
shall be paid, in cash, on each subsequent annual anniversary of the Purchase
Date. In the event the Series A Preferred Stock is converted or retired prior to
any such annual anniversary, all accrued dividends shall be paid on a
proportionate basis through the date of such conversion or retirement.
(b) Subject to the rights of any series of preferred stock of the
Corporation the terms of which specifically provide that such series ranks
senior to the Series A Preferred Stock, or the terms of which specifically
provide that such series ranks pari passu with the Series A Preferred Stock, the
holders of shares of Series A Preferred Stock shall be entitled to receive
dividends, out of any assets legally available therefor, prior and in preference
to any declaration or payment of any dividend (payable other than in Common
Stock of the Corporation (the "Common Stock") or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock) on the Common Stock or other
junior securities of the Corporation, when, as and if declared by the Board of
Directors. No dividends shall be payable upon any junior or pari passu
securities of the Corporation unless equivalent dividends, on an as-converted
basis, are declared and paid concurrently on the Series A Preferred Stock.
B. Liquidation Preference. (a) In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary (a
"Liquidation"), the holders of shares of Series A Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of any Junior Securities (as defined
below) by reason of their ownership thereof, an amount per share equal to $0.80
(as adjusted for stock splits, combinations or similar events) for each
outstanding share of Series A Preferred Stock plus any accrued or declared but
unpaid dividends (the "Series A Liquidation Preference"). If, upon the
occurrence of such an event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock
such that an equal amount shall be paid with respect to each outstanding share
of Series A Preferred Stock. For purposes of this subsection (a), a "Junior
Security" shall include (i) the Common Stock and (ii) any series of preferred
stock the terms of which provide that such series ranks junior and subordinate
to the Series A Preferred Stock with respect to the distribution of assets upon
any Liquidation or deemed liquidation.
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(b) For purposes of this Section 2, a Liquidation shall be deemed to be
occasioned by, or to include, (i) the acquisition of the Corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation, but excluding
any merger effected exclusively for the purpose of changing the domicile of the
Corporation); or (ii) a sale of all or substantially all of the assets of the
Corporation; unless the Corporation's stockholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Corporation's acquisition or sale or otherwise) hold at least 51% of the voting
power of the surviving or acquiring entity.
C. Redemption.
(a) Optional Redemption by Holders of Series A Preferred Stock.
(i) At the written request of the holders of any then outstanding shares of
Series A Preferred Stock, mailed to the Corporation at any time following the
second annual anniversary of the Purchase Date, the Corporation shall, to the
extent it may do so under applicable law, redeem from such holders of Series A
Preferred Stock all shares of Series A Preferred Stock requested to be redeemed
on the date (the "Redemption Date") that is sixty (60) days following the date
of the request. In the event shares of Series A Preferred Stock scheduled for
redemption are not redeemed because of a prohibition under applicable law, such
shares shall be redeemed as soon as such prohibition no longer exists.
(ii) The redemption price (the "Redemption Price") for each share of Series
A Preferred Stock redeemed pursuant to this Section 3(a) shall be equal to the
Series A Liquidation Preference. In the event that the holders of the Series A
Preferred Stock do not elect to have the Series A Preferred Stock redeemed
pursuant to this Section 3(a), the shares of Series A Preferred Stock shall
remain outstanding and subject to the rights and preferences contained herein.
(iii) Nothing contained in this Section 3(a) shall in any way restrict or
prohibit the holders of Series A Preferred Stock from exercising their
conversion rights pursuant to Section 4 hereof prior to the effective date of
the redemption to be effected hereunder.
(b) Company Redemption. If, at any time after December 31, 1997, the
Company has not consummated an IPO, the Company may redeem all, but not less
than all, of the outstanding shares of Series A Preferred Stock on the date (the
"Redemption Date") that is sixty (60) days following the date of the written
request at a redemption price per share equal to the Series A Liquidation
Preference.
(c) Redemption Notice. If an election is made by any holder of Series A
Preferred Stock pursuant to Section 3(a)(i) hereof or by the Company pursuant to
Section 3(b) hereof, then, at least forty-five (45) days before the Redemption
Date, written notice (hereinafter referred to as the "Redemption Notice") shall
be mailed by the Corporation, postage prepaid, to each holder of record
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<PAGE>
of Series A Preferred Stock at its address shown on the records of the
Corporation; provided, however, that the Corporation's failure to give such
Redemption Notice shall in no way affect its obligation to redeem the shares of
Series A Preferred Stock as provided in Section 3(a)(i) hereof.
The Redemption Notice shall contain the following information:
(i) the number of shares of Series A Preferred Stock held by the
holder and the total number of shares of Series A Preferred Stock held by
all holders subject to redemption as of such Redemption Date; and
(ii) the Redemption Date and the applicable Redemption Price.
Any holder of Series A Preferred Stock who wishes to do so may, by giving
notice to the Corporation prior to the Redemption Date, convert into common
stock any or all of the shares of Series A Preferred Stock held by him and
scheduled for redemption on such Redemption Date.
(d) Surrender of Certificates. Each holder of shares of Series A Preferred
Stock to be redeemed under this Section 3 shall surrender the certificate or
certificates representing such shares to the Corporation at the place designated
in the Redemption Notice, and thereupon the Redemption Price for such shares as
set forth in this Section 3 shall be paid to the order of the person whose name
appears on such certificate or certificates. Irrespective of whether the
certificates therefore shall have been surrendered, all shares of Series A
Preferred Stock which are the subject of a Redemption Notice shall be deemed to
have been redeemed and shall be canceled effective as of the Redemption Date,
unless the Corporation shall default in the payment of the applicable Redemption
Price.
(e) Financing Requirement. To the extent that the Corporation does not have
funds legally available to fund any required redemption of shares of Series A
Preferred Stock, the Corporation shall use its commercially reasonable best
efforts to raise sufficient capital to fund such required redemption within
sixty (60) days of the date such redemption is required to be made. To the
extent that the Corporation is unable to raise sufficient capital to fund such
required redemption within such sixty (60) day period, the Corporation shall
commence, as of the sixty-first (61st) day following the date such redemption is
required to be made, a rights offering of the Corporation's common stock to all
of the Corporation's shareholders of an adequate number of shares at a purchase
price per share equal to its then fair market value such that the total dollar
amount to be raised from such rights offering will equal or exceed the dollar
amount needed by the Corporation to fund such required redemption; provided,
however, that notwithstanding anything contained in this Section 3 to the
contrary, no stockholder of the Corporation will be required to subscribe for
the common stock offered pursuant to the contemplated rights offering.
4. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
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(a) Right to Convert. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof at any time after the date
of issuance of such share at the office of the Corporation or any transfer
agent for such stock. Each share of Series A Preferred Stock shall be
convertible into the number of fully paid and nonassessable shares of
Common Stock equal to a fraction, the numerator of which is the "Conversion
Value" per share of such Series A Preferred Stock and the denominator of
which is the "Conversion Price" per share in effect for such Series A
Preferred Stock at the time of conversion. The number of shares of Common
Stock into which each share of Series A Preferred Stock is convertible is
hereinafter collectively referred to as the "Conversion Rate" for such
series. The Conversion Price of each of the Series A Preferred Stock shall
be subject to adjustment as set forth in subsection 4(d). The initial
Conversion Price per share of Series A Preferred Stock shall be $0.80,
subject to adjustment for stock splits, combinations or similar events
affecting the Series A Preferred Stock. The Conversion Value per share of
Series A Preferred Stock shall be $0.80.
(b) Automatic Conversion. Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then
effective Conversion Rate for such series immediately upon the closing of
the Corporation's sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement on Form
S-1 or F-1 (or any equivalent successor form) under the Securities Act of
1933, as amended. In addition each share of any series of Series A
Preferred Stock shall automatically be so converted on the date specified
by written consent or agreement of the holders of sixty-six and two-thirds
percent (66 2/3%) of the then outstanding shares of such series of Series A
Preferred Stock
(c) Mechanics of Conversion. Before any holder of Series A Preferred
Stock shall be entitled to convert the same into shares of Common Stock,
such holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the Corporation
at its principal corporate office, of the election to convert the same and
shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office
to such holder of Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series A
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities
Act of 1933, as amended, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
upon conversion of the Series A Preferred Stock shall not be deemed to have
converted such Series A Preferred Stock until immediately prior to the
closing of such sale of securities.
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(d) Conversion Price Adjustments of Series A Preferred Stock. The
Conversion Price of the Series A Preferred Stock shall be subject to
adjustment from time to time as set forth below.
(i) (A) If the Corporation shall issue, after the Purchase Date,
any Additional Stock (as defined below) at a purchase price less than
or equal to $5.16 (as adjusted for stock splits, combinations or
similar events), the Conversion Price for the Series A Preferred
Stock, in effect immediately prior to each such issuance shall
automatically (except as otherwise provided in this clause (i)) be
adjusted to a price determined by multiplying such Conversion Price by
a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock that the aggregate consideration
received by the Corporation for such issuance would purchase at such
Conversion Price, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of such Additional Stock.
(B) No adjustment in the Conversion Price for the Series A
Preferred Stock shall be required unless such adjustment would
require an increase or decrease of at least five cents ($0.05) in
such price; provided, however, that any adjustments which by
reason of this subsection (C) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations under
this section 4(d)(i) shall be made to the nearest one cent
($0.01). Except to the limited extent provided for in subsections
(E)(3) and (E)(4), no adjustment of such Conversion Price
pursuant to this subsection 4(d)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
(C) In the case of the issuance (whether before, on or after
the Purchase Date) of options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this
subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction
of any conditions to exercisability, including without
limitation, the passage of time, but without taking into
account potential antidilution adjustments) of such options
to purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or
rights were issued.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange
(assuming the satisfaction of any conditions to
convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into
account potential antidilution adjustments) for any such
convertible or exchangeable securities or upon the exercise
of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent
conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such
options or rights were issued.
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(3) In the event of any change in the number of shares
of Common Stock deliverable upon exercise of such options or
rights or upon conversion of or in exchange for such
convertible or exchangeable securities, (excluding a change
resulting solely from the antidilution provisions thereof if
such change results from an event which gives rise to an
antidilution adjustment under this subsection 4(d)), the
Conversion Price of the Series A Preferred Stock, to the
extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to
reflect such change, but no further adjustment shall be made
for the actual issuance of Common Stock upon the exercise of
any such options or rights or the conversion or exchange of
such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price
of the Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or
securities or options or rights related to such securities,
shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually
issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the
exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed issued
pursuant to subsections 4(d)(i)(C)(1) and (2) shall be
appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection
4(d)(i)(C)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection
4(d)(i)(C)) by the Corporation after the Purchase Date other than
(A) Common Stock issued pursuant to a transaction described
in subsection 4(d)(iii) hereof; or
(B) shares of Common Stock issuable or issued to employees,
advisors, consultants or outside directors of the Corporation
directly or pursuant to a stock option plan or restricted stock
plan approved by the Board of Directors of the Corporation so
long as the exercise price of each such stock option is greater
than or equal to the fair market value of the underlying Common
Stock and the cumulative total number of shares of Common Stock
so issuable and issued immediately prior to such issuance (and
not repurchased at cost by the Corporation in connection with the
termination of employment) does not exceed 8% of the outstanding
shares of Common Stock on the date hereof; or
(C) Common Stock issued or issuable upon conversion of the
Series A Preferred Stock.
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(iii) In the event the Corporation should at any time or from
time to time after the Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common
Stock Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), the Conversion Price of the Series A Preferred
Stock shall be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of such Series A
Preferred Stock shall be increased in proportion to such increase in
the aggregate of shares of Common Stock outstanding and those issuable
with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of
such combination, the Conversion Price for the Series A Preferred
Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of each series shall
be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in subsection 4(d)(i),
then, in each such case for the purpose of this subsection 4(e), the
holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the
holders of the number of shares of Common Stock of the Corporation into
which their shares of Series A Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of
the Corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere
in this Section 4 or Section 2) provision shall be made so that the holders
of the Series A Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series A Preferred Stock the number of shares of
stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Series A Preferred Stock after
the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number
of shares issuable upon conversion of the Series A Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
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(g) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series A Preferred
Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the conversion of
any share or shares of the Series A Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of
shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of any series of Series A Preferred Stock
pursuant to this Section 4, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with
the terms hereof and prepare and furnish to each holder of Series A
Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the Conversion
Price for such Series A Preferred Stock at the time in effect, and (C)
the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of a
share of such Series A Preferred Stock. Notwithstanding anything
contained in this paragraph to the contrary, the Corporation will not
be liable for failure to issue a like certificate unless the holder of
the Series A Preferred Stock has suffered actual damages by not
receiving it.
(i) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
the Corporation shall mail to each holder of Series A Preferred Stock, at
least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of
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its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, in addition to such
other remedies as shall be available to the holder of such Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in all reasonable efforts
to obtain the requisite stockholder approval of any necessary amendment to
these provisions.
(k) Notices. Any notice required by the provisions of this Section 4
to be given to the holders of shares of Series A Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
the Corporation.
5. Voting Rights. Except with respect to the election of members of the
Company's Board of Directors, the Series A Preferred Stock shall be entitled to
vote on all matters as to which the holders of Common Stock shall be entitled to
vote. Each share of Series A Preferred Stock shall have that number of votes
equal to the number of shares of Common Stock into which it is then convertible.
The holders of Series A Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the bylaws of the Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
required by law.
6. Status of Converted Stock. In the event any shares of Series A Preferred
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be canceled by the Corporation and will no longer be authorized stock. The
Certificate of Incorporation of the Corporation may be appropriately amended
from time to time to effect the corresponding reduction, if any, in the
Corporation's authorized capital stock.
7. Right to Elect Certain Directors.
(a) Provided that there are at least five directors, for so long as the
holders of Series A Preferred Stock hold at least 5% of the Company's Series A
Preferred Stock (or 5% of the Common Stock issuable upon conversion of the
Series A Preferred Stock or upon exercise of any warrants), the holders of the
Series A Preferred Stock voting as a separate class, shall have the right to
elect one individual to the Corporation's Board of Directors and so long as the
holders of Series A Preferred Stock hold at least 10% of the Company's Series A
Preferred Stock (or 10% of the Common Stock issuable upon conversion of the
Series A Preferred Stock or upon exercise of any warrants), the holders of the
Series A Preferred Stock voting as a separate class, shall have the right to
elect two individuals to the Corporation's Board of Directors (the "Series A
Directors"), including one member who shall be elected as Co-Chairman of the
Board of Directors. The Series A Directors shall be elected at the same time as
the election of the other members of the Board of Directors. In the event of the
resignation or removal of a Series A Director, a special meeting shall be
convened at which
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elections shall be held for the election of a substitute Series A Director,
provided that the holders of Series A Preferred Stock may act by unanimous
consent in lieu of such meeting.
8. Covenants. So long as any shares of Series A Preferred Stock are
outstanding, the Company shall not without first obtaining the written consent
of the holders of at least two-thirds of the then outstanding shares of Series A
Preferred Stock:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company is
disposed of;
(b) engage in any spin-out, distribution or sale of any business unit
of the Company;
(c) increase or decrease (other than by conversion) the total number
of authorized shares of Series A Preferred Stock or amend the terms of the
Series A Preferred Stock (or any other capital stock of the Company) so as
to affect adversely the Series A Preferred Stock;
(d) authorize or issue, or obligate itself to issue, any other equity
security, including any other security or debt instrument convertible into
or exercisable for any such equity security, having a preference over, or
being on a parity with, the Series A Preferred Stock with respect to
dividends, redemption or liquidation;
(e) redeem or repurchase any outstanding equity securities of the
Corporation except for: repurchases of unvested or restricted shares of
Common Stock in accordance with the terms of such plan at cost from
employees, consultants, or members of the Board of Directors pursuant to
repurchase options of the Company (i) currently outstanding or (ii)
hereafter entered into pursuant to a stock option plan or restricted stock
plan approved by the Corporation's Board of Directors;
(f) issue shares of Common Stock (or any security convertible into
Common Stock) to employees, advisors, consultants or outside directors
pursuant to a stock option plan or restricted stock plan if the cumulative
total number of shares of Common Stock so issuable or issued (and not
repurchased by the Corporation in connection with the termination of
employment as contemplated above) exceeds 8% of the outstanding Common
Stock on the date hereof or at the date of any Initial Public Offering, if
such number of outstanding shares of Common Stock is greater than at the
date hereof;
(g) increase the authorized number of directors of the Company to more
than five (5) members;
(h) liquidate, dissolve or otherwise wind up the affairs of the
Company;
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(i) enter into any transactions with affiliates of the Company except
on arms-length terms; or
(j) pay any dividend on or any distribution in respect of any shares
of capital stock other than the dividends paid on the Series A Preferred
Stock in accordance with its terms.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all classes
of stock at the time outstanding having prior rights as to dividends, and the
rights of series of Preferred Stock which may from time to time come into
existence, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation. Upon the liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation shall be distributed as provided in
Section B2 of this Article IV hereof.
3. Voting Rights. The holder of each share of Common Stock shall have the
right to one vote, and shall be entitled to notice of any stockholders' meeting
in accordance with the bylaws of the Corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law.
ARTICLE FIVE
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The election of directors need not be by written ballot, unless the
by-laws so provide.
(2) The Board of Directors shall have power without the assent or vote of
the stockholders to make, alter, amend, change, add to or repeal the By-Laws of
the Corporation.
ARTICLE SIX
The Corporation shall indemnify and advance expenses to the fullest extent
permitted by Section 145 of the General Corporation Law of Delaware, as amended
from time to time, each person who is or was a director or officer of the
Corporation and the heirs, executors and administrators of such a person.
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ARTICLE SEVEN
Whenever a compromise or arrangement is proposed between the Corporation and its
creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware, may, on application in a summary way of the Corporation
or of any creditor or stockholder thereof or on the application of any receiver
or receivers appointed for the Corporation under the provisions of Section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for the Corporation under the
provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or a class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE EIGHT
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
ARTICLE NINE
No director of this corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
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IN WITNESS WHEREOF, IAT Multimedia, Inc. has caused this Certificate of
Amendment to be signed by Dr. Viktor Vogt, its Chief Executive Officer, this
18th day of December, 1996.
IAT MULTIMEDIA, INC.
By: /s/ Dr. Viktor Vogt
-----------------------------
Name: Dr. Viktor Vogt
Title: Chief Executive Officer
16
BY-LAWS
OF
IAT HOLDINGS, INC.
(A Delaware Corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary for each share of
stock owned by him in the corporation. Any and all signatures on any such
certificate may be facsimiles. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is used, it may be issued by the corporation with the same effect as
if he were such officer, transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (l) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions
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are determined, or (3) issue scrip or warrants in registered or bearer form
which shall entitle the holder to receive a certificate for a full share upon
the surrender of such scrip or warrants aggregating a full share. A certificate
for a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days or less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no record date
is fixed, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said
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reference is also intended to include any outstanding share or shares of stock
and any holder of holders of record of outstanding shares of stock of any class
upon which or upon whom the certificate of incorporation confers such rights
where there are two or more classes or series of shares of stock or upon which
or upon whom the General Corporation Law confers such rights notwithstanding
that the certificate of incorporation may provide for more than one class or
series of shares of stock, one or more of which are limited or denied such
rights thereunder; provided, however, that no such right shall vest in the event
of an increase or a decrease in the authorized number of shares of stock of any
class or series which is otherwise denied voting rights under the provisions of
the certificate of incorporation.
6. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. Special meetings
shall be held on the dates and at the times fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such place,
within or without the State of Delaware, as the directors may, from time to time
fix. Whenever the directors shall fail to fix such place, the meeting shall be
held at the registered office of the corporation in the State of Delaware.
- CALL. Annual meetings and special meetings may be called by the directors
or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall, (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which he may have furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the
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adjourned meeting unless the directors, after adjournment, fix a new record date
for the adjourned meeting. Notice need not be given to any stockholder who
submits a written waiver of notice signed by him before or after the time stated
therein. Attendance of a stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be specified
in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an
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inspector or inspectors are not appointed, the person presiding at the meeting
may, but need not, appoint one or more inspectors. In case any person who may be
appointed as an inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspectors, if any, shall determine the number of
shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the person presiding at the meeting, the inspector or inspectors,
if any, shall make a report in writing of any challenge, question or matter
determined by him or them and execute a certificate of any fact found by him or
them.
- QUORUM. The holders of a majority of the outstanding voting shares of
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each voting share of stock shall entitle the holder thereof to
one vote. In the election of directors, a plurality of the votes cast shall
elect. Any other action shall be authorized by a majority of the votes cast
except where the General Corporation Law prescribes a different percentage of
votes and/or a different exercise of voting power. In the election of directors,
and for any other action, voting need not be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General
Corporation Law to be taken at any annual or special meeting of stockholders, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation
shall be managed either by the Board of Directors of the corporation or the Sole
Director. The Board of Directors shall have authority to fix the compensation of
the members thereof. The use
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of the phrase "whole board" herein refers to the total number of directors which
the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The number
of directors shall be at least one, but may be increased or decreased by action
of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. In the
interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of directors and/or for the removal of one
or more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the state
of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of
the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express
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<PAGE>
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors need be specified in any written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these By-laws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present
and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the
Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for
cause or without cause by the stockholders.
6. COMMITTEES. Whenever its number consists of three or more, the Board of
Directors may, by resolution passed by a majority of the whole Board, designate
one or more committees, each committee to consist of two or more of the
directors of the corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
any member of any such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board, shall have and may exercise the powers and authority of the Board of
Directors in the management of the business and affairs of the corpora tion with
the exception of any authority the delegation of which is prohibited by Section
l4l of the General Corporation Law, and may authorize the seal of the
corporation to be affixed to all papers which may require it; provided however,
that the Board of Directors may not authorize a committee to exercise any of the
Board's powers to the extent that such powers would otherwise require the
unanimous vote of 100% of the entire Board of Directors.
7. INFORMAL ACTION. Any member or members of the Board of Directors or of
any committee designated by the Board, may participate in a meeting of the
Board, or any such
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committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
ARTICLE III
OFFICERS
1. DESIGNATION. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or
desirable by the Board of Directors, a Chairman of the Board, a Vice-Chairman of
the Board, an Executive Vice-President, one or more other Vice-Presidents, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers with such titles as the resolution or instrument choosing them shall
designate.
2. QUALIFICATION. Except as may otherwise be provided in the resolution or
instrument choosing him, no officer other than the Chairman of the Board, if
any, and the Vice Chairman of the Board, if any, need be a director.
Any number of offices may be held by the same person, as the directors may
determine.
3. TERM OF OFFICE. Unless otherwise provided in the resolution or
instrument choosing him, each officer shall be chosen for a term which shall
continue until the meeting of the Board of Directors following the next annual
meeting of stockholders and until his successor shall have been chosen and
qualified.
Any officer may be removed, with or without cause by the Board of
Directors; and any subordinate or junior officer not chosen by the Board of
Directors, but chosen under duly constituted authority conferred by the Board of
Directors, may be removed, with or without cause, by the officer or officers who
chose him.
Any vacancy in any office may be filled by the Board of Directors. A
vacancy in any junior or subordinate office not filled by the Board of Directors
may be filled by the officer or officers duly vested with the authority to
choose the person to fill such office.
4. CHOOSING OFFICERS. The Board of Directors shall choose the President,
the Secretary, the Treasurer, the Chairman of the Board, if any, the
Vice-Chairman of the Board, if any, and Executive Vice-President, if any, one or
more additional Vice-Presidents, if any, and
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<PAGE>
such other officers as may be designated by them, and may confer upon any
executive officer or officers, authority to choose junior or subordinate
officers.
5. DUTIES AND AUTHORITY. In addition to those duties that may from time to
time be delegated to them by the Board of Directors, the officers of the
corporation shall have the following duties:
- CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all
meetings of the stockholders and of the Board of Directors at which he is
present, shall be ex-officio a member of all committees formed by the Board of
Directors, shall be an active participant in the management of the business,
shall have authority to do anything the President may, and shall have such other
duties and powers as the Board of Directors may prescribe.
- PRESIDENT. The President shall be the chief executive officer of the
corporation, shall with the Chairman of the Board have general and active
management of the business of the corporation, shall see that all orders and
resolutions of the Board of Directors are carried into effect, and, in the
absence or non-election of the Chairman of the Board, shall preside at all
meetings of the stockholders and the Board of Directors at which he is present
if he is also a director. The President also shall execute bonds, mortgages, and
other contracts requiring a seal under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated expressly by the
Board of Directors to some other officer or agent of the corporation, and shall
have such other powers and duties as the Board of Directors may prescribe.
- VICE-PRESIDENT. The Vice-President or Vice-Presidents, if any, shall have
such duties and powers as the Board of Directors or the President may prescribe.
In the absence of the President or in the event of his inability or refusal to
act, the Vice-President, if any, or if there be more than one, the
Vice-Presidents, in the order designated by the Board of Directors, or, in the
absence of such designation, then in the order of their election, shall perform
the duties and exercise the powers of the President.
- SECRETARIES AND ASSISTANT SECRETARIES. The Secretary shall record the
proceedings of all meetings of the stockholders and all meetings of the Board of
Directors in books to be kept for that purpose, shall perform like duties for
the standing committees when required, and shall give, or cause to be given,
calls and/or notices if all meetings of the stockholders and meetings of the
board of Directors in accordance with these By-laws. The Secretary also shall
have custody of the corporate seal and attest thereto when authorized by the
Board of Directors or the President, and shall have such other duties and powers
as the Board of Directors may prescribe.
The Assistant Secretary, if any, or if there be more than one, the
Assistant Secretaries, in the order designated by the Board of Directors, or, if
there be no such designation, then in order of their election, shall, in the
absence of the Secretary or in the event of his inability
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<PAGE>
or refusal to act, perform the duties and exercise the powers of the Secretary
and shall have such other duties and powers as the Board of Directors may
prescribe.
In the absence of the Secretary or an Assistant Secretary, at a meeting of
the stockholders or the board of directors, an acting Secretary shall be chosen
by the stockholders or directors, as the case may be, to exercise the duties of
the Secretary at such meeting.
In the absence of the Secretary or an Assistant Secretary, or in the event
of the inability or refusal of the Secretary or any Assistant Secretary to give,
or cause to be given, any call and/or notice required by law or these by-laws,
any such call and/or notice may be given by any person so directed by the Board
of Directors, the President or stockholders upon whose requisition the meeting
is called in accordance with these By-laws.
- TREASURER AND ASSISTANT TREASURER. The Treasurer shall have the custody
of the corporate funds and securities, shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall also disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, shall render to the Board of Directors, when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the corporation, and shall have such other duties and
powers as the Board of Directors may prescribe. If required by the Board of
Directors, the Treasurer shall give the corporation a bond, which shall be
renewed every six years, in such sum and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
The Assistant Treasurer, if any, or if there be more than one, the
Assistant Treasurers in the order designated by the Board of Directors, or, in
the absence of such designation, then in the order of their election, shall, in
the absence of the Treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Treasurer and shall have other
duties and powers as the Board of Directors may prescribe.
- OTHER OFFICERS. Any other officer shall have such powers and duties as
the Board of Directors may prescribe.
6. RESOLUTIONS AND INSTRUMENTS - EFFECT. The Secretary of the corporation
shall keep, or cause to be kept, with the By-laws of the corporation a copy of
every resolution or instrument designating and choosing officers and prescribing
their qualifications, tenure, authority, duties, compensation, and other
appropriate incidents and attributes of office; and each such resolution or
instrument shall be deemed to be a component part of these By-laws.
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<PAGE>
ARTICLE IV
INDEMNIFICATION
The Corporation shall indemnify its officers, directors, employees and
agents to the full extent permitted by the General Corporation Law of Delaware.
Expenses incurred by a director of the Corporation in defending a civil or
criminal action, suit or proceeding by reason of the fact that he is or was a
director of the Corporation (or was serving at the Corporation's request as a
director or officer of another corporation) shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized by relevant sections of the General Corporation Law of
Delaware.
This indemnification and advancement of expenses provided by this By-law
shall not be deemed exclusive of any other rights provided by any agreement,
vote of stockholders or disinterested directors or otherwise.
ARTICLE V
GENERAL PROVISIONS
1. DIVIDENDS. Dividends upon the capital stock of the corporation may be
declared by the Board of Directors in any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
2. CHECKS. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
3. FISCAL YEAR. The fiscal year of the corporation shall be fixed by a
resolution of the Board of Directors.
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<PAGE>
4. SEAL. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VI
AMENDMENTS
These By-laws may be amended at any proper meeting of the stockholders.
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<PAGE>
WARRANT AGREEMENT
AGREEMENT, dated as of this ____th day of ___________, 1997, by and among
IAT Multimedia, Inc., a Delaware corporation ("Company"), American Stock
Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"), and Royce
Investment Group, Inc., a New York corporation ("Royce") and ___________ (" "
and together with Royce, the "Underwriters").
W I T N E S S E T H
WHEREAS, in connection with a public offering of up to 3,565,000 units
("Units"), each unit consisting of one (1) share of the Company's Common Stock,
$.01 par value ("Common Stock") and one (1) redeemable Warrant ("Warrants")
pursuant to an underwriting agreement (the "Underwriting Agreement") dated
_______________, 1997 between the Company and Royce and (ii) the issuance to the
Underwriters or their designees of Unit Purchase Option to purchase an aggregate
of 310,000 additional Units, to be dated as of __________, 1997 (the "Unit
Purchase Option") the Company may issue up to 3,875,000 Warrants; and
WHEREAS, each Warrant initially entitles the Registered Holder thereof to
purchase one (1) share of Common Stock; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the Registered Holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class, whether
now or hereafter authorized, which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage, which at the date hereof consists of 20,000,000 shares of Common
Stock, $.01 par value.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or its
successor) at which at any particular time its principal business shall be
administered, which
<PAGE>
office is located at the date hereof at ____________________________, New York,
NY__________.
(c) "Exercise Date" shall mean, as to any Warrant, the date on which the
Warrant Agent shall have received both (a) the Warrant Certificate representing
such Warrant, with the exercise form thereon duly executed by the Registered
Holder thereof or his attorney duly authorized in writing, and (b) payment in
cash, or by official bank or certified check made payable to the Company, of an
amount in lawful money of the United States of America equal to the applicable
Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean as to each Warrant the
Separation Date (as herein defined).
(e) "Purchase Price" shall mean the purchase price to be paid upon exercise
of each Warrant in accordance with the terms hereof, which price shall be $____,
subject to adjustment from time to time pursuant to the provisions of Section 9
hereof, and subject to the Company's right to reduce the Purchase Price upon
notice to all Registered Holders of Warrants.
(f) "Redemption Price" shall mean the price at which the Company may, at
its option in accordance with the terms hereof, redeem the Warrants, which price
shall be $0.05 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Section 6.
(h) "Separation Date" shall mean _____________, 1997.
(i) "Transfer Agent" shall mean American Stock Transfer & Trust Company, as
the Company's transfer agent, or its authorized successor, as such.
(j) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
_________, 2002 or, with respect to Warrants which are outstanding as of the
applicable Redemption Date (as defined in Section 8) and specifically excluding
Warrants issuable upon exercise of Unit Purchase Options if the Unit Purchase
Options have not been exercised, the Redemption Date, whichever is earlier;
provided that if such date shall in the State of New York be a holiday or a day
on which banks are authorized or required to close, then 5:00 P.M. (New York
time) on the next following day which in the State of New York is not a holiday
or a day on which banks are authorized or required to close. Upon notice to all
Registered Holders, the Company shall have the right to extend the Warrant
Expiration Date.
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<PAGE>
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Warrant initially shall entitle the Registered Holder of the Warrant
Certificate representing such Warrant to purchase one share of Common Stock upon
the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 9.
(b) The Warrants included in the offering of Units will not be detachable
or separately transferable from the shares of Common Stock constituting part of
such Units until the Separation Date.
(c) Upon execution of this Agreement, Warrant Certificates representing the
number of Warrants sold pursuant to the Underwriting Agreement shall be executed
by the Company and delivered to the Warrant Agent. Upon written order of the
Company signed by its President or Co-Chairman or a Vice President and by its
Secretary or an Assistant Secretary, the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent as part of the Units.
(d) From time to time, up to the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of 3,875,000 shares of Common
Stock, subject to adjustment as described herein, upon the exercise of Warrants
in accordance with this Agreement.
(e) From time to time, up to the Warrant Expiration Date, the Warrant Agent
shall countersign and deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any transfer or
exchange permitted under this Agreement; provided that no Warrant Certificates
shall be issued except (i) those initially issued hereunder, (ii) those issued
on or after the Initial Warrant Exercise Date, upon the exercise of fewer than
all Warrants represented by any Warrant Certificate, to evidence any unexercised
Warrants held by the exercising Registered Holder, (iii) those issued upon any
transfer or exchange pursuant to Section 6; (iv) those issued in replacement of
lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7;
(v) those issued pursuant to the Unit Purchase Option; and (vi) at the option of
the Company, in such form as may be approved by its Board of Directors, to
reflect any adjustment or change in the Purchase Price, the number of shares of
Common Stock purchasable upon exercise of the Warrants or the Target Price(s)
therefor made pursuant to Section 9 hereof.
(f) Pursuant to the terms of the Unit Purchase Options, the Underwriters,
or their designees, may purchase up to 310,000 Units, which include up to
310,000 Warrants. Notwithstanding anything to the contrary contained herein, the
Warrants underlying the Unit Purchase Option shall not be subject to redemption
by the Company except under the terms and conditions set forth in the Unit
Purchase Options.
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SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated herein) and
may have such letters, numbers or other marks of identification or designation
and such legends, summaries or endorsements printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Warrants may be listed, or to conform to
usage or to the requirements of Section 2(d). The Warrant Certificates shall be
dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrant Certificates shall be
numbered serially with the letter W on Warrants of all denominations.
(b) Warrant Certificates shall be executed on behalf of the Company by its
Co-Chairman of the Board, President or any Vice President and by its Secretary
or an Assistant Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the Company's
seal. Warrant Certificates shall be manually countersigned by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Warrant Certificates
shall cease to be an officer of the Company or to hold the particular office
referenced in the Warrant Certificate before the date of issuance of the Warrant
Certificates or before countersignature by the Warrant Agent and issue and
delivery thereof, such Warrant Certificates may nevertheless be countersigned by
the Warrant Agent, issued and delivered with the same force and effect as though
the person who signed such Warrant Certificates had not ceased to be an officer
of the Company or to hold such office. After countersignature by the Warrant
Agent, Warrant Certificates shall be delivered by the Warrant Agent to the
Registered Holder without further action by the Company, except as otherwise
provided by Section 4(a) hereof.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof at any
time on or after the Initial Exercise Date, but not after the Warrant Expiration
Date, upon the terms and subject to the conditions set forth herein and in the
applicable Warrant Certificate. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the Exercise Date and the person
entitled to receive the securities deliverable upon such exercise shall be
treated for all purposes as the holder of those securities upon the exercise of
the Warrant as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date, the Warrant Agent shall deposit the
proceeds received from the exercise of a Warrant and shall notify the Company in
writing of the exercise of the Warrants. Promptly following, and in any event
within five days after the date of such notice from the Warrant Agent, the
Warrant Agent, on behalf of the Company, shall cause to be issued and delivered
by the Transfer Agent, to the person or persons entitled to receive the same, a
certificate or certificates for the securities deliverable upon such exercise,
(plus a Warrant Certificate for any remaining unexercised
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<PAGE>
Warrants of the Registered Holder) unless prior to the date of issuance of such
certificates the Company shall instruct the Warrant Agent to refrain from
causing such issuance of certificates pending clearance of checks received in
payment of the Purchase Price pursuant to such Warrants. Notwithstanding the
foregoing, in the case of payment made in the form of a check drawn on an
account of Royce or such other investment banks and brokerage houses as the
Company shall approve in writing to the Warrant Agent, certificates shall
immediately be issued without prior notice to the Company or any delay. Upon the
exercise of any Warrant and clearance of the funds received, the Warrant Agent
shall promptly remit the payment received for the Warrant (the "Warrant
Proceeds") to the Company or as the Company may direct in writing, subject to
the provisions of Sections 4(b) and 4(c) hereof.
(b) If, at the Exercise Date in respect of the exercise of any Warrant
after _____________, 1998, (i) the market price of the Company's Common Stock is
greater than the then Purchase Price of the Warrant, (ii) the exercise of the
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. ("NASD") as designated in writing on the Warrant Certificate
Subscription Form, (iii) the Warrant was not held in a discretionary account,
(iv) disclosure of compensation arrangements was made both at the time of the
original offering and at the time of exercise; and (v) the solicitation of the
exercise of the Warrant was not in violation of Rule 10b-6 (as such rule or any
successor rule may be in effect as of such time of exercise) promulgated under
the Securities Exchange Act of 1934, then the Warrant Agent, simultaneously with
the distribution of the Warrant Proceeds to the Company shall, on behalf of the
Company, pay from the Warrant Proceeds, a fee of five percent (5%) (the
"Solicitation Fee") of the Purchase Price to Royce as Representative of the
Underwriters; provided that either Royce or _______ shall have solicited the
exercise of the applicable warrant as evidenced in writing in the Warrant
Certificate Subscription Form. Upon receipt of the solicitation fee from the
Warrant Agent, Royce shall in turn, if and as applicable, forward all (in the
event that _______ solicited the exercise of the applicable warrant as evidenced
in writing in the Warrant Certificate Subscription Form) or, if unclear whether
________ solicited the exercise of the applicable warrant, a portion of the
Solicitation Fee to ________, to the extent that Royce, in its sole discretion
shall determine (of which a portion may be reallowed by Royce to the dealer who
solicited the exercise which may also be an Underwriter). In the event the
Solicitation Fee is not received within five days of the date on which the
Company receives Warrant Proceeds, then the Solicitation Fee shall begin
accruing interest at an annual rate of prime plus four percent (4%), payable by
the Company to Royce, as Representative of the Underwriters, at the time Royce
receives the Solicitation Fee. Within five days after exercise the Warrant Agent
shall send to the Underwriters a copy of the reverse side of each Warrant
exercised. The Underwriters shall reimburse the Warrant Agent, upon request, for
its reasonable expenses relating to compliance with this Section 4(b). In
addition, the Underwriters and the Company may at any time during business
hours, examine the records of the Warrant Agent, including its ledger of
original Warrant Certificates returned to the Warrant Agent upon exercise of
Warrants. The provisions of this paragraph may not be modified, amended or
deleted without the prior written consent of the Underwriters.
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<PAGE>
(c) In order to enforce the provisions of Section 4(b) above, in the event
there is any dispute or question as to the amount or payment of the Solicitation
Fee, the Warrant Agent is hereby expressly authorized to withhold payment to the
Company of the Warrant Proceeds unless and until the Company establishes an
escrow account for the purpose of depositing the entire amount of the
Solicitation Fee, which amount will be deducted from the net Warrant Proceeds to
be paid to the Company. The funds placed in the escrow account may not be
released to the Company without a written agreement from Royce that the required
Solicitation Fee has been received by Royce, as Representative of the
Underwriters.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants shall, at the time of delivery, be duly and validly issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, (other than those which the Company shall promptly pay or
discharge) and that upon issuance such shares shall be listed on each national
securities exchange, on which the other shares of outstanding Common Stock of
the Company are then listed or shall be eligible for inclusion in the Nasdaq
National Market or the Nasdaq SmallCap Market if the other shares of outstanding
Common Stock of the Company are so included.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration or approval. The Company will use reasonable efforts
to obtain appropriate approvals or registrations under state "blue sky"
securities laws. With respect to any such securities, however, Warrants may not
be exercised by, or shares of Common Stock issued to, any Registered Holder in
any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and other
governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock, are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition the
Company's Transfer Agent from time to time for certificates representing shares
of Common Stock issuable upon exercise of the Warrants, and the Company will
authorize the Transfer
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Agent to comply with all such proper requisitions. The Company will file with
the Warrant Agent a statement setting forth the name and address of the Transfer
Agent of the Company for shares of Common Stock issuable upon exercise of the
Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants of the same class or may be
transferred in whole or in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its Corporate Office, and upon satisfaction
of the terms and provisions hereof, the Company shall execute and the Warrant
Agent shall countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making the exchange
shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for registration or
transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company
and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any exchange
or registration of transfer of Warrant Certificates. In addition, the Company
may require payment by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange in
case of mutilated Warrant Certificates shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or, with the prior written
consent of the Underwriters, disposed of or destroyed, at the direction of the
Company.
(f) Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary. The Warrants, which are being publicly offered in Units with
shares of Common
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Stock pursuant to the Underwriting Agreement, will be detachable from the Common
Stock and transferable separately therefrom beginning on the Separation Date.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership of and loss, theft,
destruction or mutilation of any Warrant Certificate and (in case of loss, theft
or destruction) of indemnity satisfactory to them, and (in the case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall (in the absence of notice to the Company and/or
Warrant Agent that the Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. Redemption.
(a) Subject to the provisions of paragraph 2(g) hereof, on not less than
thirty (30) days notice given at any time after ____, 1998 (the "Redemption
Notice"), to Registered Holders of the Warrants being redeemed, the Warrants may
be redeemed, at the option of the Company, at a redemption price of $0.05 per
Warrant, provided the Market Price of the Common Stock receivable upon exercise
of such Warrants shall equal or exceed $16.00 with respect to the Warrants (the
"Target Price"), subject to adjustment as set forth in Section 8(f), below.
Market Price shall mean (i) the average last reported sale price of the Common
Stock, for twenty (20) consecutive business days ending on the Calculation Date
as reported by Nasdaq, if the Common Stock is traded on the Nasdaq National
Market, or (ii) the average closing bid price of the Common Stock, for twenty
(20) consecutive business days ending on the Calculation Date, as reported by
the primary exchange on which the Common Stock is traded, if the Common Stock is
traded on a national securities exchange, or by Nasdaq, if the Common Stock is
traded on the Nasdaq SmallCap Market. All Warrants of a class must be redeemed
if any of that class are redeemed, provided that the Warrants underlying the
Unit Purchase Option may only be redeemed in compliance with and subject to the
terms and conditions of the Unit Purchase Option. For purposes of this Section
8, the Calculation Date shall mean a date within 5 days of the mailing of the
Redemption Notice. The date fixed for redemption of the Warrants is referred to
herein as the "Redemption Date".
(b) If the conditions set forth in Section 8(a) are met, and the Company
desires to exercise its right to redeem the Warrants, it shall request the
Underwriters to mail a Redemption Notice to each of the Registered Holders of
the Warrants to be redeemed, first class, postage prepaid, not later than the
thirtieth day before the date fixed for redemption, at their last address as
shall appear on the records maintained pursuant to Section 6(b). Any notice
mailed in the manner provided herein shall be conclusively presumed to have been
duly given whether or not the Registered Holder receives such notice.
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<PAGE>
(c) The Redemption Notice shall specify (i) the redemption price, (ii) the
Redemption Date, (iii) the place where the Warrant Certificates shall be
delivered and the redemption price paid, (iv) that the Underwriters will assist
each Registered Holder of a Warrant in connection with the exercise thereof and
(v) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New
York time) on the business day immediately preceding the Redemption Date. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
Registered Holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant
Secretary of the Underwriters or the Company that notice of redemption has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date. On and
after the Redemption Date, Registered Holders of the Warrants shall have no
further rights except to receive, upon surrender of the Warrant, the Redemption
Price.
(e) From and after the Redemption Date, the Company shall, at the place
specified in the Redemption Notice, upon presentation and surrender to the
Company by or on behalf of the Registered Holder thereof of one or more Warrant
Certificates evidencing Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Registered Holder a sum in cash
equal to the Redemption Price of each such Warrant. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the Redemption Price, shall
cease.
(f) If the shares of the Company's Common Stock are subdivided or combined
into a greater or smaller number of shares of Common Stock, the Target Prices
shall be proportionally adjusted by the ratio which the total number of shares
of Common Stock outstanding immediately prior to such event bears to the total
number of shares of Common Stock to be outstanding immediately after such event.
SECTION 9. Adjustment of Exercise Price and Number of Shares of Common
Stock or Warrants.
(a) Subject to the exceptions referred to in Section 9(g) below, in the
event the Company shall, at any time or from time to time after the date hereof,
sell any shares of Common Stock for a consideration per share less than the
Market Price of the Common Stock (as defined in Section 8, except that for
purposes of Section 9, the Calculation Date shall mean the date of the sale or
other transaction referred to in this Section 9) on the date of the sale or
issue any shares of Common Stock as a stock dividend to the holders of Common
Stock, or subdivide or combine the outstanding shares of Common Stock into a
greater or lesser number of shares (any such sale, issuance, subdivision or
combination being herein called a "Change of
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Shares"), then, and thereafter upon each further Change of Shares, the Purchase
Price in effect immediately prior to such Change of Shares shall be changed to a
price (including any applicable fraction of a cent) determined by multiplying
the Purchase Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares and the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in subsection 9(f)(F) below) for the issuance of such
additional shares would purchase at the Market Price and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such adjustment shall
be made successively whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant to this Section 9, the
total number of shares of Common Stock purchasable upon the exercise of each
Warrant, shall (subject to the provisions contained in Section 9(b) hereof) be
such number of shares (calculated to the nearest tenth) purchasable at the
Purchase Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants (calculated to the nearest tenth)
determined by multiplying the number one by a fraction, the numerator of which
shall be the Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the Purchase Price in effect immediately after
such adjustment. Upon each adjustment of the number of Warrants pursuant to this
Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10 hereof,
the number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Warrants to which such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other change
of outstanding shares of Common Stock, or in case of any consolidation or merger
of the Company with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or substantially as, an
entirety (other than a sale/leaseback, mortgage or other financing transaction),
the Company
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<PAGE>
shall cause effective provision to be made so that each holder of a Warrant then
outstanding shall have the right thereafter, by exercising such Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon exercise of
such Warrant immediately prior to such reclassification, capital reorganization
or other change, consolidation, merger, sale or conveyance. Any such provision
shall include provision for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 9. The
Company shall not effect any such consolidation, merger or sale unless prior to
or simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Warrant Agent, the obligation
to deliver to the holder of each Warrant such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations of the Company under this
Agreement. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants, the
Warrant Certificates theretofore and thereafter issued shall, unless the Company
shall exercise its option to issue new Warrant Certificates pursuant to Section
2(f) hereof, continue to express the Purchase Price per share, the number of
shares purchasable thereunder and the Redemption Price therefor as the Purchase
Price per share, and the number of shares purchasable and the Redemption Price
therefor were expressed in the Warrant Certificates when the same were
originally issued.
(e) After each adjustment of the Purchase Price pursuant to this Section 9,
the Company will promptly prepare a certificate signed by the Co-Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so
adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of
each Warrant after such adjustment and, if the Company shall have elected to
adjust the number of Warrants, the number of Warrants to which the Registered
Holder of each Warrant shall then be entitled, and the adjustment in Redemption
Price resulting therefrom, and (iii) a statement of the facts accounting for
such adjustment and showing in detail the method of calculation and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
securities issued or sold or deemed to have been issued, (b) the number of
shares of Common Stock outstanding or deemed to be outstanding, and (c) the
Purchase Price in effect immediately prior to such issue or sale and as adjusted
and readjusted (if required by Section 9) on account thereof. The Company will
promptly file such certificate with the Warrant Agent and furnish a copy thereof
to be sent by ordinary first class mail to the Underwriters and to each
Registered Holder of Warrants at his last address as it shall appear on the
registry books of the Warrant
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<PAGE>
Agent. No failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity thereof except as to the holder to whom the
Company failed to mail such notice, or except as to the holder whose notice was
defective. The Company will, upon the written request at any time of the
Underwriters, furnish to the Underwriters a report by Rothstein, Kass & Company,
P.C., or other independent public accountants of recognized national standing
(which may be the regular auditors of the Company) selected by the Company to
verify such computation and setting forth such adjustment or readjustment and
showing in detail the method of calculation and the facts upon which such
adjustment or readjustment is based. The Company will also keep copies of all
such certificates and reports at its principal office.
(f) For purposes of Section 9(a) and 9(b) hereof, the following provisions
(A) to (G) shall also be applicable:
(A) The number of shares of Common Stock outstanding at any given time
shall include shares of Common Stock owned or held by or for the account of
the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change
of Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless such
adjustment would require an increase or decrease of at least $.10 in the
Purchase Price; provided that any adjustments which by reason of this
clause (B) are not required to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment
which, together with any adjustment(s) so carried forward, shall require an
increase or decrease of at least $.10 in the Purchase Price then in effect
hereunder.
(C) In case of (1) the sale by the Company for cash (or as a component
of a unit being sold for cash) of any rights or warrants to subscribe for
or purchase, or any options for the purchase of, Common Stock or any
securities convertible into or exchangeable for Common Stock without the
payment of any further consideration other than cash, if any (such
securities convertible, exercisable or exchangeable into Common Stock being
herein called "Convertible Securities"), or (2) the issuance by the
Company, without the receipt by the Company of any consideration therefor,
of any rights or warrants to subscribe for or purchase, or any options for
the purchase of, Common Stock or Convertible Securities, in each case, if
(and only if) the consideration payable to the Company upon the exercise of
such rights, warrants or options shall consist of cash, whether or not such
rights, warrants or options, or the right to convert or exchange such
Convertible Securities, are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the minimum aggregate consideration
payable to the Company upon the exercise of such rights, warrants or
options, plus the
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consideration, if any, received by the Company for the issuance or sale of
such rights, warrants or options, plus, in the case of such Convertible
Securities, the minimum aggregate amount of additional consideration, other
than such Convertible Securities, payable upon the conversion or exchange
thereof, by (y) the total maximum number of shares of Common Stock issuable
upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities issuable upon the
exercise of such rights, warrants or options) is less than the Market Price
on the Calculation Date, then the total maximum number of shares of Common
Stock issuable upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities (as of the
date of the issuance or sale of such rights, warrants or options) shall be
deemed to be outstanding shares of Common Stock for purposes of Sections
9(a) and 9(b) hereof and shall be deemed to have been sold for cash in an
amount equal to such price per share.
(D) In case of the sale by the Company for cash of any Convertible
Securities, whether or not the right of conversion or exchange thereunder
is immediately exercisable, and the price per share for which Common Stock
is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by
the Company for the sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion or exchange thereof, by
(y) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities) is less than the
Market Price on the Calculation Date, then the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities (as of the date of the sale of such Convertible
Securities) shall be deemed to be outstanding shares of Common Stock for
purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have been
sold for cash in an amount equal to such price per share.
(E) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in (C) or (D)
above or any other securities of the Company convertible, exchangeable or
exercisable for shares of Common Stock, for any reason other than an event
that would require adjustment to prevent dilution, so that the
consideration per share received by the Company after such modification is
less than the Market Price on the Calculation Date, the Purchase Price to
be in effect after such modification shall be determined by multiplying the
Purchase Price in effect immediately prior to such event by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding on the date prior to the modification plus the number of shares
of Common Stock which the aggregate consideration receivable by the Company
for the securities affected by the modification would purchase at the
Market Price and of which the denominator shall be the number of shares of
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Common Stock outstanding on such date plus the number of shares of Common
Stock to be issued upon conversion, exchange or exercise of the modified
securities at the modified rate. Such adjustment shall become effective as
of the date upon which such modification shall take effect. On the
expiration of any such right, warrant or option or the termination of any
such right to convert or exchange any such Convertible Securities referred
to in Paragraph (C) or (D) above, the Purchase Price then in effect
hereunder shall forthwith be readjusted to such Purchase Price as would
have obtained (a) had the adjustments made upon the issuance or sale of
such rights, warrants, options or Convertible Securities been made upon the
basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received
therefor) upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities and (b) had
adjustments been made on the basis of the Purchase Price as adjusted under
clause (a) for all transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such rights, warrants,
options or Convertible Securities.
(F) In case of the sale for cash of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, the consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting therefrom any
expense paid or incurred by the Company or any underwriting discounts or
commissions or concessions paid or allowed by the Company in connection
therewith.
(G) In case any event shall occur as to which the provisions of
Section 9 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by the
Warrants in accordance with the essential intent and principles of Section
9, then, in each such case, the Board of Directors of the Company shall in
good faith by resolution provide for the adjustment, if any, on a basis
consistent with the essential intent and principles established in Section
9, necessary to preserve, without dilution, the purchase rights represented
by the Warrants. The Company will promptly make the adjustments described
therein.
(g) No adjustment to the Purchase Price of the Warrants or to the number of
shares of Common Stock purchasable upon the exercise of each Warrant will be
made, however,
(i) upon the exercise of any of the options outstanding as of the date
of this Agreement under the Company's Stock Option Plan (the "Plan") for
officers, directors and certain other key personnel of the Company; or
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(ii) upon the issuance or exercise of any other securities which may
hereafter be granted or exercised under the Plan or under any other
employee benefit plan of the Company approved by the Company's
stockholders; or
(iii) upon the sale or exercise of the Warrants, including without
limitation the sale or exercise of any of the Warrants comprising the Unit
Purchase Option or upon the sale or exercise of the Unit Purchase Option;
or
(iv) upon the sale of any shares of Common Stock and/or Convertible
Securities in a firm commitment underwritten public offering, including,
without limitation, shares sold upon the exercise of any overallotment
option granted to the underwriters in connection with such offering; or
(v) upon the sale by the Company of any shares of Common Stock and/or
Convertible Securities in a private placement for which the Underwriter is
the Placement Agent; or
(vi) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants or options were
outstanding on the date of the original sale of the Warrants or were
thereafter issued or sold; or
(vii) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, whether or not any adjustment in
the Purchase Price was made or required to be made upon the issuance or
sale of such Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold.
(h) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Common Stock authorized on the date of the original issue
of the Units and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation as Common Stock on the
date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
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(i) Any determination as to whether an adjustment in the Purchase Price in
effect hereunder is required pursuant to Section 9, or as to the amount of any
such adjustment, if required, shall be binding upon the holders of the Warrants
and the Company if made in good faith by the Board of Directors of the Company.
(j) If and whenever the Company shall grant to the holders of Common Stock,
as such, rights or warrants to subscribe for or to purchase, or any options for
the purchase of, Common Stock or securities convertible into or exchangeable for
or carrying a right, warrant or option to purchase Common Stock, the Company
shall concurrently therewith grant to each Registered Holder as of the record
date for such transaction of the Warrants then outstanding, the rights, warrants
or options to which each Registered Holder would have been entitled if, on the
record date used to determine the stockholders entitled to the rights, warrants
or options being granted by the Company, the Registered Holder were the holder
of record of the number of whole shares of Common Stock then issuable upon
exercise (assuming, for purposes of this Section 9(j), that exercise of Warrants
is permissible during periods prior to the Initial Warrant Exercise Date) of his
Warrants. Such grant by the Company to the holders of the Warrants shall be in
lieu of any adjustment which otherwise might be called for pursuant to this
Section 9.
SECTION 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called for
upon the exercise of any Warrant, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the current market value of such
fractional share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or is traded on
the Nasdaq National Market, the current market value shall be the last
reported sale price of the Common Stock on such exchange or market on the
last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average of the closing bid and asked
prices for such day on such exchange or market; or
(2) If the Common Stock is not listed or admitted to unlisted trading
privileges on a national securities exchange or is not traded on the Nasdaq
National Market, the current market value shall be the mean of the last
reported bid and asked prices reported by the Nasdaq SmallCap Market or, if
not traded thereon, by the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Warrant; or
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(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
holder shall have exercised such Warrants and been issued shares of Common Stock
in accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a Warrant, by his
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the Warrant
Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and cancelled by it and
-17-
<PAGE>
retired. The Warrant Agent shall also cancel the Warrant Certificate or Warrant
Certificates following exercise of any or all of the Warrants represented
thereby or delivered to it for transfer or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts hereunder
as agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder be
deemed to make any representations as to the validity, value or authorization of
the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price or the Redemption Price provided
in this Agreement, or to determine whether any fact exists which may
require any such adjustments, or with respect to the nature or extent of
any such adjustment, when made, or with respect to the method employed in
making the same. It shall not (i) be liable for any recital or statement of
facts contained herein or for any action taken, suffered or omitted by it
in reliance on any Warrant Certificate or other document or instrument
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any
failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or
(iii) be liable for any act or omission in connection with this Agreement
except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good
faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument
signed by the Co-Chairman of the Board, President, any Vice President, its
Secretary, or Assistant Secretary, (unless other evidence in respect
thereof is herein specifically prescribed). The Warrant Agent shall not be
liable for any action taken, suffered or omitted by it in accordance with
such notice, statement, instruction, request, direction, order or demand
believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except
losses, expenses and liabilities arising as a result of the Warrant Agent's
negligence or wilful misconduct.
-18-
<PAGE>
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or wilful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior
to the date such resignation is to become effective, the Warrant Agent
shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense.
Upon such resignation, or any inability of the Warrant Agent to act as such
hereunder, the Company shall appoint a new warrant agent in writing. If the
Company shall fail to make such appointment within a period of 15 days
after it has been notified in writing of such resignation by the resigning
Warrant Agent, then the Registered Holder of any Warrant Certificate may
apply to any court of competent jurisdiction for the appointment of a new
warrant agent. Any new warrant agent, whether appointed by the Company or
by such a court, shall be a bank or trust company having a capital and
surplus, as shown by its last published report to its stockholders, of not
less than $10,000,000 or a stock transfer company that is a registered
transfer agent under the Securities Exchange Act of 1934. After acceptance
in writing of such appointment by the new warrant agent is received by the
Company, such new warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act
or deed; but if for any reason it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act or deed, the
same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file
notice thereof with the resigning Warrant Agent and shall forthwith cause a
copy of such notice to be mailed to the Registered Holder of each Warrant
Certificate.
Any corporation into which the Warrant Agent or any new warrant agent
may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be
a party or any corporation succeeding to the trust business of the Warrant
Agent shall be a successor warrant agent under this Agreement without any
further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding
paragraph. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effects as though it were not
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions of Section
4(b), the parties hereto and the Company may by supplemental agreement make any
changes or corrections in this Agreement (i) that they shall deem appropriate to
cure any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained; (ii) to reflect an increase in the
number of Warrants which are to be governed
-19-
<PAGE>
by this Agreement resulting from (a) a subsequent public offering of Company
securities which includes Warrants or (b) a subsequent private placement of
Company securities which includes Warrants, in either case having the same terms
and conditions as the Warrants, respectively, originally covered by or
subsequently added to this Agreement under this Section 16, provided, however,
that in the case of a private placement, the amendment to this Agreement will be
effective only at such time as the resale of such Warrants, as well as the
securities underlying such Warrants is covered by an effective registration
statement under the Act; or (iii) that they may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, that this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not less
than 50% of the Warrants then outstanding; and provided, further, that no change
in the number or nature of the securities purchasable upon the exercise of any
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the Registered
Holder of the Warrant Certificate representing such Warrant, other than such
changes as are specifically prescribed by this Agreement as originally executed
or are made in compliance with applicable law.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company, at Geschaftshaus Wasserschloss, Aarestrasse 17, CH-
5300 Vogelsand-Turgi, Switzerland, attention: Dr. Viktor Vogt, or at such other
address as may have been furnished to the Warrant Agent in writing by the
Company; if to the Warrant Agent, at its Corporate Office; if to Royce, at Royce
Investment Group, Inc., 199 Crossways Park Drive, Woodbury, NY 11797; [ ]
SECTION 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates . Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the close of
business on the earlier of the Warrant Expiration Date or the date upon which
all Warrants (including the warrants issuable upon exercise of the Unit Purchase
Options) have been exercised, except that the Warrant Agent shall account to the
Company for cash held by it and the provisions of Section 15 hereof shall
survive such termination.
-20-
<PAGE>
SECTION 21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
IAT MULTIMEDIA, INC.
By: ______________________________
Authorized Officer
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: ______________________________
Authorized Officer
ROYCE INVESTMENT GROUP, INC.,
By: ______________________________
Authorized Officer
[ ]
By: ______________________________
Authorized Officer
-21-
<PAGE>
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
No. ______ Warrants
VOID AFTER ________
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
IAT Multimedia, Inc.
This certifies that FOR VALUE RECEIVED __________________ or registered
assigns (the "Registered Holder") is the owner of the number of Warrants
("Warrants") specified above. Each Warrant represented hereby initially entitles
the Registered Holder to purchase, subject to the terms and conditions set forth
in this Warrant Certificate and the Warrant Agreement (as hereinafter defined),
one fully paid and nonassessable share of Common Stock, $.01 par value ("Common
Stock"), of IAT Multimedia, Inc., a Delaware corporation (the "Company"), at any
time between the Separation Date (as Defined in the Warrant Agreement), and the
Expiration Date (as hereinafter defined), upon the presentation and surrender of
this Warrant Certificate with the Subscription Form on the reverse hereof duly
executed, at the corporate office of American Stock Transfer & Trust Company as
Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of
$_____ (the "Purchase Price") in lawful money of the United States of America in
cash or by official bank or certified check made payable to IAT Multimedia, Inc.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated _________, 1997,
by and among the Company, the Warrant Agent, Royce Investment Group Inc.
("Royce") and ______________.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant
A-1
<PAGE>
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
_________________, 2002 or such earlier date as the Warrants shall be redeemed.
If such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, then the Expiration Date shall mean 5:00 P.M. (New York
time) the next following day which in the State of New York is not a holiday or
a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of the Warrants represented hereby unless a registration statement
under the Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. The Warrants represented hereby shall not be
exercisable by a Registered Holder in any state where such exercise would be
unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any applicable transfer fee
per certificate in addition to any tax or other governmental charge imposed in
connection therewith, for registration of transfer of this Warrant Certificate
at such office, a new Warrant Certificate or Warrant Certificates representing
an equal aggregate number of Warrants will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
The Warrants represented hereby may be redeemed at the option of the
Company, at a redemption price of $.05 per Warrant at any time after ________,
1998, provided the Market Price (as defined in the Warrant Agreement) for the
Common Stock shall exceed $16.00 per share. Notice of redemption shall be given
not later than the thirtieth day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to the Warrants
represented hereby except to receive the $.05 per Class A Warrant upon surrender
of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon
A-2
<PAGE>
made by anyone other than a duly authorized officer of the Company or the
Warrant Agent) for all purposes and shall not be affected by any notice to the
contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
the Warrants represented hereby.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile, by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
IAT MULTIMEDIA, INC.
