<PAGE> 1
As filed with the Securities and Exchange Commission
on July 25, 1996
Registration No. 33-____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
THE TRANSLATION GROUP, LTD.
(Name of small business issuer in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
7389
(Primary Standard Industrial Classification Code Number)
22-3382869
(I.R.S. Employer Identification No.)
7703 Maple Avenue
Pennsauken, New Jersey 08109
609-663-8600
(Address and telephone number of registrant's principal
executive offices and principal place of business)
CHARLES CASCIO
c/o The Translation Group, Ltd.
7703 Maple Avenue
Pennsauken, New Jersey 08109
609-663-8600
(Name, address and telephone number,
of agent for service)
Copies to:
<TABLE>
<S> <C> <C>
RICHARD F. HOROWITZ, ESQ. MICHAEL BECKMAN, ESQ. CHARLES PEARLMAN, ESQ.
IRVING ROTHSTEIN, ESQ. Beckman & Millman, P.C. ROXANNE K. BEILLY, ESQ.
Heller, Horowitz & Feit, P.C. 116 John Street Atlas, Pearlman, Trop &
292 Madison Avenue New York, New York 10038 Borkson, P.A.
New York, New York 10017 Telephone: (212) 227-6777 New River Center, Suite 1900
Telephone: (212) 685-7600 Facsimile: (212) 227-1486 200 East Las Olas Boulevard
Facsimile: (212) 696-9459 Fort Lauderdale, Florida 33301
Telephone: (954) 763-1200
Facsimile: (954) 523-1952
</TABLE>
<PAGE> 2
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the registration statement
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
Proposed
Maximum Proposed
Offering Maximum
Title of Each Class Amount Price Per Aggregate Amount of
of Securities to be To Be Security Offering Registration
Registered Registered Price (1) Fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 Par Value(2) 1,295,000 $ 3.00 $ 3,885,000 $1,339.55
Common Stock Purchase Warrants(3) 1,725,000 $ .20 $ 345,000 $ 118.96
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 Par Value(4)(11) 1,725,000 $ 4.00 $ 6,900,000 $2,379.12
- --------------------------------------------------------------------------------------------------------------------------
Representative's Securities (5)(11) 100,000 $ .40 $ 250 $ .09
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 Par Value(6)(11) 110,000 $ 3.60 $ 396,000 $ 136.54
Common Stock Purchase Warrants(6)(11) 150,000 $ .24 $ 36,000 $ 12.41
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 Par Value(7)(11) 150,000 $ 4.80 $ 720,000 $ 248.26
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 Par Value(8) 441,000 $ 3.00 $ 1,323,000 $ 456.17
- --------------------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants(9)(11) 300,000 $ .20 $ 60,000 $ 20.69
- --------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 Par Value(10) 300,000 $ 4.00 $ 1,200,000 $ 413.76
- --------------------------------------------------------------------------------------------------------------------------
Total $14,865,250 $5,125.54
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
ii
<PAGE> 3
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to rule 457 under the Securities Act of 1933.
(2) Includes up to 195,000 shares of Common Stock which may be purchased by the
Representative to cover over-allotments, if any.
(3) Includes up to 225,000 redeemable Common Stock Purchase Warrants which may
be purchased by the Representative to cover over-allotments, if any.
(4) Reserved for issuance upon exercise of the Common Stock Purchase Warrants.
(5) Issued to the Representative entitling the Representative to purchase one
share of Common Stock ("Representative's Stock Warrants") and one Common
Stock Purchase Warrant ("Representative's Warrants") for each ten of such
securities sold in the offering.
(6) Reserved for issuance upon exercise of Representative's Securities.
(7) Reserved for issuance upon exercise of the Warrants underlying the
Representative's Warrants.
(8) Represents shares of Common Stock offered by Selling Security Holders.
(9) Represents Warrants offered by Selling Security Holders.
(10) Reserved for issuance upon exercise of Selling Security Holders' Warrants.
(11) Pursuant to Rule 416, there is also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
of the Warrants or the Unit Purchase Option.
The registrant hereby amends the registration statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall
become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
iii
<PAGE> 4
THE TRANSLATION GROUP, LTD.
Cross Reference Sheet Showing Location in Prospectus of Information Required
Therein by Items 1 through 23 of Form SB-2
<TABLE>
<CAPTION>
REGISTRATION STATEMENT PROSPECTUS CAPTION
ITEM AND HEADING OR LOCATION
---------------------- ------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus............................................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................................ Inside Front/Outside Front
Cover Page
3. Summary Information and Risk
Factors........................................................... Prospectus Summary,
Risk Factors
4. Use of Proceeds................................................... Use of Proceeds
5. Determination of Offering Price................................... Cover Page, Risk Factors,
Underwriting
6. Dilution.......................................................... Dilution
7. Selling Security Holders.......................................... Selling Security Holders
8. Plan of Distribution.............................................. Underwriting
9. Legal Proceedings................................................. Business
10. Directors, Executive Officers, Promoters and
Control Persons................................................... Management
11. Security Ownership of Certain Beneficial Owners
and Management.................................................... Security Ownership of Certain
Beneficial Owners and
Management
12. Description of Securities......................................... Description of Securities
13. Interests of Named Experts and Counsel............................ Legal Matters
14. Disclosure of Commission Position
on Indemnification for Securities Act
Liabilities....................................................... Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C> <C>
15. Organization Within Last Five
Years............................................................. Business, Certain Relationships
and Related Transactions,
Executive Compensation
16. Description of Business........................................... Business
17. Management's Discussion and Analysis or Plan of
Operation......................................................... Management's Discussion and
Analysis and Plan of Operation
18. Description of Property........................................... Business
19. Certain Relationships and Related
Transactions...................................................... Certain Relationships and
Related Transactions
20. Market for Common Equity and Related
Stockholders Matters.............................................. Description of Securities
21. Executive Compensation............................................ Executive Compensation
22. Financial Statements.............................................. Consolidated Financial
Statements
23. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure............................ Not Applicable
</TABLE>
v
<PAGE> 6
SUBJECT TO COMPLETION
DATED JULY 18, 1996
-----------------
THE TRANSLATION GROUP, LTD.
----------------------
1,300,000 SHARES OF COMMON STOCK AND
1,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
The Translation Group, LTD. (the "Company") offers hereby 1,300,000
shares of Common Stock, $.001 par value (the "Common Stock") at a price of $3.00
per share, and 1,500,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") at a price of $.20 per Warrant each of which, upon exercise,
entitles the owner thereof to purchase one share of Common Stock during the
three years following the date hereof at a price of $4.00 per share. The Common
Stock and the Warrants offered hereby (collectively, the "Securities") will be
separately tradeable immediately upon issuance and may be purchased separately.
Beginning one year from the date hereof unless earlier permitted by the
representative, the Warrants may be redeemed, at $.25 per Warrant, on thirty
day's prior written notice at any time after the closing sale or bid price for
the Common Stock closes at no less than $6.00 per share for a period of twenty
consecutive trading days as reported on the principal exchange on which the
Common Stock is traded. The Common Stock and Warrants are expected to trade
separately on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") as small cap issues under the symbols TTGL and
TTGLW, respectively. Even if the securities are listed on NASDAQ, no assurance
can be given that an active trading market will develop, or if developed, will
be sustained. See "Description of Securities."
Prior to this Offering, there has been no public market for the Common
Stock or Warrants and there can be no assurance that such a market will develop
after the completion of this Offering. The offering price of the Common Stock
and the exercise price of the Warrants have been arbitrarily determined by the
Company and Werbel-Roth Securities, Inc., the representative of the Underwriters
(the "Representative") and bear no relationship to the Company's assets, book
value, results of operations or other generally accepted criteria of value.
Simultaneously herewith, the Company is also registering for sale on behalf of
certain selling security holders 241,000 shares of Common Stock held by such
selling security holders. The 1.3 Million shares of Common Stock being offered
hereby, includes 200,000 shares sold to the Representative by an executive
officer of the Company. This Prospectus also includes an additional 300,000
warrants owned by certain founders of the Company and two executive officers.
The holders of these warrants have agreed not to transfer the warrants or the
underlying Common Stock for eighteen months from the date of this Prospectus
without the consent of the Underwriters. The proceeds from the sale of such
441,000 shares and 300,000 warrants will not inure to the benefit of the
Company, but rather to such holders. See "Selling Security Holders."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION
AS DESCRIBED HEREIN. See "RISK FACTORS" and "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
<TABLE>
<CAPTION>
=============================================================================================================================
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share (3) $3.00 $.30 $2.70
- -----------------------------------------------------------------------------------------------------------------------------
Per Warrant $.20 $.02 $ .18
- -----------------------------------------------------------------------------------------------------------------------------
Total $4,200,000 $420,000 $3,240,000
=============================================================================================================================
</TABLE>
(1) Does not include additional compensation to the Representative in the
form of (a) a non-accountable expense allowance of three percent of the
gross proceeds of this Offering ($.09 per share of Common Stock and
$.006 per Warrant) and (b) a Security, purchasable at a nominal price,
giving it the right to acquire 110,000 shares of Common Stock at an
initial exercise price of $3.60 per share (the "Representative's Stock
Warrants") and 150,000 Warrants at an initial exercise price of $.24
per Warrant to purchase shares of Common Stock at $4.80 per share (the
"Representative's Warrants," and collectively with the Representative's
Stock Warrants, the "Representative's Securities"). In addition, the
Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act") and to retain the Representative as a financial
consultant for the three years following the closing of this Offering
for a fee of 1% of the gross proceeds of the Offering to the Company
(including the over-allotment if exercised) payable at closing. See
"Underwriting."
(2) Only includes the securities offered on behalf of the Company and not
the securities offered on behalf of selling security holders who will
pay their own direct Underwriter's costs. Before deducting estimated
expenses of $373,000 payable by the Company ($391,900 if the
over-allotment option is exercised in full), including the
Underwriters' expense allowance of $108,000 ($126,900 if the
over-allotment option is exercised in full).
(3) For the purpose of covering over-allotments, if any, the Company has
granted to the Representative an option, exercisable within forty five
days of the date hereof, to purchase an additional 195,000 shares of
Common Stock and 225,000 Warrants upon the same terms and conditions as
the Securities offered hereby. If such over-allotment option is
exercised in full, the Total Price to Public will be $4,830,000, the
Total Underwriting Discount will be $483,000 and the Total Proceeds to
the Company will be $3,807,000. See "Underwriting."
WERBEL-ROTH SECURITIES, INC. MILLENNIUM SECURITIES CORP.
The date of the Prospectus is July __, 1996.
2
<PAGE> 8
The Company intends to furnish to its stockholders annual reports
containing audited financial statements examined and reported upon by an
independent certified public accounting firm. The Company's fiscal year end is
March 31. The Company has filed a Registration Statement on Form 8-A with the
Securities and Exchange Commission to register under, and be subject to the
reporting requirements of, the Securities Exchange Act of 1934.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMPANY'S SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Securities are being offered on a "firm commitment" basis subject
to receipt and acceptance of the Securities by the Representative, subject to
approval of certain legal matters by its counsel and subject to prior sale. The
Representative reserves the right to withdraw, cancel or modify the Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates representing the Securities will be made at the offices of the
Representative against payment therefor in New York funds, on or about
_________, 1996.
ADDITIONAL INFORMATION
The Company has filed with the headquarters office of the Securities
and Exchange Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549, a Registration Statement on Form SB-2 under the Securities Act of 1933
with respect to the securities offered hereby. This Prospectus filed as part of
such Registration Statement does not contain all the information set forth in,
or annexed as exhibits to, the Registration Statement. For further information
pertaining to the securities offered hereby and the Company, reference is made
to the Registration Statement and the exhibits thereto. The Registration
Statement and exhibits thereto may be inspected at the Headquarters Office of
the Securities and Exchange Commission located at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at certain of the Commission's regional offices
at the following addresses: 7 World Trade Center, 13th Floor, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may be obtained from the Public Reference Section of the SEC,
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. at prescribed rates. The
Commission also maintains a Web Site that contains reports, proxy and
information statements and other information regarding registrants such as the
Company, that file electronically with the Commission. This material can be
found at http://www.sec.gov.
3
<PAGE> 9
PROSPECTUS SUMMARY
Prospective investors should read this Prospectus carefully before
making any investment decision regarding the Company, and should pay particular
attention to the information contained in this Prospectus under the heading
"Risk Factors" and Financial Statements and related notes appearing elsewhere in
this Prospectus. In addition, prospective investors should consult their own
advisors in order to understand fully the consequences of an investment in the
Company.
The following summary does not purport to be complete and is qualified
by more detailed information appearing elsewhere in this Prospectus.
THE COMPANY
The Translation Group, Ltd. ("TTGL" or the "Company") translates
conventional documents and software written in one language into other
languages. The Company specializes as a provider of high tech translation and
localization services in the information technology ("IT") sector of the
translation market. Localization is the art of converting from one language to
another giving careful consideration to custom of the local area. The Company
believes that the worldwide translation market is at least a $20 billion per
year industry.
TTGL was incorporated in Delaware on July 7, 1995. It began
implementation of its consolidation program when it acquired the Bureau of
Translation Services, Inc., a Pennsylvania corporation formed in 1984 ("BTS"),
as a wholly owned subsidiary on January 17, 1996 through an exchange of stock.
BTS experienced significant growth in fiscal 1996 when its operating income
increased by 440% over fiscal 1995. No assurance can be given that such growth
can be replicated or even approached. See "Management's Discussion and Analysis
of Financial Conditions and Results of Operations."
In addition to its administrative offices located in Haddonfield, N.J.,
the Company maintains a center devoted specifically to Japanese translation in
Westmont N.J. and a facility in Wiesloch, Germany, managing European
translation. The Company's client list includes GE, ARCO, Brown & Williamson,
Caterpillar, Linotype-Hell, Quantum; and large computer hardware and software
companies such as Compaq, Compuware, Intel, Okidata, SAP, Dell, Syncro, Oracle
and Bentley Systems. The Company finds itself in the position of being selective
in accepting new clients and estimates that it currently accepts only one
project for every two projects presented to it.
In mid-1995, the Company entered into an agreement with debis
Systemhaus KSP-Kommerzielle Systeme und Projekte GmbH ("debis"), a division of
Daimler Benz AG. Under this agreement the Company obtained the license rights to
Keyterm, an innovative concept oriented proprietary database system running
under UNIX and Windows for developing and maintaining foreign language
glossaries. Keyterm has been in use in Germany for several years and is being
further developed, marketed and supported by the Company. In addition to
exclusive North America licensing rights, the Company is assuming and
maintaining the contract rights for current Keyterm customers in Europe.
4
<PAGE> 10
Clients of "debis" currently include major government agencies in Germany,
including the German Ministry of the Interior and Deutsche Telecom AG.
The process of localization for the information technology market is
highly labor intensive, with much of the hands on work being done by independent
translators. Through the agreement with "debis" and the integration of its own
proprietary software tools, the Company has been successful in the high tech
automating of approximately 70% of the translation process. The Company believes
that its process is quicker, more efficient and has given it a competitive edge
in the bidding, completion and turn around time of its projects. The Company is
working to further advance its automation and believes that its research and
development will enable it to achieve even higher levels of automated
translation.
The IT translation industry is dominated by small to medium size
companies, each with a handful of clients adapting IT products for global
markets. This is considered by the Company to provide substantial opportunities
for consolidation in this highly fragmented industry. The Company intends to
pursue a strategy which will enable it to expand its business through
identifying companies that fit the Company's consolidation guidelines, acquiring
these companies, and integrating such acquired operations into the Company's
existing operations. Management believes that such acquisitions will enable the
Company to achieve economies of scale, maintain its gross margins and eventually
become the largest pure translation company. The Company may retain senior
management of the acquired companies after the acquisition. Additionally, the
Company intends to expand its existing translation services and to continue to
research and develop more advanced technologies. There can be no assurances that
suitable acquisitions can be identified, consummated or successfully operated or
that the Company's goals will otherwise be achieved. The Company is currently
reviewing potential candidates for acquisition. However, it is not currently
conducting any negotiations for any such acquisitions.
The corporate offices of the Company are located at 7703 Maple Avenue,
Pennsauken, New Jersey 08109 and its telephone number is (609) 663-8600. The
administrative offices and facility are at 44 Tanner Street, Haddonfield, New
Jersey 08033 and its telephone number is (609) 795-8669.
RECENT DEVELOPMENTS
On June 25, 1996, the Company and Dr. Julius Cherny agreed to negotiate
the terms of an exclusive License Agreement or joint venture covering telephone
and computer uses in relation to a real-time completely automated machine
translation system for which a patent application has been filed by Dr. Cherny.
The proposed system would operate via standard telecommunications systems and
would have the ability to instantaneously translate voice from one language into
another. In addition, in return for financing the project, the Company would
also receive a right of first refusal for all other non-tranlation applications
covered by the patent application. It is currently estimated that a working
prototype could be produced in less than 24 months at a cost of approximately $5
million, although no assurance can be given of success. See "Business-Research
and Development".
5
<PAGE> 11
THE OFFERING
<TABLE>
<S> <C>
Securities Offered
Common Stock by the Company ................ 1,300,000 shares of Common Stock
Warrants by the Company(1).................. 1,500,000 redeemable Warrants.
Common Stock by Selling
Security Holders............................ 241,000 shares of Common Stock
Warrants by Selling Security
Holders..................................... 300,000 redeemable Warrants
Price Per Share...................................... $3.00
Price Per Warrant.................................... $.20
Common Stock Outstanding Before
Offering.................................... 2,452,000 shares(2)
Common Stock Outstanding After
Offering.................................... 3,552,000 shares (3)(4)
Comparative Common Stock
Ownership Upon Completion of
Offering
Present Shareholders
(2,252,000)(2) ............................ 63.4%
Public Shareholders
(1,300,000)(3)(4)........................... 36.6%
Estimated Net Proceeds............................... $2,867,000 ($3,415,100 if the over-
allotment option is exercised in
full), after deducting filing,
printing, legal, accounting and
miscellaneous expenses payable by the
Company estimated at $265,000.
