<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 4, 1997
REGISTRATION NO. 333-18529
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------
IAT MULTIMEDIA, INC.
(Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 7371 13-3920210
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
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)
------
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)
------
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
------
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. [ ]
------
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.
=============================================================================
<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 MARCH 4, 1997
PROSPECTUS
IAT MULTIMEDIA, INC.
3,100,000 shares of Common Stock
IAT Multimedia, Inc., a Delaware corporation (the "Company"), hereby
offers 3,100,000 shares of its Common Stock, par value $.01 per share (the
"Common Stock").
Prior to this Offering, there has been no public market for the Common
Stock and there can be no assurance that such a market will develop. The
Company has applied for quotation of the Common Stock on the Nasdaq National
Market under the symbol IATA, and may apply for trading privileges for the
Common Stock on the over the counter trading system of the Frankfurt and
Berlin Stock Exchanges. It is anticipated that the initial public offering
price will be $6.00 per share of Common Stock. See "Underwriting" for a
discussion of factors considered in determining the initial public offering
price.
The securities offered hereby involve a high degree of risk and immediate
substantial dilution. See "Risk Factors," which begin on page 11, and
"Dilution."
------
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 Share ... $ $ $
- ------------------------------------------------------------------------------
Total (3) . $ $ $
==============================================================================
(1) Does not include additional compensation to be received by Royce
Investment Group, Inc., the representative of the Underwriters (the
"Representative") and Continental Broker-Dealer Corp. (collectively, the
"Underwriters") in the form of (i) a non-accountable expense allowance of
$ , or $ per share of Common Stock ($ if the over-allotment
option is exercised in full) and (ii) warrants to be issued to the
Underwriters or their designees, to purchase up to 310,000 shares of
Common Stock at $ per share (the "Underwriters' Warrants"). In
addition, the Company has agreed to indemnify the Underwriters 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 Underwriters' non-accountable expense allowance.
(3) The Company has granted to the Underwriters a 45-day option to purchase
up to 465,000 additional shares of Common Stock 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 shares of Common Stock are being offered on a "firm commitment" basis
by the Underwriters when, as and if delivered and accepted by the
Underwriters, subject to their 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 Common Stock 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.
ROYCE INVESTMENT GROUP, INC. CONTINENTAL BROKER-DEALER CORP.
The date of this Prospectus is , 1997
<PAGE>
[PHOTO - Researcher using tele-microscope and computer screen showing remote
picture]
Caption 1:
IAT is developing, in conjunction with Olympus, systems for tele-microscopy
and tele-endoscopy using Texas Instruments' TMS320C80 programable digital
signal processor (the "C8x"). These systems allow instant collaboration
between healthcare professionals, saving valuable time in patient diagnosis
and treatment.
[PHOTO - IAT multimedia kiosk]
Caption 2:
A multimedia kiosk developed by IAT, Deutsche Telekom and IBM,
incorporating Texas Instruments' C8x digital signal processor, provides
consumers with customized product information as well as instant video
conferencing with a trained teleconsultant. Information on the kiosk is
updated remotely, with one authoring system providing content to many
kiosks."
Joint Development Joint Development with IBM and
with Olympus Deutsche Telekom
IAT
-----------------------------------------
THE ELECTRONIC MEETING
Customized Solution for MAN Roland
[PHOTO - showing tele-consultant, photo showing remote site and graphics showing
satellite and ISDN links.]
Caption 3:
MAN Roland, a subsidiary of MAN, a Multinational German conglomerate uses
an IAT customized solution to maintain and inspect high output printing
presses. MFKS technology is also being used in tele-surveillance by
Grundig, a Multinational German conglomerate as well as for document
analysis by the Police Department of Zurich, Switzerland.
------
Upon completion of this Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file reports and other
information with the Securities and Exchange Commission (the "Commission").
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent certified public
accountant and quarterly reports for the first three quarters of each fiscal
year containing unaudited interim financial information.
------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE COMMON STOCK 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 Common Stock 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.
------
Amounts and percentages appearing in this Prospectus may not total due to
rounding.
------
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>
[This Page Intentionally Left Blank.]
<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 share of Common Stock, (iii) assumes no exercise
of the Underwriters' over-allotment option or the Underwriters' Warrants 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) and elsewhere in this Prospectus have
been converted into U.S. dollars. See "Note 2 -- Consolidated Financial
Statements of the Company." 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 several 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 software-only products and
low cost hardwired 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 $18
million was invested in the Company by its stockholders and the Company has
invested approximately $10 million in
4
<PAGE>
the research and development 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.
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 wholesale prices
of approximately $5,800 to $17,500 per system (depending on the composition
of systems required by the user). 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 wholesale 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 and that increasing sales
of these products will result in corresponding decreases in sales, and
eventual phasing out, of its second generation products.
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
5
<PAGE>
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 certain of 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.
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 retail 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 retail 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 due to the geographic spread, technological sophistication
and number of potential users of the Company's products. 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 acquisitions or
other investments or may enter into joint venture agreements 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 fed-
6
<PAGE>
eral 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. The Company intends to establish a Web site and IAT Germany
maintains a Web site at http://www.iatgmbh.de.
THE OFFERING
Securities Offered ............ 3,100,000 shares of Common Stock.
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 $16.0 million, assuming a
price per share of Common Stock of $6.00.
The Company plans to use approximately $6.0
million for research and development,
approximately $1.6 million for repayment of
loans made by stockholders 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 $8.0
million will be used for working capital and
general corporate purposes including
increases in sales staff and expansion in
the United States and possible acquisitions,
other investments or joint venture
agreements. 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 of Financial
Condition and Results of Operations --
Liquidity."
- ------
(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
have deposited 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 -- Charge to Earnings in the Event of
Release of Escrow Shares" and "Principal Stockholders -- Escrow
Shares."
(3) Excludes (i) up to 465,000 shares of Common Stock issuable upon
exercise of the Underwriters' over-allotment option, (ii) 310,000
shares of Common Stock issuable upon exercise of the Underwriters'
Warrants, (iii) 1,875,000 shares of Common Stock issuable upon exercise
of the Investor Warrants, (iv) 473,485 shares of Common Stock issuable
upon exercise of the Stockholder Warrants and (v) 500,000 shares of
Common Stock reserved for issuance under the Company's 1996 Stock
Option Plan, none of which have been granted.
7
<PAGE>
Quotation..................... The Company has applied for quotation of the
Common Stock on the Nasdaq National Market and
the Company may apply for trading privileges for
the Common Stock on the over the counter trading
system of the Frankfurt and Berlin Stock
Exchanges. There can be no assurance that the
Company will be successful in obtaining such
trading privileges and that if obtained, they
will be maintained.
Proposed Nasdaq National
Market Symbol............. IATA
Proposed Frankfurt Stock
Exchange Symbol ........... IATA.F
Proposed Berlin Stock Exchange
Symbol...................... IATA.BE
Risk Factors................. This Offering involves a high degree of risk and
immediate substantial dilution. See "Risk
Factors" and "Dilution."
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following historical financial data 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"). Multimedia was formed in September 1996 as a holding company
for the existing operations of IAT AG and IAT Germany.
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>
Year Ended December 31,
-------------------------------------
1994 1995 1996
---------- ---------- ----------
(In thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Net sales .................................. $ 1,053 $ 1,510 $ 1,193
Cost of sales .............................. 700 968 811
---------- ---------- ----------
Gross margin ............................... 353 542 382
---------- ---------- ----------
Operating Expenses:
Research and development costs ............. 2,269 2,531 2,729
Less participations received ............... (2,207) (868) (398)
---------- ---------- ----------
Research and development costs, net ........ 62 1,663 2,331
Selling, general and administrative expenses 1,538 2,640 2,957
---------- ---------- ----------
Operating loss ............................. $(1,247) $(3,761) $(4,906)
========== ========== ==========
Net loss ................................... $(1,335) $(3,730) $(5,108)
========== ========== ==========
Net loss per common share .................. $ (0.33) $ (0.77) $ (0.89)
Weighted average number of shares
outstanding ............................... 4,000 4,837 5,750
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1995 1996
-------------------------
As
Actual Actual Adjusted (1)
--------- --------- -----------
(In thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Current assets ................... $ 1,489 $ 1,204 $15,798
Working capital (deficiency) ..... (1,106) (2,728) 13,113
Total assets ..................... 2,056 2,216 16,934
Total liabilities ................ 2,944 4,896 3,649
Series A Preferred Stock ......... 1,400 --
Stockholders equity
(deficiency)(2) ................. (888) (4,080) 13,285
</TABLE>
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(1) Gives effect to the net proceeds of $16,000,000 from the sale of 3,100,000
shares of Common Stock at an assumed price per share of $6.00, the payment
of $400,000 pursuant to the Marketing Agreement, the automatic conversion of
1,875,000 shares of Series A Preferred Stock into 1,875,000 shares of Common
Stock upon the consumation of this Offering, the receipt of an aggregate of
approximately $500,000 of stockholder loans received subsequent to December
31, 1996, and the repayment of an aggregate of approximately $1,607,000 of
stockholder loans, the payment of approximately $35,000 for dividends on
Series A Preferred Stock and the incurrence of Offering expenses of
$277,000, of which $137,000 were paid prior to December 31, 1996.
(2) 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) 310,000 shares of Common Stock issuable upon exercise
of the Underwriters' Warrants, (iii) 1,875,000 shares of Common Stock
issuable upon exercise of the Investor Warrants, (iv) 473,485 shares of
Common Stock issuable upon exercise of the Stockholder Warrants and (v)
465,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
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RISK FACTORS
The securities offered hereby are speculative in nature and an investment
in the Common Stock 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 Common Stock
offered hereby.
History of Operating Losses. The Company incurred net losses of
approximately $1.3 million, $3.7 million and $5.1 million in the years ended
December 31, 1994, 1995 and 1996, respectively. At December 31, 1996, the
Company had an accumulated deficit of approximately $12.3 million and a
stockholder's deficiency of approximately $4.1 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, 1995 and 1996, the Company
made significant expenditures of approximately $62,000, $1.7 million and $2.3
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. 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 unsecured 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 its creditors and to raise capital to fund its operations by obtaining
unsecured subordinated loans from stockholders of Multimedia (former
stockholders of IAT AG) and by obtaining additional shareholder equity by
increasing the share capital of IAT AG, which according to Swiss law is required
to be fixed. For more specific information regarding the measures taken, see
"Certain Transactions." The Company continues to undertake measures to obtain
and maintain operating funds. In connection therewith, the Company expects to
obtain an aggregate of approximately $500,000 in stockholder loans from Vertical
Financial Holdings ("Vertical"), Walther Glas Gmbh ("Walther Glas") and Messrs.
Vogt and Sippel in early February 1997 which the Company expects will be
sufficient to fund its operations only until approximately the third week of
March 1997 at which time the Company will have exhausted its operat-
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ing funds without the proceeds of this Offering. At such time, the Company may
obtain further financing from its existing stockholders by borrowing funds from
its lender or a combination of both, While IAT AG and IAT Germany have
successfully undertaken measures to obtain and maintain operating funds 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. In the event the Company will
borrow additional funds from existing stockholders, such funds are expected to
be repaid with the proceeds of this Offering. In the event the Company will
borrow additional funds from its lender, certain stockholders may be required to
guarantee the Company's repayment obligation. See "Certain Transactions."
Substantial Doubt as to Ability to Continue as a Going Concern. Potential
investors should be aware that the report of the Company's independent
certified public accountants relating to the Company's December 31, 1996
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 10 --
Consolidated Financial Statements of the Company."
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 and 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 this
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.
The Company intends to apply for patents on certain aspects of its
technology. However, there can be no assurance that such patents will be
granted or, if granted, that such patents will provide protection against
infringement. 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.
Substantially all of the Company's revenues in the years ended December
31, 1995 and 1996 were generated from operations located in Germany and
Switzerland, where the Company believes that regardless of differences in
legal systems, it enjoys substantially equivalent protection for its
proprietary protection rights as it would in the United States. However, the
laws of some foreign countries where the Company may in the future sell its
products, may 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
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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
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. In addition, patents held by third parties in certain countries may
require the Company to obtain a license or may prevent it from marketing
certain solutions in such countries. The Company is aware of one patent in
the United States held by a third-party which has claims related to
tele-pathology including using remote control microscopes. While the Company
does not believe that the U.S. patent will have a significant impact on the
sales of the Company, there can be no assurance that infringement 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 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. 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 for the 18 month period following this Offering,
although the Company's capital requirements are subject to numerous
contingencies associated with the early-stage of the Company's third
generation products. The Company's existing bank lines of credit in the
aggregate amount of approximately $2.1 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 addition, in the event of delays or unanticipated expenses
associated with the Company's third generation products, and after the 18
month period following this Offering, in the event sales do not increase
sunstantially and 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
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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."
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. While the prices of the
Company's products vary with the composition of systems required by the user,
the Company's second generation MFKS systems had average wholesale prices of
approximately $5,800 to $17,500 (depending on the composition of systems
required by the user). 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 wholesale prices of approximately $1,500 per system ($1,000
to OEMs in quantity) for the single board MFKS 128 system and approximately
$6,500 per system ($3,500-$4,500 to OEMs depending on the composition of
systems required by the user) for the MFKS 384 system. To date, the Company
has only installed pilots of its second generation MIKS Interactive Kiosk
systems which sell for a retail price of approximately $45,000 per electronic
kiosk. The Company intends to introduce its third generation of MIKS
Interactive Kiosks during 1997 at a retail 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. The Company expects that the introduction of its
third generation products and increasing sales of these products will result
in corresponding decreases in sales, and eventual phasing out, of its second
generation products. 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."
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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 the trend in the visual
communications market towards polarization, 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 other
providers, including the Company, are seeking to provide hardware and
software systems for more specialized and dedicated markets, will continue to
manifest itself. The Company intends to market its technology and its
products to professional customers many of whom are not currently utilizing
visual 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."
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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, 1995 and 1996 were generated from operations located
in Germany and Switzerland. While these countries have well developed
economic markets, the 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 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 Common Stock 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 Common Stock 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
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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 Common Stock 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 87%, 68% and 77% of the
Company's revenues for the years ended December 31, 1994, 1995 and 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 and expects
such sales to continue to drop until such release. 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
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
17
<PAGE>
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. The Company does not currently engage in
hedging transactions to offset the risk in currency fluctuations but may
engage in such transactions in the future. 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 depend, in part, on the timing of introduction of new products
by the Company and its competitors. The Company's sales for the fourth
quarter of 1996 were not as high proportionately as in past years or as
compared to the first three quarters of 1996 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 Common
Stock 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 Common Stock offered hereby would likely be materially and
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Benefits of the Offering to Insiders. The Company intends to use a portion of
the net proceeds of the Offering (i) to repay stockholder loans and dividends on
the Series A Preferred Stock aggregating approximately $1.6 million made to the
Company by Vertical, Walther Glas and Messrs. Vogt and Sippel, (ii) to pay a
$400,000 marketing fee payable to General Capital, an affiliate of 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 of 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 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 slate 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.
18
<PAGE>
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 $4.50 per
share, assuming an initial public offering price of $6.00 per share of Common
Stock. 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
pursuant to which it sold 1,875,000 shares of Series A Preferred Stock and
the Investor Warrants for an aggregate gross 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."
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. For more specific information
regarding these earnings levels and trading levels, see "Principal
Stockholders -- Escrow Shares." 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 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.
By way of example, if at the time of the release of the Escrow Shares the
market price of the Common Stock was $14.00, the Company would be required to
recognize compensation expense of approximately $2.6 million. The recognition
of such compensation expense may depress the market price of the Company's
Common Stock. 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."
19
<PAGE>
No Public Market for Securities. Prior to this Offering, there has not
been any market for the Company's Common Stock, and there can be no assurance
that an active trading market will develop or be sustained after this
Offering.
Arbitrary Determination of Offering Price. The initial public offering
price of the Common Stock has been determined by negotiation between the
Company and the Underwriters and is 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.
Possible Volatility of Market Price. 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 Common Stock.
See "Underwriting."
Possible Delisting of Securities from the Nasdaq National Market. While
the Company's Common Stock meets the current Nasdaq National Market listing
requirements and is 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 will be submitted to 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, the Common Stock may be delisted from the Nasdaq
National Market. In such event, trading, if any, in the Common Stock 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 Common Stock than might otherwise be
attained.
Risks of Low-Priced Stock. If the Company's Common Stock was delisted from
Nasdaq National Market and could not be quoted on Nasdaq SmallCap Market (see
"-- Possible Delisting of Securities from the Nasdaq National Market"), it
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 Common Stock and
may adversely affect the ability of purchasers in this Offering to sell any
of the shares of Common Stock 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
20
<PAGE>
than $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
Common Stock 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 Common Stock will qualify for exemption from these restrictions. In any
event, even if the Common Stock was 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 Common Stock were subject to the rules on penny
stocks, the market liquidity for the Common Stock 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 Common
Stock. All of the 6,250,000 shares of Common Stock held by existing stockholders
are eligible for sale under Rule 144 beginning in October 1997. Of the 6,250,000
shares of Common Stock outstanding, 500,000 are Escrow Shares. Currently,
5,607,757 of the 6,250,000 shares of Common Stock outstanding are held by
affiliates and will be subject to volume limitations after October 1997. In
addition, the existing stockholders have entered into lock-up agreements (the
"Lock-Up Agreements") with the Underwriters wherein they agreed not to sell or
otherwise dispose of any shares of Common Stock (other than shares of Common
Stock acquired in the public market after the date of this Prospectus) or to
exercise registration rights for a period of 24 months from the date of this
Prospectus without the prior written consent of the Representative; provided,
however, that the stockholders of the Company (other than officers and directors
of the Company) may sell or otherwise dispose of shares of Common Stock in one
or more private sales without such consent if the acquirors (and any subsequent
acquirors) of such shares enter into a Lock-Up Agreement with the Underwriters
restricting the transferability of such shares for the remainder of such 24
month period; and provided further that participants in the Private Placement
may not sell or otherwise dispose of shares of Common Stock which were issued
upon the automatic conversion of the Series A Preferred Stock in such private
sales without such consent prior to October 24, 1998. The Representative has
indicated that it will not consent to any sale or other disposition of shares of
Common Stock which were issued upon the automatic conversion of the Series A
Preferred Stock prior to October 24, 1998, except in the event of a tender
offer. The Underwriters have demand and piggy-back registration rights covering
the securities underlying the Unit Purchase Options and Vertical, Walther Glas,
and Messrs. Vogt and Sippel have demand and piggy-back registration rights with
respect to their respective securities. 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 Investor Warrants to purchase 1,875,000 shares of Common Stock, (ii) the
Stockholder Warrants to purchase 473,485 shares of Common Stock and (iii) the
Underwriters' Warrants to purchase an aggregate of 310,000 shares of Common
Stock. 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. If the
Underwriters' Warrants are exercised, the value of the Common Stock held by
public investors will be diluted, if the value of such stock immediately
prior to the exercise of such Underwriters' Warrants exceeds the exercise
price thereof, with the extent of such dilution depending upon such excess.