Dated: By: ______________________________
By: ______________________________
[seal]
Countersigned:
_________________________________
as Warrant Agent
By: ___________________________
Authorized Officer
A-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $_______ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_______ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-----------------------
-----------------------
-----------------------
[please print or type name and address]
and be delivered to
-----------------------
-----------------------
-----------------------
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
A-4
<PAGE>
The undersigned represents that the exercise of the Warrants evidenced
hereby was solicited by a member of the National Association of Securities
Dealers, Inc. If not solicited by an NASD member, please write "unsolicited" in
the space below. Unless otherwise indicated by listing the name of another NASD
member firm, it will be assumed that the exercise was solicited by Royce
Investment Group, Inc.
------------------------------------
(Name of NASD Member)
Dated: X
------------------------------------
------------------------------------
Address
------------------------------------
Taxpayer Identification Number
------------------------------------
Signature Guaranteed
------------------------------------
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
--------------------
--------------------
--------------------
[please print or type name and address]
_________________ of the Warrants represented by this Warrant Certificate, and
hereby irrevocably constitutes and appoints ____________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated:________________ X ______________________________
Signature Guaranteed
______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-6
<PAGE>
Option to Purchase
310,000 Units
IAT Multimedia, Inc.
Unit Purchase Option
Dated: ___________, 1997.
THIS CERTIFIES THAT Royce Investment Group, Inc. (herein sometimes called
the "Holder") is entitled to purchase from IAT Multimedia, Inc., a Delaware
corporation (hereinafter called the "Company"), at the prices and during the
periods as hereinafter specified, up to three hundred and ten thousand (310,000)
Units ("Units"), each Unit consisting of one share of the Company's Common
Stock, $.01 par value, as now constituted ("Common Stock") and one warrant
("Warrants"). Each Warrant is exercisable to purchase one share of Common Stock
at an exercise price of $_______, subject to adjustment, at any time commencing
one year from the effective date of the Registration Statement (as defined
below), but not earlier than the Separation Date (as defined in the Warrant
Agreement) until _______ , 2002.
The Units have been registered under a Registration Statement on Form S-1,
(File No. 333-_______ ) declared effective by the Securities and Exchange
Commission on _______ (the "Registration Statement"). This Option, together with
options of like tenor, constituting in the aggregate options (the "Options") to
purchase 310,000 Units, subject to adjustment in accordance with Section 8 of
this Option (the "Option Units"), was originally issued pursuant to an
underwriting agreement between the Company and Royce Investment Group, Inc., as
representative of the Underwriters named in Schedule A thereto (the
"Underwriters"), in connection with a public offering (the "Offering") of
3,100,000 Units (the "Public Units") through the Underwriters, in consideration
of $310 received for the Options.
Except as specifically otherwise provided herein, the Common Stock and the
Warrants issued pursuant to the option herein granted (the "Option") shall bear
the same terms and conditions as described under the caption "Description of
Securities" in the Registration Statement, and the Warrants shall be governed by
the terms of the Warrant Agreement dated as of __________, 1997 executed in
connection with such public offering (the "Warrant Agreement"), and except that
(i) the holder shall have registration rights under the Securities Act of 1933,
as amended (the "Act"), for the Option, the Common Stock and the Warrants
included in the Option Units, and the shares of Common Stock underlying the
Warrants, as more fully described in Section 6 of this Option and (ii) the
Warrants issuable upon exercise of the Option will be subject to redemption by
the Company pursuant to the Warrant Agreement at any time after the Option has
been exercised and the Warrants underlying the Option Units are outstanding. Any
such redemption shall be on the same terms and conditions as the Warrants
included in the Public Units (the "Public Warrants"). The Company will list the
Common Stock underlying this Option and, at the Holder's request the Warrants,
on the Nasdaq National Market,
<PAGE>
the Nasdaq Small Cap Market or such other exchange or market as the Common Stock
or Public Warrants may then be listed or quoted. In the event of any extension
of the expiration date or reduction of the exercise price of the Public
Warrants, the same changes to the Warrants included in the Option Units shall be
simultaneously effected.
1. The rights represented by this Option shall be exercised at the prices,
subject to adjustment in accordance with Section 8 of this Option ("the
"Exercise Price"), and during the periods as follows:
(a) During the period from _________, 1997 to _________, 1998,
inclusive, the Holder shall have no right to purchase any Option Units
hereunder, except that in the event of any merger, consolidation or sale of
all or substantially all the capital stock or assets of the Company or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of another
corporation into the Company) subsequent to _________, 1997, the Holder
shall have the right to exercise this Option and the Warrants included
herein at such time and receive the kind and amount of shares of stock and
other securities and property (including cash) which a holder of the number
of shares of Common Stock underlying this Option and the Warrants included
in this Option would have owned or been entitled to receive had this Option
been exercised immediately prior thereto.
(b) Between _________, 1998, and _________, 2002 inclusive, the Holder
shall have the option to purchase Option Units hereunder at a price of
$_______ per Unit. For purposes of the adjustments under Section 8 hereof,
the Per Share Exercise Price shall be deemed to be $_______, subject to
further adjustment as provided in such Section 8.
(c) After _________, 2002 the Holder shall have no right to purchase
any Units hereunder.
2. (a) The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); and (ii) payment to the
Company of the exercise price then in effect for the number of Option Units
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any. This Option shall be deemed to have been exercised, in
whole or in part to the extent specified, immediately prior to the close of
business on the date this Option is surrendered and payment is made in
accordance with the foregoing provisions of this Section 2, and the person or
persons in whose name or names the certificates for shares of Common Stock and
Warrants shall
-2-
<PAGE>
be issuable upon such exercise shall become the holder or holders of record of
such Common Stock and Warrants at that time and date. The certificates for the
Common Stock and Warrants so purchased shall be delivered to the Holder as soon
as practicable but not later than ten (10) days after the rights represented by
this Option shall have been so exercised.
(b) At any time during the period above specified, during which this Option
may be exercised, the Holder may, at its option, exchange this Option, in whole
or in part (an "Option Exchange"), into the number of Option Units determined in
accordance with this Section (b), by surrendering this Option at the principal
office of the Company or at the office of its stock transfer agent, accompanied
by a notice stating such Holder's intent to effect such exchange, the number of
Option Units into which this Option is to be exchanged and the date on which the
Holder requests that such Option Exchange occur (the "Notice of Exchange"). The
Option Exchange shall take place on the date specified in the Notice of Exchange
or, if later, the date the Notice of Exchange is received by the Company (the
"Exchange Date"). Certificates for the shares of Common Stock and Warrants
issuable upon such Option Exchange and, if applicable, a new Option of like
tenor evidencing the balance of the Option Units remaining subject to this
Option, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any Option
Exchange, this Option shall represent the right to subscribe for and acquire the
number of Option Units (rounded to the next highest integer) equal to (x) the
number of Option Units specified by the Holder in its Notice of Exchange up to
the maximum number of Option Units subject to this option (the "Total Number")
less (y) the number of Option Units equal to the quotient obtained by dividing
(A) the product of the Total Number and the existing Exercise Price by (B) the
Fair Market Value. "Fair Market Value" shall mean first, if there is a trading
market as indicated in Subsection (i) below for the Units, such Fair Market
Value of the Units and if there is no such trading market in the Units, then
Fair Market Value shall have the meaning indicated in Subsections (ii) through
(v) below for the aggregate value of all shares of Common Stock and Warrants
which comprise a Unit:
(i) If the Units are listed on a national securities exchange or
listed or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq National Market or the Nasdaq Small Cap
Market, the Fair Market Value shall be the average of the last reported
sale prices or the average of the means of the last reported bid and asked
prices, respectively, of the Units on such exchange or market for the
twenty (20) business days ending on the last business day prior to the
Exchange Date; or
(ii) If the Common Stock or Warrants are listed on a national
securities exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market or the Nasdaq
Small Cap Market, the Fair Market Value shall be the average of the last
reported sale prices or the average of the means of the last reported bid
and asked prices, respectively, of Common Stock or Warrants, respectively,
on such exchange or market for the twenty (20) business days ending on the
last business day prior to the Exchange Date; or
-3-
<PAGE>
(iii) If the Common Stock or Warrants are not so listed or admitted to
unlisted trading privileges, the Fair Market Value shall be the average of
the means of the last reported bid and asked prices of the Common Stock or
Warrants, respectively, for the twenty (20) business days ending on the
last business day prior to the Exchange Date; or
(iv) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Fair
Market Value shall be an amount, not less than book value thereof as at the
end of the most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be prescribed by
the Board of Directors of the Company; or
(v) If the Warrants are not so listed or admitted to unlisted trading
privileges, and bid and asked prices are not so reported for Warrants, then
Fair Market Value for the Warrants shall be an amount equal to the
difference between (i) the Fair Market Value of the shares of Common Stock
and Warrants which may be received upon the exercise of the Warrants, as
determined herein, and (ii) the Warrant Exercise Price.
3. Neither this Option nor the underlying securities shall be transferred,
sold, assigned, or hypothecated for a period of one year commencing on the
effective date of the Registration Statement except that they may be transferred
to successors of the Holder, and may be assigned in whole or in part to any
person who is an officer of the Holder, any member participating in the selling
group relating to the Offering or any officer of such selling group member. Any
such assignment shall be effected by the Holder (i) executing the form of
assignment at the end hereof and (ii) surrendering this Option for cancellation
at the office or agency of the Company referred to in Section 2 hereof,
accompanied by a certificate (signed by an officer of the Holder if the Holder
is a corporation), stating that each transferee is a permitted transferee under
this Section 3 hereof; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Option or Options of like
tenor and representing in the aggregate rights to purchase the same number of
Option Units as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock which
may be issued as part of the Option Units purchased hereunder and the Common
Stock which may be issued upon exercise of the Warrants will, upon issuance, be
duly and validly issued, fully paid and nonassessable and no personal liability
will attach to the holder thereof. The Company further covenants and agrees that
during the periods within which this Option may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of its
Common Stock to provide for the exercise of this Option and that it will have
authorized and reserved a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants included in the Option Units.
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<PAGE>
5. This Option shall not entitle the Holder to any voting rights or any
other rights, or subject to the Holder to any liabilities, as a stockholder of
the Company.
6. (a) The Company shall advise the Holder or its transferee, whether the
Holder holds the Option or has exercised the Option and holds Option Units or
any of the securities underlying the Option Units, by written notice at least
four weeks prior to the filing of any post-effective amendment to the
Registration Statement or of any new registration statement or post-effective
amendment thereto under the Act covering any securities of the Company, for its
own account or for the account of others, and will for a period of seven years
from the effective date of the Registration Statement, upon the request of the
Holder, include in any such post-effective amendment or registration statement,
such information as may be required to permit a public offering of the Option,
all or any of the Option Units, the Common Stock or Warrants included in the
Option Units or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities").
(b) If any 50% holder (as defined below) shall give notice to the Company
at any time to the effect that such holder desires to register under the Act
this Option, the Option Units or any of the underlying securities contained in
the Option Units under such circumstances that a public distribution (within the
meaning of the Act) of any such securities will be involved then the Company
will promptly, but no later than two weeks after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement on Form S-1 or such other form as the holder requests
pursuant to the Act, to the end that the Option, the Option Units and/or any of
the securities underlying the Option Units may be publicly sold under the Act as
promptly as practicable thereafter and the Company will use its best efforts to
cause such registration to become and remain effective (including the taking of
such steps as are necessary to obtain the removal of any stop order); provided,
that such holder shall furnish the Company with appropriate information in
connection therewith as the Company may reasonably request in writing. The 50%
holder may, at its option, request the filing of a post-effective amendment to
the current Registration Statement or a new registration statement under the Act
on one occasion during the four year period beginning one year from the
effective date of the Registration Statement. The Holder may, at its option
request the registration of the Option and/or any of the securities underlying
the Option in a registration statement made by the Company as contemplated by
Section 6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the Option Units issuable upon exercise of the Option
and even though the Holder has not given notice of exercise of the Option. The
50% holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to the Option,
the Option Units as a unit, or separately as to the Common Stock and/or Warrants
included in the Option Units and/or the Common Stock issuable upon the exercise
of the Warrants, and such registration rights may be exercised by the 50% holder
prior to or subsequent to the exercise of the Option.
Within ten days after receiving any such notice pursuant to this Section
6(b), the Company shall give notice to the other holders of the Options,
advising that the Company is proceeding with such post-effective amendment or
registration statement and offering to include
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<PAGE>
therein the securities underlying the Options of the other holders, provided
that they shall furnish the Company with such appropriate information (relating
to the intentions of such holders) in connection therewith as the Company shall
reasonably request in writing. All costs and expenses of the first such
post-effective amendment or new registration statement under this paragraph 6(b)
shall be borne by the Company, except that the holders shall bear the fees of
their own counsel and any underwriting discounts or commissions applicable to
any of the securities sold by them. If the Company determines to include
securities to be sold by it in any registration statement originally requested
pursuant to this Section 6(b), such registration shall instead be deemed to have
been a registration under Section 6(a) and not under this Section 6(b).
The Company will maintain such registration statement or post-effective
amendment current under the Act for a period of at least six months (and for up
to an additional three months if requested by the Holder) from the effective
date thereof.
(c) The term "50% holder" as used in this Section 6 shall mean the holder
of at least 50% of the Common Stock and the Warrants underlying the Options
(considered in the aggregate) and shall include any owner or combination of
owners of such securities, which ownership shall be calculated by determining
the number of shares of Common Stock held by such owner or owners as well as the
number of shares then issuable upon exercise of the Warrants.
(d) Whenever pursuant to Section 6 a registration statement relating to any
Registrable Securities is filed under the Act, amended or supplemented, the
Company shall (i) supply prospectuses and such other documents as the Holder may
request in order to facilitate the public sale or other disposition of the
Registrable Securities, (ii) use its best efforts to register and qualify any of
the Registrable Securities for sale in such states as such Holder designates,
(iii) furnish indemnification in the manner provided in Section 7 hereof, (iv)
notify each Holder of Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and, at the request of
any such Holder, prepare and furnish to such Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not included an untrue statement of a material
fact or omit to state material fact required to be stated therein or necessary
to make the statements therein not misleading and (v) do any and all other acts
and things which may be necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Registrable Securities,
The Holder shall furnish appropriate information in connection therewith and
indemnification as set forth in Section 7.
(e) The Company shall not permit the inclusion of any securities other than
the Registrable Securities to be included in any registration statement filed
pursuant to Section 6(b) hereof without the prior written consent of the 50%
holder.
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<PAGE>
(f) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (or, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) if such registration includes an underwritten
public offering, a "cold comfort" letter dated the effective date of such
registration statement and dated the date of the closing under the underwriting
agreement signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(g) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and to the
managing underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonable necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to
non-confidential books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times as any such Holder shall
reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement relating to
the Registrable Securities is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder of the Registrable
Securities covered by such registration statement, amendment or supplement (such
holder being hereinafter called the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Distributing Holder, any such controlling person or any
such underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Distributing Holder
and each such controlling person and underwriter for any legal or other expenses
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<PAGE>
reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder specifically for use in the preparation thereof.
(b) If requested by the Company prior to the filing of any registration
statement covering the Registrable Securities, each Distributing Holder will
agree, severally but not jointly, to indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder specifically for use in the preparation
thereof; except that the maximum amount which may be recovered from the
Distributing Holder pursuant to this Section 7 or otherwise shall be limited to
the amount of net proceeds received by the Distributing Holder from the sale of
the Registrable Securities.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 7.
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
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<PAGE>
(8) In addition to the provisions of Section 1(a) of this Option, the
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Options shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Whenever the Exercise Price payable upon exercise of each Option
is adjusted pursuant to Subsection (a) above, (i) the number of shares of
Common Stock included in an Option Unit shall simultaneously be adjusted by
multiplying the number of shares of Common Stock included in Option Unit
immediately prior to such adjustment by the Exercise Price in effect
immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price, as adjusted and (ii) the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants included
in the Option Units and the exercise price of such Warrants shall be
adjusted in accordance with the applicable terms of the Warrant Agreement.
(c) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (c)(i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section 8 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be. Anything in this Section 8 to the contrary
notwithstanding, the Company shall be entitled, but shall not be required,
to make such changes in the Exercise Price, in addition to those required
by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of
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<PAGE>
Common Stock or securities convertible into Common Stock (including
Warrants issuable upon exercise of this Option).
(d) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Option Units issuable upon exercise
of each Option and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Holders, at the
address set forth herein, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any. The Company may retain a firm of
independent certified public accountants selected by the Board of Directors
(who may be the regular accountants employed by the Company) to make any
computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder of this Option thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Option shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in Subsections (a) to (d),
inclusive above.
(f) In case any event shall occur as to which the other provisions of
this Section 8 or Section 1(a) hereof are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the
purchase rights represented by this Option in accordance with the essential
intent and principles hereof then, in each such case, the Holders of
Options representing the right to purchase a majority of the Option Units
may appoint a firm of independent public accountants reasonably acceptable
to the Company, which shall give their opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the purchase rights represented
by the Options. Upon receipt of such opinion, the Company will promptly
mail a copy thereof to the Holder of this Option and shall make the
adjustments described therein. The fees and expenses of such independent
public accountants shall be borne by the Company.
9. This Agreement shall be governed by and in accordance with the laws of
the State of New York, without giving effect to the principles of conflicts of
law thereof.
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<PAGE>
IN WITNESS WHEREOF, IAT Multimedia, Inc. has caused this Option to be
signed by its duly authorized officers under its corporate seal, and this Option
to be dated __________, 1997.
IAT MULTIMEDIA, INC.
By: _________________________
(Corporate Seal)
Attest:
_________________________
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, ___ Units of IAT Multimedia, Inc., each Unit
consisting of one share of $.01 par value Common Stock, and one Warrant to
purchase one share of Common Stock and herewith makes payment of $_________
thereof.
Dated: _________, 19__. Instructions for Registration of
Stock and Warrants
----------------------------------------
Print Name
----------------------------------------
Address
----------------------------------------
Signature
<PAGE>
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing Option, hereby
elects to exchange its Option for _________ Units of IAT Multimedia, Inc., each
Unit consisting of one share of $.01 par value Common Stock and one Warrant to
purchase one share of Common Stock, pursuant to the Option Exchange provisions
of the Option.
Dated: _____________, 19__.
------------------------------------------
Print Name
------------------------------------------
Address
------------------------------------------
Signature
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto the right to purchase Units represented by the foregoing Option
to the extent of _____ Units , and appoints _____________ attorney to transfer
such rights on the books of IAT Multimedia, Inc., with full power of
substitution in the premises.
Dated: _______________, 19__
ROYCE INVESTMENT GROUP, INC.
By: _____________________________________
__________________________________________
Address
In the presence of:
- ----------------------------
<PAGE>
Option to Purchase
310,000 Units
IAT Multimedia, Inc.
Unit Purchase Option
Dated: ___________, 1997.
THIS CERTIFIES THAT Royce Investment Group, Inc. (herein sometimes called
the "Holder") is entitled to purchase from IAT Multimedia, Inc., a Delaware
corporation (hereinafter called the "Company"), at the prices and during the
periods as hereinafter specified, up to three hundred and ten thousand (310,000)
Units ("Units"), each Unit consisting of one share of the Company's Common
Stock, $.01 par value, as now constituted ("Common Stock") and one warrant
("Warrants"). Each Warrant is exercisable to purchase one share of Common Stock
at an exercise price of $_______, subject to adjustment, at any time commencing
one year from the effective date of the Registration Statement (as defined
below), but not earlier than the Separation Date (as defined in the Warrant
Agreement) until _______ , 2002.
The Units have been registered under a Registration Statement on Form S-1,
(File No. 333-_______ ) declared effective by the Securities and Exchange
Commission on _______ (the "Registration Statement"). This Option, together with
options of like tenor, constituting in the aggregate options (the "Options") to
purchase 310,000 Units, subject to adjustment in accordance with Section 8 of
this Option (the "Option Units"), was originally issued pursuant to an
underwriting agreement between the Company and Royce Investment Group, Inc., as
representative of the Underwriters named in Schedule A thereto (the
"Underwriters"), in connection with a public offering (the "Offering") of
3,100,000 Units (the "Public Units") through the Underwriters, in consideration
of $310 received for the Options.
Except as specifically otherwise provided herein, the Common Stock and the
Warrants issued pursuant to the option herein granted (the "Option") shall bear
the same terms and conditions as described under the caption "Description of
Securities" in the Registration Statement, and the Warrants shall be governed by
the terms of the Warrant Agreement dated as of __________, 1997 executed in
connection with such public offering (the "Warrant Agreement"), and except that
(i) the holder shall have registration rights under the Securities Act of 1933,
as amended (the "Act"), for the Option, the Common Stock and the Warrants
included in the Option Units, and the shares of Common Stock underlying the
Warrants, as more fully described in Section 6 of this Option and (ii) the
Warrants issuable upon exercise of the Option will be subject to redemption by
the Company pursuant to the Warrant Agreement at any time after the Option has
been exercised and the Warrants underlying the Option Units are outstanding. Any
such redemption shall be on the same terms and conditions as the Warrants
included in the Public Units (the "Public Warrants"). The Company will list the
Common Stock underlying this Option and, at the Holder's request the Warrants,
on the Nasdaq National Market,
<PAGE>
the Nasdaq Small Cap Market or such other exchange or market as the Common Stock
or Public Warrants may then be listed or quoted. In the event of any extension
of the expiration date or reduction of the exercise price of the Public
Warrants, the same changes to the Warrants included in the Option Units shall be
simultaneously effected.
1. The rights represented by this Option shall be exercised at the prices,
subject to adjustment in accordance with Section 8 of this Option ("the
"Exercise Price"), and during the periods as follows:
(a) During the period from _________, 1997 to _________, 1998,
inclusive, the Holder shall have no right to purchase any Option Units
hereunder, except that in the event of any merger, consolidation or sale of
all or substantially all the capital stock or assets of the Company or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of another
corporation into the Company) subsequent to _________, 1997, the Holder
shall have the right to exercise this Option and the Warrants included
herein at such time and receive the kind and amount of shares of stock and
other securities and property (including cash) which a holder of the number
of shares of Common Stock underlying this Option and the Warrants included
in this Option would have owned or been entitled to receive had this Option
been exercised immediately prior thereto.
(b) Between _________, 1998, and _________, 2002 inclusive, the Holder
shall have the option to purchase Option Units hereunder at a price of
$_______ per Unit. For purposes of the adjustments under Section 8 hereof,
the Per Share Exercise Price shall be deemed to be $_______, subject to
further adjustment as provided in such Section 8.
(c) After _________, 2002 the Holder shall have no right to purchase
any Units hereunder.
2. (a) The rights represented by this Option may be exercised at any time
within the period above specified, in whole or in part, by (i) the surrender of
this Option (with the purchase form at the end hereof properly executed) at the
principal executive office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company); and (ii) payment to the
Company of the exercise price then in effect for the number of Option Units
specified in the above-mentioned purchase form together with applicable stock
transfer taxes, if any. This Option shall be deemed to have been exercised, in
whole or in part to the extent specified, immediately prior to the close of
business on the date this Option is surrendered and payment is made in
accordance with the foregoing provisions of this Section 2, and the person or
persons in whose name or names the certificates for shares of Common Stock and
Warrants shall
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<PAGE>
be issuable upon such exercise shall become the holder or holders of record of
such Common Stock and Warrants at that time and date. The certificates for the
Common Stock and Warrants so purchased shall be delivered to the Holder as soon
as practicable but not later than ten (10) days after the rights represented by
this Option shall have been so exercised.
(b) At any time during the period above specified, during which this Option
may be exercised, the Holder may, at its option, exchange this Option, in whole
or in part (an "Option Exchange"), into the number of Option Units determined in
accordance with this Section (b), by surrendering this Option at the principal
office of the Company or at the office of its stock transfer agent, accompanied
by a notice stating such Holder's intent to effect such exchange, the number of
Option Units into which this Option is to be exchanged and the date on which the
Holder requests that such Option Exchange occur (the "Notice of Exchange"). The
Option Exchange shall take place on the date specified in the Notice of Exchange
or, if later, the date the Notice of Exchange is received by the Company (the
"Exchange Date"). Certificates for the shares of Common Stock and Warrants
issuable upon such Option Exchange and, if applicable, a new Option of like
tenor evidencing the balance of the Option Units remaining subject to this
Option, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any Option
Exchange, this Option shall represent the right to subscribe for and acquire the
number of Option Units (rounded to the next highest integer) equal to (x) the
number of Option Units specified by the Holder in its Notice of Exchange up to
the maximum number of Option Units subject to this option (the "Total Number")
less (y) the number of Option Units equal to the quotient obtained by dividing
(A) the product of the Total Number and the existing Exercise Price by (B) the
Fair Market Value. "Fair Market Value" shall mean first, if there is a trading
market as indicated in Subsection (i) below for the Units, such Fair Market
Value of the Units and if there is no such trading market in the Units, then
Fair Market Value shall have the meaning indicated in Subsections (ii) through
(v) below for the aggregate value of all shares of Common Stock and Warrants
which comprise a Unit:
(i) If the Units are listed on a national securities exchange or
listed or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq National Market or the Nasdaq Small Cap
Market, the Fair Market Value shall be the average of the last reported
sale prices or the average of the means of the last reported bid and asked
prices, respectively, of the Units on such exchange or market for the
twenty (20) business days ending on the last business day prior to the
Exchange Date; or
(ii) If the Common Stock or Warrants are listed on a national
securities exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market or the Nasdaq
Small Cap Market, the Fair Market Value shall be the average of the last
reported sale prices or the average of the means of the last reported bid
and asked prices, respectively, of Common Stock or Warrants, respectively,
on such exchange or market for the twenty (20) business days ending on the
last business day prior to the Exchange Date; or
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<PAGE>
(iii) If the Common Stock or Warrants are not so listed or admitted to
unlisted trading privileges, the Fair Market Value shall be the average of
the means of the last reported bid and asked prices of the Common Stock or
Warrants, respectively, for the twenty (20) business days ending on the
last business day prior to the Exchange Date; or
(iv) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the Fair
Market Value shall be an amount, not less than book value thereof as at the
end of the most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be prescribed by
the Board of Directors of the Company; or
(v) If the Warrants are not so listed or admitted to unlisted trading
privileges, and bid and asked prices are not so reported for Warrants, then
Fair Market Value for the Warrants shall be an amount equal to the
difference between (i) the Fair Market Value of the shares of Common Stock
and Warrants which may be received upon the exercise of the Warrants, as
determined herein, and (ii) the Warrant Exercise Price.
3. Neither this Option nor the underlying securities shall be transferred,
sold, assigned, or hypothecated for a period of one year commencing on the
effective date of the Registration Statement except that they may be transferred
to successors of the Holder, and may be assigned in whole or in part to any
person who is an officer of the Holder, any member participating in the selling
group relating to the Offering or any officer of such selling group member. Any
such assignment shall be effected by the Holder (i) executing the form of
assignment at the end hereof and (ii) surrendering this Option for cancellation
at the office or agency of the Company referred to in Section 2 hereof,
accompanied by a certificate (signed by an officer of the Holder if the Holder
is a corporation), stating that each transferee is a permitted transferee under
this Section 3 hereof; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) a new Option or Options of like
tenor and representing in the aggregate rights to purchase the same number of
Option Units as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock which
may be issued as part of the Option Units purchased hereunder and the Common
Stock which may be issued upon exercise of the Warrants will, upon issuance, be
duly and validly issued, fully paid and nonassessable and no personal liability
will attach to the holder thereof. The Company further covenants and agrees that
during the periods within which this Option may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of its
Common Stock to provide for the exercise of this Option and that it will have
authorized and reserved a sufficient number of shares of Common Stock for
issuance upon exercise of the Warrants included in the Option Units.
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<PAGE>
5. This Option shall not entitle the Holder to any voting rights or any
other rights, or subject to the Holder to any liabilities, as a stockholder of
the Company.
6. (a) The Company shall advise the Holder or its transferee, whether the
Holder holds the Option or has exercised the Option and holds Option Units or
any of the securities underlying the Option Units, by written notice at least
four weeks prior to the filing of any post-effective amendment to the
Registration Statement or of any new registration statement or post-effective
amendment thereto under the Act covering any securities of the Company, for its
own account or for the account of others, and will for a period of seven years
from the effective date of the Registration Statement, upon the request of the
Holder, include in any such post-effective amendment or registration statement,
such information as may be required to permit a public offering of the Option,
all or any of the Option Units, the Common Stock or Warrants included in the
Option Units or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities").
(b) If any 50% holder (as defined below) shall give notice to the Company
at any time to the effect that such holder desires to register under the Act
this Option, the Option Units or any of the underlying securities contained in
the Option Units under such circumstances that a public distribution (within the
meaning of the Act) of any such securities will be involved then the Company
will promptly, but no later than two weeks after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement on Form S-1 or such other form as the holder requests
pursuant to the Act, to the end that the Option, the Option Units and/or any of
the securities underlying the Option Units may be publicly sold under the Act as
promptly as practicable thereafter and the Company will use its best efforts to
cause such registration to become and remain effective (including the taking of
such steps as are necessary to obtain the removal of any stop order); provided,
that such holder shall furnish the Company with appropriate information in
connection therewith as the Company may reasonably request in writing. The 50%
holder may, at its option, request the filing of a post-effective amendment to
the current Registration Statement or a new registration statement under the Act
on one occasion during the four year period beginning one year from the
effective date of the Registration Statement. The Holder may, at its option
request the registration of the Option and/or any of the securities underlying
the Option in a registration statement made by the Company as contemplated by
Section 6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the Option Units issuable upon exercise of the Option
and even though the Holder has not given notice of exercise of the Option. The
50% holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to the Option,
the Option Units as a unit, or separately as to the Common Stock and/or Warrants
included in the Option Units and/or the Common Stock issuable upon the exercise
of the Warrants, and such registration rights may be exercised by the 50% holder
prior to or subsequent to the exercise of the Option.
Within ten days after receiving any such notice pursuant to this Section
6(b), the Company shall give notice to the other holders of the Options,
advising that the Company is proceeding with such post-effective amendment or
registration statement and offering to include
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therein the securities underlying the Options of the other holders, provided
that they shall furnish the Company with such appropriate information (relating
to the intentions of such holders) in connection therewith as the Company shall
reasonably request in writing. All costs and expenses of the first such
post-effective amendment or new registration statement under this paragraph 6(b)
shall be borne by the Company, except that the holders shall bear the fees of
their own counsel and any underwriting discounts or commissions applicable to
any of the securities sold by them. If the Company determines to include
securities to be sold by it in any registration statement originally requested
pursuant to this Section 6(b), such registration shall instead be deemed to have
been a registration under Section 6(a) and not under this Section 6(b).
The Company will maintain such registration statement or post-effective
amendment current under the Act for a period of at least six months (and for up
to an additional three months if requested by the Holder) from the effective
date thereof.
(c) The term "50% holder" as used in this Section 6 shall mean the holder
of at least 50% of the Common Stock and the Warrants underlying the Options
(considered in the aggregate) and shall include any owner or combination of
owners of such securities, which ownership shall be calculated by determining
the number of shares of Common Stock held by such owner or owners as well as the
number of shares then issuable upon exercise of the Warrants.
(d) Whenever pursuant to Section 6 a registration statement relating to any
Registrable Securities is filed under the Act, amended or supplemented, the
Company shall (i) supply prospectuses and such other documents as the Holder may
request in order to facilitate the public sale or other disposition of the
Registrable Securities, (ii) use its best efforts to register and qualify any of
the Registrable Securities for sale in such states as such Holder designates,
(iii) furnish indemnification in the manner provided in Section 7 hereof, (iv)
notify each Holder of Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and, at the request of
any such Holder, prepare and furnish to such Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not included an untrue statement of a material
fact or omit to state material fact required to be stated therein or necessary
to make the statements therein not misleading and (v) do any and all other acts
and things which may be necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Registrable Securities,
The Holder shall furnish appropriate information in connection therewith and
indemnification as set forth in Section 7.
(e) The Company shall not permit the inclusion of any securities other than
the Registrable Securities to be included in any registration statement filed
pursuant to Section 6(b) hereof without the prior written consent of the 50%
holder.
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(f) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (or, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) if such registration includes an underwritten
public offering, a "cold comfort" letter dated the effective date of such
registration statement and dated the date of the closing under the underwriting
agreement signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(g) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and to the
managing underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonable necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to
non-confidential books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times as any such Holder shall
reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement relating to
the Registrable Securities is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder of the Registrable
Securities covered by such registration statement, amendment or supplement (such
holder being hereinafter called the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Distributing Holder, any such controlling person or any
such underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Distributing Holder
and each such controlling person and underwriter for any legal or other expenses
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reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder specifically for use in the preparation thereof.
(b) If requested by the Company prior to the filing of any registration
statement covering the Registrable Securities, each Distributing Holder will
agree, severally but not jointly, to indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder specifically for use in the preparation
thereof; except that the maximum amount which may be recovered from the
Distributing Holder pursuant to this Section 7 or otherwise shall be limited to
the amount of net proceeds received by the Distributing Holder from the sale of
the Registrable Securities.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 7.
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
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(8) In addition to the provisions of Section 1(a) of this Option, the
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Options shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Whenever the Exercise Price payable upon exercise of each Option
is adjusted pursuant to Subsection (a) above, (i) the number of shares of
Common Stock included in an Option Unit shall simultaneously be adjusted by
multiplying the number of shares of Common Stock included in Option Unit
immediately prior to such adjustment by the Exercise Price in effect
immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price, as adjusted and (ii) the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants included
in the Option Units and the exercise price of such Warrants shall be
adjusted in accordance with the applicable terms of the Warrant Agreement.
(c) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (c)(i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section 8 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be. Anything in this Section 8 to the contrary
notwithstanding, the Company shall be entitled, but shall not be required,
to make such changes in the Exercise Price, in addition to those required
by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common
Stock, or any subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of
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<PAGE>
Common Stock or securities convertible into Common Stock (including
Warrants issuable upon exercise of this Option).
(d) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Option Units issuable upon exercise
of each Option and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Holders, at the
address set forth herein, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any. The Company may retain a firm of
independent certified public accountants selected by the Board of Directors
(who may be the regular accountants employed by the Company) to make any
computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder of this Option thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Option shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in Subsections (a) to (d),
inclusive above.
(f) In case any event shall occur as to which the other provisions of
this Section 8 or Section 1(a) hereof are not strictly applicable but as to
which the failure to make any adjustment would not fairly protect the
purchase rights represented by this Option in accordance with the essential
intent and principles hereof then, in each such case, the Holders of
Options representing the right to purchase a majority of the Option Units
may appoint a firm of independent public accountants reasonably acceptable
to the Company, which shall give their opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the purchase rights represented
by the Options. Upon receipt of such opinion, the Company will promptly
mail a copy thereof to the Holder of this Option and shall make the
adjustments described therein. The fees and expenses of such independent
public accountants shall be borne by the Company.
9. This Agreement shall be governed by and in accordance with the laws of
the State of New York, without giving effect to the principles of conflicts of
law thereof.
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IN WITNESS WHEREOF, IAT Multimedia, Inc. has caused this Option to be
signed by its duly authorized officers under its corporate seal, and this Option
to be dated __________, 1997.
IAT MULTIMEDIA, INC.
By: _________________________
(Corporate Seal)
Attest:
_________________________
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, ___ Units of IAT Multimedia, Inc., each Unit
consisting of one share of $.01 par value Common Stock, and one Warrant to
purchase one share of Common Stock and herewith makes payment of $_________
thereof.
Dated: _________, 19__. Instructions for Registration of
Stock and Warrants
----------------------------------------
Print Name
----------------------------------------
Address
----------------------------------------
Signature
<PAGE>
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing Option, hereby
elects to exchange its Option for _________ Units of IAT Multimedia, Inc., each
Unit consisting of one share of $.01 par value Common Stock and one Warrant to
purchase one share of Common Stock, pursuant to the Option Exchange provisions
of the Option.
Dated: _____________, 19__.
------------------------------------------
Print Name
------------------------------------------
Address
------------------------------------------
Signature
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto the right to purchase Units represented by the foregoing Option
to the extent of _____ Units , and appoints _____________ attorney to transfer
such rights on the books of IAT Multimedia, Inc., with full power of
substitution in the premises.
Dated: _______________, 19__
ROYCE INVESTMENT GROUP, INC.
By: _____________________________________
__________________________________________
Address
In the presence of:
- ----------------------------
<PAGE>
************************************************************************
STOCK PURCHASE WARRANT
To Purchase Common Stock of
IAT Holdings, Inc.
************************************************************************
<PAGE>
Warrant to Purchase 210,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
IAT HOLDINGS, INC.
This is to Certify That, FOR VALUE RECEIVED, K.-D. Sippel
or assigns ("Holder"), is entitled to purchase from IAT Holdings, Inc., a
Delaware corporation (the "Company"), following an initial public offering (the
"IPO") of shares of common stock, par value $.01 per share (the "Common Stock")
of the Company and subject to the provisions of this Warrant, 210,000 fully
paid, validly issued and nonassessable shares of Common Stock of the Company at
a price per share equal to 130% of the initial public offering price of a share
of Common Stock in the IPO at any time or from time to time during the ten (10)
year period following the closing date of the IPO, but not later than 5:00 p.m.
New York City Time on December 31, 2006. The number of shares of Common Stock to
be received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price."
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any time or
from time to time during the ten (10) year period following the closing
date of the IPO, but not later than 5:00 New York City Time on December 31,
2006 (the "Exercise Period") provided, however, that (i) if either such day
is a day on which banking institutions in the State of New York are
authorized by law to close, then on the next succeeding day which shall not
be such a day, and (ii) in the event of any merger, consolidation or sale
of substantially all the assets of the Company as an entirety, resulting in
any distribution to the Company's stockholders, prior to December 31, 2006,
the Holder shall have the right to exercise this Warrant commencing at such
time through December 31, 2006 into the kind and amount of shares of stock
and other securities and property (including cash) receivable by a holder
of the number of shares of Common Stock into which this Warrant might have
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been exercisable immediately prior thereto. This Warrant may be exercised
by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the
Purchase Form annexed hereto duly executed and accompanied by payment of
the Exercise Price for the number of Warrant Shares specified in such form.
As soon as practicable after each such exercise of the warrants, but not
later than seven (7) days from the date of such exercise, the Company shall
issue and deliver to the Holder a certificate or certificate for the
Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute
and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder. Upon
receipt by the Company of this Warrant at its office, or by the stock
transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically
delivered to the Holder.
(2) At any time during the Exercise Period, the Holder may, at its
option, exchange this Warrant, in whole or in part (a "Warrant Exchange"),
into the number of Warrant Shares determined in accordance with this
Section (a)(2), by surrendering this Warrant at the principal office of the
Company or at the office of its stock transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice of Exchange
or, if later, the date the Notice of Exchange is received by the Company
(the "Exchange Date"). Certificates for the shares issuable upon such
Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the shares remaining subject to this Warrant, shall be
issued as of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant Exchange,
this Warrant shall represent the right to subscribe for and acquire the
number of Warrant Shares (rounded to the next highest integer) equal to (i)
the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal
to the quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the current market value of a share
of Common Stock. Current market value shall have the meaning set forth
Section (c) below, except that for purposes hereof, the date of exercise,
as used in such Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of
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a share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market, the current market value shall be
the last reported sale price of the Common Stock on such exchange or market
on the last business day prior to the date of exercise of this Warrant or
if no such sale is made on such day, the average closing bid and asked
prices for such day on such exchange or market; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq Small Cap Market, the
current Market Value shall be the average of the closing bid and asked
prices for such day on such market and if the Common Stock is not so
traded, the current market value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. on the
last business day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than book value thereof
as at the end of the most recent fiscal year of the Company ending prior to
the date of the exercise of the Warrant, determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant
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executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
the number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event
listed above shall occur.
(2) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or having a
conversion price per share) less than the current market price of the
Common Stock (as defined in Subsection (8) below) on the record date
mentioned below, or less than the Exercise Price on such record date, the
Exercise Price shall be adjusted so that the same shall equal the lower of
(i) the price determined by multiplying the Exercise Price in effect
immediately prior to the date of such issuance by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered (or the aggregate conversion
price of the convertible securities so offered) would purchase at such
current market price per share of the Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
on such
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record date and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so
offered are convertible) or (ii) in the event the Subscription Price is
equal to or higher than the current market price but is less than the
Exercise Price, the price determined by multiplying the Exercise Price in
effect immediately prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of shares outstanding on
the record date mentioned below and the number of additional shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the Exercise Price in
effect immediately prior to the date of such issuance, and the denominator
of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock offered for subscription or purchase (or into which
the convertible securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants;
and to the extent that shares of Common Stock are not delivered (or
securities convertible into Common Stock are not delivered) after the
expiration of such rights or warrants the Exercise Price shall be
readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made
upon the basis of delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (1) above) or subscription rights or warrants (excluding those
referred to in Subsection (2) above), then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding
multiplied by the current market price per share of Common Stock (as
defined in Subsection (8) below), less the fair market value (as determined
by the Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants, and the
denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by such current market price per share of Common
Stock. Such adjustment shall be made successively whenever such a record
date is fixed. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such distribution.
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<PAGE>
(4) In case the Company shall issue shares of its Common Stock,
excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by the Company's Board of
Directors and approved by its shareholders, if such shares would otherwise
be included in this Subsection (4), (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date
hereof, shall not exceed 5% of the Company's Common Stock outstanding at
the time of any issuance), (iii) upon exercise of this Warrant (iv) to
shareholders of any corporation which merges into the Company in proportion
to their stock holdings of such corporation immediately prior to such
merger, upon such merger, or (v) issued in a bona fide public offering
pursuant to a firm commitment underwriting, but only if no adjustment is
required pursuant to any other specific subsection of this Section (f)
(without regard to Subsection (9) below) with respect to the transaction
giving rise to such rights, for a consideration per share (the "Offering
Price") less than the current market price per share (as defined in
Subsection (8) below) on the date the Company fixes the offering price of
such additional shares or less than the Exercise Price, the Exercise Price
shall be adjusted immediately thereafter so that it shall equal the lower
of (i) the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the number of shares of
Common Stock which the aggregate consideration received (determined as
provided in Subsection (7) below) for the issuance of such additional
shares would purchase at such current market price per share of Common
Stock, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares
or (ii) in the event the Offering Price is equal to or higher than the
current market price per share but less than the Exercise Price, the price
determined by multiplying the Exercise Price in effect immediately prior to
the date of issuance by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in
subsection (7) below) for the issuance of such additional shares would
purchase at the Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made successively whenever such
an issuance is made.
(5) In case the Company shall issue any securities convertible into or
exchangeable for its Common Stock, excluding securities issued in
transactions described in Subsections (2) and (3) above, for a
consideration per share of Common
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<PAGE>
Stock (the "Conversion Price") initially deliverable upon conversion or
exchange of such securities (determined as provided in Subsection (7)
below) less than the current market price per share (as defined in
Subsection (8) below) in effect immediately prior to the issuance of such
securities, or less than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the lower of (i) the
price determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the
issuance of such securities and the number of shares of Common Stock which
the aggregate consideration received (determined as provided in Subsection
(7) below) for such securities would purchase at such current market price
per share of Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to such
issuance and the maximum number of shares of Common Stock of the Company
deliverable upon conversion of or in exchange for such securities at the
initial conversion or exchange price or rate or (ii) in the event the
Conversion Price is equal to or higher than the current market price per
share but less than the Exercise Price, the price determined by multiplying
the Exercise Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of shares
outstanding immediately prior to the issuance of such securities and the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in subsection (7) below) for such securities would
purchase at the Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to the issuance of
such securities and the maximum number of shares of Common Stock of the
Company deliverable upon conversion of or in exchange for such securities
at the initial conversion or exchange price or rate. Such adjustment shall
be made successively whenever such an issuance is made.
(6) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the
number of Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on
the date hereof and dividing the product so obtained by the Exercise Price,
as adjusted.
(7) For purposes of any computation respecting consideration received
pursuant to Subsections (4) and (5) above, the following shall apply:
(A) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case
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<PAGE>
shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(B) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), whose
determination shall be conclusive; and
(C) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by
the Company for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (A) and (B) of
this Subsection (7)).
(8) For the purpose of any computation under Subsections (2), (3), (4)
and (5) above, the current market price per share of Common Stock at any
date shall be determined in the manner set forth in Section (c) hereof
except that the current market price per share shall be deemed to be the
higher of (i) the average of the prices for 30 consecutive business days
before such date or (ii) the price on the business day immediately
preceding such date.
(9) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (9) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (f) shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this Section (f),
as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income tax liability to
the holders of Common Stock or securities convertible into Common Stock
(including Warrants).
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<PAGE>
(10) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant, and, if requested, information describing the transactions giving
rise to such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. In the event the
Company does not provide the Holder with such notice and information within
10 days of a request by the Holder, then notwithstanding the provisions of
this Section (f), the Exercise Price shall be immediately adjusted to equal
the lowest Offering Price, Subscription Price or Conversion Price, as
applicable, since the date of this Warrant, and the number of shares
issuable upon exercise of this Warrant shall be adjusted accordingly. The
Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants
employed by the Company) to make any computation required by this Section
(f), and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(11) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Subsections (1) to
(9), inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Section, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
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<PAGE>
executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Common Stock or other securities
shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part,
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<PAGE>
for a security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of Subsection (1)
of Section (f) hereof.
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<PAGE>
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Holder of this
Warrant and the shares of Common Stock issuable upon exercise of this Warrant
shall have the registration rights set forth in Section 1 of the Investor's
Rights Agreement dated as of October 24, 1996 by and between the Company and the
Holder.
IAT HOLDINGS, INC.
By /s/ Dr. Viktor Vogt
-------------------------------
[SEAL]
Dated: October 24, 1996
Attest:
/s/ Dr. Viktor Vogt
- -----------------------------
Secretary
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<PAGE>
PURCHASE FORM
Dated ____________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _______ shares of Common Stock and hereby makes payment
of _______ in payment of the actual exercise price thereof.
__________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ________________________________
(Please typewrite or print in block letters)
Address ______________________________
Signature _____________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers unto
Name _____________________________
(Please typewrite or print in block letters)
Address ____________________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ___________ as attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Date ____________, 19__
Signature ___________________
<PAGE>
ESCROW AGREEMENT
AGREEMENT, dated as of the ___th day of ________, 1997 and effective as of
the Effective Date, as defined herein, by and among American Stock Transfer &
Trust Company, a New York corporation (hereinafter referred to as the "Escrow
Agent"), IAT Mutlimedia, Inc., a Delaware corporation (the "Company"), and the
stockholders of the Company who have executed this agreement (hereinafter
collectively called the "Stockholders").
WHEREAS, the Company contemplates a public offering ("Public Offering") of
Units ("Units"), each Unit consisting of one share of its Common Stock, par
value $.01 per share (the "Common Stock") one redeemable Warrant (the "Warrant")
through Royce Investment Group, Inc. as underwriter (the "Underwriter") pursuant
to a Registration Statement (the "Registration Statement") on Form S-1 filed
with the Securities and Exchange Commission ("SEC"); and
WHEREAS, in connection with the Public Offering the Stockholders have
agreed to deposit in escrow an aggregate of 500,000 shares of Common Stock, upon
the terms and conditions set forth herein.
In consideration of the mutual covenants and promises herein contained, the
parties hereto agree as follows:
1. The Stockholders and the Company hereby appoint American Stock Transfer
& Trust Company as Escrow Agent and agree that the Stockholders will, following
the filing of the Registration Statement relating to the Public Offering,
deliver to the Escrow Agent to hold in accordance with the provisions hereof,
certificates representing an aggregate of
<PAGE>
500,000 shares of Common Stock owned of record by the Stockholders in the
respective amounts set forth on Exhibit A hereto (the "Escrow Shares"), together
with stock powers executed in blank. The Escrow Agent, by its execution and
delivery of this Agreement hereby acknowledges receipt of the Escrow Shares and
accepts its appointment as Escrow Agent to hold the Escrow Shares in escrow,
upon the terms, provisions and conditions hereof.
2. This Agreement shall become effective upon the date on which the
Securities and Exchange Commission declares effective the Registration Statement
("Effective Date") and shall continue in effect until the earlier of (i) the
date specified in paragraph 4(e) hereof or (ii) the distribution by the Escrow
Agent of all of the Escrow Shares in accordance with the terms hereof (the
"Termination Date"). The period of time from the Effective Date until the
Termination Date is referred to herein as the "Escrow Period."
3. During the Escrow Period, the Escrow Agent shall receive all of the
money, securities, rights or property distributed in respect of the Escrow
Shares then held in escrow, including any such property distributed as dividends
or pursuant to any stock split, merger, recapitalization, dissolution, or total
or partial liquidation of the Company, such property to be held and distributed
as herein provided and hereinafter referred to collectively as the "Escrow
Property."
4. (a) The Escrow Shares are subject to release to the Stockholders only in
the event the conditions set forth herein are met. The Escrow Agent, upon notice
to such effect from the Company as provided in paragraph 5 hereof, shall deliver
the Escrow Shares, together with stock powers executed in blank, and the Escrow
Property deposited in escrow with
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<PAGE>
respect to such Escrow Shares, to the respective Stockholders, if, and only if,
one of the following conditions is met:
(i) 166,666 shall be released from escrow if, for the fiscal year ending
December 31, 1997, the Company's "Minimum Revenues" (as defined below)
equals or exceeds $5,500,000;
(ii) 166,666 Escrow Shares (or, if the condition set forth in (i) above was
not met, 333,332 Escrow Shares) shall be released from escrow, if, for
the fiscal year ending December 31, 1998, the Minimum Revenues equals
or exceeds $8,000,000;
(iii) 166,668 Escrow Shares (or, if the conditions set forth in either (i)
or (ii) were not met, the remaining Escrow Shares) shall be released
if, for the fiscal year ending December 31, 1999, the Minimum Revenues
equals or exceeds $12,000,000 and the Company's income before
provision for taxes, determined as set forth below (the "Minimum
Pretax Income") equals or exceeds $1,0000,000;
(iv) The Closing Price (as defined herein) of the Company's Common Stock
shall average in excess of $13.00 per share for any 30 consecutive
business days during the period commencing on the 24th month after the
Effective Date; or
(v) the Company is acquired by or merged into another entity in a
transaction in which stockholders of the Company receive per share
consideration (after taking into account any Escrow Shares released
from escrow in connection with such transaction) at least equal to the
level set forth in (iv) above.
(b) As used in this Section 4, the term "Closing Price" shall be subject to
adjustments in the event of any stock dividend, stock distribution, stock split
or other similar event and shall mean:
(i) If the principal market for the Common Stock is a national securities
exchange or the Nasdaq National Market, the closing sales price of the
Common Stock as reported by such exchange or market, or on a
consolidated tape reflecting transactions on such exchange or market;
or
(ii) if the principal market for the Common Stock is not a national
securities exchange or the Nasdaq National Market and the Common Stock
is quoted
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<PAGE>
on the Nasdaq SmallCap Market, the closing bid price of the Common
Stock as quoted on the Nasdaq SmallCap Market; or
(iii) if the principal market for the Common Stock is not a national
securities exchange or the Nasdaq National Market and the Common Stock
is not quoted on the Nasdaq SmallCap Market, the closing bid for the
Common Stock as reported by the National Quotation Bureau, Inc.
("NQB") or at least two market makers in the Common Stock if
quotations are not available from NQB but are available from market
makers.
(c) The determination of Minimum Revenues and Minimum Pretax Income shall
be (i) calculated exclusive of any extraordinary earnings or charges (including
any charges incurred in connection with the release from escrow of the Escrow
Shares and any Escrow Property in respect thereof pursuant to the provisions of
this paragraph 4); (ii) derived solely from the businesses owned and operated by
the Company as of the closing date of the Public Offering and shall not give
effect to any operations relating to businesses or assets acquired after such
date; and (iii) audited by the Company's independent public accountants.
(d) If the Escrow Agent has not received the notice provided for in
Paragraph 5 hereof and delivered all of the Escrow Shares and related Escrow
Property in accordance with the provisions of this Paragraph 4 on or prior to
the earlier of (i) the date of the closing of a transaction referred to in
subparagraph 4(a)(v) or (ii) March 31, 2002, the Escrow Agent shall deliver the
certificates representing the remaining Escrow Shares, together with stock
powers executed in blank, and any related Escrow Property to the Company to be
placed in the Company's treasury for cancellation thereof as a contribution to
capital. After such date, the Stockholders shall have no further rights as a
stockholder of the Company with respect to any of the cancelled Escrow Shares.
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<PAGE>
5. Upon the occurrence or satisfaction of any of the events or conditions
specified in Paragraph 4 hereof, the Company shall promptly give appropriate
notice to the Escrow Agent, the Underwriter (and if the transfer agent of the
Company's Common Stock is different from the Escrow Agent, such transfer agent)
and present such documentation as is reasonably required by the Escrow Agent to
evidence the satisfaction of such conditions.
6. It is understood and agreed by the parties to this Agreement as follows:
(a) The Escrow Agent is not and shall not be deemed to be a trustee
for any party for any purpose and is merely acting as a depository and in a
ministerial capacity hereunder with the limited duties herein prescribed.
(b) The Escrow Agent does not have and shall not be deemed to have any
responsibility in respect of any instruction, certificate or notice
delivered to it or of the Escrow Shares or any related Escrow Property
other than faithfully to carry out the obligations undertaken in this
Agreement and to follow the directions in such instruction or notice
provided in accordance with the terms hereof.
(c) The Escrow Agent is not and shall not be deemed to be liable for
any action taken or omitted by it in good faith and may rely upon, and act
in accordance with, the advice of its counsel without liability on its part
for any action taken or omitted in accordance with such advice. In any
event, its liability hereunder shall be limited to liability for gross
negligence, willful misconduct or bad faith on its part.
(d) The Escrow Agent may conclusively rely upon and act in accordance
with any certificate, instruction, notice, letter, telegram, cablegram or
other written instrument believed by it to be genuine and to have been
signed by the proper party or parties.
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<PAGE>
(e) The Company agrees (i) to pay the Escrow Agent's reasonable fees
and to reimburse it for its reasonable expenses including attorney's fees
incurred in connection with duties hereunder and (ii) to save harmless,
indemnify and defend the Escrow Agent for, from and against any loss,
damage, liability, judgment, cost and expense whatsoever, including counsel
fees, suffered or incurred by it by reason of, or on account of, any
misrepresentation made to it or its status or activities as Escrow Agent
under this Agreement except for any loss, damage, liability, judgment, cost
or expense resulting from gross negligence, willful misconduct or bad faith
on the part of the Escrow Agent. The obligation of the Escrow Agent to
deliver the Escrow Shares to either the Stockholders or the Company shall
be subject to the prior satisfaction upon demand from the Escrow Agent, of
the Company's obligations to so save harmless, indemnify and defend the
Escrow Agent and to reimburse the Escrow Agent or otherwise pay its fees
and expenses hereunder.
(f) The Escrow Agent shall not be required to defend any legal
proceeding which may be instituted against it in respect of the subject
matter of this Agreement unless requested to do so by the Stockholders and
indemnified to the Escrow Agent's satisfaction against the cost and expense
of such defense by the party requesting such defense. If any such legal
proceeding is instituted against it, the Escrow Agent agrees promptly to
given notice of such proceeding to the Stockholders and the Company. The
Escrow Agent shall not be required to institute legal proceedings of any
kind.
(g) The Escrow Agent shall not, by act, delay, omission or otherwise,
be deemed to have waived any right or remedy it may have either under this
Agreement or generally, unless such waiver be in writing, and no waiver
shall be valid unless it is in writing,
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<PAGE>
signed by the Escrow Agent, and only to the extent expressly therein set
forth. A waiver by the Escrow Agent under the term of this Agreement shall
not be construed as a bar to, or waiver of, the same or any other such
right or remedy which it would otherwise have on any other occasion.
(h) The Escrow Agent may resign as such hereunder by giving 30 days
written notice thereof to the Stockholders and the Company. Within 20 days
after receipt of such notice, the Stockholders and the Company shall
furnish to the Escrow Agent written instructions for the release of the
Escrow Shares and any related Escrow Property (if such shares and property,
if any, have not yet been released pursuant to Paragraph 4 hereof) to a
substitute Escrow Agent which (whether designated by written instructions
from the Stockholders and the Company jointly or in the absence thereof by
instructions from a court of competent jurisdiction to the Escrow Agent)
shall be a bank or trust company organized and doing business under the
laws of the United States or any state thereof. Such substitute Escrow
Agent shall thereafter hold any Escrow Shares and any related Escrow
Property received by it pursuant to the terms of this Agreement and
otherwise act hereunder as if it were the Escrow Agent originally named
herein. The Escrow Agent's duties and responsibilities hereunder shall
terminate upon the release of all shares then held in escrow according to
such written instruction or upon such delivery as herein provided. This
Agreement shall not otherwise be assignable by the Escrow Agent without the
prior written consent of the Company.
7. The Stockholders shall have the sole power to vote the Escrow Shares and
any securities deposited in escrow under this Agreement while they are being
held pursuant to this Agreement.
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<PAGE>
8. (a) Each of the Stockholders agrees that during the term of this
Agreement he will not sell, transfer, hypothecate, negotiate, pledge, assign,
encumber or otherwise dispose of any or all of the Escrow Shares set forth
opposite his name on Exhibit A hereto, unless and until the Company shall have
given the notice as provided in Paragraph 5. This restriction shall not be
applicable to transfers upon death, by operation of law, to family members of
the Stockholders or to any trust for the benefit of the Stockholders, provided
that such transferees agree to be bound by the provisions of this Agreement.
(b) The Stockholders will take any action necessary or appropriate,
including the execution of any further documents or agreements, in order to
effectuate the transfer of the Escrow Shares to the Company if required pursuant
to the provisions of this Agreement.
9. Each of the certificates representing the Escrow Shares will bear
legends to the following effect, as well as any other legends required by
applicable law:
(a) "The sale, transfer, hypothecation, negotiation, pledge, assignment,
encumbrance or other disposition of the shares evidenced by this
certificate are restricted by and are subject to all of the terms,
conditions and provisions of a certain Escrow Agreement entered into
among American Stock Transfer & Trust Company, IAT Multimedia, Inc.
and its Stockholders, dated as of _________, 1997, a copy of which may
be obtained from IAT Multimedia, Inc.. No transfer, sale or other
disposition of these shares may be made unless specific conditions of
such agreement are satisfied.
(b) "The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended. No transfer, sale or
other disposition of these shares may be made unless a registration
statement with respect to these shares has become effective under said
act, or the Company is furnished with an opinion of counsel
satisfactory in form and substance to it that such registration is not
required."
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<PAGE>
Upon execution of this Agreement, the Company shall direct the transfer
agent for the Company to place stop transfer orders with respect to the Escrow
Shares and to maintain such orders in effect until the transfer agent and the
Underwriter shall have received written notice from the Company as provided in
Paragraph 5.
10. Each notice, instruction or other certificate required or permitted by
the terms hereof shall be in writing and shall be communicated by personal
delivery, fax or registered or certified mail, return receipt requested, to the
parties hereto at the addresses set forth below, or at such other address as any
of them may designate by notice to each of the others:
(i) If to the Company, to:
IAT Multimedia, Inc.
Geschaftshaus Wasserschloss Aarestrasse 17
CH-5300 Vogelsang-Turgi, Switzerland
Attn: Dr. Viktor Vogt
(ii) If to the Stockholders to their respective
addresses as set forth on Exhibit A hereto.
(iii) If to the Escrow Agent, to:
American Stock Transfer & Trust Company
Two Broadway, 19th Floor
New York, New York 10004
(iv) If to the Underwriter, to:
Royce Investment Group, Inc.
199 Crossways Park Drive
Woodbury, New York 11797
Att:
All notices, instructions or certificates given hereunder to the Escrow Agent
shall be effective upon receipt by the Escrow Agent. All notices given hereunder
by the Escrow Agent shall be
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<PAGE>
effective and deemed received upon personal delivery or transmission by fax or,
if mailed, five (5) calendar days after mailing by the Escrow Agent.
A copy of all communications sent to the Company, the Stockholders or the
Escrow Agent shall be sent by ordinary mail to Baker & McKenzie, 805 Third
Avenue, New York, New York 10022, Attention: ________________. A copy of all
communications sent to the Underwriter shall be sent by ordinary mail to
Bachner, Tally, Polevoy & Misher LLP, 380 Madison Avenue, New York, NY 10017,
Attention: Steven Fishman, Esq.
11. Except as set forth in paragraph 12 hereof, this Agreement may not be
modified, altered or amended in any material respect or cancelled or terminated
except with the prior consent of the holders of all of the outstanding shares of
Common Stock of the Company.
12. In the event that (i) the Registration Statement is not declared
effective by the SEC within one year from the date of the filing of the
Registration Statement with the SEC or (ii) the Public Offering is not
consummated within twenty-five (25) days of the Effective Date of the
Registration Statement, this Agreement shall terminate and be of no further
force and effect and the Escrow Agent, upon written notice from both the Company
and the Underwriter in accordance with paragraph 10 hereof of such termination,
will return the Escrow Shares and any Escrow Property in respect thereof to the
Stockholders.
13. This Agreement shall be governed by and construed in accordance with
the laws of New York and shall be binding upon and inure to the benefit of all
parties hereto and their respective successors in interest and assigns.
