<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended January 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number: 0-25898
Number Nine Visual Technology Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-2821358
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
18 Hartwell Avenue Lexington, Massachusetts 02421
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 674-0009
Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant (without admitting that any person whose shares are
not included in such calculation is an affiliate) as of March 18, 1999, was
$19,670,462, based on the last sale price as reported by The Nasdaq Stock
Market.
As of April 16, 1999, the registrant had 9,416,187 shares of common stock
outstanding.
<PAGE>
The undersigned registrant hereby amends its Annual Report on Form 10-K for the
year ended January 2, 1999 to include Items 10, 11, 12 and 13 of Part III and
other portions thereof as set forth below.
PART III
Item 10. Directors and Officers of the Registrant
Directors
The Company's Restated Certificate of Incorporation and By-Laws provide for
the Company's business to be managed by or under the direction of the Board of
Directors. Under the Company's Restated Certificate of Incorporation and By-
Laws, as amended, the number of directors is fixed from time to time by the
Board of Directors. The Board of Directors currently consists of four members,
classified into three classes as follows: Andrew Najda and Stanley W. Bialek
constitute a class with a term ending in 2001 (the "Class C directors") and
Dr. Fouad H. Nader constitutes a class with a term which expires at the upcoming
Meeting (the "Class A directors"); and William H. Thalheimer constitutes a
class with a term ending in 2000 (the "Class B directors"). At each annual
meeting of Stockholders, directors are elected for a full term of three years to
succeed those directors whose terms are expiring.
Pursuant to a Stockholders Agreement entered into in December 1994, Messrs.
Najda and Bialek have each agreed to vote their shares in favor of the other's
election to the Board of Directors, and not vote their shares in favor of the
election to the Board of Directors of any person to which the other reasonably
objects.
The names of the Company's current directors and certain information about
them are set forth below:
<TABLE>
<CAPTION>
Name Age Position(s)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Andrew Najda.............. 44 Chief Executive Officer and Chairman of the Board of Directors
Stanley W. Bialek......... 44 Director
Dr. Fouad H. Nader........ 44 Director
William H. Thalheimer..... 45 Director
</TABLE>
Andrew Najda, a co-founder of the Company, has been a director of the Company
since its inception in May 1982. During the period through May 1993, Mr. Najda
and Stanley W. Bialek alternated the positions of President and Chairman of the
Board on an annual basis. In May 1993, Mr. Najda reassumed the position of
President, and in December 1994 assumed the new position of Chief Executive
Officer. Mr. Najda also assumed the position of Chairman of the Board of
Directors in April 1995. Mr. Najda relinquished the position of President in May
1996, but remains the Company's Chief Executive Officer and Chairman of the
Board of Directors. Mr. Najda holds a B.S. in electrical engineering from the
Illinois Institute of Technology.
Stanley W. Bialek, a co-founder of the Company, has been a director of the
Company since its inception in May 1982. During the period through May 1993, Mr.
Bialek and Andrew Najda alternated the positions of President and Chairman of
the Board on an annual basis. In May 1993, Mr. Bialek assumed the positions of
Chairman of the Board, which he held until his resignation in April 1995, and
Chief Operating Officer, which he held until January 1995. Mr. Bialek studied
engineering at the Illinois Institute of Technology.
Dr. Fouad H. Nader has served as a director of the Company since September
1994. Since 1981, Dr. Nader has been a Senior International Management and
Technology Consultant at Arthur D. Little, Inc. Dr. Nader holds a B.S. in
mechanical engineering, an M.S. in engineering management and a professional
engineer's degree in industrial engineering from Northeastern University; a
Ph.D. in operations research from Cornell University, and a Ph.D. in industrial
engineering from the University of California at Berkeley.
1
<PAGE>
William H. Thalheimer has served as a director of the Company since September
1994, and has served as a financial and business consultant to the Company since
1992. Mr. Thalheimer also served as the Company's Acting Chief Operating Officer
from April 1996 to June 1996. Since 1979, Mr. Thalheimer has been a partner of
Thalheimer and Lemma, Certified Public Accountants. Mr. Thalheimer is a member
of the American Institute of Certified Public Accountants and holds a B.S. in
accounting from Indiana University.