The Underwriters' Warrants afford the holders thereof the opportunity, at
nominal cost, to profit from a rise in the market price of the Common Stock,
which may adversely affect the terms upon which the company could issue
additional Common Stock during the term thereof. 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 $16.0
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 share of Common Stock. The Company intends to use the net proceeds
as follows:
<TABLE>
<CAPTION>
Approximate
Amount of Net Percentage of
Proceeds Net Proceeds
--------------- ---------------
<S> <C> <C>
Research and development ................................................. $ 6,000,000 37.5%
Repayment of certain shareholder loans (1) and payment of
dividend on Series A Preferred Stock (2) ................................ 1,600,000 10.0%
Payment under Marketing Agreement (3) .................................... 400,000 2.5%
Working capital and general corporate purposes including increases in
sales staff, expansion in the United States and possible acquisitions,
other investments or joint venture agreements ........................... 8,000,000 50.0%
--------------- ---------------
Total ................................................................ $16,000,000 100.0%
=============== ===============
</TABLE>
- ------
(1) Consists of (i) loans in the aggregate amount of approximately $1.1
million made to IAT AG by Walther Glas, a stockholder of Multimedia,
during 1996 for working capital, bearing interest at 10% annually and
maturing at the earlier of the consummation of this Offering or June
30, 1997, and (ii) loans in the aggregate amount of approximately
$500,000 by Vertical, Walther Glas and Messrs. Vogt and Sippel, during
February 1997 for working capital, bearing interest at 8% annually and
maturing at the earlier of the consummation of this Offering or June
30, 1997, unless extended by mutual agreement by the parties. In
connection with these loans, the Company granted Walther Glas and
Messrs. Vogt and Sippel certain registration rights. See "Certain
Transactions."
(2) The 1,875,000 shares of Series A Preferred Stock issued on October 24,
1996 of which 890,152 were issued to Vertical, will automatically
convert into Common Stock upon consummation of this Offering. 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 $35,000 at February 15, 1997.
(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 for the 18 month period following this
Offering, although the Company's capital requirements are subject to numerous
contingencies associated with the early-stage of the Company's third
generation products. Pending application, the net proceeds will be invested
in short-term, interest-bearing investments. Any proceeds received upon
exercise of the Underwriters' over-allotment option or the Underwriters'
Warrant will be added to working capital. See "Certain Transactions."
The Company continually evaluates potential strategic partners for
additional applications and broader marketing of its technology. The Company
may make acquisitions, other investments or may enter into joint venture
agreements for strategic reasons.
A substantial part of the potential market for the Company's products are
in the United States due to the geographic spread, technological
sophistication and number of potential users of the Company's products.
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.
22
<PAGE>
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.
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 March 3, 1997, such rate was
DM 1.6967=$1.00 and SF 1.4770=$1.00, respectively.
<TABLE>
<CAPTION>
As of and for the
Year Ended December 31
-----------------------------------------------------------------
1994 1995 1996
-------------------- -------------------- --------------------
DM SF DM SF DM SF
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Exchange rate at end of period ....... 1.5495 1.3100 1.4345 1.1540 1.5411 1.3427
Average exchange rate during period (a) 1.6216 1.3367 1.4371 1.1820 1.5044 1.2358
Highest exchange rate during period .. 1.7658 1.4861 1.5591 1.3141 1.5665 1.3505
Lowest exchange rate during period ... 1.4921 1.2441 1.3543 1.1670 1.4313 1.1507
</TABLE>
- ------
(a) The average of the exchange rates on the last day of each month during
the applicable period.
23
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996, on an actual basis, and on an as adjusted basis to give
effect to the sale of the Common Stock offered hereby at an assumed price per
share of Common Stock of $6.00 (assuming no exercise of the Underwriters'
over-allotment option), and the application of net proceeds.
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------
As
Actual Adjusted (1)
-------------- --------------
<S> <C> <C>
Loans payable - stockholders ............................................ $ 2,071,111 $ 963,704
Series A Preferred stock, par value $.01 per share; 1,875,000 shares
issued and outstanding actual and no shares outstanding as adjusted .... 1,400,000 --
Stockholders' equity: (2)
Preferred stock, $.01 par value authorized 500,000 shares, none
issued ........................................................... -- --
Common stock, par value $.01 per share; 20,000,000 shares
authorized, 4,375,000 shares issued and outstanding, and 9,350,000
shares as adjusted ............................................... 43,750 93,500
Capital in excess of par value .......................................... 8,002,884 25,318,134
Accumulated deficit ..................................................... (12,293,447) (12,293,447)
Cumulative translation adjustments ...................................... 166,530 166,530
-------------- --------------
Total stockholders' equity ......................................... (4,080,283) 13,284,717
-------------- --------------
Total capitalization .................................................... $ (609,172) $ 14,248,421
============== ==============
</TABLE>
- ------
(1) Gives effect to the net proceeds of $16,000,000 from the sale of 3,100,000
shares of Common Stock at an assumed price per share of $6.00, the
automatic conversion of 1,875,000 shares of Series A Preferred Stock into
1,875,000 shares of Common Stock upon the consummation of this Offering,
the receipt of an aggregate of approximately $500,000 of stockholder loans
received subsequent to December 31, 1996, and the repayment of an
aggregate of approximately $1,607,000 of stockholder loans, the payment of
approximately $35,000 for dividends on Series A Preferred Stock and the
incurrence of Offering expenses of $277,000, of which $137,000 were paid
prior to December 31, 1996.
(2) 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) 310,000 shares of Common Stock issuable upon
exercise of the Underwriters' Warrants, (iii) 1,875,000 shares of
Common Stock issuable upon exercise of the Investor Warrants, (iv)
473,485 shares of Common Stock issuable upon exercise of the
Stockholder Warrants and (v) 465,000 shares of Common Stock issuable
upon exercise of the Underwriters' over-allotment option.
24
<PAGE>
DILUTION
At December 31, 1996, the pro forma net tangible book value of the Company
was $(2,956,808) or $(.51) per share of Common Stock, after giving effect to the
automatic conversion of the Series A Preferred Stock into 1,875,000 shares of
Common Stock upon the consummation of this Offering. The pro forma net tangible
book value per share represents the amount of the Company's total assets, less
deferred registration costs 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 the Common Stock offered hereby (assuming no exercise of the
Underwriters' over-allotment option) at an assumed offering price of $6.00 per
share, (ii) after deducting the underwriting discounts and estimated expenses of
the Offering, (iii) the payment of $400,000 pursuant to the Marketing Agreement,
(iv) 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, (v) the payment of approximately $35,000
of dividends on the Series A Preferred Stock, and (vi) the incurrence of
offering expenses of $277,000, of which $137,000 were paid prior to December 31,
1996, the net pro forma tangible book value of the Company as of December 31,
1996 would have been $13,284,717 or $1.50 per share. This represents an
immediate increase in net tangible book value of $2.01 per share to existing
stockholders and an immediate dilution in net tangible book value of $4.50 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 share ................................ $6.00
Pro forma net tangible book value per share at December 31,
1996 .......................................................... $ (0.51)
Increase in net tangible book value attributable to new
investors ..................................................... 2.01
----------
Pro forma net tangible book value after the Offering ........... 1.50
--------
Dilution to new investors ...................................... $4.50
========
</TABLE>
The following tables sets forth on an unaudited pro forma basis at
December 31, 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 an
assumed initial public offering price of $6.00 per share.
<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."
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following historical financial data, except for the information
provided for the year ended December 31, 1992, have been derived from the
Consolidated Financial Statements. The historical financial data for the year
ended December 31, 1992, 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 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>
Year Ended December 31,
----------------------------------------------------------------
1992 1993 1994 1995 1996
----------- ---------- ---------- ---------- ----------
(unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ............................. $ 1,216 $ 1,963 $ 1,053 $ 1,510 $ 1,193
Cost of sales ......................... 903 1,171 700 968 811
---------- ---------- ---------- ---------- ----------
Gross margin .......................... 313 792 353 542 382
---------- ---------- ---------- ---------- ----------
Operating Expenses:
Research and development costs ........ 434 1,828 2,269 2,531 2,729
Less participations received .......... -- (962) (2,207) (868) (398)
---------- ---------- ---------- ---------- ----------
Research and development expenses, net . 434 866 62 1,663 2,331
Selling, general and administrative
expenses ............................. 2,009 1,193 1,538 2,640 2,957
---------- ---------- ---------- ---------- ----------
Operating loss ........................ $(2,130) $(1,267) $(1,247) $(3,761) $(4,906)
========== ========== ========== ========== ==========
Extraordinary item .................... $ 4,838((1)) $ -- $ -- $ -- $ --
========== ========== ========== ========== ==========
Net Income (loss) ..................... $ 2,639 $(1,324) $(1,335) $(3,730) $(5,108)
========== ========== ========== ========== ==========
Net Income (loss) per common share .... $ 0.74 $ (0.36) $ (0.33) $ (0.77) $ (0.89)
Weighted average number of shares
outstanding. ......................... 3,563 3,647 4,000 4,837 5,750
</TABLE>
- ------
(1) Represents gain on restructuring.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
-------- -------- -------- --------- -------------------------
As
Actual Actual Actual Actual Actual Adjusted (1)
-------- -------- -------- --------- --------- -------------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets ................... $ 527 $1,671 $1,308 $ 1,489 $ 1,204 $15,798
Working capital (deficiency) ..... (1,125) 274 (865) (1,106) (2,728) 13,113
Total assets ..................... 974 2,065 1,771 2,056 2,216 16,934
Current liabilities .............. 1,652 1,397 2,173 2,595 3,932 2,685
Loans payable - stockholders ..... -- -- 336 349 964 964
Total liabilities ................ 1,764 1,488 2,509 2,944 4,896 3,649
Series A Preferred Stock ......... 1,400 --
Stockholders equity
(deficiency) (2) ................ (790) 577 (738) (888) (4,080) 13,285
</TABLE>
26
<PAGE>
- ------
(1) Gives effect to the net proceeds of $16,000,000 from the sale of 3,100,000
shares of Common Stock at an assumed price per share of $6.00, the payment
of $400,000 pursuant to the Marketing Agreement, the automatic conversion
of 1,875,000 shares of Series A Preferred Stock into 1,875,000 shares of
Common Stock upon the consummation of this Offering, the receipt of an
aggregate of approximately $500,000 of stockholder loans received
subsequent to December 31, 1996, and the repayment of an aggregate of
approximately $1,607,000 of stockholder loans, the payment of
approximately $35,000 for dividends on Series A Preferred Stock, and the
incurrence of Offering expenses of $277,000, of which $137,000 were paid
prior to December 31, 1996.
(2) 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) 310,000 shares of Common Stock issuable upon
exercise of the Underwriters' Warrants, (iii) 1,875,000 shares of
Common Stock issuable upon exercise of the Investor Warrants, (iv)
473,485 shares of Common Stock issuable upon exercise of the
Stockholder Warrants and (v) 465,000 shares of Common Stock issuable
upon exercise of the Underwriters' over-allotment option.
27
<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
Financial Statements and Notes to 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 its 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 software-only products and low
cost hardwired 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 $18 million was invested in the Company by its
stockholders and the Company has invested approximately $10 million in the
research and development 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 wholesale prices of approximately $5,800 to $17,500 per
system (depending on the composition of systems required by the user). Third
generation systems, which the Company expects to begin shipping in 1997,
utilize Texas Instruments' C8x programmable digital signal processor and are
designed for commercial production with target wholesale sales prices of
approximately $1,500 to $8,000 per system for corresponding MFKS systems.
28
<PAGE>
The Company believes that its third generation of systems will be its first
systems which have the potential for widespread commercialization and that
increasing sales of these products will result in corresponding decreases in
sales, and eventual phasing out of its second generation products.
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 due to the geographic spread, technological sophistication
and number of potential users of the Company's products. 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 acquisitions and
other investments or may enter into joint venture agreements 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's sales for the fourth quarter of 1996 were not as
high proportionately as in past years or as compared to the first three
quarters of 1996 as the Company's customers await the release of the
Company's third generation systems.
Approximately 87%, 68% and 77% of the Company's revenues for the years
ended December 31, 1994, 1995 and 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 and expects such sales to continue to drop
until such release. 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. The Company does not
currently engage in hedging transactions to offset the risk of currency
fluctuations but may engage in such transactions in the future.
RESULTS OF OPERATIONS
Year ended December 31, 1996 and 1995
The average exchange rate for the U.S. Dollar increased substantially as
compared to the Swiss Franc by approximately 5.1% resulting in a decrease in
all revenue and expense accounts in 1996 by this same percentage. The average
Swiss Franc to U.S. Dollar exchange rate was SF 1.24 = $1.00 in 1996 as
compared to SF 1.18 = $1.00 in 1995.
Revenues. The Company's revenues from the sale of multimedia systems products
for the year ended December 31, 1996 decreased by approximately 21.0% to
$1,193,000 from $1,510,000 for the year ended December 31, 1995. Although there
was approximately a 60% increase in the number of systems sold in the year ended
December 31, 1996, this increase was more than offset by a decrease in the price
per systems, resulting in decreased revenues.
Cost of sales. Cost of sales for the year ended December 31, 1996
decreased to $811,000 from $968,000 for the year ended December 31, 1995. The
cost of sales as a percentage of sales increased to 68.0% for the year ended
December 31, 1996 from 64.1% for the year ended December 31, 1995. Although
the Company realized savings from purchasing economies for the additional
units produced, the savings were more than offset due to a lower gross margin
concept for the Company's products resulting in a higher cost of sales
percentage in 1996.
29
<PAGE>
Research and development costs. Research and development costs incurred
increased by approximately 7.8% to $2,729,000 for the year ended December 31,
1996 from $2,531,000 for the year ended December 31, 1995. The Company increased
the number of employees involved in research and development to complete their
third generation of products resulting in increased payroll costs during 1996.
The Company receives participations which are reimbursements from DT for
research and development projects in which the Company and DT can both benefit
and at the conclusion of these projects, the Company as well as DT retain legal
rights in the products developed during such projects ("Research
Participations"). DT typically pays 50% of the budgeted cost of such research.
Research Participations decreased to $398,000 for the year ended December 31,
1996 compared to $868,000 for the year ended December 31, 1995. The decrease in
Research Participations received was primarily a result of the completion of
certain development projects for DT.
Selling expenses. Selling expenses increased by approximately 15.5% to
$1,462,000 for the year ended December 31, 1996 from $1,266,000 for the year
ended December 31, 1995. This is primarily 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 8.8% to $1,495,000 for the year ended December 31,
1996 from $1,374,000 for the year ended December 31, 1995.
Interest. Interest expense increased by approximately 65.1% to $213,000
for the year ended December 31, 1996, from $129,000 for the year ended
December 31, 1995, principally due to the increase in stockholder and bank
loans.
Net Loss. Net loss for the year ended December 31, 1996 increased by
approximately 36.9% to $5,108,000 from $3,730,000 for the year ended December
31, 1995. The loss primarily increased as a result of the Company's decrease in
the unit sales price, the increase in sales and marketing expenses relative to
the introduction of third generation of its products which is expected in 1997,
and a decrease in Research Participations.
YEARS ENDED DECEMBER 31, 1995 AND 1994
The average exchange rate for the U.S. Dollar 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 Swiss Franc to U.S. Dollar 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. 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. Research 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 joint projects in progress
during 1995 and the completion of certain large projects in 1994 with DT.
30
<PAGE>
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.
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 Participations received in 1995, and the increase in the selling,
general and administrative expenses previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of $2,728,000 and $1,107,000 and
a stockholders' deficiency of $4,080,000 and $888,000 at December 31, 1996 and
December 31, 1995, respectively. The significant increase in the working capital
deficiency, and the stockholders' deficiency resulted from the excess of the
loss incurred of $5,108,000 during the year ended December 31, 1996 over the
capital of $2,940,000 contributed by the stockholders and $615,000 additional
non-current stockholder loans. Net cash used in operations was $4,607,000 and
$3,231,000 for the year ended December 31, 1996 and the year ended December 31,
1995 respectively. The Company generated cash of $216,000 from the collection of
trade receivables during the year ended December 31, 1996, used $34,000 for
increased inventories and $100,000 for payments made pursuant to the Marketing
Agreement. The Company's audited financial statements for the year ended
December 31, 1996 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 $12,293,000 and $7,185,000
at December 31, 1996 and December 31, 1995, respectively. The Company has
funded its operations since inception primarily through the private placement
of equity securities, loans from stockholders and Research Participations.
Through December 31, 1996 the Company had raised approximately $15.4 million
from private placements, including approximately $6 million of loans and
capital previously restructured, $2.1 million in stockholder loans and
approximately $4.4 million in Research 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 $1,400,000 in the aggregate, bearing interest at 6.5% per annum
and of which approximately $1,210,000 was outstanding as of December 31, 1996.
IAT Germany has a line of credit with a German bank for approximately
$675,000 and of which approximately $602,000 was outstanding as of December
31, 1996. This loan bears interest at 10.5% annually. 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. 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.
During the year ended December 31, 1996, the Company received loans from
stockholders aggregating approximately $1,931,000. In October 1996, the Company
received $1.4 million in connection with the Private Placement of the Series A
Preferred Stock. In February 1997, the Company received stockholder loans in the
aggregate amount of approximately $500,000 by Vertical, Walther Glas and Messrs.
Vogt and Sippel for working capital, bearing interest at 8% annually and
maturing at the earlier of the consummation of this Offering or June 30, 1997
31
<PAGE>
unless extended by mutual agreement by the parties. Research 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 currently exceeding its revenues by
approximately $450,000 per month, principally as a result of the continued
research and development related to new products and operating losses,
therefore, the $1.4 million received upon the consummation of the Private
Placement and the additional stockholder loans expected to be received are
expected to be sufficient only to cover the Company's operations through
approximately the third week of March 1997 at which time the Company will have
exhausted its operating funds without the proceeds of this Offering. At such
time, the Company may obtain further financing from its existing stockholders,
by borrowing funds from its lender or a combination of both. In the event the
Company will borrow additional funds from existing stockholders, such funds are
expected to be repaid with the proceeds of this Offering. In the event the
Company will borrow additional funds from its lender, certain stockholders may
be required to guarantee the Company's repayment obligation. 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 for the 18 month period
following this Offering, although the Company's requirements are subject to
numerous contingencies associated with the early-stage of the Company's third
generation products. 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 the market
price of the Company's securities. See "Principal Stockholders--Escrow
Shares."
32
<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 its 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 software-only products and lower
cost hardwired 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 $18 million was invested in the Company by its
stockholders and the Company has invested approximately $10 million in the
research and development 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
wholesale prices of approximately $5,800 to $17,500 per system (depending on
the composition of systems required by the user). The Company's third
generation systems, utilize Texas Instruments' C8x programmable digital
signal processor
33
<PAGE>
and are designed for commercial production with target wholesale sales prices
of approximately $1,500 to $6,500 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 and that
increasing sales of these products will result in corresponding decreases in
sales, and eventual phasing out of its second generation products.
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
34
<PAGE>
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. 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 due to the geographic spread, technological sophistication
and number of potential users of the Company's products. 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 acquisitions or
other investments or may enter into joint venture agreements 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 Development; 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, includ-
35
<PAGE>
ing 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 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.
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.]
