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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 000-22101
IAT MULTIMEDIA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3920210
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
Geschaftshaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi, Switzerland
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (011)(41)(56) 223-5022
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
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 voting and non-voting common equity held
by non-affiliates of the registrant as of the close of business on March 29,
1999 was approximately $34,934,047.
As of March 29, 1999, 9,809,132 shares of the registrant's Common Stock,
$0.01 par value (excluding treasury shares), were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
See the Exhibit Index hereto.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of our
executive officers and directors:
Name Age Position
- -------------------------------------------------------------------------------------------------------
Jacob Agam(3)..................................... 43 Chairman of the Board and Chief
Executive Officer
Klaus Grissemann(2)(3)............................ 56 Director and Chief Financial Officer
Nicolaas Hildebrand .............................. 49 Chief Operating Officer
Viktor Vogt(3).................................... 51 Director
Volker Walther(1)(2).............................. 38 Director
Erich Weber(1)(2)................................. 57 Director
Robert Weiss(1)(2)................................ 52 Director
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Underwriting Committee
Jacob Agam has served as our Co-Chairman of the Board since our
organization in October 1996 and became our Chairman and our Chief Executive
Officer in April 1998. Mr. Agam is a founder and Chairman of Orida Capital, a
merchant banking and venture capital firm, and the Chairman of Vertical
Financial Holdings, a principal stockholder of IAT Multimedia, 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 Multimedia. 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 an LLM degree in
securities and corporate finance from the University of Pennsylvania in 1986.
Klaus Grissemann has served as our Chief Financial Officer since our
organization in October 1996 and has served as a director since December 1996.
Mr. Grissemann joined IAT AG, a subsidiary of IAT Multimedia, in 1989 as Chief
Financial Officer and has served as a director of IAT AG since 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.
Nicolaas Hildebrand has served as our Chief Operating Officer since
February 1999. Prior to joining IAT Multimedia, Mr. Hildebrand served as the
Managing Director of Asys Holding. Prior to joining Asys in July 1996, Mr.
Hildebrand served as the General Manager, Central Europe for Compuware from May
1994 until September 1995 and Director of Marketing and Research and Development
for Wang Europe from January 1987 until February 1994.
DR. VIKTOR VOGT served as a Co-Chairman of the Board and our Chief
Executive Officer and President from our organization in October 1996 until
March 1998. Since April 1998, Dr. Vogt has served as a director of and a
consultant to IAT Multimedia. Dr. Vogt currently serves as President and is a
majority shareholder of Algo Vision Schweiz and Algo Vision Systems, the newly
formed corporations following the transfer of the business and certain of the
assets and liabilities of our Swiss subsidiary and one of our German
subsidiaries in March 1998. Dr. Vogt was a co-founder and served as Chief
Executive Officer and director of IAT AG and Managing Director of IAT
Deutschland GmbH Interaktive Mediem Systeme from their formations in 1989 and
1990, respectively, until March 1998. He also served as Chairman of the Board of
IAT AG from October 1996 to March 1998. 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.
VOLKER WALTHER has served as a director of IAT Multimedia since December
1996. Mr. Walther currently serves as Chief Executive Officer and is the
majority shareholder of Walther Glas GmbH, a glass manufacturing company in
Germany which produces household glassware and gift items. Prior to becoming the
Chief Executive Officer of Walther Glas GmbH in 1996, Mr. Walther served as
general manager from 1993 to 1996 and buying manager from 1991 to 1993. Mr.
Walther holds a degree in Business Administration from Ludwig
Maximilian-University in Munich.
DR. ERICH WEBER has served as a director of IAT Multimedia since June
1998, filling the vacancy created by the resignation of Arnold J. Wasserman. Dr.
Weber's expertise is in information automation. Dr. Weber has served in
management of Revi Informatik, a data processing consulting company, since 1992
following ten years as a partner and manager of electronic data processing
consulting of Revisuisse Price Waterhouse, Zurich. Prior thereto, he was a
department manager of infomatics for Migros Genossenschaftsbund and Alusuisse.
Dr. Weber earned his doctorate in Economic Science from the University of Zurich
in 1970.
ROBERT WEISS has served as a director of IAT Multimedia since June 1998,
filling the vacancy created by the resignation of Reiner Hallauer. In 1980 Mr.
Weiss founded Robert Weiss Consulting, an independent electrical engineering
consultancy, and has served as its President since 1980. Previously, he served
nine years as a consultant to Alusuisse in its headquarters and department of
research and development. Mr. Weiss received a degree in Chemistry from
Technical College Winterthur in 1970.
All directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualified; vacancies and any additional
positions created by board action are filled by action of the existing Board of
Directors. All officers serve at the discretion of the Board of Directors.
RIGHTS TO NOMINATE DIRECTORS
So long as Vertical holds at least 10% of the 1,875,000 shares of common
stock issued by us upon conversion of our Series A preferred stock in April 1997
or the 1,875,000 shares of common stock issuable upon exercise of the warrants
issued to certain of our stockholders, Vertical has the right, but not the
obligation, to nominate two persons as members of the management slate for
election to our Board of
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Directors. So long as Vertical holds at least 5% of the 1,875,000 shares of our
common stock issued by us upon conversion of our Series A preferred stock in
April 1997 or the 1,875,000 shares of common stock issuable upon exercise of the
warrants issued to certain of our stockholders, Vertical has the right, but not
the obligation to nominate one such person. Mr. Agam, our Chairman of the Board
and Chief Executive Officer, was nominated by Vertical. Vertical has the right
to nominate a second director to the Board of Directors. The existence of such
rights increases the control over us by Vertical. See "Certain Relationships and
Related Transactions -- Stock Purchase Agreement and Related Transactions."
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee
The Audit Committee consists of Messrs. Walther, Weber and Weiss. The
primary functions of the Audit Committee are to recommend engagement of our
independent public accountants and to maintain communications among such
independent accounts, the Board of Directors and our internal accounting staff
with respect to accounting and audit procedures, the implementation of
recommendations by such independent public accountants, the adequacy of our
internal controls and related matters.
Compensation Committee
The Compensation Committee consists of Messrs. Walther, Grissemann, Weber
and Weiss. The principal functions of the Compensation Committee are to review
the management organization and development, review significant employee benefit
programs, including bonus plans, stock option and other equity-based programs,
deferred compensation plans and any other cash or stock incentive programs and
advise the Board accordingly.