Use of Proceeds...................................... To purchase advanced information
technology products and related
companies, and for general corporate
purposes, the development and
marketing of its products and for
working capital. See "Use of
Proceeds."
Proposed NASDAQ Symbols (5)
Common Stock................................ TTGL
Warrants.................................... TTGLW
</TABLE>
6
<PAGE> 12
- ------------------------------
(1) The Warrants will be exercisable at $4.00 per share for a period of
three years commencing on the date of this Prospectus. Beginning twelve
months after the date hereof (unless earlier permitted by the
Representative) the Warrants will be redeemable at $.25 per Warrant
upon the giving of thirty (30) days prior written notice and provided
that the price of the Common Stock has equaled or exceeded $6.00 for
twenty (20) consecutive trading days.
(2) Following give-back of an aggregate of 1,330,000 shares to the Company
by current stockholders immediately prior to this Offering.
(3) Assumes the Representative's over allotment option for 195,000 shares
is not exercised. See "Underwriting."
(4) Excludes (i) up to 1,500,000 shares of authorized but unissued Common
Stock reserved for issuance upon exercise of the Warrants included in
the Offering (ii) up to 110,000 shares of authorized but unissued
Common Stock issuable upon exercise of the Representative's Stock
Warrants; (iii) up to 150,000 shares of authorized but unissued Common
Stock issuable upon exercise of the Warrants underlying the
Representative's Warrants; (iv) up to an additional 420,000 shares of
Common Stock (including 225,000 shares of Common Stock underlying
warrants) issuable upon exercise of the Representative's over-allotment
option; (v) 340,000 shares of authorized but unissued Common Stock
reserved for issuance upon exercise of warrants previously issued; and
(vi) up to 2,500,000 shares of authorized but unissued Common Stock
reserved for issuance under the Company's Stock Plans. See "Description
of Securities" and "Underwriting."
(5) Even if the securities are listed on NASDAQ, no assurance can be given
that an active trading market will develop, or if developed, will be
sustained.
7
<PAGE> 13
SUMMARY OF FINANCIAL INFORMATION
The following has been summarized from the Company's financial
statements included elsewhere in this Prospectus. This information should be
read in conjunction with the financial statements and related notes thereto:
SUMMARY OF OPERATIONS:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1995 1996
---- ----
<S> <C> <C>
Total Revenues $2,149,135 $2,586,306
---------- ----------
Gross Profit 430,135 847,658
General Expenses
and Depreciation 299,627 264,180
---------- ----------
Operating Income 130,408 583,478
Non-operating expenses,
net 2,870 3,007
---------- ----------
Income before income
taxes 127,538 580,471
Provision for income taxes 69,852 232,600
---------- ----------
Net Income $ 57,686 $ 347,871
========== ==========
</TABLE>
SUMMARY BALANCE SHEET:
<TABLE>
<CAPTION>
MARCH 31, 1995 MARCH 31, 1996
-------------- --------------
Actual As Adjusted (1)
------ ---------------
<S> <C> <C> <C>
Current assets $359,528 $1,207,361 $4,074,361
Current liabilities 232,610 430,228 430,228
-------- ---------- ----------
Working capital 126,918 777,133 3,644,133
Total assets 426,743 1,438,832 4,305,832
Stockholder's equity 194,133 1,008,604 3,875,604
Book value per share $ .099 $ .411 $ 1.091
Shares outstanding (2) 1,970,000 2,452,000 3,552,000
</TABLE>
(1) Gives effect to the issuance of 1,100,000 shares of Common Stock and
1,500,000 Warrants and application of the estimated net proceeds
therefrom. Does not take into account exercise of the over-allotment
option, the Warrants, the 200,000 shares of Common Stock being sold by
an executive officer of the Company, or the Representative's
Securities. See "Use of Proceeds."
(2) Includes an aggregate of 1,330,000 shares returned to the Company by
various current stockholders.
8
<PAGE> 14
RISK FACTORS
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO, THE RISKS DESCRIBED BELOW.
BEFORE SUBSCRIBING FOR THE SECURITIES OFFERED HEREBY, EACH PROSPECTIVE INVESTOR
SHOULD CONSIDER CAREFULLY THE GENERAL INVESTMENT RISKS ENUMERATED ELSEWHERE IN
THIS PROSPECTUS AND THE FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS.
1. Special Factors Regarding the Company's Business. The following are
certain factors regarding the Company's business which investors in this
Offering should be aware.
- Continued High Growth. While the Company experienced
significant growth in fiscal 1996 (440% increase in
operating income), no assurance can be given that
even with projected growth due to the Company's
consolidation plans and other growth through
application of the proceeds of this Offering, that
the Company will be able to maintain or even
approximate such growth in the future.
- International Trade. Approximately 40% of the
Company's sales are to foreign markets. Such markets
may include areas of political instability, currency
valuation fluctuation, and local customs and habits.
- Evolving Technology. The Company's business is
concentrated in the high technology niche of the
translation industry. Thus, the Company is heavily
dependent upon its ability to adapt as the computer
and related software industries continue to develop
new products thereby causing current state of the art
technology to quickly become out of date. No
assurance can be given that the Company will be able
to expand or even continue in its niche.
- Reliance upon Software Marketing License. The Company
currently holds a five year exclusive marketing
license in North America to a product developed by
debis Systemhaus KSP ("debis"), a wholly-owned
subsidiary of Daimler-Benz, and a non-exclusive
license elsewhere. While the Company believes that
its relationship with debis is good, no assurance can
be given that the marketing license will always be
available to the Company or that the product, not yet
marketed in North America, will be commercially
successful.
2. Potential Need for Additional Financing. It is possible that
significant additional funding will be required following the Offering in order
for the Company to further expand the marketing of its services, to develop
technology and the licensing or sale thereof and to acquire other businesses
and/or technologies. Therefore, the Company will likely be required to raise
additional funds through alternative financing methods. There can be no
assurance that the Company will be able to obtain additional funding when
needed, or that such funding, if available, will be obtainable on terms
acceptable to the Company.
9
<PAGE> 15
3. Dependence on Key Personnel. The success of the Company depends in
part upon the continued successful performance of the Company's current Chief
Executive Officer and Chairman and its President and Chief Operating Officer for
the continued research, development, marketing and operation of the Company.
Although the Company has employed, and will likely employ in the future,
additional qualified employees as well as retaining consultants having
significant experience, if Ms. Theodora Landgren or Mr. Charles Cascio fail to
perform their duties for any reason, the ability of the Company to market,
operate and support its products may be adversely affected. While the Company
will own two year key man life insurance policies following the close of this
Offering in the face amount of $2,000,000 on the lives of each of Ms. Landgren
and Mr. C. Cascio, there can be no assurance that the insurance proceeds would
adequately compensate the Company for the loss of their lives. While the Company
is located in areas where the available pool of people is substantial, there is
significant competition for qualified personnel. See "Management".
4. Competition. Although the Company believes that the services it
provides are unique in several ways, and that the processes it uses have been
developed over a period of time and are part of its "trade secrets" and
"know-how" and are considered as its intellectual properties, Berlitz and AT&T,
among others, claim to provide similar services to those provided by the
Company, and other competitive products similar to its products are currently
being marketed. Moreover, there can be no assurance that there are no products
that would compete effectively with the Company's proposed products or that
other companies, many of which have financial resources, research and
development capabilities, marketing staffs and facilities greater than those of
the Company, are not currently developing, or in the future will not develop,
products that may have advantages over the Company's proposed products or that
may undercut what the Company believes are the advantages of the Company's
products. See "Business - Competition" and "Business Research and Development."
5. Patents and Protection of Proprietary Information. Currently, the
Company's services and work in tools (i.e., pieces of software that make the
translation quicker) are not protected by patents and/or copyrights and the
Company relies on its prior development activities that have resulted in a body
of information and processes that it has designated as "trade secrets" and
"know-how" and is considered as its intellectual property. However, the
commercial success of the Company may in the future depend, in part, upon the
ability of the Company to obtain strong patent protection. Accordingly, the
Company may file or cause to be filed on its behalf patent applications, where
appropriate, relating to new developments or improvements to technology or the
uses of products thereof. Given the importance of the proprietary information to
the Company, there are significant risks that the Company's failure to obtain
patent protection, preserve its trade secrets or operate without infringing upon
the proprietary rights of others may significantly and adversely effect the
Company. No assurance of obtaining patent protection can be given. There is also
no assurance that (i) any patents will be issued to the Company; (ii) any issued
patents will prove enforceable; or, (iii) the Company will derive any
competitive advantage therefrom. To the extent that any patents can not be
issued, the Company may be subject to more competition. The issuance of patents,
in some but not all aspects of a product, may be insufficient to prevent
competitors from essentially duplicating the product by designing
10
<PAGE> 16
around the patented aspects. In addition, there is no assurance that the
Company's products or processes will not infringe patents owned by others. In
any event, the Company will continue to rely on what it believes to be its
proprietary know-how. However, there can be no assurance that the obligation to
maintain the confidentiality of such proprietary information will not wrongfully
be breached by employees, consultants, advisors, suppliers or others, or that
the proprietary know-how will not otherwise become known or be independently
developed by competitors in such a manner that the Company has no practical
recourse.
6. Dependence on Principal Customers. For the year ended March 31,
1996, two of the Company's customers accounted for approximately 22% and 15%,
respectively, of the Company's sales, and for the year ended March 31, 1995,
four of the Company's customers accounted for approximately 43%, 28%, 6% and 5%,
respectively, of the Company's sales. Management believes that the Company's
prior concentration of sales will decline in the future as the Company
diversifies its customer base and especially following the start of the
Company's acquisition program. However, any significant decline in sales to the
Company's principal customers could have a material adverse effect on the
Company. See "Business."
7. Need to Increase Marketing Capability. In order to achieve continued
growth following the Offering, the Company will have to expand its marketing and
sales and develop a network of marketing and sales representatives and/or
acquire other companies. There can be no assurance that the Company will be able
to build such a marketing staff or sales force, that the cost of establishing
such a marketing staff or sales force will not exceed any product revenues, or
that the Company's direct sales and marketing efforts will be successful.
Similarly, there can be no assurance that the Company will be able to acquire
other companies or even if acquired, whether such acquisitions will be
beneficial to the Company. Alternatively, the Company may enter into
co-marketing or other licensing arrangements. To enter into co-marketing or
other licensing arrangements, the Company must establish and maintain corporate
relationships. There can be no assurance that such corporate relationships can
be established or maintained on terms acceptable to the Company, if at all. To
the extent the Company enters into co-marketing or other licensing arrangements,
any revenues received by the Company will be dependent on the efforts of third
parties, and there can be no assurance that such efforts will be successful.
Although the Company believes that future corporate partners, if any, will have
an economic motivation to commercialize any such products, the Company may not
have any control over such partners' commercialization efforts. See "Business -
Services and Clients."
8. Need of Support for International Expansion. One element of the
Company's strategy is to identify, develop and exploit opportunities in
international markets. The Company may seek to enter into an alliance with some
strategic partners to accomplish this objective and it is premature to determine
whether such alliances will eventuate, or be successful. There can be no
assurance that the Company will be able to locate strategic partners or that
such strategy ultimately will be successful. Alternatively, the Company's
international success will depend, in part, upon its own ability to provide its
international customers with technical support and customer service for its
products. The Company does not presently have the personnel to provide such
services in all locations. There can be no
11
<PAGE> 17
assurance that such services can be provided on acceptable terms, if at all.
Failure to provide such technical support and customer services could have a
material adverse effect on the Company's ability to expand into international
markets. See "Business."
9. Limited Liability Insurance. The marketing and sale of services of
the type proposed to be sold by the Company entails a risk of product liability
claims and claims of omission by consumers and others. While the Company has a
general policy of disclaiming liability arising from its work, the Company has
no liability insurance covering these areas. In the event of a successful
liability claim against the Company, lack of insurance coverage could have a
material adverse effect on the Company.
10. Dilution; Cheap Stock. Purchasers of the Common Stock (including
the shares underlying the Warrants) offered hereby will experience immediate and
substantial dilution in the net tangible book value of such shares of Common
Stock in that the net tangible book value of such shares will be substantially
less than the offering price per share of such shares. Specifically, the
investors in this Offering will experience immediate dilution of $1.91 per share
of Common Stock, or approximately 64% of the $3.00 Offering price. In addition,
since the current stockholders of the Company have acquired their respective
equity interests at a cost substantially below the Offering price, the public
investors will bear most of the risk of loss. See "Dilution."
11. Voting Control; Potential Anti-Takeover Effect; Voting Trust
Agreement. After the completion of this Offering, the executive officers and
directors of the Company will beneficially own approximately 28.97% of the
Company's outstanding Common Stock and, accordingly, will most likely be able to
elect all of the directors and, therefore, to control totally the Company's
affairs. In addition, the Company is subject to provisions of the General
Corporation Law of the State of Delaware respecting business combinations which
could, under certain circumstances, also hinder or delay a change in control.
Furthermore, Ms. Theodora Landgren, the President and Chief Operating Officer of
the Company has, including her own shares of Common Stock and pursuant to the
terms of a Voting Trust Agreement with certain of the founders of TTGL, voting
control over an aggregate of 810,000 shares of Common Stock (approximately 23%
of the shares of Common Stock following the Offering) for two years following
the date of this Prospectus. See "Security Ownership of Certain Beneficial
Owners and Management."
12. No Payment of Dividends. The Company has not paid any dividends on
its Common Stock. For the foreseeable future, the Company anticipates that all
earnings, if any, that may be generated from the Company's operations will be
used to finance the growth of the Company and that cash dividends will not be
paid to holders of the Common Stock. See "Description of Securities."
13. Arbitrary Determination of Offering Price and Warrant Exercise
Price. The offering price of the Common Stock and the exercise price of the
Warrants have been arbitrarily determined by negotiation between the Company and
the Representative and bears no relationship to the assets, book value,
operating or financial results or net worth of the Company or other generally
accepted criteria of value and should not be considered as indicating any
intrinsic value for the Securities. See "Underwriting."
12
<PAGE> 18
14. No Assurance of Public Market for the Common Stock or Warrants.
Prior to this Offering, there was no public market for the Common Stock or
Warrants, and there can be no assurance that such markets will develop or, if
developed, will be sustained after completion of this Offering. While the
Representative has informed the Company that it will endeavor to make a market
in the Common Stock and Warrants, there can be no assurance that a trading
market will develop or be sustained or that the securities offered hereby will
be saleable at or near their Offering price. In the event the Representative,
for any reason, ceases making a market in the Company's securities, the trading
market in the Company's securities will likely be materially adversely affected.
See "Underwriting."
While the Company expects the securities to be listed for
trading on NASDAQ, no assurance can be given that an active and liquid trading
market for the securities will develop or, if developed, will be sustained.
Moreover, no assurance can be given that the Company will meet the criteria for
maintaining a listing on NASDAQ. Currently, the NASDAQ maintenance criteria will
require the Company to have: (i) two registered and active market makers, (ii)
total assets of at least $2 million, (iii) minimum bid price per share of $1 or
a market value of public float of $1 million and $2 million in capital and
surplus, (iv) 300 stockholders, and (v) 100,000 shares held by non-insiders
which shares must have a market value of at least $200,000.
15. Exercise of Warrants Subject to Current Effective Registration and
Qualification. Any exercise of the Warrants must be made pursuant to a
prospectus which is current at the time of exercise. The Company is obligated to
file post-effective amendments to the registration statement containing a
prospectus which meets the "current prospectus" requirements. Assuming such
amendments were not required, this Prospectus would no longer be current after
July 31, 1997 (i.e., 16 months after the date of the certified financial
statements included herein). The Company will endeavor to maintain a current
effective registration statement under the Securities Act of 1933 relating to
the Common Stock issuable upon exercise of the Warrants. If the Company is
unable to maintain a current registration statement for any reason, the holders
of the Warrants will be unable to exercise them. Although the securities offered
hereby will not knowingly be sold to purchasers in jurisdictions in which they
are not registered or otherwise qualified for sale, purchasers may buy Warrants
in the aftermarket which may develop for the Warrants in, or purchasers of the
Warrants may move to, jurisdictions in which the shares of Common Stock
underlying the Warrants are not registered or qualified during the period when
the Warrants are exercisable. In such event, the Company would be unable to
issue shares to those persons desiring to exercise their Warrants unless and
until the shares could be registered or qualified for sale in jurisdictions in
which such purchasers reside, or an exemption to such qualification exists in
such jurisdictions. No assurance can be given that the Company will be able to
effect any required registration or qualifications. See "Description of
Securities - Warrants."
16. Possible Depressive Effect of Rule 144 Sales and Shares Currently
Held by Selling Security Holders. At the time of the completion of this
Offering, 2,011,000 unregistered Shares of the Company's Common Stock will be
held by present stockholders. Under Rule 144 of the Act, 1,770,000 of such
Shares are expected to be able to be publicly sold beginning July 7, 1997,
subject to volume restrictions (i.e. during any three month
13
<PAGE> 19
period an amount equal to the greater of the average weekly trading volume or 1%
of the then outstanding shares, or approximately 35,500 shares assuming only the
existing shares and the shares Common Stock offered hereby are outstanding). The
holders of such 1,777,000 shares have agreed not to make any Rule 144 sales for
a period of two years from the date of this Prospectus without the prior written
consent of the Representative. Also, up to 241,000 shares of Common Stock
currently held by certain security holders are being registered hereby and will
be available for sale, a further 241,000 shares of Common Stock will become
available for resale in January 1998, and 300,000 Warrants owned by certain
founders of the Company along with the underlying shares of Common Stock are
being registered hereby and will be available for resale 18 months after the
date of this Prospectus unless earlier permitted by the Underwriters. Any such
sales could have a depressive effect on the market price for the Common Stock
being offered hereby. See "Description of Securities - Shares Available for
Future Sale" and "Selling Security Holders."