36
<PAGE>
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 and 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:
37
<PAGE>
MFKS 128
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
First Generation Second Generation
- ----------------------------------------------------------------------------------------------------------------------------------
Available 1991-1992 1995-1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hardware Requirements Mandatory Mandatory
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
codec codec ISDN codec ISDN
SO SO
[GRAPHIC OMITTED] Optional
1st communi- [GRAPHIC OMITTED]
overlay cations
Optional
[GRAPHIC OMITTED] video audio
switch mix
2nd video audio
overlay switch mix
Minimum: 5 boards Minimum: 2 boards
Fully equipped with options: 8 boards Fully equipped with options: 4 boards
- ----------------------------------------------------------------------------------------------------------------------------------
Operating System Windows 3.X Windows 3.X
Windows 95 (32 bit)
- ----------------------------------------------------------------------------------------------------------------------------------
Design and Architecture Complete systems built exclusively into Complete systems built into PC's
PC's Kits
No kits No OEM's
No OEM's
- ----------------------------------------------------------------------------------------------------------------------------------
Software Video conferencing, including Video conferencing with full-frame picture and PIP
- with features as in first generation PLUS:
Control boards Data conferencing (T.120 standard)
- - application sharing
Video conference using ISDN - file transfer
2 B-channels (1 ISDN line)(128 kbs) - still video
- remote control laser disk Specialized application software
- source switching video/audio
- application sharing version 1
- ----------------------------------------------------------------------------------------------------------------------------------
Application Traditional video conferencing Same as First Generation PLUS
Pilot projects - Scientific works in information technology
Office communications - Tele-Support
- Tele-Microscopy pilots
- Tele-Commuting
- ----------------------------------------------------------------------------------------------------------------------------------
Approximate Average Wholesale Price $20,000 $5,800
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
MFKS 128
<CAPTION>
- ----------------------------------------------------------------------------------------
Third Generation
- ----------------------------------------------------------------------------------------
Available 1997
- ----------------------------------------------------------------------------------------
<S> <C>
Hardware Requirements
[GRAPHIC OMITTED]
Codec+
Video Inlay+
Video Switch+
Audio Mix+
Still Video
(Digital video/audio,
in development)
single board based on C8x technology
- ----------------------------------------------------------------------------------------
Operating System Windows 95 (16 bit)
- ----------------------------------------------------------------------------------------
Design and Architecture Complete systems built into PC's
Kits
OEM's & integrators can purchase:
- Evaluation kits
- Production license
- ----------------------------------------------------------------------------------------
Software Video conferencing and data conferencing as in
second generation PLUS
Better still video (wavelets/JPEG)
Digital video/audio (MPEG)
Specialized application software
- ----------------------------------------------------------------------------------------
Application All types of telecommunications including
- Tele-Medicine
- Tele-Surveillance
- ----------------------------------------------------------------------------------------
Approximate Average Wholesale Price $1,500 ($1,000 for OEM's in quantity)
- ----------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
MFKS 384
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Second Generation Third Generation
- --------------------------------------------------------------------------------------------------------------------------------
Available 1995-1996 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hardware Requirements Mandatory Mandatory
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
codec codec 1st overlay High-End ISDN High-End
Multimedia 3xSO VGA board
Including
[GRAPHIC OMITTED] Codec+
Video Inlay+
Communi- Inverse ISDN Hi Fi Audio+
cations Multiplexer 3xSO Basic video
Switch+
Basic audio mix
Optional (Digital video/
audio in
[GRAPHIC OMITTED] development)
2nd video audio
overlay switch mix
[GRAPHIC OMITTED]
bus 3 boards high-end set based on C8x technology
extension
box
Minimum: 6 boards
Fully equipped with options: 9 boards
- --------------------------------------------------------------------------------------------------------------------------------
Design and Architecture Complete systems in desktop PC Complete systems in desktop PC
No kits Kits
No OEM's OEM's
- --------------------------------------------------------------------------------------------------------------------------------
Operating System Windows 3.X Windows 95 (32 bit)
Windows 95 (16 bit)
- --------------------------------------------------------------------------------------------------------------------------------
Software Same as Second-Generation MFKS 128 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 Tele-Service All types of telecommunications including
Tele-Consulting - Tele-Service
Tele-Medicine pilots - Tele-Medicine; including tele-endoscopy and
tele-microscopy
- Tele-Security
- --------------------------------------------------------------------------------------------------------------------------------
Approximate Average Wholesale Price $17,500 $8,000
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<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 wholesale
prices of approximately $1,500 per system ($1,000 to OEMs in quantity) for
the single board MFKS 128 system and approximately $6,500 per system
($3,500-$4,500 to OEMs depending on the composition of systems required by
the user) 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.
40
<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
interavtive 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 retail 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 retail 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."
41
<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 1994-1995 1997
- ----------------------------------------------------------------------------------------------------------------------------------
Hardware Requirements Pilot Systems Commercial Systems
for Electronic Kiosks Prototype Only - 2 desktop computers - 1 desktop
computer with 2 boards
- ----------------------------------------------------------------------------------------------------------------------------------
Software - OS/2 operating system for MIKS software - Authoring Tool
- 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 Retail Price
per Electronic Kiosk -- $45,000 $20,000
- ----------------------------------------------------------------------------------------------------------------------------------
</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>
Description Low-Cost PC-Board based Mid-range ISA PC-Board High-end ISA PC-Board
on MFKS 128 based on MFKS 384 based on MFKS 384
- -----------------------------------------------------------------------------------------------------------------------------------
Features H.320 videoconferencing or JPEG still video H.320 videoconferencing
o Communications encoding/decoding or optional MPEG1 decoding and with simultaneous JPEG still
optional wavelet high-quality and optional still video video encoding/decoding or
optional MPEG1 decoding
- -----------------------------------------------------------------------------------------------------------------------------------
o ISDN 2 ISDN B-Channels o Up to 6 ISDN B-Channels (3 ISDN lines) 384 kbps
(1 ISDN line) 128 kbps o Other network interfaces available
- -----------------------------------------------------------------------------------------------------------------------------------
o Video Full-Screen Video Window with PIP 2 Full-Screen Video Windows
- -----------------------------------------------------------------------------------------------------------------------------------
o Others o Hi Fi Audio
o Includes all drivers
- -----------------------------------------------------------------------------------------------------------------------------------
Applications o Low-end solution for o Tele-Surveillance o Desktop Multimedia
desktop video conferencing o Tele-Security o POI/POS
o Tele-Medicine o Medicine
- -----------------------------------------------------------------------------------------------------------------------------------
Availability 2nd Half of 1997 1996 (1st Half of 1997 for licenses) 1st Half of 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Wholesale Price Less than $1,000 $3,500 plus license of $ 4,500
(in quantity) $20,000 - $150,000
- -----------------------------------------------------------------------------------------------------------------------------------
</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."
42
<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 intends to 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
87%, 68% and 77% of the Company's revenues for the years ended December 31,
1994, 1995 and 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 Vision and Live --
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 Research 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 $18 million was invested in the Company by its stockholders and the
Company has invested approximately $10 million in the research, development
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.
43
<PAGE>
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.
To date, the Company has invested approximately $4 million in the
marketing of its products. Currently, the Company 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 11 persons is located
primarily in Germany. A substantial part of the potential market for the
Company's products are in the United States due to the geographic spread,
technological sophistication and number of potential users of the Company's
products. 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
44
<PAGE>
acquisitions or other investments or may enter into joint venture agreements
for strategic reasons. Once development of the Company's products is
complete, it may enter into marketing agreements with the relevant Strategic
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 wholesale 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 unless
competition from other products would induce the Company to reduce its 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 .... Document analysis
Approximately 87%, 68% and 77% of the Company's revenues for the years
ended December 31, 1994, 1995 and 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. The
Company intends to apply for patents on certain aspects of its technology.
However, there can be no assurance that such patents will be granted or, if
granted, that such patents will provide protection against infringement.
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.
Substantially all of the Company's revenues in the years ended December
31, 1995 and 1996 were generated from operations located in Germany and
Switzerland, where the Company believes that regardless of differences in
legal systems, it enjoys substantially equivalent protection for its
proprietary rights as it would in the United States. However, the laws of
some foreign countries where the Company may in the future sell its products
may 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.
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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 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 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. In addition, patents held
by third parties in certain countries may require the Company to obtain a
license or may prevent it from marketing certain solutions in such countries.
The Company is aware of one patent in the United States held by a third-party
which has claims related to tele-pathology including using remote control
microscopes. While the Company does not believe that the U.S. patent will
have a significant impact on the sales of the Company, there can be no
assurance that infringement 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 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 the trend in the visual communications market towards polarization, 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 other providers including the Company, are seeking to provide
hardware and software systems for more specialized and dedicated markets,
will continue to manifest itself. The Company intends to market its
technology and its products to professional customers, many of whom are not
currently utilizing visual communications systems. If the market for these
products is established, competitors of the Company may begin to manufacture
products
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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
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 anticipates entering into agreements with other
manufacturers who specialize in larger batches. The Company has identified
one such manufacturer and is in the process of testing its facilities and
manufacturing processes. The Company believes that it can reach an agreement
with this or other manufacturers in time to fulfill the Company's potential
demands. However, there can be no assurance that the Company will be able to
reach an agreement with this or other manufacturers on terms acceptable to
the Company, or at all, 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.
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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 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.
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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"). 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 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. This agreement has been extended several times. Since the product
development goals of the DT Cooperation Agreement are expected to be met in
the near future, the DT Cooperation Agreement will expire on March 31, 1997.
The parties have agreed that each party retains all rights to use of the
products developed pursuant to the DT Cooperation Agreement upon expiration
of such agreement. The parties can transfer a portion of such rights or, with
the prior written consent of the other party, all of such rights.
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 December 31, 1996, the Company had a total of 54 full-time employees
of which 38 and 16 are located in Germany and in Switzerland respectively. Of
these employees, 33 are employed in engineering and product development, 11
in sales and marketing, and 10 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 6,500 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:
<TABLE>
<CAPTION>
Name Age Position
----------------- ----- ----------------------------------------------------
<S> <C> <C>
Viktor Vogt ..... 49 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
</TABLE>
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. Mr. Grissemann graduated from Kantonale
Handelsschule (Business School) in Zurich.
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, 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. Mr. Walther holds a degree in Economics from Ludwig
Maximilian-University in Munich.
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. Mr. Gudauski holds a master degree in
philosophy, classical studies and political science from the Carl von
Ossietzky University in Oldenburg.
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.
Mr. Muller holds a degree as graduate communications engineer from Technical
University, Osnabruck.
The Board of Directors of Multimedia has determined that, within 90 days
of 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
$100,000 (the "Named Executive Officers"), during the fiscal year ended
December 31, 1996:
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SUMMARY COMPENSATION TABLE
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------------------------
Annual Compensation((1)) Awards Payouts
----------------------------------- -------------------------- -----------------------
Restricted
Other Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Award(s) SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
------------------------ ------ ------------ -------- -------------- ------------ ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Viktor Vogt ............ 1996 133,845(2) -- 16,812 (3) -- -- -- --
Co-Chairman and 10,329 (4)
Chief Executive Officer
1995 133,845(2) 7,692 15,458 (3) -- -- -- --
10,329 (4)
1994 133,845(2) 11,538 15,462 (3) -- -- -- --
9,701 (4)
Klaus Grissemann (5) ... 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 -- 7,578 (3)
11,713 (4) -- -- -- --
1994 99,560 -- 7,560 (3) -- -- -- --
8,785 (4)
</TABLE>
- ------
(1) Compensation is paid in Swiss Francs or Deutsche Marks, as the case may
be, and is converted into U.S. dollars at the exchange rate of $1.00 =
1.30 SF and $1.00 = 1.55 DM on December 8, 1996.
(2) Includes a non-accountable expense allowance of SF 12,000 (approximately
$9,230).
(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 these amounts to the mandatory pension fund.
(4) Represents payments made by the Company for automobile leases for the
Named Executive Officers.
(5) 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."
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
governed by Swiss law pursuant to which Dr. Vogt agrees to serve as the
Company's Co-Chairman, Chief Executive Officer and President for a three year
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term subject to extension. It is anticipated that the employment agreement will
provide that Dr. Vogt will receive approximately $140,000 in annual salary
(based upon a fixed exchange rate of SF 1.35=$1.00), a non-accountable expense
in the amount of SF 12,000 (approximately $9,230) and pension fund
contributions, as well as a cash bonus in the amount of one half of one percent
of the Company's net sales in excess of $5.0 million provided that such cash
bonus will not be less than $10,000 and other customary fringe benefits. In
addition, Dr. Vogt will be eligible to receive stock options for a number of
shares of the Company's Common Stock to be determined by the Stock Option
Committee. The employment agreement with Dr. Vogt is also expected to contain a
provision prohibiting Dr. Vogt from competing with the Company for a period of
two years from the date of expiration of his employment. During the two year
non-competition period, the Company will be required to compensate Dr. Vogt for
the difference between his salary at the Company during the year prior to
commencement of the non-competition period and any compensation he may receive
from a third party during such period, if any, and to make payments of pension
fund contributions on such compensation. For example, if upon expiration of the
employment agreement Dr. Vogt was paid a salary of $140,000 during the previous
year and if during the non-competition period Dr. Vogt is employed by a third
party at a salary of $100,000, the Company would have to pay Dr. Vogt $40,000
per year and make pension fund contributions on this amount for each of the two
years of the non-competition period. In the event the Company subsequently
waives its rights under the non-competition provision, no compensation will be
due to Dr. Vogt upon termination. Additionally, it is anticipated that the
employment agreement will provide that during its three year term each party may
only terminate the employment agreement for gross misconduct of the other party
without notice. However, Dr. Vogt may be relieved by the Company of his
functions and duties at any time provided that all compensation continues to be
paid until the expiration of the employment agreement.
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 $574) 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 $81,500), subject to increases in the Company's discretion, which
have been made from time to time, 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 $96,444), certain benefits and the payment of an undetermined
bonus upon reaching certain goals to be agreed upon by the parties. Mr.
Gudauski's salary has been increased from time to time subsequent to the
execution of the Gudauski Agreement. 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,
none of which have been granted as of this date, 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.
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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 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
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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. Options granted under the 1996 Plan which
constitute ISOs will, in general, be subject to the following Federal income
tax treatment:
(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, 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 ("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.
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(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.
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
unsecured 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 its 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 (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 and, except for one
instance where Robert Klein Handel & Co. GmbH was issued 1,500 shares of IAT
AG for cash consideration of SF 1.875 million (approximately $1.49 million),
and one instance in June 1993 where shareholders made their capital
contribution of SF 0.3 million by transfer of the rights to certain
proprietary licenses instead of by cash consideration, 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 10.375 million
(approximately $8.05 million at historic exchange rates) were exchanged (the
"Exchange") for 4,375,000 shares of Common Stock of Multimedia and the
Shareholder Warrant to Messrs. Sippel, Suter and Holthuisen at a purchase
price equivalent to approximately $1.84 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 (approximately $714,300) at
historic exchange rates, 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, Walther Glas made several
unsecured subordinated loans to IAT AG in the aggregate amounts of SF 900,000
(approximately $666,700) and DM 700,000 (approximately $440,700). 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 (approximately $481,500). A portion of this loan was used to repay an
unsecured non-interest bearing loan in the amount of SF 150,000
(approximately $111,000) 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.
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The Company obtained an aggregate of approximately $500,000 in stockholder
loans in February 1997 from Vertical, Walther Glas and Messrs. Vogt and
Sippel. These loans bear annual interest at 8% and mature at the earlier of
the consummation of this Offering or June 30, 1997 unless extended by mutual
agreement of the parties. In connection with these loans, the Company granted
registration rights to Walther Glas and Messrs. Vogt and Sippel evidenced by
registration rights agreements (the "Registration Rights Agreements").
Pursuant to these agreements, each of these three stockholders have one
demand and unlimited piggy-back registration rights for all of the shares of
Common Stock owned by such stockholder except for Dr. Vogt whose registration
rights are limited to 250,000 of his shares of Common Stock. The Registration
Rights Agreements further provide that any demand registration at a minimum
will include an amount of shares of Common Stock equal to 25% of the
demanding stockholder's share ownership at the time of this Offering. In
addition, the Registration Rights Agreements provide that any exercise of
registration rights in such agreements is subject to Vertical's approval.
The stockholder loans described above are expected to be sufficient only to
cover the Company's operations through approximately the third week of March
1997, at which time the Company will have exhausted its operating funds without
the proceeds of this Offering. At such time, the Company may obtain further
financing from its stockholders, by borrowing funds from its lender or a
combination of both. In the event the Company will borrow additional funds from
existing stockholders, such funds are expected to be repaid with the proceeds of
this Offering. In the event the Company will borrow additional funds from its
lender, certain stockholders may be required to guarantee the Company's
repayment obligation.
In connection with the operations of IAT Germany, the capital was
increased in 1993 and 1995 from the initial DM 100,000 (approximately
$64,300) to the current DM 700,000 (approximately $450,000). 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
500,000 (approximately $321,467) which was increased in June 1996 to DM 750,000
(approximately $482,200) (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 $56,300). 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 each in the amount of SF
600,000 (approximately $444,400) 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 (approximately $518,500) under IAT AG's credit agreement
with Swiss Bank Corporation for SF 1,900,000 (approximately $1.41 million).
IAT Germany entered into a line of credit with Volksbank Sottrum in the
amount of DM 1,050,000 (approximately $675,000). IAT AG, HIBEG, Dr. Vogt and
Mr. Gudauski have each guaranteed the amount of DM 350,000 (approximately
$225,000) of this line of credit. These guarantees are offset by a lien on
accounts receivable balances. In addition, IAT AG has agreed with Volksbank
Sottrum that IAT AG will insure that IAT Germany has sufficient capital to
ensure that IAT Germany will be able to meet all of its obligations,
including its obligatons under its loan agreement to Volksbank Sottrum.
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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 Company completed the Private Placement and issued an aggregate of
1,980,000 shares of Series A Preferred Stock (which was subsequently adjusted
in the Company's recapitalization) and the Investor Warrants to Vertical,
Behala Anstalt, Lupin Investments Services Ltd., Henilia Financial Ltd. and
Avi Suriel for an aggregate gross 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
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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 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.
Amendment No. 1 to the Stock Purchase Agreement provides that Vertical
shall not enter into an agreement or make any investment in an entity engaged
in the video conferencing 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 video conferencing
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 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. Currently, General
Capital is working with the Company to structure a possible marketing joint
venture with an Israeli company relating to marketing of the Company's
products in the United States and to structure a possible marketing joint
venture with a German company related to the marketing by
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the Company of certain products of the German company. There can be no
assurance that the Company will be able to structure these joint ventures on
terms acceptable to the Company, or at all. 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 provides 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 the video
conferencing business without any geographical limitation.
STOCKHOLDERS' AGREEMENT
Prior to the closing of this Offering, all of the existing stockholders of
the Company will enter into a stockholders' agreement (the "Stockholders'
Agreement"). Pursuant to the Stockholders' Agreement, Walther Glas and Messrs.