14. This Agreement may be executed in several counterparts, which taken
together shall constitute a single instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the day and year first above
written.
IAT MULTIMEDIA, INC.
By:
------------------------
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:
------------------------
STOCKHOLDERS:
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EXHIBIT A
STOCKHOLDERS' LIST
Name and Address Stock
of Stockholder Certificate No. Number of Escrow Shares
-------------- --------------- -----------------------
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IAT MULTIMEDIA, INC.
1996 STOCK OPTION PLAN
1. Purpose. The purposes of the IAT Multimedia, Inc. (the "Company") 1996
Stock Option Plan (the "Plan") are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to key employees, officers, and advisors of the Company and its
subsidiaries and to promote the success of the Company's business.
2. The Plan. Two types of stock options may be granted under the Plan:
incentive stock options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations promulgated thereunder
("ISOs"), and options that do not qualify as incentive stock options ("NQSOs").
All options shall be exercisable to purchase shares of Common Stock, $.01 par
value (the "Common Stock"), of the Company. Collectively, ISOs and NQSOs are
referred to herein as "Options."
Subject to Section 6(a), ISOs may be awarded only to employees of the
Company and its subsidiaries, within the meaning of Code Section 424(f),
including employees who may serve as officers and directors.
NQSOs may be awarded only to employees who may serve as officers and
directors, and anyone other than non-employee Directors whom the Committee
administering the Plan pursuant to Section 3 determines provides substantial
service to the Company.
To the extent that any Option is not designated as an ISO, or even if so
designated it does not qualify as an ISO, it shall be treated as a NQSO.
3. Administration. The Plan shall be administered by a committee (the
"Committee") selected by the Board (the "Board") of not fewer than two Outside
Directors. An Outside Director shall mean a director within the meaning of Code
Section 1.162-27, voting as a separate class. The Committee shall act by a
majority of its members at the time in office and eligible to vote on any
particular matter, and such action may be taken either by a vote at a meeting or
in writing without a meeting. Subject to the provisions of the Plan, the
Committee shall from time to time and at its discretion (i) grant Options, (ii)
determine which employees and other individuals performing substantial services
("Grantees") may be granted Options under the Plan; (iii) determine whether any
Option shall be an ISO or NQSO; (iv) determine the number of shares subject to
each Option; (v) determine the term of each Option granted under the Plan; (vi)
determine the date or dates on which the Option shall be exercisable; (vii)
determine the exercise price of any Option; (viii) determine the fair market
value of the Common Stock subject to the Options; (ix) determine the terms of
any agreement pursuant to which Options are granted; (x) amend any such
agreement with the consent of the Grantee; (xi) establish such procedures as it
deems appropriate for a recipient of an award hereunder to designate a
beneficiary to whom any benefits payable in the event of his or here death are
to be made; and (xii) determine any other matters specifically delegated to it
under the Plan or necessary for the proper administration of the Plan.
The Committee shall also have the final authority to interpret and construe
the terms of the Plan and of any Option and such interpretation and construction
by the Committee shall be final, binding and conclusive upon all persons
including, without limitation, the Company, shareholders of the Company, the
Plan, and all persons claiming an interest in the Plan.
No member of the Committee or Director shall be liable for any action,
interpretation or construction made in good faith with respect to the Plan or
any Option granted hereunder.
4. Effectiveness and Termination of Plan. This Plan shall become effective
as of the date of adoption thereof by the Board of the Company, or the date this
Plan is approved by the stockholders, whichever is earlier. This
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Plan shall terminate on the earliest of:
a. The tenth anniversary of the effective date as determined under
this Section 4;
b. The date when all shares of the Common Stock reserved for issuance
under the Plan, shall have been acquired through exercise of Options
granted under the Plan; or
c. Such earlier date as the Board may determine. Any Option
outstanding under the Plan at the time of its termination shall remain in
effect in accordance with its terms and conditions and those of the Plan.
5. The Stock. The aggregate number of shares of Common Stock which may be
issued under the Plan shall be 500,000 shares. Such number of shares may be set
aside out of the authorized but unissued shares of Common Stock not reserved for
any other purpose or out of shares of Common Stock held in or acquired for the
treasury of the Company. All or any shares of Common Stock subject under this
Plan to an Option which, for any reason, terminates unexercised as to such
shares, may again be subjected to an Option under the Plan. No Grantee may
receive grants in respect of more than 100,000 shares of Common Stock.
6. Grant, Terms and Conditions of Options. Options may be granted by the
Committee at any time and from time to time prior to the termination of the
Plan. Each Option granted under the Plan shall be evidenced by an agreement in a
form approved by the Committee. The terms and conditions of such Option
agreement need not be identical with respect to each Grantee, but each Option
agreement will evidence on its face whether it is an ISO or a NQSO. For purposes
of this Section, an Option shall be deemed granted on the date the Committee
selects an individual to be a Grantee, determines the number of shares to be
issued pursuant to such Option and specifies the terms and conditions of the
Option. Except as hereinafter provided, Options granted pursuant to the Plan
shall be subject to the following terms and conditions:
a. Grantee. Subject to Section 2 hereof, the Grantees of any Options
hereunder shall be such key employees of the Company and its subsidiaries,
within the meaning of Code Section 424(f), as determined by the Committee,
who have substantial responsibility in the direction of the Company and its
subsidiaries, and anyone else whom the Committee determines provides
substantial and important services to the Company except that in no event
shall a non-employee Director of the Company be a Grantee under this Plan.
b. Price and Exercise. The purchase price of the shares of Common
Stock upon exercise of an ISO shall be no less than the fair market value
of the shares at the time of grant of an ISO; provided, however, if an ISO
is granted to a person owning stock of the Company possessing more than 10%
of the total combined voting power of all classes of stock of the Company
as defined in Code Section 422 ("10% Shareholder"), the purchase price
shall be no less than 110% of the fair market value of the shares. The fair
market value of the Common Stock shall be the closing price of publicly
traded Common Stock on the national securities exchange on which the Common
Stock is listed (if the Common Stock is so listed) or on the Nasdaq
National Market System (if the Common Stock is regularly quoted on the
Nasdaq National Market System), or, if not so listed or regularly quoted,
the mean between the closing bid and asked prices of publicly traded Common
Stock in the over-the-counter market, or, if such bid and asked prices
shall not be available, as reported by any nationally recognized quotation
service selected by the Company, or as determined by the Committee in a
manner consistent with the provisions of the Code.
The purchase price of the shares of Common Stock upon exercise of a NQSO
may be any price set by the Committee; provided that the exercise price of
any grant to an employee required to be named on the Summary Compensation
Table of the Company's annual proxy statement under the rules and
regulations promulgated under the Securities Exchange Act of 1934, as
amended, shall not be lower than the fair market
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<PAGE>
value of the underlying Common Stock on the date of grant which constitutes
a performance goal under Section 162(m) of the Internal Revenue Code of
1986, as amended.
The notice of the exercise of any Option shall be accompanied by payment in
full of the Option price. The purchase price shall be paid in United States
dollars in cash or by certified or cashier's check payable to the order of
the Company at the time to purchase. At the discretion of the Committee,
the purchase price may be paid with: (i) stock of the Company (Common Stock
already owned by, and in the possession of, the Grantee); or (ii) any
combination of United States dollars or stock of the Company. Anything
contained herein to the contrary notwithstanding, any required withholding
tax shall be paid by the Grantee in full in United States dollars in cash
or by certified or cashier's check at the time of exercise of the Option.
Shares of stock of the Company used to satisfy the exercise price of an
Option shall be valued at their fair market value as determined by the
Committee, as of the close of business on the day immediately preceding the
date of exercise.
In lieu of the notice of exercise procedures set forth above, the Committee
may prescribe cashless exercise or other exercise methods pursuant to which
a broker or financial intermediary assists in the exercise by an amount of
shares sufficient to provide the exercise plus any required with holdings.
If required by the Company, such notice of exercise of an Option shall be
accompanied by the Grantee's written representation that the shares being
acquired are purchased for investment and not for distribution;
acknowledging that such shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"); and agreeing that such
shares may not be sold or transferred unless there is an effective
Registration Statement for them under the 1933 Act, or, in the opinion of
counsel, such sale or transfer is not in violation of the 1933 Act.
The purchase price shall be subject to adjustment, but only as
provided in Section 7 hereof.
c. Vesting. Options shall vest in accordance with the schedule
established for each Grantee; provided, however, an Option may be
immediately exercisable in accordance with Section 6(g) below.
d. Forfeiture. Notwithstanding anything contained herein to the
contrary, the right (whether or not vested) of a Grantee to exercise his or
her outstanding Options, if any, shall be forfeited if (i) the Grantee
shall enter into a business or employment which the Committee determines to
be detrimentally competitive with the Company or substantially injurious to
the Company's financial interests; or (ii) the Grantee is discharged from
employment with the Company for cause; or (iii) the Grantee performs acts
of willful malfeasance or gross negligence in a matter of material
importance to the Company.
e. Additional Restrictions on Exercise of an ISO. The aggregate fair
market value of Common Stock (determined at the time an ISO is granted) for
which an ISO is exercisable for the first time by a Grantee during any
calendar year (under all plans of the Company and its subsidiaries or
parent) shall not exceed $100,000.
f. Duration of Options. Options may be granted for terms of up to but
not exceeding ten (10) years from the effective date the particular Option
is granted; provided, however, that ISOs granted to a 10% Shareholder may
be for a term of up to but not exceeding five (5) years from the effective
date the particular ISO is granted.
g. Termination of Employment. Upon the termination of a Grantee's
employment with the Company, his or her rights to exercise an Option then
held by such Grantee shall be only as follows:
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<PAGE>
i. Retirement. If the Grantee's employment is terminated because
he or she has attained the age which the Company may from time to time
establish as the retirement age for any class of its employees, or in
accordance with the age specified in an employment agreement with a
Grantee he or she may, with the consent of the Company within three
months following such termination, exercise the Option with respect to
all or any part of the shares subject thereto, regardless of whether
the Grantee had the right to purchase such shares at the time of
termination of employment. However, in the event of his or her death
prior to the end of the three-month period after the aforesaid
termination of his or here employment, his or her estate shall have
the right to exercise the Option within one (1) year following such
termination with respect to all or any part of the shares subject
thereto, regardless of whether the Grantee had the right to purchase
such shares at the time of termination of employment.
ii. Death. In the case of a Grantee who dies while employed by
the Company, his or her estate shall have the right for a period of
one (1) year following the date of such death to exercise the Option
to the extent the Grantee had the right to purchase such shares on the
day immediately prior to his or her death.
iii. Disability. In the case of a Grantee whose employment with
the Company is terminated by disability, as defined in Code Section
22(e)(3), he or she shall have the right for a period of one (1) year
of the disability to exercise the Option to the extent the right had
occurred prior to the date of his or her disability.
iv. Other Reasons. In the case of a Grantee whose employment is
terminated for any reason other than those provided above under
"Retirement," Death," or "Disability," the Grantee or his or her
estate (in the event of his or her death after such termination) may,
within the 30-day period following such termination, exercise the
Option to the extent the right to exercise had occurred prior to such
termination.
For purposes of this Section 6(g), "termination of employment" shall mean
the termination of a Grantee's employment with the Company or a subsidiary
or a parent. A Grantee employed by a subsidiary shall also be deemed to
have a termination of employment if the subsidiary ceases to be a
subsidiary of the Company, and the Grantee does not immediately thereafter
become an employee of the Company or of a subsidiary or the parent. Any
other Grantee who is not otherwise an employee of the Company shall be
considered to have terminated employment when substantial services, as
determined by the Committee, are no longer provided to the Company by the
Grantee.
Also for purposes of this Section 6(g), a Grantee's "estate" shall mean his
or her legal representatives upon his or her death or any person who
acquires the right to exercise an Option by reason of the Grantee's death.
The Committee may in its discretion require the transferee of a Grantee to
supply it with written notice of the Grantee's death or disability and to
supply it with a copy of the will (in the case of the Grantee's death) or
such other evidence as the Committee deems necessary to establish the
validity of the transfer of an Option.
h. Transferability of Option and Shares Acquired Upon Exercise of
Option. Options shall not be transferred other than to members of the
holder's family, trusts and charities. Any other transfers are permissible
only upon prior written approval of the Committee. Notwithstanding the
above, the option agreement accompanying the issuance of any incentive
stock options shall limit the transferability of such ISOs to the extent
required by the then applicable tax provisions governing the qualification
of ISOs. Except as limited by applicable securities laws and the provisions
of Sections 6(b), 6(j), 8 and 14 hereof, shares of Common Stock acquired
upon exercise of Options hereunder shall be freely tradeable.
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<PAGE>
i. Modifications, Extension and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Committee
may modify, extend or renew outstanding Options granted under the Plan, or
accept the surrender or outstanding Options (up to the extent not
theretofore exercised) and authorize the granting of new Options in
substitution therefor (to the extent not theretofore exercised). The
Committee shall not, however, with respect to ISOs, modify any outstanding
Options so as to specify a lower Option price or accept the surrender of
outstanding Options and authorize the granting of new Options in
substitution therefor specifying a lower price. Notwithstanding the
foregoing, no modification of an Option shall, without the consent of the
Grantee, alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
j. Shares Held for Investment. Each Option agreement may contain an
undertaking that, upon demand by the Committee for such a representation,
the Grantee, or any person acting under Section 6(g), shall deliver to the
Committee at the time of any exercise of an Option a written representation
that the shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution thereof.
Upon such demand, delivery of such representation prior to the delivery of
any shares issued upon exercise of an option shall be a condition precedent
to the right of the Grantee or such other person to purchase any shares of
Common Stock.
k. Other Terms and Conditions. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate.
7. Adjustment of the Changes in the Stock.
a. In the event the shares of Common Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation (whether by reason
of merger, consolidation, recapitalization, reclassification, split, reverse
split, combination of shares, or otherwise) or if the number of such shares of
Common Stock shall be increased through the payment of a stock dividend, then
there shall be substituted for or added to each share of Common Stock
theretofore appropriated or thereafter subject or which may become subject to an
Option under this Plan, the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock shall be so
changed, or for which each such share shall be exchanged, or to which each such
share shall be entitled, as the case may be. Outstanding Options shall also be
appropriately amended as to price and other terms as may be necessary to reflect
the foregoing events. In the event there shall be any other change in the number
or kind of the outstanding shares of the Common Stock, or of any stock or other
securities into which such Common Stock shall have been changed, or for which it
shall have been exchanged, then, if the Board shall, in its sole discretion,
determine that such change equitably requires as adjustment in any Option
theretofore granted or which may be granted under the Plan, such adjustments
shall be made in accordance with such determination.
b. Fractional shares resulting from any adjustment in Options pursuant to
Section 7 may be settled in cash or otherwise as the Committee shall determine.
Notice of any adjustment shall be given by the Company to each holder of an
Option which shall have been so adjusted and such adjustment (whether or not
such notice is given) shall be effective and binding for all purposes of the
Plan.
8. Securities Law Requirements. No Option granted pursuant to this Plan
shall be exercisable in whole or in part, nor shall the Company be obligated to
sell any shares of Common Stock subject to any such Option, if such exercise and
sale would, in the opinion of counsel for the Company, violate the 1933 Act (or
other Federal or State statutes having similar requirements), as it may be in
effect at that time. In this regard, the Committee may demand the
representations described in Section 6(b) and Section 6(j).
Each Option shall be subject to the further requirement that, if at any
time the Committee shall determine
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<PAGE>
in its discretion that the listing or qualification of the shares of Common
Stock subject to such Option under any securities exchange requirements or under
any applicable law, or the consent or approval of any governmental regulatory
body, is necessary as a condition of, or in connection with, the granting of
such Option or the issue of shares thereunder, such Option may not be exercised
in whole or in part, unless such listing, qualification, consent or approval
shall have been affected or obtained free of any conditions not acceptable to
the Board.
No person who acquires shares of Common Stock under the Plan may, during
any period of time that such person is an affiliate of the Company within the
meaning of the rules and regulations of the Securities and Exchange Commission
under the 1933 Act, sell such shares of Common Stock, unless such offer and sale
is made (i) pursuant to an effective registration statement under the 1933 Act,
which is current and includes the shares to be sold, or (ii) pursuant to an
appropriate exemption from the registration requirement of the 1933 Act, such as
that set forth in Rule 144 promulgated under the 1933 Act.
9. Amendment of the Plan.
The Board may amend the Plan at any time, except that approval of the
holders of a majority of the outstanding voting stock of the Company is required
for amendments which:
a. extend the term of the Plan beyond ten years;
b. extend the maximum terms of the Options granted hereunder beyond
ten years;
c. withdraw the administration of the Plan from the Committee
appointed pursuant to Section 3;
d. expand the class of eligible employees, and other Grantees;
e. increase the aggregate number of shares of Common Stock which may
be issued pursuant to the provisions of the Plan; or
f. change the material terms of the performance goal within the
meaning of Code Section 162(m).
Notwithstanding the foregoing, the Board may, without the need for
stockholders' approval, amend the Plan in any respect to qualify ISOs as
incentive stock options under Code Section 422.
10. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Grantee (or upon a transferee of a Grantee) to
exercise such Option.
11. No Limitation on Rights of the Company. The grant of any Option shall
not in any way affect the right or power of the Company to make adjustments,
reclassification, or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
12. Plan Not a Contract of Employment. The Plan is not a contract of
employment, and the terms of employment of any recipient of any award hereunder
shall not be affected in any way by the Plan or related instruments except as
specifically provided therein. The establishment of the Plan shall not be
construed as conferring any legal rights upon any recipient of any award
thereunder for a continuation of employment, nor shall it interfere with the
right of the Company or any subsidiary to discharge any recipient of any award
hereunder and to treat him or her without regard to the effect which such
treatment might have upon him or her as the recipient of any award hereunder.
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13. Expenses of the Plan. All of the expenses of the Plan shall be paid by
the Company.
14. Compliance with Applicable Law. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or delivered
any certificates for shares of Common Stock pursuant to the exercise of an
Option, unless and until the Company is advised by its counsel that the issuance
and delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authority and the requirements of any exchange upon
which shares of Common Stock are traded. The Company shall in no event be
obligated to register any securities pursuant to the 1933 Act (as now in effect
or as hereinafter amended) or to take any other action in order to cause the
issuance and delivery of such certificates to comply with any such law,
regulation or requirement. The Committee may require, as a condition of the
issuance and delivery of such certificates and in order to ensure compliance
with such law, regulations and requirements, that the recipient of any award
hereunder make such covenants, agreements and representations as the Committee,
in its sole discretion, deems necessary or desirable, including, without
limitation, a written representation from a stockholder that the shares are
being purchased for investment and not for distribution, acknowledging that such
shares have not been registered under the 1933 Act, as amended and agreeing that
such shares may not be sold or transferred unless there is an effective
Registration Statement for them under the 1933 Act, or, in the opinion of
counsel to the Company, that such sale or transfer is not in violation of the
1933 Act.
15. Effect Upon Other Compensation. Nothing contained herein shall prevent
the Company or any subsidiary from adopting other or additional compensation
arrangements for its employees or directors.
16. Grantee to Have No Rights as a Stockholder. No Grantee of any Option
shall have any rights as a stockholder with respect to any shares subject to his
or her Option prior to the date on which he or she is recorded as the holder of
such shares on the records of the Company. No Grantee of any Option shall have
the rights of a stockholder until he or she has paid in full the Option price.
17. Notice. Notice to the Committee shall be deemed given if in writing and
mailed to the Secretary of the Company at its principal executive offices by
first class, certified mail at the then principal office of the Company.
18. Governing Law. Except to the extent preempted by Federal law, this Plan
and all Option agreements entered into pursuant thereto shall be construed and
enforced in accordance with, and governed by, the laws of the State of Delaware,
determined without regard to its conflict of law rules.
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 4, 1996, by and among IAT
Holdings, Inc., a Delaware corporation ("Holdings"), IAT AG, a corporation
organized under the laws of Switzerland ("IAT"), IAT Deutschland GmbH, a
corporation organized under the laws of Germany ("IAT Germany"),Vertical
Financial Holdings, a corporation organized under the laws of Liechtenstein
("Investor"), and the stockholders of IAT, all of which to become stockholders
of Holdings at the Closing (as defined below), listed on Exhibit A hereto (the
"Stockholders"). As used herein, the term "Holdings" refers to IAT Holdings,
Inc. and the term the "Company" refers to Holdings and its subsidiaries,
including, but not limited to, IAT AG and IAT Germany.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares
1.1. Agreement to Purchase.
(a) Subject to the terms and conditions of this Agreement and in
reliance on the representations, warranties and agreements of Holdings,
IAT, IAT Germany and each of the Stockholders contained herein, the
Investor agrees to purchase at the Closing and Holdings agrees to sell and
issue to the Investor at the Closing, 1,980,000 shares of Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock") of Holdings, for an aggregate purchase price of
$1,500,000 (the "Purchase Price").
(b) In addition, Holdings shall issue to the Investor, at the Closing,
a warrant in the form attached hereto as Exhibit E (the "Warrant") to
purchase up to 1,980,000 shares (the "Warrant Shares") of Common Stock, par
value $.01 per share, of Holdings (the "Common Stock"). In the event of an
initial public offering of shares of Common Stock (an "IPO"), the Warrant
shall be exercisable during the ten (10) year period following the closing
date of the IPO at an exercise price per share equal to 130% of the initial
public offering price of a share of Common Stock in the IPO.
1.2. Closing. The purchase and sale of the Series A Preferred Stock to be
purchased by the Investor shall take place at the offices of Bachner, Tally,
Polevoy & Misher LLP, New York, New York, on the 14th day following the delivery
by Holdings or IAT AG to the Investor of audited financial statements of the
Company, or at such other time and place as shall be mutually agreed upon
between the Investor and Holdings (the "Closing"). At the Closing, Holdings
shall deliver to the Investor a certificate or certificates representing the
Series A Preferred Stock that the Investor is purchasing, in such names and
denominations as the Investor may request not less than two (2) business days
prior to the date of the Closing, against receipt of a certified check payable
to the order of Holdings or a wire transfer of the purchase
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price to an account designated by Holdings not less than two (2) business days
prior to the date of the Closing.
1.3. Further Assurances. After the Closing, the parties shall from time to
time, at the request of the other parties and without further cost or expense to
such party, execute and deliver such other instruments of conveyance and
transfer and take such other actions as the other parties may reasonably
request, in order to more effectively consummate the transaction contemplated
hereby and to vest in Investor good and marketable title to the Shares being
sold hereunder.
2. Representations and Warranties of Holdings. Except for the exceptions
set forth on the Schedule of Exceptions attached hereto as Exhibit B and
furnished to the Investor, which exceptions shall be deemed to be
representations and warranties as if made hereunder, (i) Holdings, with respect
to itself, IAT and IAT Germany and (ii) IAT and IAT Germany, each with respect
to itself, hereby represent and warrant severally to the Investor that:
2.1 Organization, Good Standing, Qualification; Corporate Power and
Authorization.
(a) Each of Holdings, IAT and IAT Germany is a corporation duly
organized, validly existing and in good standing under the laws its
jurisdiction of incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. Holdings is duly qualified to transact business, and is in good
standing in each jurisdiction in which the failure so to qualify would have
a material adverse effect on its business or properties. True and correct
copies of the Certificate of Incorporation and By-laws of Holdings, IAT and
IAT Germany have been provided to the Investor.
(b) Holdings, IAT and IAT Germany, have all requisite legal and
corporate power to execute and deliver this Agreement and Holdings has all
requisite legal and corporate power to execute and deliver the Investor's
Rights Agreement of even date herewith, by and among Holdings and the
Investor, the form of which is attached hereto as Exhibit C (the "Rights
Agreement"), the Marketing Agreement of even date herewith, by and among
Holdings and General Capital, the form of which is attached hereto as
Exhibit D (the "Marketing Agreement") and the Warrant, the form of which is
attached hereto as Exhibit E, to issue and sell the Series A Preferred
Stock and the Warrant hereunder. Holdings, IAT and IAT Germany have all
requisite legal and corporate power to carry out and perform their
obligations under the terms of this Agreement and Holdings has all
requisite legal and corporate power to carry out and perform its
obligations under the terms of the Rights Agreement, the Marketing
Agreement and the Warrant. This Agreement has been duly authorized,
executed and delivered by Holdings, IAT and IAT Germany and constitutes the
legal, valid and binding obligation of Holdings, IAT and IAT Germany,
enforceable in accordance with its terms and, the Rights Agreement, the
Marketing Agreement and the Warrant have been duly authorized, executed and
delivered by Holdings and constitute the legal, valid and binding
obligations of Holdings, enforceable in
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accordance with their respective terms except as such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights or
other equitable principles..
2.2 Capitalization and Voting Rights. The authorized capital of Holdings
consists of:
(a) Preferred Stock. 2,000,000 shares of Preferred Stock, par value
$.01 per share, of which 1,980,000 shares have been designated Series A
Convertible Preferred Stock, of which no shares shall be issued and
outstanding until consummation of the transactions contemplated hereby. The
rights, privileges and preferences of the Series A Preferred Stock are as
stated in the Certificate of Incorporation of Holdings.
(b) Common Stock. 20,000,000 shares of Common Stock, par value $.01
per share, of which 4,620,000 shares are issued and outstanding or will be
issued and outstanding prior to the Closing.
(c) Except for the conversion privileges of the Series A Preferred
Stock, the Warrant and except for the warrant issuable to the
non-management stockholders of Holdings (the "Non-Management Stockholder
Warrant") and except as otherwise set forth on Exhibit B, there are not
outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from
Holdings of any shares of its capital stock. The Stockholders set forth on
Exhibit A, together with the number of shares, options or other derivative
securities held by each such Stockholder and set forth on Exhibit A,
represent all of the holders of the capital stock of Holdings.
2.3 Subsidiaries. A list of the direct and indirect subsidiaries of
Holdings (each, a "Subsidiary") is set forth on Exhibit B, and Holdings
does not own, directly or indirectly, any capital stock or other equity
ownership or proprietary interests in any other corporation, association,
trust, partnership, joint venture or other entity. Each Subsidiary is a
corporation duly organized and validly existing under the laws of the state
or country set forth on Exhibit B, and the capital stock of each Subsidiary
set forth on Exhibit B is owned in the percentage amounts and by the entity
set forth on Exhibit B free and clear of all liens, encumbrances, security
interests, claims, restrictions on transfer and other defects in title
("Encumbrances").
2.4 Valid Issuance of Stock.
(a) The issuance, sale and delivery of the Series A Preferred
Stock which is being purchased by the Investor hereunder, the
issuance, sale and delivery of the Warrant and the reservation for
issuance of the Common Stock issuable upon conversion or exercise
thereof have been duly authorized by all required corporate action on
the part of Holdings, and when issued, sold, and delivered in
accordance with the terms hereof for the
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consideration expressed herein, will be duly and validly issued, fully
paid and non-assessable and, based in part upon the representations
and warranties of the Investor in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Series A Preferred Stock
purchased under this Agreement and upon exercise of the Warrant has
been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Certificate of Incorporation, shall
be duly and validly issued, fully paid, and non-assessable, and issued
in compliance with all applicable securities laws, as presently in
effect, of the United States and each of the states whose securities
laws govern the issuance of any of the Series A Preferred Stock
hereunder. The Series A Preferred Stock issued hereunder (and the
Common Stock issuable upon conversion of such Series A Preferred Stock
and upon exercise of the Warrant) will be free and clear from all
Encumbrances other than those created by, or imposed upon, the holders
thereof through no action of Holdings.
(b) The outstanding shares of capital stock of Holdings, IAT and
IAT Germany are, or will be upon issuance prior to the Closing, all
duly and validly authorized and issued, fully paid, and
non-assessable, and were, or will be, issued in compliance with all
applicable federal and state securities laws.
2.5 Financial Statements. Prior to the Closing, Holdings or IAT will have
delivered to the Investor IAT's audited consolidated balance sheet as of
December 31, 1995, and the related statements of operations, cash flows and
stockholder's equity as of, and for the twelve months ended, December 31, 1995
(the "Financial Statements"). Upon delivery to the Investor, the Financial
Statements will be complete and correct in all material respects and will have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis throughout the periods indicated. Prior
to the Closing, Holdings or IAT will also provide the Investor with IAT's
consolidated balance sheet as of June 30, 1996, and the related statements of
operations, cash flows and stockholder's equity as of, and for the six months
ended, June 30, 1996 (the "Interim Financial Statements"), certified by the
chief financial officer of Holdings or IAT. The Financial Statements and Interim
Financial Statements will fairly present the financial condition and results of
operations of IAT as of the dates and during the periods indicated therein,
subject to normal year-end audit adjustments which are neither individually nor
in the aggregate expected to be material. As of the date of the balance sheet
included in the Interim Financial Statements (the "Interim Balance Sheet Date"),
to the best of the Company's knowledge, IAT has no liabilities or obligations of
any nature (absolute, accrued, contingent or otherwise) which were not fully
reflected or reserved against in the Financial Statements, and all reserves
established by IAT and set forth on such balance sheet were adequate for the
purposes for which they were established.
2.6 Governmental Consents. Except as listed on Exhibit B, no consent,
approval, order, or authorization of, or registration, qualification,
designation, declaration or filing with, any Swiss, German or United States
federal, state, local or provincial governmental authority on the part of
Holdings or any Subsidiary is required in connection with the consummation of
the transactions contemplated by this Agreement. To the best of the
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Company's knowledge, Holdings and each Subsidiary has complied (and in carrying
out their respective businesses Holdings and each Subsidiary will be in
compliance) with all laws, ordinances and regulations applicable to it and its
business, which the failure to comply with would, either individually or in the
aggregate, have a materially adverse effect upon Holdings and its Subsidiaries
taken as a whole. Holdings and each Subsidiary has obtained all Swiss, German
and United States federal, state, local and foreign governmental licenses and
permits material to and necessary in the conduct of their respective businesses,
such licenses and permits are in full force and effect, no material violations
are or have been recorded in respect of any such licenses or permits, and no
proceeding is pending or, to the best of the Company's knowledge, threatened to
revoke or limit any thereof.
2.7 Litigation. Except as described on Exhibit B hereto, there is no
action, suit, proceeding, or investigation pending or to the Company's knowledge
currently threatened against Holdings or any Subsidiary (nor, to the Company's
knowledge, is there any reasonable basis therefor).
2.8 Patents and Trademarks.
(a) Except as set forth on Exhibit B, Holdings and each Subsidiary has
title and ownership of all Intellectual Property (as defined below) (i)
free and clear of all liens and encumbrances and (ii) without any conflict
with or infringement of the rights of others. Exhibit B attached hereto
contains a complete list of items of Intellectual Property which are
required for the conduct of the business of Holdings and each Subsidiary.
Except as shown on Exhibit B, there are no outstanding options, licenses,
or agreements of any kind relating to the Intellectual Property, nor is
Holdings or any Subsidiary bound by or a party to any options, licenses, or
agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights, and processes of any other person or entity. To the
Company's knowledge the Intellectual Property does not violate any of the
patents, trademarks, service marks, trade names, copyrights, or trade
secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of the employees of Holdings or any
Subsidiary is obligated under any contract (including licenses, covenants,
or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's best efforts to promote the
interests of Holdings and each Subsidiary or that would conflict with the
business of Holdings and each Subsidiary as proposed to be conducted.
Except as disclosed on Exhibit B, none of the past or present employees,
officers, directors, shareholders or consultants of Holdings or any
Subsidiary has any rights in any of the Intellectual Property. Neither the
execution nor delivery of this Agreement, the Rights Agreement, the
Marketing Agreement or the Warrant, nor the carrying on of the business of
Holdings and each Subsidiary by the employees of Holdings and each
Subsidiary, nor the conduct of the business of Holdings and each Subsidiary
as proposed, will, to the Company's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such
employees is now obligated. Exhibit B sets
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forth all copyrights owned by Holdings and each Subsidiary and all
copyright applications which have been made by Holdings and each
Subsidiary. "Intellectual Property" includes all patents, patent
applications, trademarks (whether or not registered), trade names, service
marks (whether or not registered), trademark and service mark registrations
(and pending applications therefor), copyrights, computer software
(including without limitation all object code and source code owned by
Holdings or any Subsidiary or authored or developed for Holdings or any
Subsidiary by any of its employees or agents), licenses, sublicenses and
franchise agreements of Holdings or any Subsidiary, and all know-how,
formulae, processes, techniques, confidential business information,
designs, patterns, shapes, inventions (whether or not patented or
patentable), trade secrets and other proprietary information and technology
used in the business of Holdings and each Subsidiary or required to operate
such business.
(b) There is no object code used in the business of Holdings or any
Subsidiary or required to operate the business of Holdings or any
Subsidiary or other Intellectual Property that (i) is owned by entities
other than Holdings or any Subsidiary and (ii) is necessary to implement,
operate or maintain the business of Holdings and each Subsidiary as
presently operated.
2.9 Compliance with Other Instruments. Except as noted in Exhibit B hereto,
neither Holdings nor any Subsidiary is in violation or default of any provisions
of its respective Certificate of Incorporation or By-laws (or other
organizational documents) or of any instrument, judgment, order, writ, decree,
or contract to which it is a party or by which it is bound, the violation or
default of which would have a material adverse effect on Holdings and its
Subsidiaries taken as a whole. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provision of the respective Certificate of Incorporation or By-Laws
(or other organizational documents) of Holdings or any Subsidiary or (b)
violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
excuse performance by any person of any of its obligations under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property or assets of
Holdings or any Subsidiary under, any agreement or commitment to which Holdings
or any Subsidiary is a party or by which any of its respective property or
assets is bound, or to which any of the property or assets of Holdings or any
Subsidiary is subject, or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other governmental authority
applicable to Holdings or such Subsidiary. Neither Holdings nor any Subsidiary
has any knowledge of any termination or material breach or anticipated
termination or material breach by the other parties to any material contract or
commitment to which it is a party or to which any of its assets is subject. To
the knowledge of the respective parties, there are no warranty claims or other
uninsured claims against Holdings or any Subsidiary under completed contracts
which might involve a material monetary liability which is not reserved against
in the Financial Statements.
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2.10 Agreements; Action.
(a) Except as listed on Exhibit B hereto and except for agreements
explicitly contemplated hereby, there are no agreements, understandings, or
proposed transactions between Holdings or any Subsidiary and any of their
respective officers, directors, affiliates (as defined in the Securities
Act of 1933, as amended), or any affiliate thereof.
(b) Except as listed on Exhibit B hereto, there are no agreements,
understandings, instruments, contracts or proposed transactions to which
Holdings or any Subsidiary is a party or by which it is bound which (i)
involve obligations (contingent or otherwise) of, or payments to Holdings
or any Subsidiary in excess of, $100,000 annually, (ii) are material to the
conduct and operations of Holdings' or any Subsidiary's business or
properties, including, without limitation, the license of any patent,
copyright, trade secret, or other proprietary rights to or from Holdings or
any Subsidiary or provisions restricting or affecting the development,
manufacture, or distribution of Holdings' or any Subsidiary's products or
services, or (iii) involve any employment or consulting arrangement,
whether written or oral, between Holdings or any Subsidiary and any person.
(c) Except as listed on Exhibit B hereto, neither Holdings or any
Subsidiary has (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $100,000 annually or, in the case of
indebtedness and/or liabilities individually less than $100,000 annually,
in excess of $200,000 in the aggregate annually, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses,
or (iv) sold, exchanged, or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of
business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts, and proposed transactions involving the same person or entity
(including persons or entities Holdings or any Subsidiary has reason to
believe are affiliated therewith) shall be aggregated for the purpose of
meeting the individual minimum dollar amounts of such subsections.
2.11 Disclosure. Holdings or IAT has, or will, at or prior to the Closing,
provide the Investor with a copy of the most recently available financial
projections for Holdings and its Subsidiaries (the "Projections") and all other
information which the Investor has requested for deciding whether to enter into
the transactions contemplated hereby. The Projections were prepared in good
faith and were carefully reviewed by management of Holdings or IAT, and Holding
and IAT believe that the assumptions underlying the Projections were reasonable;
provided, that neither Holdings nor IAT warrants hereby that such Projections
will ultimately prove to be accurate. Neither the representations and warranties
made pursuant to this Agreement, including for these purposes Exhibit B attached
hereto, nor any other written statements or certificates made or delivered in
connection herewith, contains any untrue
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statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances in
which they were made.
2.12 Registration Rights. Except as provided in Section 1 of the Investor's
Rights Agreement, and as set forth on Exhibit B hereto, Holdings has not granted
or agreed to grant any registration rights, including piggyback rights, to any
person or entity.
2.13 Title to Property and Assets. Except as set forth on Exhibit B hereto,
Holdings and each Subsidiary has good and marketable title to its property and
assets free and clear of all mortgages, liens, loans, and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair Holdings' or such Subsidiary's ownership or use of such
property or assets. With respect to the property and assets it leases, Holdings
and each Subsidiary is in compliance in all material respects with such leases
and, to the Company's knowledge, holds a valid leasehold interest free of any
liens, claims, or encumbrances. All of Holdings' and each Subsidiary's
properties and assets are, in all material respects, in good operating and
usable condition, subject to normal wear and tear.
2.14 Labor Agreements and Actions; Employee Benefits. Neither Holdings nor
any Subsidiary is bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied, contract,
commitment, or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives, or agents of Holdings or any Subsidiary. There
is no strike or other labor dispute involving Holdings or any Subsidiary
pending, or, to the knowledge of the Company, threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of Holdings and its subsidiaries taken as a whole
(as such business is presently conducted and as it is proposed to be conducted
taken as a whole), nor is the Company aware of any labor organization activity
involving its employees. Except as set forth on Exhibit B, neither Holdings nor
any Subsidiary has any employment contract, deferred compensation agreement or
bonus, incentive or profit-sharing plans currently in force and effect, and
there are no existing or proposed material arrangements or transactions between
Holdings or any Subsidiary and any officer or director or holder of capital
stock of Holdings or any Subsidiary, other than transactions referred to in this
Agreement. To the best of the Company's knowledge, no officer or key employee of
Holdings or any Subsidiary is in violation of (a) any material term of any
employment agreement, non-disclosure agreement, noncompete agreement or other
similar agreement with any previous employer of such employee (and the
employment of such employee with Holdings or any Subsidiary will not result in a
violation of any such agreement) or (b) any obligation binding on such employee
which would prohibit the use of information obtained from such employee which
Holdings or any Subsidiary has used or proposes to use.
2.15 Tax Matters. Holdings and each Subsidiary (i) has timely filed all tax
returns that are required to have been filed by it with all appropriate
governmental agencies (and all such returns are true and correct and fairly
reflect in all material respects its operations for tax
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purposes); and (ii) has timely paid all taxes owed or assessments by it (other
than taxes the validity of which are being contested in good faith by
appropriate proceedings and which are reserved) and all such returns are true
and correct in all material respects. The assessment of any additional taxes for
periods for which returns have been filed is not expected to exceed the recorded
liability therefor and, to the Company's knowledge, there are no material
unresolved questions or claims concerning Holdings' or any Subsidiary's tax
liability. Neither Holdings' nor any Subsidiary's tax returns have been reviewed
or audited by any taxing authority. There is no pending dispute with any taxing
authority relating to any of said returns.
2.16 Insurance. All insurable properties of Holdings and each Subsidiary
are insured for the benefit of Holdings or each Subsidiary against such risks as
are usually insured against, and in such amounts as are usually obtained, by
persons owning or operating similar properties in the locality where such
properties are located, under policies issued by insurers of recognized
responsibility. Exhibit B hereto sets forth a description of the liability
insurance carried by Holdings and each Subsidiary, including policy amounts,
deductibles, carriers and coverage.
2.17 Exchange of Shares of IAT and Issuance of Warrants. The Stockholders
delivered and exchanged, or will deliver and exchange prior to the Closing, all
of the outstanding shares of capital stock of IAT in exchange for an aggregate
of 4,620,000 shares of Common Stock and the Non-Management Stockholder Warrant.
Upon delivery and exchange of each Stockholder's shares of capital stock of IAT
for Common Stock, good and marketable title to such shares of capital stock of
IAT passed, or will pass to Holdings, free and clear of all Encumbrances and IAT
became, or will become, a wholly-owned subsidiary of Holdings. There are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from IAT of any shares of
its capital stock.
3. Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to the Investor with respect to itself that:
3.1 Authorization. He, she or it is of full age and has full right, power,
legal capacity and authority to execute and deliver this Agreement and to
perform his, her or its obligations hereunder. The execution, delivery and
performance of this Agreement and the performance of his, her or its obligations
hereunder constitutes the valid and binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with its terms except as such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
or other equitable principles.
3.2 Exchange of Shares of IAT. Each Stockholder delivered and exchanged, or
will deliver and exchange prior to the Closing, all of his, her or its
outstanding shares of capital stock of IAT in exchange for certain shares of
Common Stock. Upon delivery and exchange of each Stockholder's shares of capital
stock of IAT for Common Stock, good and marketable title to such shares of
capital stock of IAT passed, or will pass to Holdings, free and clear of all
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Encumbrances. There are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from IAT of any shares of its capital stock.
3.3 Ownership of Capital Stock of Holdings. The Stockholders set forth on
Exhibit A, together with the number of shares, options or other derivative
securities held by each such Stockholder and set forth on Exhibit A, represent
all of the holders of the capital stock of Holdings.
3.4 Loan to IAT. Investor understands that between August 1, 1996 and the
Closing, certain non-management stockholders contributed capital to IAT which is
evidenced by demand notes issued by IAT to such stockholders. Such loans do not
exceed 2.5 million S.F. in the aggregate.
4. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to Holdings that:
4.1 Authorization. This Agreement and the Rights Agreement constitute its
valid and legally binding obligations, enforceable in accordance with their
terms except as such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights or other equitable principles. The Investor
represents that it has full power and authority to enter into this Agreement and
the Rights Agreement.
4.2 No Unregistered Distribution. The Series A Preferred Stock to be
received by the Investor pursuant to the terms hereof will be acquired for
investment for the Investor's own account, without any view to the unregistered
public distribution or resale thereof, all without prejudice, however, to the
right of the Investor and any other person or entity receiving shares of Series
A Preferred Stock at the Closing ("Permitted Affiliate Transferees") at any time
lawfully to sell or otherwise to dispose of all or any part of the Series A
Preferred Stock pursuant to registration, any exemption therefrom under the Act,
applicable state securities laws and as set forth in Section 7.7.
4.3 Restricted Securities. The Investor understands that the Series A
Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
Holdings in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Act only in certain limited circumstances.
4.4 Investor Suitability. The Investor represents and warrants that it and
any Permitted Affiliate Transferee has the capacity to evaluate the merits and
risks of an investment in the Series A Preferred Stock and is able to bear the
economic risk of this investment. The
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Investor acknowledges that it has been provided access to all information
requested by it in order to evaluate the merits and risks of an investment in
the Series A Preferred Stock.
4.5 Legends. It is understood that the certificates evidencing the Series A
Preferred Stock may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT."
(b) Any legend required by the laws of the State of Delaware.
The legend referred to in clause (a) above shall be removed by Holdings
from any certificate at such time as the holder of the Series A Preferred Stock
represented by the certificate delivers an opinion of counsel reasonably
satisfactory to Holdings to the effect that such legend is not required in order
to establish compliance with any provisions of the Act, or at such time as the
holder of such shares satisfies the requirements of Rule 144(k) under the Act,
provided that Rule 144(k) as then in effect does not differ substantially from
Rule 144(k) as in effect as of the date of this Agreement, and provided further
that Holdings has received from the holder a written representation that such
holder satisfies the requirements of Rule 144(k) as then in effect with respect
to such shares.
4.6 Governmental Consents. Except as listed on Exhibit G, no consent,
approval, order, or authorization of, or registration, qualification,
designation, declaration or filing with, any Swiss federal, state, local or
provincial governmental authority on the part of Investor is required in
connection with the consummation of the transactions contemplated by this
Agreement. To the best of the Investor's knowledge, Investor has complied (and
in carrying out its businesses the Investor will be in compliance) with all
laws, ordinances and regulations applicable to it and its business, which the
failure to comply with would, either individually or in the aggregate, have a
materially adverse effect upon the Investor. The Investor has obtained all Swiss
federal, state, local and foreign governmental licenses and permits material to
and necessary in the conduct of its business, such licenses and permits are in
full force and effect, no material violations are or have been recorded in
respect of any such licenses or permits, and no proceeding is pending or, to the
best of the Investor's knowledge, threatened to revoke or limit any thereof.
4.7 Compliance with Other Instruments. Except as noted in Exhibit G hereto,
the Investor is not in violation or default of any provisions of its Certificate
of Incorporation or By-laws (or other organizational documents) or of any
instrument, judgment, order, writ, decree, or contract to which it is a party or
by which it is bound, the violation or default of which would have a material
adverse effect on the Investor. Neither the execution and delivery of this
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Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provision of the Certificate of Incorporation or By-Laws (or other
organizational documents) of the Investor or (b) violate, or be in conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or excuse performance by any person of
any of its obligations under, or cause the acceleration of the maturity of any
debt or obligation pursuant to, or result in the creation or imposition of any
Encumbrance upon any property or assets of the Investor under, any agreement or
commitment to which the Investor is a party or by which any of its respective
property or assets is bound, or to which any of the property or assets of the
Investor is subject, or (c) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other governmental authority
applicable to the Investor. The Investor does not have any knowledge of any
termination or material breach or anticipated termination or material breach by
the other parties to any material contract or commitment to which it is a party
or to which any of its assets is subject.
4.8 Ability to Make the Investment. The Investor has sufficient financial
ability and funds to make the investment in the Series A Preferred Stock as
contemplated by this Agreement.
5. Conditions of Investor's Obligations at Closing. The obligations of the
Investor under subsection 1.2 of this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions, the waiver of
which shall not be effective against the Investor unless the Investor has
consented in writing thereto:
5.1 Representations and Warranties. The representations and warranties of
Holdings, IAT and IAT Germany contained in Section 2 and the Stockholders
contained in Section 3 shall be true in all material respects on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
5.2 Performance. The Stockholders and Holdings, shall have performed and
complied with all agreements, obligations, and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
5.3 Compliance Certificate. The President and Treasurer of Holdings shall
deliver to the Investor at the Closing a certificate certifying that the
relevant conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4 Secretary's Certificate. The Secretary of each of Holdings, IAT and IAT
Germany shall deliver to the Investor at the Closing a certificate certifying:
(i) that attached thereto is a true and complete copy of the By-laws of
Holdings, IAT or IAT Germany, as the case may be, as in effect at the Closing;
(ii) that attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors and the stockholders of each such entity
authorizing the transactions contemplated hereby and that such resolutions have
not been amended or
-12-
<PAGE>
modified and are in full force and effect; (iii) that Certificate of
Incorporation of each such entity, a true and correct copy of which is attached,
has not been further amended since September 26, 1996; (iv) to the incumbency
and specimen signatures of each officer of each such entity executing this
Agreement and the other agreements and certificates contemplated hereby.
5.5 Qualifications. Holdings shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Series A Preferred Stock hereunder.
5.6 Opinions of Company Counsel. The Investor shall have received from
Baker & McKenzie, special counsel for Holdings and IAT, opinions, dated as of
the Closing, substantially in the forms attached hereto as Exhibit F, and from
Dr. Schackow and Partner, special counsel for IAT Germany, substantially in the
form of the opinion from special counsel for IAT.
5.7 Consents and Waivers. Holdings shall have obtained any and all consents
and waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement.
5.8 Rights Agreement. Holdings and the Investor shall have executed and
delivered the Rights Agreement.
5.9 Marketing Agreement. Holdings and General Capital shall have executed
and delivered the Marketing Agreement.
5.10 Warrant. Holdings shall have issued and delivered to the Investor the
Warrant.
5.11 Exchange. Prior to the Closing, the Stockholders shall have delivered
and exchanged an aggregate of 10,000 shares of capital stock of IAT,
constituting all of the outstanding capital stock of IAT, in exchange for an
aggregate of 4,620,000 shares of Common Stock and the Non-Management
Stockholders' Warrant.
5.12 Financial Statements. Holdings or IAT shall have delivered to the
Investor the financial statements referred to in Section 2.5 hereof and there
has not been a material adverse change to such financial statements from the
draft of the financial statements previously delivered to the Investor.
6. Conditions of Holdings' Obligations at Closing. The obligations of
Holdings under subsection 1.2 of this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions, the waiver of
which shall not be effective against Holdings unless Holdings has consented in
writing thereto:
-13-
<PAGE>
6.1 Representations and Warranties. The representations and warranties of
the Investor contained in Section 4 shall be true in all material respects on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
6.2 Performance. The Investor shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6.3 Compliance Certificate. The President of the Investor shall deliver to
Holdings at the Closing a certificate certifying that the relevant conditions
specified in Sections 6.1 and 6.2 have been fulfilled.
6.4 Consents and Waivers. Investor shall have obtained any and all consents
and waivers necessary or appropriate for consummation of the transactions
contemplated by this Agreement.
6.5 Rights Agreement. Holdings and the Investor shall have executed and
delivered the Rights Agreement.
6.6 Marketing Agreement. Holdings and General Capital shall have executed
and delivered the Marketing Agreement.
6.7 Bank Statement. The Investor shall have delivered to Holdings a copy of
a bank statement representing the ability of Investor to make the investment
contemplated by this Agreement.
7. Covenants.
7.1 Initial Public Offering. Holdings agrees that it shall use all
reasonable efforts to prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement under the Act relating to the
initial public offering no later than December 31, 1996.
7.2 Establishment of Underwriting Committee. On the date of the Closing,
Holdings shall establish an Underwriting Committee of its Board of Directors
(the "Committee"), which Committee shall be vested with full and exclusive
responsibility and authority on behalf of Holdings to select an underwriter and
to negotiate all of the terms and conditions of any such underwriting. The
Committee shall consist of four members, with two members to be appointed by
each of Holdings and the Investor. The Chairman of the Committee shall be
designated by the Investor. In the event that the Committee is unable to produce
a majority vote on any particular issue, such issue shall be decided by a vote
of the Board of Directors of Holdings; provided, that
-14-
<PAGE>
the resolution of any such issue by the Board of Directors shall not be
effectuated without the written consent of the Investor.
7.3 Valuation Adjustments.
(a) If, on the effective date of the IPO, the aggregate value of the
shares of Common Stock (as measured by the per share offering price of the
shares of Common Stock offered in the IPO) owned by non-management
stockholders of Holdings to be identified at the Closing (the
"Non-Management Stockholders") is less than $15,000,000 (the amount of such
shortfall being hereinafter referred to as the "Shortfall"), the Investor
and management stockholders of Holdings to be identified at the Closing
(the "Management Stockholders") shall, within five business days of the
Closing of the IPO, issue to the Non-Management Stockholders such
additional number of shares of Common Stock as shall have a value equal to
the Shortfall, rounded down to the nearest whole share, with the Investor
contributing 60% of the Shortfall, rounded down to the nearest whole share,
and the Management Stockholders contributing 40% of the Shortfall, pro
rata, rounded down to the nearest whole share.
(b) If, on the effective date of the IPO, the aggregate value of the
shares of Common Stock (as measured by the per share offering price of the
shares of Common Stock offered in the IPO) owned by the Non-Management
Stockholders is greater than $25,000,000 (the amount of such excess amount
being hereinafter referred to as the "Excess Amount"), the Non-Management
Stockholders shall, within five business days of the Closing of the IPO,
distribute, without any further consideration, such number of shares of
Common Stock as shall have a value equal to (i) 60% of the Excess Amount,
rounded down to the nearest whole share, to the Investor and (ii) 40% of
the Excess Amount, rounded down to the nearest whole share, to the
Management Stockholders, pro rata according to their respective
stockholdings.
7.4 Co-Chairman Compensation. During the three year period following the
date of the Closing, Holdings shall pay to Jacob Agam, the Co-Chairman, or upon
Jacob Agam's resignation, the individual designated by the Investor, approved by
the Board of Directors and elected as Co-Chairman of Holdings monthly
compensation as follows: (i) for each month prior to the Closing of the IPO,
$5,000 and (ii) for each month subsequent to the Closing of the IPO, $12,000.
7.5 Board Composition. Holdings agrees that, for so long as the Investor
shall hold the Series A Preferred Stock (or Common Stock issued upon conversion
thereof or upon exercise of the Warrant), without the Investor's consent, the
composition of the Board of Directors of IAT and IAT Germany shall be identical
to the composition of the Board of Directors of Holdings; provided, that the
Investor's consent shall not be withheld if required to comply with Swiss law.
7.6 Capitalization of IAT and IAT Germany. Holdings shall cause IAT and IAT
Germany not to issue, and shall not permit the issuance of, any shares of
capital stock (or any
-15-
<PAGE>
security convertible into shares of capital stock) of IAT or IAT Germany, it
being the intention of the parties that IAT shall remain a direct or indirect
wholly-owned subsidiary of Holdings and IAT Germany shall remain a direct or
indirect subsidiary of Holdings.
7.7 Right of First Refusal. (a) From the Closing until June 30, 1997, the
Investor may not sell, transfer or dispose of ("Transfer") any of its shares of
Series A Preferred Stock (or Common Stock issued upon conversion thereof or upon
exercise of the Warrant), and after June 30, 1997, the Investor may not Transfer
any of its shares of Series A Preferred Stock (or Common Stock issued upon
conversion thereof or upon exercise of the Warrant), except in accordance with
the following procedures:
(i) If the Investor desires to Transfer all or any part of the
Investor's shares of Series A Preferred Stock, the Investor shall submit a
written offer (the "Offer") to sell such shares of Series A Preferred Stock
(together, the "Offered Shares") to Holdings and the Stockholders, which
Offer shall specify the number of Offered Shares proposed to be sold, the
total number of shares of Series A Preferred Stock owned by the Investor,
and the terms and conditions, including price, at which the shares of
Series A Preferred Stock are being offered to Holdings and the
Stockholders, and such terms shall not be more favorable to the Investor
than the terms offered to Investor by the third party.
(ii) Holdings shall have the first right to purchase all of the
Offered Shares. In the event that Holdings determines not to purchase any
of the Offered Shares or less than all of the Offered Shares, each
Stockholder shall have the right to purchase that number of Offered Shares
as shall be equal to the number of Offered Shares not purchased by Holdings
multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock then owned by such Stockholder and the denominator
of which shall be the aggregate number of shares then owned by all of the
Stockholders (the "Pro Rata Fraction"). In all instances, the Stockholders
shall only have the right, but not the obligation, to purchase such Offered
Shares as are not purchased by Holdings.
(iii) Stockholders shall have a right of oversubscription such that if
any Stockholder fails to accept the Offer as to its or his full Pro Rata
Fraction, the other Stockholders shall, among them, have the right to
purchase up to the balance of the Offered Shares not so purchased. Such
right of oversubscription may be exercised by a Stockholder by accepting
the Offer as to more than its or his Pro Rata Fraction. If, as a result
thereof, such oversubscriptions exceed the total number of Offered Shares
available in respect of such oversubscription privilege, the
oversubscribing Stockholders shall be cut back with respect to their
oversubscriptions so as to sell the Offered Shares as nearly as possible in
accordance with their respective Pro Rata Fractions or as they may
otherwise agree among themselves.
(iv) If Holdings or a Stockholder desires to purchase all or any part
of the Offered Shares, Holdings or such Stockholder (a "Purchasing
Stockholder") shall communicate in writing its or his election to purchase
(an "Acceptance") to the Investor, which
-16-
<PAGE>
Acceptance shall state the number of Offered Shares Holdings or the
Purchasing Stockholder desires to purchase and shall be delivered in person
or mailed to the Investor at the address set forth in the Offer, with a
copy to Holdings and the other Stockholders, within 20 days of the date the
Offer was made. Sale of the Offered Shares to be sold to Holdings or the
Purchasing Stockholders pursuant to this Section 7.7 shall be made at the
offices of the Investor on the thirtieth day following the expiration of
the 20-day period after the Offer is made (or if such thirtieth day is not
a business day, then on the next succeeding business day). Such sales shall
be effected by the Investor's delivery to Holdings or each Purchasing
Stockholder, as the case may be, of a certificate or certificates
evidencing the Offered Shares to be purchased by it or him, duly endorsed
for transfer to Holdings or the Purchasing Stockholder, as the case may be,
which shares shall be delivered free and clear of all liens, charges,
claims and encumbrances of any nature whatsoever, against payment to the
Investor of the purchase price therefor by Holdings or such Purchasing
Stockholder, as the case may be. Payment for the Offered Shares shall be
made as provided in the Offer or by wire transfer or cashier's check.
(v) If Holdings and/or the Stockholders, as the case may be, do not
agree to purchase all of the Offered Shares, then all of the Offered Shares
may be sold by the Investor at any time within 120 days after the date the
Offer was made. Any such sale shall be upon terms and conditions, including
price, not less favorable to Investor than those specified in the Offer.
Any Offered Shares not sold within such 120-day period shall continue to be
subject to the requirements of a prior offer pursuant to this Section 7.7.
(b) Any prohibition on transfer stated in this Section 7.7 shall also
include the Warrant.
(c) The covenant set forth in this Section 7.7 shall terminate and be of no
further force or effect upon the consummation of an IPO.
8. Indemnification
8.1. Indemnification by Holdings, IAT and IAT Germany. In the event that
the transactions contemplated by this Agreement are consummated, Holdings, IAT
and IAT Germany severally shall indemnify Investor and each of its officers and
directors and hold each of them harmless from, against and in respect of and
shall on demand reimburse such persons for all its losses, liabilities, damages,
costs and expenses arising from any material misrepresentation or breach of any
representation, warranty, covenant or agreement on the part of Holdings, IAT or
IAT Germany, under this Agreement, the Rights Agreement, the Marketing Agreement
or the Warrant, and any and all actions, suits, proceedings, elections, demands,
assessments, judgments, costs and expenses, including without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid same or to oppose the imposition
thereof, or in enforcing this indemnity; provided, that the aggregate liability
of Holdings, IAT and IAT Germany under this Section 8.1 shall be limited to
$1,500,000 and provided, further, that Holdings, IAT and IAT Germany shall have
no liability pursuant to this
-17-
<PAGE>
Section 8.1 until the aggregate of all losses, damages, costs and expenses,
including reasonable legal fees, exceeds $25,000, except that this proviso shall
not apply to any liability resulting from Holdings', IAT's or IAT Germany's
fraud, intentional misrepresentation or intentional failure to perform or comply
with any agreement contained herein or in the Rights Agreement, the Marketing
Agreement or the Warrant and Holdings, IAT and IAT Germany shall be liable for
all losses, damages, costs and expenses with respect thereto. Notwithstanding
the foregoing, in the event that a court of competent jurisdiction having final
adjudicative authority and from which no appeal is available shall determine
that the Investor is not entitled to indemnification, then the Investor shall
not be entitled to recover its legal fees with respect to such claim from
Holdings, IAT or IAT Germany.
8.2. Indemnification by Investor. In the event that the transactions
contemplated by this Agreement are consummated, the Investor shall indemnify
Holdings, IAT and IAT Germany and each of their officers and directors and hold
each of them harmless from, against and in respect of and shall on demand
reimburse such persons for all its losses, liabilities, damages, costs and
expenses arising from or in connection with any material misrepresentation or
breach of any representation, warranty, covenant or agreement on the part of the
Investor under this Agreement, the Rights Agreement, the Marketing Agreement or
the Warrant, and any and all actions, suits, proceedings, elections, demands,
assessments, judgments, costs and expenses, including without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid same or to oppose the imposition
thereof, or in enforcing this indemnity; provided, that the aggregate liability
of the Investor under this Section 8.2 shall be limited to $1,500,000 and
provided, further, that Investor shall have no liability pursuant to this
Section 8.2 until the aggregate of all losses, damages, costs and expenses,
including reasonable legal fees, exceeds $25,000, except that this proviso shall
not apply to any liability resulting from Investor's fraud, intentional
misrepresentation or intentional failure to perform or comply with any agreement
contained herein or in the Rights Agreement, the Marketing Agreement or the
Warrant and Investor shall be liable for all losses, damages, costs and expenses
with respect thereto. Notwithstanding the foregoing in the event that a court of
competent jurisdiction having final adjudicative authority and from which no
appeal is available shall determine that Holdings is not entitled to
indemnification then Holdings shall not be entitled to recover its legal fees
with respect to such claim from the Investor.
8.3. Procedures for Indemnification. Promptly after receipt by an
indemnified party under sections 8.1 or 8.2 of notice of the commencement of any
action for which indemnification may be available under section 8.1 or 8.2 such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such section, give notice to the indemnifying party of
the commencement thereof, but the failure so to notify the indemnifying party
shall not relieve it of any liability that it may have to any indemnified party
except to the extent the indemnifying party demonstrates that the defense of
such action is prejudiced thereby. In case any such action shall be brought
against an indemnified party and it shall give notice to the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall elect, to assume the
defense thereof with counsel
-18-
<PAGE>
reasonably satisfactory to such indemnified party and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such section for any fees of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation and costs and
expenses of legal counsel, if the indemnified party and the indemnifying party
are both parties to the action and the indemnified party has been advised by
counsel that there may be one or more defenses available to it and not available
to the indemnifying party. If an indemnifying party assumes the defense of such
an action, (a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's consent (which shall not be
unreasonably withheld) unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any person and no effect on
any other claims that may be made against the indemnified party and (ii) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party and (b) the indemnifying party shall have no liability with
respect to any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld). If notice is given to an
indemnifying part of the commencement of any action and it does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense thereof, the
indemnifying party shall be bound by any determination made in such action or
any compromise or settlement thereof effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party determines in good faith
that there is a reasonable probability that an action may materially and
adversely affect it or its affiliates other than as a result of monetary
damages, such indemnified party may, by notice to the indemnifying party, assume
the exclusive right to defend, compromise or settle such action, but the
indemnifying party shall have the right to participate in such action and not be
bound by any determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
9. Miscellaneous
9.1 Survival of Warranties. The warranties, representations, and covenants
of Holdings, the Stockholders, and the Investor contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing for a period of two years from the date of this Agreement and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of Holdings, the Investor or the Stockholders.