17. Possible Issuance of Substantial Amounts of Additional Shares
Without Stockholder Approval. After this Offering (excluding the over-allotment
option), the Company will have an aggregate of 4,600,000 shares of Common Stock
authorized but unissued and reserved for issuance pursuant to (i) the Company's
Stock Plan, (ii) exercise of the Warrants being offered hereby, (iii) exercise
by the Representative of the Representative's Stock Warrants and the exercise of
the Warrants underlying the Representative's Warrants, and (vi) exercise of
currently outstanding warrants and an additional 6,848,000 shares of Common
Stock authorized but unissued and not reserved for specific purposes. All of
such shares may be issued without any action or approval by the Company's
stockholders. Although there are no other present plans, agreements, commitments
or undertakings with respect to the issuance of additional shares, or securities
convertible into any such shares by the Company, any shares issued would further
dilute the percentage ownership of the Company held by the public stockholders
and would likely have an adverse impact on the market price of the Common Stock.
In addition to the above referenced shares of Common Stock which may be issued
without stockholder approval, the Company has 1,000,000 shares of authorized
preferred stock. While the Company has no present plans to issue any shares of
preferred stock, the Board of Directors has the authority, without stockholder
approval, to create and issue one or more series of preferred stock and to
determine the voting, dividend and other rights of holders of such preferred
stock. The issuance of any preferred stock could have an adverse effect on the
rights of holders of Common Stock and could have the effect of discouraging, or
used as a defensive measure against, a takeover candidate. The mere existence of
this potential could have an adverse impact on the market price of the Common
Stock. See "Description of Securities."
18. Representative's Securities. In connection with this Offering, the
Company will sell to the Representative for a nominal amount, warrants to
purchase up to 110,000 shares of Common Stock and 150,000 Warrants. The
Representative's Securities will be exercisable commencing on the effective date
of this Prospectus and will continue to be exercisable until five years from the
date hereof at an exercise price of $3.60 per share and $.24 per warrant, with
the warrants underlying the Representative's Warrant allowing the purchase of
Common Stock at $4.80 per share. For the life of the Representative's
Securities, the holder thereof will be given the opportunity to profit from a
rise in the market price of the Common Stock with a resulting dilution in the
interest of the Company's other
14
<PAGE> 20
stockholders. The terms on which the Company could obtain additional capital
during the life of the Representative's Securities may be adversely affected
because the holder of the Representative's Securities might be expected to
exercise them if the Company were able to obtain any needed additional capital
in a new offering of securities at a price greater than the exercise price of
the Representative's Stock Warrants. A similar adverse impact on the Company's
ability to raise additional capital could be caused by the large number of
Warrants issued hereby or by the issuance of a significant amount of stock
options. See "Underwriting."
19. Potential Adverse Effect of Redemption of Warrants. The Warrants
may be redeemed by the Company at any time after one year from the date hereof,
unless earlier permitted by the representative, at a price of $.25 per Warrant
on thirty days prior written notice provided that the trading price of the
Common Stock for the preceding twenty (20) consecutive trading days has equaled
or exceeded $6.00. Notice of redemption of the Warrants could force the Warrant
holders to exercise the Warrants at a time when it might be disadvantageous for
the holders to do so or to sell the Warrants at their then current market price
when the holders might otherwise wish to hold the Warrants for possible
appreciation. Alternatively, the holders may accept the redemption price, when
it is likely to be substantially less than the market value of the Warrants at
the time of redemption. Any holders who do not exercise Warrants prior to their
expiration or redemption, as the case may be, will forfeit the right to purchase
the shares of Common Stock underlying the Warrants. While the Company may
legally be permitted to give notice to redeem the Warrants at a time when a
current prospectus is not available thereby leaving the Warrant holders no
opportunity to exercise their Warrants prior to redemption, the Company does not
intend to redeem the Warrants unless a current prospectus is available at the
time of the redemption. See "Description of Securities - Warrants."
20. Underwriters' Influence on the Market. A significant amount of the
securities offered hereby will be sold to customers of the Underwriters. Such
customers subsequently may engage in transactions for the sale or purchase of
such securities through or with the Underwriters. Although it has no legal
obligation to do so, the Representative has indicated that it intends to act as
a market-maker and otherwise effect transactions in the securities offered
hereby. To the extent the Underwriters act as market-makers in the Common Stock
or Warrants, they may be dominating influences in those markets. The degree of
participation in those markets by the Underwriters may significantly effect the
price and liquidity of the Company's securities. The Underwriters may
discontinue such activities at any time or from time to time. Moreover, pursuant
to Rule 10b-6, any of the Underwriters which solicit exercise of any of the
Warrants, including the Representative's Warrants, will be unable to act as a
market-maker with respect to the Company's Securities for a period of two or
nine business days prior to any solicitation by it of the exercise of any of the
Warrants, including the Representative's Warrants, until the termination of such
activity. Accordingly, the Representative will not be able to act as a
market-maker during certain periods and, as a result, holders of the Company's
Securities may find it more difficult to sell their holdings. Also, the same
restriction may arise if any of the Underwriters becomes involved in a
distribution of any of the currently restricted securities.
15
<PAGE> 21
21. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $6.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and, if the broker dealer is the sole market-maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the market,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, broker-dealers who sell such securities
to persons other than established customers and accredited investors (generally,
those persons with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse), the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security that becomes
subject to the penny stock rules. If the Company's securities become subject to
the penny stock rules, investors in this Offering may find it more difficult to
sell their shares and/or Warrants.
16
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto contained in this
Prospectus.
(a) GENERAL
The Company has been in business since 1984. Generally, sales
have been increasing year to year. Net sales for its fiscal year ended March 31,
1996, were approximately 20% higher than its net sales for its fiscal year ended
March 31, 1995.
Notwithstanding the Company's increased sales and its strong
competitive position in its industry, it remains a small company due to capital
constraints. Those capital constraints were partially alleviated by its private
offering, completed in January, 1996, from which it received net proceeds of
$463,000. The offering being made by this prospectus is intended to provide the
Company with substantial additional capital, to be used in the manner set forth
under "USE OF PROCEEDS" and thus to permit the Company to pursue its strong
competitive position and attempt to expand its business, its sales and its
earnings.
(b) RESULTS OF OPERATIONS
Fiscal 1996 compared to fiscal 1995
Net sales for the fiscal year ending March 31, 1996 increased
to $2,586,000 from $2,149,135 or approximately 20% over net sales for the prior
fiscal year, ending March 31, 1995. The Company believes this increase is
primarily due to the growth of its reputation with regard to its ability to
deliver quality work on a timely basis. During the current fiscal year 1995, 58%
of the Company's sales were to four major customers in the high-tech area.
The Company's operating income for the fiscal year ended March
31, 1996, was $583,500 in comparison to $130,400 for the prior fiscal year, or
an increase of 440%. Of this increase of $453,000, approximately $331,000 (or
73%) is attributable to the increase in gross margin -- from 20% to 33%;
approximately $87,000 (or 19%) is attributable to the increase in sales volume
of $436,000; and $35,000 (or 8%) to the decrease in general and administrative
expenses and depreciation.
The significant increase in gross profit from 20% to 33% was
the result of increasing use of machines for translation. Increasing
applications of concept oriented data bases for terminology and lexicographical
information allow for greater standardization for key customers and markets.
Moreover, as a concomitant of machine technology, the Company has expanded its
own number of employees in relation to independent contractors which also
results in greater control and efficiencies.
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<PAGE> 23
Total general and administrative expenses and depreciation
decreased in the amount $35,000 for fiscal 1996 in comparison to fiscal 1995,
from $299,627 to $264,180. This decrease was caused by the providing for bad
debits in prior years ($36,000 in fiscal 1994) and recovering $45,000 in the
current fiscal year. Excluding such accounts for bad debts, general and
administrative expenses increased by $25,000 (12%) over the prior fiscal year
and depreciation by $19,000 (35%).
(c) LIQUIDITY AND FINANCIAL RESOURCES
Net working capital at March 31, 1996 was $777,000, an
increase of approximately $650,000 from the end of the prior fiscal year. The
increase in net working capital was primarily due to the Company completing in
January 1996 a private offering of 120.5 units of its securities at a price of
$5,000 per unit, each unit consisting of 4,000 shares of Common Stock. The gross
proceeds from the offering were $602,500; the net proceeds were $463,000. On
March 31, 1996, the Company had $530,000 in cash or cash equivalents. See
Statement of Cash Flow for other sources and uses of working capital.
Inflation has not been a significant factor in the Company's
operations.
(d) TRENDS
Based on its special expertise, the Company has succeeded in
increasing its translation and localization services in the burgeoning market
for Asian languages. With the increased capital provided by the private offering
and the infusion of additional capital anticipated from this Offering, the
Company believes that it has an excellent opportunity to capture additional
business in these growing markets.
(e) FOREIGN CURRENCY FLUCTUATIONS
Although most of the Company's business is transacted in
United States dollars, billings to one large Japanese customer are in Japanese
yen. During the fiscal year ended March 31, 1996, the Company's billings to this
customer amounted to 20% of its total sales in comparison to 37% for the fiscal
year ended March 31, 1995. The Company could be significantly affected by
fluctuations in the exchange rate between the United States dollar and the
Japanese yen. In an effort to mitigate this risk, the Company purchases forward
exchange contracts as a hedge against adverse currency fluctuations. No
assurance can be given that this strategy will continue to be successful.
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<PAGE> 24
DILUTION
At March 31, 1996, the Company had a net tangible book value of
$1,008,604, or $.41 per share of Common Stock. Net tangible book value per share
represents the amount of total tangible assets less liabilities, divided by
2,452,000, the number of shares of Common Stock outstanding at March 31, 1996
(after giving effect to the give-back of an aggregate of 1,330,000 shares
returned to the Company by various current stockholders). After giving effect to
the sale of the 1,300,000 shares of Common Stock and 1,500,000 Warrants hereby,
the pro forma net tangible book value at March 31, 1996 would have been
$3,875,604 or $1.09 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $ .68 per share to the existing
stockholders and an immediate dilution of $1.91 per share to investors in this
Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Public offering price per share $ 3.00
Net tangible book value per share before offering $ .41
Increase attributable to investors in offering $ .68
---
Net tangible book value per share after offering (1) $ 1.09
-----
Dilution per share to investors in offering (2) $ 1.91
=====
</TABLE>
- -----------------
(1) After deduction of underwriting discounts and commissions, the
Underwriter's non- accountable expense allowance and other estimated
expenses of the offering. See "Use of Proceeds" and "Underwriting."
(2) Does not give effect to (a) 420,000 shares issuable upon exercise of
the Representative's over-allotment option (including shares of Common
Stock underlying the Warrants); (b) 110,000 shares of Common Stock
issuable upon exercise of the Representative's Stock Warrants; (c)
150,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Representative's Warrants; (d) 1,500,000 shares of
Common Stock underlying the Warrants; (e) 340,000 shares of Common
Stock issuable upon exercise of previously issued warrants; or (f)
2,500,000 shares of Common Stock reserved for issuance pursuant to the
Company's Stock Plan. See "Underwriting," "Executive Compensation -
Stock Plan" and "Description of Securities."
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<PAGE> 25
The following table presents as of March 31, 1996 the relative share
purchases, percentages of equity ownership in the Company, total cash paid,
percentage of total cash invested, and the average price per share of Common
Stock to the current and public shareholders after giving effect solely to the
sale of the shares of Common Stock offered hereby:
<TABLE>
<CAPTION>
Percentage Average
Percentage Total of Total Price
Shares of Equity Cash Cash Per
COMMON STOCK ONLY Purchased Ownership Paid Invested Share
- ----------------- --------- ---------- ------ ----------- -------
<S> <C> <C> <C> <C> <C>
Public Investors (1) 1,300,000 36.60% $3,900,000 86.20% $3.00
Current Stockholders (2) 2,252,000 63.40% $ 624,270(3) 13.80% $ .28
--------- ------ ---------- ------
Total 3,552,000 100.00% $4,524,270 100.00%
========= ====== ========== ======
</TABLE>
- -------------------
(1) Includes 200,000 shares sold in the Offering by a Selling Security
Holder.
(2) Does not include 200,000 shares sold in the Offering on behalf a
Selling Security Holder.
(3) Does not give effect to the shares of Common Stock issued to the
shareholders of BTS in exchange for their shares in such company.
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<PAGE> 26
USE OF PROCEEDS
The net proceeds of this Offering, after deducting discounts and
commissions, the Representative's expense allowance and expenses of this
Offering, will be approximately $2,867,000 ($3,415,100, if the over-allotment
option is exercised in full). The Company intends to use such net proceeds as
follows:
<TABLE>
<CAPTION>
Without Over-allotment With Over-allotment
------------------------------ ------------------------------
Approx. Approx.
Approx. % of Net Approx. % of Net
$ Amount Proceeds $ Amount Proceeds
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Advertising and promotion...................... $ 200,000 6.98% $ 200,000 5.86%
Research and Systems Development .............. $ 800,000 27.90% $1,000,000 29.28%
Purchasing advanced information technology
products..................................... $ 500,000 17.44% $ 650,000 19.03%
Acquisition of service providers............... $1,150,000 40.11% $1,300,000 38.07%
Working capital and general corporate
purposes..................................... $ 217,000 7.57% $ 265,100 7.76%
---------- ------ ---------- ------
TOTAL $2,867,000 100.00% $3,415,100 100.00%
========== ====== ========== ======
</TABLE>
The amount of net proceeds to be received by the Company reflects the
Company's best estimate of the amount of expenses incurred in the Offering of
$355,000 paid or to be paid by the Company at or around the closing of this
Offering out of proceeds.
The foregoing table represents the Company's best estimate of the
allocation of the proceeds of this Offering based upon the current state of the
Company's development, its current plans and current economic and industry
conditions, and is subject to reapportionment of proceeds among the categories
listed above or to new categories in the event of drastic changes to the current
economic and industry conditions or an entirely unforseen opportunity,
acquisition or otherwise, is presented to the Company. While the Company has no
specific current acquisition plans, it currently intends to simultaneously focus
its energies and assets towards growing its business internally, while at the
same time exploring opportunities to expand its business through acquisitions.
The Company expects that the net proceeds of this Offering will be sufficient
for it to reach its objectives over at least the next 12 months.
Until used, the Company intends to invest the proceeds of this Offering
in government securities, certificates of deposit, money market securities,
commercial paper or other top-rated income-producing investments.
Exercise of all the Warrants would generate approximately an additional
$5,400,000 in net proceeds to the Company. The Company intends to use such funds
for acquisitions ($4,400,000), research and development ($750,000) and working
capital ($250,000). No assurance can be given that any or all of the Warrants
will be exercised and that these funds will be available to the Company.
21
<PAGE> 27
CAPITALIZATION
The following table sets forth the capitalization of the Company at
March 31, 1996, after giving effect to the return of an aggregate 1,330,000
shares of Common Stock from various stockholders of the Company (to be canceled
and available for reissuance) and the increase of authorized capital from
5,000,000 shares of Common Stock and as adjusted to reflect receipt of the net
proceeds from this Offering:
<TABLE>
<CAPTION>
March 31, 1996
------------------------------------
Actual As Adjusted (2)
---------- -----------
<S> <C> <C>
SHAREHOLDERS' EQUITY(1)
Preferred stock, $.001 par value, 1,000,000 shares authorized;
None issued and outstanding -- --
Common stock, $.001 par value, 15,000,000 shares authorized;
Issued and outstanding 3,782,000 at March 31, 1996,
and 3,552,000 as adjusted $ 3,782 $ 3,552
Additional paid-in capital 462,868 3,330,098
Retained earnings 541,954 541,954
---------- -----------
Capitalization Total $1,008,604 $ 3,875,604
========== ===========
</TABLE>
- ---------------
(1) Does not give effect to (a) 420,000 shares issuable upon exercise of the
Underwriter's over-allotment option (including shares of Common Stock underlying
the Warrants); (b) 100,000 shares of Common Stock issuable upon exercise of the
Representative's Stock Warrants; (c) 150,000 shares of Common Stock issuable
upon exercise of the Warrants underlying the Representative's Warrants; (d)
1,500,000 shares of Common Stock underlying the Warrants; (e) 340,000 shares of
Common Stock issuable upon exercise of previously issued warrants; or (f)
2,500,000 shares of Common Stock reserved for issuance pursuant to the Company's
Stock Plan. See "Underwriting," "Executive Compensation - Stock Plan" and
"Description of Securities."
(2) Gives effect to the issuance and sale of 1,100,000 shares of Common stock
and 1,500,000 Warrants.
22
<PAGE> 28
BUSINESS
THE COMPANY
The Translation Group, Ltd. ("TTGL") was incorporated under the laws of
Delaware on July 7, 1995. On January 17, 1996, TTGL consummated its first
acquisition when the shareholders of Bureau of Translation Services, a
Pennsylvania corporation ("BTS") exchanged their shares of BTS for shares of
TTGL (the "Stock Exchange") so that BTS became a wholly owned subsidiary of
TTGL. TTGL and BTS are sometimes referred to herein collectively as the
"Company." The corporate offices of the Company are located at 7703 Maple
Avenue, Pennsauken, New Jersey 08109 and its telephone number at that location
is (609) 663-8600. The administrative offices and facility are at 44 Tanner
Street, Haddonfield, New Jersey 08033 and its telephone number at that location
is (609) 795- 8669.
BUSINESS OF THE COMPANY
The Company translates conventional documents and software written in
one language into other languages. The Company's headquarters is located in
Haddonfield, New Jersey, where it leases approximately 3,600 square feet of
space. It also leases approximately 1,100 square feet of space in nearby
Westmont, New Jersey wherein it houses its Japanese Projects Center. A European
office is maintained near Heidelberg, Germany.
The Company functions in the so-called "high tech" niche of the
translation industry, providing translation, localization, software and tools to
a range of world wide companies who have needs in computer related hardware
and/or software fields, referred to in the industry as Informational Technology
("IT"). Localization is the art of converting contracts, marketing tools,
advertising, engineering specs, computer hardware and software support
materials, packaging, TV shows, etc. into local languages, giving careful
consideration to custom and tradition indigenous to the local area.