Vogt and Sippel (the "Registration Rights Group") have agreed not to sell or
otherwise dispose of any shares of Common Stock or exercise any registration
rights, or seek the consent of the Representative for such sale, disposition or
exercise, without Vertical's prior written consent for a period of 24 months
after the consummation of the Offering. In addition, pursuant to the
Stockholders' Agreement, all of the existing stockholders of the Company other
than Vertical and the Registration Rights Group, have agreed not to sell or
otherwise dispose of any shares of Common Stock or seek the consent of the
Representative for such sale or disposition, without the prior written consent
of each member of the Registration Rights Group and Vertical for a period of 24
months after the consummation of this Offering. In addition, the Stockholders'
Agreement prohibits any sale or other disposition of shares of Common Stock
within such 24 month period unless the acquiror (and any subsequent acquirors)
of such shares becomes a party to the Stockholders' Agreement.
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.
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
IAT AG and IAT Germany have entered into written employment and consulting
agreements with Grissemann Consulting S.A., Franz Muller and Wilhelm Gudauski
and the Company intends to enter into a written employment agreement with
Dr. Vogt prior to or 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 shares of Common Stock 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) .......................... 870,079 870,079 (3) 13.92% 9.31%
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 ............. 2,186,967 2,186,967 34.99% 23.39%
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 69,605 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;
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(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
(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 Common Stock. See "Risk Factors -- Charge to Earnings in
the Event of Release of Escrow Shares", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 4 -- Consolidated
Financial Statements of the Company.
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 the
Common Stock.
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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.
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 offered hereby
will be, when issued, fully paid and non-assessable.
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
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redemption within such period, Multimedia shall commence, as of the 61st day
following the date such redemption 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.
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BLANK CHECK PREFERRED STOCK
The Company is authorized to issue up to 500,000 shares of Blank Check
Preferred Stock. The Board of Directors has the authority to issue this Blank
Check Preferred Stock in one or more series and to fix the number of shares
and the relative 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 Blank Check
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 Blank Check 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 Blank Check 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, Blank Check 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 Blank Check 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. In addition, the
Investor Warrants also contain a cashless exercise option provision.
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."
UNDERWRITERS' WARRANTS
For a description of the Underwriters' Warrants, see "Underwriting."
TRANSFER AGENT
American Stock Transfer & Trust Company serves as Transfer Agent for the
shares of Common Stock.
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
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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, 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 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
1997. Of the outstanding shares of Common Stock, 500,000 shares are Escrow
Shares. Currently 5,607,757 of the 6,250,000 shares of Common Stock outstanding
are held by affiliates and will be subject to volume limitations after October
1997. The existing stockholders of the Company have entered into the Lock-Up
Agreements wherein they agreed not to sell or otherwise dispose of any shares of
Common Stock (other than shares of Common Stock acquired in the public market
after the date of this Prospectus) or to exercise any registration rights for a
period of 24 months from the date of this Prospectus without the prior written
consent of the Representative; provided, however, that the stockholders of the
Company (other than officers and directors of the Company) may sell or otherwise
dispose of shares of Common Stock in one or more private sales without such
consent if the acquirors (and any subsequent acquirors) of such shares enter
into a Lock-Up Agreement with the Underwriters restricting the transferability
of such shares for the remainder of such 24 month period; and provided further
that participants in the Private Placement may not sell or otherwise dispose of
shares of Common Stock which were issued upon the automatic conversion of the
Series A Preferred Stock in such private sales without such consent prior to
October 24, 1998. The Representative has indicated that it will not consent to
any sale or other disposition of shares of Common Stock which were issued upon
the automatic conversion of the Series A Preferred Stock prior to October 24,
1998, except in the event of a tender offer. 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 or 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 1997.
Upon completion of this Offering, the Company will have outstanding in
addition to the securities referred to above, the Underwriters' Warrants to
purchase an aggregate of 310,000 shares of Common Stock. See "Underwriting."
If the Underwriters' Warrants are exercised, the value of the Common Stock
held by public investors will be diluted, if the value of such stock
immediately prior to the exercise of such Underwriters' Warrants exceeds the
exercise price thereof, with the extent of such dilution depending upon such
excess. The Underwriters' Warrants afford the holders thereof the
opportunity, at nominal cost, to profit from a rise in the market price of
the Common Stock, which may adversely affect the terms upon which the Company
could issue additional Common Stock during the term thereof. 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 one year 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 two years is entitled to
sell such shares without regard to the volume or other resale requirements.
Vertical, Walther Glas and Messrs. Vogt and Sippel have certain demand and
piggy-back registration rights covering their respective securities. See
"Certain Transactions." In addition, the Underwriters also have demand and
piggy-back registration rights with respect to the securities underlying the
Underwriters' Warrants. See "Underwriting."
Prior to this Offering, there has been no market for the Common Stock 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 the Common Stock 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. and Continental Broker-Dealer Corp. (the
"Underwriters"), have severally agreed, subject to the terms and conditions
of the Underwriting Agreement between the Company and the Underwriters (the
"Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the Underwriters, the number of shares of Common Stock set
forth opposite their respective names in the table below at the price set
forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------------------------- ----------------
<S> <C>
Royce Investment Group, Inc.
Continental Broker-Dealer Corp.
----------------
Total 3,100,000
================
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Common Stock 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 share, 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 Underwriters. The
Underwriters are committed to purchase all of the shares offered hereby if
any are purchased.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriters a non-accountable expense allowance
equal to 2.5% of the gross proceeds derived from the sale of the shares
offered hereby, including any shares purchased pursuant to the Underwriters'
over-allotment option, $50,000 of which has been paid to date.
The Company has granted to the Underwriters 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 shares for the purpose of covering over-allotments, if any, made
in connection with the sale of the shares of Common Stock offered hereby.
The existing stockholders of the Company have entered into the Lock-Up
Agreements wherein they agreed not to sell or otherwise dispose of any shares of
Common Stock (other than shares of Common Stock acquired in the public market
after the date of this Prospectus) or to exercise any registration rights for a
period of 24 months from the date of this Prospectus without the prior written
consent of the Representative; provided, however, that stockholders of the
Company (other than officers and directors of the Company) may sell or otherwise
dispose of shares of Common Stock in one or more private sales without such
consent if the acquirors (and any subsequent acquirors) of such shares enter
into a Lock-Up Agreement with the Underwriters restricting the transferability
of such shares for the remainder of such 24 month period; and provided further
that participants in the Private Placement may not sell or otherwise dispose of
shares of Common Stock which were issued upon the automatic conversion of the
Series A Preferred Stock in such private sales without such consent prior to
October 24, 1998. The Representative has indicated that it will not consent to
any sale or other disposition of shares of Common Stock which were issued upon
the automatic conversion of the Series A Preferred Stock prior to October 24,
1998, except in the event of a tender offer.
The Company has agreed to sell to the Underwriters or their designees, for
nominal consideration, the Underwriters' Warrants to purchase up to an
aggregate of 310,000 shares of Common Stock. The Underwriters' Warrants are
exercisable during the four-year period commencing one year from the date of
this Prospectus at an exercise price equal to 165% of the per share price set
forth on the cover page of this Prospectus, subject to adjustment in certain
events, and are not transferable for a period of one year from the date of
this Prospectus except to officers of the Underwriters or to members of the
selling group. The Underwriters' Warrants also contain a cashless exercise
provision. The Company has agreed to register under the Securities Act during
the four- year period commencing one year from the date of the Prospectus, on
two separate occasions, the securities issuable upon exercise thereof. The
initial such registration shall be at the Company's expense and the second at
the expense of the holders.
During the five-year period from the date of this Prospectus, in the event
the Representative originates a financing or a merger, acquisition, joint
venture, strategic introduction or other similar transaction to which the
68
<PAGE>
Company is a party, the Representative 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.
The Underwriters have informed the Company that they do not expect sales
to discretionary accounts to exceed 5% percent of the total number of the
shares offered hereby.
Prior to this Offering, there has been no public market for the Common
Stock offered hereby. Accordingly, the offering price of the shares of Common
Stock offered hereby has been determined by negotiation between the Company
and the Underwriters and is not necessarily related to the Company's asset
value, net worth or other established criteria of value. Factors considered
in determining such price 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. Certain legal matters related to this
Offering will be passed upon for the Underwriters by Bachner, Tally, Polevoy
& Misher LLP, New York. Baker & McKenzie, 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 will be subject to the informational requirements of the
Exchange Act, and in accordance therewith will file reports and other
information with the Commission. The Company has filed a Registration
Statement on Form S-1 under the Securities Act with the Commission in
Washington, D.C. with respect to the shares of Common Stock 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 shares of Common Stock 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
"Byte" 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
<TABLE>
<CAPTION>
Page
-------------
<S> <C>
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-13
</TABLE>
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, 1995 and 1996, 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,
1996. 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, 1995 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, 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
10 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 10. 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
January 31, 1997
F-2
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1996
------------ --------------
<S> <C> <C>
Assets
Current assets:
Cash ..................................................... $ 198,879 $ 264,661
Accounts receivable, less allowance for doubtful accounts
of $0 in 1995 and $20,000 in 1996 ..................... 600,904 309,133
Inventories .............................................. 476,487 437,128
Other current assets ..................................... 212,330 192,996
------------ --------------
Total current assets ................................... 1,488,600 1,203,918
Equipment and improvements, less accumulated depreciation
and amortization ......................................... 567,806 638,955
Other assets:
Other assets ............................................. 96,667
Deferred registration costs .............................. -- 276,525
------------ --------------
$ 2,056,406 $ 2,216,065
============ ==============
Liabilities and Stockholders' Deficit
Current liabilities:
Notes payable, banks ..................................... $ 1,616,669 $ 1,811,837
Accounts payable and other current liabilities ........... 978,480 1,013,400
Loans payable, stockholders .............................. -- 1,107,407
------------ --------------
Total current liabilities .............................. 2,595,149 3,932,644
------------ --------------
Loans payable, stockholders, net of current portion ........ 348,913 963,704
------------ --------------
Series A Convertible Preferred Stock, $.01 par value,
redeemable, authorized, issued and outstanding 1,875,000
shares ................................................... 1,400,000
Commitments and contingencies --------------
Stockholders' deficit:
Preferred stock, $.01 par value, authorized 500,000
shares, none issued
Common stock, $.01 par value, authorized 20,000,000
shares, issued and outstanding 3,500,000 and 4,375,000
shares, respectively .................................. 35,000 43,750
Capital in excess of par value ........................... 6,472,051 8,002,884
Accumulated deficit ...................................... (7,184,969) (12,293,447)
Cumulative translation adjustments ....................... (209,738) 166,530
------------ --------------
Total stockholders' deficit ............................ (887,656) (4,080,283)
------------ --------------
$ 2,056,406 $ 2,216,065
============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1994 1995 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Net sales ........................................... $ 1,053,148 $ 1,510,076 $ 1,193,302
Cost of sales ....................................... 699,701 967,909 811,771
-------------- -------------- -------------
Gross margin ........................................ 353,447 542,167 381,531
-------------- -------------- -------------
Operating expenses:
Research and development costs:
Expenses incurred .............................. 2,269,191 2,531,093 2,728,815
Less participations received ................... 2,206,888 868,335 398,177
-------------- -------------- -------------
Research and development costs, net ....... 62,303 1,662,758 2,330,638
Selling expenses .................................. 739,385 1,265,697 1,462,191
General and administrative expenses ............... 798,766 1,374,379 1,494,858
-------------- -------------- -------------
1,600,454 4,302,834 5,287,687
-------------- -------------- -------------
Operating loss ...................................... (1,247,007) (3,760,667) (4,906,156)
-------------- -------------- -------------
Other income (expense):
Interest expense .................................. (124,776) (128,804) (213,136)
Other income ...................................... 36,586 30,127 10,814
Minority interest in net loss of subsidiaries ..... -- 129,167 --
-------------- -------------- -------------
(88,190) 30,490 (202,322)
-------------- -------------- -------------
Net loss ............................................ $(1,335,197) $(3,730,177) $(5,108,478)
============== ============== =============
Loss per share of common stock ...................... $ (0.33) $ (0.77) $ (0.89)
============== ============== =============
Weighted average number of common shares outstanding 4,000,000 4,837,243 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, 1994 ................... 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 .................... 875,000 8,750 1,530,833 -- -- 1,539,583
Change in cumulative translation adjustments . -- -- -- -- 376,268 376,268
Net loss .................................... -- -- -- (5,108,478) -- (5,108,478)
----------- --------- ------------ --------------- ------------- -------------
Balances, December 31, 1996 ................. 4,375,000 $43,750 $8,002,884 $(12,293,447) $ 166,530 $(4,080,283)
=========== ========= ============ =============== ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
IAT MULTIMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ....................................... $(1,335,197) $(3,730,177) $(5,108,478)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ............... 152,413 194,274 230,134
Minority interest ........................... -- (129,167) --
(Increase) decrease in cash attributable to
changes in assets and liabilities:
Accounts receivable ........................ 448,460 291,512 216,016
Inventories ................................ (23,611) (111,089) (34,002)
Other current assets ....................... 18,282 (409) (8,480)
Other assets ............................... (96,667)
Accounts payable and other current
liabilities ............................... (13,116) 253,707 194,949
------------- -------------- --------------
Net cash used in operating activities ............ (752,769) (3,231,349) (4,606,528)
------------- -------------- --------------
Net cash used in investing activities, purchases
of equipment and improvements .................. (169,435) (243,706) (370,780)
------------- -------------- --------------
Cash flows from financing activities:
Proceeds from (repayments of) loans payable,
stockholders ................................ 321,124 (130,524) 1,931,250
Deferred registration costs .................... -- -- (276,525)
Proceeds from issuance of common stock ......... -- 3,804,348 1,539,583
Proceeds from issuance of preferred stock ...... 1,400,000
Issuance of common stock of a subsidiary to a
minority interest ........................... -- 129,167 --
Proceeds from (repayments of) short-term bank
loan ........................................ 501,507 (39,475) 473,235
------------- -------------- --------------
Net cash provided by financing activities ........ 822,631 3,763,516 5,067,543
------------- -------------- --------------
Effect of exchange rate changes on cash .......... (4,261) (103,403) (24,453)
------------- -------------- --------------
Net increase (decrease) in cash .................. (103,834) 185,058 65,782
Cash, beginning of period ........................ 117,655 13,821 198,879
------------- -------------- --------------
Cash, end of period .............................. $ 13,821 $ 198,879 $ 264,661
============== ============== ==============
Supplemental disclosures of cash flow information,
cash paid during the period for interest ....... $ 124,776 $ 128,804 $ 162,473
============== ============== ==============
</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 to customers mainly in
Germany and Switzerland.
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 and Improvements -- Equipment and improvements are stated at
cost. Depreciation and amortization are provided using the straight-line
method over the following estimated useful lives:
Computer hardware and software 3-5 years
Office furniture and equipment 8 years
Leasehold improvements 10 years
Deferred Registration Costs -- The Company has incurred costs relating to
its proposed public offering. 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 (1.15 and 1.35 Swiss Francs for each U.S. Dollar at December 31,
1995 and 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 123"). 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 9, 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, 9 and 10). In
addition, all shares have been adjusted to reflect the reverse stock split
discussed in Note 9.
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,
1994, 1995 and 1996 were $2,206,888, $868,335, and $398,177, respectively.
F-8
<PAGE>
NOTE 3. INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1995 1996
---------- ----------
<S> <C> <C>
Raw Materials .................... $343,814 $406,202
Finished Goods ................... 132,673 30,926
---------- ----------
$476,487 $437,128
========== ==========
</TABLE>
NOTE 4. EQUIPMENT AND IMPROVEMENTS:
Equipment and improvements consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Computer hardware and software ............... $ 735,322 $ 806,768
Office furniture and equipment ............... 298,411 286,863
Leasehold improvements ....................... 344,791 294,624
----------- -----------
1,378,524 1,388,255
Less accumulated depreciation and amortization 810,718 749,300
----------- -----------
$ 567,806 $ 638,955
=========== ===========
</TABLE>
NOTE 5. NOTES PAYABLE, BANKS:
Notes payable, banks consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Note payable under a line of credit with a Swiss Bank for a maximum
amount of approximately $1.4 million, bearing interest at 6.5% per
annum (at December 31, 1996), due on demand and guaranteed by
certain of the stockholders of IAT ............................... $1,365,457 $1,209,770
Notes payable to German banks including a line of credit
arrangement for a maximum amount of approximately $675,000,
bearing interest at 10.5% per annum, due on demand, collateralized
by account receivable balances and guaranteed by the stockholders
of IAT GmbH ...................................................... 251,212 602,067
------------ ------------
$1,616,669 $1,811,837
============ ============
</TABLE>
F-9
<PAGE>
NOTE 6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES:
Accounts payable and other current liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1995 1996
---------- -----------
<S> <C> <C>
Accounts payable, trade . $416,663 $ 347,615
Value added taxes ....... 173,798 92,807
Payroll taxes ........... 143,393 120,486
Other current liabilities 244,626 452,492
---------- -----------
$978,480 $1,013,400
========== ===========
</TABLE>
NOTE 7. LOANS PAYABLE, STOCKHOLDERS:
Loans payable, stockholders consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1996
---------- -----------
<S> <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 $ 482,222
Unsecured loans payable to a stockholder, 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 .................................................. 1,107,407
Unsecured loan payable to a stockholder, bearing interest at 8% per
annum and due January 1, 1998. The loan is subordinated to all
other creditor claims ............................................ 481,482
---------- -----------
348,913 2,071,111
Less current portion .............................................. 1,107,407
---------- -----------
$348,913 $963,704
========== ===========
</TABLE>
Scheduled aggregate payments of loans payable stockholders are as follows:
Year Ending December 31,
------------------------
1997 $1,107,407
1998 481,482
1999
2000 96,444
2001 96,444
-----------
$1,781,777
===========
NOTE 8. SERIES A CONVERTIBLE PREFERRED STOCK
During October 1996, the Company issued 1,875,000 shares of Series A
Convertible Preferred Stock, par value $.01 per share (Series A), for net
proceeds of $1,400,000, after deducting expenses of $100,000. The Series A
Convertible Preferred Stock is convertible into 1,875,000 shares of the
Company's common stock subject to anti-dilution provisions and 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
F-10
<PAGE>
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.
NOTE 9. STOCKHOLDERS' EQUITY
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.
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. As of December 31, 1996, no options have been
granted under the plan.
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.
NOTE 10. 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 December 31, 1996 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 in December 1996 executed a
letter of intent with an underwriter for an IPO on a Registration Statement
on Form S-1.
NOTE 11. DEPENDENCE UPON KEY RELATIONSHIPS:
Approximately $915,000, $1,032,000, $923,000 of the Company's revenues for
the years ended December 31, 1994, 1995 and 1996, respectively, were
attributable to sales to one customer or affiliates of the customer. Sales
for the years ended December 31, 1994, 1995 and 1996, respectively are from
customers located in Switzerland and Germany. At December 31, 1 1995 and 1996
substantially all of the Company's assets and liabilities were located in
Germany and Switzerland.