9.2 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement may not be assigned by any party without the
written consent of the other parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
-19-
<PAGE>
9.3 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of New York, disregarding any New York
principles of conflicts of laws that would otherwise provide for the application
of the substantive laws of another jurisdiction. The parties agree that all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated only in the State of New York. The parties waive any right they
may have to assert the doctrine of forum non conveniens or to object to such
venue, and hereby consent to court ordered relief.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery or delivery by facsimile to the party to be
notified or four (4) days after deposit with an air courier or the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties, with a copy for
Holdings or IAT to Baker & McKenzie, 805 Third Avenue, New York, New York 10022,
Attention: Malcolm I. Ross, facsimile telephone number (212) 759-9133 and a copy
for the Investor to Bachner, Tally, Polevoy & Misher, LLP, 380 Madison Avenue,
New York, New York 1017-2590, Attention: Sheldon E. Misher, Esq.
9.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each party agrees to indemnify and hold harmless the other parties
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which such party or any of its officers, employees, or
representatives is responsible.
9.8 Entire Agreement; Amendments and Waivers. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of Holdings and the Investor. Any amendment or waiver effected
in accordance with this Section 9.8 shall be binding upon each holder of any
securities purchased or exchanged under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities, Investor and Holdings.
-20-
<PAGE>
9.9 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.10 Expenses. Whether or not the transactions contemplated by this
Agreement shall be consummated, each party agrees that all fees and expenses
incurred by it in connection with this Agreement shall be borne by it,
including, without limitation, all fees of counsel, actuaries and accountants.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
IAT HOLDINGS, INC.
By: /s/ Dr. Viktor Vogt
------------------------------
Name: Dr. Viktor Vogt
Title: Chief Executive Officer
Address: Delaware, USA
Facsimile telephone number:
IAT AG
By: /s/ Dr. Viktor Vogt
------------------------------
Name: Dr. Viktor Vogt
Title: Chief Executive Officer
Address:
Facsimile telephone number:
IAT GERMANY
By: /s/ Dr. Viktor Vogt
------------------------------
Name: Dr. Viktor Vogt
Title: Managing Director
Address:
Facsimile telephone number:
VERTICAL FINANCIAL HOLDINGS
By: /s/ Jacob Agam
------------------------------
Name: Jacob Agam
Title: Director
Address:
Facsimile telephone number:
<PAGE>
STOCKHOLDERS:
/s/ K. - D. Sippel
-----------------------------------
/s/ V. Walther
-----------------------------------
/s/ Walther Blas GmbH
-----------------------------------
/s/ R. Suter
-----------------------------------
/s/ R. Klein Handel GmbH & Co KG
-----------------------------------
/s/ C. Holthuisen
-----------------------------------
/s/ Dr. V. Vogt
-----------------------------------
/s/ P. Freitag
-----------------------------------
/s/ bmp Management Consultants GmbH
-----------------------------------
/s/ U. Stamm
-----------------------------------
<PAGE>
/s/ Gradl Consult AG
------------------------------
<PAGE>
Exhibit A
On the date of the Stock Purchase Agreement, the persons or entities
listed below are the stockholders of IAT AG and they hold the number of shares
set forth opposite of their respective names.
Non-Management Stockholders
K. - D. Sippel 1,792
V. Walther 1,679
Walther Glas GmbH 357
R. Suter 1,309
R. Klein Handel GmbH & Co KG 1,041
C. Holthuisen 306
Dr. V. Vogt 214
P. Freitag 146
bmp Management Consultants GmbH 143
U. Stamm 107
Gradl Consult AG 49
----------
7,143
Management Stockholders
Dr. V. Vogt 2,857
<PAGE>
Exhibit B
(Oktober 21, 1996)
Any item or matter contained in any subsection to this Exhibit B shall be deemed
incorporated by reference into all other subsections to this Exhibit B as though
set forth in full therein, without need for any reference thereto.
1. (Section 2.2 (c))
None
2. (Section 2.3)
IAT AG, a corporation incorporated in and under the laws of
Switzerland, having its domicile at Turgi (Gebenstorf). The nominal
share capital is SFr. 10,000,000 divided into 10,000 registered shares
with a nominal value of SFr. 1,000 each, 100% of which are held by
Holdings. However, under Swiss law, the members of the board of
directors require one share each. The Articles of Incorporation of IAT
AG provide for a restriction of the transfer of the shares.
IAT Deutschland GmbH, a company incorporated in and under the laws of
Germany, having its domicile at Bremen. The nominal share capital is DM
700,000, 74.9% of which is held by IAT AG. The minority shareholder
holding 25.1 of the share capital of the company is HIBEG (Hanseatische
Industrie-Beteiligungen GmbH), a company having its domicile in Bremen.
According to the Articles of Incorporation, the transfer of quotas of
the capital of IAT GmbH is subject to the consent of the other
shareholder.
3. (Section 2.6)
None
4. (Section 2.7)
A. Holdings
None
-1-
<PAGE>
B. IAT AG
Dispute with Basix AG, Zurich, a supplier of computer chips regarding
the cancellation of a purchase order dated August 4, 1995, The value in
dispute amounts to approx. $23,000. So far, no provisions have been
made in the financial statements.
C. IAT GmbH
Dispute with Alarm Meyer, Breman, a supplier of a burglar alarm systems
regarding his insufficient performance. The value in dispute is approx.
DM 5,000.
Dispute with Vero Electronics, a supplier of IAT GmbH, concerning
defective hardware. The claim against IAT GmbH amounts to approx. DM
60,200. The local lawyer of IAT GmbH estimates that the matter can be
settled by payment of approx. 50% of the claim.
In both cases, provisions of approx. 50% of the claims in question
have been made in the financial statements.
5. (Section 2.8)
A. Holdings
None
B. IAT AG
I. Product Rights and Licenses in Joint Development Contracts
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Vertrag der Entwicklungsgemein-schaft German Telkom August 1992 Special multimedia communication
Kommunikationsrechner (EGKP) ("Agreement as to the facilities
Joint Development of Communication FacilIATeAG)
The period of the agreement has expired
- ------------------------------------------------------------------------------------------------------------------------------------
MVP Cross License Agreement Texas Instruments Fran August 1994 Version 1 H.32p Libraries, JPEG
IAT AG The period of the agreement will expire
in 2004 if not terminated earlier for
valid reasons
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transfer of Source Codes between Texas I Texas Instruments Fran August 1994 Closing of Version 1 H.320 cross
IAT License Agreement
IAT AG
The period of the agreement has expired
- ------------------------------------------------------------------------------------------------------------------------------------
Kooperationsvertrag zur Entwicklung der IBM Germany December 1994 Interactive Kiosk
Multimedialen Informations- und Kommunikations-
systems MIKS ("Cooperation-Agreement regGerman German Telekom
Telekom Development of Version 3 of the Multimedia
Information and Communication System MIKS") IAT AG According to the agreement the period
of the contract expired on June 30,
1996. The parties have, however,
agreed on an extension of the period
of the contract until December 31,
1996 in order to enable the completion
of the development of the product.
Furthermore, the parties are presently
negotiating an agreement as to the
marketing of the product.
- ------------------------------------------------------------------------------------------------------------------------------------
Rahmenkooperationsvertrag uber die gemeinsame German Telekom October 1995 Special functions:
Weiterentwicklung des IAT/Deutsche Telekom MPEG/JPEG
Softwarecodecs auf Basi's des Texas Instruments IAT AG H.320 as TMS320C80
Parallelprozessors TMS320C8x ("Frame-Cooperation-
Agreement regarding the Joint Further Development of
the IAT/ German Telecom Softwarecodecs based on According to the agreement the period
Texas Instruments Parallel Processor TMS320C8x") of the contract will expire on
December 31, the 1996. However, as the
development of product will not be
completed by that date, the parties
have agreed to extend the period of
the contract until the product has
been completed.
- ------------------------------------------------------------------------------------------------------------------------------------
Auftrag Entwicklung des Multi-funktional German Telekom December 1995 Last version of several contracts,
Kommunikations-systems MFKS ("Agreement closes MFKS development
regarding the Development of the Multifunctional IAT AG
Communications System MFKS") The period of the agreement has expired
- ------------------------------------------------------------------------------------------------------------------------------------
Auftrag Wavelet-Datacompression fur die Prof. Seiler April 1996 Quality still-video for telemedicine
Ubertragung von Still-Video-bildern in hoher
Qualitat ("Agreement regarding
Wavelet-Datenkompression for the IAT AG The period of the agreement will expire
Transmission of High Quality Still Video") on December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Joint Development and Cross License Texas Instruments Inc. June 1996 Version 2, Low-cost board, H.320
Agreement Library, Software Modules, Production
IAT AG and Development Licenses
The period of the agreement will
expire on March 31, 1999 if not
terminated earlier for valid reasons
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
Furthermore, there are, at present, ongoing negotiations between IAT AG and
Texas Instruments Inc. regarding the conclusion of a new agreement
concerning the development of Basic Codes for the TI C80 processor.
II. Use of Third Party Rights by License Agreements for Development or
Production of IAT-Products (standard tools excluded)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MVIP License and Technology Disclosure Mitel February 1993 Use of MVIP Interface
Agreement
IAT AG This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
- --------------------------------------------------------------------------------------------------------------------------
Program License Agreement Texas Instruments November 1993 MVP
Germany
IAT AG This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
- --------------------------------------------------------------------------------------------------------------------------
Software License Agreement Trillium February 1996 Version 2 (LAPD, Q.930/Q.931 CCITT
88, Q.930/Q.931 ETSI)
IAT AG
This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
- --------------------------------------------------------------------------------------------------------------------------
License Agreement Amendment Trillium May 1996 Q.930/Q.931-National ISDN-1,
Q.930/Q.931 NTT
IAT AG
This agreement has been entered into for
an indefinite period of time but can be
terminated for valid reasons
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
III. Marketing and Project Agreement regarding Applications
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Contract Partner Date Comment
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lizenz- und Vertriebsrahmen-vereinbarung GermaneTelekom April 1994 Sale/Marketing of jointly developed
and Frame-Distribution-Agreement") products
IAT AG
The agreement is governed by German law and does
not provide for an expiry date. It can, however,
be terminated for valid reasons.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
Note: All relevant contracts include Non-Disclosure Agreements. Only those
parts of the contracts necessary for marketing and sales may be
published.
IV. Use of Rights owned by IAT AG by Third Parties
Except for the Agreements already listed in this section and for
license agreements entered into by IAT AG with third parties in the
normal course of its business, there are no other agreements entitling
any third party to make use of IAT AG's rights to Intellectual
Property.
V. Rights of Employees to Intellectual Property
According to Swiss law, the employee who creates Intellectual Property
while performing his employment activities and his contractual duties
automatically obtains a personal right thereto. The employer is,
however, entitled to make any use of this Intellectual Property, to the
extent consistent with the purpose of the employment relationship.
C. IAT GmbH
I. Project Agreement
Projektvertrag ("Project-Agreement") between Olympus Optical Co.
(Europa) GmbH and IAT GmbH concerning the development/integration of
ISDN-based remote control for parts of an Olympus Microscope. The date
of the Agreement is January 5, 1996. The Agreement came into force
retrospectively in September 1995 and expired on December 31, 1995.
II. Licensing and Marketing Agreement
Know-How, Vertriebs- und Herstellungs- Lizenzvertrag (Know-How,
Distribution- and Production- License Agreement) between IAT AG and IAT
GmbH. The date of the Agreement is December 1995. The Agreement grants
IAT GmbH the nonexclusive right to produce, use and distribute the
"IAT-Products" in Germany and contains detailed provisions as to the
rights and duties of each party to this Agreement. The Agreement has
been entered into for an indefinite period of time and except for valid
reasons it can not be terminated earlier than December 31, 2000.
Kooperationsvereinbarung (Cooperation-Agreement) between Olympus
Optical Co. (Europa) GmbH and IAT GmbH. The Agreement was entered into
on March 18, 1996, is governed by German law and does not contain any
provisions as to its termination.
-5-
<PAGE>
III. Rights of Employees to Intellectual Property
Under German law according to the employee-invention-act
(Arbeitnehmererfindungsgesetz) the employee while performing his
employment activities and his contractual duties obtains a personal
right thereto. If the invention is patentable or admissible to model
registration utility, the employee has the duty to inform his employer
of his invention. The employer is entitled - respecting certain time
limits - to request the transfer of rights to the invention
indemnifying the employee. Employee-inventions subject to the
copyright-act (Urheberrechtsgesetz) are not transferable, therefore the
employer being only entitled to make use of it. According to the
copyright-act (Urheberrechtsgesetz, ss. 69 b) the employer, however,
has in general the exclusive right to make use of computer programs
which the employee has developed while performing his employment
activities and his contractual duties. In principle, jurisprudence
grants an indemnification to the employee for programs being qualified
as special performances (Sonderleistungsprinzip).
6. (Section 2.9)
A. Holdings
None
B. IAT AG
In the event that the assets, as listed in the annual balance sheet, no
longer cover half of the share capital and the legal reserves of the
company, Art. 725 subsection 1 of the Swiss Code of Obligations ("Art.
725 subsection 1") provides for the board of directors to call a
general meeting of the shareholders and to propose a financial
reorganization. Furthermore, Art. 725 subsection 2 of the Swiss Code of
Obligations ("Art. 725 subsection 2"_) states that if the claims of the
company's obligees are neither covered if the assets are valued at
on-going business value nor at liquidation values, the board of
directors shall notify the judge in order to commence bankruptcy
proceedings unless obligees of the company subordinate their claims to
those of all other company obligees to the extent of such insufficient
coverage.
As far as IAT AG is concerned, the assets as listed in the annual
balance sheets of the company have fallen below the limit provided in
Art. 725 subsection 1. Consequently, in order to comply with the
provisions of Art. 725 subsection 1. and Art. 725 subsection 2 the
shareholder and the board of directors have taken and are taking the
measures they deem appropriate. In particular, the capital of the
company was increased to
-6-
<PAGE>
SFr. 10,000,000 and the present shareholders of IAT AG have provided
IAT AG with subordinated loans amounting to SFr. 900,000 and DM
700,000. Furthermore, from the point of view of the shareholders of IAT
AG, one of the objectives of this present Agreement is to increase the
capital of IAT AG with the funds which are expected to be provided with
the proceeds of the Closing and any subsequent financing and thus to
effect the financial restructuring of the company. IAT AG is of the
opinion that at Closing it will not be in violation of Art. 725
subsection 2. Future activities of IAT AG will, however, be dependent
upon further equity financing as described above.
C. IAT GmbH
The company discloses a negative owners' equity. Since the long-term
loans from the owners have been subjected to declaration of debt
subordination under German commercial law, these loans act as equity
substitutes versus other creditors of the company.
7. (Section 2.10(a))
A. Holdings
None
B. IAT AG
I. Officers and Directors
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Notification
Amount Period of
Name and Position Form of Agreement SFr. Fringe benefits SFr. Termination
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. Vogt oral 162,000 p.a. 12,000 p.a. expense Contract ruled
CEO company car by Swiss Code
option to shares of of Obligations
IAG AT
- ------------------------------------------------------------------------------------------------------------------------------
D. Jeschke oral 1,500 per meeting -- Contract ruled
Chairman of the Board by Swiss Code
of Obligations
- ------------------------------------------------------------------------------------------------------------------------------
C. Holthuizen oral 1,000 per meeting -- Contract ruled
Member of the Board by Swiss Code
of Obligations
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. Suter future oral 1,000 per meeting -- Contract ruled
Member of the Board by Swiss Code
of Obligations
- ------------------------------------------------------------------------------------------------------------------------------
K. Grissemann Consulting contract 775.-/day Company car 30 days before
CFO end of each
quarter
- ------------------------------------------------------------------------------------------------------------------------------
U. Stamm Employment contract 128,000 p.a. Company car 6 months
Sales Manager Bonus based on performance
(none so far)
12,000 expense allowance
- ------------------------------------------------------------------------------------------------------------------------------
F. Muller Employment contract 126,000 p.a. Company car 6 months
Manager Product Development
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II. Affiliates
Agreement as to subordinated loans between IAT AG, Walther Glas GmbH,
Mr. Sippel and Mr. Suter. The date of this Agreement is August 23,
1996. According to this Agreement Walther Glas GmbH shall grant to IAT
AG a subordinated loan amounting to SFr. 1,000,000 and Mr. Sippel
shall grant to IAT AG a subordinated loan amounting to SFr. 500,000
(or in the event that the loan granted by Telefutura AG has to be paid
back prior to the IPO amounting to SFr. 650,000). The loans are to be
paid back by the company by June 30, 1997. In the event that such
repayment cannot be effected, specific provisions apply and, in
particular, Walther Glas GmbH has an option to acquire the shares of
IAT AG or of Holding held by Mr. Sippel and Mr. Suter. After signing
of the Stock Purchase Agreement the additional shareholder loan of
SFr. 500,000 which ought to have been granted to IAT AG by Mr. Sippel
was granted by Walther Glas GmbH. In return Walther Glas GmbH has
acquired 500 shares of IAT AG from Mr. Sippel. Mr. Sippel has,
however, an option to reacquire the equivalent of 500 shares of IAT AG
in shares of Holdings from Walther Glas GmbH, in the event that this
last loan amounting to SFr. 500,000 granted by Walther Glas GmbH to
IAT AG is replaced by a similar loan granted by him at a latter date.
Investment agreement dated December 19, 1995 between AIG GmbH, IAT AG
and HIBEG, Bremen. The Agreement provided for the acquisition of 25.1%
of the capital of IAT GmbH by HIBEG. Furthermore the Agreement lays
down the general rules for the conduct of the business of IAT GmbH and
provides for both HIBEG and IAT AG to grant to IAT GmbH subordinated
shareholders' loans.
-8-
<PAGE>
C. IAT GmbH
I. Officers and Directors
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Notification
Amount Period of
Name and Position Form of Agreement SFr. Fringe benefits SFr. Termination
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Gudauski written employment co168,000 p.a. Bonus on performance (none so far) 6 months
Managing Director Company car
IAT GmbH
- ------------------------------------------------------------------------------------------------------------------------------------
B. Scheibler written employment co95,000 p.a. 6 weeks before
Administration Manager end of each
quarter
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II. Affiliates
Investment agreement dated December 19, 1995 between AIG GmbH, IAT AG
and HIBEG, Bremen. The Agreement provided for the acquisition of 25.1%
of the capital of IAT GmbH by HIBEG. Furthermore the Agreement lays
down the general rules for the conduct of the business of IAT GmbH and
provides for both HIBEG and IAT AG to grant to IAT GmbH subordinated
shareholders' loans.
Agreement as to subordinated shareholders' loan between IAT GmbH and
HIBEG. The date of the Agreement is December 19, 1995. According to the
Agreement IAT AG shall grant to IAT GmbH a subordinated loan not
exceeding DM 750,000. The Agreement provides for that from June 30,
2000 to December 31, 2004 the loan has to be paid back in installments.
Agreement as to subordinated shareholders' loan between IAT GmbH and
IAT AG. The date of the Agreement is December 19, 1995. According to
the Agreement IAT AG shall grant to IAT GmbH a loan subordinated to the
loan of HIBEG not exceeding DM 1,000,000. The Agreement provides for
that from June 30, 2000 to December 31, 2004, the loan has to be paid
back in installments.
-9-
<PAGE>
8. (Section 2.10(b))
A. Holdings
None
B. IAT AG
All the Agreements listed pursuant to section 2.8 and the employment
agreements which are not listed as none of them provides for an
exceptional notice period of termination.
Agreement as to the lease of the premises of IAT AG. The lease amounts
to approx. $120,000 p.a., the notification period of termination is 6
months and the Agreement can be terminated at the end of each quarter
of a year.
C. IAT GmbH
Agreement as to the lease of the premises of IAT GmbH. The lease
amounts to approx. $185,000 p.a. The notification period of termination
is 12 months, the earliest possible date of termination is January 1,
1998. The Agreement can then be terminated at the end of each quarter
of the year.
Agreement as to the purchase of Codecs from Elcoteq for the price of
approx. $140,000.
Consulting Agreement with R. Hlavatsch for technical advice. The
remuneration amounts to approx. $100,000 p.a. the notification period
of termination is 1 month and the agreement can be terminated at the
end of each quarter of the year.
9. (Section 2.10 (c))
A. Holdings
None
-10-
<PAGE>
B. IAT AG
Subordinated loans:
Walther Glas GmbH SFr. 900,000 and DM. 700,000 (as of October
15, 1996) these loans are to be paid back
with the proceeds of the IPO
Other loans:
Telefutura AG approx. $125,000
Bank loans and bank overdrafts:
Schweiz. Bankverein approx. $1,550,000 (secured by guarantees
of IAT shareholders)
C. IAT GmbH
Subordinated shareholders' loans:
HIBEG approx. $500,000
IAT AG approx. $670,000
Bank loans and bank overdrafts:
Volksbank Sottrum approx. $670,000 (secured by pledge of
accounts receivable
and guarantees of IAT AG,
HIBEG, Mr.
Gudauski and Dr. Vogt)
Bremer Bank approx. $37,000 (secured by guarantee of
IAT AG)
Accounts payable:
Elcoteq approx. $150,000
10. (Section 2.12)
None
-11-
<PAGE>
11. (Section 2.13)
A. Holdings
None
B. IAT AG
None
C. IAT GmbH
IAT GmbH has pledged all of its accounts receivable in order to secure
the bank loan granted by Volksbank Sottrum.
12. (Section 2.14)
A. Holdings
None
B. IAT AG
In Switzerland, most employment relations are based on written
agreements regardless of what position and responsibilities the
employee has and what kind of work he performs for the employer. Except
for some of the employment agreement already listed in other
subsections of Exhibit B, none of these employment contracts provide
for an unusual period of termination. It must, however, be noted that
some of the employees of IAT AG work in teams and that the termination
of some employment relations might, therefore, have an influence on the
performance of such a team.
C. IAT GmbH
In Germany, most employment relations are based on written agreements
regardless of what position and responsibilities the employee has and
what kind of work he performs for the employer. Except for some of the
employment agreement already listed in other subsections of Exhibit B,
none of these employment contracts provide for an unusual period of
termination. It must, however, be noted that some of the employees of
IAT
-12-
<PAGE>
GmbH work in teams and that the termination of some employment
relations might, therefore, have an influence on the performance of
such a team.
13. (Section 2.16)
A. Holdings
None
B. IAT AG
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Carrier Policy amount SFR Coverage
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Genfer Versicherungen 1,000,000 Inventory and Fixed Assets, Fire,
Burglary
- ------------------------------------------------------------------------------------------------------------------
Genfer Versicherungen 2,000,000 Company liability
- ------------------------------------------------------------------------------------------------------------------
C. IAT GmbH
<CAPTION>
Carrier Policy amount DM Coverage
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Securitas 800,000 Inventory and Fixed Assets, Fire,
Burglary
- ------------------------------------------------------------------------------------------------------------------
Securitas 2,000,000 Company liability
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
EXHIBIT C
INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is made as of October
__, 1996, by and between IAT Holdings, Inc., a Delaware corporation (the
"Company"), and Vertical Financial Holdings ("Vertical" or the "Investor").
RECITALS
WHEREAS, the Company and the Investor are parties to that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement");
WHEREAS, to induce the Investor to invest funds in the Company pursuant to
the Stock Purchase Agreement, the Investor and the Company hereby agree that
this Agreement shall govern the rights of the Investor to cause the Company to
register shares of Common Stock issuable to the Investor upon conversion of
shares of Series A Preferred Stock purchased by the Investor and upon exercise
of a Warrant issued to the Investor pursuant to the Stock Purchase Agreement,
and certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Common Stock" means shares of the common stock of the
Company, par value $.01 per share.
(c) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the
SEC.
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.12 hereof.
-1-
<PAGE>
(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(f) The term "Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share.
(g) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(h) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Preferred Stock or upon exercise
of the Warrant, (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the shares referenced in (i) above,
excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned in accordance with the terms of Section 1.12 hereof.
(i) The term "SEC" shall mean the Securities and Exchange Commission.
(j) The term "Warrant" shall mean the warrant to purchase shares of
Common Stock of the Company issued to the Investor pursuant to the Stock
Purchase Agreement.
1.2 Request for Registration.
(a) If the Company shall receive at any time after December 31, 1996 a
written request from the Investor that the Company file a registration statement
under the Act covering the registration of at least twenty-five percent (25%) of
the Registrable Securities then held by the Investor, the Company shall:
(1) within ten (10) days of the receipt thereof, give written notice,
in accordance with Section 3.5 hereof, of such request to all
such other Holders; and
(2) file as soon as practicable, and in any event within sixty (60)
days of the receipt of such request, and use all reasonable
efforts to cause to become effective as soon as practicable, the
registration under the Act of all Registrable Securities which
such Holders request to be registered, subject to the limitations
of Subsection 1.2(b).
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting,
-2-
<PAGE>
they shall so advise the Company as a part of their request made pursuant to
Subsection 1.2(a) and the Company shall include such information in the written
notice referred to in Subsection 1.2(a). The underwriter will be selected by the
Company and shall be acceptable to a majority in interest of the Initiating
Holders. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 1.2, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Company shall exclude from such underwriting
(x) first, the maximum number of securities, if any, other than Registrable
Securities, as is necessary to reduce the size of the offering and (y) then the
minimum number of Registrable Securities, pro rata to the extent practicable, on
the basis of the number of Registrable Securities requested to be registered
among the participating holders of Registrable Securities, as is necessary in
the opinion of the managing underwriter(s) to reduce the size of the offering.
(c) In addition, the Company shall not be obligated to effect, or to take
any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations pursuant to
this Section 1.2, excluding any registrations effected on Form S-3, and
such registrations have been declared or ordered effective; provided, that
the Company shall not be obligated to effect more than one registration
pursuant to this Section 1.2 in any twelve (12) month period;
(ii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below; or
(iii) If the Company delivers to the Initiating Holders an opinion, in
form and substance acceptable to such Initiating Holders, of counsel
satisfactory to the Initiating Holders that the Registrable Securities
requested to be registered by the Initiating Holders may be sold or
transferred pursuant to Rule 144(k) of the Act.
1.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, a registration relating solely to a
Rule 145 transaction, a
-3-
<PAGE>
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after giving of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered; provided, that the Company shall not be obligated to effect more
than two (2) registrations pursuant to this Section 1.3.
1.4 Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and keep such registration
statement effective for a period of up to one hundred twenty (120) days or
until the distribution contemplated in the Registration Statement has been
completed, whichever first occurs; provided, however, that such one hundred
twenty (120) day period shall be extended for a period of time equal to the
period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and provided further that in the case of any
registration of Registrable Securities on Form S-3 that are intended to be
offered on a continuous or delayed basis, such one hundred twenty (120) day
period shall be extended until all such Registrable Securities are sold, if
applicable rules under the Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of
the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the 1934 Act in the registration
statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as, in the opinion of counsel to the Company, may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
-4-
<PAGE>
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with the registration
pursuant to this Section 1, if such Registrable Securities are being sold
through underwriters, or, if such Registrable Securities are not being sold
through underwriters, on the date that the registration statement with
respect to such Registrable Securities becomes effective, (i) an opinion,
dated such date, of counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders, and (ii) a letter, dated such
date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself,
-5-
<PAGE>
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder, including (without limitation) all registration, filing,
and qualification fees, printers' and accounting fees relating or apportionable
thereto and, for one such registration only, the reasonable fees and
disbursements of one counsel for the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock pursuant to Section 1.3,
the Company shall not be required under Section 1.3 to include any of a Holder's
securities in such underwriting unless such Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters, and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall exclude from such underwriting (x) first, the maximum number of
securities, if any, other than Registrable Securities being sold for the account
of other than the Company, as is necessary to reduce the size of the offering
and (y) then the minimum number of Registrable Securities, pro rata to the
extent practicable, on the basis of the number of Registrable Securities
requested to be registered among the participating holders of Registrable
Securities, as is necessary in the opinion of the managing underwriter(s) to
reduce the size of the offering.
1.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder
participating in such registration, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they
may become subject under the Act, the 1934 Act or state
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securities and blue sky laws, or otherwise insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto and any document filed in
connection therewith or in connection with any registration or
qualification under the state securities and blue sky laws, (ii) the
omission or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Act, the 1934 Act or state securities and blue sky laws or any rule or
regulation promulgated under the Act, the 1934 Act or state securities and
blue sky laws and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
Company shall not be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person;
provided, however, that the indemnity agreement contained in this
Subsection 1.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this
Subsection 1.9(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that, in no
event shall any selling Holder's liability under this Subsection 1.9(b)
exceed the proceeds received by such Holder from the offering (net of any
underwriting discounts and commissions).
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(c) Promptly after receipt by an indemnified party under this Section
1.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to
be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability
to defend such action, shall relieve such indemnifying party of its
liability under this Section 1.9, but (i) only to the extent of the
liability actually resulting from the failure to deliver written notice and
(ii) the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or
omission; provided, that in no event shall any selling Holder's liability
under this Section 1.9(d) exceed the proceeds received by such Holder from
the offering (net of any underwriting discounts and commissions).
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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(f) The obligations of the Company and Holders under this Section 1.9
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of
the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), (ii)
a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.11 Form S-3 Registration. In case the Company shall receive at any time
after the completion of the first registration statement for a public offering
of securities of the Company (other than a registration statement relating
either to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request from the Holders of at least twenty five percent (25%) of the
Registrable Securities then outstanding that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
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(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance,
pursuant to this Section 1.11: (1) if Form S-3 is not available for such
offering by the Holders; (2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriting discounts or commissions) of less than $500,000; (3) if the
Company has already effected during the previous twelve (12) month period
two (2) registrations on Form S-3, or any equivalent successor form, for
the Holders pursuant to this Section 1.11; or (4) in any particular
jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection
with a registration requested pursuant to this Section 1.11, including,
without limitation, all registration, filing, qualification, printers' and
accounting fees and the reasonable fees and disbursements of one (1)
counsel for the selling Holder or Holders and counsel for the Company, but
excluding any underwriting discounts or commissions associated with
Registrable Securities, shall be borne by the Company. Registrations
effected pursuant to this Section 1.11 shall not be counted as
registrations effected pursuant to Sections 1.2 or 1.3.
(d) The Company shall not be obligated to effect any registration
pursuant to this Section 1.11 if the Company delivers to the Holders
requesting registration under this Section 1.11 an opinion, in form and
substance acceptable to such Holders, of counsel satisfactory to such
Holders, that the Registrable Securities so requested to be registered may
be sold or transferred pursuant to Rule 144(k) under the Act.
1.12 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to any transferee or assignee of
such securities, provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are
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being assigned; and (b) such transferee or assignee agrees in writing to be
bound by and subject to the terms and conditions of this Agreement.
2. Covenants of the Company.
2.1 Financial Statements and Other Information. Except as otherwise set
forth below in this Section 2.1, until the Company is subject to the reporting
requirements of the 1934 Act, the Company will deliver to the Investor, for so
long as the Investor holds any shares of the Company's Common Stock:
(a) as soon as available, but in any event within forty-five (45) days
after the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of operations and consolidated cash flows
of the Company and its subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such quarter,
and consolidated balance sheets of the Company and its subsidiaries as of
the end of such quarterly period, setting forth in each case comparisons to
the annual budget and to the corresponding period in the preceding fiscal
year, and all such statements will be prepared in accordance with generally
accepted accounting principles, consistently applied (except for the
absence of notes and subject to normal year-end adjustments);
(b) as promptly as possible (but in any event within ninety (90) days)
after the end of each fiscal year, audited consolidated statements of
operations and a consolidated statement of cash flows of the Company and
its subsidiaries for such fiscal year and consolidated balance sheets and
statements of stockholders' equity of the Company and its subsidiaries as
of the end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance with
United States generally accepted accounting principles, consistently
applied, and accompanied by an unqualified opinion (except for
qualifications regarding specified contingent liabilities) of an
independent accounting firm selected by the Company's Board of Directors;
(c) prior to the end of each fiscal year, an annual budget (approved
by the Board of Directors) prepared on a monthly, consolidated basis for
the Company and its subsidiaries for the succeeding fiscal year (displaying
detailed anticipated statements of operations and cash flows and balance
sheets), and promptly upon preparation thereof any other significant
budgets which the Company prepares and any revisions of such annual or
other budgets;
(d) promptly (and in any event within thirty (30) days) after the
discovery or receipt of notice of any event or circumstance affecting the
Company or its subsidiaries that is determined in good faith by the Company
to be material to the Company and its subsidiaries, taken as a whole,
including but not limited to, the filing of any material litigation against
the Company or its subsidiaries, acquisitions, mergers, substantial sales
of assets, significant regulatory or legal developments, the commencement
of voluntary or involuntary bankruptcy proceedings, natural or
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other disasters, significant changes in management or directors, changes in
auditors, and execution or termination of, or defaults under, material
contracts, a letter from the Chief Executive Officer or Chief Financial
Officer of the Company specifying the nature and period of existence
thereof and, in the case of material litigation, what actions the Company
and its subsidiaries have taken and propose to take with respect thereto;
(e) promptly after transmission thereof, copies of all financial
statements, proxy statements, reports and any other written communications
which the Company sends to its stockholders generally and copies of all
registration statements and all regular, special or periodic reports which
it files with the SEC or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public;
(f) a notice specifying the terms of all sales of the Company's
securities of which the Company is aware, promptly following the
consummation thereof; and
(g) notice of the effectiveness under the Act of the registration
covering the Company's initial public offering, such notice to be provided
by telecopier immediately following the SEC's notification to the Company
of such effectiveness.
Each of the financial statements referred to in this Section 2.1 will be
true and correct in all material respects and will fairly present the Company's
consolidated financial position and results of operations as of the dates and
for the periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the Company's
financial condition, operating results or business prospects). The Company's
obligation to provide to the Investor the materials described in Subsection (e)
above will continue after the Company is subject to the reporting requirements
of the 1934 Act until the Investor no longer holds any shares of the Company's
Preferred Stock (or Common Stock issued upon conversion thereof or upon exercise
of the Warrant).
2.2 Designated Director. For so long as the Investor shall hold at least 5%
of the shares of the Company's Preferred Stock, (or at least 5% of the Common
Stock issuable upon conversion of the Preferred Stock or upon exercise of the
Warrant), the Investor shall have the right, but not the obligation, to nominate
as a member of the management slate for election to the Company's Board of
Directors by the stockholders of the Company one (1) person and for so long as
the Investor shall hold at least 10% of the shares of the Company's Preferred
Stock (or at least 10% of the Common Stock issued upon conversion thereof or
upon exercise of the Warrant), the Investor shall have the right, but not the
obligation, to nominate as a member of the management slate for election to the
Company's Board of Directors by the stockholders of the Company two (2) persons,
and the Company agrees to use its best efforts to ensure that such person or
persons are duly elected. Moreover, the
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Company agrees that one such person shall be elected Co-Chairman of the Board of
Directors of the Company.
2.3 Inspection of Property. Until the Company is subject to the reporting
requirements of the 1934 Act, the Company will permit the Investor, or any
representatives designated by the Investor, upon reasonable notice and during
normal business hours and such other times as the Investor may reasonably
request, to (i) visit and inspect any of the properties of the Company and its
subsidiaries, (ii) examine the corporate and financial records of the Company
and its subsidiaries and make copies thereof or extracts therefrom, (iii)
discuss the affairs, finances and accounts of the Company and its subsidiaries
with the directors, senior management and independent accountants of the Company
and its subsidiaries, and (iv) consult with and advise the management of the
Company and its subsidiaries as to their affairs, finances and accounts.
2.4 Positive Covenants. So long as any shares of the Preferred Stock are
outstanding, the Company agrees as follows:
(a) The Company will retain independent public accountants acceptable
to the Investor in its discretion who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
independent public accountants so selected, or any firm of independent
public accountants hereafter employed by the Company are terminated, the
Company will promptly thereafter notify the Investor and will request the
firm of independent public accountants whose services are terminated to
deliver to the Investor a letter from such firm setting forth the reasons
for the termination of their services. In the event of such termination,
the Company will promptly thereafter engage another firm of independent
public accountants of recognized national standing. In its notice to the
Investor the Company shall state whether the change of accountants was
recommended or approved by the Board of Directors of the Company or any
committee thereof.
(b) The Company will retain counsel to the Company acceptable to the
Investor in its discretion.
(c) The Company's Board of Directors will meet at least once every
fiscal quarter.
(d) The Company shall maintain in full force and effect, fire,
casualty, workmen's compensation and liability insurance policies, with
extended coverage, in such amounts and with such coverage as are carried by
companies in a position similar to that of the Company.
2.5 Termination of Certain Covenants. The covenants set forth in Sections
2.3 and 2.4 shall terminate and be of no further force or effect upon the
consummation of an initial public offering of shares of Common Stock of the
Company.
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3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including transferees
of any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York, disregarding New York principles of conflicts
of laws which would otherwise provide for the application of the substantive
laws of another jurisdiction. The parties agree that all actions or proceedings
arising in connection with this Agreement shall be tried and litigated only in
the State of New York. The parties waive any right they may have to assert the
doctrine of forum non conveniens or to object to such venue, and hereby consent
to court ordered relief.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery or delivery by facsimile to the party to be
notified or four (4) days after deposit with an air courier, the United States
Post Office or air courier in the case of non-U.S. parties, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
3.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of two-thirds of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 3.7 shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
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3.8 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
IAT HOLDINGS, INC.
By: ___________________________________
Name:
Title:
Address:
Facsimile Telephone Number:
VERTICAL FINANCIAL HOLDINGS
By: _____________________________________
Name:
Title:
Address:
Facsimile Telephone Number:
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EXHIBIT D
MARKETING AGREEMENT
MARKETING AGREEMENT, dated as of October 24, 1996 (the "Agreement"),
between IAT Holdings, Inc., a Delaware corporation (the "Company"), and General
Capital, a corporation organized under the laws of Switzerland ("General").
W I T N E S S E T H :
WHEREAS, the Company desires to receive services in connection with (a)
marketing its products worldwide, (b) arranging debt or equity financing for the
Company's products to be purchased by its customers and (c) arranging financing
for the Company's operations, leasing programs, joint ventures and distribution
arrangements generally, in each case for the further enhancement of the
Company's marketing strategy (collectively, the "Objectives"); and
WHEREAS, General has established its expertise in, among other things,
assisting companies in marketing their produces worldwide and arranging
financing for customers; and
WHEREAS, General has performed services for the Company's wholly-owned
subsidiary IAT AG, a corporation organized under the laws of Switzerland, since
early 1996 as outlined above and the parties now desire to memorialize their
agreement and understanding as to their respective duties and obligations.
NOW, THEREFORE, in consideration of the mutual covenants and agreements,
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties do hereby covenant and agree, upon the terms
and subject to the conditions hereinafter set forth, as follows:
Section 1. Retention of General. The Company engages General to assist the
Company in achieving its Objectives, and General accepts such engagement,
subject to the terms and conditions of this Agreement.
Section 2. Services. (a) At such times as are mutually convenient to
General and the Company during the Term (as defined below), General shall
provide its services to the Company in connection with the Objectives.
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(b) In connection with performing its services, General and the Company
acknowledge and agree that General may, from time to time, propose certain
arrangements to the Company in connection with its Objectives and the Company
has no obligation to accept such proposals or further obligate itself, and shall
only do so with prior written approval.
Section 3. Term. Subject to Section 5 hereof, this Agreement shall be for a
term of five years, commencing on the date hereof and ending on October 24, 2001
(the "Term").
Section 4. Compensation. For services rendered or to be rendered by General
pursuant to this Agreement, the Company shall pay or issue to General the
following:
(a) $100,000 for services to be performed by General during the Term,
which shall be paid on the date hereof.
(b) $300,000 payable at such time as the Company's consolidated
stockholders' equity exceeds $6,000,000 and an additional $100,000 payable
at such time as the Company's consolidated stockholders' equity exceeds
$8,000,000; provided, that the current liabilities of Holdings used to
determine the consolidated stockholders' equity of the Company shall not
exceed $3,500,000 and, to the extent it exceeds $3,500,000 any such
additional amounts shall not reduce such stockholders' equity.
Section 5. Termination. The Company or General may terminate this Agreement
at any time after June 30, 1997 if the Company's working capital does not exceed
$4,000,000 by such date (the "Termination Date"), provided, however, that in the
event the Company's working capital exceeds such amount by the Termination Date,
this Agreement shall not be terminated and shall be a valid and binding
obligation upon the parties during the Term.
Section 6. Marketing Efforts. (a) The Company shall provide General with
certain technical and other information relating to its business and operations
as is reasonable and necessary for General to market the Company's products. In
addition, the Company shall provide General with the necessary sales promotion
materials to market the Company's products.
(b) The Company shall also make its management available to General and
prospective customers at such reasonable times and locations as is necessary for
General to market the Company's products.
Section 7. Confidentiality; Non-Competition. General acknowledges that in
the course of its engagement it will become familiar with trade secrets and
other confidential information ("Confidential Information") concerning the
Company and that its services will be special, unique and extraordinary to the
Company. General agrees that, during the Term and for a period of five years
following the Term, it shall not disclose to any third party any Confidential
Information for any
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purpose other than the performance of its duties under this Agreement and upon
the prior written approval of the Company. Subject to the limitations set forth
herein, General agrees that during the Term and for a period of two years
thereafter it shall not directly or indirectly own, manage, control, participate
in, consult with, render services for, or in any manner engage in any business
competing with the business of the Company as such business exists within any
geographical area in which the Company conducts its business. In the event the
Company breaches its duties or obligations under this Agreement, the Company
agrees that General shall not be bound by this Agreement, except for the
confidentiality provisions contained in this Section 7.
Section 8. Further Assurances. During the Term, the Company shall use its
reasonable good faith efforts to maintain and promote its products.
Section 9. Representations and Warranties. The Company and General each
represent that (a) it has the requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, (b) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and (c) this
Agreement is valid and binding upon each party, enforceable against each party
in accordance with its terms.
Section 10. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, disregarding any New York
principles of conflicts of laws that would otherwise provide for the application
of the substantive laws of another jurisdiction. The parties agree that all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated only in the State of New York. The parties waive any right they
may have to assert the doctrine of forum non conveniens or to object to such
venue, and hereby consent to court ordered relief.
Section 11. Entire Agreement; Amendments. This Agreement contains the full
and entire understanding and agreement between the parties and supersedes and
preempts any prior understandings or agreements, whether written or oral. The
provisions of this Agreement may be amended or waived only with the prior
written consent of the Company and General.
Section 12. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and shall be enforceable by General and the Company and
their respective successors and assigns. The rights and obligations of General
under this Agreement (with the exception of those rights in Section 4 hereof)
shall not be assignable.
Section 13. Counterparts. This Agreement may be executed in two or more
counterparts, each which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
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Section 14. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery or delivery by facsimile to the party
to be notified or four (4) days after deposit with an air courier or the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
Section 15. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
IAT HOLDINGS, INC.
By:_______________________________
Name:
Title:
Address:
Facsimile telephone number:
GENERAL CAPITAL
By:_______________________________
Name:
Title:
Address:
Facsimile telephone number:
<PAGE>
EXHIBIT E
Warrant to Purchase 1,980,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
IAT HOLDINGS, INC.
This is to Certify That, FOR VALUE RECEIVED, Vertical Financial Holdings,
or assigns ("Holder"), is entitled to purchase from IAT Holdings, Inc., a
Delaware corporation (the "Company"), following an initial public offering (the
"IPO") of shares of common stock, par value $.01 per share (the "Common Stock")
of the Company and subject to the provisions of this Warrant, 1,980,000 fully
paid, validly issued and nonassessable shares of Common Stock of the Company at
a price per share equal to 130% of the initial public offering price of a share
of Common Stock in the IPO at any time or from time to time during the ten (10)
year period following the closing date of the IPO, but not later than 5:00 p.m.
New York City Time on December 31, 2006. The number of shares of Common Stock to
be received upon the exercise of this Warrant and the price to be paid for each
share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price."
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any time or
from time to time during the ten (10) year period following the closing
date of the IPO, but not later than 5:00 New York City Time on December 31,
2006 (the "Exercise Period") provided, however, that (i) if either such day
is a day on which banking institutions in the State of New York are
authorized by law to close, then on the next succeeding day which shall not
be such a day, and (ii) in the event of any merger, consolidation or sale
of substantially all the assets of the Company as an entirety, resulting in
any distribution to the Company's stockholders, prior to December 31, 2006,
the Holder shall have the right to exercise this Warrant commencing at such
time through December 31, 2006 into the kind and amount of shares of stock
and other securities and property (including cash) receivable by a holder
of the number of shares of Common Stock into which this Warrant might have
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been exercisable immediately prior thereto. This Warrant may be exercised
by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the
Purchase Form annexed hereto duly executed and accompanied by payment of
the Exercise Price for the number of Warrant Shares specified in such form.
As soon as practicable after each such exercise of the warrants, but not
later than seven (7) days from the date of such exercise, the Company shall
issue and deliver to the Holder a certificate or certificate for the
Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute
and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder. Upon
receipt by the Company of this Warrant at its office, or by the stock
transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically
delivered to the Holder.
(2) At any time during the Exercise Period, the Holder may, at its
option, exchange this Warrant, in whole or in part (a "Warrant Exchange"),
into the number of Warrant Shares determined in accordance with this
Section (a)(2), by surrendering this Warrant at the principal office of the
Company or at the office of its stock transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice of Exchange
or, if later, the date the Notice of Exchange is received by the Company
(the "Exchange Date"). Certificates for the shares issuable upon such
Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the shares remaining subject to this Warrant, shall be
issued as of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant Exchange,
this Warrant shall represent the right to subscribe for and acquire the
number of Warrant Shares (rounded to the next highest integer) equal to (i)
the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal
to the quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the current market value of a share
of Common Stock. Current market value shall have the meaning set forth
Section (c) below, except that for purposes hereof, the date of exercise,
as used in such Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of
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a share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market, the current market value shall be
the last reported sale price of the Common Stock on such exchange or market
on the last business day prior to the date of exercise of this Warrant or
if no such sale is made on such day, the average closing bid and asked
prices for such day on such exchange or market; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq Small Cap Market, the
current Market Value shall be the average of the closing bid and asked
prices for such day on such market and if the Common Stock is not so
traded, the current market value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. on the
last business day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than book value thereof
as at the end of the most recent fiscal year of the Company ending prior to
the date of the exercise of the Warrant, determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant
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executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
the number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event
listed above shall occur.
(2) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or having a
conversion price per share) less than the current market price of the
Common Stock (as defined in Subsection (8) below) on the record date
mentioned below, or less than the Exercise Price on such record date, the
Exercise Price shall be adjusted so that the same shall equal the lower of
(i) the price determined by multiplying the Exercise Price in effect
immediately prior to the date of such issuance by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so offered (or the aggregate conversion
price of the convertible securities so offered) would purchase at such
current market price per share of the Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
on such
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record date and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so
offered are convertible) or (ii) in the event the Subscription Price is
equal to or higher than the current market price but is less than the
Exercise Price, the price determined by multiplying the Exercise Price in
effect immediately prior to the date of issuance by a fraction, the
numerator of which shall be the sum of the number of shares outstanding on
the record date mentioned below and the number of additional shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at the Exercise Price in
effect immediately prior to the date of such issuance, and the denominator
of which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of additional
shares of Common Stock offered for subscription or purchase (or into which
the convertible securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants;
and to the extent that shares of Common Stock are not delivered (or
securities convertible into Common Stock are not delivered) after the
expiration of such rights or warrants the Exercise Price shall be
readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made
upon the basis of delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (1) above) or subscription rights or warrants (excluding those
referred to in Subsection (2) above), then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding
multiplied by the current market price per share of Common Stock (as
defined in Subsection (8) below), less the fair market value (as determined
by the Company's Board of Directors) of said assets or evidences of
indebtedness so distributed or of such rights or warrants, and the
denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by such current market price per share of Common
Stock. Such adjustment shall be made successively whenever such a record
date is fixed. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date for
the determination of shareholders entitled to receive such distribution.
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(4) In case the Company shall issue shares of its Common Stock,
excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by the Company's Board of
Directors and approved by its shareholders, if such shares would otherwise
be included in this Subsection (4), (but only to the extent that the
aggregate number of shares excluded hereby and issued after the date
hereof, shall not exceed 5% of the Company's Common Stock outstanding at
the time of any issuance), (iii) upon exercise of this Warrant (iv) to
shareholders of any corporation which merges into the Company in proportion
to their stock holdings of such corporation immediately prior to such
merger, upon such merger, or (v) issued in a bona fide public offering
pursuant to a firm commitment underwriting, but only if no adjustment is
required pursuant to any other specific subsection of this Section (f)
(without regard to Subsection (9) below) with respect to the transaction
giving rise to such rights, for a consideration per share (the "Offering
Price") less than the current market price per share (as defined in
Subsection (8) below) on the date the Company fixes the offering price of
such additional shares or less than the Exercise Price, the Exercise Price
shall be adjusted immediately thereafter so that it shall equal the lower
of (i) the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the number of shares of
Common Stock which the aggregate consideration received (determined as
provided in Subsection (7) below) for the issuance of such additional
shares would purchase at such current market price per share of Common
Stock, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after the issuance of such additional shares
or (ii) in the event the Offering Price is equal to or higher than the
current market price per share but less than the Exercise Price, the price
determined by multiplying the Exercise Price in effect immediately prior to
the date of issuance by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in
subsection (7) below) for the issuance of such additional shares would
purchase at the Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made successively whenever such
an issuance is made.
(5) In case the Company shall issue any securities convertible into or
exchangeable for its Common Stock, excluding securities issued in
transactions described in Subsections (2) and (3) above, for a
consideration per share of Common
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Stock (the "Conversion Price") initially deliverable upon conversion or
exchange of such securities (determined as provided in Subsection (7)
below) less than the current market price per share (as defined in
Subsection (8) below) in effect immediately prior to the issuance of such
securities, or less than the Exercise Price, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the lower of (i) the
price determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to the
issuance of such securities and the number of shares of Common Stock which
the aggregate consideration received (determined as provided in Subsection
(7) below) for such securities would purchase at such current market price
per share of Common Stock, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to such
issuance and the maximum number of shares of Common Stock of the Company
deliverable upon conversion of or in exchange for such securities at the
initial conversion or exchange price or rate or (ii) in the event the
Conversion Price is equal to or higher than the current market price per
share but less than the Exercise Price, the price determined by multiplying
the Exercise Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of shares
outstanding immediately prior to the issuance of such securities and the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in subsection (7) below) for such securities would
purchase at the Exercise Price in effect immediately prior to the date of
such issuance, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to the issuance of
such securities and the maximum number of shares of Common Stock of the
Company deliverable upon conversion of or in exchange for such securities
at the initial conversion or exchange price or rate. Such adjustment shall
be made successively whenever such an issuance is made.
(6) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the
number of Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Shares initially
issuable upon exercise of this Warrant by the Exercise Price in effect on
the date hereof and dividing the product so obtained by the Exercise Price,
as adjusted.
(7) For purposes of any computation respecting consideration received
pursuant to Subsections (4) and (5) above, the following shall apply:
(A) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case
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shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(B) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), whose
determination shall be conclusive; and
(C) in the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by
the Company for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (A) and (B) of
this Subsection (7)).
(8) For the purpose of any computation under Subsections (2), (3), (4)
and (5) above, the current market price per share of Common Stock at any
date shall be determined in the manner set forth in Section (c) hereof
except that the current market price per share shall be deemed to be the
higher of (i) the average of the prices for 30 consecutive business days
before such date or (ii) the price on the business day immediately
preceding such date.
(9) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (9) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (f) shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this Section (f),
as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income tax liability to
the holders of Common Stock or securities convertible into Common Stock
(including Warrants).
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(10) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant, and, if requested, information describing the transactions giving
rise to such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. In the event the
Company does not provide the Holder with such notice and information within
10 days of a request by the Holder, then notwithstanding the provisions of
this Section (f), the Exercise Price shall be immediately adjusted to equal
the lowest Offering Price, Subscription Price or Conversion Price, as
applicable, since the date of this Warrant, and the number of shares
issuable upon exercise of this Warrant shall be adjusted accordingly. The
Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants
employed by the Company) to make any computation required by this Section
(f), and a certificate signed by such firm shall be conclusive evidence of
the correctness of such adjustment.
(11) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Subsections (1) to
(9), inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Section, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
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executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Common Stock or other securities
shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part,
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for a security of the Company other than Common Stock, any such issue shall be
treated as an issue of Common Stock covered by the provisions of Subsection (1)
of Section (f) hereof.
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(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Holder of this
Warrant and the shares of Common Stock issuable upon exercise of this Warrant
shall have the registration rights set forth in Section 1 of the Investor's
Rights Agreement dated as of October __, 1996 by and between the Company and the
Holder.
IAT HOLDINGS, INC.
By ______________________________
[SEAL]
Dated: October __, 1996
Attest:
- -----------------------------
Secretary
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PURCHASE FORM
Dated ____________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _______ shares of Common Stock and hereby makes payment
of _______ in payment of the actual exercise price thereof.
__________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ________________________________
(Please typewrite or print in block letters)
Address ______________________________
Signature _____________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers unto
Name _____________________________
(Please typewrite or print in block letters)
Address ____________________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ___________ as attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Date ____________, 19__
Signature ___________________
<PAGE>
************************************************************************
STOCK PURCHASE WARRANT
To Purchase Common Stock of
IAT Holdings, Inc.
************************************************************************
<PAGE>
EXHIBIT F
[Baker & McKenzie - New York Letterhead]
[Form of opinion of counsel to Holdings
Vertical Financial Holdings
[Address]
Ladies and Gentlemen:
We have acted as special counsel to IAT Holdings, Inc., a Delaware
corporation ("Holdings"), in connection with the Stock Purchase Agreement dated
as of October __, 1996 (the "Stock Purchase Agreement"), between Holdings, IAT
AG, a corporation organized under the laws of Switzerland, IAT Deutschland GmbH,
a corporation organized under the laws of Germany, Vertical Financial Holdings
(the "Investor") and the stockholders listed on Schedule I to the Stock Purchase
Agreement. This is the opinion contemplated by Section 5.6 of the Stock Purchase
Agreement. All capitalized terms used in this opinion without definition have
the respective meanings given to them in the Stock Purchase Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Stock Purchase
Agreement, (ii) the Rights Agreement, (iii) the Marketing Agreement, (iv) the
Warrant (together with the Stock Purchase Agreement, the Rights Agreement and
the Marketing Agreement, the "Transaction Documents"), (v) the Certificate of
Incorporation and (vi) the By-Laws of Holdings. In addition, we have made such
investigations and examined such other documents, including certificates of the
officers of Holdings and of public officials, as we have considered necessary or
appropriate as a basis for this opinion. We have assumed the genuineness of the
signatures on all original documents we received and the conformity to the
original documents of all copies submitted to us as certified, conformed or
photographic copies; as to certificates of public officials, we have assumed
that such certificates have been properly given and are accurate.
Members of our firm are admitted to the bar of the State of New York. We
express no opinion as to the laws of any other jurisdiction other than (i) the
laws of the State of New York and the General Corporation Law of the State of
Delaware and (ii) the federal laws of the United States of America.
<PAGE>
Based on the foregoing and subject to the assumptions and qualifications
herein, our opinion is as follows:
1. Holdings is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. Holdings is duly qualified to transact business, and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2. Holdings has all requisite legal and corporate power to execute and
deliver each of the Transaction Documents and to carry out and perform its
obligations under the terms of each of the Transaction Documents. Each of the
Transaction Documents has been duly authorized, executed and delivered by
Holdings and constitutes the legal, valid and binding obligation of Holdings,
enforceable in accordance with its respective terms, except that (a) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights,
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought and (c) any rights
to indemnity may be limited by federal and state securities laws and public
policy considerations. Assuming that each of the Transaction Documents has been
duly authorized, executed and delivered by the Subsidiaries (as defined below)
and assuming that each of the Transaction Documents constitutes the legal, valid
and binding obligation of each of the Subsidiaries under the respective laws of
their jurisdictions, each of the Transaction Documents is enforceable as to each
of such Subsidiaries in accordance with its respective terms, except that (a)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought and
(c) any rights to indemnity may be limited by federal and state securities laws
and public policy considerations.
3. The authorized capitalization of Holdings consists of 20,000,000 shares
of Common Stock, par value $.01 per share (the "Common Stock"), of which
4,620,000 shares are validly issued and outstanding, and 2,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which
1,980,000 shares have been designated Series A Convertible Preferred Stock.
Prior to the Closing, there were no issued and outstanding shares of Preferred
Stock of Holdings. All of the issued and outstanding shares of Common Stock are
duly and validly authorized and issued, fully paid and non-assessable. Except
for the conversion privileges of the Series A Preferred Stock, the Warrant and
the Non-Management Stockholder Warrant, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights), agreements or
commitments of any kind relating to the issuance, sale or transfer of any
securities of Holdings as to which Holdings is a party.
<PAGE>
None of the outstanding shares of Common Stock or other securities of Holdings
was issued in violation of the Securities Act of 1933, as amended.
4. Assuming that all of the subsidiaries of Holdings are listed on Schedule
I hereto, to the best of our knowledge Holdings does not own, directly or
indirectly, any capital stock or other equity ownership or proprietary interest
in any other corporation, association, trust, partnership, joint venture or
other entity.
5. The issuance, sale and delivery of the Series A Preferred Stock which is
being purchased by the Investor pursuant to the Stock Purchase Agreement, the
issuance, sale and delivery of the Warrant and the reservation for issuance of
the Common Stock issuable upon conversion or exercise thereof have been duly
authorized by all required corporate action on the part of Holdings, and when
issued, sold, and delivered in accordance with the terms of the Stock Purchase
Agreement for the consideration expressed therein, will be duly and validly
authorized and issued, fully paid and non-assessable and will be issued in
compliance with all applicable federal securities laws. The Common Stock
issuable upon conversion of the Series A Preferred Stock purchased under the
Stock Purchase Agreement upon issuance in accordance with the terms of the
Certificate of Incorporation and upon exercise of the Warrant, shall be duly and
validly authorized and issued, fully paid, and non-assessable, and issued in
compliance with all applicable federal securities laws. The Series A Preferred
Stock issued pursuant to the Stock Purchase Agreement (and the Common Stock
issuable upon conversion of such Series A Preferred Stock and upon exercise of
the Warrant) will be free and clear from all Encumbrances other than those
created by, or imposed upon, the holders thereof through no action of Holdings.
6. Neither the execution and delivery of the Transaction Documents nor the
consummation of any or all of the transactions contemplated thereby (a) violates
any provision of the Certificate of Incorporation or By-Laws of Holdings, (b)
violates, or is in conflict with, or constitutes a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
results in the termination of, or accelerates the performance required by, or
excuses performance by any person of any of its obligations under, or causes the
acceleration of the maturity of any debt or obligation pursuant to, or results
in the creation or imposition of any Encumbrance upon any property or assets of
Holdings under, any agreement or commitment to which Holdings is a party, or (c)
violates any statute, law, regulation, rule, judgment, decree or order of any
court or other governmental body applicable to Holdings.
7. No consent, approval, order, or authorization of, or registration,
qualification, designation, declaration or filing with, any United States state
or local governmental authority (other than such as may be required under
applicable securities laws of the various jurisdictions in which the Series A
Preferred Stock will be offered or sold, as to which we express no opinion) on
the part of Holdings is required in connection with the consummation of the
transactions contemplated by the Transaction Documents.
<PAGE>
8. There is no action, suit, inquiry, proceeding or investigation by or
before any court or governmental body pending or, to the best of our knowledge,
threatened against or involving Holdings or which questions or challenges the
validity of the Transaction Documents or any action taken or to be taken by
Holdings pursuant to the Transaction Documents or in connection with the
transaction contemplated thereby.
9. To the best of our knowledge, except as provided in Section 1 of the
Rights Agreement, Holdings has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
We are furnishing this opinion to you solely for your benefit, and this
opinion is not to be used, circulated, quoted or otherwise referred to for any
other purpose without our prior written consent.
Very truly yours,
MIR/WD
<PAGE>
October 23, 1996
Vertical Financial Holdings
Ladies and Gentlemen:
1. We have acted as counsel to IAT AG, a corporation organized under the laws
of Switzerland (the "Company" ) in connection with the Stock Purchase
Agreement dated October 4, 1996 (the "Stock Purchase Agreement"), between
AIT Holdings, Inc., a Delaware corporation ("Holdings"), the Company, IAT
Deutschland GmbH Interaktive Mediensysteme, a corporation organized under
the laws of Germany ("IAT Germany"), the stockholders of Holdings and
Vertical Financial Holdings (the "Investor"). This is the opinion
contemplated by Section 5.6 of the Stock Purchase Agreement. All
capitalized terms used in this opinion without definition have the
respective meaning given to them in the Stock Purchase Agreement.
2. In connection with this opinion we have examined a sample copy of (i) the
Stock Purchase Agreement, (ii) the Rights Agreement, (iii) the Marketing
Agreement, (iv) the Warrant (together with the Stock Purchase Agreement,
the Rights Agreement and the Marketing Agreement, the "Transaction
Agreements") and (v) a copy of the current Certificate of Registration and
Articles of Association of the Company, both dated September 26, 1996. In
addition, we have made such investigations and examined such other
documents, records and papers as we have thought relevant and necessary as
a basis for our opinions hereinafter expressed.