In mid-1995, the Company entered into an Agreement with debis
Systemhaus KSP- Kommerzielle Systeme und Projekte GmbH ("debis"), a wholly owned
subsidiary of Daimler Benz, whereby the Company acquired license rights to a
software product known as KEYTERM. KEYTERM is a concept-oriented fully
relational proprietary database running under UNIX and Windows for developing
and maintaining glossaries. It has a customizable structure for entering
terminology and lexicographical information. The product has been in use in
Germany for several years and is being further developed, marketed and supported
by the Company. Further, the Company has the option to assume contract rights
with existing debis customers in Europe and will have the exclusive right to
market KEYTERM throughout North America, and elsewhere non-exclusively. Finally,
under the debis Agreement, the Company is allowed to use the indication "Bureau
of Translation Services in partnership with debis Systemhaus".
23
<PAGE> 29
COMPETITIVE POSITION
The Company believes it has a good position in the localization
industry, in part because, through BTS, it entered this market early. Initially,
the Company provided translation of technical material in various industries
heavily weighted toward engineering and analytical instrumentation. However, by
the mid-1980's, the Company recognized the opportunity in the computer industry.
Thus, the Company made the transition from a "generic" translation bureau, to
one whose business emphasizes translation services in the Information Technology
field (IT).
The Company has leveraged ten years of localization experience into a
set of processes which it considers its principal competitive advantage. Every
operational process, from bidding through delivery of the completed project, is
scrupulously tracked and accounted for, making job costing accurate and
predictable, while at the same time offering its customers savings over others
in the industry. The Company believes that its competitive bidding system is
unique in the industry. The Company seeks to build long-term relationships with
clients, most of whom continue to work with the Company over several years and
many projects.
At present, key markets for the Company's services are customers
located in Japan, Europe (including Scandinavia) and in "the Americas" the
dialects of Canadian French, Latin American Spanish and Brazilian Portuguese.
The Company does not provide Middle and Near Eastern languages at this time.
Growth markets are primarily in Asia. Japanese now represents the Company's
largest single language, by volume, and the Company believes that Chinese will
also become significant in the near future, although no assurance can be given
that the Company will realize any significant revenues from this market.
The IT translation industry is highly fragmented and is dominated by
numerous small to medium size companies, each with a handful of clients adapting
IT products for global markets. The Company believes that this industry
phenomenon provides it with substantial opportunities for consolidation. The
Company intends to pursue a strategy which will enable it to expand its business
through identifying companies that fit the Company's consolidation guidelines,
acquiring these companies, and integrating the acquired operations into the
Company's existing operations. Management believes that such acquisitions will
enable the Company to achieve economies of scale, maintain its gross margins and
eventually become the world's largest pure translation company. The Company may
retain senior management and other employees of the acquired companies after the
acquisition. Additionally, the Company intends to expand its existing
translation services and to continue to research and develop more advanced
technologies. There can be no assurances that suitable acquisitions can be
identified, consummated or successfully operated or that the Company's goals
will otherwise be achieved. The Company is currently reviewing potential
candidates for acquisition. However, it is not currently conducting any
negotiations for any such acquisitions.
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<PAGE> 30
SERVICES AND CLIENTS
The Company provides translation and localization services (i.e.,
translating so that the result is reader friendly, using local dialect so that
it is easily readable and not stilted) to a range of industries and sectors,
with an emphasis on IT companies. During fiscal 1995 and 1996, approximately 80%
of the Company's revenues came from localization work for software publishers,
computer hardware manufacturers and computer and peripherals vendors. The
Company also has an active business in the legal area, translating depositions,
patents, and material relating to international contracts and law suits for
large law firms in the Philadelphia area.
The Company has a large number of IT-based clients. The Company has not
entered into any long-term contracts with any of its clients in accordance with
industry practice. Significant customers includes Dell Products LP, for whom the
Company translates documents and manuals for Asian markets. The Company also has
a long-standing relationship with SAP-AG (a leading software producer) whereby
the Company is responsible for Japanese translation of its "Financial
Accounting" support materials. The strong relationships the Company has
developed with its IT clients have also generated a volume of more conventional
translation work. For example, the Company is translating software messages and
conventional documentation for Okidata, a peripherals manufacturer. Bentley
Systems, a leading CAD/CAM software developer, relies on the Company for Korean
and Japanese software localization and translation of related documentation.
Synchro, Inc., a developer of telephony software, uses the Company to localize
the software into at least ten languages. Because many American companies have a
large number of Hispanic and Vietnamese employees in the United States, the
Company has been engaged to translate corporate personnel materials into Spanish
and Vietnamese.
At the request of clients, the Company has also recently expanded its
software localization services to include video and multi-media translation.
While these translation contracts require an investment in equipment and
facilities, the Company believes the costs are justified by the higher value
contracts generated by this application. The Company has also been working in
the media sector for several years, translating copy for a client who places
"info-mercials" (commercial advertisements presented through an information
format) on European broadcast channels, and for whom the Company has translated
the product literature, packaging labels and even TV scripts. In addition, the
Company has been testing and exploring multimedia localization. Currently, the
Company performs multimedia localization using external studio facilities. If it
proves feasible and attractive, the Company may consider establishing its own
studio, and broaden its localization services to full multimedia capability. The
Company sees multimedia localization as similar, in process, to other software
localization that it already performs, and while it adds a layer or two of
additional technical complexity, it does not require a substantially different
skill set.
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<PAGE> 31
THE TRANSLATION PROCESS
The Company considers its highly detailed project management, tracking
and costing procedures to be at the heart of its specialized services. In the
view of the Company, much of what passes for "process" and "quality" in the
localization business is of a very low standard. The Company places a strong
emphasis on efficient processes, and believes that centralized project
management is essential to efficiency. Thus, even when a project may have team
members in many different locations, most work is coordinated centrally in the
United States via electronic communication. Certain core functions such as
editing, proofreading, desktop publishing and client coordination are part of
central project management. In preparing work for translation into multiple
languages the project editor may identify problems or issues which are relevant
across the entire project. Similarly, in a multiple-language project, problems
may be picked up by the translators in one or two languages that are relevant to
others. The Company believes that central control of the process is the only way
certain situations can be adequately handled, such as identification of software
bugs.
All the Company's translators are native speaking professionals in the
target language, and generally are required to know the subject matter of the
area in which they translate. In addition, a project must have technically
knowledgeable staff in the source language, preferably a specialist in that
area.
The Company's project manager often has a direct phone line for
customers, who call him or her directly. The Company supports an extensive range
of communications facilities linking its internal systems to both clients and
translators. These include an in-house local area network ("LAN"), dial-up
bulletin board (BBS), modem transfer and multiple Internet and CompuServe
connections. Some of the Company's staff have remote connections to clients'
LANs as well. Most translation projects use one or the other of the following
processes to exchange files:
-the client dials into the Company's own systems and "drops off" files,
usually via FTP (file transfer protocol) at any time; the files are
then picked up, and entered into the translation process.
-the client shares a common messaging platform with the Company (either
LAN-to- LAN or using a wide-area service provider) and files are sent
back and forth on the internal network systems between the Company and
the client.
-the client is connected via a high speed dedicated line directly to
the Company's network and several of the Company's machines may be
connected, via a Router, directly through this line so that translators
are able to work directly inside the client environment.
26
<PAGE> 32
Files are prepared for translation by the Company's technical staff and
are distributed electronically to translators either locally or abroad.
Translated versions are returned to the Company's central project management for
checking and proofing (and also compilation, if software is involved) and the
target language versions are distributed to appropriate client locations which
may be multiple locations or a central site.
In terms of process, the Company considers itself an extension of the
client's documentation department. All project activities are closely tracked
using spreadsheets which are fully available to the client. Thus, the client
always knows the status of the project.
TRANSLATION TOOLS
The Company has an internal IT standard which is based around a Novell
LAN, Windows NT for handling Japanese, and Microsoft applications. All client
projects, however, are handled on a purely customized basis.
As the Company uses increasingly advanced technological translation
tools (i.e., pieces of software that make the translation quicker), the most
notable impact has been a change in the structure of the project team. Under the
old, "pre-tools" model, a typical project might consist of a project manager
with 50 translators and editors working in various languages. Translation tools
have created an entirely new type of team, particularly where translation memory
databases are used to leverage previously translated material for re-use in new
or updated programs and documentation. The same project team might now include a
project manager, 2 technical analysts, 5 technical clerks and 15
translators/editors.
The Company believes it was one of the first extensive outside
commercial users of a workbench environment for software translation called XL8.
It has selected as its corporate standard the integrated Transit/Termstar
Translation Management System. The product was designed for use in translation
and editing of software, help and documentation. The manager controls the flow
of materials and translators use limited version workstations. It is believed to
be the most versatile product of its kind commercially available on the market;
it runs in Windows environment, and may be used for Asian as well as European
languages. Its advantages over manual efforts are versatility, language
independence, and easy file handling.
The Company has followed the progress of machine translation (MT) over
the years. After much careful review and consideration, the Company concluded
that to the best of its knowledge no one system exists that meets its standards
of accuracy, efficiency and efficacy. Therefore, the Company intends to complete
its own MT system which it hopes will be capable of automatic document
translation. Until such a machine is available, the Company will continue to
upgrade both its hardware and software as technology in this or other adaptable
fields progress. The Company intends to take necessary action to maintain its
position as a leader in the use of MT. No assurance can be given that other
companies will
27
<PAGE> 33
not develop a competitive machine which could have an adverse affect on the
Company. See "Business - Research and Development."
For the Company the fastest growing translation market at the moment is
for Asian languages. The Company's business in Japan is primarily in translation
for manufacturers of applications software, including a substantial volume of
Unix-based systems and customized implementations. The principal applications
are financial and manufacturing, with systems encompassing everything from order
entry to distribution. The Company believes these are strong growth application
areas in Asia.
RESEARCH AND DEVELOPMENT
The Company has devoted only minimal resources to formal research and
development to date. On the other hand, monies have been spent continually, and
charged to operations, for the continuing development of Company tailored
processes and disciplines used in the translation field. The Company anticipates
investing significant amounts on research and development in the foreseeable
future with specific emphasis on developing a proprietary real-time completely
automated machine translation system. The proposed system would operate via
standard telecommunications systems and would have the ability to
instantaneously translate voice from one language into another. The Company
intends to enter into some form of joint venture or licensing agreement with the
inventor, Dr. Cherny, for the exclusive rights to such technology as they regard
translation applications and have a right of first refusal for all other
applications covered by the patent application in return for financing the
project. Part of the proceeds of this Offering has been allocated for this
project and the Company currently intends to finance a portion of the balance
(up to approximately $750,000) through proceeds received from the potential
exercise of the Warrants and the remainder through other external financing. The
Company intends to closely monitor the progress of the project and will
discontinue financing the project unless certain development milestones are
reached. While Dr. Cherny has estimated that a working prototype can be produced
in less than 24 months at a cost of approximately $5 million, the project is
still in its infancy and until the first two milestones are completed (costing
approximately $250,000 and $500,000, respectively, over the next 12-15 months)
the likelihood of the success of the project can not be predicted. No assurance
can be given that the Company will have sufficient funds to finance the project
or that even if funded, that the project will be able to successfully develop
such a system.
COMPETITION
Berlitz and AT&T, among other companies offering similar services,
currently compete with the Company. Most of these competitors have substantially
greater financial resources, more extensive experience, and better established
research and development, marketing and servicing capabilities than the Company.
The Company now competes primarily on the basis of faster delivery and, in its
opinion, higher quality.
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<PAGE> 34
SUPPLIES AND MATERIALS
The materials and supplies used to produce the Company's products are
obtainable from a wide variety of suppliers. There is not currently, nor has
there been in the recent past, a shortage of any of these materials. The Company
believes that its current sources of supply are adequate to meet its future
needs.
EMPLOYEES
The Company presently employs twenty-nine (29) full-time people,
comprised of five (5) Executives, two (2) in Administrative positions, two (2)
in Sales and Marketing, and twenty (20) in Translation. In addition, the Company
also uses the services of ten (10) independent contractors as full time
tele-workers and uses up to a further sixty (60) freelance and/or independent
translators on an as-needed basis. The Company has never had a problem with
access to qualified personnel. The Company has entered into employment
agreements with each of Ms. Landgren and Messrs. Charles and Michael Cascio. See
"Management - Employment Agreements".
PROPERTY
The Company's principal operating facility is located in Haddonfield,
New Jersey, where it occupies approximately 3,600 square feet at a monthly rate
of $2,875 pursuant to a lease that extends until March, 1998. The Company has
another domestic operating facility in Westmont, New Jersey, where it occupies
approximately 1,100 square feet at a monthly rate of $1,200 pursuant to a lease
that extends until June, 1999. The Company also has an operating facility
outside Heidelberg, Germany, where it occupies approximately 1,200 square feet
at a monthly rate of $1,000, pursuant to a lease that extends at least until
January, 1997. The Company's corporate office is located in Pennsauken, New
Jersey, where it occupies approximately 800 square feet at a monthly rate of
$666.67 as a tenant at will. The Company believes that all of its facilities are
currently adequate and further believes that, if necessary, adequate facilities
could be located in the event the Company needs to replace or expand its current
facilities. The Company is maximizing the utility of its current facilities by
scheduling two or three shifts per day.
LEGAL PROCEEDINGS
The Company is not a party to, or involved in, any legal proceedings.
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<PAGE> 35
MANAGEMENT
The directors and/or executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Theodora Landgren 49 Chairman and Chief Operating Officer
Charles D. Cascio 57 President, Chief Executive Officer and Director
Richard J.L. Herson 77 Director and Chief Accounting Officer
Luis M. Garcia-Barrio, Ph.D 52 Vice President/Special Projects
John Wetter 51 Vice President/Production
Michael C. Cascio, Esq. 31 Secretary and Treasurer
Julius Cherny, Ph.D 59 Director
</TABLE>
THEODORA LANDGREN has been the Chairman and Chief Operating Officer of the
Company since January 17, 1996. In addition, she has been Chairman and President
of BTS since the founding of that firm in 1984. Prior to starting BTS she
studied linguistics and computer programming at several universities including
Universities of Denver and Innsbruck (Austria) and USC College of Continuing
Education, as well as teaching English to non-English speaking students at the
University of Stockhom, Sweden. Ms. Landgren is active in the American
Translator's Association (ATA), Society of Technical Communication (STC) where
she annually speaks on translation processes, and serves as an elected executive
committee member on the board of the Localization Industry Standards Association
(LISA). LISA is the leading association and is headquartered in Geneva,
Switzerland, dedicated to promoting standards for the computer industries. She
also serves as the newly elected president of the Logos User's Group in the
United States. Logos, Inc. is the developer of a prominent machine translation
system. She is a respected authority on product globalization and has published
articles in major magazines on the subject. Ms. Landgren lived many years in
Europe prior to opening BTS thereby gaining hands on expertise in multi-lingual
product adaptation.
CHARLES D. CASCIO became a Director, President and Chief Executive Officer of
the Company in May of 1996. He had previously been engaged by the Company, from
inception, as a full time financial consultant. From late 1992 until July 1996
he was Chairman and President of Electro-Kinetic Systems, Inc., a publicy held
provider of laboratory testing products. From 1990 to late 1992, Mr. Cascio was
employed as a full time marketing and financial consultant to a large privately
held development, building and
30
<PAGE> 36
entertainment company located in Southern New Jersey. From 1987 to 1990, he was
a full time financial operations and marketing consultant to Drug Screening
Systems, Inc., a publicly held manufacturer of drug screening systems to detect
the presence of "drugs of abuse," when he sold his interest at a substantial
profit. From 1984 to 1987, Mr. Cascio managed a wholly and family owned sporting
entertainment and recreational facility, known as the Coliseum, located in
Voorhees, N.J., which was sold for a profit in 1987. Mr. Cascio holds a
Bachelors Degree in Economics from Iona College and is the father of Michael
Cascio.
RICHARD J.L. HERSON was Secretary, Treasurer and a Director of TTGL since
inception until February 1, 1996, when he resigned as Secretary and Treasurer
and was appointed Chief Accounting Officer. Mr. Herson was previously a General
Partner in the firm of Hertz, Herson and Company, CPA's with offices in New
York, Boston and Charlotte. He is currently Treasurer of Entrepren Associates,
Inc. a consulting firm, and Secretary of the Bruner Foundation, where he is
responsible for its investments and accounting operations. He holds a Bachelor's
Degree from the City College of New York and an M.S. in Accounting from Columbia
University. He has also authored numerous articles and a book on accounting.
LUIS M. GARCIA-BARRIO, PH.D has been the Vice President/Special Projects of the
Company since April 1996. Prior thereto, since January 1991, he held the
position of International Production Manager. Dr. Barrio also is the head of
Research and Development. Dr. Barrio holds degrees in Linguistics, Education,
and the Humanities, including a Masters Degree and Ph.D. from the University of
Pennsylvania. He is a certified State and Federal Court interpreter and has
served on the faculty as Chairman, Associate Professor and Curriculum
Development Administrator of several major universities in both the US and
abroad. In addition, he has published over two (2) dozen papers on literature
and linguistics.
JOHN WETTER has been Vice President/Production for the Company since April 1996.
Since his arrival in July 1995, he has been responsible for the significant
increase in the turn around time and quality of the Company's project work by
concentrating on increased productivity through computerization and training.
From 1989 until June 1995, Mr. Wetter owned and operated Colortech Graphics,
Inc., a specialty music printing company. Mr. Wetter holds an MBA in Business
from the University of Scranton and has served as an adjunct professor at the
University of Vermont.
MICHAEL C. CASCIO, ESQ. is currently the Secretary and Treasurer of the Company.
Prior thereto he was President, CEO and a Director of TTGL from inception until
May 10, 1996. Mr. M. Cascio is also acting as house counsel to the Company.