Underwriting Committee
The Board of Directors has appointed Mr. Agam, Dr. Vogt and Mr. Grissemann
to the Underwriting Committee. Under the provisions of the Stock Purchase
Agreement, the Underwriting Committee shall consist of four members with two
members appointed by each of Vertical and us. Vertical appointed Mr. Agam and
has not yet named its second nominee to the Underwriting Committee. Mr. Agam
serves as the Chairman of the Underwriting Committee. The Underwriting Committee
is vested with full and exclusive responsibility and authority on our behalf to
select an underwriter and to negotiate all of the terms and conditions of any
underwriting. 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 full Board of Directors provided that the resolution of any such issue by
the Board of Directors shall not be effectuated without the written consent of
Vertical.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and officers and persons who own more than 10% of a class of our
equity securities which are registered under the Exchange Act to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes of ownership of such registered securities. To our knowledge, based
solely on a review of the copies of such reports furnished to us and on
representations that no other reports were required, no person required to file
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such a report failed to file on a timely basis during fiscal 1998, except that a
report on Form 5 reporting the sale in May 1998 of shares of our common stock by
Volker Walther, a director of IAT Multimedia, was filed by Mr. Walther in
February 1999 and a report of Form 3 reporting the election of each of Erich
Weber and Robert Weiss to our Board of Directors in June 1998 was filed by each
of Dr. Weber and Mr. Weiss in September 1998.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth the aggregate
compensation paid or accrued by us to Viktor Vogt, our Chief Executive Officer
until April 1998 and Jacob Agam, our Chief Executive Officer since April 1998,
one of our other executive officers whose annual compensation exceeded $100,000
for fiscal 1998 who was serving as an executive officer at December 31, 1998 and
two executive officers who were no longer serving in such capacity at December
31, 1998 for services rendered during the fiscal years ended December 31, 1998,
1997 and 1996:
SUMMARY COMPENSATION TABLE
for the Years Ended December 31, 1998, 1997 and 1996
Annual Compensation(1) Long-Term Compensation
-------------------------------------- --------------------------------------------
Restricted Securities
Other Annual Stock Underlying All other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Awards(s) Options(#) Compensation ($)
- --------------------------- ---- ---------- --------- ---------------- --------- ---------- ----------------
Jacob Agam(2)
Chairman and Chief
Executive Officer............ 1998 25,000 0 -- -- -- --
Viktor Vogt(3)
Co-Chairman, Chief Executive
Officer and President........ 1998 70,655 0 4,377(4) -- 75,000 --
2,336(5)
1997 136,458 10,000 16,965(4) -- -- --
9,387(5)
1996 120,833 -- 15,178(4) -- -- --
9,325(5)
Klaus Grissemann (6)
Chief Financial Officer...... 1998 144,845 0 8,731(5) -- 50,000 --
25,000 (9)
1997 142,083 -- 8,792(5) -- -- --
1996 136,163 -- 8,792(5) -- -- --
Franz Muller(7)
Chief Technical Officer of
IAT AG....................... 1998 0 -- -- -- -- --
1997 95,632 -- 7,774(4) -- -- --
8,633(5)
1996 87,299 -- 7,729(4) -- -- --
8,633(5)
Alfred Simmet(8)
Chief Operating Officer
of FSE....................... 1998 56,818 -- -- -- 25,000 --
1997 22,066 -- -- -- -- --
- -----------------
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(1) Compensation is paid in Swiss Francs or German Deutsche Marks and is
converted into U.S. dollars at the exchange rate of $1.00 = 1.44 SF and
$1.00 = 1.775DM for 1996 and 1997 and $1.00 = 1.45 SF for 1998.
(2) Mr. Agam served as Co-Chairman of the Board since our organization in 1996
and became the sole Chairman and Chief Executive Officer in April 1998.
For 1998, represents amounts accrued from September 1, 1998 to December
31, 1998, all of which was paid in 1999. Under an employment agreement
effective September 1, 1998, Mr. Agam is entitled to an annual salary of
$75,000 per year plus certain other benefits. Excludes $123,000 and
$144,000 paid to Vertical as compensation for the services of Jacob Agam,
our Chairman, during 1997 and 1998, respectively. See "-- Director
Compensation" and "-- Employment Contracts and Termination of Employment
and Change-In-Control Arrangements."
(3) Dr. Vogt resigned as our Co-Chairman, President and Chief Executive
Officer as of April 1, 1998 in connection with our restructuring in March
1998. Includes $36,000 paid to Dr. Vogt for services rendered in 1998 as a
consultant to IAT Multimedia and FSE. See "-- Employment Contracts and
Termination of Employment and Change-In-Control Arrangements" and "Certain
Relationships and Related Transactions -- Spinoffs."
(4) Pursuant to the pension system in existence in Switzerland, we contribute
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.
(5) Represents payments made by us for automobile leases.
(6) Mr. Grissemann is not directly employed by IAT Multimedia. His services
are provided on a per diem basis by Grissemann Consulting S.A. See "--
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements."
(7) Mr. Muller was the Chief Technical Officer of IAT AG until March 1998 when
he resigned from his position with IAT AG. Salary accrued from January 1,
1998 through March 31, 1998 was assumed by Algo Vision Schweiz in
connection with our restructuring in March 1998. See "-- Employment
Contracts and Termination of Employment and Change-In-Control
Arrangements" and "Certain Relationships and Related Transactions --
Spinoffs."
(8) Dr. Simmet became the Chief Operating Officer of FSE Computer-Handel GmbH
& Co. on November 13, 1997 in connection with our acquisition of FSE. Dr.
Simmet waived his rights to a portion of his salary during 1998.
Dr. Simmet's compensation in 1997 represents amounts accrued from
November 13, 1997 to December 31, 1997, all of which was paid in 1997.
Dr. Simmet resigned as the Chief Operating Officer of FSE effective
December 31, 1998. See "-- Employment Contracts and Termination of
Employment and Change-In-Control Arrangements" and "Certain Relationships
and Related Transactions -- Simmet Purchase Agreement."
(9) Consists of a payment to Mr. Grissemann for services rendered in
connection with the acquisition of Columbus Computer Handels-und
Vertriebs. See "-- Employment Contracts and Termination of Employment and
Change-In-Control Arrangements."
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OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
granted to our named executive officers during the fiscal year ended December
31, 1998. No stock appreciation rights were granted to these individuals during
such year.
Individual Grants
----------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates
Number of Percent of of Stock Price
Securities Total Options Exercise Appreciation For
Underlying Granted to or Base Option Term(1)
Options Employees in Price Expiration --------------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ----------- ------ ---- ------ -------
Jacob Agam -- -- -- -- -- --
Victor Vogt (2) 50,000(3) 28.6 $5.00 3/11/03 69,070 152,628
25,000(4) 14.3 $6.00 4/16/03 41,442 91,577
Klaus Grissemann 50,000(5) 28.6 $6.00 4/16/08 188,668 478,123
Franz Muller (6) -- -- -- -- -- --
Alfred Simmet (7) 25,000(5) 14.3 $6.00 4/16/03 94,334 239,061
(1) Calculated by multiplying the exercise price by the annual appreciation
rate shown (as prescribed by the SEC rules) and compounded for the term of
the options, subtracting the exercise price per share and multiplying the
gain per share by the number of shares covered by the options. These
amounts are not intended to forecast possible future appreciation, if any,
of the price of our common stock. The actual value realized upon exercise
of the options will depend on the fair market value of our common stock on
the date of exercise.
(2) Dr. Vogt resigned as an executive officer of IAT Multimedia effective
April 1, 1998. See "-- Employment Contracts and Termination of Employment
and Change-In-Control Arrangements."
(3) The options are exercisable in equal annual installments of one-third on a
cumulative basis commencing from the date of grant.
(4) The options are all exercisable in full commencing from the date of grant.
(5) The options are exercisable in equal annual installments of 50% on a
cumulative basis commencing from the date of grant.
(6) Mr. Muller resigned as an executive officer of IAT Multimedia effective
April 1, 1998. See "-- Employment Contracts and Termination of Employment
and Change-In-Control Arrangements."
(7) Dr. Simmet resigned as an executive officer of IAT Multimedia effective
December 31, 1998 and as a result these options have terminated. See "--
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements."
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information with respect to the
exercise of stock options during fiscal 1998 by our named executive officers and
the number and value of unexercised options held by each of our named executive
officers as of December 31, 1998:
Number of Securities Under- Value of Unexercised
lying Unexercised Options at In-the- Money Options at
Fiscal Year-End (#) Fiscal Year-End ($)(1)
----------------------------- -------------------------------
Shares
Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
Jacob Agam -- -- -- -- -- --
Victor Vogt (2) -- -- 41,666 33,334 -- --
Klaus Grissemann -- -- 25,000 25,000 -- --
Franz Muller (3) -- -- -- -- -- --
Alfred Simmet (4) -- -- 12,500 12,500 -- --
- -----------------
(1) None of the options outstanding at December 31, 1998 were exercisable at
below $4.25, the market price of our common stock December 31, 1998.