3. Assumptions
For the purposes of this opinion, we have assumed:
3.1 The genuineness of all signatures;
3.2 The completeness of and conformity to originals of all documents
purporting to be copies of originals and the authenticity of all
documents submitted to us as originals;
-1-
<PAGE>
3.3 the capacity, power and authority of each of the parties other
than the Company to enter into and the due execution and delivery
by such parties other than the Company of the Transaction
Agreements and the agreements examined by us mentioned in section
4.6 below;
3.4 that since October 21, 1996 there have been no amendments to the
Certificate of Registration and Articles of Associations of the
Company in the form examined by us;
3.5 that there are no provisions of the laws of any jurisdiction
outside Switzerland which would have any implication on the
opinions we express;
3.6 that the Transaction Agreements are legal, valid and enforceable
against the parties thereto under the laws of the State of New
York;
3.7 that, for the purpose of section 4.4(b) hereof and contrary to
the actual situation, all agreements listed in Schedule 1 are
governed by Swiss law.
4. Opinion
We have made such examination of the laws of Switzerland as currently
applied by the courts of Switzerland as in our judgment is necessary or
appropriate for the purposes of this opinion. We do not purport to be
qualified to pass upon and express no opinion herein as to the laws of any
other jurisdiction other than those of Switzerland.
This opinion shall be governed by and construed in accordance with Swiss
law.
On the above assumptions and subject to the reservations below, we are of
the opinion that:
4.1 The company is a corporation duly incorporated, registered and
existing under the laws of Switzerland and has all requisite corporate
power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact
business. According to publicly available information in Switzerland
obtained on October 21, 1996, no legal proceedings have been started
or threatened for the winding-up, dissolution or reorganization or for
the appointment of a receiver, administrator or similar officer of the
Company.
4.2 The Company has all requisite legal and corporate power to execute and
deliver the Stock Purchase Agreement and has all requisite legal and
corporate power to carry out and perform its obligations under the
terms of such agreement. The Stock Purchase Agreement has been duly
authorized, (subject to the assumption in section 3.1 above) executed
and delivered by the Company and, as a whole constitutes the valid and
-2-
<PAGE>
binding obligation of the Company under the assumption that the Stock
Purchase Agreement were subject to Swiss law. The choice of New York
law to govern the Stock Purchase Agreement will be upheld and applied
by the courts in Switzerland in proceedings in relation to the Stock
Purchase Agreement, provided that the requested party has sufficiently
proven to such court the contents of New York law, and further
provided, that New York law is not incompatible with public policy as
understood in Switzerland.
4.3 The authorized capital of the Company consists of 10,000 registered
shares, par value CHF 1,000.- per share, which are all validly issued
and outstanding, all of which are held by Holdings to our knowledge
free and clear of all liens, encumbrances, security interests and,
subject to the transfer restriction contained in art. 7 of the
Articles of Association of the Company, free of any restrictions on
transfer. All of the issued and outstanding registered shares are
fully paid-in and non-assessable. To our knowledge, with the exception
of the agreement of August 20/23, 1996 between K.-D. Sippel, R. Suter,
Walther Glas GmbH and the Company, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights)
or commitments of any kind relating to the issuance, sale or transfer
of any securities of the Company.
4.4 Neither the execution and delivery of the Stock Purchase Agreement nor
the consummation of any or all of the transactions contemplated
thereby (a) violates any provision of the Articles of Association of
the Company, (b) to our knowledge, violates, or is in conflict with,
or constitutes a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or results in the
termination of, or accelerates the performance required by, or excuses
performance by any person of any of its obligation under, or causes
the acceleration of the maturity of any debt or obligation pursuant
to, or results in the creation or imposition of any encumbrance upon
any property or assets of the Company under any agreement or
commitment to which the Company is a party, or (c) to our knowledge,
violates any statute, law, regulation, rule, judgment, decree or order
of any court or other governmental body applicable to the Company.
4.5 No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Swiss
federal, cantonal or municipal governmental authority on the part of
the Company is required in connection with the consummation of the
transactions contemplated by the Stock Purchase Agreement. The Company
has, to our knowledge, complied with all laws, ordinances and
regulations applicable to it and its business, which the failure to
comply with would, either individually on the aggregate, have a
materially adverse effect upon the Company. The Company has obtained
all Swiss federal, cantonal and municipal governmental licenses and
permits material to and necessary in the conduct of its
-3-
<PAGE>
respective business, such licenses and permits are according to
information received from management in full force and effect, no
material violations are or have been recorded according to publicly
available information in respect of any such licenses or permits, and
no proceeding is pending or, to our knowledge, threatened to revoke or
limit any thereof.
4.6 The agreements of the company listed in Schedule I hereto have been
duly executed by the Company and we are of the opinion that they
constitute the legal, valid and binding obligation of the Company,
enforceable in accordance with their terms to the extent they are
subject to Swiss law.
4.7 To our knowledge, there is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental body pending or
threatened against or involving the Company which questions or
challenges the validity of the Stock Purchase Agreement or any action
taken or to be taken by the Company pursuant to the Stock Purchase
Agreement or in connection with the transactions contemplated thereby,
and the Company is, with the exception of the proceedings mentioned in
Exhibit B of the Stock Purchase Agreement, not subject to any
judgment, order, or decree that may have any material adverse effect
on its business practices or on its ability to acquire any property or
conduct any business in any part of the world.
5. Qualifications
This opinion is subject to the following qualifications:
(a) The enforceability and validity of the Transaction Agreements may be
limited or affected by bankruptcy, insolvency, liquidation,
arrangement, reorganization, moratorium or other laws relating to, or
affecting, creditor' rights generally and by general equitable
principles.
(b) We express no opinion on any statements or warranties of fact set out
in the Transaction Agreements.
(c) The enforcement of the Investor's rights under the Transaction
Agreements may be subject to the defenses of set off or counterclaim.
(d) With regard to our opinion expressed in section 4.3. last sentence,
section 4.4(b) and (c), section 4.5 second sentence and 4.7 above we
have solely relied upon information received from management of the
Company and we have not made any independent review of the Company's
records with regard to these issues, provided that with regard to
section 4.4(b) we have reviewed the documents listed in Schedule 1.
-4-
<PAGE>
6. Benefit
This opinion is addressed to you solely in your capacity as investor for your
own use. This opinion may not be referred or relied upon for any other purpose
or disclosed in whole or in part to any person other than your legal counsel.
Very truly yours,
Martin Frey
Schedule 1: List of Material Agreements
-5-
<PAGE>
SCHEDULE 1 TO THE OPINION LETTER OF BAKER & MCKENZIE
ZURICH
LIST OF MATERIAL AGREEMENTS
- MVP Cross License Agreement between Texas Instruments France and IAT
AG, dated August 8/16, 1994
- Kooperationsvertrag zur Entwicklung der Version 3 des Multimedialen
Informations-und Kommunikationssystems MIKS (-Co-operation Agreement
regarding the Development of Version 3 of the Multimedis Informaton
and Communications System MIKS-) between IBM Germany, German Telekom
and IAG AG, dated Decemher 16, 1994
- Rahenkooperationsvertrag ber die gemeinsame Weiterentwicklung des
LT/Deutsche Telekom Softwarecodecs aut Basis des Texas Instruments
Parallelprozesor TMS320C8x ("frame Cooperation Agreement regarding the
Joint Further Deelopment of the I.AT/Genn Telecom Softwarecodec based
on Texas Instruments Parallel Processor 5320C8") between German
Telekom and IAT AG, dated October 2/16, 1995 Joint Development and
Cross License Agreement between Texas Instruments Inc. and IAT AG,
dated June 21/July 18, 1996 Lizenz- und Vertriebsrhmenvereinbarung
("License and Frame-Distribution-Agreement") between German Telekom
and IAT At, dated March 11/April 11/1994
- Know-How, Vertriebo- und Herstellungs-Lizentvertrag ("Xnow-How",
Distribution- and Production-License Agreement") between IAT AG and
IAS GmbH, dated December 1995
-6-
INVESTOR'S RIGHTS AGREEMENT
THIS INVESTOR'S RIGHTS AGREEMENT (the "Agreement") is made as of October
24, 1996, by and between IAT Holdings, Inc., a Delaware corporation (the
"Company"), and Vertical Financial Holdings ("Vertical" or the "Investor").
RECITALS
WHEREAS, the Company and the Investor are parties to that certain Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement");
WHEREAS, to induce the Investor to invest funds in the Company pursuant to
the Stock Purchase Agreement, the Investor and the Company hereby agree that
this Agreement shall govern the rights of the Investor to cause the Company to
register shares of Common Stock issuable to the Investor upon conversion of
shares of Series A Preferred Stock purchased by the Investor and upon exercise
of a Warrant issued to the Investor pursuant to the Stock Purchase Agreement,
and certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Common Stock" means shares of the common stock of the
Company, par value $.01 per share.
(c) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the
SEC.
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.12 hereof.
(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(f) The term "Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share.
<PAGE>
(g) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(h) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Preferred Stock or upon exercise
of the Warrant, (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the shares referenced in (i) above,
excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned in accordance with the terms of Section 1.12 hereof.
(i) The term "SEC" shall mean the Securities and Exchange Commission.
(j) The term "Warrant" shall mean the warrant to purchase shares of
Common Stock of the Company issued to the Investor pursuant to the Stock
Purchase Agreement.
1.2 Request for Registration.
(a) If the Company shall receive at any time after December 31, 1996 a
written request from the Investor that the Company file a registration
statement under the Act covering the registration of at least twenty-five
percent (25%) of the Registrable Securities then held by the Investor, the
Company shall:
(1) within ten (10) days of the receipt thereof, give written notice,
in accordance with Section 3.5 hereof, of such request to all
such other Holders; and
(2) file as soon as practicable, and in any event within sixty (60)
days of the receipt of such request, and use all reasonable
efforts to cause to become effective as soon as practicable, the
registration under the Act of all Registrable Securities which
such Holders request to be registered, subject to the limitations
of Subsection 1.2(b).
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to Subsection 1.2(a)
and the Company shall include such information in the written notice
referred to in Subsection 1.2(a). The underwriter will be selected by the
Company and shall be acceptable to a majority in interest of the Initiating
Holders. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the
2
<PAGE>
Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company as provided in Subsection 1.4(e)) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other
provision of this Section 1.2, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall exclude from
such underwriting (x) first, the maximum number of securities, if any,
other than Registrable Securities, as is necessary to reduce the size of
the offering and (y) then the minimum number of Registrable Securities, pro
rata to the extent practicable, on the basis of the number of Registrable
Securities requested to be registered among the participating holders of
Registrable Securities, as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering.
(c) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations pursuant
to this Section 1.2, excluding any registrations effected on Form S-3,
and such registrations have been declared or ordered effective;
provided, that the Company shall not be obligated to effect more than
one registration pursuant to this Section 1.2 in any twelve (12) month
period;
(ii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below; or
(iii) If the Company delivers to the Initiating Holders an
opinion, in form and substance acceptable to such Initiating Holders,
of counsel satisfactory to the Initiating Holders that the Registrable
Securities requested to be registered by the Initiating Holders may be
sold or transferred pursuant to Rule 144(k) of the Act.
1.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, a registration relating solely to a
Rule 145 transaction, a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after giving of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered; provided, that the Company shall not be
obligated to effect more than two (2) registrations pursuant to this Section
1.3.
3
<PAGE>
1.4 Obligations of the Company. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and keep such registration
statement effective for a period of up to one hundred twenty (120) days or
until the distribution contemplated in the Registration Statement has been
completed, whichever first occurs; provided, however, that such one hundred
twenty (120) day period shall be extended for a period of time equal to the
period the Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and provided further that in the case of any
registration of Registrable Securities on Form S-3 that are intended to be
offered on a continuous or delayed basis, such one hundred twenty (120) day
period shall be extended until all such Registrable Securities are sold, if
applicable rules under the Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective
amendment which (I) includes any prospectus required by Section 10(a)(3) of
the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (I) and (II) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the 1934 Act in the registration
statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as, in the opinion of counsel to the Company, may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
4
<PAGE>
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with the registration
pursuant to this Section 1, if such Registrable Securities are being sold
through underwriters, or, if such Registrable Securities are not being sold
through underwriters, on the date that the registration statement with
respect to such Registrable Securities becomes effective, (i) an opinion,
dated such date, of counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders, and (ii) a letter, dated such
date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.6 Expenses of Demand Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder, including (without limitation) all registration, filing,
and qualification fees, printers' and accounting fees relating or apportionable
thereto and, for one such registration only, the reasonable fees and
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disbursements of one counsel for the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock pursuant to Section 1.3,
the Company shall not be required under Section 1.3 to include any of a Holder's
securities in such underwriting unless such Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters, and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall exclude from such underwriting (x) first, the maximum number of
securities, if any, other than Registrable Securities being sold for the account
of other than the Company, as is necessary to reduce the size of the offering
and (y) then the minimum number of Registrable Securities, pro rata to the
extent practicable, on the basis of the number of Registrable Securities
requested to be registered among the participating holders of Registrable
Securities, as is necessary in the opinion of the managing underwriter(s) to
reduce the size of the offering.
1.9 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder
participating in such registration, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they
may become subject under the Act, the 1934 Act or state securities and blue
sky laws, or otherwise insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto and any document filed in connection
therewith or in connection with any registration or qualification under the
state securities and blue sky laws, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Act, the 1934 Act or
state securities and blue sky laws or any rule or regulation promulgated
under the Act, the 1934 Act or state securities and blue sky laws and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Company shall not be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder, underwriter or controlling person; provided, however, that the
indemnity agreement contained in
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this Subsection 1.9(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each
such Holder will pay, as incurred, any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this
Subsection 1.9(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided, that, in no
event shall any selling Holder's liability under this Subsection 1.9(b)
exceed the proceeds received by such Holder from the offering (net of any
underwriting discounts and commissions).
(c) Promptly after receipt by an indemnified party under this Section
1.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to
be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its ability
to defend such action, shall relieve such indemnifying party of its
liability under this Section 1.9, but (i) only to the extent of the
liability actually resulting from the failure to deliver written notice and
(ii) the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss,
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liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on
the other in connection with the statements or omissions that resulted in
such loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission; provided,
that in no event shall any selling Holder's liability under this Section
1.9(d) exceed the proceeds received by such Holder from the offering (net
of any underwriting discounts and commissions).
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section 1.9
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of
the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the
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<PAGE>
effective date of the first registration statement filed by the Company),
the Act and the 1934 Act (at any time after it has become subject to such
reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such
form.
1.11 Form S-3 Registration. In case the Company shall receive at any time
after the completion of the first registration statement for a public offering
of securities of the Company (other than a registration statement relating
either to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request from the Holders of at least twenty five percent (25%) of the
Registrable Securities then outstanding that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance,
pursuant to this Section 1.11: (1) if Form S-3 is not available for such
offering by the Holders; (2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriting discounts or commissions) of less than $500,000; (3) if the
Company has already effected during the previous twelve (12) month period
two (2) registrations on Form S-3, or any equivalent successor form, for
the Holders pursuant to this Section 1.11; or (4) in any particular
jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection
with a registration requested pursuant to this Section 1.11, including,
without limitation, all registration, filing, qualification, printers' and
accounting fees and the reasonable fees and disbursements of one (1)
counsel for the selling Holder or Holders and counsel for the Company, but
excluding any underwriting discounts or commissions associated with
Registrable
9
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Securities, shall be borne by the Company. Registrations effected pursuant
to this Section 1.11 shall not be counted as registrations effected
pursuant to Sections 1.2 or 1.3.
(d) The Company shall not be obligated to effect any registration
pursuant to this Section 1.11 if the Company delivers to the Holders
requesting registration under this Section 1.11 an opinion, in form and
substance acceptable to such Holders, of counsel satisfactory to such
Holders, that the Registrable Securities so requested to be registered may
be sold or transferred pursuant to Rule 144(k) under the Act.
1.12 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to any transferee or assignee of
such securities, provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and (b) such transferee or assignee
agrees in writing to be bound by and subject to the terms and conditions of this
Agreement.
2. Covenants of the Company.
2.1 Financial Statements and Other Information. Except as otherwise set
forth below in this Section 2.1, until the Company is subject to the reporting
requirements of the 1934 Act, the Company will deliver to the Investor, for so
long as the Investor holds any shares of the Company's Common Stock:
(a) as soon as available, but in any event within forty-five (45) days
after the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of operations and consolidated cash flows
of the Company and its subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such quarter,
and consolidated balance sheets of the Company and its subsidiaries as of
the end of such quarterly period, setting forth in each case comparisons to
the annual budget and to the corresponding period in the preceding fiscal
year, and all such statements will be prepared in accordance with generally
accepted accounting principles, consistently applied (except for the
absence of notes and subject to normal year-end adjustments);
(b) as promptly as possible (but in any event within ninety (90) days)
after the end of each fiscal year, audited consolidated statements of
operations and a consolidated statement of cash flows of the Company and
its subsidiaries for such fiscal year and consolidated balance sheets and
statements of stockholders' equity of the Company and its subsidiaries as
of the end of such fiscal year, setting forth comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance with
United States generally accepted accounting principles, consistently
applied, and accompanied by an unqualified opinion (except for
qualifications regarding specified contingent liabilities) of an
independent accounting firm selected by the Company's Board of Directors;
10
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(c) prior to the end of each fiscal year, an annual budget (approved
by the Board of Directors) prepared on a monthly, consolidated basis for
the Company and its subsidiaries for the succeeding fiscal year (displaying
detailed anticipated statements of operations and cash flows and balance
sheets), and promptly upon preparation thereof any other significant
budgets which the Company prepares and any revisions of such annual or
other budgets;
(d) promptly (and in any event within thirty (30) days) after the
discovery or receipt of notice of any event or circumstance affecting the
Company or its subsidiaries that is determined in good faith by the Company
to be material to the Company and its subsidiaries, taken as a whole,
including but not limited to, the filing of any material litigation against
the Company or its subsidiaries, acquisitions, mergers, substantial sales
of assets, significant regulatory or legal developments, the commencement
of voluntary or involuntary bankruptcy proceedings, natural or other
disasters, significant changes in management or directors, changes in
auditors, and execution or termination of, or defaults under, material
contracts, a letter from the Chief Executive Officer or Chief Financial
Officer of the Company specifying the nature and period of existence
thereof and, in the case of material litigation, what actions the Company
and its subsidiaries have taken and propose to take with respect thereto;
(e) promptly after transmission thereof, copies of all financial
statements, proxy statements, reports and any other written communications
which the Company sends to its stockholders generally and copies of all
registration statements and all regular, special or periodic reports which
it files with the SEC or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public;
(f) a notice specifying the terms of all sales of the Company's
securities of which the Company is aware, promptly following the
consummation thereof; and
(g) notice of the effectiveness under the Act of the registration
covering the Company's initial public offering, such notice to be provided
by telecopier immediately following the SEC's notification to the Company
of such effectiveness.
Each of the financial statements referred to in this Section 2.1 will be
true and correct in all material respects and will fairly present the Company's
consolidated financial position and results of operations as of the dates and
for the periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the Company's
financial condition, operating results or business prospects). The Company's
obligation to provide to the Investor the materials described in Subsection (e)
above will continue after the Company is subject to the reporting requirements
of the 1934 Act until the Investor no longer holds any shares of the Company's
Preferred Stock (or Common Stock issued upon conversion thereof or upon exercise
of the Warrant).
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2.2 Designated Director. For so long as the Investor shall hold at least 5%
of the shares of the Company's Preferred Stock, (or at least 5% of the Common
Stock issuable upon conversion of the Preferred Stock or upon exercise of the
Warrant), the Investor shall have the right, but not the obligation, to nominate
as a member of the management slate for election to the Company's Board of
Directors by the stockholders of the Company one (1) person and for so long as
the Investor shall hold at least 10% of the shares of the Company's Preferred
Stock (or at least 10% of the Common Stock issued upon conversion thereof or
upon exercise of the Warrant), the Investor shall have the right, but not the
obligation, to nominate as a member of the management slate for election to the
Company's Board of Directors by the stockholders of the Company two (2) persons,
and the Company agrees to use its best efforts to ensure that such person or
persons are duly elected. Moreover, the Company agrees that one such person
shall be elected Co-Chairman of the Board of Directors of the Company.
2.3 Inspection of Property. Until the Company is subject to the reporting
requirements of the 1934 Act, the Company will permit the Investor, or any
representatives designated by the Investor, upon reasonable notice and during
normal business hours and such other times as the Investor may reasonably
request, to (i) visit and inspect any of the properties of the Company and its
subsidiaries, (ii) examine the corporate and financial records of the Company
and its subsidiaries and make copies thereof or extracts therefrom, (iii)
discuss the affairs, finances and accounts of the Company and its subsidiaries
with the directors, senior management and independent accountants of the Company
and its subsidiaries, and (iv) consult with and advise the management of the
Company and its subsidiaries as to their affairs, finances and accounts.
2.4 Positive Covenants. So long as any shares of the Preferred Stock are
outstanding, the Company agrees as follows:
(a) The Company will retain independent public accountants acceptable
to the Investor in its discretion who shall certify the Company's financial
statements at the end of each fiscal year. In the event the services of the
independent public accountants so selected, or any firm of independent
public accountants hereafter employed by the Company are terminated, the
Company will promptly thereafter notify the Investor and will request the
firm of independent public accountants whose services are terminated to
deliver to the Investor a letter from such firm setting forth the reasons
for the termination of their services. In the event of such termination,
the Company will promptly thereafter engage another firm of independent
public accountants of recognized national standing. In its notice to the
Investor the Company shall state whether the change of accountants was
recommended or approved by the Board of Directors of the Company or any
committee thereof.
(b) The Company will retain counsel to the Company acceptable to the
Investor in its discretion.
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(c) The Company's Board of Directors will meet at least once every
fiscal quarter.
(d) The Company shall maintain in full force and effect, fire,
casualty, workmen's compensation and liability insurance policies, with
extended coverage, in such amounts and with such coverage as are carried by
companies in a position similar to that of the Company.
2.5 Termination of Certain Covenants. The covenants set forth in Sections
2.3 and 2.4 shall terminate and be of no further force or effect upon the
consummation of an initial public offering of shares of Common Stock of the
Company.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties (including transferees
of any shares of Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York, disregarding New York principles of conflicts
of laws which would otherwise provide for the application of the substantive
laws of another jurisdiction. The parties agree that all actions or proceedings
arising in connection with this Agreement shall be tried and litigated only in
the State of New York. The parties waive any right they may have to assert the
doctrine of forum non conveniens or to object to such venue, and hereby consent
to court ordered relief.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery or delivery by facsimile to the party to be
notified or four (4) days after deposit with an air courier, the United States
Post Office or air courier in the case of non-U.S. parties, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
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address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
3.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of two-thirds of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 3.7 shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
IAT HOLDINGS, INC.
By: /s/ Dr. Viktor Vogt
---------------------------------
Name:
Title:
Address:
Facsimile Telephone Number:
VERTICAL FINANCIAL HOLDINGS
By: /s/ Jacob Agam
---------------------------------
Name:
Title:
Address:
Facsimile Telephone Number:
15
MARKETING AGREEMENT
MARKETING AGREEMENT, dated as of October 24, 1996 (the "Agreement"),
between IAT Holdings, Inc., a Delaware corporation (the "Company"), and General
Capital, a corporation organized under the laws of Switzerland ("General").
W I T N E S S E T H :
WHEREAS, the Company desires to receive services in connection with (a)
marketing its products worldwide, (b) arranging debt or equity financing for the
Company's products to be purchased by its customers and (c) arranging financing
for the Company's operations, leasing programs, joint ventures and distribution
arrangements generally, in each case for the further enhancement of the
Company's marketing strategy (collectively, the "Objectives"); and
WHEREAS, General has established its expertise in, among other things,
assisting companies in marketing their produces worldwide and arranging
financing for customers; and
WHEREAS, General has performed services for the Company's wholly-owned
subsidiary IAT AG, a corporation organized under the laws of Switzerland, since
early 1996 as outlined above and the parties now desire to memorialize their
agreement and understanding as to their respective duties and obligations.
NOW, THEREFORE, in consideration of the mutual covenants and agreements,
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties do hereby covenant and agree, upon the terms
and subject to the conditions hereinafter set forth, as follows:
Section 1. Retention of General. The Company engages General to assist the
Company in achieving its Objectives, and General accepts such engagement,
subject to the terms and conditions of this Agreement.
Section 2. Services. (a) At such times as are mutually convenient to
General and the Company during the Term (as defined below), General shall
provide its services to the Company in connection with the Objectives.
(b) In connection with performing its services, General and the
Company acknowledge and agree that General may, from time to time, propose
certain arrangements to the
<PAGE>
Company in connection with its Objectives and the Company has no obligation
to accept such proposals or further obligate itself, and shall only do so
with prior written approval.
Section 3. Term. Subject to Section 5 hereof, this Agreement shall be for a
term of five years, commencing on the date hereof and ending on October 24, 2001
(the "Term").
Section 4. Compensation. For services rendered or to be rendered by General
pursuant to this Agreement, the Company shall pay or issue to General the
following:
(a) $100,000 for services to be performed by General during the Term,
which shall be paid on the date hereof.
(b) $300,000 payable at such time as the Company's consolidated
stockholders' equity exceeds $6,000,000 and an additional $100,000 payable
at such time as the Company's consolidated stockholders' equity exceeds
$8,000,000; provided, that the current liabilities of Holdings used to
determine the consolidated stockholders' equity of the Company shall not
exceed $3,500,000 and, to the extent it exceeds $3,500,000 any such
additional amounts shall not reduce such stockholders' equity.
Section 5. Termination. The Company or General may terminate this Agreement
at any time after June 30, 1997 if the Company's working capital does not exceed
$4,000,000 by such date (the "Termination Date"), provided, however, that in the
event the Company's working capital exceeds such amount by the Termination Date,
this Agreement shall not be terminated and shall be a valid and binding
obligation upon the parties during the Term.
Section 6. Marketing Efforts. (a) The Company shall provide General with
certain technical and other information relating to its business and operations
as is reasonable and necessary for General to market the Company's products. In
addition, the Company shall provide General with the necessary sales promotion
materials to market the Company's products.
(b) The Company shall also make its management available to General
and prospective customers at such reasonable times and locations as is
necessary for General to market the Company's products.
Section 7. Confidentiality; Non-Competition. General acknowledges that in
the course of its engagement it will become familiar with trade secrets and
other confidential information ("Confidential Information") concerning the
Company and that its services will be special, unique and extraordinary to the
Company. General agrees that, during the Term and for a period of five years
following the Term, it shall not disclose to any third party any Confidential
Information for any purpose other than the performance of its duties under this
Agreement and upon the prior written approval of the Company. Subject to the
limitations set forth herein, General agrees that during the Term and for a
period of two years thereafter it shall not directly
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or indirectly own, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with the
business of the Company as such business exists within any geographical area in
which the Company conducts its business. In the event the Company breaches its
duties or obligations under this Agreement, the Company agrees that General
shall not be bound by this Agreement, except for the confidentiality provisions
contained in this Section 7.
Section 8. Further Assurances. During the Term, the Company shall use its
reasonable good faith efforts to maintain and promote its products.
Section 9. Representations and Warranties. The Company and General each
represent that (a) it has the requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, (b) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and (c) this
Agreement is valid and binding upon each party, enforceable against each party
in accordance with its terms.
Section 10. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York, disregarding any New York
principles of conflicts of laws that would otherwise provide for the application
of the substantive laws of another jurisdiction. The parties agree that all
actions or proceedings arising in connection with this Agreement shall be tried
and litigated only in the State of New York. The parties waive any right they
may have to assert the doctrine of forum non conveniens or to object to such
venue, and hereby consent to court ordered relief.
Section 11. Entire Agreement; Amendments. This Agreement contains the full
and entire understanding and agreement between the parties and supersedes and
preempts any prior understandings or agreements, whether written or oral. The
provisions of this Agreement may be amended or waived only with the prior
written consent of the Company and General.
Section 12. Successors and Assigns. This Agreement shall be binding upon,
inure to the benefit of, and shall be enforceable by General and the Company and
their respective successors and assigns. The rights and obligations of General
under this Agreement (with the exception of those rights in Section 4 hereof)
shall not be assignable.
Section 13. Counterparts. This Agreement may be executed in two or more
counterparts, each which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
Section 14. Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery or delivery by facsimile to the party
to be notified or four (4) days after deposit with an
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air courier or the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
Section 15. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
IAT HOLDINGS, INC.
By: /s/ Dr. Viktor Vogt
------------------------------------
Name:
Title:
Address:
Facsimile telephone number:
GENERAL CAPITAL
By: /s/ Jacob Agam
------------------------------------
Name:
Title:
Address:
Facsimile telephone number:
Contract of the communications computer development community (EGKR)
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1. Preamble
The Deutsche Bundespost Telekom and I.A.T. Deutschland GmbH intend to develop a
communications computer (KR). For this purpose, the contractual parties have
established a "Communications Computer Development Community" (EGKR). The stated
goal of the partners is to obtain the utilization rights to the products
resulting from the development.
2. Members of the EGKR
The EGKR consists of the following members:
I.A.T. Deutschland GmbH Deutsche Bundespost Telekom
FA Siegen, SfE EKOM
Fahrenheitstr. 1 Koblenzer Str. 29
2800 Bremen 33 D-5900 Siegen
3. Performing the development work
3.1 Goal of the development
The basis for the development of the KR is a systematic "Technical KR
Description" (TBKR), which specifies the relative agreements, a summary
description of the object being developed, the general technical-organizational
requirements, functions, technical documents, operating instructions and
documentation.
The TBKR (Appendix 1 of the contract), which is a component of this contract,
specifies the goal of the development.
Both contractual partners must determine, in writing, that the development has
been completed. Completion is scheduled for 12/31/93.
3.2 Development costs
The members of the EGKR shall bear equal parts of the development costs for the
KR.
Two budgets are drawn up for the development, containing all costs needed for
it. Alternative budget 1 contains the MPEG and RGB-Codec board parts of the
development; alternative budget 2 does not contain these parts. Alternative
budget 2 shall be valid until the interpretation of the technology studies and
the decision whether or not to develop MPEG and RGB Codec boards.
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Contract of the communications computer development community (EGKR)
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The basis for the decision and the determining criteria for developing the MPEG
and RGB Codec boards are market relevancy and technical feasibility within the
agreed upon budget. If MPEG and RGB Codec boards are developed after the
interpretation of the technology studies, alternative budget 1 shall become
valid. The budgets (Appendix 2 to the contract) shall be finalized with firm
figures, considered maxima, when the contract is concluded.
The total costs shall be determined on the basis of the valid budget. The
Deutsche Bundespost Telekom and I.A.T. GmbH shall each bear 50% of the total
costs so determined. A cost settlement shall be calculated on the basis of the
actual costs incurred by each contractual partner. The cost settlement shall be
made upon completion of the development work.
The amount of the settlement shall be paid by the contractual partner to the
partner which is to receive the settlement within one month from presentation of
the invoice.
Both parties shall assume the duty to minimize costs.
3.3 Change of the goal of the development or of the budget
Changes in the goal of the development (specified in the TBKR) or overrunning
the costs specified in the budget shall be agreed upon by the contractual
parties and set forth in writing.
3.4 Utilization rights
The EGKR shall receive the sole, exclusive, unlimited, irrevocable utilization
rights for all developed components.
The EGKR may sell developed parts. The goal of marketing is the avoidance of
mistakes in development by timely feedback from the market and, if applicable,
refinancing of the development costs by the sale.
A separate agreement shall be made if one of the members of the EGKR wishes to
sell a part of the KR before the development has been completed.
3.5 Division of the development tasks
At the conclusion of the contract, the contractual partners shall specify which
partner shall perform which development work.
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Contract of the communications computer development community (EGKR)
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3.6 Subcontractors
The contractual partners may subcontract parts of their part of the development
work. The issuance of a subcontract shall require written approval from the
other contractual partner, unless it is awarded to a member of the EGKR.
Each contractual partner shall independently conduct the acceptance of the
subcontracts it has issued.
3.7 Confidentiality. Other secrecy. Confidential treatment
The contractual partners shall treat the conclusion of the contract and its
contents, in particular the development goals specified in the TBKR, as strictly
confidential; they may disclose the contents to third parties only to the extent
that this is essential for the performance of their part of the development
work. Each disclosure of contents of the contract shall be notified to the other
contractual partner in writing.
If only partial areas of the development work have to be disclosed,
confidentiality agreements (Appendix 3 to the contract) shall be concluded
covering the purchase of marketable materials/components, or the employment of
free-lance persons.
Subcontractors shall be bound to confidentiality according to the above
mentioned principles.
3.8 Documentation of the stage of development
Each contractual partner shall document its progress in the development work and
keep this record up to date. The continued documentation shall be given to the
other contractual partner every quarter. These documents shall make it possible
to perceive and reconstruct the current stage of development; they shall include
the description of the technology (hard- and software), and the list of the
needed financial and material resources. The documents must make it possible to
compare the estimated versus the actual costs (budget vs. actual expenses).
3.9 ATM components
The ATM components will be developed separately. The Deutsche Bundespost Telekom
will bear the costs of these components alone and shall have the sole,
exclusive, unlimited, irrevocable utilization rights. The Deutsche Bundespost
Telekom will place orders separately for the work needed to adapt the ATM
components to the KR.
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Contract of the communications computer development community (EGKR)
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3.10 Further development of the KR
Further development of the KR, even after the dissolution of the EGKR, shall be
effected by agreement with the other contractual partner.
4. Amendments and supplements to the contract
Amendments to this contract shall be effective only if they were agreed upon in
writing by a statement signed by the contractual parties. They shall be
designated as "contractual amendment." Contractual amendments shall become valid
components of the contract when they are signed by all contractual parties.
Oral agreements are valid only if they have been confirmed in writing as
indicated above and thus have become components of the contract.
5. Dissolution and cancellation of the EGKR
The EGKR will be dissolved after the final presentation, the final acceptance of
the KR and the joint statement by both contractual parties that the goal of the
development has been attained. The dissolution of the EGKR shall be set forth in
a written statement, signed by both contractual parties.
Before the dissolution of the EGKR, an agreement shall be concluded concerning
the subsequent utilization of the EGKR utilization rights by the contractual
parties in the form of a licensing agreement, regulating the conveyance, or
exploitation of the utilization rights.
The EGKR may be canceled with 3 month's notice by a contractual partner.
Cancellation shall occur in particular if the contractual parties can no longer
agree on joint action to develop the KR.
In case of cancellation of the EGKR, the results of the development then
existing will be exchanged among the contractual partners in such a way that
each contractual partner has the entire know-how at its disposal. In such a
case, each contractual partner shall receive an unlimited, irrevocable
utilization right for all the components developed by that time. The cost
settlement in such a case shall be based on actual costs incurred by the
contractual partners up to that time.
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<PAGE>
Contract of the communications computer development community (EGKR)
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6. Site of jurisdiction and performance
Bonn is the site of jurisdiction and performance.
7. Applicable law
The laws of the Federal Republic of Germany shall apply.
Siegen, 8/12/92
/signature/ /signature/
I.A.T. Deutschland GmbH Deutsche Bundespost Telekom
Siegen Telecommunications Office, SfE EKOM
/handwritten:/ valid version
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Contract of the communications computer development community (EGKR)
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Contract(Appendix 2)
Part A: Special contractual conditions
Art. 1 Components of the contract
The following items shall become components of the contract, in the order in
which they are listed, when the order is placed:
1. The order
2. The list of services
3. The technical description of the communications computer (TBKR)
4. The ZVB T status as of 7/1/92
5. VOL/B status as of 7/1/92
Art. 2 Object of the contract and description of services
2.1 General Information
This order covers the development of components of the communications computer
(KR) and the integration of the individual components in it. The technical
functions of the communications computer are described in the "Technical
description of the communications computer" (TBKR), which is a component of this
contract, and is attached as an Appendix.
The individual components of the KR are to be developed in such a way as not to
impair the functions of any one.
2.2 The basic KR model
The development of the basic model shall consist of the following work:
Development of a DEMUX-SW base
Development of DEMUX-SW for ISDN So board
o Development, or purchase, of the ISDN S2M board (incl. 4 prototypes)
o Development of DEMUX-SW for ISDN S2M board
o Development DEMUX-SW for X.21 board
Integration of the H2.61 Codec board
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Contract of the communications computer development community (EGKR)
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Building the prototypes
Four prototypes shall be provided after the basic model has been accepted.
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<PAGE>
Contract of the communications computer development community (EGKR)
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2.3 Integration of additional components in the KR
The following work shall represent the integration of additional components:
Integration of the data DEMUX
Integration of the RGB/AV
Demux Development of a DEMUX-SW for 2Mbit/s board
Integration of the LAN connection
Integration of the video and audio switch matrix boards
2.4 Integration of the software for the application computer (Front End)
The development of the software for the application computer shall consist of
the following work:
The provision of basic libraries (MS-DOS and Windows) for:
1. Communication between PC and KR
2. Control of the individual components of the KR
3. Data communication
Provision of an application program (Windows) for interactive control of the KR
via the application computer, incl. assembly of the connection and manual
setting for the individual parameters (transmission channel, transmission
rate, division of the transmission rate for VGA and video image, etc.)
2.5 Development of an audio switch matrix
The audio switch matrix is to be developed as a PC board with the following
characteristics:
8 audio inputs
It must be possible to configure them individually per hardware
(symmetric/asymmetric, impedance, sensitivity and phantom feed)
8 audio outputs
It must be possible to configure them individually per hardware; individual
level control per software
Composite signal
All input signals may be combined in any combination into a merged signal.
The level of each input signal may be adjusted before the accumulation
individually per software.
Overload protection
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Contract of the communications computer development community (EGKR)
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Level compression per hardware may be switched off (only at output No. 1).
Cross-matrix
All input signals may be switched to each output individually or in any
combination as merged signal.
Handsfree facilities
An external echo canceling module may be connected to channel 1 (input and
output No. 1).
BZT license for the audio switch matrix board is necessary in order to guarantee
trouble free connection of the board to public networks. BZT license shall be
proven by 6 months after the acceptance at the Deutsche Bundespost Telekom. If
the audio matrix board must be altered because of the BZT license, the delivered
boards shall be exchanged free of charge.
Art. 3 Processing the order
3.1 Communications computer development community (EGKR)
The Deutsche Bundespost Telekom (Telekom), represented by SfE EKOM at the Siegen
Communications Office, and I.A.T. GmbH together shall form the EGKR which shall
develop the KR jointly. The existence of the EGKR shall have no effect on the
principal/contractor relationship.
3.2 Utilization rights and confidentiality
With the order, the EGKR shall receive, free of charge, the irrevocable,
unlimited, exclusive, assignable right to utilize all the work done during the
implementation of the contract without restriction. The EGKR shall also have the
right to reproduce and change the work, and the right to grant utilization
rights to third parties (sale of licenses).
The contractor may not pass on or otherwise use the results of the development
work without written approval from the principal. Unless they are obviously and
generally accessible, the contractor shall treat the experience gained and
knowledge learned from the development work and documents as strictly
confidential and shall not utilize them to develop competing products. The
contractor shall obligate its employees to maintain confidentiality accordingly.
The contractor/principal relation shall not be affected by the assumption of the
utilization rights by the EGKR.
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<PAGE>
Contract of the communications computer development community (EGKR)
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3.3 Documentation of the stage of development
The progress of the development work shall be documented at all times by the
contractor and kept up to date. Quarterly, the document record shall be
delivered to the principal. This record must make it possible to perceive and
reconstruct the current stage of development. This record shall include the
description of the technology (hard- and software) and the list of needed
financial and material resources. No special payment shall be made for
transmitting the required documents; the amount is included in the development
costs.
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Contract of the communications computer development community (EGKR)
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Art. 4 Acceptance and warranty
4.1 Examination of the stage of development
The principal shall examine the stage of development once a month. Unless
otherwise agreed upon, this examination shall be held on the contractor's
premises. On this occasion, the documents listed under 3.3 shall be submitted
and the current stage of the development shall be presented. The contractor's
expenses for presenting the stage of development are included in the payment for
the development.
4.2 Operational readiness, presentation for acceptance (BzA)
The contractor shall present the partial work, pursuant to the schedule, Art.
4.3, for partial acceptance. The presentation shall be preceded by an
operational test by the contractor. The principal shall accept the operationally
ready partial performance in writing no later than four weeks after the BzTA
(presentation for partial acceptance) date.
Acceptance of the last partial performance shall also be considered full
acceptance of the order regarding the combination of all partial performances
(BzA date).
If the principal does not refuse acceptance within four weeks from the
presentation for acceptance, all parts of the order shall be considered
accepted. Reasons for refusing acceptance shall be given within four weeks from
the refusal, as otherwise the refusal shall be considered rejected.
Acceptance shall be effected by the Bf department of the Siegen communications
office.
Address for acceptances:
FA Siegen
Koblenzer Str. 29
5900 Siegen
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Contract of the communications computer development community (EGKR)
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4.3 Performance schedule
4.3.1 Basic model
BzTA for:
o Development of a basic DEMUX-SW 9/30/92
o Development of DEMUX-SW for ISDN So board 9/30/92
o Development, or purchase, of the ISDN S2M board 9/30/92
o Development DEMUX-SW for ISDN S2M board 9/30/92
o Development DEMUX-SW for X. 21 board 9/30/92
o Integration of the H2.61 Codec board 9/30/92
o Presentation of the basic model prototype 10/30/92
4.3.2 Integration of additional components
BzTA for:
o Integration of the data-DEMUX 3/12/93
o Integration of the RGB/AV-Demux 3/12/93
o Development of a DEMUX-SW for 2Mbit/s board 12/15/92
o Integration of the LAN connection 12/15/92
o Integration of the video and audio switch matrix boards 9/30/92
4.3.3 Development of the audio switch matrix
o BzTA: 9/30/92
4.3.4 Development of the software for the application computer (front end)
o BzTA: 3/12/93
4.4 Warranty
The warranty period for all work is 12 months from the date of full acceptance.
The warranty period for repairs and elimination of breakdowns and defects is
also 12 months.
Regarding the development samples, the contractor warrants:
a) observance of the recognized rules of the art
b) quality of material not covered by the development work
c) expert technical performance of the work
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Contract of the communications computer development community (EGKR)
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d) compliance with the guaranteed characteristics pursuant to the technical
description of the KR
4.5 Maintenance during the warranty period
The contractor shall be obligated to provide maintenance work during the
warranty period, including all necessary work for this purpose. If the
contractor is not able to undertake it, the Deutsche Bundespost Telekom as a
matter of principle is authorized to repair equipment which fails during the
warranty period, or have third parties do so. The expenses incurred thereby by
the Deutsche Bundespost shall be charged the contractor. The Deutsche Bundespost
shall calculate these expenses according to its rules governing services
provided outside the utilization regulations. To simplify the calculation, lump
sum payments for maintenance may be applied for specific categories of equipment
within amounts or technical characteristics to be specified. Details shall be
reserved to a special agreement by the Deutsche Bundespost Telekom and the
contractor.
The contractor shall begin removing defects immediately, within 3 business days
from the written notification by the Deutsche Bundespost Telekom.
The Deutsche Bundespost Telekom shall not make technical changes deviating from
the current state of the documents (acceptance record and technical descriptions
of the KR) as part of the warranted maintenance.
The Deutsche Bundespost Telekom shall determine whether or not a defective piece
of equipment is covered by the warranty. The contractor shall have the right to
examine individual warranty cases.
In case of dispute whether or not a defective piece of equipment is covered by
the warranty, the mediation office indicated in Art. 8 shall be asked to decide.
Art. 5 Cancellation
5.1 General information
The following shall apply to an extraordinary cancellation by the principal:
o The contractor shall immediately terminate any subcontract concluded on the
basis of this contract, safeguarding the principal's interests. In case of
subcontracts with a right
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Contract of the communications computer development community (EGKR)
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by the contractor to cancel, an attempt shall be made to terminate the
contract before the next admissible date, if this will save expenses for
the principal.
o The contractor shall advise the principal in writing of any work which has
been started and must be completed; the contractor shall perform such work
under the conditions of the canceled contract.
o All payments due under the contract, including the remaining settlement may
not exceed the total amount of the order which the contractor would have
received if the contract had not been canceled.
o The contractor shall provide evidence for all items on which its claims are
based.
o The principal shall be obligated to pay for objects and rights for which
full refund of costs is due only if the contractor grants and/or conveys to
the principal the objects and rights unencumbered of the rights of third
parties, unless it is unable to do so without violating existing contracts.
Such contracts shall be reported to the principal.
The contractor shall advise its subcontractors of this agreement and shall make
suitable agreements in subcontracts which are relevant for the contract. If a
subcontractor is not willing to assume this obligation, the contractor shall
advise the principal thereof in writing before granting the subcontract.
The subcontractor shall have no right of recourse against the Deutsche
Bundespost Telekom on the basis of a cancellation pursuant to Art. 5.
The stipulations regarding industrial and utilization rights shall not affected
by a cancellation. Such stipulations shall also apply to industrial rights
registered after the cancellation.
5.2 Special clauses
The principal shall have the right at all times to cancel all or part of the
contract without notice if:
1. The contractor does not pursue the development goals described in the
order. In case of dispute on the matter, the mediation office mentioned in
Art. 8 shall be called upon to make a decision;
2. The budget specified in the proposal is overrun;
3. The due dates for performances stipulated in section 4.3 are not met.
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Contract of the communications computer development community (EGKR)
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It is also possible, depending on the results of the technological studies, that
the "integration of the AV/RGB-Demux" will be canceled and therefore not made.
In case of a complete or partial cancellation, work will be paid for pursuant to
actual, proven expenses, with a maximum of the amount indicated in the proposal.
Other rights for regular or extraordinary cancellation shall remain unaffected.
Art. 6 Payment
The agreed upon payment shall cover all the work and expenses incurred by the
contractor itself or subcontractors in the preparation and fulfillment of the
order.
Changes in prices or expenses caused by a change in the work shall be taken into
consideration only if they are set forth in a special written agreement.
If the prices specified in the order represent refunds of expenses, the BAPT
"Preisprufreferat" [price referee] shall determine the prices binding for the
final settlement after all the services have been performed and the prices have
been checked. The prices shall be determined on the basis of the LSP on VO PR
No. 30/53 and any agreements still to be made concerning preliminary price
calculations. Interest to be calculated may be taken into consideration at a
maximum rate of 6% of the capital necessary for the company. The profit is to be
calculated at 3.5% of the assets needed by the company and 1.5% of the costs
incurred, with a maximum of 5% of such costs. If market prices can be proven, or
deduced for individual items, the costs shall not be examined. After the order
has been fulfilled, the vouchers for costs shall be presented to the BAPT price
referee.
Art. 7 Payment
7.1 Payment conditions
Payments shall be made only after all partial services have been accepted.
When the settlement of the order is effected, the claims pursuant to the
contract shall be offset against payments due the EGKR.
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Contract of the communications computer development community (EGKR)
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7.1 Address for the invoice
Fernmeldeamt
DSt Aw
Postfach 10 00 20
5900 SIEGEN
Art. 8 Mediation office
The following mediation office shall resolve disputes pursuant to Art. 4.5 and
5:
Deutsche Bundespost Telekom
Research Institute
Division of visual communication (Fl 15)
Am Kavalleriesand 3
6100 Darmstadt
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Contract of the communications computer development community (EGKR)
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Part B: General Conditions of the Contract
Art. 1 Performing the development work
To implement the contract, the contractor shall perform the development work
using the latest state of science and technology and its own knowledge and
experience to achieve the contractually specified result.
The contractor shall develop the component entrusted to it in continuous
consultation with the principal. The duty of the contractor to report shall also
apply to measures which did not lead to a solution pursuant to the order and are
therefore not usable in fulfilling the order.
The principal is authorized to acquaint itself at any time with the progress of
the development work and to view documents and all records on the material,
costs, and labor.
All items and processes developed by the contractor in the performance of the
order shall be considered development results, as well as the records, attempts,
models and prototypes used for this purpose. Upon fulfillment of the contract,
or in case of early cancellation, the development results then existing shall be
appropriately documented and delivered to the principal.
The contractor shall take the principal's written requests for changes into
consideration in performing the development work. If this consideration of
changes jeopardizes the stage of development, or if the expected financial
extent of the development work will thereby be considerably exceeded, the
contractor shall immediately report this to the principal in writing. If cost
overruns are connected with the change, the request for change shall be binding
only after a special, written agreement has been concluded by the contractual
partners concerning the payment for the resulting additional expenses and work
by the contractor.
Art. 2 Subcontractors
Subcontracts shall be subject to prior written approval from the principal.
The contractor shall always request prior written approval from the principal if
it wishes to have third parties outside its company, including free-lance
workers, employed in performing the order, or wishes to acquaint third parties
with portions of the development order.
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Contract of the communications computer development community (EGKR)
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The contractor shall safeguard the principal's interests in awarding
subcontracts. In particular, subcontracts shall be awarded under reasonable
economic conditions from the competitive point of view. Subcontracts shall be
subject to VO PR 30/53. The contractor shall advise its subcontractors thereof
and conclude pertinent agreements with them.
The contractor may not demand a separate, supplementary payment for awarding a
subcontract.
If the contractor entrusts a specific portion of its development work to a third
party, this shall be considered a subcontract. The acquisition by the contractor
of materials or components on the market shall not be considered a subcontract.
Art. 3 Industrial rights
In its development work, the contractor shall use the care customarily used in
its line of business to safeguard the industrial rights of third parties.
If the contractor neglects to use the care required by its line of business, it
shall be liable for all damaging results which the Deutsche Bundespost Telekom
suffers because of the violation of industrial rights by the contractor in its
work.
Art. 4 Technical assistance, obligation to provide supplies
Upon request by the principal, the contractor shall render technical assistance
to third parties which are copying the developed item or applying the developed
process. In case of a difference of opinion between the contractor and the
copying third party, the character and scope of technical assistance shall be
decided by the principal, after both parties have been heard. The personnel and
time involved may not affect the other interests of the contractor.
If, by order of the principal, a third party is making objects needed for other
objects which shall be considered development results pursuant to Art. 1, the
contractor, if it manufactures them and if the principal has no right to copy
them shall, at the principal's request, deliver the items mentioned under Art. 1
to the third party within a reasonable time, at a reasonable price.
[
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Contract of the communications computer development community (EGKR)
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Art 5 Confidentiality, confidential treatment
The contractor shall treat the conclusion of the contract, and in particular the
specified development goals, in strict confidence. It may disclose the contents
to third parties only to the extent that this be absolutely necessary for
performing the contract and if the principal has given prior approval. If only
portions of the development work covered by the order need be disclosed, the
"Vertraulichkeitsvereinbarungen" [confidentiality agreements] (Appendix 1)
provided by the Deutsche Bundespost Telekom shall have to be concluded if the
contractor acquires materials and components on the market and employs
free-lance persons, .
The contractor expressly states that it shall treat as strictly confidential the
information it receives during the performance of the contract, in particular
during conversations with other contractors of the Deutsche Bundespost Telekom.
The contractor shall acquaint third parties with the technical data given it by
the contractual partner only with the approval of the principal.
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Contract of the communications computer development community (EGKR)
- --------------------------------------------------------------------------------
Art. 6 Amendments and supplements to the contract
Amendments to this contract shall be set forth in a statement signed by the
contractual parties. Amendments must be expressly labeled therein "Contractual
amendment." Contractual amendments become valid components of the contract once
they are signed by all contractual parties.
The principal's right to demand changes in the nature of the work on the basis
of Art. 3 VOL/B shall not be affected, but such a demand shall be legally valid
only if it is made in writing, with express reference to Art. 3 VOL/B. If
possible, a change in the agreed upon prices necessitated by the technical
change shall be mutually agreed upon when the request for the technical change
is made.
Art. 7 Disclosures
Disclosures by the contractor of results of work and research shall be subject
to written approval from the principal.
Art. 8 Follow-up orders
The contractor shall not be entitled to receive follow-up orders on the basis of
this contract.
Art. 9 Liability to third parties
The contractor shall not be authorized to represent itself as a representative
of the principal. It shall hold the Deutsche Bundespost Telekom harmless from
claims which, however, may be asserted, pursuant to the principle of the
apparent power of attorney, due to contractual violations.
Art. 10 Site of jurisdiction and performance
Bonn is the site of jurisdiction and performance.
- 20 -
<PAGE>
Contract of the communications computer development community (EGKR)
- --------------------------------------------------------------------------------
EGKR Budget for the development of the KR
<TABLE>
<CAPTION>
Budget 1 Budget 2
-------- --------
A. Telekom financing before cost settlement
1. No Name company development orders
1.1 Partial order for technology studies + data-DEMUX + test generator
<S> <C> <C>
Tools for the 1st partial order (67% share of the costs) 147,907 DM 147,907 DM
Data-DEMUX 128,000 DM 128,000 DM
RGB-Codec technology study 108,000 DM 108,000 DM
MPEG-Codec technology study 102,000 DM 102,000 DM
Test generator (single) 54,000 DM 54,000 DM
----------------------- ---------- ----------
Total costs 539,907 DM 539,907 DM
</TABLE>
1.2 Partial order RGB+MPEG-Codec - and AV/RGB Demux boards development;
optional after the interpretation of the technology studies
<TABLE>
<S> <C>
Development costs for the 2nd partial order (67% share of the 85,000 DM
costs)
RGB-Codec board development 215,000 DM
MPEG-Codec board development 168,000 DM
AV/RGB-Demux board development 115,000 DM
------------------------------ ----------
Total costs 583,000 DM
</TABLE>
2. Barcos company delivery order
<TABLE>
<S> <C> <C>
2 Mbit/s board 110,900 DM 110,900 DM
X.21-board 50,900 DM 50,900 DM
- ---------- ---------- ----------
Total costs 161,800 DM 161,800 DM
Telekom costs 1,284,707 DM 701,707 DM
14% VAT 179,859 DM 98,239 DM
- ------- ------------- ----------
Total Telekom costs 1,464,566 DM 799,946 DM
</TABLE>
- 21 -
<PAGE>
Contract of the communications computer development community (EGKR)
<TABLE>
<CAPTION>
Budget 1 Budget 2
-------- --------
B. I.A.T. Financing before cost settlement
<S> <C> <C>
Materials for 4 prototypes and 1development computer 220,000 DM 220,000 DM
KR basic model 550,000 DM 550,000 DM
Integration of the following modules into the KR (driver 175,000 DM 175,000 DM
development):
* Data-DEMUX, H2.61-Codec, 2 Mbit/s- board and LAN
Development of audio + video switch matrix boards 60,000 DM 60,000 DM
Providing the software for the application computer (front end) 160,000 DM 160,000 DM
Integration of the AV/RGB-Demux board into the KR 45,000 DM 0 DM
- ------------------------------------------------- ------------- -------------
Total costs 1,210,000 DM 1,165,000 DM
I.A.T. costs 1,210,000 DM 1,165,000 DM
14% VAT 169,400 DM 163,100 DM
- ------- ------------- -------------
I.A.T. total costs 1,379,400 DM 1,328,100 DM
C. Cost settlement between I.A.T. and Telekom
Total Telekom costs 1,464,566 DM 799,946 DM
I.A.T. total costs 1,379,400 DM 1,328,100 DM
- ------------------ ------------- -------------
Total EGKR costs 2,843,966 DM 2,128,046 DM
Share of costs per partner = total cost of EGKR/2 1,421,983 DM 1,064,023 DM
Each partner's share 1,421,983 DM 1,064,023 DM
Total Telekom costs 1,464,566 DM 799,946 DM
- ------------------- ------------ ----------
Difference -42,583 DM 264,077 DM
Settlement payment incl. VAT -42,583 DM 264,077 DM
--------- ----------
Settlement payment (net) -37,354 DM 231,647 DM
14% VAT -5,229 DM 32,431 DM
- ------- --------- ---------
Settlement payment incl. VAT* -42,583 DM 264,077 DM
---------- ----------
</TABLE>
* for (+) = payment by Telekom to I.A.T.
for (-) = payment by I.A.T. to Telekom
- 22 -
<PAGE>
Contract of the communications computer development community (EGKR)
- --------------------------------------------------------------------------------
1. Preamble
I.A.T. Deutschland GmbH and the Deutsche Bundespost Telekom established an
"Entwicklungsgemeinschaft Kommunikationsrechner" [communications computer
development community] (EG-KR) on August 12, 1992. The stated goal of the EG-KR
is to produce an intelligent network adapter pursuant to the KR technical
description and to obtain the utilization rights for the products resulting from
this development.
IAT Schweiz AG and the Deutsche Bundespost TELEKOM state and agree that the work
done so far in developing the KR, and the work still to be done or finished in
1994 on the basis of this amendment contract, shall be offset between the two
parties, IAT and Telekom, and then be borne in equal parts by the two parties on
the basis of a new budget, according to the EG-KR agreements. This means that a
cost settlement shall be paid pursuant to section 3.2 of the EG-KR contract.
Because in the meantime the communications computer has been designated as an
"intelligent network adapter," the designation of the development community
shall be changed to "Entwicklungsgemeinschaft Intelligenter Netzadapter"
[intelligent network adapter development community], EG-INA.
All the components of the EG-KR contract of 8/12/92 which are not mentioned in
this amendment contract remain unchanged.
2. Contractual amendments
2.1 Members of the EG-INA
AIT AG Schweiz Deutsche Bundespost Telekom
Geschaftshaus Wasserschlo FA Siegen, SfE EKOM
Aarestra e 17 Koblenzer Str. 29
CH-5300 Vogelsang-Turgi D-57072 Siegen
2.2 Development goal
The data needed for the summary description of the development object, required
to attain the development goal, the general technical-organizational
requirements, functions, technical data, etc., are specified and described in
detail in the "Technische Beschreibung INA" [INA technical description] (TB-INA,
9/22/94).
The 9/22/94 INA technical description shall be a component of this amendment
contract.
- 23 -
<PAGE>
Contract of the communications computer development community (EGKR)
- --------------------------------------------------------------------------------
2.3 Development period
The development work for the INA based on EG-KR and EG-INA contracts and the
related INA technical description shall be concluded by 12/20/94.
- 24 -
<PAGE>
Contract of the communications computer development community (EGKR)
- --------------------------------------------------------------------------------
2.4 Development costs
A new budget is appended to this amendment contract. It contains, among other
items, all the expenses required for developing the INA pursuant to the INA
technical description which are foreseeable at the time the contract is
concluded. The budget shall be accepted with the conclusion of the contract and
the figures shall be considered maximal. Overruns of these maxima shall require
prior written agreement by all partners of the EG-INA.
The currently planned total costs shall be determined on the basis of the
budget. The actual amount of the expenses incurred before this amendment
contract is signed shall be entered in the budget. Expenses incurred until the
termination of the contract shall be projected on the basis of work which has
begun and so entered in the budget.
IAT AG and Deutsche Bundespost Telekom shall each bear 50% of the total costs
(Item F in the budget). A cost settlement shall be calculated based on the costs
incurred by each contractual partner. The cost settlement shall be made after
the development work has been concluded (12/20/94). At the request of a
contractual partner, a cost settlement may be initiated during the validity of
the contract, unless this is contraindicated by existing financial and/or
technical-administrative conditions.
Siegen, 10/6/94
/signature/ /signature/
IAT AG Schweiz Deutsche Bundespost
TELEKOM
- 25 -
<PAGE>
Contract of the communications computer development community (EGKR)
- --------------------------------------------------------------------------------
Budget for the EG-INA amendment contract
<TABLE>
<CAPTION>
in thousands of DM
Telekom IAT IAT +
Telekom
A. Services provided by Telekom
<S> <C> <C> <C> <C>
1. No Name [company name] development order
1.1 Development tools (67% of the purchase price) 121
1.2 RGB-Codec technological study 108
1.3 MPEG-board technological study 135
1.4 Test generator 54
1.5 Development tools (67% of the purchase price) 44
1.6 Data-I/O-unit (formerly: data-Demux) 128
1.7 RGB-data-A/V Mux (formerly: A/V-Demux) 38
1.8 RGB-Codec-board 215
2. Company work performed
2.1 Hardware, etc., through '93 160
2.2 Hardware, etc., in '94 282
B. Work performed by IAT
1. INA basic development 3,148
2. TI/MVP 1,674
JE X.11 591
C. Total Telekom contribution 1,285
D. Total IAT contribution 5,413
E. Total before settlement 6,698
F. Total/2 (each partner's share) 3,349 3,349
</TABLE>
- 26 -
Cooperation Contract covering the development of
Version 3 of the Multimedia Information
and Communications System MIKS
I A T
THE ELECTRONIC MEETING
IBM
T - e - l - e - k - o - m -
<PAGE>
Cooperation Contract covering the development of
Version 3 of the Multimedia Information
and Communications System MIKS
by and between
The Deutsche Bundespost Telekom, Graduate Engineer Joachim Claus
represented by Manager TD 2
Bahnstrabe 42
53 105 Bonn
- - hereinafter referred to as Telekom -
and
IBM Deutschland Informationssysteme GmbH,
represented by Director Peter Schwarzmann
Manager of the Telekom dept.
IBM Deutschland
Informationssysteme GmbH
Pascalstrabe 100
70 569 Stuttgart
- - hereinafter referred to as IBM -
and
IAT Schweiz AG, represented by Dr. Viktor Vogt
Manager
IAT Schweiz AG
Geschaftshaus Wasserschlob
Aarestrabe 17
CH-5300 Vogelsang-Turgi
- hereinafter referred to as IAT -
<PAGE>
Preamble
The Deutsche Bundespost Telekom and the companies I.A.T, AG and IBM Deutschland
Informationssysteme GmbH have established the "Entwicklungsgemeinschaft
Multimediales Informations- und Kommunikations-System" (EG-MIKS) [multimedia
information and communications system development community] pursuant to a
contract dated 6/8/93, to jointly develop a multimedia information and
communications system (MIKS).
The stated goal of the developing partners is to develop the MIKS as a joint
product and to keep the utilization rights of the functionality of the MIKS as a
total system based on their joint development, separate from the rights to the
jointly developed components.