Since 1995 Mr. M. Cascio practices law in his own firm, The Law Offices of
Michael C. Cascio. From 1991 through 1994, he was a litigation associate with
several New Jersey law firms including Parker, McCay and Criscuolo. Mr. M.
Cascio holds a Juris Doctor from Rutgers University School of Law, and a
Bachelor of Arts Degree in History from the University of Delaware. Mr. M.
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<PAGE> 37
Cascio will only devote a portion of his time to the Company in the beginning as
he completes some current obligations and he anticipates devoting more of his
time to the Company in the future, on an as-needed basis. Mr. M. Cascio is the
son of Charles Cascio.
JULIUS CHERNY, PH.D has been a Director since May 10, 1996. Dr. Cherny is a
founder and partner of Mottola, Cherny and Associates, a consulting firm
specializing in providing financial, organizational and systems consulting
services. Dr. Cherny holds a Ph.D. in accounting and is currently on staff at
the NYU Graduate School of Business and previously at the Hagen School of
Business at Iona College. Dr. Cherny has held positions as Director, Senior Vice
President, and Chief Financial Officer with firms in the securites industry. Dr.
Cherny has published numerous papers and authored several books dealing with
Finance, Accounting and Advanced Mathematical Theory.
BOARD OF DIRECTORS
Each director is elected at the Company's annual meeting of
stockholders and holds office until the next annual meeting of stockholders, or
until his successor is elected and qualified. At present, the Company's bylaws
require no fewer than one director. Currently, there are three directors of the
Company. The bylaws permit the Board of Directors to fill any vacancy and the
new director may serve until the next annual meeting of stockholders or until
his successor is elected and qualified. Officers are elected by the Board of
Directors and their terms of office are, except to the extent governed by
employment contracts, at the discretion of the Board. Other than as indicated
above, there are no family relations among any officers or directors of the
Company. The officers of the Company, other than Michael Cascio, Esq. and
Richard J.L. Herson, devote full time to the business of the Company. See
"Certain Transactions."
Upon completion of this Offering the Company will establish separate
Audit and Compensation Committees. The Audit Committee will consist of Mr.
Herson and Dr. Cherny. The Audit Committee will make recommendations to the
Board of Directors regarding the selection of independent auditors, reviews the
results and scope of the audit and of the services provided by the Company's
independent auditors, and review and evaluate the Company's internal control
functions.
The Compensation Committee will consist of Ms. Landgren and Mr. Herson.
The Compensation Committee will make recommendations to the Board of Directors
concerning compensation for executive officers and consultants of the Company.
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<PAGE> 38
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVES
From inception (July 7, 1995) through March 31, 1996, the Company paid
an aggregate of $99,070 of compensation to all of its executive officers.
EMPLOYMENT AGREEMENTS
As of December 7, 1995, the Company entered into formal five year
written employment contracts with the Company's Chairman/Chief Operating Officer
and its President/Chief Executive Officer for an annual base salary of $110,000
and $80,000, respectively, during each of the five years thereof, plus annual
cost of living adjustments. These agreements also (i) contain restrictions on
competing with the Company for two years following termination of employment,
(ii) provide for severance payments in the event of termination without cause by
the Company in an amount equal to the aggregate amount of payments due under the
term of the Agreement (without regard to extensions), but in no event less than
one year's compensation, (iii) provide that the Company will purchase a life
insurance policy naming as beneficiary a person chosen by each officer in an
amount equal to 2.5 times such officer's salary and (iv) provide a car or a car
allowance. The Company has also entered into an oral agreement with Mr. Herson
to pay him an annual compensation of $25,000 to begin following the close of
this Offering and a written agreement with Mr. Michael Cascio similar to the
above-described contracts, with an annual salary of $40,000.
STOCK OPTION PLAN
The Board of Directors and stockholders of the Company have adopted a
Stock Option Plan (the "Option Plan") as an incentive for, and to encourage
share ownership by, the Company's officers, directors and other key employees
and/or consultants. The Option Plan provides that options to purchase a maximum
of 2,500,000 shares of Common Stock (subject to adjustment in certain
circumstances) may be granted under the Option Plan. The Option Plan also allows
for the granting of stock appreciation rights ("SARs") in tandem with, or
independently of, stock options. Any SARs granted will not be counted against
the 2,500,000 limit.
The purpose of the Option Plan is to make options (both "incentive
stock options" within the meaning of Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code"), and non-qualified options) and "stock
appreciation rights" (with non-qualified options only) available to certain
officers, directors and other key employees and/or consultants of the Company in
order to give such individuals a greater personal interest in the success of the
Company and, in the case of employees, an added incentive to continue and
advance in their employment.
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<PAGE> 39
The Plans will be administered by the majority vote of a Committee (the
"Committee") appointed by the Board of Directors and comprised of at least two
members of the Board who, in the case of the Option Plan, are not eligible to
receive options, other than pursuant to a formula, it being intended that such
plan shall qualify under Rule 16b-3 as promulgated pursuant to the Securities
Exchange Act of 1934, as amended. The Committee will designate those persons to
receive grants under the Plans and determine the number of shares and/or
options, as the case may be, to be granted and the price payable for the shares
of Common Stock thereunder. The price payable for the shares of Common Stock
under each incentive stock option will be fixed by the Committee at the time of
the grant, but must be not less than 100% (110% if the person granted such
option owns more than 10% of the outstanding shares of Common Stock) of the fair
market value of Common Stock at the time the option is granted.
Pursuant to agreement with the Representative, the Company will not
issue more than 300,000 stock options during the 24 months following the date of
this Prospectus without the consent of the Representative.
COMPENSATION OF DIRECTORS
Directors of the Company are not compensated for their services, in
that capacity. See "Executive Compensation - Employment Agreements" for
descriptions of other agreements between the Company and certain of its
directors.
34
<PAGE> 40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into Employment Agreements with each of Ms.
Theodora Landgren and Messrs. Charles and Michael Cascio, and an oral agreement
with Mr. Herson all of whom are executive officers and/or directors to perform
translation services of the Company. See "Executive Compensation - Employment
Agreements."
Peter Landgren (who is fluent in 3 languages) is retained by the
Company to perform translation services on an as-needed basis at the standard
rate paid for comparable work. During fiscal 1995, Peter Landgren received an
aggregate of $24,000. Peter Landgren is the adult son of Theodora Landgren.
The Company and Dr. Cherny have recently agreed to begin negotiating
the terms of an exclusive license agreement or joint venture for the rights to
an automated machine translation system for which Dr. Cherny has filed a patent
application. See "Business - Research and Development."
As part of the Company's January 1996 acquisition of BTS, Ms. Landgren
received 1,355,000 shares of Common Stock, which has since been reduced to
770,000 shares by accounting for her give-back to the Company of 585,000 shares
and which will be further reduced to 570,000 shares by the sale by the
Underwriters of 200,000 shares on her behalf as part of this Offering.
On May 24, 1996, the Company sold 100,000 warrants, to each of Ms.
Landgren and Mr. Cascio at a price of $ .20 per warrant. These warrants are
similar in all respects to the Warrants and, while they are being registered
herewith, they are subject to restrictions on transferability for 18 months.
See "Selling Security Holders."
35
<PAGE> 41
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law, as amended,
authorizes the Company to indemnify any director or officer under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Company if it is determined that such person
acted in accordance with the applicable standard of conduct set forth in such
statutory provisions. Article 9 of the Company's Certificate of Incorporation
contains provisions relating to the indemnification of directors and officers,
to the full extent permitted by Delaware law.
The Company may also purchase and maintain insurance for the benefit of
any director or officer which may cover claims for which the Company could not
indemnify such person.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore unenforceable.
36
<PAGE> 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock, $.001 par value, as of the date hereof
and after the Offering by (i) each person known by the Company to own
beneficially more than five percent of the Company's outstanding shares of
Common Stock, (ii) each director and executive officer of the Company who owns
shares and (iii) all directors and executive officers of the Company as a group.
As of the date hereof, the Company had 2,452,000 shares of Common Stock
outstanding. Unless otherwise indicated, all shares of Common Stock are owned by
the individual named as sole record and beneficial owner with exclusive power to
vote and dispose of such shares. None of the people listed below owns any other
securities of the Company.
<TABLE>
<CAPTION>
Approximate Approximate
Percentage Percentage
Shares of Class of Class
Owned Before After
Name and Address Beneficially Offering Offering
- ---------------- ------------ ------------ ------------
<S> <C> <C> <C>
Theodora Landgren 770,000 31.40% 16.05%(3)
(1)(2)
Charles D. Cascio 175,000 7.14% 4.93%
(1)(2)(4)
Michael C. Cascio 170,000 6.93% 4.75%
(1)(2)(5)
Richard J.L. Herson 115,000 4.69% 3.24%
(1)(2)
All Executive
Officers and
Directors as a Group 1,230,000 31.42% 28.97%
</TABLE>
(1) Uses the Company's address at 7703 Maple Avenue, Pennsauken, New Jersey
08109.
(2) Reflects the return, pursuant to agreement with the Representative, of
shares of Common Stock immediately prior to the Company's initial
public offering.
(3) Reflects the sale of 200,000 shares of Common Stock in this Offering.
Does not include an additional 240,000 shares of Common stock held in a
voting trust under which she has sole voting control for two years
following the date of this Prospectus, which would give her voting
control over an aggregate of approximately 23% of the outstanding
Common Stock.
(4) Father of Michael Cascio. Does not include an aggregate of 340,000
shares owned by adult children of Mr. Cascio. Mr. Cascio disclaims
beneficial interest in such shares.
(5) Son of Charles Cascio.
37
<PAGE> 43
DESCRIPTION OF SECURITIES
The Company has authorized capital stock consisting of 15,000,000
shares of Common Stock, par value $.001 per share and 1,000,000 shares of
Preferred Stock, par value $.01 per share. As of the date of this Prospectus,
2,452,000 shares of Common Stock are issued and outstanding.
The following are brief descriptions of the securities offered hereby
and other securities of the Company. The rights of the holders of shares of the
Company's capital stock are established by the Company's Certificate of
Incorporation, the Company's Bylaws and Delaware Law. The following statements
do not purport to be complete or give full effect to statutory or common law,
and are subject in all respects to the applicable provisions of the Certificate
of Incorporation, Bylaws and state law.
COMMON STOCK
The holders of Common Stock have no preemptive or subscription rights
in later offerings of Common Stock and are entitled to share ratably (i) in such
dividends as may be declared by the Board of Directors out of funds legally
available for such purpose and (ii) upon liquidation, in all assets of the
Company remaining after payment in full of all debts and obligations of the
Company and any preferences granted in the future to any preferred stock. The
Company has not paid any dividends on the Common Stock.
Holders of Common Stock are entitled to one vote for each share held
and have no cumulative voting rights. Accordingly, the holders of more than 50%
of the issued and outstanding shares of Common Stock entitled to vote for
election of directors can elect all the directors if they choose to do so. After
completion of this Offering, the current stockholders collectively will continue
to own more than 50% of the outstanding shares of Common Stock. All shares of
Common Stock now outstanding are fully paid and nonassessable and all shares of
Common Stock which are the subject of this Offering, when issued, will be fully
paid and nonassessable. The Board of Directors is authorized to issue additional
shares of Common Stock within the limits authorized by the Company's Certificate
of Incorporation without stockholder action.
Section 203 of the Delaware General Corporation Law provides that if a
person acquires 15% or more of the stock of a Delaware corporation, he becomes
an "interested stockholder" and may not engage in a "business combination" with
that corporation for a period of 3 years. The term "business combination"
includes a merger, a sale of assets or a transfer of stock. The 3 year
moratorium may be terminated if any of the following conditions are met: (1) the
Board of Directors approved the acquisition of stock or the business combination
before the person became an interested stockholder, (2) the interested
stockholder acquired 85% of the outstanding voting stock, excluding in the
determination of outstanding stock is any stock owned by individuals who are
officers and directors of the corporation and any stock owned by certain
employee stock plans, or (3) the business combination is approved after the
person became an interested stockholder by voting stock which is not owned by
the interested stockholder. Theodora Landgren owns, either directly
38
<PAGE> 44
or beneficially, 15% or more of the stock of the Company and may be an
interested stockholder.
WARRANTS
The Warrants offered hereby will be issued in registered form under a
Warrant Agreement (the "Warrant Agreement") between the Company and American
Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"). The
following summary of the provisions of the Warrants is qualified in its entirety
by reference to the Warrant Agreement, a copy of which is filed as an exhibit to
the registration statement of which this Prospectus is a part.
Each Warrant will be separately transferable and will entitle the
registered holder thereof to purchase one share of Common Stock at $4.00 per
share (subject to adjustment as described below) for a period of three years
commencing on the date of this Prospectus. A holder of Warrants may exercise
such Warrants by surrendering the certificate evidencing such Warrants to the
Warrant Agent, together with the form of election to purchase on the reverse
side of such certificate attached thereto properly completed and executed and
the payment of the exercise price and any transfer tax. If less than all of the
Warrants evidenced by a Warrant certificate are exercised, a new certificate
will be issued for the remaining number of Warrants. See "Underwriting."
For a holder of a Warrant to exercise the Warrants, there must be a
current registration statement on file with the United States Securities and
Exchange Commission and various state securities commissions. This Prospectus
will become outdated, at the latest, on July 31, 1997. The Company will be
required to file post-effective amendment to the registration statement when
events require such amendments and to take appropriate action under state
securities laws. While it is the Company's intention to file post-effective
amendments when necessary and to take appropriate action under state securities
laws, there is no assurance that the registration statement will be kept
effective or that such appropriate action under state securities laws will be
effected. If the registration statement is not kept current for any reason, the
Warrants will not be exercisable, and holders thereof may be deprived of value.
The Company has authorized and reserved for issuance a number of shares
of Common Stock sufficient to provide for the exercise of the Warrants. When
issued, each share of Common Stock will be fully paid and nonassessable. Warrant
holders will not have any voting or other rights as shareholders of the Company
unless and until Warrants are exercised and shares issued pursuant thereto. The
exercise price and the number of shares of Common Stock issuable upon the
exercise of each Warrant are subject to adjustment in the event of a stock
split, stock dividend, recapitalization, merger, consolidation or certain other
events.
At any time after 12 months from the date of this Prospectus, unless
earlier permitted by the Representative, any or all of the Warrants may be
redeemed by the Company at a price of $.25 per Warrant, upon the giving of 30
days written notice and provided that the closing price or bid price of the
Common Stock for the twenty (20) preceding trading days
39
<PAGE> 45
has equaled or exceeded the lower of $6.00 or 167% of the then exercise price of
the Warrants offered to the public hereby. The right to purchase the Common
Stock represented by the Warrants noticed for redemption will be forfeited
unless the Warrants are exercised prior to the date specified in the notice of
redemption. While the Company may legally be permitted to give notice to redeem
the Warrants at a time when a current prospectus is not available thereby
leaving the Warrant holders no opportunity to exercise their Warrants prior to
redemption, the Company does not intend to redeem the Warrants unless a current
prospectus is available at the time of redemption.
There are currently 340,000 warrants outstanding. Of these warrants,
300,000 were issued by the Company to the persons who participated in the
give-back to the Company of shares of Common Stock to satisfy the capitalization
requirements set by the Underwriters, are identical to the Warrants offered by
the Company, are held by certain founders of the Company and are subject to an
18 month restriction on transferability unless earlier released by the
Underwriters. The other 40,000 warrants are identical to the Warrants offered by
the Company except that each is exercisable at $1.50 per warrant until January
17, 2001 and they do not have registration rights.
PREFERRED STOCK
The Board of Directors is authorized to issue up to 1,000,000 shares of
Preferred Stock, par value $.001, without any further vote or action by the
stockholders, in one or more series, and to fix the rights, preferences and
privileges and qualifications thereof including, without limitation, liquidation
preference, voting rights and the limitation or exclusion thereof. The issuance
of Preferred Stock could decrease the amount of earnings and assets available
for distribution to holders of Common stock or adversely affect the rights and
powers, including voting rights, of the holders of Common Stock, and may have
the effect of delaying, deferring or preventing a change in the control of the
Company. There are currently no shares of Preferred Stock outstanding. The
Company may issue shares of Preferred Stock as part of an acquisition.
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 3,552,000
shares of Common Stock outstanding (3,747,000 shares if the Underwriter's
over-allotment option is exercised in full). Of these shares, the 1,300,000
shares sold in this offering (1,495,000 shares if the Underwriter's
over-allotment option is exercised in full) and 241,000 shares held by selling
security holders will be freely tradeable without restriction or further
registration under the Securities Act of 1933, except for any shares purchased
by an "affiliate" of the Company (in general, a person who has a control
relationship with the Company) which will be subject to the limitations of Rule
144 adopted under the Securities Act. Except as described below, all of the
remaining 2,011,000 shares of Common Stock are "restricted securities," as that
term is defined under Rule 144 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares
40
<PAGE> 46
are aggregated with an affiliate of the Company), who has owned restricted
shares of Common Stock beneficially for at least two years is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class
(approximately 35,500 shares assuming only the existing shares and the shares of
Common Stock offered hereby are outstanding) or the average weekly trading
volume of the Company's Common Stock on all exchanges and/or reported through
the automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. A person who has not been an affiliate of the
Company for at least the three months immediately preceding the sale and who has
beneficially owned shares of Common Stock for at least three years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above. None of the shares of restricted stock presently outstanding
will be eligible for resale under Rule 144 prior to July 7, 1997.
Of the 2,452,000 shares of Common Stock currently outstanding, 441,000
are being registered herewith.
As a result of this Offering, an additional 1,500,000 shares of Common
Stock (1,725,000 if the Underwriters over-allotment option is exercised) will be
subject to issuance pursuant to the exercise of the Warrants offered hereby. In
addition, 300,000 warrants currently held by certain founders of the Company are
being registered hereby, although without the prior consent of the Underwriters
such warrants and the Common Stock underlying them are restricted from transfer
for 18 months.