(2) Dr. Vogt resigned as an executive officer of IAT Multimedia effective
April 1, 1998 but remaining a director and consultant to IAT Multimedia.
As a result, his options did not terminate as a result of his resignation
as an executive officer. See "-- Employment Contracts and Termination of
Employment and Change-In-Control Arrangements."
(3) Mr. Muller resigned as an executive officer of IAT Multimedia effective
April 1, 1998. See "-- Employment Contracts and Termination of Employment
and Change-In-Control Arrangements."
(4) Dr. Simmet resigned as an executive officer of IAT Multimedia effective
December 31, 1998 and as a result these options have terminated. See "--
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements."
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Agam
We entered into an employment agreement effective as of September 1, 1998
with Mr. Agam under which Mr. Agam has agreed to serve as our Chief Executive
Officer for a three year term expiring September 1, 2001. Under the employment
agreement, Mr. Agam is entitled to an annual salary of $75,000 per year, plus a
bonus to be approved by the Board of Directors. If the employment agreement is
terminated by us without cause, Mr. Agam is entitled to receive his base salary
for a period of one year following the date of termination.
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Dr. Vogt
We entered into an employment agreement effective as of March 1, 1997 with
Dr. Vogt (which, as noted below, terminated as of April 1, 1998) and governed by
Swiss law under which Dr. Vogt agreed to serve as our Co-Chairman, Chief
Executive Officer and President originally for a three year term subject to
extension. The employment agreement provided that Dr. Vogt was to receive
approximately $140,000 in annual salary (based upon a fixed exchange rate of SF
1.35 = $1.00), a non-accountable expense allowance of approximately $8,333 (SF
12,000) and pension fund contributions, as well as a cash bonus in the amount of
one half of one percent of our net sales in excess of $5.0 million provided that
such cash bonus would not be less than $10,000, and other customary fringe
benefits. In addition, Dr. Vogt was eligible to receive stock options for a
number of shares of our common stock to be determined by the Stock Option
Committee. The employment agreement with Dr. Vogt also contained a provision
prohibiting Dr. Vogt from competing with us for a period of two years from the
date of expiration of his employment. During the two year non-competition
period, we are required to compensate Dr. Vogt for the difference between his
salary 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. In the
event we subsequently waive our rights under the non-competition provision, no
compensation would be due to Dr. Vogt upon termination. The employment agreement
provided 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 us of his functions and duties at any time
provided that all compensation continues to be paid until the expiration of the
employment agreement.
In connection with our reorganization in March 1998, Dr. Vogt resigned
from his positions as our Co-Chairman, Chief Executive Officer and President and
from management positions in our subsidiaries and the employment agreement
described above terminated as of April 1, 1998. Dr. Vogt continues to be a
director. In April 1998, we entered into a three-year consulting contract with
Dr. Vogt under which Dr. Vogt agreed to provide us with his services with
respect to (i) evaluation and analysis of technology issues, (ii)
identification, evaluation and integration of acquisitions for us and (iii) such
other matters as the Board of Directors may request and to which Dr. Vogt may
agree. In connection with such consulting agreement, Dr. Vogt is entitled to
receive $2,000 per month plus reimbursement of his reasonable expenses. No other
compensation is due to Dr. Vogt under the terminated employment agreement. In
March 1998, Dr. Vogt entered into a consulting agreement with FSE to participate
in the integration of FSE with us for which FSE will pay Dr. Vogt $2,000 per
month, plus reimbursement of reasonable expenses, for such services. In March
1998, Dr. Vogt received options to purchase 50,000 shares of our common stock in
connection with our reorganization in March 1998. See "Certain Relationships and
Related Transactions -- Spinoffs."
Mr. Grissemann
Mr. Grissemann's services are provided to us on a per diem basis by
Grissemann Consulting S.A. pursuant to an agreement, dated September 1, 1992,
and amended on December 19, 1994, between IAT AG and Grissemann Consulting S.A.
This agreement has an indefinite term and provides that Mr Grissemann is
responsible for the administration and accounting of IAT Multimedia and that the
amount of his business time which he is to devote to our affairs is to be agreed
among the parties but shall not be less than 30% of Mr. Grissemann's business
time. Grissemann Consulting S.A. is paid a fee of SF 775 (approximately $538)
per day to be amended yearly in line with increases in salary of our other
executive officers plus expenses of an automobile to be provided to Mr.
Grissemann. In July 1998, we further amended the agreement to provide for
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a payment to Mr. Grissemann for services provided by him in connection with our
acquisitions or financings. The amount to be paid to Mr. Grissemann for such
services in any year will not exceed $50,000. In 1998, we paid $25,000 to Mr.
Grissemann for services provided in connection with our acquisition of Columbus.
Mr. Muller
Franz Muller and IAT AG entered into an employment agreement on March 1,
1991 under which Mr. Muller was appointed Director of Product Development
(Hardware), Technical Support of IAT AG. The Agreement had an indefinite term
and provided for a base annual salary of SF 110,110 (approximately $81,500),
subject to increases in our discretion, which have been made from time to time,
and could be terminated by either party upon six months notice at the end of the
calendar year. In addition, the agreement contained a confidentiality provision
which extends beyond termination of the employment relationship. The agreement
was amended effective as of July 1, 1993 to provide that Mr. Muller assigned to
IAT AG any and all rights to work and computer programs which he developed
singly or in cooperation with others during the performance of his duties. In
connection with our reorganization in March 1998, our rights and obligations
under the agreement were transferred to Algo Vision Schweiz. See "Certain
Relationships and Related Transactions -- Spinoffs."
Dr. Simmet
On November 12, 1997, FSE entered into an employment agreement with Dr.
Alfred Simmet pursuant to which Dr. Simmet served as the Chief Operating Officer
of FSE. Dr. Simmet was entitled to a gross monthly salary of DM 25,000
(approximately $14,085), and reimbursement for travel, other business-related
expenses and expenses of an automobile provided to Dr. Simmet. The employment
agreement also provided that, in the event Dr. Simmet is temporarily prevented
from performing his managerial duties through no fault of his own, FSE shall pay
his full salary for up to a period of six months. The employment agreement was
for a term of two years and could be terminated by either party upon six months
notice, effective at the end of the calendar year. Dr. Simmet is subject to a
non-competition clause which prohibits Dr. Simmet from either directly or
indirectly competing with us and FSE's current operations in those territories
in which we and FSE are currently active until December 31, 2001. Dr. Simmet
resigned as the Chief Operating Officer of FSE effective December 31, 1998.
Mr. Hildebrand
We entered into an employment agreement effective as of February 1, 1999
with Mr. Hildebrand under which Mr. Hildebrand has agreed to serve as our Chief
Operating Officer until January 31, 2000. The term of employment may be extended
until January 31, 2002 if agreed to by us and Mr. Hildebrand. Following such
period, if extended, the agreement will automatically renew for successive two
year terms unless terminated by either party. Under the employment agreement,
Mr. Hildebrand is entitled to an annual salary of DM 240,000 (approximately
$136,000), reimbursement for travel and other business related expenses and an
annual bonus of 3% of the consolidated earnings before interest, taxes,
depreciation and amortization of FSE and Columbus. During the first year of the
agreement, Mr. Hildebrand is entitled to a minimum bonus of DM 60,000
(approximately $34,000). Under the employment agreement, Mr. Hildebrand received
options to purchase 60,000 shares of our common stock.