Committees of the Board of Directors and Meetings
Meeting Attendance. During the fiscal year ended January 2, 1999 there were
seven meetings of the Board of Directors, and the various committees of the
Board of Directors met a total of nine times. No director attended fewer than
75% of the total number of meetings of the Board and of committees of the Board
on which he served during fiscal 1998. In addition, from time to time, the
members of the Board of Directors and its committees acted by unanimous written
consent pursuant to Delaware law.
Audit Committee. The Audit Committee, which met two times in fiscal 1998 has
two members, Dr. Fouad H. Nader and William H. Thalheimer. The Audit Committee
reviews the engagement of the Company's independent accountants, reviews annual
financial statements, considers matters relating to accounting policy and
internal controls and reviews the scope of annual audits.
Compensation Committee. The Compensation Committee has two members, Dr. Fouad
H. Nader (Chairman) and Stanley W. Bialek. The Compensation Committee met one
time during fiscal 1998. The Compensation Committee reviews, approves and makes
recommendations on the Company's compensation policies, practices and procedures
to ensure that legal and fiduciary responsibilities of the Board of Directors
are carried out and that such policies, practices and procedures contribute to
the success of the Company. The Compensation Committee also administers the
Company's stock and employee benefit plans, including the Company's 1989 Stock
Option Plan (the "1989 Stock Plan"), 1994 Employee, Director and Consultant
Stock Option Plan (the "1994 Stock Plan"), 1996 Employee, Director and
Consultant Stock Option Plan (the "1996 Stock Plan") and 1999 Employee, Director
and Consultant Stock Option Plan (the "1999 Stock Plan").
Nominating Committee. The Company does not have a standing Nominating
Committee.
Compensation Committee Interlocks and Insider Participation. The Compensation
Committee has two members, Dr. Fouad H. Nader (Chairman) and Stanely W. Bialek.
None of such members is or has been an employee of the Company. No executive
officer of the Company serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
Compensation of Directors
The Company reimburses ordinary and necessary out-of-pocket expenses incurred
by non-employee directors in connection with their services, including
attendance at meetings of the Board of Directors. In addition, directors of the
Company are eligible to receive non-qualified stock options under the Company's
1994 Stock Plan, 1996 Stock Plan and 1999 Stock Plan. During fiscal 1998, as
compensation for serving as the Company's Acting Chief Operating Officer from
April 1996 to June 1996, William H. Thalheimer was granted a fully vested non-
qualified stock option to purchase 25,000 shares of Common Stock under the 1994
Stock Plan. No other options to purchase shares were granted during fiscal 1998
to any of the Company's directors.
2
<PAGE>
Executive Officers
The names of, and certain information regarding, executive officers of the
Company who are not also directors, are set forth below.
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------------------------------------------------------------------
<S> <C> <C>
William L. Ralph......... 33 General Manager and Assistant Treasurer
Timothy J. Burns......... 59 Chief Financial Officer and Treasurer
Laurence P. McIntosh..... 42 Senior Vice President, Sales
Michael P. Green......... 33 Vice President, Product Development
</TABLE>
William L. Ralph has served as the Company's General Manager and Assistant
Treasurer since June 1998, and served as the Company's Assistant Treasurer and
Finance Manager since joining the Company in January 1995. From June 1988 to
December 1994, Mr. Ralph was employed by Digital Equipment Corporation, most
recently as a Financial Analyst. Mr. Ralph holds a M.S. in finance from Boston
College, and a B.A. in Economics from Colby College.
Timothy J. Burns has been the Company's Chief Financial Officer since May
1999. Prior to his current position, Mr. Burns was the Company's Acting Chief
Financial Officer since the Company hired Argus Management Corporation ("Argus")
as a consultant for financial matters working with the Company in February 1998.
Prior to joining the Company, Mr. Burns worked at Ibis Technology Corporation
from June 1994 to January 1998, most recently as Chief Financial Officer and
Operations Manager. From January 1988 to June 1994, Mr. Burns was employed by
Argus as a Principal focusing on corporate restructurings, turnarounds and
financial management issues. Mr. Burns holds a M.B.A. in finance from the
University of Chicago, a B.S. in Economics from Boston College, and holds a
C.P.A from the State of Massachusetts.