As of the date hereof, there were 56 record holders of the Common
Stock.
DIVIDEND POLICY
The Company has paid no dividends and does not expect to pay dividends
on its Common Stock in the foreseeable future as it intends to retain earnings
to finance the growth of its operations.
TRANSFER AGENT
The Company has engaged American Stock Transfer & Trust Company, 40
Wall Street, New York, New York 10005, to act as Transfer Agent for the
Company's Common Stock.
41
<PAGE> 47
UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement between the Company and the Underwriters named below, for which
Werbel-Roth Securities, Inc. is acting as Representative (a copy of which
agreement is filed as an exhibit to the Registration Statement of which this
prospectus forms a part), the Company has agreed to sell to each of the
Underwriters named below, and each of such Underwriters has severally agreed to
purchase, the number of shares of Common Stock and Warrants set forth opposite
its name. All 1,300,000 shares of Common Stock and 1,500,000 Warrants offered
must be purchased by the several Underwriters if any are purchased. The shares
of Common Stock and Warrants are being offered by the Underwriters subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to approval of certain legal matters by counsel and to certain other
conditions.
<TABLE>
<CAPTION>
Number
--------------------------------
Underwriter of Shares of Warrants
----------- --------- -----------
<S> <C> <C>
Werbel-Roth Securities, Inc. ........................
Millennium Securities Corp. ..........................
Total................................................. 1,300,000 1,500,000
========= =========
</TABLE>
The Representative has advised the Company that the Underwriters
propose to offer the shares of Common Stock and the Warrants to the public at
the offering prices set forth on the cover page of this Prospectus and that the
Underwriters may allow to certain dealers who are members in good standing of
the National Association of Securities Dealers, Inc. ("NASD") concessions of
$___ per share of Common Stock and $____ per warrant. After the initial public
offering, the public offering price and concessions may be changed by the
Underwriters.
The Company has granted the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 195,000 shares of
Common Stock and 225,000 Warrants from it, at the public offering prices less
the underwriting discounts set forth on the cover page of this Prospectus. The
Underwriters may exercise this option solely to cover over-allotments in the
sale of the shares of Common Stock and Warrants offered hereby.
The Company has agreed to pay the Representative a non-accountable
expense allowance of 3% of the gross proceeds to the Company of the shares of
Common Stock and Warrants sold in the offering (including the over-allotment
option).
The Representatives will (i) receive a Warrant solicitation fee equal
to 10% (or the maximum amount permissible under NASD rules) of the exercise
price of all Warrants it causes to be exercise and (ii) enter into a three year
consulting agreement with the Company providing for a fee equal to 1% of the
gross proceeds of this Offering to the Company all of which will be payable in
advance at the closing of this Offering.
42
<PAGE> 48
The underwriting agreement provides for reciprocal indemnification
between the Company and the Underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933.
The Company has agreed to sell to the Representative or its designees,
at a price of $250, a total of 100,000 warrants (the "Representative's Stock
Warrants") to purchase 110,000 shares of Common Stock of the Company and 150,000
warrants (the "Representative's Warrants") to purchase a like number of Common
Stock Purchase Warrants. Other than a one-year restriction on transferability
and a higher exercise price, the warrants underlying the Representative's
Warrants are identical in all respects to the Warrants offered to the public
hereby, including the redemption feature, as to which they will be treated pari
passu with the public Warrants. The Representative's Stock Warrants will be
exercisable at a price of $3.60 per share for a period of five years and the
Representative's Warrants will be exercisable at a price of $.24 per Common
Stock Purchase Warrant, which warrants will entitle the holder to purchase
shares of Common Stock at a price of $4.80 per share or 120% of the then
exercise price of the Warrants offered to the public hereby, whichever is lower,
for a period of five years commencing on the date hereof (unless redeemed
earlier). The Representative's Securities (including their underlying
securities) will not be transferable for one year from the date hereof except to
underwriters and selected dealers and officers and partners thereof. Any profit
realized upon any resale of the Representative's Stock Warrants or the
Representative's Warrants or upon any sale of the shares of Common Stock or
Common Stock Purchase Warrants underlying same may be deemed to be additional
underwriter's compensation. The Company has agreed to register (or file a
post-effective amendment with respect to any registration statement registering)
the Representative's Stock Warrant and the Representative's Warrants and their
underlying securities under the Securities Act at its expense on one occasion
during the five years following the date of this Prospectus and at the expense
of the holders thereof on another occasion, upon the request of a majority of
the holders thereof. The Company has also agreed to "piggy-back" registration
rights for the holders of the Representative's Stock Warrants and the
Representative's Warrants and their underlying securities at the Company's
expense during the five years following the date of this Prospectus.
The Underwriters have informed the Company that they do not expect
sales of shares of Common Stock to be made to discretionary accounts to exceed
2% of the shares of Common Stock offered hereby.
PRICING OF THE OFFERING
Prior to this offering, there has been no public trading market for any
of the Company's securities. Consequently, the initial offering prices of the
shares of Common Stock and Warrants have been determined by negotiations between
the Company and the Representative. Among the factors considered in determining
the offering prices were the Company's financial condition and prospects, the
industry in which the Company is engaged, certain financial and operating
information of companies engaged in activities similar to those of the Company
and the general market condition of the securities markets. Such prices do not
necessarily bear any relationship to any established standard or criteria of
value based upon assets, earnings, book value or other objective measures.
43
<PAGE> 49
SELLING SECURITY HOLDERS
The Company is registering the shares of Common Stock (the "Reoffer
Shares") purchased by investors in the Company's January 1996 private placement
offering (the "Selling Stockholders") and 300,000 warrants and the underlying
Common Stock. These warrants and the underlying Common Stock are restricted from
transfer for 18 months, without the prior consent of the Underwriters. The
following disclosure regarding Reoffer Shares and Selling Stockholders is also
applicable to these warrants, their underlying Common Stock and the warrant
holders.
Each of the Selling Stockholders may be deemed to be an "underwriter"
of the Company's Common Stock offered hereby, as that term is defined under the
Act. Each of the Selling Stockholders may sell the Reoffer Shares from time to
time for his own account in the open market at the prices prevailing therein, or
in individually negotiated transactions at such prices as may be agreed upon.
The net proceeds from the sale of the Reoffer Shares by the Selling Stockholders
will inure entirely to their benefit and not to that of the Company.
None of the Selling Stockholders has held any position or office, or
had any material relationship with the Company or any of its predecessors or
affiliates within the last three years, and none of the Selling Stockholders
will own any of the outstanding Common Stock of the Company after completion of
the offering of such shares. However, the selling warrant holders all currently
own at least 1% of the outstanding Common Stock and two of them are executive
officers.
The Selling Stockholders have advised the Company that their Reoffer
Shares may be offered for sale from time to time by them in regular brokerage
transactions in the over-the-counter market, or, either directly or through
brokers or to dealers, or in private sales or negotiated transactions, or
otherwise, at prices related to the then prevailing market prices. Thus, they
are required to deliver a current prospectus in connection with the offer or
sale of the Reoffer Shares. In the absence of a current prospectus, these shares
may not be sold publicly without restriction unless held for three years, or
after two years subject to volume limitations and satisfaction of other
conditions. The Selling Stockholders have been advised that Rules 10b-6 and
10b-7 of the General Rules and Regulations promulgated under the Securities
Exchange Act of 1934 will be applicable to their sales of Reoffer Shares. These
rules contain various prohibitions against trading by persons interested in a
distribution and against so-called "stabilization" activities.
The Selling Stockholders might be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act and any profit on the resale of the
Reoffer Shares as principal might be deemed to be underwriting discounts and
commissions under the Act.
Any sale of Reoffer Shares by Selling Stockholders through
broker-dealers may cause the broker-dealers to be considered as participating in
a distribution and subject to Rule 10b- 6 promulgated under the Securities
Exchange Act of 1934, as amended. If any such transaction were a "distribution"
for purposes of Rule 10b-6, then such broker-dealers might
44
<PAGE> 50
be required to cease making a market in the Company's equity securities for
either two or nine trading days prior to, and until the completion of, such
activity.
Included in the 1.3 million shares of Common Stock being offered herein
by the Underwriters are 200,000 shares owned by Ms. Theodora Landgren, the
President, Chief Operating Officer and a Director of the Company. After the
Offering, Ms. Landgren will own 550,000 shares representing 16.05% of the
outstanding shares of Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."
45
<PAGE> 51
LEGAL MATTERS
The validity of the issuance of the Units offered hereby will be passed
upon for the Company by the law firm of Heller, Horowitz & Feit, P.C., New York,
New York. The law firms of Atlas, Pearlman, Trop & Borkson, P.A., Fort
Lauderdale, Florida and Beckman & Millamn, P.C., New York, New York will pass on
certain aspects of this Offering on behalf of the Underwriters.
Irving Rothstein, Esq. is associated with the law firm of Heller,
Horowitz & Feit, P.C., counsel to the Company. On January 16, 1996, Mr.
Rothstein was appointed an Assistant Secretary of the Company. This is purely an
administrative position and Mr. Rothstein was appointed solely to assist, and to
ease the burdens of, the executive officers of the Company in the execution of
various documents and/or certificates on behalf of the Company. Neither Mr.
Rothstein nor his law firm receive any additional compensation for these
efforts.
EXPERTS
The audited financial statements of the Company as of March 31, 1995
and 1996 and for the fiscal years then ended are included herein and in the
registration statement in reliance upon the report of Votta and Company
independent certified accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
47
<PAGE> 52
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
The Translation Group, LTD
We have audited the accompanying balance sheets of THE TRANSLATION GROUP, LTD.
and its consolidated subsidiary at March 31, 1996 and 1995, and the related
statements of operations, stockholders' equity and cash flows for both of the
years in the two year period ended March 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of THE TRANSLATION
GROUP, LTD. and its subsidiary at March 31, 1996 and 1995, and the results of
their operations, stockholders' equity and their cash flows for each of the
years in the two year period ended March 31, 1996, in conformity with generally
accepted accounting principals.
As discussed in Notes 1, 2 and 3 to the consolidated financial statements, the
consolidated financial data was restated as a result of a business combination
merger, accounted for as a pooling of interests.
Votta & Company
Haddonfield, New Jersey
May 1, 1996
(July 1, 1996 as to Note 17)
<PAGE> 53
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS: 1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2) $ 530,340 $ 2,238
Accounts receivable, net of allowance
for doubtful accounts of $20,000
and $65,000, respectively (Notes 2 and 4) 642,481 325,665
Prepaid rent (Note 12) 31,625
Deferred offering costs (Note 18) 34,540
----------- -----------
Total current assets 1,207,361 359,528
----------- -----------
Property and equipment (Notes 2 and 15) 362,178 165,429
Less: accumulated depreciation and amortization (189,466) (114,715)
----------- -----------
Net property and equipment 172,712 50,714
----------- -----------
Other assets (Note 8) 58,759 16,501
----------- -----------
TOTAL ASSETS $ 1,438,832 $ 426,743
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 55,834 $ 22,008
Accrued liabilities 26,000 23,870
Accrued income taxes (Notes 2 and 16) 115,000 7,882
Deferred income taxes (Notes 2 and 16) 233,394 115,794
Line of credit (Note 6) 40,000
Notes payable (Note 7) 23,056
----------- -----------
Total current liabilities 430,228 232,610
----------- -----------
Stockholders' equity:
Common stock (Notes 1,3,9,10,11,17 and 18):
$1 par value, 1000 shares authorized, 50 outstanding 50
$.001 par value, 5,000,000 shares authorized
3,782,000 outstanding 3,782
Preferred stock, $.001 par value,
1,000,000 authorized,
none outstanding (Note 14)
Additional paid in capital (Notes 1, 3, 9 and 10) 462,868
Retained earnings 541,954 194,083
----------- -----------
Total stockholders' equity 1,008,604 194,133
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,438,832 $ 426,743
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 54
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenue (Notes 1, 2, 3 and 5) $ 2,586,306 $ 2,149,135
Cost of services provided 1,738,648 1,719,100
----------- -----------
Gross profit 847,658 430,035
Selling, general and administration expense 189,429 244,290
Depreciation and amortization (Notes 2 and 15) 74,751 55,337
----------- -----------
Operating income 583,478 130,408
----------- -----------
Non-operating income (expense)
Other income 220
696
Interest expense (Notes 6 and 7) (3,227) (3,566)
----------- -----------
(3,007) (2,870)
----------- -----------
Income before income taxes 580,471 127,538
Provision for income taxes (Notes 2 and 16) 232,600 69,852
----------- -----------
Net income (Note 3) $ 347,871 $ 57,686
=========== ===========
Net income per common share outstanding (Note 2) $ 0.09 $ 0.02
=========== ===========
Total shares outstanding
(Notes 1, 2, 3, 9,10 and 11) 3,782,000 3,782,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 55
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 347,871 $ 57,686
Depreciation and amortization 74,751 55,337
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable (316,816) (9,073)
Prepaid rent 31,625 (31,625)
Other assets (42,258) (15,151)
Accounts payable 33,826 (76,708)
Accrued liabilities 2,130 (2,350)
Accrued income taxes 107,118 7,882
Deferred income taxes 117,600 35,329
--------- ---------
Net cash flows provided by operating activities 355,847 21,327
--------- ---------
CASH FLOWS (USED FOR) INVESTING ACTIVITIES:
Purchase of property and equipment (196,749) (54,975)
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Issuance of common stock 446,600
Conversion of note to common stock 20,000
Deferred offering costs (34,540)
Net borrowings (payments) under line of credit (40,000) 40,000
Payment on long-term debt (23,056) (1,223)
--------- ---------
Net cash flows provided by financing activities 369,004 38,777
--------- ---------
Net increase in cash and cash equivalents 528,102 5,129
Cash and cash equivalents, beginning of year 2,238 (2,891)
--------- ---------
Cash and cash equivalents, end of year $ 530,340 $ 2,238
========= =========
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest $ 3,227 $ 3,556
========= =========
Taxes $ 8,933 $ 9,725
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 56
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON PAID-IN RETAINED STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS EQUITY
------ ------ ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance March 31, 1994 50 $ 50 -- $ 136,397 $ 136,447
Net Income March 31, 1995 -- -- -- 57,686 57,686
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1994 50 50 -- 194,083 194,133
Formation of TTGL 1,770,000 1,770 -- 1,770
Conversion of note 20,000 20 19,980 -- 20,000
Business Combination 1,510,000 1,510 (1,460) -- 50
BTS shares acquired (50) (50) -- -- (50)
Private Placement 482,000 482 444,348 -- 444,830
Net income - March 31, 1996 -- -- -- 347,871 347,871
----------- ----------- ----------- ----------- -----------
Balance at March 31,1996 3,782,000 $ 3,782 $ 462,868 $ 541,954 $ 1,008,604
=========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 57
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
NOTE 1 - THE COMPANY
DESCRIPTION OF COMPANY
The Translation Group, LTD (TTGL) was incorporated in the State of Delaware on
July 6, 1995, specifically to acquire 100% of the issued and outstanding shares
of the Bureau of Translation Services, Inc. (BTS). BTS was incorporated in 1984
in the State of Pennsylvania and is presently located in Haddonfield, New
Jersey.
On January 17, 1996, pursuant to an Agreement and Plan of Reorganization dated
December 7, 1995, TTGL completed a business combination merger transaction,
accounted for as a pooling of interests, with BTS (See Note 3).
The accompanying Consolidated Financial Statements were restated to include TTGL
and BTS for the entire fiscal years ended March 31, 1996 and 1995 in accordance
with Accounting Principles Board Opinion No. 16, Accounting for Business
Combinations (APB 16).
TTGL with its wholly owned subsidiary BTS (the Company) translate and localize
documents and software into various languages. Localizing is translating so that
the result is reader friendly using local dialect. The Company provides services
to a range of industries with a concentration in information technology
companies.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of TTGL and its
wholly owned subsidiary, BTS. All intercompany accounts and transactions are
eliminated. Financial data for March 31, 1996 and 1995 in accordance with APB 16
reflects the retroactive effect of the business combination merger, accounted
for as a pooling of interests, of TTGL with BTS, consummated in January 1996
(See Note 3).
The accompanying Consolidated Financial Statements were restated to include the
results of operations of BTS for the entire fiscal years ended March 31, 1996
and 1995.
Preparation of the consolidated financial statements in conformity with
generally accepted accounting principals requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE> 58
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
REVENUE RECOGNITION
Revenues are recognized on the accrual method of accounting upon billing to
customers.
MARKETING AND ADVERTISING
The Company adopted the American Institute of Certified Public Accountants
Statement of Position (SOP) 93-7, Reporting on Advertising Cost. In accordance
with SOP 93-7, the Company expenses marketing and advertising costs as incurred.
Marketing and advertising expense for each of the years ended March 31, 1996 and
1995 approximated $53,000.
FOREIGN CURRENCY TRANSACTIONS
Assets and liabilities of foreign operations are translated at end of period
rates of exchange. Income, expense and cash flows are translated at weighted
average rates of exchange for the period.
The Company occasionally enters into foreign currency forward exchange contracts
as hedges to limit the effect of exchange rate fluctuations. Gains and losses,
if any, related to hedge transactions are deferred and are recognized in the
results of operations as part of the underlying transaction while those related
to unhedged transactions are included in the income statement currently.
At of March 31, 1995, approximately $55,000 of foreign exchange contracts were
outstanding, denominated in Japanese Yen. At March 31, 1996, the Company had no
foreign currency exchange contracts in effect.
FISCAL YEAR
The Company's fiscal year ends on March 31.
CASH AND CASH EQUIVALENTS
Cash includes demand deposits, certificates of deposits and cash equivalents,
which are highly liquid investments with a maturity of three months or less when
purchased. Because of the short maturity of these instruments, the carrying
amount is a reasonable estimate of fair value.
<PAGE> 59
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and consisted of the following at
March 31,1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Furniture and fixtures $ 26,174 $ 15,366
Computer equipment 221,212 126,600
Software 114,792 23,463
-------- --------
Total $362,178 $165,429
======== ========
</TABLE>
Depreciation and software amortization is computed using an accelerated method
over the estimated useful lives of the assets.