-9-
DIRECTOR COMPENSATION
Our directors currently do not receive any compensation as such, but
directors who are not also our executive officers are reimbursed for expenses
incurred in connection with their service on the Board of Directors. We may
establish different compensation policies in the future. Under the terms of the
Stock Purchase Agreement between us and Vertical, Vertical currently receives a
monthly payment of $12,000 as compensation for the services of our Chairman
nominated by Vertical. Jacob Agam is the current nominee of Vertical. During
fiscal 1998, Vertical received $144,000 as consideration for Mr. Agam's services
as our Chairman. See "Certain Relationships and Related Transactions -- Stock
Purchase Agreement and Related Transactions."
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1998 ("fiscal 1998"), our
Compensation Committee consisted of Messrs. Walther, Grissemann, Weber and
Weiss, none of whom is a current or former employee or officer of IAT Multimedia
or any of our subsidiaries, except Mr. Grissemann who, while not our employee,
provides the services of a Chief Financial Officer and is indirectly compensated
by us. See "-- Employment Contracts and Termination of Employment and
Change-In-Control Arrangements."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
our common stock as of April 29, 1999 by (i) each of our directors, (ii) each of
our executive officers named under "Executive Compensation," (iii) each person
known by us to own beneficially more than five percent of our outstanding common
stock, and (iv) all of our executive officers and directors as a group. Unless
otherwise indicated, the address of these directors and officers is c/o IAT
Multimedia, Inc., Geschaftshaus Wasserschloss, Aarestrasse 17, CH-5300
Vogelsang-Turgi, Switzerland. Beneficial ownership is defined in accordance with
the rules of the SEC and generally means the power to vote and/or to dispose of
the securities regardless of any economic interest therein. In computing number
and percentage ownership of shares of our common stock beneficially owned by a
person, shares of common stock subject to options held by that person that are
exercisable within 60 days are deemed outstanding. Such shares of our common
stock, however, are not deemed outstanding for purposes of computing the
percentage ownership of stockholders other than such person.
We have been advised that Vertical owns equity interests in Behala
Anstalt, Lupin Investments Services Ltd. and Henilia Financial Ltd. and that
Vertical has agreements with third party investors in each such entity. These
entities beneficially own an aggregate of 660,526 shares of common stock and
890,151 shares of common stock issuable upon exercise of warrants. These equity
interests and agreements entitle Vertical to varying percentages of the profits
resulting from the sale of the shares of each of these entities. Under
agreements with each of these entities, the trustee of each such entity has
voting and dispositive power over the shares held by that entity, although
Vertical retains the right to appoint or terminate the appointment of the
trustee.
-10-
Percentage of
Number of Shares Shares
Name and Address Beneficially Beneficially Owned
of Beneficial Owner Owned (%)
- ----------------------------------------------------------- ---------------- ------------------
Jacob Agam(1).............................................. ------ ------
Klaus Grissemann........................................... 239,395 (2) 2.4%
Alfred Simmet.............................................. 146,949 (3) 1.5
Viktor Vogt................................................ 227,938 (4) 2.3
Volker Walther(5).......................................... 940,750 (6) 9.5
Franz Muller(7)............................................ 0 *
Erich Weber................................................ 0 (8) *
Robert Weiss .............................................. 0 (8) *
Behala Anstalt(9).......................................... 592,804 (10) 5.9
Lupin Investments Services Ltd.(11)........................ 592,804 (12) 5.9
Klaus-Dirk Sippel(13)...................................... 1,055,923 (14) 10.3
Richard Suter(15).......................................... 721,551 (16) 7.2
Vertical Financial Holdings Establishment(17).............. 1,580,304 (18) 15.0
All executive officers and directors of the
Company as a group (7 persons)....................... 1,403,083 (19) 14.1%
- ---------------
* Less than 1%
(1) Jacob Agam, our Chairman and Chief Executive Officer, is the Chairman
of the Board of Vertical Financial Holdings Establishment, a company
organized under the laws of Liechtenstein, which beneficially owns
1,580,304 shares of common stock. Pursuant to an agreement between
Orida Capital Ltd. and Vertical, Orida has the right to receive a
portion of the profits from the sale of the shares of common stock held
by Vertical. Mr. Agam is the Chairman of Orida. Excludes an aggregate
of 660,526 shares of our common stock and 890,151 shares of our common
stock issuable upon exercise of warrants held by Behala Anstalt, Lupin
Investment Services Ltd. and Henilia Financial Ltd. Mr. Agam disclaims
beneficial ownership of the shares held by Vertical, Behala, Lupin and
Henilia.
(2) Includes:
o 15,151 shares of common stock which are held in escrow but in
respect of which Mr. Grissemann retains the power to vote; and
o 50,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days.
See "Certain Relationships and Related Transactions -- Escrow Shares."
(3) Dr. Simmet resigned as an officer of IAT Multimedia effective December
31, 1998.
(4) Includes:
o 69,605 shares of common stock which are held in escrow but in
respect of which Dr. Vogt retains the power to vote; and
-11-
o 58,333 shares of common stock issuable upon exercise of
options that are exercisable within 60 days. Excludes 16,667
shares of common stock issuable upon exercise of options that
are not exercisable within 60 days.
See "Certain Relationships and Related Transactions -- Escrow Shares."
(5) Volker Walther's address is Pohlweg 44, D-33098, Paderborn.
(6) Includes:
o 831,985 shares of common stock held by Walther Glas GmbH of
which Mr. Walther is the majority shareholder, of which 12,495
shares of common stock are held in escrow but in respect of
which Walther Glas GmbH retains the power to vote;
o 58,765 shares of common stock which are held in escrow but in
respect of which Mr. Walther retains the power to vote; and
o 50,000 shares of common stock issuable upon exercise of
options that are exercisable within 60 days.
See "Certain Relationships and Related Transactions -- Escrow Shares."
(7) Mr. Muller resigned as an officer of IAT Multimedia in April 1998.
(8) Excludes 10,000 shares of common stock issuable upon the exercise of
options that are not exercisable within 60 days.
(9) The address of Behala Anstalt is Heiligkreuz 6, PL-9490 Vaduz,
Liechtenstein.
(10) Includes:
o 296,402 shares of common stock issuable upon exercise of
warrants beneficially owned by Behala Anstalt and exercisable
within 60 days; and
o 23,712 shares of common stock which are held in escrow but in
respect of which Behala Anstalt retains the power to vote.
See "Certain Relationships and Related Transactions -- Escrow Shares."
(11) The address of Lupin Investments Services Ltd. is P.O. Box 3186, Road
Town, Tortola, British Virgin Islands.
(12) Includes:
o 296,402 shares of common stock issuable upon exercise of
warrants beneficially owned by Lupin Investments Services Ltd.
and exercisable within 60 days; and
o 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 "Certain Relationships and Related Transactions -- Escrow Shares."
(13) The address of Klaus-Dirk Sippel is Tannenweg 2, CH-5415 Nussbaumen,
Switzerland.
-12-
(14) Includes:
o 398,864 shares of common stock issuable upon exercise of
warrants beneficially owned by Klaus-Dirk Sippel and
exercisable within 60 days; and
o 56,565 shares of common stock which are held in escrow but in
respect of which Mr. Sippel retains the power to vote.
Excludes 76,941 shares sold in October 1996 by Mr. Sippel to Mr. Jurgen
Henning. While Mr. Sippel does not have any voting or dispositive power
with respect to these shares, an agreement between Messrs. Sippel and
Henning provides that Mr. Sippel will share in the proceeds of the sale
of Mr. Henning's shares. See "Certain Relationships and Related
Transactions -- Escrow Shares."
(15) Richard Suter's address is Lendikerstrasse 25, CH-8484 Weisslingen,
Switzerland.