The developing partners have already jointly developed MIKS version 1 and MIKS
version 2. The development of MIKS version 3 is to be covered by a new contract
for the development community, governed by the stipulations listed below. The
contract covering the establishment of EG-MIKS dated 6/8/93 is thus not
applicable to the development of the MIKS version 3.
1. Object of the contract
1.1 Content
The three partners will jointly develop a version 3.0 of the MIKS, as a 2-card
solution (IMT-basis board incl. ISDN piggy-back board, IMT Codec board and
Breakout-Box).
IBM shall produce the technology of the hard- and software of the IMT Basis
board, of the ISDN piggy-back board and of the Breakout Box, which is used to
connect external signal sources.
IAT shall provide the hard- and software needed for the Codec board.
IBM shall manufacture in two steps the MIKS "Kiosk tool," a tool to manufacture
user interfaces for MIKS applications incl. running time environment components
and administrative functions:
1) MIKS Kiosk tool software development, based on MIKS hardware platform
version 2.0 on MIKS subsystem version 2.1.
2) MIKS Kiosk Tool software development based on MIKS hardware platform
version 3.0 on MIKS subsystem version 3.0.
IAT shall make the MIKS 2.1 subsystem for the hardware platform MIKS version
2.0.
IBM and IAT shall make MIKS version 3.0, including the subsystem software on the
basis of the IMT Board.
2
<PAGE>
Telekom shall assume the necessary project management, the (partial) acceptance,
and the measurements required for the BZT approval and for the conformity tests.
The services described in Appendix 1, itemized for each contributor, corresponds
to the division of labor listed above.
All the work shall be performed pursuant to the "Technische Beschreibung MIKS
Vers. 3.0" [MIKS version 3 technical description] (TB-MIKS) and the "Technische
Beschreibung der IMT Komponenten" [Technical description of the IMT components]
(TB-IMT) attached as Appendix 2 and Appendix 3, being essential components of
the contract. The technical descriptions take precedence over all descriptions
of MIKS version 3 and all its appendices.
All the partners shall collaborate at the level of the highest achievable state
of the art in science and technology, using their own knowledge and experience.
1.2 The MIKS system components
The MIKS consists of the following main components:
- - terminals (T1 to T4)
- - consultant station
- - editing station
- - administration station and
- - remote maintenance station.
The basis performance characteristics and available functions of the main
components of the MIKS versions 2, 3 and 4 (planned) are described in Appendix 4
of the MIKS version 3.0 cooperation contract (MIKS system components).
1.3 Time schedule
By 1/31/95, the contractual partners shall work out the detailed specifications
required for performing the contract pursuant to the technical descriptions, and
a project schedule based thereon. The detailed specifications and project
schedule shall be attached as Appendices 6 and 7 once this contract has been
drawn up.
By 7/15/95, IBM is to have completed the development of 24 functional prototypes
of the IMT Basis Board, the ISDN piggy-back boards and Breakout boxes, and IAT
the development of 24 prototypes IMT Codec boards. By that date, IBM and IAT
shall deliver eight functional prototypes, including all necessary cables, to
each of the other two contractual partners. The intention is to complete the
development, including acceptance and approval pursuant to No. 6 of this
contract, by 9/30/95.
3
<PAGE>
1.4 Imponderables, changes of the technical design
Observance of the tight schedule for developing MIKS version 3.0 on the basis of
the IMT boards is based on careful estimates by the EG-MIKS partners.
But because of unforeseeable events (e.g. advances in technology) it may become
necessary to change the schedule as to time and/or work done. In such case, the
technical descriptions of IMT and MIKS which together form the technically
binding basis for the development, will have to be adapted.
Such a change requires the joint decision of all the partners to this
cooperation contract.
4
<PAGE>
2. Expenses
The amounts indicated in the list of services for the cooperation contract
(appendix 1), which is a component of this contract, represent the maxima costs
to be offset. These maxima may be changed only for inevitable cost overruns
which could not be foreseen when the contract was concluded, and only by
agreement of all the project partners.
Each partner shall bear one third of the expenses.
From the beginning of the development until completion, acceptance and BZT
approval, the funds spent by participating project partners shall be reported
monthly to SfE EKOM (project management) and carried forward by the latter.
A weekly telephone conference, under the leadership of SfE EKOM, by all the
companies participating in the project is recommended to make it possible to
monitor the progress of the project and make any necessary adjustments.
The expenses incurred by each project partner will be added up when the project
is completed and settled in such a way (full settlement) that each project
partner (IBM, IAT, Telekom) shall bear an equal amount of the expenses (share
of the funding).
Undocumented expenses cannot be included in this cost settlement.
The parts of the platform needed for the MIKS (IBM PC, OS/2 operating system, H.
320 software Codec and builder/2) are not covered by this contract. Unless they
are provided free of charge pursuant to No. 3.1 (existing rights), they shall be
acquired, along with the utilization rights, from the cooperating partners at
market prices.
The purchase prices listed in Appendix 9 are estimates based on current
quotations.
On the following occasions, advance payments (installments of the expected full
settlement payments) shall be made by Telekom to IAT and IBM, against proof of
work done and presentation of invoices:
<TABLE>
- ----------------------------------------------------------------------------------------------
<S> <C>
Partial payments to IBM:
After the signing of this contract: 50% of the Telekom=>IBM differential payment
indicated in the list of services
- ----------------------------------------------------------------------------------------------
After completion of the detailed specifications: 20% of the Telekom=>IBM differential payment
indicated in the list of services
- ----------------------------------------------------------------------------------------------
After acceptance of the prototype Basis board 30% of the Telekom=>IBM differential payment
and the Breakout box indicated in the list of services
- ----------------------------------------------------------------------------------------------
Partial payments to IAT:
- ----------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
<S> <C>
After the signing of this contract: 50% of the Telekom=>IAT differential payment
indicated in the list of services
- ----------------------------------------------------------------------------------------------
After completion of the detailed specifications: 50% of the Telekom=>IAT differential payment
indicated in the list of services
- ----------------------------------------------------------------------------------------------
</TABLE>
As described above, the paid installments shall be offset at the time of the
settlement of the expenses in such a way that each partner bears the same
amount.
3. Utilization rights
3.1 Existing rights
Independently of this cooperation contract, Telekom and IAT jointly manufactured
a software codec based on the TI-MVP. The resulting copyrights and other rights
remain in force. For the legal duration of these rights, the contractual
cooperating partners are granted, free of charge, non-exclusive utilization and
exploitation rights for the use of the software codec in the MIKS.
IBM shall contribute the development work done by IBM Boblingen/Sindelfingen on
the ISDN/PCMCIA board for the ISDN piggy-back board, as a result of the
development of the Kiosk tool by the "European Network Center/Multimedia"
ENC/MM of the IBM Heidelberg data holding, editing and running time environment
adapted for MIKS version 3.0. The resulting copyrights and other rights remain
in force. For the legal duration of these rights, the partners of the
cooperation contract shall be granted the non-exclusive utilization and
exploitation rights, free of charge, to use the above mentioned components in
the MIKS.
To the extent necessary for the work under this cooperation contract and to
exploit new rights pursuant to No. 3.2 of this contract in order to use them in
the MIKS, each partner shall receive appropriate marketing rights for the above
mentioned software codec and the data holding, editing and running time
components for the MIKS version 3.0 and for the ISDN piggy-back board software.
3.2 New rights
Pursuant to No. 10 of this contract, each partner shall have, during their legal
validity, the utilization and exploitation rights for MIKS version 3.0 and,
separately, for the jointly developed main components and parts, with all
written documents, against payment of royalties, for the following
activities:
- -(1) Use for its own purposes.
- -(2) Dissemination, i.e. to sell simple utilization rights to third parties, for
specific internal usage
- -(3) Allow third parties to have main parts and components for marketing as
resellers
6
<PAGE>
Any further development, change or alteration of the jointly developed main
parts and components of the MIKS requires prior approval by all partners.
F3.3 Patents, patentable inventions
If patentable inventions are created during the work on the project goals
mentioned in this contract, they shall be offered to the partners of the
cooperation contract for their joint registration. If there is no interest in
joint registration of rights, the cooperating partner under whose aegis the
patentable invention was created, shall decide whether or not to register it for
its own account.
7
<PAGE>
4. Subcontractors
The partners may give orders to subcontractors for parts of the planned work,
without need for contract by the other partners, provided they make sure that
this shall not affect meeting of their obligations under the other stipulations
of this contract. Subcontractors shall not be covered by this contract.
5. Confidentiality
The cooperating partners pledge to use documents, drawings and other information
provided by the other partners only to fulfill the obligations they have assumed
from the latter under the contract; they shall treat as confidential any of the
other partners' business or operational secrets they learn. They shall limit the
dissemination of the information within their companies to employees who must
receive it on the basis of their activity. The accepting cooperating partner
shall maintain confidentiality on received information in the same manner as for
its own confidential information.
This obligation also applies to partners' associated companies; but they are not
considered third parties in the sense of this contract. The following are
understood to be associated companies:
- - Companies in which the business of the cooperating partner, or another
associated business, has a direct or indirect majority participation or on
which it can directly or indirectly exercise a dominating influence.
- - Companies which receive a direct or indirect majority participation in the
business of the cooperating partner or which can directly or indirectly
exercise a dominating influence on it.
Information which must be kept confidential shall be labeled "(name of the
owner) Confidential." If information which should be kept confidential is not so
labeled, or was so indicated only orally, it shall be labeled confidential when
this becomes known and this shall be confirmed to the recipient immediately in
writing.
The following information need not be treated as confidential:
Information:
- - Owned by the cooperating partners before the beginning of the negotiations
on the EG-MIKS,
- - Developed, or to be developed, independently of information received from
the other cooperating partners,
- - Publicly available,
8
<PAGE>
- - Received, or to be received, legally by the cooperating partners from third
parties without obligation to secrecy,
- - Released by other cooperating partners.
Each partner is free to use the "knowledge remaining" of the confidential
information of the other cooperating partners for all purposes, but shall
prevent access to it by third parties during the agreed upon period. The receipt
of confidential information does not obligate the recipient to restrict the
place and area of employment of its employees in any way. "Knowledge remaining"
is understood to mean information which is not written down but which might be
remembered by employees who participated in conversations. It shall not create a
right to a license for patents and similar industrial rights and copyrighted
material.
The obligation to maintain confidentiality persists after the contract is
terminated, but not for more than five years after transmittal of the
information in question.
6. Acceptance and guarantee of the joint development work
If the development stages have concluded with the making of the prototype
boards, serial boards and MIKS version 3.0, the developing partner reports this
to the others and all parties agree on a date for presentation of the prototype
and of other results of the development. A written acceptance report shall be
issued on this presentation, containing the test findings and results. The
results of the development shall be measured by criteria specified for the
detailed specifications and the technical descriptions.
The examination and test routines are defined for this purpose in the detailed
specifications. The other partners shall acknowledge the service rendered on the
basis of the reports on successful tests.
The developing partners shall warranty:
- - observance of the accepted rules of technology
- - quality of the materials
- - observance of the specifications pursuant to MIKS and IMT technical
descriptions
Warranty claims shall cover the elimination of any existing defects, plus
transportation and incidental costs. The statute of limitations on them runs out
6 months after acceptance. If improvement work is necessary after the warranty
period, the developing partner shall perform it against appropriate payment.
7. Liability
9
<PAGE>
The partners assume mutual liability for indirect personal and material damage,
to the extent that they are responsible for it. They shall be responsible for
intentional acts and gross negligence by management personnel. Liability for
lost income, lost savings, losses due to claims by third parties and loss of
data and other consequential damages is excluded. Also excluded is joint
liability of the cooperating partners for the violation of the rights of third
parties represented by knowledge, results and documents provided by a
contractual partner pursuant to this contract.
8. Duration of the contract
This cooperation contract is concluded definitively from the date it is signed
by all three partners until 12/31/95 (availability of MIKS version 3 for
marketing). If the work is not completed by that date, this contract shall be
automatically extended until final completion, but not by more than 6 months.
The results of the work available at that time shall be placed at the disposal
of all the partners.
The utilization and exploitation rights granted pursuant to this cooperation
contract and the limitations of liability and duty to confidentiality persist
after the termination of the contract.
If the scheduled work is not completed by the time the contract is terminated,
the following shall apply:
The rights granted pursuant to No. 3.2 shall cover the results of the work on
hand when the contract is terminated. Each cooperating partner may develop the
results further until they are ready for mass production, or order third parties
to do, and shall be authorized, without restriction, to internally use, sell,
alter, in particular process and modify and continue to develop individual
results of jointly developed work and the total system based on the joint
development. The results of the work shall be fully documented and immediately
given to the other partners, including the source code which has not yet been
deposited by then.
9. Deposit of the source code
The partner developing the software shall deposit, with a German notary public
of its choice, a copy of the source code of the software components defined and
jointly financed pursuant to this contract. The name and address of this notary
public shall be reported in writing to the cooperating partners when the deposit
is made.
The code shall be filed, exclusively and irrevocably in favor of the cooperating
partners, in printed and machine readable form.
The products to be filed shall consist of the following components (hereinafter
jointly referred to as "products"):
10
<PAGE>
- - Copies of all source codes developed and their instructions and support
documentation, unless they are generally available standard products,
- - Copies of the tools needed to develop, support and maintain the software,
and the relative documents,
- - Copies of all design documents on which the software is based.
The software shall be deposited as soon there is a stable code.
All the deposited products shall be handed over to a cooperating partner who
demands them, if
- - a bankruptcy or settlement proceeding is requested on the assets of one of
the cooperating partners which is developing the software, or if such a
partner becomes insolvent,
- - one of the cooperating partners which is developing the software gives up
his business activity, or suffers a financial collapse,
- - one of the cooperating partners which is developing the software does not
meet its contractual warranty and maintenance obligations to customers of
the other cooperating partners (delay, non-performance). The proof thereof
shall be accepted if the demanding cooperating partner can submit pertinent
customer correspondence,
- - a cooperating partner developing the software is not willing, in spite of
request, to perform maintenance work under the general conditions it has
offered, or ceases to offer maintenance service.
Each cooperating partner has the right to test the deposited products for
completeness and usefulness, at its own expense.
Each cooperating partner bears the cost of its deposit.
10. Royalties
The expenses incurred in developing the MIKS 3.0 and the necessary hard- and
software pursuant to No. 2, second paragraph, are to be made up by the
collection of royalties. For this purpose, each developing partner shall pay to
the cooperating community a royalty of DM 3,000 for each main component it has
used or sold, and nine percent of the sales per part used outside the MIKS
(derivative product), until the joint development costs have been covered (list
of services, Appendix 1). These payment obligations cease when the amount of the
joint development costs has been attained. Each partner is entitled to one third
of the royalties. The share of the royalties per main component and part /
derivative product shall be transferred quarterly, automatically on the last
11
<PAGE>
payment date, to the contractual partners, with the amounts for the main
components and parts listed separately.
The accounts into which the royalties are to be paid are listed in Appendix 8
(to be sent).
The prototype boards created during the development work shall not be subject to
payment of royalties.
The main components are the terminals in versions T1 to T4, the consultant,
editing, administration, and remote maintenance piggy-backs. The functions of
the administration and/or remote maintenance station may be integrated into the
editing station. No additional license fee shall be necessary if this is done.
As of today, parts are the IMT Boards and the Breakout box listed in the table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Components Royalty payable to EG-MIKS per unit
- --------------------------------------------------------------------------------
<S> <C>
Main components:
- --------------------------------------------------------------------------------
Terminals, consultant, editing, administration DM 3,000
and remote maintenance stations
- --------------------------------------------------------------------------------
Parts:
- --------------------------------------------------------------------------------
IMT basis board including the subsystem 9% of the sales per part
software
- --------------------------------------------------------------------------------
IMT codec board including the subsystem 9% of the sales per part
software
- --------------------------------------------------------------------------------
Breakout box 9% of the sales per part
- --------------------------------------------------------------------------------
</TABLE>
The amount of the royalty for each main component or part may subsequently be
adjusted among the cooperating partners to current needs, by mutual agreement,
based on market conditions (in particular with a view to the derivation and
possible development of additional marketable products on the basis of the IMT
board).
The software code provided by IAT and Telekom under OS/2 for MIKS shall be
calculated as a sublicense at market price at the time of the sale of the codec
board.
The ISDN software provided by IBM under OS/2 for MIKS for the ISDN piggy-back
board will be calculated as sublicense, at regular market price, when the basis
board and/or Codec board is sold.
11. Delivery
It is planned that, upon conclusion of the IMT board development by IBM and IAT,
IBM will assume the coordination for the production of the IMT boards (basis
board, ISDN piggy-back board
12
<PAGE>
and Codec board) and for the assembly, test or customer specific adjustments of
the MIKS by order of the cooperating community.
For financial reasons, the contractual partners may decide to place orders for
mass production of the boards to other board manufacturers as well as to the
partners responsible for developing the IMT boards (IAT and IBM), if assurance
is given that the IBM quality standard, including ISO 9001, will be observed.
Suitable procedures will be specified in time for the provision (production and
administration) of the required MIKS software (subsystem software and kiosk
tool) and the documentation.
12. Concluding specifications
Changes and supplements to this cooperation contract must be set forth in
writing.
This contract is subject to the laws of the federal republic of Germany. The
contractual law on the UN agreement of 4/11/80 governing contracts on
international sales of merchandise (UNCITRAL) shall not be applicable.
Bonn is the site of jurisdiction for all disputes under or in connection with
this contract, to the legally permissible extent.
If one stipulation is invalid, or if this contract has gaps, this shall not
affect the validity of the remaining stipulations. The invalid stipulation shall
be considered to have been replaced by one which comes closest to the original
financial meaning and purpose. In case of gaps, a stipulation shall be
considered agreed upon which corresponds to the original meaning and purpose of
this contract.
Bonn, 12/16/94 Bonn, 12/16/94 Bonn, 12/16/94
Place, Date Place, Date Place, Date
/signature/ /signature/ /signature/
IAT AG IBM Deutschland DBP Telekom
Dr.Viktor Vogt Informationssysteme GmbH Geschaftsbereich TD 2
P. Schwarzmann Dipl. Ing. Joachim Claus
Appendices:
1) List of services
2) Technical description of the MIKS
13
<PAGE>
3) Technical description of the IMT
4) The MIKS system components
5) MIKS main components (drawing)
6) Detailed specifications (to be remitted by 1/31/95)
7) Project schedule (to be remitted by 1/31/95)
8) Accounts for license (to be remitted)
9) System cost estimate
[APPENDICIES DELETED--CONFIDENTIAL TREATMENT HAS BEEN APPLIED FOR]
14
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1
General Cooperation Agreement concerning Joint Further
Development of the IAT/Deutsche Telekom Software
Codec on the Basis of the Texas Instruments Parallel Processor
TMS320C8x
between
Deutsche Telekom AG, represented by
Dr. Hans-Peter Quadt, Graduate Engineer
Director of the Department TD23
Friedrich Ebert Strasse 140
53105 Bonn
- hereinafter referred to as DT -
and
IAT Schweiz AG, represented by
Dr. Viktor Vogt
General Manager
IAT Schweiz AG
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi
- hereinafter referred to as IAT -
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
1. FOREWORD.........................................................................3
1.1 WORK SECTION(S) TYPE "A"........................................................3
1.2 WORK SECTION(S) TYPE "B"........................................................3
1.3 WORK SECTION(S) TYPE "C"........................................................3
2. OBJECT OF THE AGREEMENT..........................................................4
2.1 WORK SECTION 1, OPTIMIZATION OF THE H.320 MVP CODEC, TYPE "A"...................4
2.2 WORK SECTION 2, INTEGRATION OF JPEG CODEC AND H.320, TYPE "B"...................4
2.3 WORK SECTION 3, INTEGRATION OF MPEG1 DECODER AND H.320, TYPE "B"................4
2.4 WORK SECTION 4, MVP CODEC FOR MFKS, TYPE "A"....................................4
2.5 WORK SECTION 5, MPEG1 DECODER, TYPE "B".........................................4
2.6 WORK SECTION 6, EXPANSION OF H.320 MULTI-POINT CAPABLE, TYPE "A"................4
2.7 WORK SECTION 7, MPEG2 DECODER, TYPE "C".........................................4
3. PRICES, RESPONSIBILITY FOR COSTS................................................5
4. COMPLETION DEADLINES............................................................6
4.1 WORK SECTION 1, OPTIMIZATION OF THE H.320-MVP CODEC, TYPE "A"...................6
4.2 WORK SECTION 2, INTEGRATION OF JPEG CODEC AND H.320, TYPE "B"...................6
4.3 WORK SECTION 3, INTEGRATION OF MPEG1 DECODER AND H.320, TYPE "B"................6
4.4 WORK SECTION 4, MVP CODEC FOR MFKS, TYPE "A"....................................6
4.5 WORK SECTION 5, MPEG1 DECODER, TYPE "B".........................................6
4.6 WORK SECTION 6, EXPANSION OF H.320 MULTI-POINT CAPABLE, TYPE "A"................6
4.7 WORK SECTION 7, MPEG2 DECODER, TYPE "C".........................................6
5. PAYMENT TERMS...................................................................6
5.1 WORK SECTION 1, OPTIMIZATION OF THE H.320-MVP CODEC, TYPE "A"...................6
5.2 WORK SECTION 2, INTEGRATION OF JPEG CODEC AND H.320, TYPE "B"...................6
5.3 WORK SECTION 3, INTEGRATION OF MPEG1 DECODER AND H.320, TYPE "B"................7
5.4 WORK SECTION 4, MVP CODEC FOR MFKS, TYPE "A"....................................7
5.5 WORK SECTION 5, MPEG1 DECODER, TYPE "B".........................................7
5.6 WORK SECTION 6, EXPANSION OF H.320 MULTI-POINT CAPABLE, TYPE "A"................7
5.7 WORK SECTION 7, MPEG2 DECODER, TYPE "C".........................................7
6. UTILIZATION RIGHTS, INTELLECTUAL PROPERTY RIGHTS................................7
7. DOCUMENTATION OF THE STATUS OF DEVELOPMENT, DEVELOPMENT RESULTS.................8
8. DEMONSTRATION OF TIME/AMOUNT FRAMEWORK..........................................8
9. PATENTS, PATENTABLE INVENTIONS..................................................9
10. CONFIDENTIALITY................................................................9
</TABLE>
2
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
11. APPROVAL AND WARRANTY OF DEVELOPMENT SERVICES.................................10
12. DURATION OF THE AGREEMENT, SCHEDULE...........................................10
13. NOTICE OF TERMINATION.........................................................11
13.1 GENERAL INFORMATION...........................................................11
13.2 SPECIAL PROVISIONS............................................................11
14. FINAL PROVISIONS..............................................................12
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
1.......................................................................FOREWORD
IAT, together with DT, has developed a codec, the control and compression
algorithms of which function in a completely software-oriented manner. This
creates the greatest possible independence of licenses and chips of third
parties. Furthermore, it guarantees the possibility of rapid adaptation to
future developments in the sector of digital compression and data transfer
protocols. With this general cooperation agreement, the partners agree to the
further development and refinement of the codec board, which is currently a
prototype. The services agreed to according to this agreement are not of
significance for marketing of the codec board as such, but rather represent the
obligations taken on by IAT and DT within the scope of the "MIKS" cooperation
agreement (decisive development of the MIKS codec board).
The work sections described in Section 2 (Object of the Agreement) are the total
amount of work services which IAT and DT intend to jointly achieve in accordance
with this agreement, and therefore during the period of this agreement as
defined in Section 12 (Duration of the Agreement). Each work section is followed
by a "transfer and information phase." The concrete division of labor between
the parties to the agreement with regard to the services described in the
individual work sections is described below, by means of the distinction between
Types A, B, and C:
1.1 Work section(s) Type "A"
Work sections defined as Type "A" are those for which it has already been
decided upon conclusion of the agreement that they will be carried out by IAT as
the responsible partner.
1.2 Work section(s) Type "B"
Work sections defined as Type "B" are characterized in that it has not yet been
clearly determined, at the time of conclusion of the agreement, which party to
the agreement is to carry out the service defined in the work section, either
entirely or at least in a leading and primary capacity. These work sections are
characterized in that a study or concept phase precedes the beginning of the
actual development work. In this phase, the work necessary for achieving the
required results is to be recognized, defined, and conceptionally prepared and
described in detailed specifications, so that a binding decision can be reached
about which party to the agreement is to perform the work for this work section
(entirely or in part), taking into consideration the external circumstances
(time frame, costs, other advantages and disadvantages). The decision about this
must be reached by agreement between the partners. The party to the agreement
not entrusted with the development of the tasks of the work section is free to
participate by "accompanying the development" with its own resources, so that a
know-how transfer from the developing partner to the accompanying partner is
ensured. It must be assured that any delays which might result from the know-how
transfer do not significantly influence adherence to the schedule, and that the
developing partner does not incur any additional costs as a result.
- --------------------------------------------------------------------------------
4
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
1.3 Work section(s) Type "C"
Work sections defined as Type "C" are those which are clearly to be carried out
by DT as the responsible partner. For reasons of confidentiality, DT will
commission only its software development center in Berlin and the company
Multimedia Software GmbH Dresden, which is part of the DT group, to carry out
work within the framework of this agreement. Commissioning of any other DT
divisions requires the prior approval of IAT.
2. Object of the Agreement
The technically binding basis of all the development services described in this
section is the "Technical Description of the IMT codec card (TB codec),"
particularly Revisions B and C of the codec board, which is an integral part of
this agreement. For the meanings of the technical terms and abbreviations used
in this agreement, reference is also made to the TB codec.
2.1 Work section 1, Optimization of the H.320 MVP Codec, Type "A"
Optimization of the H.320-MVP codec, including the codec hardware for Rev.
3.0/40 MHz. This includes the H.320 standards. It also includes the H.320-API
with drivers as well as the "Tiny Application" (for demos). The Tiny Application
is based on the H.320-API and runs under the operating system Windows 3.x.
2.2 Work section 2, Integration of JPEG Codec and H.320, Type "B"
Within the scope of this work section, it is supposed to become possible to
operate H.320 and JPEG code simultaneously, on the MVP (under the Multi Tasking
Executive). Starting on 10/16/95, there will be a one-month study phase by IAT.
Subsequently, a description of the service to be performed can be issued.
2.3 Work section 3, Integration of MPEG1 Decoder and H.320, Type "B"
Within the scope of this work section, it is supposed to become possible to
operate H.320 and MPEG decoder simultaneously, on the MVP (under the Multi
Tasking Executive). Starting on 10/16/95, there will be a two-month study phase
by IAT. Subsequently, a description of the service to be performed can be
issued.
2.4 Work section 4, MVP Codec for MFKS, Type "A"
In this work section, the H.320-API as well as the necessary drivers for use of
the MVP code in MFKS under Windows are supposed to be written.
- --------------------------------------------------------------------------------
5
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
2.5 Work section 5, MPEG1 Decoder, Type "B"
The software for MPEG1 encoding, which is being acquired as a license from TI,
is supposed to be implemented on the MVP processor for image coding according to
the ISO standard MPEG-1, without additional external modules. Since a very large
amount of computer time is required for MPEG coding, this function is allowed to
use the full capacity of the MVP exclusively. Starting on 10/15/95, a one-month
study phase by IAT will follow. This software (available as a source code) will
be included if the evaluation of the study is positive.
2.6 Work section 6, Expansion of H.320 multi-point capable, Type "A"
The multi-point capability of the MVP codec is to be developed according to the
H.320 recommendation.
2.7 Work section 7, MPEG2 Decoder, Type "C"
It is agreed that a study will be drawn up by DT concerning the potential
possibilities of the implementation of MPEG2 on the MVP chip. The study and the
subsequent implementation of the results found in the study are the object of
this work section.
3. Prices, Responsibility for Costs
The parties to the agreement agree that an hourly rate of DM 200 (two hundred)
per hour will be billed for the work to be performed within the scope of this
agreement.
DT (SfE EKOM, Siegen) will take on any project management tasks within the scope
of this agreement, and will carry out the approval tests required at the end of
each work section in institutions belonging to Telekom, suitable for such
approval tests.
The amounts listed below represent the maximum limit of costs to be billed. This
maximum limit can only be amended for unavoidable additional costs which could
not be foreseen at the time the agreement was concluded, and only with the
agreement of both partners (see also Section 8, Demonstration of the Time/Amount
Framework). The only exception is costs which are caused by the institutions
commissioned for the approval tests.
<TABLE>
<CAPTION>
<S> <C>
Project management for all work sections agreed to in this agreement: DM 100,000
Carrying out approval tests for all the work sections agreed to in
this agreement: DM 80,000
Optimization of the H.320-MVP codex: DM 920,000
Integration of JPEG decoder and H.320: DM 224,000
Integration of MPEG1 decoder and H.320: DM 512,000
MVP codec for MFKS: DM 96,000
MPEG1 encoder: DM 300,000
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Expansion of H.320 multi-point capable DM 96,000
MPEG-2 decoder: DM 512,000
Additional amount due to planning inaccuracies (20% of total costs) DM 568,000
Total: DM 1,408,000
</TABLE>
For the Type "B" work sections, both parties to the agreement can each make a
detailed offer, no later than up to the time of a decision concerning carrying
out the development work, in which the costs and the time required for
completing the work must be indicated in binding manner. For finalization of the
Type "A" or "C" work sections, it is sufficient if the partner who is scheduled
to perform the work submits an offer.
A decision about commissioning the development work will be sent to the
developing partner by SfE EKOM, in writing, in the form of an order, so that the
partner can submit a bill for its costs in accordance with the offer and in
accordance with Section 5 (Payment Terms).
Per work section, a cost equalization will be made after completion of the
development work, in that each party to the agreement will pay half of the total
costs incurred within the scope of the agreement, in the final analysis, and
within the framework of the maximum limits indicated above.
The resources expended (human resources, hardware and software expenses) will be
cumulatively documented from the start of development to final completion and
approval.
Non-documented costs cannot be included in the cost equalization.
The costs for their own internal test environments will be paid by the partners
themselves, in each instance.
Any hardware or software costs for prototypes, etc., will be included in the
cost equalization.
If costs are incurred for the know-how transfer from the developing partner to
the accompanying partner, these are to be paid for by the accompanying partner,
upon documentation and by a separate order and billing of the developing
partner. In this case, the uniform hourly billing rate of DM 200 (two hundred)
per hour, which has been agreed to for the agreement as a whole, will apply.
4. Completion Deadlines
4.1 Work section 1, Optimization of the H.320-MVP Codec, Type "A"
Ready for approval: 10/16/95
- --------------------------------------------------------------------------------
7
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
4.2 Work section 2, Integration of JPEG Codec and H.320, Type "B"
Ready for approval: 4/30/96
4.3 Work section 3, Integration of MPEG1 Decoder and H.320, Type "B"
Ready for approval: 6/30/96
4.4 Work section 4, MVP Codec for MFKS, Type "A"
Ready for approval: 10/31/95
4.5 Work section 5, MPEG1 Decoder, Type "B"
Ready for approval: 6/30/96
4.6 Work section 6, Expansion of H.320 multi-point capable, Type "A"
Ready for approval: 6/30/96
4.7 Work section 7, MPEG2 Decoder, Type "C"
Ready for approval: 6/30/96
5. Payment Terms
The following payment terms are agreed upon for the individual work sections:
Each copntractual partner shall bear the expense for research and development.
This applies to all types of work sections (A, B, C).
5.1 Work section 1, Optimization of the H.320-MVP Codec, Type "A"
80% four weeks after the agreement is signed
20% after approval is complete
5.2 Work section 2, Integration of JPEG Codec and H.320, Type "B"
10% four weeks after the agreement is signed (for drawing up the study)
30% after a decision as to who will carry out the development
40% after completion and therefore availability of the development service
20% after approval is complete
5.3 Work section 3, Integration of MPEG1 Decoder and H.320, Type "B"
10% four weeks after the agreement is signed (for drawing up the study)
30% after a decision as to who will carry out the development
40% after completion and therefore availability of the development service
20% after approval is complete
- --------------------------------------------------------------------------------
8
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
5.4 Work section 4, MVP Codec for MFKS, Type "A"
80% four weeks after the agreement is signed
20% after approval is complete
5.5 Work section 5, MPEG1 Decoder, Type "B"
10% four weeks after the agreement is signed (for drawing up the study)
30% after a decision as to who will carry out the development
40% after completion and therefore availability of the development service
20% after approval is complete
5.6 Work section 6, Expansion of H.320 multi-point capable, Type "A"
40% immediately before the development work begins, no earlier than four
weeks after the agreement is signed
40% after completion and therefore availability of the development service
20% after approval is complete
5.7 Work section 7, MPEG2 Decoder, Type "C"
40% four weeks after the agreement is signed
40% after completion and therefore availability of the development service
20% after approval is complete
If the deadlines indicated in Section 4 are not met, payment of a contract
penalty is agreed. The contract penalty is 1/2% of the package value in question
per week of lateness, but the total can be at most 10% of the order volume of
the package in question.
6. Utilization Rights, Intellectual Property Rights
The rights and obligations with regard to use of the MVP and the software made
available by TI, which are derived from the bilateral agreement between Texas
Instruments and IAT, are transferred to DT to their full extent.
Both parties to the agreement receive the irrevocable, unlimited, exclusive,
free-of-charge and transferable right to utilize all the results achieved within
the scope of carrying out this agreement, without restrictions. The parties to
the agreement also have the right to reproduce and change the results, as well
as the right to grant others a utilization right (sale of licenses).
The sale and/or transfer of the entire utilization rights to third parties is
only possible with the written approval of the other partner.
- --------------------------------------------------------------------------------
9
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
To the extent that rights of third parties are involved, these must also be
taken into consideration accordingly, in this and all subsequent agreements.
The parties to the agreement particularly have the right to duplicate and revise
the software. One of the partners can also use individual program modules
without the approval of the other.
The software provided on diskettes must be identified with an appropriate
copyright note:
(C) Copyright
TMS 320 C 80 software codec
Deutsche Telekom AG IAT AG
1995 Version xx
In addition to a program version which can be run, both parties to the agreement
receive the source version in the programming language used in each instance
(e.g. "C"), with an indication of all the programming aids used, such as
compilers, linkers, tools, program libraries, etc., with product and
manufacturer designation, as well as the corresponding version numbers. The
source code must be completely documented.
Within the scope of the development work, the partners must observe the care
which is usual in the industry to protect the intellectual property rights of
third parties. This is particularly true for granting sublicenses.
If one of the partners fails to observe the care which is usual in the industry,
it is liable for all the disadvantages which the other partner incurs with
regard to the services to be performed by the former, due to the infringement of
intellectual property rights.
7. Documentation of the Status of Development, Development Results
The progress of the development work must be constantly documented and kept
updated by the developing partner. Updated documentation must be handed over to
the other partner monthly. On the basis of this documentation, the current state
of development must be evident, and the work performed must be reproducible.
Documentation includes not only a description of the technology (hardware and
software including source codes), but also a listing of the funds and resources
used and the current schedule. The documentation must be drawn up with programs
under Windows. No special compensation is paid for provision of the required
documentation, it is included in the development costs. It must be ensured that
the other partner is constantly up to date on the progress of development, so
that any advance payments made by this partner are always offset by a
corresponding equivalent value of available development results.
- --------------------------------------------------------------------------------
10
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
8. Demonstration of Time/Amount Framework
The proof that the time/amount assumptions of the developing partner on which
this agreement is based have actually been met is submitted by the developing
partner using the documentation to be drawn up according to Section 7, in time
manner before billing.
If the agreed time/amount assumptions are not met, only the services actually
performed can be billed.
If it is foreseeable that the time/amount assumptions will not be met (but no
later than when 90% of the contractually agreed rates have been reached), the
developing partner must inform the other partner immediately. The total costs of
the agreement are allowed to be at most 20% higher than the values stated in
Section 3 (Prices, Responsibility for Costs). An equalization within the work
sections to be performed by a party to the agreement is possible.
9. Patents, Patentable Inventions
If patentable inventions come about within the scope of the work for achieving
the project goals stated in this agreement, these will be offered to the parties
to the agreement for joint filing. If there is no interest in joint filing of
patents, it is left to the discretion of the cooperation partner under whose
aegis the patentable invention came about whether or not it wishes to file an
application on its own.
10. Confidentiality
The parties to the agreement undertake to use any documentation, drawings and
other information provided by the other partner only for fulfillment of the
obligations taken on, and to handle any business or industrial secrets of the
other partner of which they have gained knowledge as confidential. They will
limit dissemination of the information within their company to those employees
who must receive it on the basis of their activities. The receiving partner
undertakes to protect the confidentiality of the information received in the
same manner as it protects its own confidential information.
This obligation also applies to affiliates of the partners; however, they are
not considered third parties in the sense of this agreement. "Affiliated
companies" are understood to be:
- - Any company in which the company of the party to the agreement or another
affiliated company holds a majority interest, directly or indirectly, or on
which it can exercise a controlling influence, directly or indirectly.
- - Any company which holds a majority interest in the company of the party to
the agreement, directly or indirectly, or which can exercise a controlling
influence, directly or indirectly.
- --------------------------------------------------------------------------------
11
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
The information to be handled as confidential must be marked as "(name of owner)
- - Confidential." If any information which must be treated as confidential does
not have this marking, or if the confidentiality status was indicated orally,
this information must be designated as being confidential at the time it was
made known, and the recipient must receive written confirmation without delay.
The following information is not subject to the confidentiality obligation:
- - information which the parties to the agreement already had in their
possession at the time this agreement came into being,
- - information which they have developed or will develop independent of
information received from the other partner,
- - information which is publicly available,
- - information which the parties to the agreement have received or will
receive, in accordance with the law, from third parties, without any
obligation to keep it confidential,
- - information released by the other party to the agreement.
Each partner is free to use the "retained knowledge" from the confidential
information of the other cooperation partner for any purpose, with the
restriction of not making it available to third parties during the agreed period
of time. Receiving confidential information does not establish any obligation to
restrict the location at which employees may work or the area of work, in any
manner. "Retained knowledge" is understood to mean information which was not
written down, which the employees who participated in the discussions remember.
This does not establish a license for patents and similar intellectual property
rights and copyrighted material.
The obligation to maintain confidentiality continues to apply even after
termination of the agreement, but no longer than five years after transfer of
the information in question.
11. Approval and Warranty of Development Services
The partner with responsibility for the services (work sections) according to
Section 4 (Completion Dates) will make them available for approval tests to SfE
EKOM. This presentation is to be preceded by a function test by the developing
partner. Functional approval testing of the service is performed no later than
30 calendar days after the deadline for readiness for approval (readiness for
partial approval), in writing, by SfE EKOM or the Siegen office. In exceptional
cases where this is justified, the 30 calendar day limit can be extended to 40
calendar days by SfE EKOM.
- --------------------------------------------------------------------------------
12
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
Immediately before the approval test, the result achieved by the developing
partner will be presented and its functionality will be demonstrate
theoretically and practically (transfer). The partner not responsible for the
development shall have an opportunity to familiarize itself with the topics
inherent in the work section, and with the know-how in this regard.
If SfE EKOM or the Siegen office does not refuse approval within four weeks
after a work section has been presented as ready for approval, then approval is
considered to have been issued for all parts of the agreement. A reason for
refusing approval must be given within four weeks after approval was refused,
otherwise the refusal is considered rejected.
The warranty claims are directed at elimination of any defects, including
transport costs and incidental costs. They expire six months after approval.
If corrective work becomes necessary after expiration of the warranty period,
the developing partner is obligated to perform it in return for suitable
payment.
12. Duration of the Agreement, Schedule
This general cooperation agreement begins on the date it is signed by the
partners, and is fixed until 6/30/96.
If the planned work is not completed by this date, the agreement is
automatically extended until completion of the development which has not been
finished, but no longer than until 12/31/96.
More details about the time distribution of the work sections are contained in
the enclosed project schedule.
Even after termination of the agreement, the utilization and exploitation rights
granted according to this cooperation agreement will apply, as will the
limitations of liability and the confidentiality obligation.
If the planned work is still not complete upon termination of the agreement on
12/31/96, the following will apply:
The utilization rights granted according to Section 5 refer, in this case, to
the work results which are available and have been paid for at the time the
agreement ends. Each party to the agreement can furthermore develop these
results itself, or have them developed by third parties on its behalf, until
they are ready for production, and is entitled to use internally, distribute,
change, particularly to edit, restructure, and further develop individual
jointly developed work results, without restriction. The work results up to the
time of termination of the agreement must be fully documented and given to the
other partner immediately, including the source code for which a patent has not
yet been filed at that time.
- --------------------------------------------------------------------------------
13
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
13. Notice of Termination
13.1 General Information
Each party to the agreement has the right to terminate the agreement, in whole
or in part, without notice, if:
1. the other party to the agreement does not pursue the development goals
described in the agreement,
2. the costs established in Section 3 are exceeded,
3. the completion deadlines established in Section 4 are not met.
In case of notice of termination, in whole or in part, services will be billed
according to expenses actually incurred and documented, limited to a maximum of
the final offer sums in each instance.
Only those expenses which were proven to be necessary by the documentation which
accompanies development will be reimbursed. Expenses which were not reported
with documentation by the (leading) developing partner during the development
work will not be reimbursed.
The other rights to ordinary or extraordinary notice of termination remain
unaffected by this.
13.2 Special Provisions
In case of extraordinary notice of termination by a partner, the following
applies:
- - The partner will inform the other partner, in writing, about started work
that must still be completed; the partner is obligated to complete this
work under the terms of the cancelled agreement.
- - Any payments which must be made on the basis of the agreement, including
remaining payments, are not allowed to exceed the total amount of the order
which the partner would have received upon completion of the work if the
agreement had not been cancelled.
- - The developing partner must provide documentation for all items on which
claims are based.
The partners are obligated to point these terms out to any third parties are
contractors, and are required to reach corresponding agreements if subcontracts
which are of importance for the agreement are involved.
The provisions concerning intellectual property rights and utilization rights
are not affected by notice of termination. They also apply for those
intellectual property rights for which applications were not filed until after
the notice of termination.
- --------------------------------------------------------------------------------
14
<PAGE>
General Cooperation Agreement concerning Joint Further Development of the
IAT/Deutsche Telekom Software Codec on the Basis of the Texas Instruments
Parallel Processor TMS320C8x
- --------------------------------------------------------------------------------
14. Final Provisions
Changes in and additions to this agreement must be made in writing.
This agreement is subject to the laws of the Federal Republic of Germany. The
contract law related to the United Nations convention dated 4/11/80, concerning
agreements about international sale of goods (UNCITRAL) does not apply.
For any litigation resulting from or in connection with this agreement, the
courts in Bonn are agreed to have jurisdiction, if this is permissible by law.
If any provision of this agreement is invalid, or if this agreement contains
gaps, this does not affect the validity of the remaining provisions. Instead of
the invalid provision, it is agreed that the provision which comes closest to
the economic intent and purpose of the invalid provision will be agreed to. In
the case of gaps, the provision which corresponds to what would have been
agreed, according to the economic intent and purpose of this agreement, if the
matter had been agreed to right from the start, will be agreed to.
Dresden, 10/16/95 Bonn, 10/2/95
Place, date Place, date
[signature] [signature]
IAT AG Deutsche Telekom AG
Dr. Viktor Vogt Dr. Hans-Peter Quadt, Graduate Engineer
- --------------------------------------------------------------------------------
15
/handwritten text/
cc: MG
IBM
IBM Deutschland Informationssysteme GmbH
Division of Telecommunications
P. Dorweiler
Ext. 2287
July 30, 1996
Mr. D. Bruck-Neufeld
Deutsche Telekom
Director of PZM /abbreviation unknown/
57069 Singen
Re: Extension of Agreement concerning MIKS Version 3
Dear Mr. Bruck-Neufeld:
As previously discussed, the parties have agreed to extend the MIKS V3
Cooperation Agreement until September 30, 1996. If the work has not been
completed as planned by that date, the agreement shall be extended automatically
until completion of the work, at the most, however, by three (3) months.
Please sign below to indicate your consent and send this letter to IAT with the
request that they proceed accordingly. Please return the copy bearing your
signature to me.
All partners shall receive one copy of this document upon execution of same.
Sincerely,
/signature/ /signature/
Signed by:
IBM Deutsche Telekom IAT
P. Abt D. Bruck-Neufeld Dr. V. Vogt
/signature/
cc: IAT, Dr. V. Vogt /fax number/
IBM, Dr. H.-W. Moritz /fax number/
/letterhead information/
<PAGE>
/handwritten text/
TM /illegible/
cc: MG
Deutsche Telekom
Branch Office Singen
Deutsche Telekom AG, Branch Office Singen
57069 Singen
To:
<TABLE>
<CAPTION>
Company Name Place Fax Number
<S> <C> <C> <C>
IAT Mr. Leffering 28359 Bremen /see original/
IAT Mr. Muller CH-5300 Turgi /see original/
IBM Mr. Dorweiler 55131 Mainz /see original/
IBM Mr. Sander 65115 Heidelberg /see original/
IBM Mr. Schonwalder 71003 Boblingen /see original/
</TABLE>
Your Reference: /no entry/
Our File Number: PZM-1 B 1399-1
Direct Dial: 0271/2 30 50 11
Date: 06/26/96
Re: Project Progress Report
Dear Sirs:
Delays in the critical phase of the project became obvious during the last
teleconference on 06/13/96. The primary reasons for these delays are related to
the development of the base board by IBM (ISDN and inlay). In turn, this causes
delays in the development of the ISDN drivers at IAT, since the latter must
build on the base board.
These delays affect subsequent driver development:
<TABLE>
<CAPTION>
ID Procedure Start End Duration
<C> <C> <C> <C> <C>
048 MIKS 3.0 06/24/96 07/26/96 25 days
066 Integration Rev. A 06/24/96 07/26/96 25 days
081 VK + H.320 Module 06/24/96 07/05/96 10 days
082 State Machine 07/15/96 07/19/96 5 days
083 IOM on ISDN 07/01/96 07/01/96 0 days
084 NMM + ISDN DLL AV 07/01/96 07/12/96 10 days
085 Integration + Text 07/22/96 07/26/96 5 days
086 Dtrs H320 MCD to IBM 07/26/96 07/26/96 0 days
071 Integration MIKS 07/29/96 08/30/96 25 days
072 Base Board 07/29/96 08/30/96 25 days
073 Codec 07/29/96 08/30/96 25 days
074 EMV/CE Tests Rev. A 07/29/96 08/30/96 25 days
</TABLE>
Table 1: Delayed Procedures in the Critical Phase
The aforesaid procedures were integrated into the updated, enclosed project plan
(see enclosure). Given that these tasks (see Table 1) fall into the project's
critical phase, the final completion date will be delayed. In order to prevent
- 2 -
<PAGE>
further delays, we believe that it will be necessary for IBM's ISDN development
team to work even more closely with IAT than has been the case so far.
IBM is at present unable to forecast with certainty when the development of the
inlay will be completed. This is due to the absence of certain capabilities in
Videologic's technology. These capabilities are insufficient or not documented
at all. Only one developer at Videologic has any knowledge of these details.
However, since this person is also involved in other projects, he is not
available to IBM to a sufficient degree. IBM is therefore unable to state when
the development of the inlay will be completed.
We shall send a mutually agreed-upon letter to Videologic with the urgent
request that they support IBM in a more effective way than has been the case to
date. In the final analysis, the problems concerned are related to features
which, according to statements made by the representatives of Videologic's
management at the time, were supposed to exist. We depend on the support of
Videologic in the development of the inlay because, in our view, there is no
technical alternative.
However, we shall continue the development work on a parallel track in spite of
the absence of the second inlay. We hope that the problem will have been solved
by the time the MIKS integration phase (071) begins. Any further delays with
regard to the integration of the inlays will automatically delay the entire
project. This would mean that the aforementioned deadline (08/30/96) would have
to be postponed once again.
Finally, we would like to use this occasion to remind our partners that the
information concerning the amount of funds used since the onset of the
development work until now has still not been provided to us; in this connection
please see the "Cooperation Agreement Regarding the Development of MIKS, Version
3," Article 2 (responsibility for costs). Given that until now we have not
received any information in regards thereto, we must once again refer expressly
to said stipulation and request that you submit the respective data. We shall
process the data received and make them available to all project partners. We
have previously pointed out in each project progress report that this
information has not been provided to us. Should all cooperating partners no
longer wish to make said information available, we request that you declare as
much to us in a letter. In our view this would then necessitate amending the
agreement to reflect this change.
The Cooperation Agreement concluded by all parties will have to be extended in
light of the aforementioned delays. Under present stipulations, the agreement is
to terminate on 06/30/96.
We propose therefore that all cooperating partners provide a declaration to PZM
signed by the person who executed the agreement that they agree to an extension
of the agreement until 12/31/96.
Sincerely,
/signature/
Manfred Scheiter
Enc.
- 3 -
<PAGE>
Copy
<TABLE>
<S> <C> <C>
Dr. Frank Dr. Vogt Generaldirektion Telekom
IBM Deutschland Produktion GmbH IAT AG GK 33
P.O. Box 266 Aarestrabe 17 P.O. Box 20 00
71044 Sindelfingen CH - 5300 Vogelsang-Turgi 53105 Bonn
6/26/96
/initials/
Enclosure Enclosure Enclosure
Dr. Golke Generaldirektion Telekom Forschungs- und
IBM Deutschland TD 2 Entwicklungszentrum
Informationssysteme GmbH P.O. Box 20 00 EK 2
P.O. Box 25 40 53105 Bonn P.O. Box 10 00 03
55015 Mainz 6/26/96 64276 Darmstadt
/initials/
Enclosure Enclosure Enclosure
Dr. Ruckert Generaldirektion Telekom
IBM Deutschland TD 23
Informationssysteme GmbH P.O. Box 20 00
P.O. Box 10 30 68 53105 Bonn
69020 Heidelberg 6/26/96
/initials/
Enclosure Enclosure
</TABLE>
- 4 -
<PAGE>
Deutsche Telekom
Siegen Office
Deutsche Telekom AG x Siegen Office x 57069 Siegen
IAT AG
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi
Order
- - Please mention in all correspondence -
1 Number: 448150063
2 Date: December 12, 1995
3 Utilization number: 754108
4 Vendor number: 00300327
Dear Sir or Madam:
We hereby issue you an order for the services indicated below, at our terms as
indicated on the reverse, and ask you to confirm this order immediately, using
the enclosed form.
5 Our reference: EKOM 4, B 1399-5
6 Your offer/price list number/contract number/date: fax dated 11/23/95
7 Telephone: (02 71) 7 08-0 or 23050-15
8 Dirk Muller
9 Delivery date/performance date: December 15, 1995
10 Quality testing by: ---
11 Delivery address/location of service to be performed:
Deutsche Telekom AG, Siegen Office, EKOM Special Development Center
Koblenzer Strasse 29
57072 Siegen
12 Guarantee: ___ months
13 Type of price: ---
14 Invoice to be sent to:
Deutsche Telekom AG
Office
57069 Siegen
15 Pricing, if different from General Business Conditions 5.6.1.3.1
(explanation on reverse): ---
16 Sales tax ID number, Deutsche Telekom: DE 123476223
17 Sales tax ID number, company: ---
18 Consecutive number: 1
19 Designation of the service, information about technical contract
conditions, supplemental contract conditions, specific information:
Integration of the codec box ...
20 Amount and units: 1 piece
21 Price per unit, in DM: 30,000.00
22 Total amount, in DM: 30,000.00
Delivery of the hardware and software according to your offer dated 11/23/95 and
the corresponding descriptions.
Presentation and proof of correct function of the delivery at the PZM in Siegen
on 12/15/95. Proof of resources used by means of documentation of hours.
Sincerely, Enclosure
1 order confirmation
- 5 -
<PAGE>
[signature] [signature]
Dieter Bruck-Neufeld Dirk Muller
Transferred from page: ---
Net end price: 30,000.00
15% sales tax: 4,500.00
Total: 34,500.00
23 Payment due within 31 calendar days, in case of payment
within ___ calendar days, ___ % discount.
Net amount due upon receipt of invoice.
[illegible letterhead information (address, phone, fax, bank accounts]
[names of Supervisory Board and Managing Board members]
- 6 -
<PAGE>
Deutsche Telekom
Siegen Office
Deutsche Telekom AG x Siegen Office x 57069 Siegen
IAT AG
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi
Order
- - Please mention in all correspondence -
1 Number: 448150062
2 Date: December 12, 1995
3 Utilization number: 754109
4 Vendor number: 00300327
Dear Sir or Madam:
We hereby issue you an order for the services indicated below, at our terms as
indicated on the reverse, and ask you to confirm this order immediately, using
the enclosed form.
5 Our reference: EKOM 4, B 1399-5
6 Your offer/price list number/contract number/date: fax dated 11/17/95
7 Telephone: (02 71) 7 08-0 or 23050-15
8 Dirk Muller
9 Delivery date/performance date: December 15, 1995
10 Quality testing by: ---
11 Delivery address/location of service to be performed:
Deutsche Telekom AG, Siegen Office, EKOM Special Development Center
Koblenzer Strasse 29
57072 Siegen
12 Guarantee: ___ months
13 Type of price: ---
14 Invoice to be sent to:
Deutsche Telekom AG
Office
57069 Siegen
15 Pricing, if different from General Business Conditions 5.6.1.3.1
(explanation on reverse): ---
16 Sales tax ID number, Deutsche Telekom: DE 123476223
17 Sales tax ID number, company: ---
18 Consecutive number: 1
19 Designation of the service, information about technical contract
conditions, supplemental contract conditions, specific information:
MFKS Version 3.X translation into English
20 Amount and units: 1 piece
21 Price per unit, in DM: 9,000.00
22 Total amount, in DM: 9,000.00
50% participation in the translation costs for MFKS including help texts and
descriptions in English to obtain joint rights to the English-language version.
Scope of delivery: complete copies of the translations produced (texts, files,
etc.) as well as any documentation.
Sincerely, Enclosure
1 order confirmation
- 7 -
<PAGE>
[signature]
Dirk Muller
Transferred from page: ---
Net end price: 9,000.00
15% sales tax: 1,350.00
Total: 10,350.00
23 Payment due within 31 calendar days, in case of payment
within ___ calendar days, ___ % discount.
Net amount due upon receipt of invoice.
[illegible letterhead information (address, phone, fax, bank accounts]
[names of Supervisory Board and Managing Board members]
- 8 -
<PAGE>
Deutsche Telekom
Siegen Office
Deutsche Telekom AG x Siegen Office x 57069 Siegen
IAT AG
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi
Order
- - Please mention in all correspondence -
1 Number: 448150061
2 Date: December 12, 1995
3 Utilization number: 754113
4 Vendor number: 00300327
Dear Sir or Madam:
We hereby issue you an order for the services indicated below, at our terms as
indicated on the reverse, and ask you to confirm this order immediately, using
the enclosed form.
5 Our reference: EKOM 4, B 1399-5
6 Your offer/price list number/contract number/date: fax dated 11/17/95
7 Telephone: (02 71) 7 08-0 or 23050-15
8 Dirk Muller
9 Delivery date/performance date: December 15, 1995
10 Quality testing by: ---
11 Delivery address/location of service to be performed:
Deutsche Telekom AG, Siegen Office, EKOM Special Development Center
Koblenzer Strasse 29
57072 Siegen
12 Guarantee: ___ months
13 Type of price: ---
14 Invoice to be sent to:
Deutsche Telekom AG
Office
57069 Siegen
15 Pricing, if different from General Business Conditions 5.6.1.3.1
(explanation on reverse): ---
16 Sales tax ID number, Deutsche Telekom: DE 123476223
17 Sales tax ID number, company: ---
18 Consecutive number: 1
19 Designation of the service, information about technical contract
conditions, supplemental contract conditions, specific information:
MFKS Version 3.2T
20 Amount and units: 1 piece
21 Price per unit, in DM: 200,000.00
22 Total amount, in DM: 200,000.00
Take-over of 50% of the development costs for the Version 3.2T of the MFKS in
return for obtaining joint rights.
Scope of delivery:
Delivery of the completely described source code and indication of the
development environment used, pursuant to offer of 11/17/95, work package 2, and
according to specifications dated 12/4/95 (Version 3.2T).
Description of the compiler settings to be used, so that a complete version
which is able to run can be produced at Telekom.
- 9 -
<PAGE>
Delivery of the complete documentation and the handbook.
Proof of resources used by means of documentation of hours.
Partial performances 1 and 4 of work package 2: 12/15/95
Partial performances 2, 3, and 5-9 of work package 2: 2/28/96
2 partial invoices, each after delivery of the partial performances.
Sincerely, Enclosure
1 order confirmation
[signature] [signature]
Dieter Bruck-Neufeld Dirk Muller
Transferred from page: ---
Net end price: 200,000.00
15% sales tax: 30,000.00
Total: 230,000.00
23 Payment due within 31 calendar days, in case of payment
within ___ calendar days, ___ % discount.
Net amount due upon receipt of invoice.
[illegible letterhead information (address, phone, fax, bank accounts]
[names of Supervisory Board and Managing Board members]
- 10 -
<PAGE>
Deutsche Telekom
Siegen Office
Deutsche Telekom AG x Siegen Office x 57069 Siegen
IAT AG
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi
Order
- - Please mention in all correspondence -
1 Number: 448150060
2 Date: December 12, 1995
3 Utilization number: 754114
4 Vendor number: 00300327
Dear Sir or Madam:
We hereby issue you an order for the services indicated below, at our terms as
indicated on the reverse, and ask you to confirm this order immediately, using
the enclosed form.
5 Our reference: EKOM 4, B 1399-5
6 Your offer/price list number/contract number/date: fax dated 11/17/95
7 Telephone: (02 71) 7 08-0 or 23050-15
8 Dirk Muller
9 Delivery date/performance date: December 15, 1995
10 Quality testing by: ---
11 Delivery address/location of service to be performed:
Deutsche Telekom AG, Siegen Office, EKOM Special Development Center
Koblenzer Strasse 29
57072 Siegen
12 Guarantee: ___ months
13 Type of price: ---
14 Invoice to be sent to:
Deutsche Telekom AG
Office
57069 Siegen
15 Pricing, if different from General Business Conditions 5.6.1.3.1
(explanation on reverse): ---
16 Sales tax ID number, Deutsche Telekom: DE 123476223
17 Sales tax ID number, company: ---
18 Consecutive number: 1
19 Designation of the service, information about technical contract
conditions, supplemental contract conditions, specific information:
MFKS Version 3.1T
20 Amount and units: 1 piece
21 Price per unit, in DM: 200,000.00
22 Total amount, in DM: 200,000.00
Take-over of 50% of the development costs for the Version 3.1T of the MFKS in
return for obtaining joint rights.
Scope of delivery:
Delivery of the completely described source code and indication of the
development environment used, pursuant to offer of 11/17/95, work package 1, and
according to specifications dated 12/4/95 (Version 3.1T).
Description of the compiler settings to be used, so that a complete version
which is able to run can be produced at Telekom.
- 11 -
<PAGE>
Delivery of the complete documentation and the handbook.
Proof of resources used by means of documentation of hours.
Sincerely, Enclosure
1 order confirmation
[signature] [signature]
Dieter Bruck-Neufeld Dirk Muller
Transferred from page: ---
Net end price: 200,000.00
15% sales tax: 30,000.00
Total: 230,000.00
23 Payment due within 31 calendar days, in case of payment
within ___ calendar days, ___ % discount.
Net amount due upon receipt of invoice.
[illegible letterhead information (address, phone, fax, bank accounts]
[names of Supervisory Board and Managing Board members]
- 12 -
Licensing and
General Distribution Agreement
between
Deutsche Bundespost Telekom
(Telekom)
and
IAT AG
(IAT)
<PAGE>
Licensing and General Distribution Agreement
- --------------------------------------------------------------------------------
Preamble
Telekom and IAT have developed and are developing products on the basis of
separate development agreements of the development associations (EG).
The existing contractual agreements of the EG are set forth in Appendix A.
Agreements not set forth therein, as well as supplementary agreements, are null
and void.
It is the purpose of the present agreement to launch and to exploit products
previously generated on the basis of the development agreements (Appendix B) or
products that are already contractually secured but are still in the process of
being developed (Appendix C) by way of, for example, direct distribution,
third-party sales, distribution, and licensing agreements on the basis of joint
use and exploitations rights.
Art. 1 Common Use and Exploitation Rights of the Parties
The purpose of this agreement is to facilitate the unrestricted economic use and
exploitation rights to the products -- which belong to both parties jointly --
that have already been generated on the basis of this development process or
that will be generated on that basis in the future. Accordingly, one party
cannot dispose of the product rights without the other party unless this
agreement contains express provisions to the contrary. If one party decides not
to continue participating in common efforts to exploit a product, the other
party shall be given the possibility to exploit the product on its own. The
licensing shares of the other party shall not be affected thereby.
As far as the previously concluded development agreements are concerned, the
parties depart from the premise that all rights are divided equally among them.
Art. 2 Distribution Rights and Licenses
The parties grant each other a worldwide distribution right subject to
remuneration.
These rights shall be based on specified and still to be specified agreements
concerning base systems, licensing shares, as well as delivery and procurement
terms and conditions, all of which shall be equal for both parties.
As a rule, the licensing share to be stipulated separately for each product
shall be distributed among the parties according to their respective development
expenditures.
The licensing share in the aforesaid agreements shall be established at ten
percent (10%) of the recommended list price, unless provided otherwise in the
individual agreements.
<PAGE>
Licensing and General Distribution Agreement
- --------------------------------------------------------------------------------
The procedure for settling and offsetting licenses, as well as any and all rules
and modalities in connection therewith, shall be set forth in a separate
agreement.
- 2 -
<PAGE>
Licensing and General Distribution Agreement
- --------------------------------------------------------------------------------
Art. 3 Services and Costs to be Offset Separately
The following services and costs shall not be subject to the licensing agreement
and shall be stipulated at fixed prices by and between the parties. In the case
the parties cannot come to an agreement, cost prices according to VOL [German
contracting rules] shall apply.
o deliveries of hardware
o handbooks
o software production (copying costs, diskettes)
o packaging
o shipping
o modifications / adjustments
o assembly
o on-site installation
o consulting and projection services
o third-party software.