F-11
<PAGE>
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 12. INCOME TAXES:
For the years ended December 31, 1994 and 1995 and 1996, 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, 1996, the Company has net operating loss carryforwards
("NOL") for Swiss and German income tax purposes of approximately $11,754,000
and $1,272,000, respectively, subject to change based upon final tax
assessment from the applicable taxing authorities. The Swiss NOLs expire
between 1997 and 2003, and the German NOLs have no expiration date. As a
result, at December 31, 1995 and 1996, the Company recorded deferred tax
assets of approximately $3,669,000 and $4,162,000, 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 13. 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, 1994, 1995 and 1996 was approximately $196,000, $306,000 and
$400,000 respectively.
Aggregate approximate future minimum rental payment under these operating
leases are as follows:
Year Ending December 31,
-----------------------
1997 $321,000
1998 220,000
1999 200,000
2000 3,000
---------
$744,000
=========
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.
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.
F-12
<PAGE>
NOTE 14. SUBSEQUENT EVENT:
In January 1997, certain stockholders represented to the Company their
intention to advance the Company, in early February 1997, an aggregate amount of
approximately $500,000. These loans will bear interest at 8% per annum and will
mature at the earlier of the consummation of an IPO or June 30, 1997, unless
extended by mutual consent of the parties.
F-13
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[Schematic depicting elements of
MFKS Vision and Live superimposed
over a map of the world]
<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
Underwriters. 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
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Prospectus Summary ........................ 4
Risk Factors .............................. 11
Use of Proceeds ........................... 22
Dividend Policy ........................... 23
Exchange Rate ............................. 23
Capitalization ............................ 24
Dilution .................................. 25
Selected Consolidated Financial Data ...... 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 28
Business .................................. 33
Management ................................ 50
Certain Transactions ...................... 56
Principal Stockholders .................... 60
Description of Securities ................. 64
Shares Eligible for Future Sale ........... 67
Underwriting .............................. 68
Legal Matters ............................. 69
Experts ................................... 69
Additional Information .................... 69
Glossary .................................. 70
Index to Financial Statements ............. F-1
</TABLE>
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.
=============================================================================
<PAGE>
=============================================================================
IAT MULTIMEDIA, INC.
3,100,000 SHARES
OF
COMMON STOCK
------
PROSPECTUS
------
ROYCE INVESTMENT
GROUP, INC.
CONTINENTAL
BROKER-DEALER CORP.
, 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 $465,000) are as follows:
Amount
---------
SEC Registration Fee ............. $ 18,167
NASD Filing Fee .................. 6,495
Nasdaq Filing Fees ............... 20,500
Printing and Engraving Expenses .. 95,000
Accounting Fees and Expenses ..... 130,000
Legal Fees and Expenses .......... 300,000
Blue Sky Fees and Expenses ....... 15,000
Transfer Agent's Fees and Expenses 3,500
Miscellaneous Expenses ........... 58,338
---------
Total ............................ $647,000
=========
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 Registrant's 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 (Reserved)
4.2 Form of Underwriters' Warrant
*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
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
*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 20, 1996
10.25 Employment Agreement, dated as of March 1, 1997, between IAT Multimedia, Inc. and Dr. Viktor Vogt
10.26 Registration Rights Agreement, dated February 27, 1997, between IAT Multimedia, Inc. and Walter Glas, GmbH
10.27 Registration Rights Agreement, dated February 27, 1997, between IAT Multimedia, Inc. and Dr. Viktor Vogt
10.28 Registration Rights Agreement, dated February 27, 1997, between IAT Multimedia, Inc. and Klaus-Dirk Sippel
10.29 Form of Stockholders' Agreement, dated as of February 27, 1997, between all existing stockholders of IAT Multimedia,
Inc.
*11 Statement regarding computation of per share earnings.
*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 & Partner
</TABLE>
- ------
* Previously filed.
+ Confidential treatment has been applied for with respect to portions of this
exhibit.
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
II-3
<PAGE>
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.
(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 Amendment No. 3 to the 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 4th of March, 1997.
IAT MULTIMEDIA, INC.
By: /s/ Viktor Vogt
-------------------------------
Viktor Vogt
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the registration statement has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------------------- ------------------------------------------------- -------------------
<S> <C> <C>
/s/ Viktor Vogt Co-Chairman of the Board of Directors and Chief March 4, 1997
---------------------- Executive Officer and President
Viktor Vogt (Principal Executive Officer)
/s/ Jacob Agam Co-Chairman of the Board of Directors March 4, 1997
----------------------
Jacob Agam
* Chief Financial Officer and Director March 4, 1997
---------------------- (Principal Accounting and Financial Officer)
Klaus Grissemann
* Director March 4, 1997
----------------------
Volker Walther
March 4, 1997
</TABLE>
*By: /s/ Jacob Agam
----------------------
Jacob Agam
as Attorney-in-Fact
II-5
<PAGE>
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 (Reserved)
4.2 Form of Underwriters' Warrant
*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
*10.15 Loan Agreement between IAT Deutschland GmbH and Bremer Bank
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
*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 20, 1996
10.25 Employment Agreement, dated as of March 1, 1997, between IAT Multimedia, Inc. and Dr. Viktor Vogt
10.26 Registration Rights Agreement, dated February 27, 1997, between IAT Multimedia, Inc. and Walter Glas, GmbH
10.27 Registration Rights Agreement, dated February 27, 1997, between IAT Multimedia, Inc. and Dr. Viktor Vogt
10.28 Registration Rights Agreement, dated February 27, 1997, between IAT Multimedia, Inc. and Klaus-Dirk Sippel
10.29 Form of Stockholders' Agreement dated as of February 27, 1997 between all existing stockholders of IAT Multimedia,
Inc.
*11 Statement regarding computation of per share earnings.
*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 & Partner
</TABLE>
- ------
* Previously filed.
+ Confidential treatment has been applied for with respect to portions of this
exhibit.
<PAGE>
Exhibit 1.1
3,100,000 Shares of Common Stock
IAT MULTIMEDIA, INC.
UNDERWRITING AGREEMENT
Royce nvestment Group, Inc. March , 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 several 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 shares of Common Stock, par value $.01 per share (the
"Common Stock"). In addition, IAT proposes to grant to the Underwriters (or, at
the Representative's 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 shares of Common Stock.
The aggregate of 3,100,000 shares of Common Stock to be sold
by IAT, together with all or any part of the 465,000 shares of Common Stock
which the Underwriters have the option to purchase are herein called the
"Shares." The Common Stock of IAT to be outstanding after giving effect to the
sale of the Shares is herein called the "Common Stock."
You have advised IAT that you and the other Underwriters
desire to purchase, severally, the Shares, 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 Shares by the several
Underwriters on whose behalf you are signing this Agreement, as follows:
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. 333-18529) on
Form S-1 relating to the public offering of the Shares, 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 applicable 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
<PAGE>
defined) relating to the Shares 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 Shares 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 Rule 424(b) under the Act, 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 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
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<PAGE>
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 in the last paragraph on the front cover, 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 December 31, 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 Shares are duly authorized, and when issued
and delivered pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable 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 Shares as contemplated in this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock, except as described
in the Registration Statement.
The Shares underlying the Share Purchase Option have been
reserved for issuance upon the exercise of the Share Purchase Option and when
issued and sold in accordance with the terms of the Share Purchase Option, 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 Share Purchase Option, 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 Shares to be sold by it hereunder on
the terms and conditions set forth herein, and no consent, approval,
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<PAGE>
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 Shares or the Share Purchase Option, except
such as may be required for the registration of the Shares under the Act, by the
National Association of Securities Dealers, Inc. (the "NASD") 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, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries may be bound or to which any of the
property or assets of the Company or any of the Subsidiaries is subject, which
violation, breach or default would have a material adverse effect on either the
Company or any of the Subsidiaries; 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 or any lien, charge or encumbrance upon any of the property or assets
of the Company 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 the Company or any Subsidiary is party or by which the
assets of the Company or any of the Subsidiaries is subject, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws (or other organizational documents) of the Company
or any of the Subsidiaries, as amended, or any statute or any order, rule or
regulation applicable to the Company or any of the Subsidiaries of any court or
of any regulatory authority or other governmental body having jurisdiction over
the Company 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, neither IAT nor any of the Subsidiaries is 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 each of IAT and the
Subsidiaries owns or leases all such properties described in the Prospectus as
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<PAGE>
are necessary to their respective 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 has given
its 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 (subject in
the case of financial statements for interim periods, to normal and recurring
year-end adjustments). 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 included in
the Prospectus (or the Preliminary Prospectus) has been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements, and, in the opinion of the Company, 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,
in the opinion of the Company, 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, in either case 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, nor are there any actions, suits or
-5-
<PAGE>
proceedings related to environmental matters or related to discrimination on the
basis of age, sex, religion or race, in either case, 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; and no
labor disputes involving the employees of IAT or any of the Subsidiaries exist
or are imminent which might be expected to materially 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, or have duly obtained extensions of the
time for filing of, 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 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 are 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. To the Company's
knowledge, IAT's and the Subsidiaries' business as now conducted does not and
will not infringe or conflict in any material respect with 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) 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
-6-
<PAGE>
quasi-public duties, other than payments or contributions required or allowed by
applicable law each of IAT's and the Subsidiaries' internal accounting controls
and procedures are sufficient to cause each of IAT and the Subsidiaries to
comply in all material respects with the Foreign Corrupt Practices Act of 1977,
as amended.
(r) 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 Shares 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.
(s) 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.
(t) 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 Shares hereby.
(u) 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.
(v) Except as previously disclosed in writing by IAT
to the Representative, no officer, director or five percent 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").
(w) Neither IAT nor any of the Subsidiaries is, nor
upon receipt of the proceeds from the sale of the Shares will be, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(x) Neither IAT nor any of the Subsidiaries has
distributed, nor will it distribute prior to the First Closing Date (as
hereinafter defined) any offering material in connection with the offering and
sale of the Shares other than the Preliminary Prospectus, the Prospectus, the
Registration Statement or the other materials permitted by the Act, if any.
(y) 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.
-7-
<PAGE>
(z) 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 Shares.
(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 Share, at the place and time hereinafter specified, the respective number of
Shares set forth opposite the names of the Underwriters in Schedule A attached
hereto (the "First Shares") plus any additional Shares which such Underwriters
may become obligated to purchase pursuant to the provisions of Section 9 hereof.
The First Shares shall consist of 3,100,000 Shares to be purchased from IAT.
Delivery of the First Shares against payment therefor
shall take place at the offices of Royce Investment Group, Inc., 199 Crossways
Park Drive, Woodbury, N.Y. 11797 (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 Shares 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 (or, at the Representative's option, to the Representative
individually) to purchase all or any part of an aggregate of an additional
465,000 Shares at the same price per Share as the Underwriters shall pay for the
First Shares being sold pursuant to the provisions of subsection (a) of this
Section 2 (such additional Shares being referred to herein as the "Option
Shares"). 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 Shares as to which the option is being exercised, the
names and denominations in which the certificates for such Option Shares 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
Shares against payment therefor shall take place at the offices of Royce
Investment Group, Inc., 199 Crossways Park Drive, Woodbury, N.Y. 11797 (or at
such other place as may be designated by agreement between you and IAT). The
number of Option Shares to be purchased by each Underwriter, if any, shall bear
the same percentage to the total number of Option Shares being purchased by the
several Underwriters pursuant to this subsection (b) as the number of Shares
such Underwriter is purchasing bears to the total number of the First Shares
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
-8-
<PAGE>
appropriate. The option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriters of First Shares 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 Shares on the Option
Closing Date.
(c) IAT will make the certificates for the securities
comprising the Shares 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.
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
Shares 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 (or the
Representative individually) exercise the option to purchase from IAT all or any
portion of the Option Shares pursuant to the provisions of subsection (b) above,
payment for such Shares 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 Shares as required by the
provisions of subsection (b) above, against receipt of the certificates for such
Shares 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 Shares 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 Shares 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 Shares to be purchased hereunder to the public upon the
terms and conditions set forth in the Registration Statement, after the
Registration Statement becomes effective.
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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 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 Shares
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 Shares.
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 Shares 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 Shares 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
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should be set forth in an amendment to 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 Shares 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 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 Shares to deliver a 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 Shares.
(b) IAT will use its best efforts to qualify to
register the Shares 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 Shares. 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 Shares 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 out-of-pocket 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.
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<PAGE>
(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 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 deliver to you as soon as it is practicable to do so but in no event
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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 Shares 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
Shares 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, Tally, Polevoy & Misher LLP, counsel to
the several Underwriters, may be reasonably necessary or advisable in connection
with the distribution of the Shares, 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 Share 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 Common Stock 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) Each of IAT and the Principal Stockholders
represents that it or he has not taken and agrees 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 Shares or to facilitate the sale or resale of
the Shares.
(o) On the Closing Date and simultaneously with the
delivery of the Shares, IAT shall execute and deliver to you, individually and
not as representative of the Underwriters, the Share Purchase Option. The Share
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Purchase Option will be substantially in the form of the Representative's Share
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
Shares 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. 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.
(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) 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, which
consent shall not be unreasonably withheld.
(t) 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.
(u) 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 Representative.
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(v) IAT shall, for a period of six years after the
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.
(w) Except for the use of net proceeds from the sale
of the Shares 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 Shares will be used to repay any
obligations owed by IAT to any Principal Stockholder.
4. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters to purchase and pay for the Shares 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 Shares or to the Registration Statement, as
the case may be, containing information regarding the initial public offering
price of the Shares has been filed with the Commission, or at 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 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 respective properties and conduct its respective business
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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, except where the failure to so
qualify or be so licensed would not have a material adverse affect on the
business, properties or financial condition of the Company and the Subsidiaries
taken as a whole;
(ii) to the knowledge of such counsel, (a) IAT and
each of the Subsidiaries have obtained, or are in the process of obtaining, all
licenses, permits and other governmental authorizations necessary to the conduct
of their respective 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 are in all material respects
complying therewith;
(iii) the authorized capitalization of IAT as of
December 31, 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 any statutory preemptive rights or, to the knowledge of such
counsel, any other 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 Common Stock (except as described in the Prospectus and the Registration
Statement); the Common Stock and the Share Purchase Option 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 Share
Purchase Option, upon issuance in accordance with the terms of such Share
Purchase Option have been duly authorized and, when issued and delivered, will
be duly and validly issued, fully paid, non-assessable, free of any statutory
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 the Company's securities; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the Share 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 Shares 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 Share Purchase Option, 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,
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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 Share Purchase Option will be
exercisable for shares of Common Stock of IAT in accordance with the terms of
the Share Purchase Option and at the price therein provided for; at all times
during the term of the Share Purchase Option the shares of Common Stock of IAT
issuable upon exercise of the Share Purchase Option 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 Share Purchase Option 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 IAT and the Subsidiaries taken as a whole;
or which question the validity of the Shares, this Agreement the Share 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 Share 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; to the best of
such counsel's knowledge, 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 such counsel's 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 such counsel's 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;
(viii) to such counsel's knowledge, except as
described in the Prospectus, neither the Company nor any of the Subsidiaries is
in violation, breach or default of or under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries may be bound or to which any of the property or assets of the
Company or any of the Subsidiaries is subject, which violation breach or default
would have a material adverse effect on the Company and the Subsidiaries taken
as a whole; nor will the execution and delivery of this Agreement, the Share
Purchase Option, the Escrow Agreement and the Merger and Acquisition Agreement
and the incurrence of the obligations herein and therein contemplated with or
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without the giving of notice of the lapse of time, or both, result in a breach
or violation of, or constitute a default under the Certificate of Incorporation
or the By-Laws (or other organizational documents) of the Company or any of the
Subsidiaries, in the performance or observance of any material obligation,
agreement, covenant or condition contained in any bond, debentures, note or
other evidence of indebtedness or any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which the
Company of any of the Subsidiaries is a party and by which it or any of their
respective 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, in each case which breach,
violation of default would have a material adverse effect on the Company and the
Subsidiaries taken as a whole;
(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, notes thereto and other financial,
numerical, statistical and accounting 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) all descriptions in the Registration Statement
and the Prospectus, and any amendment or supplement thereto, of contracts and
other documents are accurate in all material respects 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;
(xi) 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 Shares by
IAT, in connection with the execution, delivery and performance of this
Agreement by IAT or in connection with the taking of any action contemplated
herein, or the issuance of the Share Purchase Option or the Shares underlying
the Share Purchase Option, other than registrations or qualifications of the
Shares under applicable state or foreign securities or Blue Sky laws and
registration under the Act or the NASD;
(xii) 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; and
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(xiii) based upon letters received by the Company
from the Nasdaq Stock Market, the Common Stock has been duly authorized for
listing on the Nasdaq National Market.
In addition, such counsel's opinion shall state that such
counsel has participated in conferences with officers and other representatives
of the Company, representatives of the independent public accountants for the
Company, the representatives of the Underwriter and counsel to the Underwriters
at which the contents of the Registration Statement and Prospectus and related
matters were discussed and, although counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus (except as
otherwise expressly set forth in its opinion), on the basis of the foregoing, no
facts have come to the attention of such counsel that caused it to believe that
the Registration Statement (other than the financial statements and the notes
thereto and other financial numerical, statistical and accounting date included
therein, or omitted therefrom, as to which it expresses no opinion), as amended
or supplemented, at the time such Registration Statement became effective and as
of the Closing Dates, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus (other than
the financial statements and notes thereto and other financial, numerical,
statistical and accounting data included therein, or omitted therefrom as to
which it expresses no opinion), as amended or supplemented, as of its date and
the Closing Dates, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
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 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 reasonably 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 Shares, 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 it may reasonably request for the purpose of enabling it 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-Chairmen 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
Shares 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, counsel for IAT Germany, 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 Shares.
(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 each of the Co-Chairmen 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 certificates
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 Shares 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
reasonably request in connection with this transaction in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of IAT 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 Shares and no proceedings for the taking of such action shall
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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 notifying the Company of such cancellation in writing or by
telegram at or prior to the applicable Closing Date. 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 Shares is subject to the following conditions:
(a) The Registration Statement shall have become
effective not later than 10:00 a.m. New York time, on the day following the date
of this Agreement, or on such later date as the Company and the Representative
may agree in writing; and
(b) 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 conditions 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 Shares 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
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specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Shares 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 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 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 Shares 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,
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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
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
Share 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
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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 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 Shares purchased by such Underwriter to the number of Shares 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 Shares 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 Shares contemplated
hereby; the costs of investigative reports regarding certain officers and
directors of IAT and the Subsidiaries; all expenses, including reasonable fees
and disbursements of counsel to the Underwriters, in connection with the
qualification of the Shares under the state securities or blue sky laws which
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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 Common
Stock on the Nasdaq National Market or any other securities exchange, the cost
of printing the certificates representing the securities comprising the Shares,
the fees of the transfer 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 $50,000 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 2.5% 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 out-of-pocket 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.
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9. Substitution of Underwriters.
If any of the Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase the First Shares hereunder, or
shall fail to take up and pay for the number of First Shares set forth opposite
their respective names in Schedule A hereto upon tender of such First Shares in
accordance with the terms hereof, then:
(a) If the aggregate number of First Shares which
such Underwriter or Underwriters agreed but failed to purchase does not exceed
10% of the total number of First Shares, the other Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the First Shares 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 Shares with respect to which such default or defaults
occurs is more than 10% of the total number of First Shares, 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 Shares 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 Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase, the time
for delivery of the First Shares shall be extended to the next business day to
allow the remaining 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 Shares 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 Shares 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 Shares 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 Shares 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 Shares
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 Shares as aforesaid,
then this Agreement shall terminate.