(16) Includes:
o 198,864 shares of common stock issuable upon exercise of
warrants beneficially owned by Richard Suter and exercisable
within 60 days; and
o 45,815 shares of common stock which are held in escrow but in
respect of which Mr. Suter retains the power to vote. See
"Certain Relationships and Related Transactions -- Escrow
Shares."
(17) The address of Vertical Financial Holdings Establishment is
Hombrechtikerstrasse 61, CH-8640 Rapperswil, Switzerland.
(18) Includes:
o 690,152 shares of common stock issuable upon exercise of
warrants beneficially owned by Vertical and exercisable within
60 days; and
o 71,212 shares of common stock which are held in escrow but in
respect of which Vertical retains the power to vote.
Excludes an aggregate of 660,526 shares of common stock and 890,151
shares of common stock issuable upon exercise of warrants held by
Behala Anstalt, Lupin Investments Services Ltd. and Henilia Financial
Ltd. Vertical has the right to receive a percentage of the proceeds
from the sale of shares by these entities. Also excludes 69,605 shares
of common stock owned by Dr. Vogt in which Vertical does not have any
voting or dispositive power. However, under an agreement between
Vertical and Dr. Vogt, Vertical has the right to receive a portion of
the proceeds of the sale of these shares by Dr. Vogt. See "Certain
Relationships and Related Transactions -- Escrow Shares."
(19) Includes:
o 156,016 shares of common stock which are held in escrow but in
respect which the officers and directors retain the power to
vote; and
o 158,333 shares of common stock issuable upon exercise of
options that are exercisable within 60 days.
Excludes 36,667 shares of common stock issuable upon exercise of
options that are not exercisable within 60 days. Also excludes shares
of common stock beneficially owned by:
o Dr. Simmet who resigned as officers of IAT Multimedia; and
o Vertical, of which Mr. Agam is Chairman of the Board.
-13-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDER LOANS AND GUARANTEES
On November 6, 1996, Mr. Sippel 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 by IAT AG 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 Mr. Sippel. The loan by Mr. Sippel to IAT AG
had an annual interest rate of 8% and principal and accrued interest was repaid
in February 1998.
On December 19, 1995, HIBEG, the then 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 loan accrued interest at 5% per
annum payable semi-annually and the interest rate was to be increased to 10% per
annum during the year when the retained earnings of IAT Germany exceeded DM
87,500 (approximately $56,300). IAT Germany was required to make semi-annual
payments of 10% of the principal starting on June 30, 2000 until the principal
was repaid in full. This loan was assumed by Algo Vision Systems in our
reorganization in March 1998. See "-- Spinoffs."
Mr. Sippel and Richard Suter, each a principal stockholder of IAT
Multimedia, jointly and severally guaranteed two bank loans from Swiss Bank
Corporation to IAT AG each in the amount of SF 600,000 (approximately $444,400)
prior to our organization in September 1996. Each of Messrs. Sippel, Suter and
Cornelius Holthuizen, a stockholder of IAT Multimedia, jointly and severally
guaranteed a bank loan from Swiss Bank Corporation to IAT AG in the amount of SF
700,000 (approximately $518,500) under IAT AG's credit agreement with Swiss Bank
Corporation for an aggregate of SF 1,900,000 (approximately $1.4 million). IAT
AG's line of credit with the Swiss Bank Corporation was reduced to the aggregate
principal amount of SF 1,300,000 (approximately $900,000), and we agreed with
Swiss Bank Corporation to repay IAT AG's credit line in monthly installments of
approximately $140,000, the first installment of which was made on October 31,
1997. In connection with the agreement between us and Swiss Bank Corporation
pursuant to which we agreed to repay IAT AG's credit line installments, we were
assigned the rights of Swiss Bank Corporation under the guarantees of Messrs.
Sippel, Suter and Holthuizen. Under an agreement dated as of December 22, 1997
between us and Messrs. Sippel, Suter and Holthuizen, Messrs. Sippel, Suter and
Holthuizen sold 50,000, 50,000 and 20,000 shares of our common stock,
respectively, in March 1998 and we received approximately $494,000 from the
proceeds of such sales which was used to repay the credit line with Swiss Bank
Corporation. As a result, the guarantees of Messrs. Sippel, Suter and Holthuizen
were released.
IAT Germany obtained a line of credit from Volksbank Sottrum in January
1996 in the amount of DM 1,050,000 (approximately $675,000). IAT AG, HIBEG and
Dr. Vogt each guaranteed DM 350,000 (approximately $225,000) of this line of
credit. Amounts outstanding under this line of credit were assumed by Algo
Vision Systems in our reorganization in March 1998. See "-- Spinoffs."
All amounts in U.S. dollars were converted based on the exchange rate
in effect at the time of the respective transaction.
-14-
STOCK PURCHASE AGREEMENT AND RELATED TRANSACTIONS
Under a stock purchase agreement among us, IAT AG, IAT Germany and
Vertical dated October 4, 1996, we sold an aggregate of 1,875,000 shares of
Series A preferred stock and warrants to purchase 1,875,000 shares of common
stock to Vertical, Behala Anstalt, Lupin Investments Services Ltd., Henilia
Financial Ltd. and Avi Suriel for an aggregate purchase price of $1.5 million or
$.80 per share of our Series A preferred stock (attributing no value to the
warrants).
Upon consummation of our initial public offering in April 1997 all
outstanding shares of the Series A preferred stock were converted into shares of
common stock.
Under the Stock Purchase Agreement, 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 us to select an underwriter
and to negotiate all of the terms and conditions of any such underwriting. 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, 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 until October 24,
1999 we shall pay to Vertical monthly compensation of $12,000 for the services
of our Chairman nominated by Vertical. Jacob Agam is the current nominee of
Vertical. During fiscal 1998, Vertical received $144,000 as full compensation
for the services of Mr. Agam, our Chairman. We also agreed that, for so long as
Vertical shall hold the common stock issued upon conversion of its Series A
preferred stock or upon exercise of the warrants held by Vertical, the
composition of the Board of Directors of IAT AG and IAT Germany shall be
identical to the composition of our Board of Directors and shall not be changed
without Vertical's consent; provided that, consent shall not be withheld if
required to comply with Swiss law.
We further agreed in the Stock Purchase Agreement that we 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 us and Vertical that
IAT AG shall remain our direct or indirect wholly-owned subsidiary and IAT
Germany shall remain our direct or indirect subsidiary.
Amendment No. 1 to the Stock Purchase Agreement, effective as of
December 19, 1997, provides that Vertical shall not enter into an agreement or
make any investment in an entity engaged in the video conferencing business
without first providing us the opportunity to enter into such agreement or make
such investment instead of Vertical.
In connection with the Stock Purchase Agreement, we also entered into
an investor rights agreement with Vertical which provides that Vertical has the
right to nominate as a member of the management slate for election to the Board
of Directors one or two persons for so long as Vertical holds at least 5% or
10%, respectively, of the 1,875,000 shares of common stock issued by us upon
conversion of our Series A preferred stock in April 1997 or the 1,875,000 shares
of common stock issuable upon exercise of the warrants. As of April 29, 1999,
Vertical held 850,152 of such shares of common stock and held warrants to
purchase 690,152 shares of common stock. We agreed that one such person shall be
elected Chairman of the Board of Directors. Vertical has nominated, and our
stockholders have elected Jacob Agam as a director, and Vertical nominated
-15-
and Mr. Agam was elected as our Chairman. Vertical has the right to nominate a
second director. The Investor Rights Agreement further provides for one demand
and two piggy-back registration rights for the shares of common stock held by
Vertical and issuable upon exercise of warrants held by Vertical. Vertical
exercised such demand for its common stock in February 1999 and we registered
for resale shares of our common stock held by Vertical and certain other
stockholders.