Art. 4 Product Parts not Subject to Licenses
Optional enhancements and conversions of the systems through third-party
hardware and software, which are not subject to the parties' mutual rights, are
not subject to this agreement.
Art. 5 Mutual Information and Agreement
The parties to this agreement undertake to inform each other with regard to all
important matters pertaining to the licensed products and to their mutual
cooperation.
This applies specifically to the following areas:
o product design
o product naming
- 3 -
<PAGE>
Licensing and General Distribution Agreement
- --------------------------------------------------------------------------------
o marketing strategies.
Art. 6 Warranty
As a rule, the delivering party to this agreement shall release the receiving
party to this agreement from warranty claims related to the specified licensed
products.
Art. 7 Right to Grant Sub-Licenses
The parties may grant sub-licenses to third parties for the purposes of
third-party sales and distribution.
The granting or sale of rights or partial rights (e.g. production licenses) to
third parties shall be subject to the agreement of both parties.
Art. 8 Trade and Business Secrets
The parties to this agreement shall neither use nor make available to other
parties any and all trade and business secrets to which they have become privy,
by whatever means, in the course of implementing the present agreement, neither
during the lifetime of the agreement nor upon termination of same.
Sales information related to licensed products may be made available to third
parties only insofar as necessary for commercializing their distribution.
Art. 9 Assistance in Matters of Unfair Competition and Violations of Rights
The licensees shall notify each other of any and all violations of laws
governing unfair competition, as well as of violations of copyrights, marketing,
licensing, and other rights of which they gain knowledge. They shall assist each
other in defending themselves against such violations and shall agree on
appropriate measures to that end.
Art. 10 Service and Maintenance
The party to this agreement making the sale shall be responsible for servicing
and maintaining the sold products unless contractually stipulated otherwise.
The parties to this agreement undertake to make available all necessary measures
and information required for providing due service and maintenance of products
to customers.
- 4 -
<PAGE>
Licensing and General Distribution Agreement
- --------------------------------------------------------------------------------
Art. 11 Continuous Development
The continued development of the products shall occur in the framework of the
existing and future development associations (EG). It shall be budgeted subject
to mutual agreement and in consideration of the experience gained on the market
and shall be implemented in the context of development agreements, to the extent
that both parties declare these to be necessary.
Both parties to this agreement have the right not to participate in the
continued development of one or several products. In such cases the other party
must be notified thereof in writing. The outcome of the continuing development
of the products concerned shall subsequently be set forth in supplementary
agreements. In such cases, the party willing to continue its development efforts
shall be granted the right to do so on its own on the basis of the existing
developments.
To this end, the party not interested in continuing the development efforts
shall make available, free of charge, all results developed in mutual
cooperation.
Art. 12 Termination of the Agreement
This agreement is concluded for an unspecified duration.
The right to terminate the agreement for important reasons remains unaffected
thereby.
A termination automatically voids all agreements deriving from this agreement
between the parties effective on the same termination date.
Subsequently, the specified licensing duties shall remain in effect until the
cumulative licensing revenue has reached the level of the investments made for
development purposes.
Agreements concluded by one party to this agreement relative to third parties in
the course of this agreement that must be maintained for satisfying obligations
shall not be affected by a termination.
All rights to the products shall revert to the parties to this agreement in
their entirety once this agreement has been terminated.
Art. 14 Disputes
All disputes arising from the interpretation and implementation of this
agreement shall be subject to the laws of the Federal Republic of Germany. The
place of jurisdiction is Bonn.
- 5 -
<PAGE>
Licensing and General Distribution Agreement
- --------------------------------------------------------------------------------
The parties shall bring disputes before an official court of arbitration before
taking recourse to ordinary courts of law.
Art. 15 Cure Clause
If this agreement lacks a specific provision, or if a provision of this
agreement is null and void, is questionable, or cannot be implemented, the
effectiveness of the remainder of this agreement shall not be affected thereby.
The parties shall adopt that legal provision in place of the possibly missing,
void, questionable, or non- implementable provision by a provision most suitable
to bring about the success envisioned by the parties to this agreement.
- 6 -
<PAGE>
Licensing and General Distribution Agreement
- --------------------------------------------------------------------------------
Deutsche Bundespost Telekom IAT AG
represented by: represented by:
The Division
"Bild-, AV, Multimedia"
[Image, Audio Visual, Multimedia]
of the Generaldirektion Telekom
/signature/ /signature/
(Mr. Penz) (Dr. Vogt)
Place, Date: Place, Date:
3/11/94 Bonn, 04/11/94
[APPENDIX A NOT INCLUDED--TRANSLATION IS NOT YET AVAILABLE AND WILL BE FILED
UPON RECEIPT]
[APPENDIX B NOT INCLUDED--CONFIDENTIAL TREATMENT HAS BEEN APPLIED FOR]
- 7 -
PROGRAM LICENSE AGREEMENT
BETWEEN
TEXAS INSTRUMENTS DEUTSCHLAND GMBH,
Haggertystr. 1, 85356 Freising
("Licensor")
and
IAT AG GESCHAEFTSHAUS WASSERSCHLOSS,
Aarestrasse 17, CH-5300 Vogelsang-Turgi
("Licensee")
<PAGE>
TEXAS INSTRUMENTS
Deutschland GmbH
1. Scope of license
1.1 The Licensor grants to the Licensee a personal, non-transferable,
non-exclusive license to use the software program described below ("the
Program") on the workstations and at the locations indicated with the
number of users indicated.
1.2 The Program is protected by copyright. The Licensee is aware that the
Program and all copyright, patent rights and other intellectual property
rights relating solely thereto are vested in the originator.
1.3 The Licensee may make a back-up copy of the Program insofar as this is
necessary for the use of the Program. The Licensee undertakes to transfer
to such copy all endorsements relating to copyright and ownership which are
included in the Program. No further copies may be made by the Licensee
without the express prior approval of the Licensor.
1.4 The Licensee undertakes not to sublicense, transfer or sell the Program or
make it accessible in any other manner to third parties without the prior
written consent of the Licensor.
1.5 The Licensee may not translate, adapt, arrange or otherwise alter the
Program of reverse compile the program except as allowed by local
legislation implementing article 6 of the EC Software Directive and only to
the extent necessary to achieve interoperability of an independently
created program with other programs. The Licensee is specifically
prohibited from copying, adapting or reverse compiling for the purpose of
error correction.
1.6 The Licensee undertakes that it shall not without the prior authorization
of the competent American and local authorities knowingly either directly
or indirectly export or re-export the Program or parts of the same to third
parties to whom such a transfer is restricted or prohibited by American or
local laws.
2. Limit on warranty
2.1 Defiency in title
The Licensor was authorized by the American originator of the Program to
license the same in accordance with the provisions contained herin. The
Licensor gives no undertaking and offers no warranty that the Program does
not infringe any rights of third parties, such as, for example, copyright
and patent rights or trade secrets, in the country in which it shall be
used.
<PAGE>
TEXAS INSTRUMENTS
Deutschland GmbH
2.2 Program errors
The Licensor merely warrants that the Program fulfils the functions
indicated in the software description. It does not however give any
warranty that the Program is free of errors or that it satisfies particular
requirements of the Licensee. The Licensee shall assume full responsibility
for selection of the Program, as well as for all decisions and actions
which he shall implement on the basis of information gained through use of
the Program. Any statements on the application possibilities of the Program
shall be neither implied nor express undertakings.
The Licensor shall make the Program available "as it is". In the event that
the Program does not fulfil the functions indicated in the software
description, the Licensee shall receive reimbursement of the licence fee
upon returning the Program whithin six months of transfer: All further
claims shall be excluded.
2.3 Data carrier
The Licensor warrants for a period of three months with effect from the
date upon which the Licensee receives the Program as indicated in the
confirmation of receipt, that the data carrier, but not, however: the
Program, is free of defects in material and manufacturing defect.
Defective data carriers shall be replaced during the period of warranty if
the Licensee returns the same to the supplier or to the Licensor: further
claims shall be excluded.
3. Exclusion of liability
The liability of the Licensor shall be limited to the above-mentioned
warranty claims; further rights to claim shall not exist.
The liability of the Licensor in other instances for damage suffered by the
Licensee or third parties arising from delivery, use or application of the
Program or in connection with the same shall be excluded in so far as the
damage was not cuased either intentionally or due to gross negligence on
the part of the management or a managerial employee of the Licensor.
4. Notice to terminate in the event of violation of contract
The Licensee shall use the Program and the documentation related therto
exclusively in accordance with the terms of this Licence and shall give
evidence of the same to the Licensor when requested in writing to do so. In
the event of violation of these terms, the Licensor may and shall give
notice to terminate the licence with immediate effect and shall prohibit
use of the Program. In the event of termination of the licence, the
Licensee shall destroy all complete or partial copies of the Program.
- 2 -
<PAGE>
TEXAS INSTRUMENTS
Deutschland GmbH
5. General conditions
In addition, the Licensors General Terms and Conditions of Delivery and
Services shall apply (attach by way of Schedule hereto).
In the event that a provision of this contract shall be or become wholly or
partially inoperative, the remaining provision or the remaining parts of
the provision shall remain operative.
In the event that the content of other documents contrained in the software
package shall contradict the terms of this Licence, the latter shall have
priority.
German law shall exclusively apply.
- 3 -
<PAGE>
TEXAS INSTRUMENTS
Deutschland GmbH
The above licensing conditions shall apply to the following software
programs:
<TABLE>
<CAPTION>
Order S/W-description No of Company No of users per
Locations for Location Installations
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NRE-MVP MVP-Tools
Package 2 2
</TABLE>
- 4 -
MVP CROSS LICENSE AGREEMENT
CONTENTS
- - Preamble
Licensed Products
Title
1. License Grants
2. Consideration
3. Term and Termination
4. TI Engineering Support
5. Maintenance Support
6. Availability of Licensed Products
7. Warranty and Warranty Disclaimers
8. Patent Infringement Disclaimer
9. Updates and Releases
10. Limitation of Liabilities
11. Force Majeure
12. Assignment
13. Applicable Law and Jurisdiction
14. Waiver
Severability
Export Control Compliance
15. Publicity
16. Headings
17. Notice
18. Complete Agreement
19. Summary of Schedules
<PAGE>
MVP CROSS LICENSE AGREEMENT
This Agreement is entered into by and between the Application Specific Product
Group of Texas Instruments France with its offices at 821 Avenue Jack Kilby,
06270 Villeneuve Loubet, France ("TI") and IAT AG with its offices at
Geschaeftshaus Wasserschloss Aarestrasse 17, 5300 Vogelsang-Turgi, Switzerland
("IAT").
WHEREAS the parties have previously executed a Cross License Agreement for a ten
(10) year term beginning, September 1, 1994, which the parties now desire to
cancel and replace by this Agreement.
NOW THEREFORE the parties hereto agree as follows:
1. LICENSED PRODUCTS
TI shall deliver to IAT the software products and related documentation
detailed in Schedule 1 (collectively referred to as "TI products") and
IAT shall deliver to TI the software products and related documentation
detailed in Schedule 2 (collectively referred to as "IAT Products").
2. TITLE
TI represents that it has sufficient rights to grant the license to the
TI Products and IAT represents that it has sufficient rights to grant the
license to the IAT Products. Nothing contained in this Agreement shall be
construed as transferring any right, title, or interest in the TI Product
or the IAT Products (collectively referred to as the "Licensed Products")
by one party to the other, except as expressly set forth herein.
3. LICENSE GRANTS
3.1 TI grants to IAT a worldwide non-transferable, non-assignable,
non-exclusive, fully paid up license to use, modify, compile, or
otherwise develop as applicable software programs which may be original
or derivative with respect to the TI Products, and to make, have made,
use, sell and otherwise dispose of hardware and software products
incorporating object code versions of such software programs.
3.1.1 IAT may also sublicense third parties to use, modify, compile or
otherwise develop as applicable software programs which may be original
or derivative with respect to the TI Products, and to make, have made,
use, sell and otherwise dispose of hardware and software products
incorporating object code version of such software programs, provided
that IAT first executes with each such third party a software license
agreement substantially similar to this Agreement. Such third parties
shall not have the right to sublicense the TI Products.
3.1.2 IAT undertakes to reproduce on all original or derivative software
programs of the TI Products, all copyright notices exactly as and where
they appear on the TI Products, or as
<PAGE>
closely as possible where a change in media precludes exact reproduction,
and to procure a written undertaking from its sublicensees to do the
same.
3.1.3 Except as may be required pursuant to any sublicense granted by IAT under
Section 3.1.1 above, IAT undertakes to maintain any source code of the TI
Products as confidential, and not to disclose or otherwise make available
such source code to any other party, and to procure a written undertaking
from its sublicensees to do the same. The obligations of this provision
shall survive termination or expiration of this Agreement.
3.1.4 IAT shall ensure that all end users are restricted by written agreement
from copying, distributing, translating, adapting, arranging or otherwise
altering any object code versions of the TI Products, or reverse
compiling such object code except as allowed by local legislation
implementing Article 6 of the EC Software Directive and only to the
extent necessary to achieve interoperability of an independently created
program with other programs, and procure a written undertaking from its
sublicensees to do the same. Such end users shall be specifically
prohibited from copying, adapting or reverse compiling such object code
for the purpose of error correction.
3.2 IAT grants to TI a worldwide transferable, non-assignable non-exclusive
fully paid up license to use, modify, compile or otherwise develop as
applicable software programs which may be original or derivative with
respect to the IAT Products, to incorporate object code versions of such
software programs in its MVP Software Library, and to make, have made,
use, sell and otherwise dispose of hardware and software products
incorporating object code versions of such software programs.
3.2.1 TI may also sublicense third parties to use, modify, compile or otherwise
develop as applicable software programs which may be original or
derivative with respect to the IAT Products, and to make, have made, use,
sell and otherwise dispose of hardware and software products
incorporating object code versions of such software programs, provided
that TI first executes with each such third party a software license
agreement substantially similar to this Agreement. Such third parties
shall not have the right to sublicense the IAT products.
3.2.2 TI undertakes to reproduce on all original or derivative software
programs of the IAT Products, all copyright notices exactly as and where
they appear on the IAT Products, or as closely as possible where a change
in media precludes exact reproduction, and to procure a written
undertaking from its sublicensees to do the same.
3.2.3 Except as may be required pursuant to any sublicense granted by TI under
Section 3.2.1 above, TI undertakes to maintain any source code of the IAT
Products as confidential, and not to disclose or otherwise make available
such source code to any other party, and to procure a written undertaking
from its sublicensees to do the same. The obligations of this provision
shall survive termination or expiration of this Agreement.
- 2 -
<PAGE>
3.2.4 TI shall ensure that all end users are restricted by written agreement
from copying, distributing, translating, adapting, arranging or otherwise
altering any object code versions of the IAT Products, or reverse
compiling such object code except as allowed by local legislation
implementing Article 6 of the EC Software Directive and only to the
extent necessary to achieve interoperability of an independently created
program with other programs, and procure a written undertaking from its
sublicensees to do the same. Such end users shall be specifically
prohibited from copying, adapting or reverse compiling such object code
for the purpose of error correction.
3.3 TI and IAT shall ensure that the preprinted agreements accompanying
Licensed Products supplied to end users include provisions disclaiming
all product warranties either express or implied, and any liability for
patent infringement and indirect, incidental or consequential damages, to
the extent permitted under local law. End users shall be required to
comply with United States and other applicable export control
regulations.
4. CONSIDERATION
4.1 TI and IAT understand and agree that the cross licenses granted herein
represent full and fair consideration one for the other, and that no
license fees or royalty payments shall be payable by either party to the
other in respect thereof.
5. TERM AND TERMINATION
5.1 This Agreement shall be for ten (10) years beginning __________ 1994
unless terminated sooner as provided for herein. This Agreement may be
extended for additional one (1) year periods thereafter by mutual written
agreement of the parties.
5.2 Either party may terminate this Agreement at any time upon written notice
to the other in the event that:
A. The other party is in material or persistent breach of any term of
this Agreement and such breach is not corrected within sixty (60)
days from written notice thereof.
B. The other party shall be or become insolvent; or
C. The other party admits in writing its inability to pay its debts
as they mature; or
D. The other party shall make an assignment (other than working
capital financing) for the benefit of creditors; or
E. There are instituted by or against the other party judicial or
administrative proceedings in bankruptcy or under any insolvency
law or for reorganization, receivership or dissolution; or
- 3 -
<PAGE>
F. The other party shall have a substantial change in ownership such
as to create a material conflict of interest.
5.3 Upon termination of this Agreement for either of the reasons specified in
Sections 5.2.A or 5.2.F, each party shall return and/or certify
destruction of all copies of the Licensed Products belonging to the other
party and all original or derivative versions of such Licensed Products
in source code or object code in its possession. Such termination shall
not affect the rights and obligations of existing sublicensees and end
users.
5.4 Upon termination of this Agreement for any of the reasons specified in
Sections 5.2.B through 5.2.E, the defaulting party hereby assigns joint
ownership and unrestricted rights in the Licensed Products of the
defaulting party, to the other party, including the right to license such
Licenced Products to third parties without accounting to the other.
6. TI ENGINEERING SUPPORT
6.1 TI shall assign an engineer to IAT's site for three (3) months beginning
June 1, 1194, free of charge to IAT, to collaborate with IAT in the
development and merging of the Licensed Products.
6.2 IAT agrees to provide suitable office space for the TI engineer and to
provide telephone, fax, E-mail and other necessary support services free
of charge to TI.
6.3 IAT shall make known to TI's engineer upon his arrival at IAT's site, any
regulations it may have relating to conduct, safety and security.
6.4 IAT represents that it maintains adequate Worker's Compensation insurance
for injury (including death), howsoever caused, covering TI's engineer
while working at IAT's site. IAT will provide a certificate of insurance
representing such coverage to TI, upon request.
7. MAINTENANCE SUPPORT
7.1 For a period of one (1) year from delivery of the TI Products to IAT, TI
will at no charge to IAT, verify and correct errors in the TI Products
that are reported by IAT. The time to correct verified errors shall be
mutually agreed by the parties on a case-by-case basis. TI shall furnish
IAT with the appropriate reproduction media or written instructions or
documentation necessary to correct the error.
7.2 Likewise, for a period of one (1) year from delivery of the IAT Products
to TI, IAT will at no charge to TI, verify and correct errors in the IAT
Products that reported by TI. The time to correct verified errors shall
be mutually agreed by the parties on a case-by-case
- 4 -
<PAGE>
basis. IAT shall furnish TI with the appropriate reproduction media or
written instructions or documentation necessary to correct the error.
8. AVAILABILITY OF LICENSED PRODUCTS
Estimated delivery dates for the Licensed Products are specified in
Schedules 1 and 2. Both parties shall use reasonable endeavours to
deliver the Licensed Products on the dates specified. The parties agree
to review and discuss any slippages which may occur with a view to
defining appropriate corrective measures, however, neither party shall be
liable for any loss or expense (consequential or otherwise) if it fails
to meet a scheduled delivery date for any reason.
9. WARRANTY AND WARRANTY DISCLAIMERS
9.1 Nothing contained herein shall constitute a warranty or representation by
TI to maintain production of the hardware with which the TI Products are
to be used.
9.2 The Licensed Products are supplied 'As Is'. Neither party warrants that
the functions contained in the Licensed Products will be free from error
or will meet the other party's specific requirements, or that of any
sublicensees or end users. Neither party shall have any responsibility or
liability for errors or product malfunction resulting from the other
party's use or modification of the Licensed Products or the use or
modifications of the Licensed Products by other parties. Each party
assumes complete responsibility for its decisions made or actions taken,
based on information obtained using the Licensed Products. Any statements
made by one party to the other concerning the utility of the Licensed
Products are not to be construed as express or implied warranties.
9.3 THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
10. PATENT INFRINGEMENT DISCLAIMER
Nothing contained in this Agreement shall be construed as a warranty or
representation that any use of the Licensed Products will be free from
infringement of third party rights or, an agreement to bring or prosecute
actions or suits against third parties for infringement of any of the
rights licensed herein, or conferring any rights to bring or prosecute
actions or suits against third parties for infringement.
- 5 -
<PAGE>
11. UPDATES AND NEW RELEASES
The licenses granted pursuant to this Agreement shall be deemed to
include and extend to any updates or new releases to the Licensed
Products which either party may choose in its sole discretion to supply
to the other from time to time.
12. LIMITATION OF LIABILITIES
NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES WHETHER SUCH DAMAGES ARE ALLEGED AS A RESULT OF TORTIOUS CONDUCT
OR BREACH OF CONTRACT OR OTHERWISE, EVEN IF THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SUCH EXCLUDED DAMAGES SHALL
INCLUDE BUT SHALL NOT BE LIMITED TO COST OF REMOVAL AND REINSTALLATION OF
GOODS, LOSS OF GOODWILL, LOSS OF PROFITS, LOSS OF USE OR DATA,
INTERRUPTION OF BUSINESS OR OTHER ECONOMIC LOSS.
13. FORCE MAJEURE
Neither party shall be liable, wholly or in part, for non-performance or
a delay in performance of its obligations under this Agreement, if due to
contingencies or causes beyond the reasonable control of the party,
including but not limited to: flood, wind, hurricane, tornado, earth
quake, explosion, or other similar catastrophe; hostilities, restraint of
rulers or people, civil commotion, act of terrorism, strike, labor
dispute, blockade or embargo; lack or failure of transportation, shortage
of suitable parts, fuel materials, or labor; or any act of nature, fires,
accident, epidemic or quarantine restrictions.
14. ASSIGNMENT
This Agreement may not be transferred or assigned in any form by either
party without the prior written consent of the other party, executed by a
duly authorized representative. Any unauthorized transfer or assignment
shall be void.
15. APPLICABLE LAW AND JURISDICTION
It is expressly agreed that the validity and construction of this
Agreement, and performance hereunder, shall be governed by the laws of
England and that the courts of England, to whose jurisdiction the parties
hereby submit, shall have exclusive jurisdiction to hear all disputes
arising herefrom.
- 6 -
<PAGE>
16. WAIVER
Consent by either party to, or waiver of, a breach by the other party,
whether express or implied, shall not constitute a consent to, waiver of,
or excuse for any other different or subsequent breach.
17. SEVERABILITY
If any provision, or part of any provision of this Agreement, or the
Attachments hereto, is invalidated by operation of law or otherwise, the
provision or part will to that extent be deemed omitted and the remainder
of this Agreement, or applicable Attachment will remain in full force and
effect. Should the case arise, the parties agree that such invalidated
provision or part thereof shall be replaced by a similar but legally
valid provision which is as close as possible in commercial effect to the
invalidated provision or part thereof.
18. EXPORT CONTROL COMPLIANCE
TI and IAT undertake that they will not knowingly (1) export or reexport,
directly or indirectly, any product or technical data (as defined by the
U.S. Export Administration Regulations) or any controlled products
restricted by other applicable national regulations, including software,
received from the other party under this Agreement, (2) disclose such
technical data for use in, or (3) export or reexport, directly or
indirectly, any direct product of such technical data, or of such other
controlled products, including software, any destination to which such
export or reexport is restricted or prohibited by U.S. or non-U.S. law,
without obtaining prior authorization from U.S. Department of Commerce
and other competent government authorities to the extent required by
those laws.
19. PUBLICITY
Neither party shall publicly announce or disclose the existence of this
Agreement or its contents without the prior written consent of the other
party. This clause shall survive the expiration or termination of this
Agreement.
20. HEADINGS
The headings in this Agreement are for the convenience of the parties
only and shall not be considered in the construction or interpretation of
this Agreement.
- 7 -
<PAGE>
21. NOTICES
All notices made or required to be given under this Agreement shall be in
writing and shall be sent by registered mail to the addresses indicated
below with notice of receipt and shall be effective on receipt thereof:
IAT AG: Geschaeftshaus Wasserschloss Aarestrasse 17
5300 Vogelsang-Turgi
Switzerland
Texas Instruments France: 821 avenue Jack Kilby
06270 Villeneuve Loubet
France
22. COMPLETE AGREEMENT
22.1 The parties understand and agree that the Cross License Agreement
beginning September 1, 1994, previously executed by the parties, is
hereby cancelled.
22.2 This Agreement and its Schedules are the complete and exclusive statement
of the Agreement between the parties, which supersedes all proposals or
prior agreements, oral or written, and all other communications between
the parties relating to the subject matter of this Agreement and any of
its Schedules. No addition to or modification of this Agreement shall be
binding upon either party unless reduced in writing and duly executed by
the parties to this Agreement.
- 8 -
<PAGE>
23. SUMMARY OF SCHEDULES
The following are attached hereto and incorporated by reference herein.
Schedule 1 -- TI Products and Availability
Schedule 2 -- IAT Products and Availability
<TABLE>
<S> <C>
Agreed: Texas Instruments France Agreed: IAT AG
By By
Name Name
Title Title
Date Date
</TABLE>
- 9 -
<PAGE>
SCHEDULE 1
TI PRODUCTS AND DELIVERY
Source Code Estimated delivery
- ----------- ------------------
JPEG encode and decode 1Q 94
H.261 encode and decode July 94
G.728 encode and decode June 94
G.722 encode and decode July 94
Documentation
TI standard documentation
Note
1. Delivery of H.261 to IAT shall be contingent on the prior or concurrent
delivery of G.711 to TI.
- 10 -
<PAGE>
SCHEDULE 2
IAT PRODUCTS AND DELIVERY
Source Code Estimated delivery
- ----------- ------------------
H.221, H.242, H.230 preliminary version July 94
H.221, H.242, H.230 final version October 94
Documentation
To the same standard as TI's documentation of the H261 and JPEG software
algorithms.
Note
1. 'Preliminary' as mentioned above indicates a version of the software which is
functional to the extent of allowing terminal to terminal videoconferencing for
demonstration purposes, but which may not be fully functional to the full extent
of the standard specifications.
- 11 -
<PAGE>
Transfer of source codes between Texas Instruments and IAT
- --------------------------------------------------------------------------------
On August 25, 1994, IAT transfers to Texas Instruments the actual status of the
source codes for H.221, H.242, H.230 and G.711. At the same time Texas
Instruments transfers the actual status of the source codes for H.261, G.728,
G.722 and JPEG to AIT. The following clauses will be applicable:
1. MVP CROSS LICENSE AGREEMENT, signed by IAT on August 8, 1994.
2. Texas Instruments informs all of its concerned staff about the content of
above-mentioned MVP CROSS LICENSE AGREEMENT, above all about the treatment
of the source codes (i.e. no passing-on of the source codes).
3. IAT informs all of its concerned staff about the content of above-mentioned
MVP CROSS LICENSE AGREEMENT, above all about the treatment of the source
codes (i.e. no passing-on of the source codes).
The same is applicable for all further transfers of source codes according to
the MVP CROSS LICENSE AGREEMENT.
<TABLE>
<S> <C>
Agreed: Texas Instruments Agreed: IAT AG
By: By:
Name: Name:
Date: Date:
</TABLE>
- 12 -
MSC#10850
JOINT DEVELOPMENT AND CROSS LICENSE AGREEMENT
This Agreement is entered into by and between the Application Specific Product
Group of Texas Instruments Incorporated with its offices at 8505 Forest Lane,
Dallas, Texas 75243 ("TI"), and IAT AG with its offices at eschaeftshaus
Wasserschloss Aarestrasse 17, 5300 Vogelsan-Turgi, Switzerland ("IAT")
1. LICENSED PRODUCTS
TI shall develop or acquire and deliver to IAT the software and hardware
products and related documentation as detailed in Appendix A (collectively
referred to as "TI Products") and IAT shall develop or acquire and deliver to TI
the software products and related documentation detailed in Appendix A
(collectively referred to as "IAT Products").
2. TITLE
TI represents that it has the rights to grant the license to the TI
Products and IAT represents that it has the rights to grant the license to the
IAT Products. Nothing contained in this Agreement shall be construed as
transferring any right, title, or interest in the TI Product or the IAT Products
(collectively referred to as the "Licensed Products") by one party to the other,
except as expressly set forth herein.
3. LICENSE GRANTS
3.1 Subject to IAT completing its obligations and granting of licenses to TI as
elsewhere provided herein, TI grants to IAT a worldwide non-transferable,
non-assignable, non-exclusive license under TI's copyrights and associated trade
secrets solely to use, modify, compile, or otherwise develop as applicable
software programs which may be original or derivative with respect to the
counterpart TI Products, and to make, have made, use, and sublicense use of
object code versions of such software programs solely for operation on TI DSP's.
TI DSP's are defined to be any TMS320CXX Microprocessor manufactured by Texas
Instruments. Except with respect to the DataBeam software, which shall be
royalty bearing as provided in Section 4 herein, all licenses hereunder shall be
fully paid. All the terms and conditions of this license shall be applicable to
any modifications of the Licensed Products made pursuant to this Agreement.
3.2 IAT undertakes to reproduce on all original or derivative software programs
of the TI Products, all copyright notices exactly as and where they appear on
the TI Products, or as closely as possible where a change in media precludes
exact reproduction. TI undertakes to reproduce on all original or derivative
software programs using the IAT products, all copyright notices exactly as and
whre they appear on the IAT products, or as closely as possible where a change
in media precludes exact reproduction.
<PAGE>
MSC#10850
3.3 IAT and TI shall maintain as confidential any source code of the other
party's Products and derivative software based on the other party's Products and
shall not disclose or otherwise make available such source code without entering
into a source code license with at as leas as stringent terms as TI's current
standard source code license agreement in effect at the time of disclosure; a
copy of which is attached hereto as Appendix B and incorporated herein by this
reference. TI shall notify IAT in the event that TI makes changes to such
standard source code license agreement.
3.4 IAT and TI shall ensure that all end users are restricted by written
agreement from copying, distributing, translating, adapting, arranging or
otherwise altering any object code versions of the TI and IAT Products, or
reverse compiling such object code except as allowed by local legislation
implementing Article 6 of the EC Software Directive and only to the extent
necessary to achieve interoperability of an independently created program with
other programs. Such end users shall be specifically prohibited from copying,
adapting or reverse compiling such object code for the purpose of error
correction.
3.5 IAT may sublicense original and derivative versions of the TI products in
source code form to third parties provided that IAT enters into a source code
sublicense agreement with terms no less stringent than TI's Standard Source Code
License agreement applicable to the products licensed by TI hereunder. This
applies to all third parties except for those that are involved with the
manufacture, sale or licensing of semiconductor products or development of
software which operates on digital signal processors other than those
manufactured by TI, in which case TI has the right to withhold approval of such
license issuance by IAT
3.6 Subject to the provisions of Section 4 herein, with the exception of the
ISDN library software, IAT grants to TI a worldwide transferable,
non-assignable, non-exclusive fully paid up license to use, modify, compile or
otherwise develop as applicable software programs which may be original or
derivative with respect to the IAT Products, to incorporate source code versions
of such software programs in its DSP Software Library, and to make, have made,
use, sell and otherwise dispose of products incorporating object code versions
of such software programs. All the terms and conditions of this license shall be
applicable to any modifications of the IAT Products made pursuant to this
Agreement. In the case of the ISDN library, the above license rights apply to
object code only.
3.7 TI may sublicense third parties to use, modify, compile or otherwise develop
as applicable software programs which may be original or derivative with respect
to the IAT Products, and to make, have made, use, sell and otherwise dispose of
products incorporating object code versions of such software programs, under the
TI then current standard software license agreement.
3.8 All licenses to TI hereunder shall include the right to sublicense any
affiliate or subsidiary of TI. All licenses to IAT hereunder shall include the
right to sublicense any affiliate or subsidiary of IAT.
- 2 -
<PAGE>
MSC#10850
4. CONSIDERATION
4.1 Notwithstanding the provisions of 4.3, 4.4, 4. and except as provided in
Section 4.2, TI and IAT understand and agree that the cross licenses granted
herein represent full and fair consideration one for the other, and that no
license fees or royalty payments shall be payable by either party to the other
in respect thereof.
4.2 With respect to the T.123 DataBeam license, IAT understands that TI will
negotiate this license on behalf of IAT and will extend a most favored nations
license back to IAT as a result of the final license agreement negotiated.
4.3 In the event that TI licenses third parties the use of H.320 libraries as
ported by IAT hereunder for purposes other than evaluation, TI shall remit to
IAT the greater amount of a)50% of the license fee collected by TI for such
library or b)$20,000 US. However, no such obligation will be required of TI when
supplying customers who have existing licenses of the IAT Products prior to the
execution of this agreement.
4.4 In the event that TI licenses third parties the use of the reference design
as productized by IAT hereunder for purposes other than evaluation, TI shall
remit to IAT the greater amount of a) 35% of the license fee collected by TI for
such library or b)$7,000 US.
4.5 In the event that TI sells an evaluators kit defined as the bundled hardware
and software as ported and productized by IAT hereunder and separately charges
such third party a fee for use of such kit, TI shall remit to IAT 10% of the kit
fee collected by TI for such kit. IAT recognizes that for its own business
reasons, TI may choose to sell such kit without fee or without separately
identifying fees and agrees that in such event no fees are due IAT.
4.6 In consideration of the above, IAT agrees that no fees will be due on
revenues received by TI as a result of the licensing arrangements in 4.3, 4.4
and 4.5 until IAT has completed and TI approves the productization activities
specified in the statement of work, after which all accrued amounts will be paid
in full.
Furthermore IAT agrees to provide dedicated engineering support services to TI
in a timely manner to support its licensees. TI agrees to provide timely
engineering support services to IAT on an as needed basis.
5. TERMS AND TERMINATION
5.1 This Agreement shall be for three (3) years beginning April 1, 1996 unless
terminated sooner as provided for herein. This Agreement may be extended for
additional one (1) year periods thereafter by mutual written agreement of the
parties.
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MSC#10850
5.2 Except as provided in 5.3 below, the licenses herein granted and obligations
of confidentiality shall survive any expiration or sooner termination of this
Agreement. Either party may terminate this Agreement at any time upon written
notice to the other in the event that:
A. The other party is in material or persistent breach of any term of this
Agreement and such breach is not corrected within sixty (60) days from
written notice thereof; or
B. The other party shall be or become insolvent; or
C. The other party admits in writing its inability to pay its debts as they
mature; or
D. The other party shall make an assignment (other than working capital
financing) for the benefit of creditors; or
E. There are instituted by or against the other party judicial or
administrative proceedings in bankruptcy or under any insolvency law or for
reorganization, receivership or dissolution; or
F. The other party shall have a substantial change in ownership such as to
create a material conflict of interest.
6. AVAILABILITY
Although the goal of this joint development is to complete the software
integration with the WonderBoard as defined by Appendix A and by the schedule of
events defined in the statement of work, the parties agree that a minimum set of
functionality must be achieved before the product can be sampled to customers.
These requirements are defined in Appendix C - Minimum Sampling Requirements. If
this functionality is not achieved by 10/1/96, then the minimum dollar amounts
payable to IAT and defined in sections 4.3 and 4.4 ($20,000 for the H.320
library, $7,000 for the reference design) will be reduced by $4000 and $1400
respectively each per month until such sampling can commence. Any delays caused
by late delivery or non functional TI deliverables will be comprehended in a day
for day adjustment to the 10/1/96 date.
7. WARRANTY AND WARRANTY DISCLAIMERS
7.1 Nothing contained herein shall constitute a warranty or representation by TI
to maintain production of the hardware with which the TI Products are to be
used.
7.2 The Licensed Products are supplied 'As Is'. Neither party warrants that the
functions contained in the Licensed Products will be free from error or will
meet the other party's specific requirements, or that of any sublicensees or end
users. Neither party shall have any responsibility or liability for errors or
product malfunction resulting from the other party's use or modification of the
Licensed Products or the use or modifications of the Licensed Products by other
parties. Each party assumes complete responsibility for its decisions made or
actions taken, based on information
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MSC#10850
obtained using the Licensed Products. Any statements made by one party to the
other concerning the utility of the Licensed Products are not to be construed as
express or implied warranties.
7.3 Each party warrants that with respect to third party software which it
delivers to the other hereunder, it will first secure sufficient rights from any
applicable copyright owners.
7.4 THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
8. PATENT INFRINGEMENT DISCLAIMER
8.1 Nothing contained in this Agreement shall be construed as a warranty or
representation that any use of the Licensed Products will be free from
infringement of third party patent rights or, an agreement to bring or prosecute
actions or suits against third parties for infringement of any of the rights
licensed herein, or conferring any rights to bring or prosecute actions or suits
against third parties for infringement.
9. UPDATES AND NEW RELEASES
9.1 The licenses granted pursuant to this Agreement shall be deemed to include
and extend to any updates or new releases to the Licensed Products which either
party may choose in its sole discretion to supply to the other from time to
time.
10. LIMITATION OF LIABILITIES
NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
WHETHER SUCH DAMAGES ARE ALLEGED AS A RESULT OF TORTIOUS CONDUCT OR BREACH OF
CONTRACT OR OTHERWISE, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. SUCH EXCLUDED DAMAGES SHALL INCLUDE BUT SHALL NOT
BE LIMITED TO COST OF REMOVAL AND REINSTALLATION OF GOODS, LOSS OF GOODWILL,
LOSS OF PROFITS, LOSS OF USE OR DATA, INTERRUPTION OF BUSINESS OR OTHER ECONOMIC
LOSS.
11. FORCE MAJEURE
Neither party shall be liable, wholly or in part, for non-performance or a delay
in performance of its obligations under this Agreement, if due to contingencies
or causes beyond the reasonable control of the party, including but not limited
to: flood, wind, hurricane, tornado, earth quake, explosion, or other similar
catastrophe; hostilities, restraint of rulers or people, civil commotion, act of
terrorism, strike, labor dispute, blockade or embargo; lack or failure of
transportation, shortage of suitable parts, fuel materials, or labor; or any act
of nature, fires, accident, epidemic or quarantine restrictions.
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<PAGE>
MSC#10850
12. ASSIGNMENT
This Agreement may not be transferred or assigned in any form by either party
without the prior written consent of the other party, executed by a duly
authorized representative. Any unauthorized transfer or assignment shall be
void.
13. APPLICABLE LAW AND JURISDICTION
It is expressly agreed that the validity and construction of this Agreement, and
performance hereunder, shall be governed by the laws of the State of Texas and
that the courts of the United States, to whose jurisdiction the parties hereby
submit, shall have exclusive jurisdiction to hear all disputes arising herefrom.
14. WAIVER
Consent by either party to, or waver of, a breach by the other party, whether
express or implied, shall not constitute a consent to, waiver of, or excuse for
any other different or subsequent breach.
15. SEVERABILITY
If any provision, or part of any provision of this Agreement, or the Attachments
hereto, is invalidated by operation of law or otherwise, the provision or part
will to that extent be deemed omitted and the remainder of this Agreement, or
applicable Attachment will remain in full force and effect. Should the case
arise, the parties agree that such invalidated provision or part thereof shall
be replaced by a similar but legally valid provision which is as close as
possible in commercial effect to the invalidated provision or part thereof.
16. EXPORT CONTROL COMPLIANCE
IAT and TI agrees that it will not knowingly (1) export or reexport, directly or
indirectly, any product or technical data (as defined by the U.S. Export
Administration Regulations and applicable German and French export regulations)
including software received from IAT and TI under this Agreement, (2) disclose
such technical data for use in, or (3) export or reexport, directly or
indirectly, any direct product of such technical data, including software to,
any destination to which such export or reexport is restricted or prohibited by
U.S. or applicable non-U.S. law, without obtaining prior authorization from U.S.
Department of Commerce and other competent government authorities to the extent
required by those law. This clause shall survive termination or cancellation of
this Agreement.
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<PAGE>
MSC#10850
17. PUBLICITY
Neither party shall publicly announce or disclose the existence of this
Agreement or its contents without the prior written consent of the other party.
This clause shall survive the expiration or termination of this Agreement.
18. HEADINGS
The headings in this Agreement are for the convenience of the parties only and
shall not be considered in the construction or interpretation of this Agreement.
19. NOTICES
All notices made or required to be given under this Agreement shall be in
writing and shall be sent by registered mail to the addresses indicated below
with notice of receipt and shall be effective on receipt thereof:
IAT AG: Geschaeftshaus Wasserschloss Aarestrasse 17
5300 Vogelsang-Turgi
Switzerland
TI: Rick Rinehart
12201 Southwest Freeway, M/S 712
Stafford, Texas 77477
Manager, Business Services
8505 Forest Lane, M/S 8670
Dallas, Texas 75243
20. COMPLETE AGREEMENT
This Agreement and its Schedules are the complete and exclusive statement
of the Agreement between the parties, which supercedes all proposals or prior
agreements, oral or written, and all other communications between the parties
relating to the subject matter of this Agreement and any of its Schedules. NO
addition to or modification of this Agreement shall be binding upon either party
unless reduced in writing and duly executed by the parties to this Agreement.
21. SUMMARY OF SCHEDULES
The following are attached hereto and incorporated by reference herein.
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<PAGE>
MSC#10850
Appendix A - Statement of Work, Appendix B - TI Software License Agreement,
Appendix C - Minimum Sampling Requirements
TEXAS INSTRUMENTS INCORPORATED IAT AG
By: By:
Name: Name:
Title: Title:
Date: Date:
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<PAGE>
Appendix A
[APPENDIX A NOT INCLUDED--CONFIDENTIAL TREATMENT APPLIED FOR]
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<PAGE>
APPENDIX B
SAMPLE LICENSE AGREEMENT
This Agreement ("Agreement") is entered into by and between the Semiconductor
Group of TEXAS INSTRUMENTS INCORPORATED, a Delaware Corporation with its offices
at 8390 LBJ Freeway, M/S 3684, Dallas, Texas 75243 ("TI" herein), and
______________ with principal offices at: ___________________ ("LICENSEE"
herein).
1. PURPOSE AND SCOPE
For the purpose of assisting LICENSEE in its development of products for
use with TI's TMS320 product families, TI agrees to deliver to LICENSEE the
software product(s) and related documentation described as Licensed
Products in Section 1 of Schedule 1 (collectively referred to as "Licensed
Product"). LICENSEE agrees that such Licensed Product shall be used solely
in conjunction with systems designed exclusively for one of TI's TMS320
product families, and that such use shall be subject to the terms and
conditions of this Agreement.
2. TITLE
TI represents that it has the rights to grant the license to the Licensed
Product. Nothing contained in this Agreement shall be construed as
transferring any right, title, or interest in the Licensed Product to
LICENSEE except as expressly set forth herein.
3. LICENSE AND OBLIGATIONS
3.1 TI grants to LICENSEE, only under TI's copyrights, a non-transferable,
non-assignable, non-exclusive license solely to use, modify, compile, or
otherwise develop as applicable, a software program (,,Modified Application
Program"), which may be original or derivative with respect to the Licensed
Product, for use solely in conjunction with systems designed exclusively
for one of TI's TMS320, TMS370, or TMS470 product families.
3.1.1 LICENSEE may make one copy of Licensed Product for internal back-up
purposes, LICENSEE agrees that as a condition for obtaining its rights
hereunder, each copy of the Licensed Product, or any portion thereof or
documentation thereof, shall contain a valid copyright notice and any other
proprietary notices, including the copyright notices of TI or TI's
suppliers, which appear on or in the Licensed Product and documentation
delivered to LICENSEE hereunder or as TI may require from time to time, in
order to protect TI's copyright and other ownership interests. Presence of
a copyright notice does not constitute an acknowledgment of publication.
LICENSEE shall reproduce on the copy of the Licensed Product, and on all
copies of the Modified Application Program, all copyright notices and any
other proprietary notices exactly as and where they appear on the Licensed
Product delivered, or as closely as possible where a change in media
precludes exact reproduction.
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<PAGE>
3.1.2 LICENSEE shall maintain any source code of the Licensed Product as
confidential and shall not disclose, distribute, or disseminate any such
source code to any third parties.
3.2 LICENSEE is expressly prohibited from reverse compiling, reverse
assembling, and reverse engineering any portion of the Licensed Product
provided in object format.
3.3 TI grants to LICENSEE under only TI's copyrights a non-transferable,
non-assignable, non-exclusive license solely to copy and distribute only
object code versions of the Modified Application Program for use solely in
conjunction with systems designed exclusively for one of TI's product
families and to sublicense third parties under only TI's copyrights to use,
copy and distribute the Modified Application Program in object code form
only, for use solely in conjunction with systems designed exclusively for
one of TI's TMS320 product families. LICENSEE shall ensure that, for
sublicensees who are authorized to copy or distribute a signed, written,
valid and enforceable sublicense agreement is entered into containing all
of the restrictions of the license grant set forth in this Agreement.
3.3.1 LICENSEE shall ensure that all sublicensees must reproduce on every copy
made, all copyright notices and any other proprietary notices exactly as
and where they appear on the Licensed Product delivered, or as closely as
possible where a media change precludes reproduction.
3.3.2 LICENSEE shall ensure that all sublicensees are expressly prohibited from
reverse compiling, reverse assembling, and reverse engineering the Licensed
Product or the Modified Application Program.
3.3.3 LICENSEE shall ensure that all sublicensees restrict their end users by
written agreement from copying, modifying, distributing, reverse
engineering and reverse assembling or reverse compiling the Licensed
Product or the Modified Application Program, except that end users may make
one (1) copy for back-up purposes only.
3.4 LICENSEE shall ensure that all of its end users are restricted by written
agreement from copying, modifying, distributing, reverse engineering and
reverse assembling or reverse compiling the Licensed Product or the
Modified Application Program, except that end users may make one (1) copy
for back-up purposes.
3.5 LICENSEE may reproduce all or part of the accompanying documentation (,,End
User Documentation" herein) with the Licensed Product for use and
distribution with any copies made of the Licensed Product or Modified
Application Program, provided TI's copyright notices are included as they
appear in the End User Documentation. Confidential TI documentation marked
TI PROPRIETARY or similar legend may not be reproduced or distributed.
3.6 LICENSEE agrees that it will not disclose any portion, or all, of the
Licensed Product to any employees, with the exception of employees (i) who
require access thereto for a purpose
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<PAGE>
authorized by this Agreement and (ii) who have signed an appropriate
employee agreement committing them to abide by the obligations and
restrictions in this Agreement.
3.7 LICENSEE shall ensure that the same degree of care is used to prevent the
unauthorized use, dissemination, or publication of the Licensed Product as
LICENSEE uses to protect its own confidential information, but in no event
shall the safeguards for protecting such Licensed Product be less than a
reasonably prudent business would exercise. Such safeguards, shall include
at a minimum, storage of Licensed Product in a secure, locked area when not
in use. LICENSEE shall prevent unauthorized use or disclosure of Licensed
Product by its employees, including those who have access to the Licensed
Product.
3.7.1 LICENSEE's employees who have access to the Licensed Product shall be
instructed to copy Licensed Product only as permitted under this Agreement
and to disclose Licensed Product only to other employees of LICENSEE that
LICENSEE has authorized to have access to the Licensed Product or to
appropriate TI employees.
3.7.2 Source code of Licensed Product shall be handled, used, and stored under
appropriately controlled passwords solely at the LICENSEE's site listed at
the beginning of this Agreement, and only on the following designated CPU:
Serial Number: _________, Make: ____________, Model: ___________. LICENSEE
may change this designated CPU by providing written notice to TI at the
address below, within thirty (30) days of such change:
Texas Instruments Incorporated
P.O. Box 1443, M/S 730
Houston, TX 77251
3.8 LICENSEE recognizes and agrees that the techniques, algorithms, and
processes contained in the Licensed Product which have been developed,
acquired, or licensed by TI, or any modification or extraction thereof,
constitute trade secrets of TI and/or its suppliers, and will be used by
LICENSEE only in accordance with the terms of this Agreement. LICENSEE will
take all measures reasonably required to protect the proprietary rights of
TI and its suppliers in the Licensed Product and will promptly notify TI of
any lost or missing items and take all reasonable steps to recover such
items.
3.9 If at any time during the term of this Agreement, LICENSEE decides to
develop or market a LICENSEE created product for non-TI target application
hardware having capabilities that are similar to those provided by the
Licensed Product or target application hardware (a ,,Clone Product"),
LICENSEE shall ensure that there is no sharing with the Clone Product
development of the Licensed Product.
3.10 ________________, or his successor or designee will be responsible to
maintain an updated list of all individual _________, employees or Third
Parties having access to TI software source code specified in the above
agreement between the parties (when it is signed by both in writing.
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<PAGE>
3.11 During the term of this Agreement and for a period of eighteen (18) months
thereafter, TI or its authorized representatives, upon advance written
notice, shall have access to such portion of LICENSEE's records as is
necessary to allow TI to determine whether LICENSEE is substantially in
compliance with this Agreement. In no event shall audits be made hereunder
more frequently than every six (6) months. Such access shall be (a) during
LICENSEE's regular business hours, (b) arranged so that, to the extent
possible, LICENSEE's regular business activities are minimally disrupted
and (c) under the terms of an appropriate confidentiality agreement
executed by the individual(s) conducting such audit. If TI determines,
after conducting such audit, that LICENSEE is not substantially in
compliance with its obligations to protect TI's proprietary rights,
LICENSEE shall pay the costs of such audit, which in no case shall exceed
Fifteen Thousand U.S. Dollars (U.S. $ 15,000). Otherwise, TI shall pay the
costs of such audit. Such payment will not preclude TI from exercising any
right which it may have under this Agreement. LICENSEE shall immediately
correct any deficiencies discovered during the course of the audit. Any
audit conducted by TI authorized personnel shall provide LICENSEE with at
least two (2) days advance notice of any audit requested by TI and shall be
held during normal business hours. Furthermore, any audit that may be
requested by TI shall be conducted in such a manner so as not to adversely
impact normal business operations.
3.12 The obligations of this section 3 shall survive termination or expiration
of this Agreement.
4. LICENSE FEES
4.1 All applicable License fees and/or royalties payable hereunder shall be as
indicated in Section 4 of Schedule 1 and shall be exclusive of all
governmental taxes, fees or tariffs which shall be paid by LICENSEE.
4.2 The License Fee will include an upfront payment in the amount indicated in
Section 4 of Schedule 1. The License Fee shall be payable within thirty
(30) days of delivery of the Licensed Product to LICENSEE.
4.3 Per copy royalty fees apply to items specified in Section 4 of Schedule 1,
and to Modified Applications Programs derived from the items specified, and
are charged for each copy made and distributed or placed into service,
except that no additional royalty will be charged for updates to copies
provided to end users for which the appropriate royalty has previously been
paid.
4.4 If royalties are payable hereunder, TI shall have the right once each
calendar year to inspect the books and records of LICENSEE and any
authorized sublicensees of LICENSEE in order to verify the royalty reports
provided by LICENSEE to TI. LICENSEE shall make available to TI the books
and records of LICENSEE and sublicensees at their respective places of
business during regular hours. TI will give reasonable notices of its
intent to perform an audit. LICENSEE shall promptly pay any understated
sums disclosed by the audit. In the event royalty reports prove to be
understated by 10% or more, LICENSEE shall pay all costs of TI
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<PAGE>
conducting the audit. TI shall have the right to conduct a final audit upon
expiration or termination of this License.
4.5 All payment notices and checks shall be sent by registered mail to:
ASP Controller
Texas Instruments Incorporated
Semiconductor Group
P.O. Box 1443, M/S 710
Houston, Texas 77251-1443
4.6 Royalty Payments charged for each copy made of the Licensed Product or the
Modified Application Program shall be payable within thirty (30) days of
each calendar quarter, detailing the number of copies made by LICENSEE or
with LICENSEE's authorization.
4.7 Royalty reports shall be made quarterly within thirty (30) days of each
calendar quarter, detailing the number of copies made by LICENSEE, or with
LICENSEE's authorization, providing a list of the entities who made copies,
and stating the amount of royalties paid. Royalty reports shall be
maintained for a period of two (2) years from the date of each report. A
final report shall be made on expiration or termination of this License.
4.8 LICENSEE shall ensure that a valid and enforceable sublicense agreement is
entered into with all sublicensees containing all of the restrictions of
the license grant set forth in this Section.
5. TERMS AND TERMINATION
5.1 The term of this Agreement shall be for a period of five (5) years, and
shall be automatically extended for successive one (1) year periods unless
terminated as provided herein.
5.2 TI may, in its sole discretion, terminate this License in the event of
breach by LICENSEE, with forty-five (45) days prior written notice from TI,
and failure to cure by LICENSEE within that forty-five (45) day period.
5.3 After five (5) years, either party may, in its sole discretion, terminate
this License at any time with thirty (30) days prior written notice.
5.4 Upon termination of this License, LICENSEE will return and/or certify
destruction of all copies of the Licensed Products in its possession.
LICENSEE may keep one copy of the object code of the Licensed Product for
archival purposes, LICENSEE may not keep any copies of Licensed Product
source code for any purposes, and must return and/or certify destruction of
all source code copies of the Licensed Product. Termination shall not
affect the royalty obligations of LICENSEE, or any sublicensees, or the
rights and obligations of end users.
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<PAGE>
6. WARRANTY
6.1 Nothing contained herein shall constitute a warranty or representation by
TI to maintain production of the hardware with which the Licensed Product
is to be used.
6.2 The media on which the Licensed Product is supplied shall be warranted
against defects in material and workmanship under normal use for a period
of (90) days from the date shipped. TI will replace defective media
returned to TI within the ninety (90) day warranty period.
6.3 TI does not warrant that the functions contained in the Licensed Product
will be free from error or will meet LICENSEE's specific requirements. TI
shall have no responsibility or liability for errors or product
malfunctions resulting from LICENSEE's use, modification, copying, or
distribution of the Licensed Product. LICENSEE assumes complete
responsibility for decisions made or actions taken based on information
obtained using the Licensed Product. Any statements concerning the utility
of the Licensed Products are not to be construed as expressed or implied
warranties.
6.4 THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7. LIMITATION OF DAMAGES
IN NO EVENT WILL TI BE LIABLE FOR SPECIAL, COLLATERAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR USE OF THE LICENSED PRODUCTS. THESE EXCLUDED DAMAGES INCLUDE, BUT ARE
NOT LIMITED TO, COST OF REMOVAL OR REINSTALLATION, OUTSIDE COMPUTER TIME,
LABOR COSTS, LOSS OF GOODWILL, LOSS OF PROFITS, LOSS OF SAVINGS, OR LOSS OF
USE OR INTERRUPTION OF BUSINESS. THE SOLE AND EXCLUSIVE LIABILITY OF TI,
REGARDLESS OF THE FORM OF ACTION, WILL NOT EXCEED THE PAYMENTS MADE FOR
THIS LICENSE BY LICENSEE UNDER THIS AGREEMENT.
8. UPDATES AND REVISIONS
8.1 This Agreement shall be deemed to include and extend to any updates to the
Licensed Products which TI may choose as its sole option to supply from
time to time for a fee to be negotiated.
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8.2 Any updates and revisions shall be sent by mail to the address listed below
or to such addresses as the parties have specified by written notice:
--------------------
--------------------
--------------------
9. EXPORT
The re-export of United States original software is subject to United
States laws under Export Administration Act of 1969 as Amended. Any further
sale or distribution of the Licensed Product shall be done in compliance
with the United States Department of Commerce Administration Regulations.
Compliance with such regulations is the responsibility of LICENSEE and not
the responsibility of TI.
10. CONSTRUCTION
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS FOR CONTRACTS MADE TO BE PERFORMED IN THE STATE OF TEXAS.
11. INTEGRATION
This Agreement shall constitute the entire agreement between the parties,
and shall supersede all previous agreements, whether oral or written,
concerning Licensed Products. Any amendments to this Agreement shall be in
writing and executed by authorized representatives of both parties.
12. NO PUBLICITY
Neither party will publicly announce this Agreement or release any
information pertaining hereto publicly, without the prior written consent
of the other party.
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IN WITNESS WHEREOF, this Agreement is hereby executed by the undersigned who are
respectively duly authorized representatives of TI and LICENSEE, and shall
become effective on the date of the last signature below.
Texas Instruments Incorporated _________________
8390 LBJ Freeway, M/S 3684 _________________
Dallas, Texas 75243 _________________
By: By:
Title: Title:
Date: Date:
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<PAGE>
Schedule 1
1. LICENSED PRODUCT
Software Part Numbers Description
--------------------- -----------
TMDC8XH.___ C80 H.320 Source
TMDC8XH.___ C80 H.324 Source
2. TARGET APPLICATIONS
The Licensed Product shall be used exclusively in conjunction with the
following Target Application Hardware:
TI's TMS320 product families and either: (a) TI's 74ACT8990 Test Bus
Controller or (b) TI's XDS-510 Controller.
3. HOST SYSTEM (If applicable): N/A
4. LICENSE FEES
A. Upfront License Fees payable in U.S. Dollars.
License Fee Amount: _____ (U.S. Dollars)
B. Royalty Fees per copy: Not applicable
This royalty schedule is effective for the term of this Agreement.
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<PAGE>
Appendix C
DEFINITION OF "WONDERBOARD MINIMUM SAMPLING REQUIREMENTS".
1. Physical Requirements
Application: IAT's "Sample Application" for Windows 95
Video Conferencing Application
Host Software: DirectDraw API
H.320 API
CAPI (D-Channel Protocol)
Internode Message Manager (DLL, VXD)
C80 Software: Internode Message Manager
H.320 Library
ISDN Library (with D-Channel Protocol Stack and
Timers)
C80 Driver: D-channel Network Driver
B-channel Network Driver
Video Display Driver
Video Capture Driver
Audio (Full-Duplex) Driver
Hardware: "Wonderboard" Reference Board
NTSC/PAL Camera
DirectDraw Client Graphics Card
Microphone and Speakers
Documentation: "Tiny VC App" User's Guide (or README file)
2. Functional Requirements
VC Standard: H.320 w/H.261 & G.728
ISDN Standard: Euro
NTT
US National (NI1)
Bit-rate: 128 Kbit/s (2B) via on-board ISDN connection
Reliability: Once connected, systems must remain stable for
at least 30 minutes
Quality: Video and audio quality should be as good or
better than current TI/IAT H.320 A2 system.
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CONTRACT
Wavelet Data Compression
for the transmission of
high-quality still video images
Customer:
IAT AG (Switzerland)
The Electronic Meeting
Aarestrasse 17
CH-5300 Vogelsang-Turgi, Switzerland
Contractor:
Prof. Dr. R. Seiler
Schwarzwildweg 30
D-14612 Falkensee, Germany
Start: May 15, 1996
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
Organization of the bid
1. Objectives and duties
2. Concept
3. Action steps
4. Cost schedule
5. Time schedule
6. Terms of bid
- --------------------------------------------------------------------------------
2
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
1 Objectives and duties
1.1 The objective of the project is to develop a black box model for
compression of the image data of still pictures. The software package to
be created, in the programming language C, with defined inputs and
outputs, shall allow compression and decompression of image data from the
field of medicine -- with some loss, yet still with excellent quality.
1.2 Goal:
The decompressed image shall be of excellent quality. In other words, at a
compression rate of 1:20 the PSNR should be approximately 30. During the
course of transmission of the compressed data, the decompressed image is
to be assembled in such a way that a complete but rudimentary image can be
seen at first and then the quality of the picture improves as time goes
on. The final configuration of the image should be adjustable to three
quality levels.
1.3 The Customer plans to port this code into the environment of the C80
processor from Texas Instruments, and therewith to achieve rapid and
high-quality transmission of image data over a narrow ISDN band (64 kb/s).
The code which is to be created shall be designed for this purpose. In
addition, the Contractor shall support the Customer in the porting of the
code.
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3
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
2. Concept
The following three-stage procedure is an obvious choice for the data image
compression:
1. Transformation of the image data, by means of a wavelet filter, into a
low-pass image containing only scales greater than a specified length, and
into residual portions of the picture which contain the smaller scales.
2. In the second step, these different portions of the scale -- corresponding
to the bands in the case of a Fourier transformation -- are quantified
individually.
3. In the third stage the data are coded, making use primarily of the
statistics for the color and gray values which occur in the individual
scales.
This outline is to be optimized for the supplied medical images, and three
compression plans of differing quality are to be defined. The quality of
the images shall be defined through the following criteria:
1. PSNR value in dB.
2. HVS value (subjective evaluation first by members of the Contractor's
staff and then by experts designated by IAT).
- --------------------------------------------------------------------------------
4
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
3 Action steps
AP 000 Project management and coordination
Objectives:
Supervision of the project:
o Regular review of the progress of the project;
o Contact with the Customer
Action steps (also see Section 5. Time schedule):
o Team definition
o Time and task planning;
o Verification with the Customer;
o Milestone checking
Result:
o Project plans
Resource cost:
1.5 person-months
- --------------------------------------------------------------------------------
5
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
AP 100 specification
Objectives:
The requirements for the compression process are to be specified in consultation
with the Customer. Provision is to be made in particular for the desired quality
criteria and the evaluation thereof, and the properties of the provided signal
processor. These factors are then to be the basis for defining a specification
of the algorithm.
Methodology and procedure:
o Workshop together with the Customer;
o Definition of the image classes;
o Definition of the interfaces;
o Definition of the desired image quality and evaluation procedure;
o Definition of the target compression rate;
o Specification of the algorithm
Principles and prerequisites:
o Participation of the Customer in defining the needs
o Supplying of pictorial material for the image classes and preconditions
for successful implementation in the C80 environment
o Establishing contact with medical experts for assessment of the image
quality.
Result:
Specifications of the algorithm and of the optimization requirements.
Resource cost:
1.5 person-months
- --------------------------------------------------------------------------------
6
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
AP 200 Draft of the algorithm and optimization
Objectives:
On the basis of the specifications which are worked out, a compression scheme in
C++ based on wavelet transformation is to be created, programmed and optimized.
Methodology and procedure:
o Mathematical translation of the specification;
o Programming of the C++ code;
o Optimization of the wavelet procedure;
o Testing of the procedure from themathematical perspective;
o Preparing a demonstration of the procedure with real pictures;
o Demonstration of the compression procedure for the Customer;
o Verification of the result with the Customer.