For the years ended March 31, 1996 and 1995, depreciation and amortization
expense was $74,751 and $55,337 respectively.
INCOME TAXES
Deferred income tax assets and liabilities are determined in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS No. 109), and result from revenues and expenses being recognized in
different time periods for financial reporting purposes than for income tax
purposes. Under SFAS No. 109, deferred income taxes arise from temporary
differences and carryforwards which are tax effected at the enacted tax rates
and subsequently adjusted for changes in tax laws and rates. Deferred income tax
assets and liabilities are classified as current or non-current based upon the
financial reporting classification of assets and liabilities to which they
relate.
RESEARCH AND DEVELOPMENT
Research and development cost are charged to operations when incurred.
EARNINGS PER COMMON SHARE
In calculating earnings per common share, for the years ended March 31, 1996 and
1995, retroactive effect has been given to the business combination merger,
accounted for as a pooling of interests and the private placement, per Notes 1,
2, 3, 9, 10 and 11, as if the shares were outstanding for both entire fiscal
years.
<PAGE> 60
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
NOTE 3 - BUSINESS COMBINATION MERGER
On January 17, 1996, pursuant to the terms of an Agreement and Plan of
Reorganization, dated December 7, 1995, TTGL completed a business combination
merger transaction, accounted for as a pooling of interests, with the BTS, a
provider of translation services. The business combination merger was effected
by the exchange of 1,510,000 of TTGL common shares for all the issued and
outstanding common shares of BTS.
Financial information for the years ended March 31, 1996 and 1995 was
retroactively restated, in accordance with APB 16, to reflect the combined
operations of both companies. For the year ended March 31, 1996 the combined
operations of the companies consisted of the following:
<TABLE>
<CAPTION>
TTGL BTS
<S> <C> <C>
Revenue -0- $2,586,306
======= ==========
Net Income(Loss) $(1,562) $ 349,433
======= ==========
</TABLE>
For the year ended March 31, 1995, TTGL was not in existence (See Note 1).
Therefore, the results of operations for the year ended March 31, 1995 include
only the activity of BTS.
NOTE 4 - FINANCIAL INSTRUMENTS
CREDIT RISK
Concentrations of credit risk with respect to accounts receivable are limited
due to the dispersion across different geographic areas of the Company's
customer base. As of March 31, 1996 and 1995, the Company had no significant
concentrations of credit risk with regards to its accounts receivable.
NOTE 5 - SIGNIFICANT CUSTOMERS
For the year ended March 31, 1996, two customers represented 37% of the
Company's revenue. For the year ended March 31, 1995, two customers represented
69% of the Company's revenue. For the years ended March 31, 1996 and 1995, the
Company generated approximately eighty percent (80%) of its revenue from
information technology companies (i.e. computer industry).
<PAGE> 61
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
In both 1996 and 1995 approximately forty percent (40%) of the Company's
revenues, were from foreign markets. Such markets include areas of political
instability and currency valuation fluctuation.
NOTE 6 - LINE OF CREDIT
The Company maintains and periodically amends or replaces a revolving credit
line agreement with a commercial bank that is used to finance working capital
requirements. The maximum amount of funds available to the Company from the
credit line is $40,000, with an interest rate at the bank's prime rate plus
1.5%. The credit line is secured by the Company's accounts receivable and
equipment and personally secured by the president of BTS. The prime rate at
March 31,1996 and 1995 was 8.25 percent and 6.00 percent respectively.
At March 31, 1996 and 1995, the amount outstanding on the Company's line of
credit was zero and $40,000 respectively.
NOTE 7 - NOTES PAYABLE
Outstanding debt at March 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Note payable to a bank,
term of sixty months,
interest rate of 9.50%,
monthly payments of $525
through January, 1998,
secured by computer equipment $ -0- $20,178
Note payable to a bank,
term of twenty-four months,
interest rate of 10%,
monthly payments of $231,
through April, 1996,
secured by computer equipment -0- 2,878
---- -------
Total debt $-0- $23,056
==== =======
</TABLE>
<PAGE> 62
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
NOTE 8 - RELATED PARTY TRANSACTIONS
Other assets include a loan to an officer of the Company at March 31, 1996 and
1995, in the amount of $35,000 and $12,000 respectively.
NOTE 9 - PRIVATE PLACEMENT OFFERING
On January 17, 1996, the Company completed a private placement offering without
registration under the Securities Act of 1933 in reliance on the exemption by
Regulation D, of its common stock, whereas it issued 482,000 shares of common
stock for $1.25 per share. The cost of the stock issuance of approximately
$157,700, is treated as a reduction of shareholder's equity.
NOTE 10 - WARRANTS
On January 17, 1996. upon the close of the business combination merger (Note 3)
and the private placement offering (Note 9), stock warrants were issued to the
Placement Agent to purchase 40,000 shares of the Company.
Each warrant entitles the registered holder to purchase one share of the
Company's common stock at $1.50 per share for a period of five years commencing
six months after issuance. Warrant holders do not have any voting rights or
other rights as shareholders of the Company unless and until the Warrants are
exercised and shares issued pursuant thereto.
NOTE 11 - STOCK OPTIONS
On November 29, 1995 TTGL adopted a Stock Option Plan (Plan). Under the Plan,
2,500,000 shares of the Company's Common Stock are reserved for issuance upon
the exercise of options. Options granted under the Plan may be either (i)
options intended to constitute incentive stock options under Section 422A of the
Internal Revenue Code of 1986, as amended, or (ii) non-qualified stock options
may be granted under the Plan to employees (including officers and directors who
are employees) of the Company or a subsidiary corporation thereof on the date of
the grant.
For incentive stock options the exercise price is the fair market value of the
Common Stock on the date of the grant. Non-qualified options may not have an
exercise price of less than 50% of the fair market value of a share of the
Company's Common Stock on the date the option is granted.
<PAGE> 63
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
Options granted under the Plan will expire not more than ten years from the date
of the grant.
Additionally, under the Plan, participants may be granted stock appreciation
rights. These rights consists of rights to receive either cash or shares of
Common Stock equal to the amount by which shares of Common Stock on the date the
stock appreciation right is exercised exceeds the per share option price.
NOTE 12 - COMMITMENTS
The Company routinely enters into non-cancelable lease arrangements for premises
used in the normal course of business. Future minimum obligations under lease
commitments in effect at March 31, 1996 and 1995 are approximately $74,000 per
year. The majority of these leases are due to expire by March 31, 1999. In
February 1995, BTS relocated its corporate operations. Upon relocating, BTS
voluntarily paid its monthly operating lease obligation for one year in advance.
The Company also periodically rents locations to house translators. These are
temporary commitments. Additionally, the Company has operating leases on office
equipment, which are immaterial in nature. Rent expense under operating leases
for the period ended March 31, 1996 and 1995 was approximately $68,000 and
$80,000, respectively.
NOTE 13 - EMPLOYMENT AGREEMENTS
On January 17, 1996, pursuant to an agreement dated December 7, 1995, the
Company entered into employment and consulting agreements with officers of the
Company and other individuals. Expenses under these agreements approximate
$232,000 per year, through the year 2001.
NOTE 14 - PREFERRED STOCK
The Company's Board of Directors is authorized to issue up to 1,000,000 shares
of Preferred Stock without further vote or action by the stockholders, in one or
more series, and fix the rights, preferences and privileges and qualifications
thereof including, without limitation, liquidation preference, voting rights and
the limitation or exclusion thereof. No preferred shares are outstanding and the
Company has no current plan to issue any such shares.
<PAGE> 64
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
NOTE 15 - LICENSING AGREEMENT
Effective May 24, 1995, BTS entered into an agreement with a German company,
whereby BTS acquired license rights to a software product known as KEYTERM.
KEYTERM is a concept-oriented database for developing and maintaining
glossaries. The agreement requires BTS to assume contract rights with existing
KEYTERM customers in Germany and France and to have exclusive North American
marketing rights.
The KEYTERM software cost approximately $75,000, and is capitalized in the
Consolidated Balance Sheet under property and equipment. Amortization expense of
KEYTERM, included in depreciation expense, approximated $12,000 for the year
ended March 31,1996.
NOTE 16 - INCOME TAXES
The provisions for current and deferred income tax expense for the years ending
March 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Current
Federal $ 88,000 $ 17,990
State 27,000 8,651
Deferred
Federal 92,200 34,343
State 25,400 8,868
-------- --------
Total Provision $232,600 $ 69,852
======== ========
</TABLE>
Reconciliation of effective income tax rate:
<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Federal income tax rate 34% 34%
State taxes, net of
Federal income tax benefit 6% 6%
Tax effect of non-deductible
expenses -- 15%
--- ---
40% 55%
=== ===
</TABLE>
Total deferred income taxes at March 31, 1996 and 1995 totaling $233,394 and
$115,794 are classified as a current liability due to timing differences
resulting from the deferral of income related to accounts receivable, accounts
payable and accrued liabilities.
<PAGE> 65
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(CONTINUED)
NOTE 17 - VOTING CONTROL
As of March 31, 1996, Ms. Theodora Landgren, Chairperson of the Board of
Directors and Chief Operating Officer of the Company controls approximately
eighty percent (80%) of the Company's outstanding voting common stock and
accordingly controls the Company's affairs.
If the Company is successful in its Initial Public Offering (see Note 18), Ms.
Landgren will have sole voting control of the Company's majority voting stock
for up to two years after the Initial Public Offering.
In July 1996 the voting trust was revised and Ms. Landgren will only have
voting control over approximately 23% of the outstanding common stock following
the Initial Public Offering.
NOTE 18 - SUBSEQUENT EVENTS
It is anticipated that the Company will attempt to offer up to 1 MILLION of its
common voting shares in an Initial Public Offering during 1996. There can be no
assurance that the Company's initial public offering will be successful.
Deferred offering costs of approximately $35,000 relating to the initial public
offering are included in current assets as of March 31, 1996. If the initial
public offering is successful, these cost will be offset against the proceeds of
the offering. If the offering is not successful, these cost will be expensed.
<PAGE> 66
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAD BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Additional Information..................... 3
Prospectus Summary......................... 4
Risk Factors............................... 9
Management's Discussion and Analysis
of Financial Conditions and
Results of Operations.................... 17
Dilution................................... 19
Use of Proceeds............................ 21
Capitalization............................. 22
Business................................... 23
Management................................. 30
Executive Compensation..................... 33
Certain Relationships and
Related Transactions..................... 35
Disclosure of Commission Position on
Indemnification For Securities
Act Liability............................ 36
Security Ownership of Certain
Beneficial Owners and
Management............................... 37
Description of Securities.................. 38
Underwriting............................... 42
Selling Security Holders................... 44
Legal Matters.............................. 47
Experts.................................... 47
Index to Financial Statements...............
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,300,000 SHARES OF COMMON STOCK
AND 1,500,000 REDEEMABLE COMMON
STOCK WARRANTS
THE TRANSLATION GROUP, LTD.
PROSPECTUS
WERBEL-ROTH SECURITIES,INC.
MILLENNIUM SECURITIES CORP.
, 1996
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended,
authorizes the Registrant to indemnify any director or officer under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Registrant if it is determined that such
person acted in accordance with the applicable standard of conduct set forth in
such statutory provisions. Article 9 of the Registrant's Certificate of
Incorporation contains provisions relating to the indemnification of directors
and officers and Article 9 of the Registrant's By-Laws extends such indemnities
to the full extent permitted by Delaware law.
The Registrant may also purchase and maintain insurance for the benefit
of any director or officer which may cover claims for which the Registrant could
not indemnify such persons.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated expenses in connection
with the offering described in the Registration Statement, all of which will be
borne by the Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission Fee................................ $ 5,126.00
NASD Fee.............................................................. $ 2,047.00
NASDAQ Listing Fee.................................................... $ 10,000.00
Accountants' Fees..................................................... $ 25,000.00
Legal Fees............................................................ $ 50,000,00
Blue Sky Qualification, Fees and Expenses............................. $ 50,000.00
Company's Administrative Expenses..................................... $ 75,000.00
Printing and engraving................................................ $ 30,000.00
Miscellaneous......................................................... $ 17,827.00
-----------
TOTAL $265,000.00
===========
</TABLE>
II-1
<PAGE> 68
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In October 1995, the Registrant sold an aggregate of 1,770,000 shares
of Common Stock at par value ($.001) to its founders. These sales were exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933.
On January 17, 1996 the shareholders of BTS exchanged all of their
shares for an aggregate of 1,510,000 shares of the Registrant. The result of
this transaction was that BTS became a wholly-owned subsidiary of the
Registrant. None of the shareholders of BTS received any consideration other
than shares of the Registrant. This exchange and issuance of securities was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
In January 1996, the Registrant sold a total of 120.5 Units of its
securities, each Unit consisting of a 4,000 shares of Common Stock, for an
aggregate of 482,000 shares at $1.25 per share, for a total purchase price of
$5,000 per Unit, to 36 accredited persons in a private offering exempt from
registration pursuant to Sections 3(b), 4(2) and 4(6) of the Securities Act of
1933. The Registrant received gross proceeds of $602,500 from this offering. The
Placement Agent for such private placement received 40,000 warrants.
In January 1996, the Registrant issued 20,000 shares of Common Stock
in satisfaction of an outstanding $20,000 note. The issuance was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
In May 1996, the Company issued a total of 300,000 warrants to certain
of its founders at a price of $.20 per warrant. See "Description of Securities -
Warrants." The issuance was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933.
<TABLE>
<CAPTION>
ITEM 27. EXHIBITS
--------
<S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Selected Dealers Agreement
1.3 Form of Agreement Among Underwriters
3.1 Restated Certificate of Incorporation
3.2 By-Laws
4.1* Specimen Common Stock Certificate
4.2* Specimen Warrant Certificate
4.3* Form of Warrant Agreement
4.4 Form of Representative's Warrant Agreement
4.5 Form of Representative's Warrant
4.6 Form of Subscription Agreement between Registrant and
investors pursuant to December 7, 1995 Private Placement
Memorandum
5 Opinion re: legality
10.1 Lease Agreement between BTS and J.C.G. Partnership dated
January 18, 1995.
</TABLE>
II-2
<PAGE> 69
<TABLE>
<S> <C>
10.2* Employment Agreement between the Registrant and Theodora
Landgren dated as of December 7, 1995, as amended.
10.3* Employment Agreement between the Registrant and Michael Cascio
dated as of December 7, 1995, as amended.
10.4* Employment Agreement between the Registrant and Charles Cascio
dated as of December 7, 1995, as amended.
10.5 The Translation Group, Ltd. 1995 Stock Option Plan
23.1 Consent of Heller, Horowitz & Feit, P.C. (included in the
Opinion filed as Exhibit 5)
23.2 Consent of Votta and Company
</TABLE>
- -----------------------
* To be filed by Amendment.
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit or proceedings) is asserted by such director, officer or
controlling person in connection with the securities
II-3
<PAGE> 70
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
For determining any liability under the Securities Act, the Company
will treat the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this registration statement as of the time the
Commission declared it effective.
The Company will provide to the Representative of the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Representative to
permit prompt delivery to each purchaser.
II-4
<PAGE> 71
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has authorized this registration
statement or amendment to be signed on its behalf by the undersigned, in the
City of Pennsauken and State of New Jersey on the 18th day of July, 1996.
THE TRANSLATION GROUP, LTD.
By: /s/ Charles D. Cascio
-----------------------------------
Charles D. Cascio, President, Chief
Executive Officer and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement or amendment was signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Theodora Landgren Chairman and Chief Operating Officer July 18, 1996
- ------------------------
Theodora Landgren
/s/ Charles D. Cascio President, Chief Executive Officer and Director July 18, 1996
- ------------------------
Charles D. Cascio
/s/ Richard J.L. Herson Chief Accounting Officer and Director July 18, 1996
- ------------------------
Richard J.L. Herson
/s/ Julius Cherny
- ------------------------ Director July 18, 1996
Julius Cherny
</TABLE>
<PAGE> 72
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
ITEM 27. EXHIBITS
--------
<S> <C>
1.1 Form of Underwriting Agreement
1.2 Form of Selected Dealers Agreement
1.3 Form of Agreement Among Underwriters
3.1 Restated Certificate of Incorporation
3.2 By-Laws
4.1* Specimen Common Stock Certificate
4.2* Specimen Warrant Certificate
4.3* Form of Warrant Agreement
4.4 Form of Representative's Warrant Agreement
4.5 Form of Representative's Warrant
4.6 Form of Subscription Agreement between Registrant and
investors pursuant to December 7, 1995 Private Placement
Memorandum
5 Opinion re: legality
10.1 Lease Agreement between BTS and J.C.G. Partnership dated
January 18, 1995.
10.2* Employment Agreement between the Registrant and Theodora
Landgren dated as of December 7, 1995, as amended.
10.3* Employment Agreement between the Registrant and Michael Cascio
dated as of December 7, 1995, as amended.
10.4* Employment Agreement between the Registrant and Charles Cascio
dated as of December 7, 1995, as amended.
10.5 The Translation Group, Ltd. 1995 Stock Option Plan
23.1 Consent of Heller, Horowitz & Feit, P.C. (included in the
Opinion filed as Exhibit 5)
23.2 Consent of Votta and Company
</TABLE>
- -----------------------
* To be filed by Amendment.
<PAGE> 1
EXHIBIT 1.1
1,300,000 SHARES OF COMMON STOCK
1,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
THE TRANSLATION GROUP LTD.
UNDERWRITING AGREEMENT
Boca Raton, Florida
__________, 1996
WERBEL-ROTH SECURITIES, INC.