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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 Shares at the Option
Closing Date, or shall fail to take up and pay for the number of Option Shares,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Shares in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Shares of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not take
up and pay for all such Option Shares, the Underwriters shall be entitled to
purchase the number of Option Shares 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 Shares. The time of
the initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Shares, or the time when the Shares
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 Shares 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
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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 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. Share Purchase Option.
At or before the First Closing Date, IAT will sell to the
Underwriters (or, at the Representative's option, the Representative,
individually), or their designees, as permitted by the NASD, for a consideration
of $310, and upon the terms and conditions set forth in the form of Share
Purchase Option annexed as an exhibit to the Registration Statement, a Share
Purchase Option to purchase an aggregate of 310,000 Shares. In the event of
conflict in the terms of this Agreement and the Share Purchase Option, the
language of the Share 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 Shares and the termination of this Agreement.
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14. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Underwriters, will be mailed or delivered by facsimile
or overnight courier, 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, or delivered
by facsimile or overnight courier and confirmed to it at Geschaftschaus
Wasserschloss, Aarestrasse 17, CH-5300 Vogelsang-Turgi, Switzerland, Attention:
Dr. Viktor Vogt with a copy sent to Baker & McKenzie, 805 Third Avenue, New
York, New York 10022, attention:
Malcolm I. Ross, Esq.
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 Shares. 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.
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<PAGE>
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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<PAGE>
SCHEDULE A
Underwriter Number of Shares to be Purchased
-------------------- --------------------------------
Royal Investment Group, Inc.
Continental Broker - Dealer Corporation
Total Shares: 3,100,000
=========
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<PAGE>
Exhibit 4.2
************************************************************************
STOCK PURCHASE WARRANT
To Purchase Common Stock of
IAT MULTIMEDIA, INC.
************************************************************************
<PAGE>
Void after 5:00 p.m. New York Time, on March __, 2002.
Warrant to Purchase 310,000 Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
IAT MULTIMEDIA, INC.
This is to Certify That, FOR VALUE RECEIVED, Royce Investment
Group, Inc. ("Royce"), or assigns (collectively, the "Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from IAT Multimedia, Inc.,
a Delaware corporation (the "Company"), 310,000 fully paid, validly issued and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") at a price of $ per share at any time or from time to time
during the period from March ___, 1997 to March ___, 2002, but not later than
5:00 p.m. New York City Time, on March ___, 2002. 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". This Warrant, together with warrants of like tenor,
constituting in the aggregate warrants (the "Warrants") to purchase 310,000
shares of Common Stock, was originally issued pursuant to an underwriting
agreement between the Company and Royce, in connection with a public offering
through Royce of 3,100,000 shares of Common Stock, in consideration of $310
received for the Warrants.
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any
time or from time to time on or after March __, 1998 and until March ___, 2002
(the "Exercise Period"), subject to the provisions of Section (j)(2) hereof;
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 March __, 2002, the Holder shall have the right to exercise this
Warrant commencing at such time through March __, 2002 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
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have 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 a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in
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<PAGE>
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. This Warrant is not transferable (other than
by will or pursuant to the laws of descent and distribution and except as
provided under Subsection (a)(1)(ii) hereof) and may not be assigned or
hypothecated for a period of one year from March ___, 1997, except to and among
the officers of Royce, any member of the selling group, or to and among the
officers of any member of the selling group. 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
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<PAGE>
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
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) Whenever the Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) 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.
(3) 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 (3) 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
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<PAGE>
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).
(4) 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.
(5) 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 (3), inclusive above.
(6) 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
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<PAGE>
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
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,
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<PAGE>
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, 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.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) The Company shall advise the Holder of this
Warrant or of the Warrant Shares or any then holder of
Warrants or Warrant Shares (such persons being collectively
referred to herein as "holders") by written notice at least
four weeks prior to the filing of any post-effective amendment
to the Company's Registration Statement No. 333-18529 on Form
S-1 ("Registration Statement"), declared effective by the
Securities and Exchange Commission on March ___, 1997 or of
any new registration statement or post-effective amendment
thereto under the Securities Act of 1933 (the "Act") covering
securities of the Company and will for a period of six years,
commencing one year from the effective date of the
Registration Statement, upon the request of any such holder,
include in any such post-effective amendment or registration
statement such information as may be required to permit a
public offering of the Warrants or the Warrant Shares. The
Company shall supply prospectuses and other documents as the
Holder may request in order to facilitate the public sale or
other disposition of the Warrants or Warrant Shares, qualify
the Warrants and the Warrant Shares for sale in such states as
any such holder designates and 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 Warrants or Warrant Shares, and furnish indemnification in
the manner as set forth in Subsection (3)(C) of this Section
(j). Such holders shall furnish information and
indemnification as set forth in Subsection (3)(C) of this
Section (j), except that the maximum amount which may be
recovered from the Holder shall be limited to the amount of
proceeds received by the Holder from the sale of the Warrants
or Warrant Shares.
(2) If any majority holder (as defined in Subsection
(4) of this Section (j) below) shall give notice to the
Company at any time during the four year period commencing one
year from the effective date of the Registration Statement to
the effect that such holder contemplates (i) the transfer of
all or any part of his or its Warrants and/or Warrant Shares,
or (ii) the exercise and/or conversion of all or any part of
his or its Warrants and the transfer of all or any part of the
Warrants and/or Warrant Shares under such circumstances that a
public offering (within the meaning of the Act) of Warrants
and/or Warrant Shares will be involved, and desires to
register under the Act, the Warrants and/or the Warrant
Shares, then the Company shall, within two weeks after receipt
of
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<PAGE>
such notice, file a post-effective amendment to the
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 Warrants and/or Warrant Shares may be
sold under the Act as promptly as practicable thereafter and
the Company will use its best efforts to cause such
registration to become effective and continue to be effective
(current) (including the taking of such steps as are necessary
to obtain the removal of any stop order) until the holder has
advised that all of the Warrants and/or Warrant Shares have
been sold; provided that such holder shall furnish the Company
with appropriate information (relating to the intentions of
such holders) in connection therewith as the Company shall
reasonably request in writing. In the event the registration
statement is not declared effective under the Act prior to
March ___, 2002, then at the holder's request, the Company
shall purchase the Warrants from the holders for a per share
price equal to the fair market value of the Common Stock less
the per share Exercise Price. The holder may, at its option,
request the registration of the Warrants and/or Warrant Shares
in a registration statement made by the Company as
contemplated by Subsection (1) of this Section (j) or in
connection with a request made pursuant to Subsection (2) of
this Section (j) prior to the acquisition of the Warrant
Shares upon exercise of the Warrants and even though the
holder has not given notice of exercise of the Warrants. The
holder may thereafter at its option, exercise the Warrants at
any time or from time to time subsequent to the effectiveness
under the Act of the registration statement in which the
Warrant Shares were included.
(3) The following provision of this Section(j) shall
also be applicable:
(A) Within ten days after receiving any such
notice pursuant to Subsection (2) of this Section
(j), the Company shall give notice to the other
holders of Warrants and Warrant Shares, advising that
the Company is proceeding with such post-effective
amendment or registration statement and offering to
include therein Warrants and/or Warrant Shares of
such 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. Following the effective date of
such post-effective amendment or registration, the
Company shall upon the request of any owner of
Warrants and/or Warrant Shares forthwith supply such
a number of prospectuses meeting the requirements of
the Act, as shall be requested by such owner to
permit such holder to make a public offering of all
Warrants and/or Warrant Shares from time to time
offered or sold to such holder, provided that such
holder shall from time to time furnish the Company
with such appropriate information (relating to the
intentions of such holder) in connection therewith as
the Company shall request in writing. The Company
shall also use its best efforts to qualify the
Warrant Shares for sale in such states as such
majority holder shall designate.
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<PAGE>
(B) The Company shall bear the entire cost
and expense of any registration of securities
initiated by it under Subsection (1) of this Section
(j) notwithstanding that Warrants and/or Warrant
Shares subject to this Warrant may be included in any
such registration. The Company shall also comply with
one request for registration made by the majority
holder pursuant to Subsection (2) of this Section (j)
at its own expense and without charge to any holder
of any Warrants and/or Warrant Shares; and the
Company shall comply with one additional request made
by the majority holder pursuant to Subsection (2) of
this Section (j) (and not deemed to be pursuant to
Subsection (1) of this Section (j)) at the sole
expense of such majority holder. Any holder whose
Warrants and/ or Warrant Shares are included in any
such registration statement pursuant to this Section
(j) shall, however, bear the fees of his own counsel
and any registration fees, transfer taxes or
underwriting discounts or commissions applicable to
the Warrant Shares sold by him pursuant thereto.
(C) The Company shall indemnify and hold
harmless each such holder and each underwriter,
within the meaning of the Act, who may purchase from
or sell for any such holder any Warrants and/or
Warrant Shares from and against any and all losses,
claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material
fact contained in the Registration Statement or any
post-effective amendment thereto or any registration
statement under the Act or any prospectus included
therein required to be filed or furnished by reason
of this Section (j) or caused by any omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, except insofar
as such losses, claims, damages or liabilities are
caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon
information furnished or required to be furnished in
writing to the Company by such holder or underwriter
expressly for use therein, which indemnification
shall include each person, if any, who controls any
such underwriter within the meaning of such Act
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 Holder or any
other Holder, specifically for use in the preparation
thereof.
(D) Neither the giving of any notice by any
such majority holder nor the making of any request
for prospectuses shall impose any
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<PAGE>
upon such majority holder or owner making such
request any obligation to sell any Warrants and/or
Warrant Shares, or exercise any Warrants.
(4) The term "majority holder" as used in this
Section (j) shall include any owner or combination of owners
of Warrants or Warrant Shares in any combination if the
holdings of the aggregate amount of:
(i) the Warrants held by him or among them,
plus
(ii) the Warrants which he or they would be
holding if the Warrants for the Warrant
Shares owned by him or among them had
not been exercised,
would constitute a majority of the Warrants originally issued.
The Company's agreements with respect to Warrants or Warrant
Shares in this Section (j) shall continue in effect regardless of the exercise
and surrender of this Warrant.
(k) GOVERNING LAW.
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 Stock
Purchase Warrant to be signed by its duly authorized officers under its
corporate seal, and this Stock Purchase Warrant to be dated March __, 1997.
IAT MULTIMEDIA, INC.
By:______________________________
[SEAL]
Attest:
- -----------------------------
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>
Exhibit 10.25
EMPLOYMENT AGREEMENT
("the Agreement")
between
IAT Multimedia, Inc., c/o IAT AG, Geschaftshaus Wasserschloss, Aarestrasse 17,
CH-5300 Vogelsang-Turgi
(the "Company")
and
Dr. Viktor Vogt, Boldistrasse 12, CH-5415 Rieden bei Nussbaumen
(the "Executive")
1. Employment Duties.
1.1 Title/Responsibilities. Executive shall hold the title of President,
Chief Executive Officer and Co-Chairman of the Company, and shall
have the powers and duties consistent with such position. Executive
shall also perform all duties which are assigned to him by the Board
of Directors (the "Board"). In particular, Executive shall, without
any additional compensation by either the Company or its
subsidiaries, provide such services to the subsidiaries of the
Company as are required by the Board.
1.2 Full Time Attention. Executive shall devote substantially all of his
business time and attention, energy and skills to the Company and its
subsidiaries during the Employment Term. Executive agrees to notify
and obtain approval from the Board prior to accepting any board of
director or other positions with any other company.
1.3 Services to IAT AG. Services of Executive performed in Switzerland
shall be rendered to IAT AG which entity shall make all payments
pursuant to this Agreement on behalf of the Company and for which IAT
AG shall be reimbursed by the Company to the extent that Executive's
compensation is allocable to the Company.
1.4 Policy Compliance. Executive is required to comply with the Company
policy, practice and procedure in effect during his employment.
<PAGE>
2. Compensation
2.1 Base Salary. The Company shall pay to Executive an initial annual
Base Salary (the "Base Salary") of $140,000. The Base Salary shall be
payable to Executive in Swiss Francs at a fixed Swiss Franc to U.S.
Dollar exchange rate of SF1.35 to $1.00. Any increase to the annual
Base Salary is within the sole discretion of the Company.
2.2 Non-Accountable Expense Allowance. The Company shall pay to Executive
a yearly non-accountable expense allowance of SF12,000.
2.3 Bonus Compensation. In addition to the compensation provided above,
the Company will pay Executive a cash incentive bonus for each full
year starting with 1997 during the employment relationship in the
amount of one half of one percent of the Company's net sales in
excess of $5.0 million, provided that such cash bonus will not be
less than $10,000. Such bonuses are payable on March 30 of each year
or such earlier date which is ten business days after receipt and
acknowledgment of the Company's audited financial statements by the
Board of Directors of the Company; provided that Executive remains in
his position with the Company on that date.
2.4 Stock Options. Executive will be granted options to purchase shares
of the Company's common stock under the Company's 1996 Stock Option
Plan, at a price which is the fair market value of the stock at close
of business on the date of the grant. The timing and amounts of such
grants as well as the terms of the options shall be determined by the
Stock Option Committee in accordance with the provisions of the
Company's 1996 Stock Option Plan.
2.5 Benefits. Executive is entitled to the following benefits:
a) Vacation. During the Employment Term, until he reaches the age
of 50, Executive shall be entitled to four weeks (20 working
days) annual paid vacation in addition to customary paid
holidays. Thereafter, in addition to customary paid holidays,
Executive shall be entitled to five weeks (25 working days)
annual paid vacation. Executive may carry over up to 10 unused
vacation days from the prior year, but will cease to accrue
vacation once he has accrued a maximum of 30 days. Executive
will not accrue any more vacation until he has taken enough
vacation to bring his accrued vacation below the maximum.
b) Accident and Sickness Insurance. During the time Executive is
employed under this Agreement, (the "Employment Term"), the
Company agrees to insure Executive for accident and sickness
in accordance with the insurance plan which applied to date to
Executive as Chief Executive Officer of IAT AG.
c) Pension Fund Contributions. The Company shall ensure that
Executive will be able to join a pension fund substantially
under the same terms and conditions as the pension fund
Executive is presently enrolled in as the Chief Executive
Officer of IAT AG. In accordance with the former arrangements
of Executive with IAT AG, the Company will pay 2/3 of the
total pension fund contribution payments which are to be made
(both by the employer and employee) under the pertinent
statutory provisions and Executive shall pay 1/3 of such total
pension fund contributions.
<PAGE>
d) Life Insurance. The Company shall maintain a term life
insurance policy such that the sum of the proceeds from the
Swiss pension system and the term life insurance will result
in payment of an aggregate of two times the annual base salary
to Executive's designated beneficiaries should Executive die
during the Employment Term.
e) Director and Officer Insurance. During his term as Director
and/or and Officer of the Company, Executive will be covered
according to the terms of the Company's director and officer
insurance.
f) Automobile. During the Employment Term, the Company agrees to
provide Executive with an automobile substantially equivalent
to the type of automobile customarily provided to executives
occupying similar positions to Executive at other companies
within the industry.
3. Confidentiality.
3.1 Proprietary Information. Executive agrees that he will not disclose
any Proprietary Information (as hereinafter defined) to any
individual or entity at any time while he is employed by the Company
or at any time thereafter, except as is necessary and appropriate in
the ordinary course of performing Executive's duties to the Company
during his employment under this Agreement, or unless such disclosure
has been authorized in writing by the Board, or unless such
disclosure is required by law. For purposes of this Agreement, the
term "Proprietary Information" shall mean any information that was
developed by, became known by, or was assigned or otherwise conveyed,
to the Company, and which has commercial value in the Company's
business. Proprietary Information includes, but is not limited to,
trade secrets, financial information, customer lists and information,
marketing plans, strategies, business forecasts, computer programs,
product plans, research and development information, testing methods
and results, inventions, improvements, formulas, processes,
techniques, designs, know-how and data. Proprietary Information also
includes, without limitation, any information which is generally
regarded as confidential in the Company's industry or which is
generally treated as confidential by the Company.
3.2 Return Of Property. Executive agrees that all documents, records,
apparatus, equipment and other physical property which is furnished
or obtained by Executive in the course of his employment with the
Company shall be and remain the sole property of the Company.
Executive agrees that, upon the termination of his employment, he
shall return all such property and any other property of the Company
or of any of the Company's subsidiaries that may have come into his
possession in the course of the employment relationship or previous
employment relationships with any other company of the IAT group
(whether or not it pertains to Proprietary Information), and agrees
not to make or retain copies, reproductions or summaries of any such
property.
<PAGE>
4. Non-Competition
4.1 Covenant not to Compete. For a period of two years after termination
of the Agreement, Executive shall not, to the extent that the Company
does not expressly waive such obligation of the Executive, within
Switzerland, Germany and within any other country where the Company
or any of its subsidiaries are active, directly or indirectly engage
in any business activity, competing with the product lines of the
Company and of its subsidiaries or participate in any such
competitive business.
4.2 Liquidated Damages. Upon breach of his covenant not to compete,
Executive shall pay to the Company liquidated damages in the amount
of $50,000. In addition, Executive shall be liable for any further
damages caused by the breach of his covenant not to compete.
4.3 Specific Performance. In addition to the liquidated damages pursuant
to section 4.2, the Company may request Executive to refrain from or
cease any activities violating his covenant not to compete. In
particular, the Company is entitled to seek interim relief in order
to enforce such specific performance.
4.4 Severance. During the non-competition period, as set out in section
4.1, the Company shall compensate Dr. Vogt for not competing by
paying him the difference between his average salary (excluding
bonus) he earned in the last twelve months before termination of the
employment relationship and any compensation he receives from a third
party during the non-competition period.
5. Effectiveness, Duration and Termination
5.1 Effectiveness. This Agreement shall be effective as of March 1, 1997.
5.2 Duration. This Agreement has a fixed duration of three years and
will, therefore, expire on March 1, 2000.
5.3 Termination. During the fixed term set out in section 5.2 each party
may only terminate this Agreement for gross misconduct of the other
party. In such a case, the contract may, however, be terminated
immediately without giving advance notice.
5.4 Relief of Duties. Notwithstanding anything to the contrary in this
Agreement, the Company is at any time entitled to relieve Executive
of his functions and duties as set out in section 1. In such a case,
the Company will, however, pay such compensation to Executive as set
out in section 2, until the term of this Agreement expires.
<PAGE>
5.5 Extension of Agreement. On December 15, 1999 at the latest the
parties shall enter into negotiations as to an extension of the
employment relationship between Executive and the Company.
6. General Provisions
6.1 Assignment. Executive may not assign, pledge or encumber his interest
in this Agreement or any part thereof.
6.2 No Waiver Of Breach. The failure to enforce any provision of this
Agreement will not be construed as a waiver of any such provision,
nor prevent a party thereafter from enforcing the provision or any
other provision of this Agreement. The rights granted the parties are
cumulative, and the election of one will not constitute a waiver of
such party's right to assert all other legal and equitable remedies
available under the circumstances.