Principles and prerequisites:
o Results of AP 100;
o Participation of the Customer in the demonstration and involvement
in the coordination.
Results:
o Draft of the algorithm with the specified properties.
o Demonstration of a corresponding compression procedure which is capable
of running.
Resource cost:
4.5 person-months
- --------------------------------------------------------------------------------
7
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
AP 300 Conversion and implementation in C
Objectives:
After verification with the Customer, the procedure is to be converted from the
C++ code into a technical algorithm in the programming language C. The algorithm
is to be drafted (design) and implemented. The requirements for the planned
porting to a signal processor system must be taken into account.
Methodology and procedure:
o Create the software design for the algorithm;
o Test the software design;
o Create the test specification;
o Create the programmer guidelines and verify them with the Customer;
o Coding in ANSI C;
o Test of the algorithm in accordance with the test specification;
o Acceptance of the algorithm by the Customer.
Principles and prerequisites:
o Conveyance of the C code requirements which need to be taken into account
for the later porting to the C80 environment.
Result:
o Documented compression algorithm in the form of C source code;
o Acceptance of the algorithm by the Customer.
Resource cost:
2.5 person-months
- --------------------------------------------------------------------------------
8
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
AP 400 Implementation support for the porting
Objectives:
After the algorithm has been created it will be ported to the provided signal
processor by the Customer. Implementation support will be provided by the
Contractor in the form of training and consultation days. The Customer's design
for the process of porting the algorithm to the signal processor will be
analyzed in a review.
Methodology and procedure:
o Preparation and conduct of a workshop to provide training in the algorithm
for the Customer's developers;
o Review of the design for porting the algorithm to the signal processor;
o Performance of consultation days.
Principles and prerequisites:
o Delivery of the design for porting the algorithm to the signal processor
by the Customer.
Result:
o Training documentation for the algorithm;
o Workshop;
o Review report on the design for porting the algorithm to the signal
processor;
o Ten days of on-site consultation.
Resource cost:
1.5 person-months
- --------------------------------------------------------------------------------
9
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
AP 500 Consultation (optional)
Objectives:
To support the Customer in porting the algorithm and producing the compression
scheme, additional consultation days are to be made available; these may be
utilized in case of need.
Methodology and procedure:
o Preparation for one or more days of consultation;
o Performance of a maximum of 10 days of consultation on site;
o Consultation report.
Result:
o 10 days of consultation on site
o Consultation report
Resource cost:
10 consultation days
- --------------------------------------------------------------------------------
10
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
4. Cost schedule
The following rates are in effect:
PM Person-month (including upcharge for execution at the
Technical University of Berlin) DM 12,000.00
CD Consultation day (not including travel costs) DM 1,500.00
All personnel and overhead costs are included in these rates. Travel costs will
be charged to the Customer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Action steps PM CD Costs
(DM)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AP 000 Project management 1.5 - 18,000
- ---------------------------------------------------------------------------------------------------------------------------
AP 100 Specification 1.5 - 18,000
- ---------------------------------------------------------------------------------------------------------------------------
AP 200 Optimization 4.5 - 54,000
- ---------------------------------------------------------------------------------------------------------------------------
AP 300 Implementation 2.5 - 30,000
- ---------------------------------------------------------------------------------------------------------------------------
AP 400 Implementation support during 1.5 - 18,000
porting (including 10 consultation days)
- ---------------------------------------------------------------------------------------------------------------------------
Total 11.5 - 138,000
- ---------------------------------------------------------------------------------------------------------------------------
Optional:
- ---------------------------------------------------------------------------------------------------------------------------
AP 500 Additional implementation support - 10 15,000
- ---------------------------------------------------------------------------------------------------------------------------
plus the statutory value added tax, currently 15%
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
5. Time schedule
The planned timetable for the project is shown below. This is based on the
assumption that the contract is granted by May 30, 1996, and that that the data
are provided on schedule by the Customer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1996/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
05 06 07 08 09 10 11 12 01 02
AP 000
AP 100
AP 200
AP 300
AP 400
AP 500
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
Terms of contract
6.1 Payment plan
The following payment plan is proposed:
o 20% of the total cost upon granting of the order,
o 40% upon completion of AP 200,
o 30% upon completion of AP 300,
o 10% upon completion of the work of AP 400.
6.2 Services performed by the Customer
The Customer will inform the Contractor in writing of all interface definitions
before the contract is signed. The same applies to all of the prerequisites for
a successful implementation of the program on the Texas Instruments processor
C80.
The Customer will give Prof. Seiler all information and data needed for the
project immediately upon the signing of the contract.
6.3 Commitment deadline
Prof. Seiler is bound to the terms of the offer until May 30, 1996.
6.4 Marketing and royalties
The Contractor will forego any royalties for the product. The Customer pledges
to identify the team of Prof. R. Seiler as the producer of the algorithm if the
product is marketed. The nature and manner of this identification will be
formulated in the contract for this order.
6.5 Warranty
The statutory warranty period of 6 months from the time of acceptance of the
algorithm by the Customer shall apply.
6.6 General terms
- --------------------------------------------------------------------------------
13
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
The Contractor is not liable for delays for which the Contractor is not
responsible.
All prices stated above are subject to the applicable statutory value added tax.
- --------------------------------------------------------------------------------
14
<PAGE>
Wavelet Data Compression for the transmission of high-quality
still video images
- --------------------------------------------------------------------------------
In the event of changes by the Customer to the concept as presented, especially
to the extent and nature of the tasks to be performed, the Contractor reserves
the right to make a corresponding change to the price of the offer in accordance
with the cost, after consultation with the Customer.
Date, city: Date, city:
Vogelsang, April 29, 1996 Berlin, May 2, 1996
- ------------------------- -------------------
The Customer The Contractor
IAT AG
[Signed] [Signed] .
- ------------------------- -------------------
Dr. Viktor Vogt Prof. Dr. R. Seiler
- --------------------------------------------------------------------------------
15
COOPERATION AGREEMENT
OLYMPUS
OLYMPUS OPTICAL CO. (EUROPE) GMBH
/address and other coordinates/
/handwritten/
cc: MG
COOPERATION AGREEMENT
between
OLYMPUS OPTICAL (EUROPE) GMBH
Wendenstra e 14-16
20097 Hamburg,
hereinafter referred to as "ODE,"
and
IAT Deutschland GmbH
Fahrenheitstra e 9
28359 Bremen,
hereinafter referred to as "IAT."
<PAGE>
COOPERATION AGREEMENT
- --------------------------------------------------------------------------------
1. Purpose of this Agreement
This agreement concerns the cooperation between ODE and IAT with regard to the
distribution of products offered by IAT on the basis of its resale price list of
March 6, 1996, and the products offered by ODE in the field of microscopics. The
distribution activities may be extended, subject to further agreement, to
endoscopic products. Both parties to the present agreement are interested in
closely cooperating with each other and in establishing a long-term partnership.
2. Resale
ODE shall have the right to procure products from IAT in accordance with the
latter's "resale" price list and to resell the products at its discretion to its
customers. To support the distribution activities of ODE, IAT shall make
available, to the extent possible, demonstration equipment, as well as data
sheets, catalogues, and the like.
3. Terms and Conditions
ODE shall procure IAT's products in accordance with the latter's resale price
list. In turn, IAT may procure OLYMPUS microscopes, including any and all
accessories, at a resale discount of 20%. Should a customer request that only
one company issue both the order and the invoice for a given project, both
parties to this agreement shall be willing and able to comply. In such cases,
the party not participating in the sale shall assist the party making the offer
with information and materials. The "internal" settlement of accounts between
the parties to this agreement shall be effected after the respective customer
has been billed. This agreement shall apply exclusively to Germany.
The Memorandum of Understanding executed in September 1995 shall remain in
effect.
4. Service
Olympus shall be responsible for servicing the microscopes. IAT shall be
responsible for servicing IAT products.
5. Training
Olympus shall provide all initial training for the microscope program, free of
charge, excluding travel and hotel costs, subject to agreement with IAT. The
initial training regarding IAT products shall also be provided free of charge,
excluding travel and hotel costs, subject to agreement with OLYMPUS.
<PAGE>
COOPERATION AGREEMENT
6. Participation in Trade Shows
Both parties shall agree about participating jointly in trade shows, as well as
about providing personnel and demonstration equipment. (Both personnel and
demonstration equipment shall be provided free of charge to the extent
necessary.)
7. Payment Terms
Invoices for goods and demonstration equipment shall be net payable within 30
days; discounts shall not apply.
8. Partnership
Both parties to this agreement consider this document a framework within which
they intend to develop a long-tern partnership benefiting both companies. Both
parties shall keep the agreements between them confidential vis-a-vis third
parties.
IAT Deutschland GmbH OLYMPUS OPTICAL CO (ERUOPA) GMBH
/signature/ /signature/
/stamp/
OLYMPUS OPTICAL CO.
/illegible/
D - /illegible/ HAMBURG
Hamburg, 03/18/96
/stamp/
IAT Deutschland GmbH
Fahrenheitstra e 9
28359 Bremen
/tel and fax numbers/
- 3 -
/handwritten text/
back to
Bremer Bank
Branch of Dresdner Bank AG
Corporate Customer Service
Ms. Knie/na KBS
Domshof 8/9, Bremen
Postal Address:
Bremer Bank
P.O. Box 10 79 80
28079 Bremen
/bank routing number/
S.W.I.F.T.: DRES DE FF 290
/phone and fax numbers/
Bremen, 04/01/96
Confidential
IAT Deutschland GmbH
Interactive Media Systems
- - Management -
Fahrenheitstra Be 9
28359 Bremen
Dear Madame or Sir:
In 1991 the "Europaische Gemeinschaft fur Kohle und Stahl" (EGKS) [European
Community of Coal and Steel] made available to us refinancing funds in the
amount of 125,000.00 DM for the purpose of a loan to you. The loan was posted
with a value date of 03/27/91 and was to be paid off by 03/27/96. The loan was
to be repaid in a lump sum at the end of the loan agreement.
Now therefore, we confirm to you herewith that we shall make available to you,
on account number 2 855 525 03, for the purposes of follow-up financing to the
aforementioned EGKS funds a
loan in the amount of 125,000.00 DM
subject to the terms and conditions set forth below.
- 1 -
<PAGE>
Loan payment: 100%
Maturity: 12/31/96
Interest rate: 6.5% p.a., fixed until 12/31/96; no processing fee
Repayment: In eight (8) monthly instalments of 13,900.00 DM each,
beginning on 04/30/96, and a final payment of 13,800.00
on 12/31/96.
We shall automatically deduct the interest payments and the repayment
instalments from your checking account number 2 855 525 00 on the respective due
dates.
Bremer Bank
/initials/
/preprinted text at bottom of the page: bank's trade registry
number, names of board members/
- 2 -
<PAGE>
Bremer Bank
Page 2 of the Letter of 04/01/96 to
IAT Deutschland GmbH
Interactive Media Systems
- - Management -
Fahrenheitstra Be 9
28359 Bremen
The following collateral has been stipulated:
- - A maximum guaranty for DM 125,000.00 issued by IAT AG, Switzerland.
The aforesaid guaranty shall secure the present loan, as well as any and all
existing, future, and qualified claims of Dresdner Bank AG, including all of its
domestic and foreign branches, under this banking relationship. Details are or
shall be stipulated at the time the security interest is created.
The right of lien and security interest stipulated under our General Terms and
Conditions shall also serve as collateral. If the risk assessment is increased,
we shall also be able to demand that the collateral provided be increased or
that additional collateral be provided to us.
We request, in consideration of the provisions of Art.18 of the
"Kreditwesengesetz" [banking law], that you keep us informed about the economic
situation of your company and that you submit to us any and all year-end
financial statements immediately after they have been prepared. In order to
ensure that our information is current, we would appreciate it if you would make
available to us your company's quarterly financial figures.
The General Terms and Conditions of the bank, which may be inspected at any
branch and which will be sent to you upon request, shall also apply.
We are pleased to be able to assist you with the provision of the aforementioned
loan. Please execute the enclosed copy of this letter to indicate your agreement
with the stipulations set forth herein and return it to us.
Sincerely,
Bremer Bank
/signature/ /signature/
Agree with the contents of this letter:
Bremen,
(Company Stamp and Signature)
/preprinted text at bottom of page as above/
- 3 -
2 855 525
Customer /illegible/
Directly Enforceable Minimum Guarantee
For Securing all Claims under the Banking Relationship
Name(s)/Company and Address(es) of the Guarantor(s)
I.A.T. AG
Aarestra e 17
CH - 5300 Vogelsang-Turgi
For all existing, future, and qualified claims inuring to Bremer Bank, a branch
of Dresdner Bank Aktiengesellschaft, and all other domestic and foreign branches
of Dresdner Bank Aktiengesellschaft, hereinafter referred to as the "Bank,"
under this Banking relationship against
Primary Obligor - Name(s) and Address(es):
I.A.T. Deutschland GmbH
Interactive Media Systems
Fahrenheitstra e 9
28359 Bremen
- -- if there are several primary obligors, also against each one of them
individually --
I/we hereby assume the Directly Enforceable Guarantee up to a maximum amount of
125,000.00 DM
in words: one hundred twenty five thousand Deutsche Mark.
In addition, the following provisions shall apply to this guarantee; I/we am/are
jointly referred to as "guarantor" therein:
1. Scope of the Guarantee
The guarantor shall be liable under this guarantee only up to the maximum amount
set forth above, even in cases if the guarantor assumes the guarantee for
several primary obligors.
2. Continuation of the Guarantee
The guarantee shall remain in effect beyond any termination of the Banking
relationship until any and all claims of the Bank secured by this guarantee have
been satisfied in their entirety; in
- 1 -
<PAGE>
Directly Enforceable Minimum Guarantee
- --------------------------------------------------------------------------------
particular, the guarantee shall not expire if the primary obligor temporarily
repays the claims secured hereunder.
3. Enforcing the Guarantee, Objection (Refusal of Performance)
(1) If the claims of the Bank that are secured by this guarantee are due and
payable, and if the primary obligor does not satisfy these claims, the
Bank may enforce the guarantee against the guarantor who, under the
guarantor of a directly enforceable guarantee, shall undertake to pay the
Bank upon demand. The Bank does not have the obligation to first seek
recourse before the courts against the primary obligor or to sell the
collateral provided to it.
(2) The guarantor's obligation to pay shall also apply if the primary obligor
has the right to challenge the transaction underlying the debt (waiver of
the guarantor's right to challenge the principal debt pursuant to ss. 770
para 1 BGB [Burgerliches Gesetzbuch - German Civil Code]). Furthermore,
the guarantor shall not have the right to assert that the Bank could
satisfy its claims by offsetting them against a claim of the primary
obligor that is due (waiver of the guarantor's right to demand the
offsetting of claims pursuant to ss. 770 para 2 BGB).
4. Transfer of Collateral
(1) Until the debt secured by this guarantee has been discharged in full, the
guarantor shall not have the right to demand transfer of collateral
created for the Bank for the purpose of securing the guaranteed claims.
(2) To the extent that collateral is transferred to the guarantor by law (e.g.
rights of lien), the statutory provisions shall apply. If the Bank's
claims exceed the maximum amount set forth above, and if the collateral
being transferred to the guarantor by law also serve to secure the
unsecured portion of the Bank's claims, the Bank's right to satisfy its
claims shall have priority relative to the guarantor.
(3) If the guarantor has fully discharged the debt secured hereunder, and if
the Bank must release the collateral pursuant to the collateral
agreements, the Bank shall transfer the collateral created for it by the
primary obligor -- if necessary, on a pro-rated basis -- to the guarantor;
the Bank shall transfer collateral created by third parties to the
respective guarantor unless stipulated otherwise with that guarantor.
- 2 -
<PAGE>
Directly Enforceable Minimum Guarantee
- --------------------------------------------------------------------------------
(4) Any and all claims of the guarantor against other guarantors for
settlement and transfer of the collateral shall not be affected by the
foregoing provisions.
5. Application of Payments Received
To the extent that payment provisions do not stipulate otherwise, the Bank may
apply any and all proceeds from the sale of the collateral created for the Bank
by the primary obligor or by a third party first to those claims that are
secured by the collateral but are not subject to this guarantee and/or to that
portion of its claims that exceeds the maximum amount secured hereunder. This
shall also apply to guarantees created by the guarantor for the purpose of
additionally securing the claims against the primary obligor, unless these were
designed to support the guarantee. Likewise, the Bank may apply any and all
payments made by the primary obligor or on account of the latter in accordance
with its priority ranking to its claims that are not secured, in whole or in
part, under this guarantee.
6. Liability of Several Guarantors
(1) If several guarantors are securing the same debt of the primary obligor
pursuant to separate guarantee agreements, each individual guarantor shall
be liable -- vis-a-vis the Bank to the exclusion of any joint and several
liability -- for the entire guarantee assumed by the respective guarantor
until all claims of the Bank secured by the respective guarantor have been
satisfied, irrespective of any and all payments made hereunder by another
guarantor.
(2) If several guarantors assume the guarantee under this guarantee agreement,
they shall be jointly and severally liable to the Bank. This means that
the Bank may claim the maximum amount set forth above from each individual
guarantor, in whole or in part; however, overall, the Bank's claims may
not exceed said maximum amount.
(3) Compensatory claims of the guarantor called to liability hereunder against
the other guarantors shall not be affected by the foregoing provision.
7. Additional Guarantees
The guarantee shall apply in addition to any and all other guarantees provided
by the guarantor.
- 3 -
<PAGE>
Directly Enforceable Minimum Guarantee
- --------------------------------------------------------------------------------
8. Deferment and Release of Collateral
The guarantor shall not be released of its liability under this guarantee if the
Bank grants a deferment to the primary obligor, releases other guarantors from
their liability, or releases other collateral, in particular, if the Bank
permits dispositions of items subject to the Bank's right of lien and if this
occurs in connection with the due execution and settlement of the Bank's
relationship with the primary obligor or for the purposes of safeguarding
justified interests of the primary obligor or the Bank. The guarantor shall also
not be released from its liability if the Bank relinquishes collateral in order
to satisfy an obligation to release collateral pursuant to other collateral
agreements.
9. Right of the Guarantor to Terminate the Guarantee
(1) The guarantor may terminate the guarantee in writing -- unless the
guarantee is limited in duration -- at the end of one year from the time
at which it provided the guarantee. The termination shall be effective
subject to a period of three months upon receipt of same by the Bank. The
right to termination for important reasons shall not be affected thereby.
(2) The guarantor's liability shall remain in full force and effect once the
termination becomes effective; however, it shall be limited to the secured
claims existing at the time the termination became effective. The
provisions of this guarantee shall remain in effect until the secured
debts of the primary obligor have been repaid in full. Unless stipulated
otherwise under repayment provisions, any and all payments, of whatever
kind and nature, that are received on account of the primary obligor after
the termination has become effective shall be credited first to the Bank's
unsecured claims and/or to that portion of the Bank's claims that are not
secured hereunder at the time the guarantee is terminated. Any and all
additional payments shall reduce the secured debt.
(3) Until the termination becomes effective, the primary obligor may avail
itself of loans promised before the termination was received.
(4) Once the termination is in full force and effect, the guarantor shall also
be liable for those claims of the Bank against the primary obligor arising
from the fact that the Bank has entered into an obligation, in the name of
the primary obligor, vis-a-vis third parties -- e.g. by providing a
guarantee or by guaranteeing payment -- to assume the liability for debts
incurred by the primary obligor.
- 4 -
<PAGE>
Directly Enforceable Minimum Guarantee
- --------------------------------------------------------------------------------
10. Release of the Collateral
(1) Upon satisfaction of the Bank's claims that are secured hereunder, the
Bank shall release the guarantee.
(2) Upon request, the Bank shall undertake to release the guarantee, as well
as other collateral provided to it (e.g. assigned receivables, mortgages),
in whole or in part, at its discretion, to the respective guarantor before
the Bank's claims secured under this guarantee have been satisfied in full
if the realizable value of all collateral exceeds
100 %
of the Bank's secured claims at all times. If no percentage was entered
above, and if no other agreements were made, a rate of 100% shall apply.
(3) The realizable value of the guarantee shall be determined on the basis of
the guarantor's current asset and income situation at the time the release
is requested.
11. Notifications Regarding the Status of the Principal Debt
If need be, the guarantor shall obtain information as to the status of the
principal debt from the primary obligor.
12. Choice of Law
The laws of the Federal Republic of Germany shall apply to the guarantee
relationship hereunder.
Turgi, 04/18/96 /signature/
Place/Date Signature(s)/Company Stamp of the Guarantor(s)
- 5 -
<PAGE>
Directly Enforceable Minimum Guarantee
- --------------------------------------------------------------------------------
To be filled out by the Bank
The guarantor is / The guarantors are
[ ] personally know to us
[ ] provided the following identification:
Date of Birth: Place of Birth:
[ ] registered in the trade registry of the Municipal Court in:
on: in Section No.
The representation right was verified on the basis of the excerpt of the
trade registry: [ ] yes
[ ] Executed in my presence by the guarantor(s) in the Bank's offices.
[ ] The guarantee was executed by the guarantor(s) outside of the Bank's
offices.
The information as to the revocation right pursuant to the
"Hausturwiderrufsgesetz" [law regarding revocation of door-to-door
and similar dealings] was
[ ] provided on:
[ ] mailed on:
countersigned and is available. The revocation right ends on:
[ ] The information as to the revocation right is not necessary
because ...
[ ] Since the guarantee on the reverse was not submitted to us by the
guarantor(s), it was confirmed to the guarantor(s) in writing, via
registered mail, return receipt.
The confirmation was given on:
The return receipt(s) requested bearing the signature(s) of the
guarantor(s) is/are available. The signature(s) was/were verified.
The guarantor has / The guarantors have received a copy of the guarantee.
- 6 -
<PAGE>
Directly Enforceable Minimum Guarantee
- --------------------------------------------------------------------------------
Date/Signature
- 7 -
For internal bank processing purposes:
No. 10.4690.000/fi/no.
Loan Agreement for Current Account Credit Lines
Borrower (Name, Address, Date of Birth) Bank
IAT Deutschland GmbH Volksbank Sottrum eG
Interactive Media Systems GroBe StraBe 22
Fahrenheitstr. 1 27367 Sottrum
28359 Bremen
The Borrower and the Bank conclude the following Agreement:
1 The Bank shall make available to the Borrower a current account credit
line on account number 10.4690.000 in the amount of
700,000.00 DM.
Purpose:
Increase of the operating loan.
2 The loan shall be available / X / until further notice until the /no
entry/ any
extension must be agreed to in
advance and in due time.
3 Conditions
The current conditions concerning the interest rate and commissions (in
percent) are:
Interest rate: 10.5% p.a.
If interest rates rise on the money market, the Bank may raise the
interest rate to a reasonable level; conversely, if interest rates fall,
the Bank shall reduce the interest to a reasonable level. Pursuant to Art.
315 BGB [German Civil Code], the Bank may modify its fees, at its
discretion, for banking services generally utilized by Borrowers on a
permanent basis (e.g. maintaining an account).
<PAGE>
The Bank shall notify the Borrower of changes in the interest rate and in
fees.
In the event of an increase, the Borrower may terminate this Loan
Agreement for Current Account Credit Lines within one month of publication
of the changes, effective immediately. If the Borrower terminates the
Agreement, the increases shall not affect this Loan Agreement. The Bank
shall grant a reasonable time period for settling the account.
Interest and regularly occurring costs shall be billed / X / monthly,
quarterly, semi-annually, annually.
4 Collateral: All collateral to which the Bank is entitled shall secure any
and all existing, future, and qualified claims of the Bank under its
relationship with the Borrower, unless stipulated otherwise in individual
cases in separate agreements. This shall also apply to collateral not set
forth herein that serves as security pursuant to the General Terms and
Conditions. In addition, the Borrower shall make available to the Bank the
following collateral in accordance with separate agreements:
Letter of guarantee issued by HIBEG GmbH, Bremen, for 350,000.00 DM.
Letter of support issued by IAT AG, Switzerland, for 700,000.00 DM.
5 Other Provisions
The current account credit line shall be made available provided the
following conditions have been met:
o receipt of letter of guarantee of HIBEG GmbH, Bremen, for 350,00.00
DM;
o receipt of the letter of support from IAT AG, Switzerland;
o registration of the capital increase of IAT GmbH to 700,000.00 DM in
the trade registry.
The General Credit Terms set forth on the reverse and the General Terms and
Conditions (AGB - Allgemeine Geschaftsbedingungen) of the Bank shall also apply.
The AGB may be inspected in the bank's offices; a copy will be provided upon
request.
Place, Date: Bremen, 12/15/95 Place, Date: /stamp/
14 Dec. 1995
Borrower: /signature/ Bank: /signature/ /signature/
Original for the Bank
- 2 -
<PAGE>
For internal bank processing purposes:
No. 10.4690.001/fi/no.
Loan Agreement for Current Account Credit Lines
Borrower (Name, Address, Date of Birth) Bank
IAT Deutschland GmbH Volksbank Sottrum eG
Interactive Media Systems GroBe StraBe 22
Fahrenheitstr. 1 27367 Sottrum
28359 Bremen
The Borrower and the Bank conclude the following Agreement:
1 The Bank shall make available to the Borrower a current account credit
line on account number 10.4690.001 in the amount of
350,000.00 DM.
Purpose:
Provision of an operating loan.
2 The loan shall be available / X / until further notice until the /no
entry/; any extension must be agreed to
in advance and in due time.
3 Conditions
The current conditions concerning the interest rate and commissions (in
percent) are:
Interest rate: 10.5% p.a.
If interest rates rise on the money market, the Bank may raise the
interest rate to a reasonable level; conversely, if interest rates fall,
the Bank shall reduce the interest to a reasonable level. Pursuant to ss.
315 BGB [Burgerliches Gesetzbuch - German Civil Code], the Bank may modify
its fees, at its discretion, for banking services generally utilized by
Borrowers on a permanent basis (e.g. maintaining an account).
The Bank shall notify the Borrower of changes in the interest rate and in
fees.
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<PAGE>
In the event of an increase, the Borrower may terminate this Loan
Agreement for Current Account Credit Lines within one month of publication
of the changes, effective immediately. If the Borrower terminates the
Agreement, the increases shall not affect this Loan Agreement. The Bank
shall grant a reasonable time period for settling the account.
Interest and regularly occurring costs shall be billed / X / monthly,
quarterly, semi-annually, annually.
4 Collateral: All collateral to which the Bank is entitled shall secure any
and all existing, future, and qualified claims of the Bank under its
relationship with the Borrower, unless stipulated otherwise in individual
cases in separate agreements. This shall also apply to collateral not set
forth herein that serves as security pursuant to the General Terms and
Conditions. In addition, the Borrower shall make available to the Bank the
following collateral in accordance with separate agreements:
Guarantee of IAT AG, Switzerland, for 350,000.00 DM.
5 Other Provisions
The current account credit line shall be made available provided the
following conditions have been met:
o receipt of the guarantee of IAT AG, Switzerland, for 350,00.00 DM;
o registration of the capital increase of IAT GmbH to 700,000.00 DM in
the trade registry.
The General Credit Terms set forth on the reverse and the General Terms and
Conditions (AGB) of the Bank shall also apply. The AGB may be inspected in the
bank's offices; a copy will be provided upon request.
Place, Date: Place, Date: /stamp/
14 Dec. 1995
Borrower: Bank: /signature/ /signature/
Original for the Bank
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<PAGE>
General Credit Terms
1 Credit Line, Overdrafts
In availing itself of the credit line, the Borrower may not exceed the credit
limit. Nevertheless, should the Borrower overdraw the credit line, that amount
exceeding the credit limit shall be repaid to the Bank immediately. Overdrafts
of this type shall entail higher interest charges. Overdrafts do not increase
the originally granted credit line, even if the Bank has tolerated temporary
overdrafts.
2 Joint and Several Liability
In the case of more than one Borrower, all Borrowers shall be liable, jointly
and severally.
3 Disclosure of Financial Condition
Pursuant to the provisions of the banking law, the Borrower shall undertake to
regularly disclose to the Bank, as long as the credit line is in effect, its
asset and income situation, to allow the Bank to inspect its books and records,
and to provide any and all information required in connection therewith. To this
end, the Bank may obtain the requisite records directly from the persons and/or
entities consulting the Borrower in bookkeeping and accounting matters. If the
Borrower prepares annual financial statements, it shall submit a copy of same,
if necessary in audited form, to the Bank without being requested to do so. The
Bank is entitled to obtain information concerning the Borrower from governmental
authorities, registries of deeds, other public offices, and insurance companies;
to obtain records from said entities; and to inspect records and deeds in the
offices of said entities. This includes, in particular, notarized copies of
entries in public registries, governmental certifications, and records
pertaining to insurance policies. The Bank may submit the Loan Agreement for
such purposes.
4 Insurance Policies
The Borrower shall undertake to properly insure the collateral, including any
and all accessories, against any and all risks which, in the Bank's view, must
be insured, and to prove such insurance to the Bank upon request at any time, in
particular, by submitting the requisite insurance policies. The Borrower shall
be responsible for satisfying these conditions even if the collateral belongs to
others.
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<PAGE>
5 Collateral
If the financial position of the Borrower, an equally liable person or entity,
or a guarantor deteriorates or is at significant risk, or if significant changes
occur in the value of the collateral to be created in accordance with the Loan
Agreement, which increase the risk of due repayment of the loan relative to the
financial condition at the time the loan was granted to an extent that is not
insignificant, the Bank may require the Borrower to create additional, suitable
collateral at the Bank's discretion, even if until such time the Bank did not
require such collateral. The same shall apply if statements about the financial
situation of the Borrower, an equally liable person or entity, or a guarantor
turn out in hindsight to have been incorrect.
The Borrower may avail itself of the loan only if any and all conditions have
been met, the required collateral has been created, and the Bank has verified
that everything is in due order.
6 Refinancing
The Bank shall have the right to assign its claims under the Loan Agreement in
the event of a refinancing and to convey the collateral created by the Borrower
to the refinancing entity.
7 Termination
The Bank may terminate loans and promised loans, in regards to which the parties
did not stipulate either a temporal limit or different provisions concerning the
period of notice, at any time without complying with a period of notice. If the
Bank exercises this right of termination, it shall take the Borrower's
legitimate interests into account.
If the loan is terminated without a period of notice, the Bank shall grant to
the Borrower a reasonable time frame for settling the loan.
The Bank shall be available at any time to discuss possibilities of achieving
mutual agreement in these matters.
8 Costs
Any and all expenses and ancillary costs incurred in connection with this
agreement, including the costs of commissioning the responsible cooperative
trust agency, shall be borne by the Borrower. The expenses and ancillary costs
shall be debited to the Borrower's current bank account.
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<PAGE>
9 Modification of the Agreement
Any and all modifications of and amendments to this agreement or an agreement
concerning the termination thereof shall be made in writing to be effective.
10 Partial Invalidity
The agreement as a whole shall not be affected if individual provisions thereof
did not become integral part of the final agreement, are ineffective, or are not
implemented. The content of the agreement shall be subject to applicable law if
individual provisions have not become integral part of the agreement or are
ineffective.
The signature(es) under this agreement
was/were effected before me by the Borrower(s) was/were verified by me.
He/She provided the following identification (type of document)
is personally known to me
and has previously identified himself/herself.
No. Issuing Authority Date Issued
The loan is being granted for the Borrower's own account
on account of third parties.(1)
Place, Date Bank Officer
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1 Please use form 301 100.
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<PAGE>
For internal bank purposes:
No. 10.4690/no.
Guarantee for Claims Under the Banking Relationship
Guarantor (Name, Address, Date of Birth) Bank
IAT AG Volksbank Sottrum eG
Aarestra e 17 GroBe StraBe 22
CH - 5300 Vogelsang 27367 Sottrum
The guarantor assumes the following guarantee relative to the Bank:
1 For the purposes of securing any and all existing, future, and qualified
claims of the Bank or a successor or assignee of the Bank that continues the
banking relationship
against
Primary Obligor(1)
IAT Deutschland GmbH, Fahrenheitstra e 1, 28359 Bremen,
or its universal successor and assignee, and, if the primary obligor is a
company or corporation, against its successor and assignee,
under the banking relationship, in particular,
o under current accounts or under loans of any type whatsoever, bills,
checks, deliveries, and services;
o under guarantees, as well as any and all other undertakings on account of
third parties; as well as
o under receivables acquired from third parties in connection with customary
banking business, bills, and checks, even if the collateral is created in
connection with a particular loan,
I/We assume
a directly enforceable guarantee up to
350,000.00 DM
for current account number 10.4690.001.
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<PAGE>
2 The guarantee is given for an unlimited time period.
3 The guarantee may be terminated in writing one year after it has been given,
at the earliest, subject to a period of notice of three months. The right of
termination for important reasons shall remain unaffected thereby.
When the termination takes effect, the guarantee shall be limited to the
existing claims secured hereunder at the time. However, the guarantor shall not
be liable for any and all loan promises made by the Bank after receipt of the
notice of termination. The stipulations of this guarantee shall remain in force
until the claims against the primary obligor that are secured hereunder have
been satisfied in full.
4 All payments of the guarantor shall serve as collateral until the Bank's
claims have been fully satisfied; the Bank's claims against the primary obligor
shall be transferred to the guarantor to the extent of the latter's performance
only after any and all claims of the Bank have been satisfied in full. The same
shall apply to any and all accessory rights. Unless stipulated otherwise in an
agreement between the guarantor and the Bank, the Bank shall undertake to
transfer the nonaccessory rights to the guarantor. At the request of the
guarantor, the Bank shall transfer these claims to the guarantor at an early
date, provided it no longer needs them, not even temporarily.
5 The Bank shall have the right to apply any and all proceeds from the
collateral, payments of the primary obligor or other persons and/or entities
liable hereunder, as well as any and all other payments received first to its
claims that exceed the amount secured hereunder and/or, in the case of a
termination pursuant to item 3 above, to the then remaining secured balance.
6 If this agreement is executed by several guarantors, all of them shall be
jointly and severally liable (joint guarantee).
7 If the Bank's claims against the primary obligor are secured, at present or in
the future, by additional guarantees that are separate from the present
agreement, each guarantor shall be liable hereunder, irrespective of the other
guarantees, for the entire amount stipulated in the respective guarantee
(secondary joint guarantee) -- in deviation from ss. 759 BGB2 [Burgerliches
Gesetzbuch - German Civil Code]. The guarantee under the present document shall
have the same rank as any and all other guarantees assumed by the guarantor.
8 The guarantee waives the right to challenge and to offset pursuant to ss. 770
BGB2, as well as the defense of failure to purse remedies pursuant to ss. 771
BGB2; the guarantor also waives its rights pursuant to ss. 776 BGB2 (release of
collateral and of guarantors). The Bank shall therefore have the right to grant
additional loans to the primary obligor; to enter into an agreement with the
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<PAGE>
primary obligor concerning the deferment of its claims against the latter; and
to arrive at a settlement, in or out of court, regarding its secured claims
against the primary obligor, without having to obtain the guarantor's consent.
9 Any and all modifications of and amendments to this guarantee agreement, as
well as any agreement concerning its termination, shall be made in writing to be
effective.
10 This guarantee agreement shall remain in full force and effect, even if
individual provisions thereof have not become integral part of the agreement,
are ineffective, or have not been implemented. The content of this agreement
shall be subject to applicable law to the extent that individual provisions have
not become integral part of this agreement or are ineffective.
11 The General Terms and Conditions of the Bank (AGB) shall also apply. The AGB
may be inspected at the Bank's branches; a copy thereof shall be made available
upon request.
Place, Date Guarantor
The signature(es) under this agreement
was/were effected before me by the Borrower(s) was/were verified by me.
He/She provided the following identification (type of document)
is personally known to me
and has previously identified himself/herself.
No. Issuing Authority Date Issued
Place, Date Bank Officer
Text of applicable laws:
Art. 769 BGB: If several persons/entities secure one and the same
debt, all of them shall be jointly and severally liable
therefor, even if they do not jointly assume the
guarantee.
Art. 770 BGB: The guarantor may refuse to satisfy the creditor as long
as the primary obligor has the right to challenge the
legal transaction underlying his debt. The guarantor has
the same right as long as the creditor can satisfy any
and all claims due against the primary obligor by
offsetting them.
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<PAGE>
Art. 771 BGB: The guarantor may refuse to satisfy the creditor's
claims as long as the creditor has not successfully
enforced its claims against the primary obligor (defense
of failure to pursue remedies).
Art. 776 BGB: If the guarantor waives a preferential right in
connection with the claim, a mortgage or a maritime
mortgage pertaining to the claim, a right of lien
pertaining to the claim, or the right against a
coguarantor, the guarantor shall be released from his
obligation insofar as he could have obtained damages
under the right waived pursuant to ss.774 BGB. This also
applies if the waived right came into existence after
the guarantee was assumed.
[Endnotes]
1. If there are several primary obligors, and if the collateral is also
designed to secure the claims against individual obligors, such fact shall
be negotiated separately and expressed through suitable additional
wording, such as "and against each one of the obligors."
2. See the text of the law on the reverse.
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<PAGE>
Appendix 1
Undertaking
Pursuant to Section II, No. 16 of the Guarantee
IAT Deutschland GmbH agrees herewith that the representatives of the State, the
City of Bremen, or the Audit Office of the Free Hanseatic City of Bremen may
inspect the books of IAT Deutschland GmbH in its offices, as long as
Hanseatische Industrie-Beteiligungen GmbH, Bremen, guarantees loans granted to
IAT Deutschland or if the guarantee is enforced against the former, thus giving
rise to claims against IAT Deutschland GmbH.
Sottrum,
(IAT Deutschland GmbH)
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<PAGE>
Appendix 2
Undertaking
Until the guarantee relationship is terminated, IAT Deutschland GmbH undertakes
relative to Volksbank Sottrum to
a) notify it immediately of and to explain any and all circumstances
that might bring about a change in the assessment of the economic
situation of IAT Deutschland GmbH relative to the time at which the
Bank agreed to provide the loan or at which the guarantee was
provided;
b) not to relocate either the company that is being supported with the
help of the secured loan or the offices (or essential parts thereof)
that are being supported with the help of the loan from the
territory of the Free Hanseatic City of Bremen without the written
consent of Volksbank Sottrum; and
c) not to change its legal form or to merge with another company
without the consent of Volksbank Sottrum.
Pursuant to the provisions of the guarantee agreement, Volksbank Sottrum
reserves the right to terminate the secured loan effective immediately if IAT
Deutschland GmbH
o has made incorrect statements in order to obtain the guarantee
or
o has violated existing obligations relative to HIBEG in connection
with the guarantee
or
o has violated its obligations pursuant to Item 3 b) or c) of the
General Guarantee Terms or has committed gross violations of its
obligations under Item 3 a) of the General Guarantee Terms.
Sottrum,
(IAT Deutschland GmbH)
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<PAGE>
Appendix 3
Letter of Support
IAT AG
Aarestr. 17
CH - 5300 Vogelsang-Turgi,
represented by Dr. Viktor Vogt, President of the Supervisory Board,
herewith issues the following Letter of Support for its subsidiary
IAT Deutschland GmbH
FahrenheitstraBe 9
D - 28359 Bremen:
We, IAT AG, CH - 5300 Vogelsang-Turgi, undertake to financially support our
subsidiary, IAT Deutschland GmbH, at all times in a manner enabling the latter
to satisfy its obligations under the loan agreement concluded with Volksbank
Sottrum eG.
Sottrum,
(IAT AG, Dr. Viktor Vogt)
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Agreement
between Grissemann Consulting SA, Chatillens
(hereafter KG)
and IAT AG, Turgi
(hereafter IAT)
Preamble
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Presumably until December 3, 1992 IAT will have a financial reorganization and
wants to reorganize the responsibilities of its administration. Since on the one
hand the outcome of the financial reorganization is open and on the other hand
the necessary work time for this position varies strongly but lies under 50%,
the occupation of this position under a regular working contract is unsuitable.
1. Scope of work and resposibilities
With effect from September 1, 1992 KG takes on the responsibility for the
administration and accounting of IAT. In doing so, he can rely on the
assistance of IAT staff.
His work place is Turgi, Montreux and Chatillens as required.
2. Employment of time
The employment of time is defined by the requirements of IAT and is agreed
upon with the management. It will amount to a minimum of 30 percent and is
not upwards limited until the conclusion of the financial reorganization
KG ensures that he can always be reached by telephone.
3. Remuneration
The remuneration corresponds to a pro rata salary including social
security of an IAT manager and will amount to SFr. 5'000.--/month from
September 1, 1992.
Grissemann Consulting SA will bill the company on a monthly bases. The
invoice will be settled at the end of each month together with the salary
payments of IAT.
IAT will not be charged with any social security expenses.
Domestic travel expenses are included in the remuneration.
<PAGE>
4. Notice of termination
Until the conclusion of the financial reorganization the agreement cannot
be terminated. After that the agreement can be terminated by either side
at 30 days' written notice at the end of a quarter.
5. Final clause
Under the condition of a positive outcome of the financial reorganization
IAT and KG reserve the right to redefine the work time percentage and
remuneration of this agreement at the beginning of 1993.
Turgi and Chatillens, September 1, 1992
IAT AG Grissemann Consulting SA
[signed] [signed]
Dr. Viktor Vogt Klaus Grissemann
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Addendum to the Agreement of September 1, 1992
between Grissemann Consulting SA, Chatillens
(hereafter KG)
and IAT AG, Turgi
(hereafter IAT)
1. From January 1, 1995 the fee will amount to SFr. 775.--/day. The yearly
adaptation shall correspond to the salary increases of IAT managers with a
similar position.
2. KG will have at his disposal a company automobile corresponding in its
class and equipment to the company car of other IAT managers.
All other clauses of the agreement remain unchanged.
Turgi and Chatillens, December 19, 1994
Grissemann Consulting SA IAT AG
[signed] [signed]
Klaus Grissemann Dr. Viktor Vogt
Management contract
by and between
IAT GmbH
Fahrenheitstrasse 1
28359 Bremen
(hereinafter referred to as IAT)
represented by the delegate of the IAT AG Board of
Directors,
sole partner of IAT GmbH
Dr. Viktor Vogt
and
Mr. Wilhelm Gudauski
Krumhornweg 20
28259 Bremen
<PAGE>
Management contract
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Art. 1
1. Effective January 3, 1994, Mr. Wilhelm Gudauski shall enter the employment
of IAT GmbH as manager of marketing and sales. The contract shall be
concluded for an indefinite period. The goal is long-term, successful
collaboration.
2. Mr. Gudauski's duties are specified in the attached job description,
Appendix A.
Art. 2
1. Mr. Gudauski shall place all his knowledge, abilities and energy at the
service of the company.
2. Mr. Gudauski shall be required to obtain authorization from the IAT AG
company management for the following actions in the company's area of
business:
a) operating a commercial company or doing business for his own or a
third party's account,
b) directly or indirectly, financially or actively, participating or
having a share in another company, in particular as general partner
in another commercial company, and
c) assuming or performing any other remunerative secondary activity.
Owning shares of corporations or partnerships which have no effect on
their governing bodies shall not be considered participation pursuant to
paragraph 2 b).
Art. 3
1. For his activity, Mr. Gudauski shall receive a firm gross annual salary of
DM 150,000.00
(in words: one hundred fifty thousand Deutsche Mark).
2. The salary shall be paid in 12 monthly installments, at the end of each
month.
3. A refined company car (class BMW 520) shall be provided for Mr. Gudauski,
also for his personal use.
4. The company shall pay an employer contribution of 50% for Mr. Gudauski's
chosen health insurance.
<PAGE>
Management contract
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5. If Mr. Gudauski is prevented through no fault of his own (e.g. due to
sickness, accident, etc.) from exercising his activity, he shall be
entitled to payment of his full salary for 6 weeks.
6. Mr. Gudauski is entitled to a pension appropriate to his function as
manager.
Art. 4
1. Upon reaching the goals specified in the Appendix (Appendix B), Mr.
Gudauski shall be entitled to a bonus, represented by a share of the
company's profits, based on the (annual) budget and profit and loss
account. The target salary is thus more than DM 200,000.
Art. 5
1. Against the presentation of receipts, IAT shall reimburse Mr. Gudauski's
costs and travel expenses incurred in the exercise of his activity.
2. His place of employment shall be the head office of IAT GmbH, Bremen. Mr.
Gudauski's activity for the company requires flexibility and readiness to
travel.
3. A 6-month trial period is considered to have been agreed upon by the
contractual parties.
During the trial period, both parties have the right to dissolve the
employment relationship effective at the end of a month. Thereafter, the
employment relationship may be terminated by either party with 6 months'
notice.
4. Written notice must reach the other party no later than the last day of
the notice period, delivered either by hand or by registered mail.
During the notice period, the company shall be authorized to relieve the
employee of his duties and/or grant any vacation to which he is still
entitled.
Regardless of the foregoing, the employment relationship shall terminate
at the end of the month in which the employee has reached the legal
retirement age.
The legal right to immediate dismissal for important reasons is
unaffected.
Art. 6 Prohibition against competition
1. For one year from the end of the employment relationship, Mr. Gudauski
shall not be active for a competing company in the Federal Republic of
Germany, nor collaborate directly or indirectly in the establishment or
operation of such a company.
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<PAGE>
Management contract
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2. Violation of this prohibition against competition shall obligate the
employee to pay a contractual penalty of DM 50,000.
3. For the duration of the period during which competition is prohibited, the
company shall pay Mr. Gudauski 70% of his last contractual salary.
4. The company may waive the prohibition against competition agreed upon in
paragraph 1 by a written statement even before the termination of the
employment relationship. The company shall be released of its obligation
to pay, even without a statement of waiver, if the employment relationship
is ended for reasons for which Mr. Gudauski is responsible.
Art. 7 Final stipulations
1. The rights and duties arising out of this contract shall be assigned to
the legal and business successors of the company.
2. It is agreed that no oral agreements may be made concerning this contract.
Amendments and supplements to this contract shall be valid only if made in
writing.
3. If a stipulation of this contract is entirely or partially invalid or
later loses legal validity, the validity of the other stipulations shall
not be affected thereby. As far as legally permissible, the invalid
stipulation shall be replaced by one which comes closest to the
contracting parties' financial intentions.
4. The venue for all disputes arising out of this contract and any
supplements shall be the head office of IAT GmbH.
German law shall apply to everything not covered herein.
Place, date Place, date
/handwritten/:
Bremen, 12/14/95 Bremen, 12/14/95
IAT GmbH
/signature/ /signature/
Dr. Viktor Vogt Wilhelm Gudauski
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<PAGE>
Management contract
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JOB DESCRIPTION
Mr. Gudauski assumes the position as manager for Marketing and Sales at IAT GmbH
with the aim:
a) of building up, organizing and servicing the direct sale of IAT products
to strategically important professional key-account customers,
b) of installing a network of distributors, retailers or licensees first and
primarily within Germany,
c) of organizing strategic partners for production, maintenance and service
jointly with manager Gunter Schierloh and the management of IAT AG.
As part of his main duties, Mr.Gudauski shall be fully responsible for attaining
the corporate goals of IAT AG in Germany which he has creatively co-fashiones
and implements in a business-like manner.
As a responsible manager of IAT GmbH, he is also co-responsible for the regular
management of the company and personnel of IAT GmbH. In this function, Mr.
Gudauski is a member of the expanded management of IAT AG, Vogelsang-Turgi,
Schweiz. He provides his know-how for joint strategic corporate goals and shall
support IAT AG using his competence and technical knowledge, in particular in
building up and conducting marketing and sales of interactive multimedia
communication systems.
Mr. Gudauski shall report directly to the management of IAT AG; his activity
shall be subordinated to the Board of Directors of IAT AG.
The success, and therefore Mr. Gudauski's bonus, will be measured by the
fulfillment of the qualitative goals and the budgets for sales, profits and
costs drawn up jointly. In particular, the amount he achieves in his main
activity shall be determining.
Place, date: Place, date:
/handwritten/:
Bremen, 12/14/95 Bremen, 12/14/95
IAT GmbH
/signature/ /signature/
Dr. Viktor Vogt Wilhelm Gudauski
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EMPLOYMENT CONTRACT
between IAT AG, Haselstrasse 1, CH - 5400 Baden,
the "Employer,"
and Mr. Franz Muller, born on March 9, 1951, residing at Schulstrasse 9,
8192 Glattfelden,
the "Employee."
The aforementioned parties conclude the following individual employment
contract.
The Employee shall be employed as:
Director of Product Development (Hardware), Technical Support.
The Employee's responsibilities shall comprise:
Organization, implementation, and supervision of technical
support/maintenance related to video conferencing and multimedia systems
(Europe).
Creative cooperation in the development, maintenance, and optimization of
IAT's products.
Contact person for IAT's customers, personnel, and partners.
Cooperation in the preparation of projects and proposals.
Technical project management.
The employment relationship shall commence on:
March 1, 1991.
<PAGE>
Employment Contract
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Art. 1 Working Hours
Regular working hours shall be 40 hours a week, distributed over five week days.
Special stipulation:
As an executive of IAT AG, the Employee shall be expected to be flexible in
arranging his work, as appropriate, in particular, to his distribution-oriented
activities.
Art. 2 Salary
Gross annual salary: 110,110.00 Sfr.
Payable in 13 equal monthly instalments
(gross) of: 8,470.00 Sfr.
The statutory contributions to social security and other benefits shall be
deducted from the Employee's salary on a pro-rated basis.
The Employer reserves the right to pay a voluntary bonus.
Art. 3 Expenses
The Employee shall be reimbursed for expenses pursuant to Art. 327a - c OR.
Subject to agreement, a portion of the Employee's salary (max. 1,000.00 Sfr. per
month) may be considered a flat fee for expenses. Such agreement must be made
with the Central Office at the onset of the employment relationship.
Art. 4 Vacation
The Employee shall be entitled to vacation time as set forth below:
If aged 20 and older: Four (4) weeks or 20 work days.
Statutory holidays, as well as sick days due to illnesses or accidents that are
confirmed by a physician and result in the Employee's temporary disability,
shall not be considered vacation time. Vacation days lost for the aforesaid
reasons may be taken at any time, provided that the health-related events
occurred on work days on which, under normal circumstances, the Employee would
have worked.
Provided the Employee notifies the company in due time of his wishes, both
parties shall endeavor to achieve a mutually satisfactory agreement concerning
vacation dates.
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<PAGE>
Employment Contract
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The Employer reserves the right to reduce vacation time pursuant to Art. 329b OR
[Obligationenrecht - Swiss law of obligations].
Art. 5 Benefits
Health insurance: o Mandatory minimum insurance pursuant to BVG
[Bundes- Vorsorge-Gesetz - Swiss Federal Social
Security Act]
o Additional insurance in accordance with the
benefits provided to executives of IAT AG.
Accident insurance: o Insurance covering work-related accidents and
illnesses
o Insurance covering accidents unrelated to work.
Daily benefits insurance starting on the 61st day of an illness.
Art. 6 Trial Period
The parties stipulate a trial period of three (3) months to commence on the
first day of employment pursuant to Art. 335b para 2 OR.
Art. 7 Termination
This employment contract may be terminated by either party at the end of the
trial period subject to the period of notice effective at the end of a calendar
month. The stipulated period of notice shall be three (3) months.
The notice of termination must be given in writing to be effective. The
provisions of Art. 334 ff. OR shall also apply.
Art. 336, 336a, and 336b OR concern abusive termination, and Art. 336c and 336d
OR notices of termination not in compliance with statutory periods of notice.
The Employer reserves the right to terminate the employment contract effective
immediately for important reasons pursuant to the provisions of Art. 337 and
337b OR.
Art. 8 Overtime
Any and all required overtime shall be remunerated by vacation days of equal
duration.
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<PAGE>
Employment Contract
- --------------------------------------------------------------------------------
Art. 9 Short-Term Absences
The Employee shall have the right to take off the following number of work days,
provided that the events in question occur on days considered work days by the
company and provided that the Employer was notified in due time; such time off
shall not be considered vacation days and shall not be deducted from the
Employee's salary:
<TABLE>
<S> <C>
o Employee's own marriage 3 days
o Marriage in the family 1 day
o Birth of own child 1 day
o Death of spouse, children, or other relatives living in the same household up to 3 days
o Death of other close relatives, as needed up to 2 days
o Death of other relatives or close friends for purposes of attending the funeral max. 1 day
o Military inspection 1/2 to 1 day
o Recruitment 1 day
o Move from own household, provided the move does not occur in connection with a
change in employment 1 day
o Higher examinations recognized by the BIGA [Bundesamt fur Industrie, Gewerbe und
Arbeit - Federal Bureau of Industry, Trade, and Work], consultancies, participation in
association meetings and courses 1 day
o Discharge of public office pursuant to mutual agreement
o Job search upon termination the required time pursuant to Art. 329 para 3 OR.
</TABLE>
Art. 10 Payment of Salary in Cases of Public Service
The Employee may hold public offices and/or offices in a professional
association subject to the Employer's permission if such offices result in
absences from work. The Employer shall grant such permission unless sufficient
organizational considerations dictate otherwise.
If the Employee must satisfy statutory duties or wishes to hold public office,
the parties to this agreement shall, in each individual case, stipulate in
writing and in advance the extent to which the Employer shall continue to pay
the Employee's salary in consideration of any and all remuneration from such
statutory or public office.
Art. 11 Payment of Salary in the Case of Military and Civil Service
The salary shall be paid as follows if the Employee is prevented from
discharging his/her duties under this contract because of military service,
civil service, or service in the auxiliary women's force in times of peace:
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Employment Contract
- --------------------------------------------------------------------------------
o As a recruit, during the respective training period: Single persons: 50%
of the salary; married persons or single persons with dependents: 80% of
the salary.
o In case of other mandatory military service or civil service: 100% of the
salary for up to four weeks in a given calendar year. For any time
exceeding aforesaid four-week period: Single persons: 50% of the salary;
married persons or single persons with dependents: 80% of the salary.
The Employer shall have the right to make continued salary payments during
periods exceeding the aforesaid four-week period dependent on demands related to
the minimum duration of employment upon completion of the respective service.
The Employer shall be entitled to claim the compensation due under the EO
[Erwerbersatzordnung - Salary Compensation Regulations] for continuing to pay
the Employee's salary as stipulated above; however, the Employer's entitlement
hereunder shall be restricted to the salary paid to the Employee by the
Employer. Both parties reserve the right to conclude a special agreement in
cases of active service.
Art. 12 Payment of Salary Upon Employee's Death
The employment relationship shall cease upon the Employee's death.
Continued payment of the Employee's salary shall be subject to Art. 338 OR. The
Employer shall pay the salary for one additional month, or for two additional
months, if the Employee was in the Employer's services for five years,
calculated from the day of the Employee's death, provided that the Employee is
survived by a spouse or by under-age children or, in the absence of such heirs,
other persons to whom the Employee owed a support and maintenance obligation.
Any and all benefits payable under retirement or life insurance policies shall
be applied as follows to the aforementioned salary payments:
o the entire benefit amount if the Employer paid all the premiums;
o that portion of the benefits deriving from the Employer's contribution if
both parties paid the premiums.
Art. 13 Employer's Right to the Results of the Employee's Work
All work prepared by the Employee in connection with the performance of his/her
responsibilities and duties shall belong to the Employer. Copies of such work
may be made only with the express permission of the Employer.
- 5 -
<PAGE>
Employment Contract
- --------------------------------------------------------------------------------
Art. 14 Commissions and Other Payments from Third Parties
The Employee shall not have the right to demand or to accept any commissions or
other payments from third parties, in particular entrepreneurs and suppliers.
In addition, the Employee shall undertake to notify the Employer of such offers.
Art. 15 Due Diligence and Safeguarding of Employer's Interests
The Employee shall undertake to discharge his/her duties and responsibilities
with due diligence and to safeguard the justified interests of the Employer in
good faith.
Art. 16 Moonlighting
The Employee may not assume any other work on his/her own account or on the
account of third parties without the permission of the Employer. The permission
must be sought on a case-by-case basis.
Art. 17 Participation in Competitions
In principle, employees may participate in competitions outside of their regular
working hours. However, such participation shall not be permitted if the
Employer is the competition judge and if the Employer participates in the
competition as a contestant. The Employer shall provide to the Employee, upon
request and provided such request is received in due time, information as to
whether the Employer intends to participate in a given competition.
Art. 18 Inventions and Improvements
The provisions of Art. 332 OR shall apply to inventions and improvements.
Art. 19 Duty of Secrecy
The Employee shall undertake to maintain absolute confidentiality regarding
business and trade secrets, even after the employment relationship has been
terminated. This duty to secrecy applies to records, drawings, photocopies, etc.
which the Employee may prepare in the course of his/her work, of which s/he may
gain knowledge, and/or to which s/he may gain access in connection with the
employment relationship, as well as to records in the recruitment phase and to
current competitions in which the Employee participated while working for the
Employer. The
- 6 -
<PAGE>
Employment Contract
- --------------------------------------------------------------------------------
Employee may not use such records without the permission of the Employer, nor
may s/he make the contents thereof known to third parties or show or provide
same to third parties.
Art. 20 Prohibition of Competition
The parties may prohibit competition in consideration of the provisions of Art.
340, 340a, 340b, and 340c OR, e.g. in Art. 25 of the present employment
contract.
- 7 -
<PAGE>
Employment Contract
- --------------------------------------------------------------------------------
Art. 21 Cooperation
To promote cooperation, an understanding of the Employer's objectives, as well
as better professional development, all employees are granted the following
possibilities to obtain information and to participate in decision-making:
Information
The Employee may, upon request, obtain periodic information concerning the
company's objectives, the general development of its business, its
prospects in the short and medium term, as well as possible structural
changes.
Participation in Decision-Making
The Employee has the right to participate in any and all matters related
to the organization of work and social questions before the respective
decisions are finalized. This applies in particular to questions about
vacation time, workplace organization, the structure of training provided
by the company, company regulations (related to the distribution of
working hours, the manner in which employees must make up for absences,
regulations concerning the system of suggestions, etc.), company benefit
plans, as well as social measures in the event of significant layoffs.
Implementation
How such cooperation is implemented shall be at the discretion of the
company. It shall take into consideration the company's size, as well as
the personnel and executive structure.
Art. 22 Data Protection
The company shall store only those personal data electronically that are
necessary for organizational purposes.
The Employee shall be entitled to review electronically stored data concerning
his or her person.
Incorrect personal data shall be corrected. Upon termination of the employment
relationship, the company shall delete the Employee's personal data that is no
longer needed for internal organizational or governmental purposes.
Art. 23 Arbitration / Jurisdiction
5400 Baden shall be the place of jurisdiction for all disputes arising under
this contract.
- 8 -
<PAGE>
Employment Contract
- --------------------------------------------------------------------------------
Art. 24 Appendices
None.
Executed in two copies. Baden, on this 13th day of November 1990
/stamp/
IAT AG
/signature/
The Employer: The Employee: /signature/
- 9 -
<PAGE>
Employment Contract
- --------------------------------------------------------------------------------
Amendment to the Employment Contract Pursuant to New Copyright Laws
The Employee shall assign to the Employer any and all copyrights to work and
computer programs that he creates in performance of his contractual duties.
This assignment shall apply irrespective of whether the Employee creates the
computer program or the work alone or in collaboration with others.
The assignment shall encompass, in particular, any and all rights pursuant to
Art. 9, 10, and 11 URG [Urheberrechtsgesetz - Copyright Law].
The assignment shall also comprise any and all rights to work and computer
programs created by the Employee in performance of business-related activities
but not in performance of contractual duties.
Such assignment shall be considered remunerated by the stipulated salary.
This amendment to the employment contract shall be effective retroactively as of
July 1, 1993.
Place, Date: Place, Date:
Vogelsang, August 10, 1993 7/10/93
IAT AG The Employee:
/signature/ /signature/
Dr. Viktor Vogt Franz Muller
- 10 -
<PAGE>
Subsidiaries of IAT Multimedia, Inc.
The subsidiaries of IAT Multimedia, Inc., a Delaware corporation (the
"Company"), are as follows:
1. IAT AG, a corporation organized under the laws of Switzerland ("IAT
AG"). IAT AG is a wholly-owned subsidiary of the Company.
2. IAT Deutschland GmbH, a corporation organized under the laws of
Germany ("IAT Germany"). IAT Germany is an indirectly-owned
subsidiary of the Company.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement of IAT Multimedia, Inc. on
Form S-1 of our report dated November 15, 1996 except for Notes 1 and 12 as to
which the date is December 18, 1996 on the consolidated financial statements of
IAT Multimedia, Inc. and to the reference to our firm under the caption
"Experts" in such Prospectus.
/s/ Rothstein, Kass & Company, P.C.
ROTHSTEIN, KASS & COMPANY, P.C.
Roseland, New Jersey
December 20, 1996
<PAGE>
CONSENT
We hereby consent to the use of our firm name in IAT Multimedia, Inc.'s
Registration Statement on Form S-1 and in the Prospectus forming a part of such
Registration Statement. In giving this consent, we do not concede that we come
within the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended.
/s/ Dr. Schackow & Partner
-----------------------------
DR. SCHACKOW & PARTNER
Dated: December 20, 1996
<TABLE> <S> <C>
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 13,384
<SECURITIES> 0
<RECEIVABLES> 182,948
<ALLOWANCES> 3,600
<INVENTORY> 707,044
<CURRENT-ASSETS> 1,005,878
<PP&E> 1,420,764
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<TOTAL-ASSETS> 1,695,231
<CURRENT-LIABILITIES> 4,058,458
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0
0
<COMMON> 43,750
<OTHER-SE> (2,898,977)
<TOTAL-LIABILITY-AND-EQUITY> 1,695,231
<SALES> 961,257
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<CGS> 689,952
<TOTAL-COSTS> 689,952
<OTHER-EXPENSES> 3,874,626
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