We also entered into a marketing agreement with General Capital, an
affiliate of Vertical. The Marketing Agreement provides that General Capital
will assist us in connection with marketing our products worldwide, arranging
debt or equity financing for our products to be purchased by our customers, and
arranging financing for our operations, leasing programs, joint ventures and
distribution arrangements, in each case for the further enhancement of our
marketing strategy. The Marketing Agreement has a five year term expiring on
October 26, 2001. Under the Marketing Agreement, we paid in October 1996
$100,000 and the remaining $400,000 was paid with a portion of the proceeds of
our initial public offering in April 1997.
ESCROW SHARES
Prior to our initial public offering our then stockholders deposited an
aggregate of 498,285 shares of common stock into escrow in connection with our
initial public offering. The escrow shares are not assignable or transferable.
All of the escrow shares shall be released if, for the fiscal year ending
December 31, 1999, our minimum revenues equal or exceed $12.0 million and our
income before provision for taxes equal or exceeds $1.0 million. All of the
escrow shares will also be released from escrow if one or more of the following
remaining conditions is met:
o the average of the closing bid prices of our common stock for
any 30 consecutive trading days commencing March 26, 1999
exceeds $13.00 per share; or
o we are acquired by or merged into another entity commencing
March 26, 1999 in a transaction in which the value of the per
share consideration received by our stockholders (after giving
effect to the release of shares from escrow) on the date of
such transaction exceeds $13.00 per share.
The minimum revenues and minimum income amounts set forth above shall
be:
o derived solely from the business owned and operated by us at
the time of the IPO and shall not give effect to any
operations relating to businesses or assets acquired after
April 1, 1997;
o calculated exclusive of any extraordinary earnings including,
but not limited to, any charge to income resulting from the
release of the escrow shares; and
o audited by our 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 IAT Multimedia.
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 our capital. We expect that the release of the escrow shares to our officers,
directors, employees and consultants 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 our net income for
financial reporting purposes for the
-16-
period during which such shares are, or become probable of being, released from
escrow. Although the amount of compensation expense recognized by us will not
affect our total stockholders' equity, it may have a negative effect on the
market price of our common stock.
The minimum revenues and minimum income amounts and closing bid price
levels set forth above were determined by negotiation between us and the
underwriters in our initial public offering and should not be construed to imply
or predict any future earnings by us or any increase in the market price of our
common stock.
SIMMET PURCHASE AGREEMENT
In November 1997, we purchased 100% of the capital stock of the general
partner of FSE and 80% of the limited liability company shares of FSE for an
aggregate purchase price of approximately $3.7 million, of which approximately
$2.8 million was paid in cash and approximately $900,000 was paid in shares of
our common stock. Dr. Simmet retained a 20% ownership interest in FSE. Pursuant
to the provisions of the transaction documents, Dr. Simmet had the right, under
certain circumstances, to receive from us an aggregate amount of approximately
$1,000,000, which amount represents the retained earnings of FSE prior to the
acquisition of FSE by us. During 1998, Dr. Simmet received approximately
$150,000 of such amount. Dr. Simmet resigned as an officer effective December
31, 1998 and, as a result, the remaining approximately $850,000 owed to Dr.
Simmet by us was applied to reduce the amounts owed by Dr. Simmet to us under
the guarantee discussed below. During 1998, Dr. Simmet elected not to receive
a portion of his salary from FSE.
In connection the FSE acquisition, Dr. Simmet guaranteed to refund a
portion of the purchase price paid by us for FSE if the earnings before
interest, income taxes, depreciation and amortization (EBITDA) of FSE for the
fiscal year ended December 31, 1998 did not reach certain targets. The EBITDA of
FSE for the fiscal year ended December 31, 1998 did not reach such targets and
as a result, Dr. Simmet owed us approximately $1.5 million. In February 1999, we
entered into a purchase agreement with Dr. Simmet under which Dr. Simmet agreed
to pay us the $1.5 million and we agreed to purchase Dr. Simmet's remaining 20%
interest in FSE by December 31, 2000. The $1.5 million owed to us by Dr. Simmet
was reduced by $920,000, which represented the remainder of the retained
earnings of FSE owed to Dr. Simmet by us, as discussed above, and pension
contributions owed to Dr. Simmet. The remaining approximately $580,000 is owed
by Dr. Simmet to us and will be credited towards the purchase price for the FSE
shares which we agreed to purchase from Dr. Simmet. The purchase price for a
portion of the FSE shares, which we have agreed to purchase as of either
December 31, 1999 or December 31, 2000, will be based upon the operating results
of FSE for the fiscal year ending December 31, 1999 and the purchase price for
the remaining shares of FSE, which we have agreed to purchase as of December 31,
2000 will be based upon the operating results of FSE for the fiscal year ending
December 31, 2000. If the purchase price for the FSE shares is less than
$580,000 then Dr. Simmet will pay us the difference between $580,000 and the
purchase price for the FSE shares. If the purchase price for the FSE shares is
greater than $580,000 then we will pay Dr. Simmet the difference between the
purchase price for the FSE shares and $580,000.
-17-
SPINOFFS
German Restructuring. In March 1998, we transferred the business and
substantially all of the assets and the liabilities (other than intercompany
accounts) of one of our majority-owned German subsidiaries, IAT Germany, to a
newly formed German company, Algo Vision Systems. IAT Germany had provided our
research and development and was responsible for sales and marketing in Germany
of our visual communications technology. We own a 15% interest in Algo Vision
Systems. The transfer was given economic effect at January 1, 1998.
In connection with the restructuring, HIBEG transferred all of its
approximately 25% interest in IAT Germany to IAT AG for a purchase price of DM
175,700 (approximately $100,000), and IAT Germany became a wholly-owned
subsidiary of IAT AG.
In connection with this transaction, we contributed approximately
$650,000 to Algo Vision Systems, which represented the excess of the book value
of the assumed liabilities over the assets transferred. We also provided Algo
Vision Systems with a working capital loan of approximately $300,000, of which
$160,000 plus interest was repaid in 1998 and the remaining $140,000 plus
interest was repaid in April 1999. Algo Vision Systems assumed substantially all
of the liabilities of IAT Germany (other than intercompany amounts). IAT Germany
represented and warranted that the liabilities assumed by Algo Vision Systems
were not to be more than the assets transferred to Algo Vision Systems and IAT
Germany agreed to pay Algo Vision Systems an amount equal to the nominal value
of such additional shortfall. We have no further obligation to make future
contributions to Algo Vision Systems.
Algo Vision Systems has also assumed all rights and obligations under a
credit agreement dated December 19, 1995 between HIBEG, as creditor, and IAT
Germany, as debtor, relating to a loan in the aggregate principal amount of DM
750,000 (approximately US $430,000).
IAT Germany agreed not to compete for a period of five years with the
present core business of Algo Vision Systems (systems, system kits and software
system solutions for visual communications) within Germany.
Swiss Restructuring. In March 1998, we also transferred the business
and certain of the assets and liabilities of IAT AG, other than, among others,
our intellectual property and the ownership interests in IAT Germany, to Algo
Vision Schweiz, a newly formed Swiss corporation. We own a 15% interest in Algo
Vision Schweiz. The transfer was given economic effect at January 1, 1998.
Algo Vison Schweiz gave IAT AG a three year note, denominated in U.S.