6.3 Severability. The provisions of this Agreement are severable, and if
any provision will be held to be invalid or otherwise unenforceable,
in whole or in part, the remainder of the provisions, or enforceable
parts of this Agreement, will not be affected.
6.4 Entire Agreement. This Agreement constitutes the entire Agreement of
the parties with respect to the subject matter of this Agreement, and
supersedes all prior and contemporaneous negotiations, Agreements and
understandings between the parties, oral or written.
6.5 Amendment, Modification and Waivers. No amendment, modification,
termination or attempted waiver of this Agreement will be valid
unless in writing and signed by the parties.
6.6 Fees and Expenses. If any proceeding is brought for the enforcement
or interpretation of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any
provisions of this Agreement, Executive, if Executive is the
successful or prevailing party, will be entitled to recover from the
Company reasonable attorneys' fees and other costs incurred in the
proceedings, in addition to any other relief to which Executive may
be entitled.
6.7 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
6.8 English Language. All reports, data, information, notices, schedules,
plans, records and other information required to be provided
hereunder by either party shall be in the English language. If a
translation is made of this Agreement, it shall be made for the
convenience of the parties and the English language of this Agreement
shall be controlling.
<PAGE>
6.9 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 days after deposit with an air
courier or by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for
such party below, or at such other address as such party may
designate by ten days' advance written notice to the other parties.
If to the Company:
IAT Multimedia, Inc.
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi, Switzerland
011-41-56-223-5023 (facsimile number)
If to the Executive:
Dr. Viktor Vogt
Boldistrasse 12
5415 Rieden b. Nussbaumen, Switzerland
7. Applicable Law and Jurisdiction
7.1 Applicable Law. This Agreement shall be governed by Swiss law, in
particular by Art. 319 et seq. of the Swiss Code of Obligations.
7.2 Jurisdiction. The ordinary Civil Courts of Baden in the Canton of
Aargau shall have exclusive jurisdiction for any disputes arising out
of or in connection with this Agreement.
Place and date: Place and date:
As of March 1, 1997. Turgi As of March 1, 1997. Turgi
- --------------------------------- --------------------------------
/s/ Jacob Agam /s/ Viktor Vogt
- ---------------------------------- --------------------------------
IAT Multimedia, Inc. Dr. Viktor Vogt
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 27, 1997,
by and among IAT Multimedia, Inc., a Delaware corporation (the "Company"),
Vertical Financial Holdings, a Delaware corporation ("Vertical"), and Walther
Glas GmbH, a company organized under the laws of Germany ("Walther Glas").
W I T N E S S E T H
WHEREAS, in or about the first week of February 1997 the
Company received an aggregate of approximately $500,000 in stockholder loans
from Vertical, Walther Glas, Viktor Vogt and Klaus-Dirk Sippel;
WHEREAS, Vertical has been granted certain registration rights
pursuant to that certain Investor's Rights Agreement, dated as of October 4,
1996 (the "Investor's Rights Agreement"), by and between the Company and
Vertical;
WHEREAS, Walther Glas, Viktor Vogt and Klaus-Dirk Sippel (the
"Registration Rights Group") have not previously been granted registration
rights and the Company deemed it to be in its best interest to grant each of
Walther Glas and Klaus-Dirk Sippel certain registration rights in respect of all
of the shares of Common Stock (the "Glas Common Stock" and the "Sippel Common
Stock", respectively) held by Walther Glas and Klaus-Dirk Sippel, respectively,
as of the Effective Date (as herein defined) and to Viktor Vogt certain
registration rights in respect of an aggregate of 250,000 shares of Common Stock
held by Viktor Vogt as of the Effective Date (the "Vogt Common Stock");
WHEREAS, the Company and Vertical have entered into
Registration Rights Agreements (of which this agreement is one) with each of
Walther Glas, Viktor Vogt and Klaus-Dirk Sippel (the "Registration Rights
Agreements"); and
WHEREAS, the Company has proposed to enter into an
Underwriting Agreement with the several underwriters (the "Underwriters")
providing for the public offering (the "Public Offering") by the Underwriters,
including Royce Investment Group, Inc. ("Royce") as Representative of the
Underwriters, of shares of Common Stock.
NOW, THEREFORE, in consideration of the foregoing, 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.
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(b) The term "Common Stock" means shares of the common stock
of the Company, par value $.01 per share.
(c) The term "Covered Securities" means the Glas Common Stock,
Vogt Common Stock and Sippel Common Stock which the respective member of the
Registration Rights Group has requested the Company to register pursuant to
Section 1.2 or 1.3 of his Registration Rights Agreement.
(d) The term "Effective Date" means the date of the final
prospectus related to the Public Offering.
(e) 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 the inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(f) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(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 "Registerable Securities" has the meaning set
forth in the Investor's Rights Agreement.
(i) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the
Effective Date a written request from Walther Glas that the Company file a
registration statement under the Act covering the registration of at least 25%
of the shares of Glas Common Stock held by Walther Glas as of the Effective
Date, the Company shall file as soon as practicable, and in any event within 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
the Covered Securities which Walther Glas requests to be registered, subject to
the limitations of Subsections 1.2(b) and 1.2(c) and Section 1.12.
(b) If Walther Glas intends to distribute the Covered
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to Subsection 1.2(a).
The underwriter will be selected by the Company and shall be acceptable to
Walther Glas, which acceptance shall not be unreasonably withheld. Walther Glas
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.
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Notwithstanding any other provision of this Section 1.2, if the underwriter
advises Walther Glas in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Company shall exclude from
such underwriting (i) first, the maximum number of securities, if any, other
than the Covered Securities and Registrable Securities, being sold for the
account of other than the Company, as is necessary to reduce the size of the
offering and (ii) second, the minimum number of Covered Securities, divided pro
rata to the extent practicable, among the number of Covered Securities requested
to be registered by the members of the Registration Rights Group, 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
after the Company has effected one registration pursuant to a demand made by
Walther Glas under the provisions of this Section 1.2.
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 Walther Glas) 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 shares of Common Stock 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 Walther Glas written notice of
such registration. Upon the written request of Walther Glas given within 20 days
after giving of such notice by the Company in accordance with Section 3.5, the
Company shall, subject to the limitations of Sections 1.8 and 1.12, cause to be
registered under the Act all of the shares of Glas Common Stock that Walther
Glas has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section 1
to effect the registration of any shares of Common Stock, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such shares of Common Stock 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 120 days or until the distribution
contemplated in the Registration Statement has been completed, whichever first
occurs; provided, however, that such 120 day period shall be extended for a
period of time equal to the period Walther Glas 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 shares of Common Stock on Form S-3 that are
intended to be offered on a continuous or delayed basis, such 120 day period
shall be extended until all such shares of Common Stock 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
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<PAGE>
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 Walther Glas such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as Walther Glas may reasonably
request in order to facilitate the disposition of the Covered Securities owned
by it.
(d) Use its best efforts to register and qualify the Covered
Securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by Walther
Glas; 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.
(f) Notify Walther Glas at any time when a prospectus relating
to Walther Glas' Covered Securities covered by such registration statement 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 Covered 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 Covered
Securities registered pursuant hereunder and a CUSIP number for all Covered
Securities, in each case not later than the effective date of such registration.
(i) Furnish, on the date that such Covered Securities are
delivered to the underwriters for sale in connection with the registration
pursuant to this Section 1, if such Covered
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<PAGE>
Securities are being sold through underwriters, or, if such Covered Securities
are not being sold through underwriters, on the date that the registration
statement with respect to such Covered 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 Walther Glas, 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 Walther Glas.
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 Covered Securities of Walther Glas that Walther Glas shall
furnish to the Company such information regarding itself, the shares of Common
Stock held by it, and the intended method of disposition of such securities as
shall be required to effect the registration of Walther Glas' Covered
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 Walther Glas, 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 shares of Common Stock with respect to the registrations
pursuant to Sections 1.2 or 1.3 for Walther Glas, 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 Walther Glas, but excluding
underwriting discounts and commissions relating to the Covered 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 Walther Glas' Covered Securities in such underwriting unless Walther Glas
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 Covered Securities requested by Walther Glas to
be included in such offering, exceeds the amount of securities sold other than
by the Company and the Registrable Securities that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall exclude from such underwriting (i) first, the maximum number of
securities, if any, other than the Covered Securities and Registrable
Securities, being sold for the account of other than the Company, as is
necessary to reduce the size of the offering and (ii) second, the minimum number
of Covered Securities, divided pro rata to the extent practicable, among the
number of Covered
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<PAGE>
Securities requested to be registered by the members of the Registration Rights
Group, 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 Covered 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 Walther Glas, any underwriter (as defined in the Act) for
Walther Glas and each person, if any, who controls Walther Glas or such
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 Walther
Glas, such 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
Walther Glas, any such 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, Walther Glas 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
stockholder selling securities in such registration statement and any
controlling person of any such underwriter or other stockholder, 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 Walther Glas expressly for use
in connection with such registration; and Walther Glas will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
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<PAGE>
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
Walther Glas, which consent shall not be unreasonably withheld; provided, that,
in no event shall Walther Glas' liability under this Subsection 1.9(b) exceed
the proceeds received by Walther Glas 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, 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 Walther Glas' liability
under this Section 1.9(d) exceed the proceeds received by Walther Glas from the
offering (net of any underwriting discounts and commissions).
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(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 Walther Glas under this
Section 1.9 shall survive the completion of any offering of Covered 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 Walther Glas the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit
Walther Glas 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 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
Walther Glas to utilize Form S-3 for the sale of its shares of Common Stock,
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 Walther Glas, so long as Walther Glas owns any
shares of Common Stock, 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 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 Walther Glas 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 Assignment of Registration Rights. Subject to the provisions of
Section 1.12 and the other limitations herein, the rights to cause the Company
to register shares of Glas Common Stock pursuant to this Section 1 may be
assigned (but only with all related obligations) by Walther Glas to any
transferee or assignee of such securities; provided that (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
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<PAGE>
(b) such transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement. The term "Walther Glas" shall
include any such assignee.
1.12 Approval of Vertical. The exercise by Walther Glas of any
registration rights pursuant to Sections 1.2 or 1.3 hereof and the assignment of
registration rights pursuant to Section 1.12 hereof are subject to the prior
written consent of Vertical.
2. Miscellaneous.
2.1 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 shares of Common Stock). 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.
2.2 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.
2.3 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.
2.4 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.
2.5 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 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 days' advance written notice to the
other parties.
2.6 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.
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<PAGE>
2.7 Amendments and Waivers. Any term of this Agreement may be amended
only with the consent of the Company, Vertical and Walther Glas. 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 Vertical.
2.8 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.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
IAT MULTIMEDIA, INC.
By: /s/ Viktor Vogt
-----------------------------
Name: Viktor Vogt
Title: Chief Executive Officer
Address: Aarestrasse 17, Vogelsang-Turgi, Switzerland
Facsimile Telephone Number: 011-41-56-223-5023
VERTICAL FINANCIAL HOLDINGS
By: /s/ Jacob Agam
-----------------------------
Name: Jacob Agam
Title: Director
Address: 221 East 61st Street, New York, New York
Facsimile Telephone Number: 212-754-4044
WALTHER GLAS GmbH
By: /s/ Volker Walther
-----------------------------
Name: Volker Walther
Title: CEO
Address: Glasmuttenlieg 23
Facsimile Telephone Number: 05253/85-200
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 27, 1997,
by and among IAT Multimedia, Inc., a Delaware corporation (the "Company"),
Vertical Financial Holdings, a Delaware corporation ("Vertical"), and Viktor
Vogt.
W I T N E S S E T H
WHEREAS, in or about the first week of February 1997 the
Company received an aggregate of approximately $500,000 in stockholder loans
from Vertical, Walther Glas GmbH, a company organized under the laws of Germany
("Walther Glas"), Viktor Vogt and Klaus-Dirk Sippel;
WHEREAS, Vertical has been granted certain registration rights
pursuant to that certain Investor's Rights Agreement, dated as of October 4,
1996 (the "Investor's Rights Agreement"), by and between the Company and
Vertical;
WHEREAS, Walther Glas, Viktor Vogt and Klaus-Dirk Sippel (the
"Registration Rights Group") have not previously been granted registration
rights and the Company deemed it to be in its best interest to grant each of
Walther Glas and Klaus-Dirk Sippel certain registration rights in respect of all
of the shares of Common Stock (the "Glas Common Stock" and the "Sippel Common
Stock", respectively) held by Walther Glas and Klaus-Dirk Sippel, respectively,
as of the Effective Date (as herein defined) and to Viktor Vogt certain
registration rights in respect of an aggregate of 250,000 shares of Common Stock
held by Viktor Vogt as of the Effective Date (the "Vogt Common Stock");
WHEREAS, the Company and Vertical have entered into
Registration Rights Agreements (of which this agreement is one) with each of
Walther Glas, Viktor Vogt and Klaus-Dirk Sippel (the "Registration Rights
Agreements"); and
WHEREAS, the Company has proposed to enter into an
Underwriting Agreement with the several underwriters (the "Underwriters")
providing for the public offering (the "Public Offering") by the Underwriters,
including Royce Investment Group, Inc. ("Royce") as Representative of the
Underwriters, of shares of Common Stock.
NOW, THEREFORE, in consideration of the foregoing, 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.
<PAGE>
(b) The term "Common Stock" means shares of the common stock
of the Company, par value $.01 per share.
(c) The term "Covered Securities" means the Glas Common Stock,
Vogt Common Stock and Sippel Common Stock which the respective member of the
Registration Rights Group has requested the Company to register pursuant to
Section 1.2 or 1.3 of his Registration Rights Agreement.
(d) The term "Effective Date" means the date of the final
prospectus related to the Public Offering.
(e) 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 the inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(f) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(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 "Registerable Securities" has the meaning set
forth in the Investor's Rights Agreement.
(i) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the
Effective Date a written request from Viktor Vogt that the Company file a
registration statement under the Act covering the registration of at least 25%
of the shares of Vogt Common Stock, the Company shall file as soon as
practicable, and in any event within 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 the Covered Securities which Viktor Vogt
requests to be registered, subject to the limitations of Subsections 1.2(b) and
1.2(c) and Section 1.12.
(b) If Viktor Vogt intends to distribute the Covered
Securities covered by his request by means of an underwriting, he shall so
advise the Company as a part of his request made pursuant to Subsection 1.2(a).
The underwriter will be selected by the Company and shall be acceptable to
Viktor Vogt, which acceptance shall not be unreasonably withheld. Viktor Vogt
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.
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<PAGE>
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises Viktor Vogt in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Company shall exclude from
such underwriting (i) first, the maximum number of securities, if any, other
than the Covered Securities and Registrable Securities, being sold for the
account of other than the Company, as is necessary to reduce the size of the
offering and (ii) second, the minimum number of Covered Securities, divided pro
rata to the extent practicable, among the number of Covered Securities requested
to be registered by the members of the Registration Rights Group, 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
after the Company has effected one registration pursuant to a demand made by
Viktor Vogt under the provisions of this Section 1.2.
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 Viktor Vogt) 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 shares of Common Stock 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 Viktor Vogt written notice of
such registration. Upon the written request of Viktor Vogt given within 20 days
after giving of such notice by the Company in accordance with Section 3.5, the
Company shall, subject to the limitations of Sections 1.8 and 1.12, cause to be
registered under the Act all of the shares of Vogt Common Stock that Viktor Vogt
has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section 1
to effect the registration of any shares of Common Stock, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such shares of Common Stock 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 120 days or until the distribution
contemplated in the Registration Statement has been completed, whichever first
occurs; provided, however, that such 120 day period shall be extended for a
period of time equal to the period Viktor Vogt 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 shares of Common Stock on Form S-3 that are
intended to be offered on a continuous or delayed basis, such 120 day period
shall be extended until all such shares of Common Stock 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
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<PAGE>
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 Viktor Vogt such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as Viktor Vogt may reasonably
request in order to facilitate the disposition of the Covered Securities owned
by him.
(d) Use its best efforts to register and qualify the Covered
Securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by Viktor
Vogt; 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.
(f) Notify Viktor Vogt at any time when a prospectus relating
to Viktor Vogt's Covered Securities covered by such registration statement 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 Covered 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 Covered
Securities registered pursuant hereunder and a CUSIP number for all Covered
Securities, in each case not later than the effective date of such registration.
(i) Furnish, on the date that such Covered Securities are
delivered to the underwriters for sale in connection with the registration
pursuant to this Section 1, if such Covered
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<PAGE>
Securities are being sold through underwriters, or, if such Covered Securities
are not being sold through underwriters, on the date that the registration
statement with respect to such Covered 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 Viktor Vogt, 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 Viktor Vogt.
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 Covered Securities of Viktor Vogt that Viktor Vogt shall furnish
to the Company such information regarding himself, the shares of Common Stock
held by him, and the intended method of disposition of such securities as shall
be required to effect the registration of Viktor Vogt's Covered 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 Viktor Vogt, 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 shares of Common Stock with respect to the registrations
pursuant to Sections 1.2 or 1.3 for Viktor Vogt, 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 Viktor Vogt, but excluding
underwriting discounts and commissions relating to the Covered 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 Viktor Vogt's Covered Securities in such underwriting unless Viktor Vogt
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 Covered Securities requested by Viktor Vogt to
be included in such offering, exceeds the amount of securities sold other than
by the Company and the Registrable Securities that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall exclude from such underwriting (i) first, the maximum number of
securities, if any, other than the Covered Securities and Registrable
Securities, being sold for the account of other than the Company, as is
necessary to reduce the size of the offering and (ii) second, the minimum number
of Covered Securities, divided pro rata to the extent practicable, among the
number of Covered Securities requested to be registered by the members of the
Registration Rights Group, as is
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<PAGE>
necessary in the opinion of the managing underwriter(s) to reduce the size of
the offering.
1.9 Indemnification. In the event any Covered 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 Viktor Vogt, any underwriter (as defined in the Act) for
Viktor Vogt and each person, if any, who controls such 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 Viktor Vogt, such
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
Viktor Vogt, any such 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, Viktor Vogt 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 stockholder
selling securities in such registration statement and any controlling person of
any such underwriter or other stockholder, 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 Viktor Vogt expressly for use in connection with such
registration; and Viktor Vogt 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
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<PAGE>
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 Viktor Vogt, which consent shall not be unreasonably withheld;
provided, that, in no event shall Viktor Vogt's liability under this Subsection
1.9(b) exceed the proceeds received by Viktor Vogt 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, 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 Viktor Vogt's liability
under this Section 1.9(d) exceed the proceeds received by Viktor Vogt 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
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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 Viktor Vogt under this
Section 1.9 shall survive the completion of any offering of Covered 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 Viktor Vogt the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit
Viktor Vogt 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 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
Viktor Vogt to utilize Form S-3 for the sale of its shares of Common Stock, 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 Viktor Vogt, so long as Viktor Vogt owns any
shares of Common Stock, 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 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 Viktor Vogt 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 Assignment of Registration Rights. Subject to the provisions of
Section 1.12 and the other limitations herein, the rights to cause the Company
to register shares of Vogt Common Stock pursuant to this Section 1 may be
assigned (but only with all related obligations) by Viktor Vogt to any
transferee or assignee of such securities; provided that (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. The term "Viktor Vogt" shall include any such
assignee.