Laurence P. McIntosh has been the Company's Senior Vice President of Sales
since June 1998, and has been employed by Number Nine since May 1989. Prior to
his current position, Mr. McIntosh served as the Company's Vice President of OEM
Sales since 1993. Mr. McIntosh holds a B.A. in Psychology and Economics from
Fairfield University.
Michael P. Green has been the Company's Vice President of Product Development
since December 1997. Prior to his current position, Mr. Green was an OEM Sales
Engineer since joining the Company in February 1992. Prior to Number Nine, Mr.
Green was a Technical Sales Engineer for Texas Instruments from 1987 to 1992.
Mr. Green has a B.S. in Electrical Engineering from Worcester Polytechnical
Institute.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of the Company's
Common Stock, to file with the Securities and Exchange Commission (the "SEC")
initial reports of beneficial ownership and reports of changes in beneficial
ownership of the Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% beneficial owners are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to it and written representations that no other reports were
required during the fiscal year ended January 2, 1999 all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except that: (i) James T. O'Bray, the
former Vice President of Manufacturing of the Company failed to file a Form 5
with respect to the exercise of a stock option.
3
<PAGE>
Item 11. Executive Compensation
Summary of Executive Compensation
The following Summary Compensation Table sets forth summary information as to
compensation received for services rendered to the Company in all capacities
during fiscal 1996, 1997 and 1998 by: (i) the Company's Chief Executive Officer
(the "CEO") and (ii) each of the four other most highly compensated persons
who were serving as executive officers of the Company (other than the CEO) as of
January 2, 1999 whose salary and bonus earned during fiscal 1998 exceeded
$100,000 (collectively, the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> Long Term
Annual Compensation Compensation(1)
---------------------------------------------------------- --------------------
Fiscal Other Annual Securities
Name and Principal Position(s) Year Salary(2) Bonus Compensation Underlying
- -------------------------------------- ------ ----------------- ------------- ------------- Options(#)
--------------------
<S> <C> <C> <C> <C> <C>
Andrew Najda........................... 1998 $245,841 -- -- --
Chief Executive Officer and 1997 $200,000 -- -- --
Chairman of the Board 1996 $200,000 -- $35,561(3)
Timothy J. Burns(4).................... 1998 -- -- -- --
Chief Financial Officer
William L. Ralph....................... 1998 $ 93,750 $17,000 -- 86,464
General Manager and 1997 $ 70,000 $20,000 -- 28,000
Assistant Treasurer 1996 $ 59,338 -- -- 15,000
Laurence P. McIntosh................... 1998 $135,417 $38,981 -- 73,000
Senior Vice President, Sales 1997 $ 93,750 $36,722 -- --
1996 $ 75,000 $69,139 -- 24,000
Michael P. Green....................... 1998 $125,938 $25,000 -- 27,000
Vice President, Product Development 1997 $114,450 -- -- 20,000
1996 $ 80,000 $32,668 -- 5,000
</TABLE>
- --------------
(1) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payments during its
1996, 1997 or 1998 fiscal years.
(2) Includes amounts deferred during 1996, 1997 and 1998 under the Company's
401(k) plan. The Company does not make any matching contributions under that
plan.
(3) Represents amounts paid to Mr. Najda for reimbursement of certain personal
expenses.
(4) In February 1998, the Company retained Argus Management Corporation
("Argus"), a financial consulting firm with experience in working with
financially troubled companies. Mr. Burns, in the capacity of Acting Chief
Financial Officer, was the main consultant from Argus to the Company on
this assignment. The Company paid $294,000 for Mr. Burns's services, as
well as for other financial consulting services, directly to Argus.
4
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding options granted
during the fiscal year ended January 2, 1999 by the Company to its named
executive officers:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------
Number of Potential Realizable Value
Securities % of Total Exercise at Assumed Annual Rates of
Underlying Options Granted or Base Stock Price Appreciation for
Options to Employees in Price Per Expiration Option Term (2)
Name Granted Fiscal Year (1) Share Date 5% 10%
- ---------------------- ------------ --------------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew Najda - - - - - -
Timothy J. Burns - - - - - -
William L. Ralph 3,464 (3) 0.3% $1.375 1/12/05 $ 1,939 $ 4,519
10,000 (3) 1.0% $1.375 11/03/05 $ 5,598 $ 13,045
5,000 (3) 0.5% $1.375 9/18/06 $ 3,283 $ 7,862
3,000 (3) 0.3% $1.375 3/13/07 $ 2,274 $ 5,602
25,000 (3) 2.4% $1.375 12/10/07 $ 18,952 $ 46,679
40,000 3.9% $ 2.44 6/2/08 $ 61,380 $155,549
Laurence P. McIntosh 73,000 7.0% $ 2.44 6/2/08 $112,019 $283,877
Michael P. Green 27,000 2.6% $ 3.07 12/23/06 $ 41,432 $104,996
</TABLE>
(1) The Company granted options representing 795,000 shares of Common Stock in
1998.