Dollars, with an aggregate principal amount equal to the book value of the
transferred assets less the book value of the assumed liabilities as of January
1, 1998 plus the pro-rata portion of any prepaid expenses and any portion of the
liabilities assumed by Algo Vision Schweiz which were paid by IAT AG prior to
the closing date of the transaction. The note has an aggregate principal amount
of approximately $325,000, which will be reduced by the amount of certain
expenses of IAT AG to be paid by Algo Vision Schweiz. The note bears interest at
the rate of 3% per annum, payable semi-annually on March 1 and September 1
commencing September 1, 1998. The note will be due and payable in March 2001.
The note may be pre-paid at any time without penalty.
-18-
We loaned Algo Vision Schweiz $250,000 which is evidenced by a note
from Algo Vision Schweiz. This note bears interest at the rate of 3% per annum,
payable semi-annually on March 1 and September 1 commencing September 1, 1998.
This note will be due and payable on the earlier of (i) March 2001 and (ii) the
date on which Algo Vision Schweiz closes one or more funding transactions
resulting in issuance of Algo Vision Schweiz's (A) debt with an aggregate
principal amount of SF 1,000,000 or more, (B) capital stock for consideration of
SF 1,000,000 or more, or (C) any combination of (A) or (B) amounting to SF
1,000,000 or more. The loan may be pre-paid at any time without penalty. The
Company has no further obligation to make future contributions to Algo Vision
Schweiz.
At the time of the transaction, an entity controlled by Dr. Vogt loaned
Algo Vision Schweiz $250,000. The loan bears interest at the rate of 3% per
annum, payable semi-annually on March 1 and September 1 commencing September 1,
1998. The loan will be due and payable on the third anniversary of the closing
date of the transaction. The loan may be pre-paid at any time without penalty;
provided, however, that the loan may not be paid prior to the time that the
loans by us to Algo Vision Schweiz are paid in full. The loan by Dr. Vogt to
Algo Vision Schweiz is subordinated to the loans made by us to Algo Vision
Schweiz.
In connection with the restructuring, we maintained our ownership of
all intellectual property developed for our visual communications products but
granted Algo Vision Schweiz a non-exclusive five-year license to use our
intellectual property for multimedia and compression/decompression applications.
Algo Vision Schweiz has the right to grant sublicenses to Algo Vision Systems
and other affiliates. In most cases, the royalty varies between 10% and 20% of
the sales price of the software sold. Algo Vision Schweiz has a five-year option
to purchase a 50% co-ownership of our intellectual property for $1 million. Upon
the exercise of such option, the royalty paid by Algo Vision Schweiz to us would
be cut in half and we would pay Algo Vision Schweiz half of the royalties
received by us from third-parties. In addition, after exercise of the option,
Algo Vision Schweiz can grant sub-licenses to third-parties or transfer the
license or co-ownership interest, in each case subject to our consent.
In connection with our restructuring, Dr. Vogt resigned from his
positions as our Co-Chairman, Chief Executive Officer and President and from
management positions in our subsidiaries.
We have had discussions with Algo Vision Systems and Algo Vision
Schweiz relating to our potential sale to these entities of:
o our 15% equity interest in each of these entities; and
o our visual communications intellectual property rights.
Our discussions proposed that in exchange for our sale of these assets,
we would receive:
o cash;
o an equity interest in a new entity which will continue the
operations of Algo Vision Systems and Algo Vision Schweiz; and
o reduced royalty and license fees for a period of time
following such sale.
The terms of any proposed transaction have not been finalized and are
subject to certain financing and other contingencies. We cannot predict whether
this proposed transaction will be consummated on terms favorable to us or at
all.
-19-
LEASE
We sublease a portion of approximately 4,600 square feet of office
space in New York, New York from an affiliate of our Chairman and Chief
Executive Officer. This lease terminates in January 2002 and has annual rental
cost of $100,000, which amount includes administrative and office services.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with each of our executive
officers and have granted options to certain of our executive officers. See
"Executive Compensation -- Employment Contracts and Termination of Employment
and Change-in-Control Arrangements."
-20-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
An index to Consolidated Financial Statements appears on page F-1.
2. Schedules
All financial statement schedules are omitted because they are not applicable,
not required under the instructions or all the information required is set forth
in the financial statements or notes thereto.
(b) Reports on Form 8-K
We filed a report on Form 8-K on January 11, 1999 reporting information under
Item 5.
(c) Exhibits
Exhibit Number Description
- -------------- ------------
3.1 - Amended and Restated Certificate of Incorporation of the Registrant (1)
3.1(a) - Amended and Restated Certificate of Incorporation (10)
3.2 - Amended and Restated By-laws of the Registrant
4.1 - Form of Warrant Agreement (1)
4.2 - Form of Underwriter's Warrant (1)
4.3 - Warrant issued to Vertical Financial Holdings (one in a series of warrants with identical terms) (1)
4.4 - Warrant issued to Stockholders (one in a series of warrants with identical terms) (1)
4.5 - Escrow Agreement (1)
10.1 - Participation Agreement dated as of March 5, 1998 by and among Communication Systems, IAT AG, Dr.
Viktor Vogt, and HIBEG (5)
10.2 - Spinoff Agreement dated as of March 5, 1998 by and among IAT GmbH and Communications Systems (5)
10.3 - Agreement concerning the Assignment and Transfer of Corporate Shares dated as of March 5, 1998 by and
among HIBEG, IAT GmbH, and IAT AG (5)
10.4 - Loan Transfer Agreement dated as of March 5, 1998 by and among HIBEG, IAT GmbH, and
Communications Systems (5)
10.5 - Option Agreement dated as of March 5, 1998 by and among Dr. Viktor Vogt and HIBEG (5)
10.6 - Spinoff Agreement dated as of March 11, 1998 by and among the Company, Dr. Viktor Vogt, and Swiss
Newco (5)
10.7 - Transfer Agreement dated as of March 11, 1998 by and among the Company, IAT AG, Dr. Viktor Vogt,
and IAT Communications AG (5)
10.8 - Agreement on the Acquisition of Assets dated as of March 18, 1998 between IAT AG and Swiss Newco (5)
10.9 - Restructuring Agreement dated as of March 5, 1998 by and among IAT GmbH, IAT AG, Dr. Vogt and
HIBEG (5)
10.10 - Amendment to the Transfer Agreement dated as of March 24, 1998 by and among the Company, IAT AG,
Dr. Viktor Vogt and IAT Communication AG (6)
10.11 - Promissory Note dated March 24, 1998 by IAT Communication AG to the Company (6)
10.12 - Promissory Note dated March 24, 1998 by IAT Communication AG to Dr. Viktor Vogt (6)
10.13 - Promissory Note dated March 24, 1998 by IAT Communication AG to IAT AG (6)
10.14 - Cooperation Agreement, dated March 18, 1996, by and between Olympus Optical (Europe) GmbH and IAT
Deutschland GmbH (1)
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10.15 - Loan Agreement for Current Account Credit Lines between IAT Deutschland GmbH and Volksbank
Sottrum AG (1)
10.16 - Agreement, dated September 1, 1992, by and between Grissemann Consulting SA and IAT AG (1)
10.17 - Addendum to the Agreement of September 1, 1992, dated December 14, 1994, by and between Grissemann
Consulting SA and IAT AG (1)
10.18 - Employment Contract, dated as of July 1, 1993, by and between IAT, IAG and Mr. Franz Muller (1)
10.19 - 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 (1)
10.20 - 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 (1)
10.21 - Letters of Consent dated December 20, 1996 (1)
10.22 - Registration Rights Agreement, dated February 27, 1997, between the Company, Vertical Financial
Holdings and Viktor Vogt (1)
10.23 - Amendment No. 1 to the Joint Development and Cross License Agreement, dated June 2, 1997, between
Texas Instruments Incorporated and IAT AG (2)
10.24 - Registration Rights Agreement, dated February 27, 1997, between the Company, Vertical Financial
Holdings, and Klaus-Dirk Sippel (1)
10.25 - License Agreement, dated June 2, 1997, between Texas Instruments Incorporated and IAT AG (2)
10.26 - Registration Rights Agreement, dated February 27, 1997 between the Company, Vertical Financial
Holdings, and Walter Glas GmbH (1)
10.27 - Purchase Agreement, dated November 13, 1997, by and between IAT Multimedia, Inc. and Dr. Alfred
Simmet (3)
10.28 - Irrevocable Letter of Credit and Indemnity, dated November 7, 1997, by and between IAT Multimedia, Inc.