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<PAGE>
1.12 Approval of Vertical. The exercise by Viktor Vogt of any
registration rights pursuant to Sections 1.2 or 1.3 hereof and the assignment of
registration rights pursuant to Section 1.12 hereof are subject to the prior
written consent of Vertical.
2. Miscellaneous.
2.1 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 shares of Common Stock). 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.
2.2 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.
2.3 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.
2.4 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.
2.5 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 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 days' advance written notice to the
other parties.
2.6 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.
2.7 Amendments and Waivers. Any term of this Agreement may be amended
only with the consent of the Company, Vertical and Viktor Vogt. The observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or
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prospectively) only with the written consent of the Company and Vertical.
2.8 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.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
IAT MULTIMEDIA, INC.
By: /s/ Viktor Vogt
---------------------------
Name: Viktor Vogt
Title: Chief Executive Officer
Address: Aarestrasse 17, Vogelsang-Turgi, Switzerland
Facsimile Telephone Number: 011-41-56-223-5023
VERTICAL FINANCIAL HOLDINGS
By: /s/ Jacob Agam
---------------------------
Name: Jacob Agam
Title: Director
Address: 221 East 61st Street, New York, New York
Facsimile Telephone Number: 212-754-4044
/s/ Viktor Vogt
---------------------------
Viktor Vogt
Address:
Facsimile Telephone Number:
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 27, 1997,
by and among IAT Multimedia, Inc., a Delaware corporation (the "Company"),
Vertical Financial Holdings, a Delaware corporation ("Vertical"), and Klaus-Dirk
Sippel.
W I T N E S S E T H
WHEREAS, in or about the first week of February 1997 the
Company received an aggregate of approximately $500,000 in stockholder loans
from Vertical, Walther Glas GmbH, a company organized under the laws of Germany
("Walther Glas"), Viktor Vogt and Klaus-Dirk Sippel;
WHEREAS, Vertical has been granted certain registration rights
pursuant to that certain Investor's Rights Agreement, dated as of October 4,
1996 (the "Investor's Rights Agreement"), by and between the Company and
Vertical;
WHEREAS, Walther Glas, Viktor Vogt and Klaus-Dirk Sippel (the
"Registration Rights Group") have not previously been granted registration
rights and the Company deemed it to be in its best interest to grant each of
Walther Glas and Klaus-Dirk Sippel certain registration rights in respect of all
of the shares of Common Stock (the "Glas Common Stock" and the "Sippel Common
Stock", respectively) held by Walther Glas and Klaus-Dirk Sippel, respectively,
as of the Effective Date (as herein defined) and to Viktor Vogt certain
registration rights in respect of an aggregate of 250,000 shares of Common Stock
held by Viktor Vogt as of the Effective Date (the "Vogt Common Stock");
WHEREAS, the Company and Vertical have entered into
Registration Rights Agreements (of which this agreement is one) with each of
Walther Glas, Viktor Vogt and Klaus-Dirk Sippel (the "Registration Rights
Agreements"); and
WHEREAS, the Company has proposed to enter into an
Underwriting Agreement with the several underwriters (the "Underwriters")
providing for the public offering (the "Public Offering") by the Underwriters,
including Royce Investment Group, Inc. ("Royce") as Representative of the
Underwriters, of shares of Common Stock.
NOW, THEREFORE, in consideration of the foregoing, 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.
<PAGE>
(b) The term "Common Stock" means shares of the common stock
of the Company, par value $.01 per share.
(c) The term "Covered Securities" means the Glas Common Stock,
Vogt Common Stock and Sippel Common Stock which the respective member of the
Registration Rights Group has requested the Company to register pursuant to
Section 1.2 or 1.3 of his Registration Rights Agreement.
(d) The term "Effective Date" means the date of the final
prospectus related to the Public Offering.
(e) 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 the inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(f) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(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 "Registerable Securities" has the meaning set
forth in the Investor's Rights Agreement.
(i) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the
Effective Date a written request from Klaus-Dirk Sippel that the Company file a
registration statement under the Act covering the registration of at least 25%
of the shares of Sippel Common Stock held by Klaus-Dirk Sippel as of the
Effective Date, the Company shall file as soon as practicable, and in any event
within 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 the Covered Securities which Klaus-Dirk Sippel requests to be registered,
subject to the limitations of Subsections 1.2(b) and 1.2(c) and Section 1.12.
(b) If Klaus-Dirk Sippel intends to distribute the Covered
Securities covered by his request by means of an underwriting, he shall so
advise the Company as a part of his request made pursuant to Subsection 1.2(a).
The underwriter will be selected by the Company and shall be acceptable to
Klaus-Dirk Sippel, which acceptance shall not be unreasonably withheld.
Klaus-Dirk Sippel shall (together with the Company as provided in Subsection
1.4(e)) enter into an underwriting
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<PAGE>
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 Klaus-Dirk Sippel in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall exclude from such underwriting (i) first, the maximum number of
securities, if any, other than the Covered Securities and Registrable
Securities, being sold for the account of other than the Company, as is
necessary to reduce the size of the offering and (ii) second, the minimum number
of Covered Securities, divided pro rata to the extent practicable, among the
number of Covered Securities requested to be registered by the members of the
Registration Rights Group, 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
after the Company has effected one registration pursuant to a demand made by
Klaus-Dirk Sippel under the provisions of this Section 1.2.
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 Klaus-Dirk Sippel) 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 shares of Common Stock 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 Klaus-Dirk Sippel written notice
of such registration. Upon the written request of Klaus-Dirk Sippel given within
20 days after giving of such notice by the Company in accordance with Section
3.5, the Company shall, subject to the limitations of Sections 1.8 and 1.12,
cause to be registered under the Act all of the shares of Sippel Common Stock
that Klaus-Dirk Sippel has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section 1
to effect the registration of any shares of Common Stock, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such shares of Common Stock 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 120 days or until the distribution
contemplated in the Registration Statement has been completed, whichever first
occurs; provided, however, that such 120 day period shall be extended for a
period of time equal to the period Klaus-Dirk Sippel 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 shares of Common Stock on Form S-3 that are
intended to be offered on a continuous or delayed basis, such 120 day period
shall be extended until all such shares of Common Stock are sold, if applicable
rules under the Act governing the obligation to file
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<PAGE>
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 Klaus-Dirk Sippel such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as Klaus-Dirk Sippel may
reasonably request in order to facilitate the disposition of the Covered
Securities owned by him.
(d) Use its best efforts to register and qualify the Covered
Securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by
Klaus-Dirk Sippel; 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.
(f) Notify Klaus-Dirk Sippel at any time when a prospectus
relating to Klaus-Dirk Sippel's Covered Securities covered by such registration
statement 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 Covered 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 Covered
Securities registered pursuant hereunder and a CUSIP number for all Covered
Securities, in each case not later than the effective date of such registration.
(i) Furnish, on the date that such Covered Securities are
delivered to the
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<PAGE>
underwriters for sale in connection with the registration pursuant to this
Section 1, if such Covered Securities are being sold through underwriters, or,
if such Covered Securities are not being sold through underwriters, on the date
that the registration statement with respect to such Covered 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 Klaus-Dirk Sippel, 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 Klaus-Dirk Sippel.
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 Covered Securities of Klaus-Dirk Sippel that Klaus-Dirk Sippel
shall furnish to the Company such information regarding himself, the shares of
Common Stock held by him, and the intended method of disposition of such
securities as shall be required to effect the registration of Klaus-Dirk
Sippel's Covered 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 Klaus-Dirk Sippel, 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 shares of Common Stock with respect to the registrations
pursuant to Sections 1.2 or 1.3 for Klaus-Dirk Sippel, 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 Klaus-Dirk
Sippel, but excluding underwriting discounts and commissions relating to the
Covered 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 Klaus-Dirk Sippel's Covered Securities in such underwriting unless Klaus-Dirk
Sippel 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 Covered Securities requested by
Klaus-Dirk Sippel to be included in such offering, exceeds the amount of
securities sold other than by the Company and the Registrable Securities that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall exclude from such underwriting
(i) first, the maximum number of securities, if any, other than the Covered
Securities and Registrable Securities, being sold for the account of other than
the Company, as is necessary to reduce the size of the offering and (ii) second,
the minimum
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<PAGE>
number of Covered Securities, divided pro rata to the extent practicable, among
the number of Covered Securities requested to be registered by the members of
the Registration Rights Group, 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 Covered 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 Klaus-Dirk Sippel, any underwriter (as defined in the Act) for
Klaus-Dirk Sippel and each person, if any, who controls such 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 Klaus-Dirk
Sippel, such 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
Klaus-Dirk Sippel, any such 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, Klaus-Dirk Sippel 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
stockholder selling securities in such registration statement and any
controlling person of any such underwriter or other stockholder, 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 Klaus-Dirk Sippel expressly for
use in connection with such registration; and Klaus-Dirk Sippel will pay, as
incurred, any legal or other expenses reasonably incurred by any person
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<PAGE>
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 Klaus-Dirk Sippel, which consent shall not be unreasonably
withheld; provided, that, in no event shall Klaus-Dirk Sippel's liability under
this Subsection 1.9(b) exceed the proceeds received by Klaus-Dirk Sippel 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, 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 Klaus-Dirk Sippel's
liability under this Section 1.9(d) exceed the proceeds received by Klaus-Dirk
Sippel from the offering (net of any underwriting discounts and commissions).
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<PAGE>
(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 Klaus-Dirk Sippel under
this Section 1.9 shall survive the completion of any offering of Covered
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 Klaus-Dirk Sippel the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
Klaus-Dirk Sippel 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 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
Klaus-Dirk Sippel to utilize Form S-3 for the sale of its shares of Common
Stock, 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 Klaus-Dirk Sippel, so long as Klaus-Dirk Sippel
owns any shares of Common Stock, 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 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 Klaus-Dirk Sippel 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 Assignment of Registration Rights. Subject to the provisions of
Section 1.12 and the other limitations herein, the rights to cause the Company
to register shares of Sippel Common Stock pursuant to this Section 1 may be
assigned (but only with all related obligations) by Klaus-Dirk Sippel to any
transferee or assignee of such securities; provided that (a) the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such
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<PAGE>
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. The term "Klaus-Dirk Sippel" shall include any such assignee.
1.12 Approval of Vertical. The exercise by Klaus-Dirk Sippel of any
registration rights pursuant to Sections 1.2 or 1.3 hereof and the assignment of
registration rights pursuant to Section 1.12 hereof are subject to the prior
written consent of Vertical.
1.13 Escrow of Sippel Common Stock. Klaus-Dirk Sippel hereby agrees to
enter into an escrow agreement with Vertical and the law firm of Baker &
McKenzie pursuant to which the Sippel Common Stock will be held in escrow in the
Zurich office of Baker & McKenzie and will not be released from escrow prior to
the expiration of any and all "lock up" agreements to which such stock is
subject without the prior written consent of Vertical.
2. Miscellaneous.
2.1 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 shares of Common Stock). 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.
2.2 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.
2.3 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.
2.4 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.
2.5 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 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,
-9-
<PAGE>
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 days' advance written notice to the other
parties.
2.6 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.
2.7 Amendments and Waivers. Any term of this Agreement may be amended
only with the consent of the Company, Vertical and Klaus-Dirk Sippel. 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 Vertical.
2.8 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.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
IAT MULTIMEDIA, INC.
By: /s/ Viktor Vogt
-----------------------------------------------------
Name: Viktor Vogt
Title: Chief Executive Officer
Address: Aarestrasse 17, Vogelsang-Turgi, Switzerland
Facsimile Telephone Number: 011-41-56-223-5023
VERTICAL FINANCIAL HOLDINGS
By: /s/ Jacob Agam
-----------------------------------------------------
Name: Jacob Agam
Title: Director
Address: 221 East 61st Street, New York, New York
Facsimile Telephone Number: 212-754-4044
/s/ Klaus-Dirk Sippel
-----------------------------------------------------
Klaus-Dirk Sippel SMP AG
Address: Haselstrasse 1, 5401 Baden
Facsimile Telephone Number: Fax: 056 221 26 88
Tel.: 056 221 26 66
-11-
<PAGE>
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of February 27, 1997, by and
among IAT Multimedia, Inc., a Delaware corporation (the "Company"), Walther Glas
GmbH, a corporation organized under the laws of Germany ("Walther Glas"), Viktor
Vogt, Klaus-Dirk Sippel (collectively, the "Registration Rights Group"),
Vertical Financial Holdings, a Delaware corporation ("Vertical"), and the other
undersigned holders of shares of Common Stock, par value $.01 per share (the
"Common Stock"), and/or shares of Series A Convertible Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"), each of the Company.
W I T N E S S E T H
WHEREAS, the Company has proposed to enter into an
Underwriting Agreement with the several underwriters (the "Underwriters")
providing for the public offering (the "Public Offering") by the Underwriters,
including Royce Investment Group, Inc. ("Royce") as Representative of the
Underwriters (the "Representative"), of shares of Common Stock;
WHEREAS, in connection with such Public Offering, all of the
holders of Common Stock and Series A Preferred Stock deemed it to be in the best
interests of the Company to enter into this Agreement; and
WHEREAS, the Company has entered into Registration Rights
Agreements with each of Walther Glas, Viktor Vogt and Klaus-Dirk Sippel, dated
as of February 27, 1997 (collectively, the "Registration Rights Agreements").
NOW, THEREFORE, in consideration of the foregoing and
intending to be legally bound, the undersigned hereby agree as follows:
SECTION 1. For a period commencing on the date hereof and ending 24
months after the date of the final prospectus relating to the Public Offering
(the "Effective Time"), the Registration Rights Group will not, without the
prior written consent of Vertical, (i) Sell (as defined herein) or otherwise
dispose of any shares of Common Stock, (ii) make any demand for or exercise any
right with respect to the registration of any shares of Common Stock pursuant to
any of the Registration Rights Agreements or (iii) seek the consent of the
Representative for any transaction described in (i) or (ii) pursuant to any of
the "lock-up" agreements entered into by each member of the Registration Rights
Group and Royce in connection with the Public Offering. "Sale" shall mean any
offer, pledge, contract to sell, sale of any option or contract to purchase,
purchase of any option or contract to sell, grant of any option, right or
warrant to purchase, or other direct or indirect transfer or disposition of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or warrants or the entering into of any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the shares of Common Stock owned by the
undersigned, whether any such transaction is to be settled by delivery of shares
of Common Stock or such other securities, in cash or otherwise. "Sell" shall
have a commensurate meaning with Sale.
<PAGE>
SECTION 2. During the Effective Time, the undersigned stockholders,
except for Vertical and each member of the Registration Rights Group (the
"Remaining Stockholders"), will not, without the prior written consent of
Vertical and each member of the Registration Rights Group, (i) Sell or otherwise
dispose of any shares of Common Stock or (ii) seek the consent of the
Representative to Sell or otherwise dispose of any shares of Common Stock
pursuant to any of the "lock-up" agreements entered into by each of the
Remaining Stockholders and Royce in connection with the Public Offering.
SECTION 3. During the Effective Time, the undersigned stockholders will
not Sell or otherwise dispose of any shares of Common Stock unless the acquiror
(and any subsequent acquirors) of such shares becomes a party to this
Stockholders' Agreement.
SECTION 4. It is understood that the certificates evidencing the shares
of Common Stock held by the undersigned stockholders will bear, among others,
the following legend:
"THESE SECURITIES ARE SUBJECT TO THE STOCKHOLDERS' AGREEMENT,
DATED AS OF FEBRUARY 27, 1997, BY AND AMONG IAT MULTIMEDIA, INC.,
WALTHER GLAS, GmbH, VIKTOR VOGT, KLAUS-DIRK SIPPEL, VERTICAL FINANCIAL
HOLDINGS AND CERTAIN OTHER HOLDERS OF COMMON STOCK AND/OR SERIES A
CONVERTIBLE PREFERRED STOCK, EACH OF IAT MULTIMEDIA, INC., AND ANY
TRANSFER OF THESE SECURITIES IS SUBJECT TO SUCH STOCKHOLDERS'
AGREEMENT."
SECTION 5. This Stockholders' Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
SECTION 6. 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.
SECTION 7. 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.
SECTION 8. 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 Vertical.
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<PAGE>
SECTION 9. Any term of this Agreement may be amended only by the
written consent of Vertical and the party or parties to be bound.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Stockholders' Agreement as of the date first above written.
IAT MULTIMEDIA, INC. BEHALA ANSTALT
By: /s/ Viktor Vogt By: /s/ Jacob Agam
------------------------------ --------------------------------
Name: Viktor Vogt Name:
Title: Chief Executive Officer Title:
VERTICAL FINANCIAL HOLDINGS HENILIA FINANCIAL LIMITED
By: /s/ Jacob Agam By: /s/ Jacob Agam
------------------------------ --------------------------------
Name: Jacob Agam Name:
Title: Director Title:
WALTHER GLAS GmbH LUPIN INVESTMENT SERVICES Ltd.
By: /s/ Volker Walther By: /s/ Jacob Agam
------------------------------ --------------------------------
Name: Volker Walther Name:
Title: CEO Title:
R. KLEIN HANDEL GmbH
/s/ Viktor Vogt
--------------------------------
By: /s/ Robert Klein Viktor Vogt
------------------------------
Name: Robert Klein
Title: Owner and CEO
/s/ Klaus-Dirk Sippel
--------------------------------
Klaus-Dirk Sippel
bmp MANAGEMENT CONSULTANT
GmbH
By: /s/ Oliver Borrmann /s/ Volker Walther
------------------------------ --------------------------------
Name: Oliver Borrmann Volker Walther
Title: Managing Director
-4-
<PAGE>
/s/ Klaus Grissemann /s/ Barbara Scheibler
- ------------------------------ ------------------------------
Klaus Grissemann Barbara Scheibler
/s/ Monica Germann /s/ Wilhelm Gudauski
- ------------------------------ ------------------------------
Monica Germann Wilhelm Gudauski
/s/ C.M. Leffering
/s/ Franz Muller ------------------------------
- ------------------------------ Christian Leffering
Franz Muller
/s/ Urs Stamm
/s/ Richard Suter ------------------------------
- ------------------------------ Urs Stamm
Richard Suter
/s/ Czeslaw Paulus
/s/ C. Holthuizen ------------------------------
----------------------------- Czeslaw Paulus
C. Holthuizen
/s/ Avi Suriel
------------------------------
/s/ P. Freitag Avi Suriel
- ------------------------------
P. Freitag
GRADL CONSULT AG
/s/ H.J. Henning
- ------------------------------
H.J. Henning
By: /s/ W. Gradl
---------------------------
Name: W. Gradl
/s/ A. Frutterer Title: CEO
- ------------------------------
A. Frutterer
-5-
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement of IAT Multimedia, Inc. on
Form S-1 of our report dated January 31, 1997, 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
March 4, 1997
<PAGE>
EXHIBIT 23.3
CONSENT
We hereby consent to the use of our firm name in IAT Multimedia, Inc.'s
Amendment No. 3 to the 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
Dated: March 4, 1997