(2) Represents the hypothetical gains that could be achieved for the options if
exercised at the end of option terms. These gains are based on assumed rates
of stock price appreciation of 5% and 10% compounded annually from the date
the respective options were granted to their expiration dates. There is no
assurance the stock price will appreciate at the rates shown in this table.
(3) In fiscal 1998, the Company repriced the November 13, 1995, November 16,
1995, September 9, 1996, October 22, 1996 and December 23, 1996 and March
13, 1997 non-qualified stock options to purchase shares of Common Stock
granted to William L. Ralph, under the Company's 1994 and 1996 Stock Plans.
Repriced options are considered grants for the purpose of this table.
5
<PAGE>
Option Exercises in Last Fiscal Year and Fiscal Year-End Values
None of the named executive officers exercised stock options during the fiscal
year ended January 2, 1999. The following table provides information regarding
the number of shares covered by both exercisable and unexercisable stock options
held by each of the named executive officers as of January 2, 1999 and the
values of "in-the-money" options, which values represent the positive spread
between the exercise price of any such option and the fiscal year-end value of
the Company's Common Stock.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of the Unexercised
Underlying Unexercised In-The-Money Options at
Options at Fiscal Year-End Fiscal Year-End (1)
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Andrew Najda -- -- -- --
Timothy J. Burns -- -- -- --
William L. Ralph 46,214 40,250 $0 $0
Laurence P. McIntosh 62,650 60,750 $0 $0
Michael P. Green 66,850 33,150 $0 $0
</TABLE>
- --------------
(1) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the Company's Common Stock of $1.19, the closing sale
price per share of the Company's Common Stock as reported in the Nasdaq
National Market on January 2, 1999. The exercise price of each of the
options held by Mr. Ralph, Mr. McIntosh and Mr. Green exceeds $1.19.
Employment Agreements, Termination of Employment and Change-in-Control
Arrangements
None of the Company's named executive officers has an employment agreement
with the Company. The named executive officers are parties to confidentiality
agreements with the Company, whereby each is required to disclose to the Company
certain inventions, discoveries and developments, and to assign his rights
therein to the Company.
Under the Company's 1989 Stock Plan, 1994 Stock Plan, 1996 Stock Plan and 1999
Stock Plan, if the Company is consolidated with or acquired by another entity,
the Compensation Committee may, among other things, make all options granted
thereunder immediately exercisable just prior to such consolidation or merger or
arrange to have any successor or acquiring entity grant replacement options to
the optionees. In addition, under the 1994 Stock Plan, 1996 Stock Plan and 1999
Stock Plan, in the event of a consolidation or acquisition of the Company, the
Compensation Committee may terminate all options in exchange for a cash payment
equal to the difference between the fair market value of the shares then subject
to purchase pursuant to the options and the exercise price for such shares
pursuant to the options.
6
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Share Ownership
The following table sets forth certain information as of April 16, 1999
concerning the beneficial ownership of (i) shares of the Company's Common Stock,
(ii) shares of the Company's Preferred Stock, in each case by each Stockholder
known by the Company to be the beneficial owner of more than 5% of its
outstanding shares of Common Stock, each current member of the Board of
Directors, each executive officer named in the Summary Compensation Table on
page 4 hereof, and all current directors and executive officers as a group.