and Citibank, N.A. (3)
10.29 - Consulting Agreement, dated July 18, 1997, by and between IAT Multimedia, Inc. and Arnold J. Wasserman
(4)
10.30 - Amendment to Consulting Agreement between the Company and Arnold J. Wasserman, dated March 2,
1998. (7)
10.31 - Retainment Agreement, dated August 25, 1997, by and between IAT Multimedia, Inc. and Reiner Hallauer
(4)
10.32 - Stock Option Agreement for Arnold J. Wasserman, dated July 18, 1997, by and between IAT Multimedia,
Inc. and Arnold J. Wasserman (4)
10.33 - Stock Option Agreement for Reiner Hallauer, dated August 25, 1997, by and between IAT Multimedia, Inc.
and Reiner Hallauer (4)
10.34 - Management Contract, dated as of November 13, 1997, by and between FSE Computer Handel-Verwaltungs
GmbH and Dr. Alfred Simmet (4)
10.35 - Credit Agreement, dated as of February 5, 1996, by and between IAT AG and Swiss Bank Corporation (4)
10.36 - Agreement by and between Swiss Bank Corporation and IAT Multimedia, Inc. (4)
10.37 - License Agreement, dated as of July 2, 1997, by and between IAT AG and Proton Communications
Technologies Inc. (4)
10.38 - License Agreement, dated as of July 23, 1997, by and between IAT AG and Sony Electronics Inc. (4)
10.39 - Consent of Sony Electronics Inc. (4)
10.40 - License Agreement, dated as of June 12, 1997, by and between IAT Multimedia, Inc. and Precision Digital
Images Corporation (4)
10.41 - Development Agreement, dated as of June 20, 1997, by and between IAT Multimedia, Inc, and Precision
Digital Images Corporation (4)
10.42 - Letter of Intent, dated November 18, 1997, by and between Olympus Co. (Europe) GmbH and IAT
Deutschland GmbH (4)
10.43 - Annex to the OKI Semiconductor Gate Array, Standard Cell, Macrocell Products Development and
Purchase Agreement, dated as of June 5, 1997, by and among IAT Multimedia, Inc., Precision Digital
Images Corporation and OKI Semiconductor (4)
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10.44 - Settlement Agreement, dated November 12, 1997, by and between IAT Deutschland GmbH, IAT
Multimedia, Inc. and Mr. Wilhelm Gudauski (4)
10.45 - Letter of Termination from Deutsche Telekom (4)
10.46 - Letter of Termination from IBM Deutschland (4)
10.47 - Agreement dated as of December 22, 1997 by and among Richard Suter, Klaus-Dirk Sippel and Cornelius
Holthuizen, IAT AG and IATMultimedia, Inc. (4)
10.48 - Amended and Restated Agreement dated as of December 22, 1997 by and among Richard Suter, Klaus-Dirk
Sippel and Cornelius Holthuizen, IAT AG and IAT Multimedia, Inc. (4)
10.49 - Amendment No. 1 to Stock Option Agreement for Arnold J. Wasserman (4)
10.50 - Amendment No. 1 to Stock Option Agreement for Reiner Hallauer (4)
10.51 - Securities Purchase Agreement, dated as of June 19, 1998, by and among IAT Multimedia, Inc., JNC
Opportunity Fund Ltd. and JNC Strategic Fund, Ltd. (8)
10.52 - Registration Rights Agreement, dated as of June 19, 1998, by and among IAT Multimedia, Inc., JNC
Opportunity Fund Ltd. and JNCStrategic Fund, Ltd. (8)
10.53 - 5% Convertible Debenture due 2008, dated as of June 19, 1998, issued by IAT Multimedia, Inc. (8)
10.54 - Form of Warrant, attached as exhibit to Securities Purchase Agreement (exhibit 10.51 hereto) (8)
10.55 - Agreement dated October 27, 1998 between Registrant and Axel Hundt, the sole shareholder of Columbus
Handels-und Vertrieb GmbH & Co. KG and Columbus Handels-und Vertrieb GmbH (9)
10.56 - Exchange Agreement dated as of December 31, 1998 by and among the Registrant, JNC Opportunity Fund
Ltd. and JNC Strategic Fund Ltd. (10)
10.57 - Executive Employment Agreement dated as of September 1, 1998 between IAT AG and Jacob Agam (11)
10.58 - Employment Agreement dated as of February 18, 1999 between IAT AG and Nico Hildebrand (11)
10.59 - Sublease Agreement dated as of January 29, 1999 between the Registrant and Petrini, N.V. for offices
located at 70 East 55th Street, New York, New York 10022 (11)
10.60 - Purchase Agreement dated February 12, 1999 between the Registrant and Dr. Alfred Simmet (11)
10.61 - Amendment dated July 1, 1998 to Agreement dated September 1, 1992 between Grissemann Consulting SA
and IAT AG
21.1 - List of Subsidiaries of Registrant (11)
27.1 - Financial Data Schedule (11)
<FN>
(1) Incorporated by reference to the Company's Registration Statement on Form S-1 (Reg. No. 333-18529) as filed
on December 23, 1996, as amended
(2) Incorporated by reference to the Company's Quarterly Report on Form 10-Q as filed on November 14, 1997
(3) Incorporated by reference to the Company's Current Report on Form 8-K as filed on November 26, 1997
(4) Incorporated by reference to the Company Registration Statement on Form S-1 (Reg. No. 333-41835) as filed
on December 10, 1997 as amended
(5) Incorporated by reference to the Company's Current Report on Form 8-K as filed on March 20, 1998
(6) Incorporated by reference to the Company's Current Report on Form 8-K/A as filed on April 3, 1998
(7) Incorporated by reference to the Company's Annual Report on Form 10-K as filed on April 15, 1998
(8) Incorporated by reference to the Company's Current Report on Form 8-K as filed on July 1, 1998
(9) Incorporated by reference to the Company's Quarterly Report on Form 10-Q as filed on November 15, 1998
(10) Incorporated by reference to the Company's Current Report on Form 8-K as filed on January 11, 1999
(11) Incorporated by reference to the Company's Annual Report on Form 10-K as filed on March 31, 1999
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SIGNATURES
In accordance with 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.
Dated: April 30, 1999 IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
------------------------------
Jacob Agam
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Jacob Agam
- ------------------------
Jacob Agam Chairman of the Board of Directors April 30, 1999
and Chief Executive Officer
(principal executive officer)
/s/ Klaus Grissemann
- ------------------------
Klaus Grissemann Chief Financial Officer and Director April 30, 1999
(principal accounting and financial officer)
/s/ Nicolaas Hildebrand
- ------------------------
Nicolaas Hildebrand Chief Operating Officer April 30, 1999
/s/ Volker Walther
- ------------------------
Volker Walther Director April 30, 1999
/s/ Viktor Vogt
- ------------------------
Viktor Vogt Director April 30, 1999
/s/ Robert Weiss
- -------------------------
Robert Weiss Director April 30, 1999
/s/ Erich Weber
- ------------------------
Erich Weber Director April 30, 1999