<TABLE>
<CAPTION>
Common Stock Preferred Stock
Shares Beneficially Shares Beneficially
Owned (1) Owned
Name and Address** Number Percent Number Percent
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Silicon Graphics Inc. (2).......................................... 3,656,052 28.0% 3,656,052 100%
2011 North Shorline Boulevard
Mountain View, CA 94043
Andrew Najda (3)................................................... 1,696,304 18.0% --- ---
c/o Number Nine Visual Technology Corporation
18 Hartwell Avenue
Lexington, MA 02421
Stanley W. Bialek (4).............................................. 1,020,664 10.8% --- ---
c/o Number Nine Visual Technology Corporation
18 Hartwell Avenue
Lexington, MA 02421
John Hancock Mutual Life Insurance Company Affiliated Entities (5). 542,736 5.8% --- ---
c/o John Hancock Place
Post Office Box 111
Boston, MA 02117
Dr. Fouad H. Nader (6)(7).......................................... 226,200 2.0% --- ---
William H. Thalheimer (6)(8)....................................... 316,528 3.3% --- ---
William L. Ralph (6)............................................... 41,584 * --- ---
Laurence P. McIntosh (6)(9)........................................ 48,061 * --- ---
Michael P. Green (6)............................................... 62,800 * --- ---
All executive officers and directors as a group (7 persons) (10)... 3,078,113 31.5% --- ---
</TABLE>
- --------------
* Represents beneficial ownership of less than 1% of the Company's outstanding
shares of Common Stock.
** Addresses are given for beneficial owners of more than 5% of the outstanding
Common Stock only.
7
<PAGE>
(1) The number of shares of Common Stock issued and outstanding on April 16,
1999 was 9,416,187, and the number of shares of Series A Convertible
Preferred Stock issued and outstanding on April 16, 1999 was 3,656,052. In
addition, 300 shares of Series B Convertible Preferred Stock, which are non-
voting, and not yet convertible, were issued and outstanding on April 16,
1999, 100% of which was held by KA Investments, LDC. The calculation of
percentage ownership for each listed beneficial owner is based upon the
number of shares of Common Stock issued and outstanding at April 16, 1999,
plus shares of Common Stock subject to options held by such person at April
16, 1999 and exercisable within 60 days thereafter, shares of Preferred
Stock held by such person at April 16, 1999 and convertible into shares of
Common Stock within 60 days thereafter, and a warrant held by Silicon
Graphics, Inc. (the "SGI Warrant") at April 16, 1999 and exercisable for
shares of Common Stock within 60 days thereafter. The persons and entities
named in the table have sole voting and investment power with respect to all
shares shown as beneficially owned by them, except as noted below.
(2) Includes (i) 3,350,894 shares of Common Stock issuable upon conversion of
3,350,894 shares of Series A Convertible Preferred Stock held by such
stockholder, which shares are convertible within 60 days of April 16, 1999,
and (ii) 305,158 shares of Common Stock issuable upon conversion of 305,158
shares of Series A Convertible Preferred Stock which are issuable upon
exercise of the SGI Warrant to purchase 305,158 shares of Series A
Convertible Preferred Stock, which SGI Warrant is exercisable and which
shares are thereafter convertible within 60 days of April 16, 1999.
(3) Also includes 148,000 shares held in the Andrew Najda Irrevocable Children's
Trust, as to which Mr. Najda disclaims beneficial ownership.
(4) Also includes 213,328 shares held in the Stanley W. Bialek Irrevocable
Children's Trust, as to which Mr. Bialek disclaims beneficial ownership.
(5) Includes 542,736 shares held by Hancock Venture Partners, Inc. ("Venture"),
which is a managing General Partner of the General Partner of Hancock
Venture Partners IV--Direct Fund L.P. ("Hancock IV") which holds 508,816 of
such shares, and Falcon Ventures II L.P. ("Falcon"), which holds 33,920 of
such shares. Each of such stockholders disclaims beneficial ownership of all
shares held by the other stockholder. Venture may be deemed to be the
beneficial owner of such shares, with sole voting and investment power as to
all such shares. Venture is a wholly-owned subsidiary of John Hancock
Subsidiaries, Inc. ("JHSI"), which is a wholly-owned subsidiary of John
Hancock Mutual Life Insurance Company ("JHMLICO"). Through their parent-
subsidiary relationship to Venture, JHMLICO and JHSI may be deemed to have
indirect beneficial ownership of all such shares deemed beneficially owned
by Venture.
(6) Includes the following shares subject to currently exercisable stock options
and stock options exercisable within 60 days of April 16, 1999: Dr. Nader--
78,200; Mr. Thalheimer--103,200; Mr. Ralph--46,214; Mr. McIntosh--62,650;
and Mr. Green--66,850.
(7) Includes 148,000 shares held on behalf of the Andrew Najda Irrevocable
Children's Trust, of which Dr. Nader is the sole trustee. Dr. Nader
exercises sole voting and investment power with respect to such shares.
(8) Includes 213,328 shares held on behalf of the Stanley W. Bialek Irrevocable
Children's Trust, of which Mr. Thalheimer is the sole trustee. Mr.
Thalheimer exercises sole voting and investment power with respect to such
shares.
(9) Includes 590 shares held on behalf of Laurence McIntosh's children. Mr.
McIntosh exercises sole voting and investment power with respect to such
shares.
(10)Includes 329,814 shares subject to currently exercisable stock options and
stock options exercisable within 60 days of April 16, 1999.
8
<PAGE>
Item 13. Certain Relationships and Related Transactions
During the fourth quarter of 1998, the Company entered into a Product
Distribution and Procurement Agreement (the "Distribution Agreement") with
Silicon Graphics, Inc. ("SGI"), a beneficial owner of approximately 28.0% of the
Company's Common Stock. Under the Distribution Agreement, and upon our request,
SGI may place orders for the manufacture of the Company's products, implementing
the Company's technical designs. SGI can then resell such prodcuts to the
Company. At January 2, 1999, the Company had purchased approximately $1.2
million of finished good products from SGI under this Distribution Agreement
during the fourth quarter of 1998, and recognized the corresponding accounts
payable liability in the Company's balance sheet for the period ending
January 2, 1999.
Also under the Distribution Agreement, SGI appointed the Company to act
through June 30, 1999 as an authorized sales representative with respect to
selling and marketing the Digital Flat Panel Solution Pack. Acting as an agent
of SGI, the Company is authorized to (i) sell and market the Digital Flat Panel
Solution Pack to national and international distributors, and to strategic OEM
customers, (ii) provide technical and customer support for the Revolution(R)
IV-FP graphics subsystem component of the Digital Flat Panel Solution Pack, and
(iii) provide administrative duties such as order entry, invoicing and
collection services for the sales of the Digital Flat Panel Solution Pack. In
exchange for providing these services, SGI pays the Company a royalty, sales
commission and support fee. During 1998, the amounts earned by the Company were
immaterial. The Distribution Agreement may be extended beyond June 30, 1999.
The Company accepted the resignation of Daniel W. Muehl, the Company's former
Chief Operating Officer and Chief Financial Officer as of January 19, 1998
pursuant to which Mr. Muehl resigned his position at the Company effective
January 31, 1998. The Company accepted the resignation of James T. O'Bray, the
Company's former Vice President of Manufacturing as of February 6, 1998 pursuant
to which Mr. O'Bray resigned his position at the Company effective February 20,
1998. The Company accepted the resignation of Archie K. Miller, the Company's
former Senior Vice President of Sales as of May 13, 1998 pursuant to which Mr.
Miller resigned his position at the Company effective May 27, 1998. The Company
accepted the resignation of Michael Romanies, the Company's former Vice
President of Marketing as of August 19, 1998 pursuant to which Mr. Romanies
resigned his position at the Company effective August 25, 1998. The Company did
not enter into separation arrangements with Mr. Muehl, Mr. O'Bray, Mr. Miller or
Mr. Romanies.
The Company entered into a consultancy arrangement with Michael Romanies, the
Company former Vice President of Marketing, effective August 26, 1998, for which
the Company received assistance with Marketing activities. This agreement
expired on October 23, 1998.
The Company entered into an arrangement with Argus Management Corporation, a
financial consulting firm, pursuant to which the Company received financial
assistance in the capacity of Acting Chief Financial Officer of the Company. In
this relationship, Timothy J. Burns was the main consultant to the Company on
this assignment. Under this agreement, and in connection with providing other
financial consulting services, Argus was paid $294,000.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Lexington,
Massachusetts on April 30, 1999.
Number Nine Visual Technology Corporation
By: /s/ Andrew Najda
Andrew Najda
Chief Executive Officer
and Chairman of the Board
10