As Representative of the
The Underwriters listed on Schedule A hereto
150 East Palmetto Park Road
Suite 380
Boca Raton, Florida 33432
Ladies and Gentlemen:
The Translation Group, Ltd., a Delaware corporation (the "Company")
confirms its agreement with Werbel-Roth Securities, Inc. ("Werbel-Roth") and
each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Werbel-Roth is acting as
representative (in such capacity, Werbel-Roth shall hereinafter be referred to
as "you" or the "Representative"), with respect to the sale by the Company and
Theodora Landgren, President, Chief Operating Officer and Director ("Initial
Selling Securityholder") and the purchase by the Underwriters, acting severally
and not jointly, of an aggregate of 1,100,000 shares of Common Stock, par value
$.001 per share, of the Company ("Shares") from the Company, 200,000 shares of
Common Stock, par value $.001 per share, of the Company ("Initial Selling
Securityholder's Shares") from the Initial Selling Security Holder and 1,500,000
Redeemable Common Stock Purchase Warrants, each of which, upon exercise,
entitles the holder thereof to purchase one share of Common Stock during the
three years following the date hereof at a price of $4.00 per share
("Warrants"), from the Company, in the respective amounts,
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<PAGE> 2
as set forth in Schedule A hereto. The Shares, Warrants and Initial Selling
Securityholder's Shares are hereinafter referred to as the "Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also sell to the Underwriters acting severally and not jointly, up
to an aggregate of 195,000 shares of Common Stock (the "Option Shares") and
225,000 Warrants (the "Option Warrants" for the purpose of covering
over-allotments, if any. Such Option Shares and Option Warrants are hereinafter
collectively referred to as the "Option Securities." The Company also proposes
to issue and sell to you warrants (the "Representative's Warrants") pursuant to
the Representative's Warrant Agreement (the "Representative's Warrant
Agreement") for the purchase of an additional 110,000 shares of Common Stock and
150,000 Warrants. The Common Stock, Warrants and Common Stock underlying the
Warrants issuable upon exercise of the Representative's Warrants are hereinafter
referred to as the "Representative's Securities." The Securities, the Option
Securities, the Representative's Warrants and the Representative's Securities
are more fully described in the Registration Statement and the Prospectus
referred to below.
1. Representations and Warranties of the Company and the Initial
Selling Securityholder. The Company and/or Initial Selling Securityholder
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. ________), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Securities, the Option Securities, the Representative's Warrants and the
Representative's Securities (collectively, hereinafter referred to as the
"Securities"), under the Securities Act of 1933, as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations (the "Regulations") of the Commission under the Act. The Company
will promptly file a further amendment to said registration statement in the
form heretofore delivered to the Underwriters and will not file any other
amendment thereto to which the Underwriters shall have objected in writing after
having been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Rules and Regulations), is hereinafter called the "Registration
Statement", and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called the
"Prospectus." For
2
<PAGE> 3
purposes hereof, "Rules and Regulations" mean the rules and regulations adopted
by the Commission under either the Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any thereof
and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed
with the requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement or Prospectus at the time of
filing thereof contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in such
Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information furnished
to the Company in writing by or on behalf of any Underwriter expressly for use
in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. Except as set forth in the Prospectus, the Company does not own
an interest in any corporation, partnership, trust, joint venture or other
business entity. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations require such qualification
or licensing. The Company has all requisite power and authority (corporate and
other), and has obtained any and all necessary authorizations, approvals,
orders,
3
<PAGE> 4
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies, to own or lease its properties and conduct its
business as described in the Prospectus; the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits; and the Company has not received
any notice of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state, local, and
foreign laws, rules and regulations on the Company's business as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact necessary to make the statements contained therein
not misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement, Representative's Warrant
Agreement and as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform or, when paid for and
issued, will conform, in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable and the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company. The Securities
are not and will not be subject to any preemptive or other similar rights of any
shareholder, have been duly authorized and, when paid for, issued and delivered
in accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and will conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities will be in due and proper form. Upon
the issuance and delivery pursuant to the terms hereof of the Securities to be
sold by the Company hereunder, the Underwriters or the Representative, as the
case may be, will acquire good and marketable title to such Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever.
4
<PAGE> 5
(f) The financial statements of the Company together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, income, changes in cash flow, changes in shareholders' equity and the
results of operations of the Company at the respective dates and for the
respective periods to which they apply and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no adverse change or development involving a material prospective
change in the condition, financial or otherwise, or in the earnings, position,
prospects, value, operations, properties, business, or results of operations of
the Company whether or not arising in the ordinary course of business, since the
date of the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and intangible,
and the businesses of the Company conform in all respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "Summary Financial
Information," "Selected Financial Data," "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
fairly present, on the basis stated in the Prospectus, the information set forth
therein, and have been derived from or compiled on a basis consistent with that
of the audited and unaudited financial statements included in the Prospectus.
(g) The Company (i) has paid, accrued or otherwise reserved
for, all federal, state, local, and foreign taxes required to be paid,
including, but not limited to, withholding taxes and amounts payable under
Chapters 21 through 24 of the Internal Revenue Code of 1986 (the "Code"), and
has furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such Taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriters of the
Securities from the Company and the purchase by the Representative of the
Representative's Warrants from the Company, (iii) the consummation by the
Company of any of its obligations under this Agreement, or (iv) resales of the
Securities in connection with the distribution contemplated hereby.
(i) The Company has, including, but not limited to, general
liability, product and property insurance, which insures the Company and its
employees against such losses and risks generally insured against by comparable
businesses. The Company (A) has not failed to give notice or present any
insurance claim with respect to any matter, including but not limited to the
Company's business, property or employees, under the insurance policy or surety
bond in a due and timely manner, (B) has no disputes or claims against any
underwriter of such insurance policies or surety
5
<PAGE> 6
bonds or has failed to pay any premiums due and payable thereunder, or (C) has
not failed to comply with all conditions contained in such insurance policies
and surety bonds. There are no facts or circumstances under any such insurance
policy or surety bond which would relieve any insurer of its obligation to
satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding, domestic or
foreign, pending or threatened against (or circumstances that may give rise to
the same), or involving the properties or business of, the Company which (i)
questions the validity of the capital stock of the Company, this Agreement or
the Representative's Warrant Agreement, or of any action taken or to be taken by
the Company pursuant to or in connection with this Agreement or the
Representative's Warrant Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects), or (iii) might materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, shareholders'
equity, value, operations, properties, business or results of operations of the
Company.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, the Representative's
Securities, enter into this Agreement and the Representative's Warrant Agreement
and to consummate the transactions provided for in such agreements; and this
Agreement, and the Representative's Warrant Agreement have each been duly and
properly authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms subject to bankruptcy, insolvency, and creditor's
rights and the application of equitable principles in any action legal or
equitable, and none of the Company's issue and sale of the Securities, the
Representative's Securities, execution or delivery of this Agreement or the
Representative's Warrant Agreement its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of, (i) the articles of incorporation or bylaws of the Company, (ii)
any license, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which it is or may
be bound or to which its properties or assets (tangible or intangible) is or may
be subject, or any indebtedness, or (iii) any statute, judgment, decree, order,
rule or regulation applicable
6
<PAGE> 7
to the Company of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body (including, without limitation,
those having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company or any of its activities or
properties.
(l) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court, regulatory
body, government agency or other body, domestic or foreign, is required for the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, the issuance of the Representative's Warrants, the performance of
this Agreement and the Representative's Warrant Agreement and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Securities, or the Representative's
Warrants, except such as have been or may be obtained under the Act or may be
required under state securities or Blue Sky laws in connection with the
Underwriters' purchase and distribution of the Securities, and the
Representative's Warrants to be sold by the Company hereunder.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which they may
be bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company enforceable
against the Company, as the case may be, in accordance with respective terms.
The descriptions in the Registration Statement of agreements, contracts and
other documents are accurate and fairly present the information required to be
shown with respect thereto by Form SB-2, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of its capital stock of any class, and
there has not been any material change in or affecting the general affairs,
management, financial operations, shareholders equity or results of operations
of the Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any material license, contract, indenture,
mortgage,
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<PAGE> 8
installment sale agreement, lease, deed of trust, voting trust agreement,
shareholders agreement, partnership agreement, note, loan or credit agreement,
purchase order, or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
the property or assets (tangible or intangible) of the Company is subject or
affected.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in material compliance
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. There are no pending investigations involving the Company by
the U.S. Department of Labor, or any other governmental agency responsible for
the enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company, or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists, or, is imminent.
(q) Except as described in the Prospectus, the Company does
not maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute,
now or at any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code, which could subject the Company to any tax penalty on
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan."
(r) The Company, nor any of its officers, directors, partners,
"affiliates" or "associates" (as these terms are defined in Rule 405 promulgated
under the Rules and Regulations) has ever taken or will take, directly or
indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the
8
<PAGE> 9
Exchange Act, or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities or
otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of
the patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company are in dispute so far as known by the Company or are in any conflict
with the right of any other person or entity. The Company (i) owns or has the
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing; and (ii) is not obligated or under any liability whatsoever to
make any payment by way of royalties, fees or otherwise to any owner or licensee
of, or other claimant to, any patent, trademark, service mark, trade name,
copyright, know-how, technology or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise.
(t) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") that are material
to the development, manufacture, operation and sale of all products and services
sold or proposed to be sold by the Company free and clear of and without
violating any right, lien, or claim of others, including without limitation,
former employers of its employees; provided, however, that the possibility
exists that other persons or entities, completely independently of the Company,
as the case may be, or its employees or agents, could have developed trade
secrets or items of technical information similar or identical to those of the
Company. The Company is not aware of any such development of similar or
identical trade secrets or technical information by others.
(u) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all its intellectual property
in all material aspects.
(v) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus, to be owned or leased by it free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
9
<PAGE> 10
(w) Votta and Company, whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations and have
been retained by the Company as its auditors.
(x) Except as provided herein and in the Registration
Statement, the Company has caused to be duly executed legally binding and
enforceable agreements ("Lock-up Agreements") pursuant to which the Company's
shareholders and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock have agreed not to, directly or
indirectly, publicly offer to sell, sell, grant any option for the sale of,
assign, transfer, pledge, hypothecate or otherwise encumber or dispose of any
shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein for a period of not
less than twenty-four (24) months following the effective date of the
Registration Statement without the prior written consent of the Representative;
provided, however, that the holders of the 300,000 Warrants included in the
Registration Statement under the Alternate Prospectus shall be permitted to sell
their securities at any time after six (6) months following the effective date
of the Registration Statement. On or before the Closing Date, the Company shall
deliver instructions to the Transfer Agent authorizing it to place appropriate
legends on the certificates representing the securities subject to the Lock-up
Agreements and to place appropriate stop transfer orders on the Company's
ledgers. Except for the issuance of shares of capital stock by the Company in
connection with a dividend, recapitalization, reorganization or similar
transaction or as a result of the exercise of warrants or outstanding options
disclosed in the Registration Statement, the Company shall not, for a period of
eighteen (18) months following the Closing Date, directly or indirectly, offer,
sell, issue or transfer any shares of its capital stock, or any security
exchangeable or exercisable for, or convertible into, shares of the capital
stock, without the prior written consent of the Representative, except the
Company may issue options, not to exceed 300,000 options (without the prior
written consent of the Representative) pursuant to the Company's Stock Option
Plan.
(y) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuances
with respect to the Company, or any of its officers, directors, shareholders,
partners, employees or affiliates that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD"); additionally, the Company further represents that other than the
forty thousand (40,000) warrants exercisable at $1.50 issued to the placement
agent no payments of consideration of any type have been
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<PAGE> 11
made by it over the twelve (12) months prior to (with the exception of a fee
paid for a private placement for funds raised of approximately $602,500) the
execution of this letter to any person or entity who has had an affiliation with
an NASD brokerage firm.
(z) The Common Stock and Warrants have been approved for
quotation on the National Association of Securities Dealers Automated Quotation
System as a small cap issue ("NASDAQ/SmallCap").
(aa) To the Company's best knowledge, no funds or assets of
the Company have been used for illegal purposes; no unrecorded funds or assets
of the Company been established for any purpose; no accumulation or use of the
Company's corporate funds or assets have been made without being properly
accounted for in the respective books and records of the Company; all payments
by or on behalf of the Company have been duly and properly recorded and
accounted for in the Company's books and records; no false or artificial entry
has been made in the books and records of the Company for any reason; no payment
has been made by or on behalf of Company with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payments; the Company has not made, directly or
indirectly, any illegal contributions to any political party or candidate. The
Company's internal accounting controls are sufficient to cause the Company to
comply with the Foreign Corrupt Practices Act of 1977, as amended.
(bb) Except as set forth in the Prospectus, no officer,
director, shareholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the Rules
and Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company; or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficiary
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus under
"Management" or "Certain Transactions," there are no existing material
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, Principal Shareholder (as such term is
defined in the Prospectus) of the Company, or any partner, affiliate or
associate of any of the foregoing persons or entities.
(cc) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
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<PAGE> 12
(dd) The minute book of the Company has been made available to
the Underwriters and contains a complete summary of all meetings and actions of
the directors and shareholders of the Company since the time of its
incorporation, and reflects all transactions referred to in such minutes
accurately in all respects.
(ee) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ff) The Company has as of the effective date of the
Registration Statement (i) entered into an employment agreement with each of
Theodora Landgren, Charles D. Cascio, Richard J.L. Herson and Luis M.
Garcia-Barrio in the forms filed as Exhibits 10.__, 10.__, 10.__ and 10.2,
respectively, to the Registration Statement, and (ii) purchased, or will
purchase within thirty (30) days of the Closing Date term keyman life insurance
on the life of Charles D. Cascio. The policy shall provide for coverage in the
amount of $2,000,000, and the policy shall name the Company as the sole
beneficiary thereof.
(gg) The Initial Selling Securityholder will have on the
Closing Date, good, valid and marketable title to securities listed on Schedule
A hereto to be sold by such Initial Selling Securityholder to the Underwriters,
free and clear of any liens, charges, claims, encumbrances, pledges, security
interests, restrictions, equities, stockholders' agreements, voting trusts or
defects in title whatsoever; and upon delivery of such Securities and payment of
the purchase price therefor as contemplated in this Agreement, each of the
Underwriters will receive good and marketable title to such Securities purchased
by it from such Initial Selling Securityholder, free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, restriction, equity,
shareholders' agreement, voting trust, community property right or defect in
title whatsoever; and other than as described in the Registration Statement and
the Prospectus or created hereby, there are no outstanding options, warrants,
rights, or other agreements or arrangements requiring such Initial Selling
Securityholder at any time to transfer any Securities to be sold hereunder by
such Initial Selling Securityholder.
(hh) Such Initial Selling Securityholder has duly authorized
(if applicable), executed and delivered, in the form heretofore furnished to the
Representative, a Power of Attorney (the "Power of Attorney") with ___________
as attorney-in-fact, (an "Attorney-in-Fact"), and a Letter of Transmittal and
Custody Agreement (the "Custody Agreement") with ____________________ as
custodian (the "Custodian"); each of the Power of Attorney and Custody Agreement
constitutes a valid and binding obligation of such Initial Selling
Securityholder, enforceable in accordance with its terms subject to
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<PAGE> 13
bankruptcy, insolvency and creditor's right; such Initial Selling
Securityholder's Attorney-in-Fact, acting alone, is authorized to execute and
deliver the certificate(s) evidencing the Securities to be sold to the
Underwriters on behalf of such Initial Selling Securityholder, to authorize the
delivery of those Securities to be sold by such Initial Selling Securityholder
under this Agreement and to duly endorse (in blank or otherwise) the certificate
or certificates representing such Securities or a stock power or powers with
respect thereto, to accept payment therefor, and otherwise to act on behalf of
such Initial Selling Securityholder in connection with this Agreement.
(ii) All authorizations, approvals, consents and orders
necessary for the execution and delivery by such Initial Selling Securityholder
of the Power of Attorney and the Custody Agreement, the execution and delivery
by or on behalf of such Initial Selling Securityholder of this Agreement, and
the sale and delivery of Securities to be sold by such Initial Selling
Securityholder under this Agreement have been obtained and are in full force and
effect; such Initial Selling Securityholder has full right, power and authority
to enter into and perform her obligations under this Agreement and such Power of
Attorney and Custody Agreement and to sell, transfer and deliver the Securities
to be sold by such Initial Selling Securityholder under this Agreement.
(jj) On the Closing Date, certificates in negotiable form for
the Securities to be sold by such Initial Selling Securityholder under this
Agreement on the Closing Date, together with a stock power or powers duly
endorsed in blank by such Initial Selling Securityholder, will have been placed
in custody with the Custodian for the purpose of effecting delivery hereunder
and thereunder.
(kk) The performance of this Agreement and the consummation of
the transactions herein contemplated by such Initial Selling Securityholder,
will not conflict with or result in a breach of, or default under, (i) any
license, contract, indenture, mortgage, deed of trust, voting trust agreement,
shareholders' agreement, note, loan or credit agreement, the Bylaws, the
Articles of Incorporation or other agreement or instrument to which such Initial
Selling Securityholder is a party or by which such Initial Selling
Securityholder is or may be bound or to which any of her property is or may be
subject, or (ii) any statute, judgment, decree, order, rule or regulation
applicable to such Initial Selling Securityholder of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body,
domestic or foreign, having jurisdiction over such Initial Selling
Securityholder or any of such Initial Selling Securityholder's activities or
properties; this Agreement when executed and delivered by the Initial Selling
Securityholder and, to the extent this Agreement is a binding agreement of the
Underwriters, constitutes the valid and binding agreement of such Initial
Selling Securityholder, enforceable in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law.
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<PAGE> 14
(ll) Such Initial Selling Securityholder has reviewed and is
familiar with the Registration Statement as originally filed with the Commission
and all amendments and supplements thereto, if any, filed with the Commission
prior to the date hereof, and with the Preliminary Prospectus and the
Prospectus, as supplemented, if applicable, to the date hereof, and has no
knowledge of any fact, condition or information not disclosed in the
Registration Statement and Prospectus, as so supplemented, if applicable, which
has adversely affected or could adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation, properties,
business or results of operations of the Company; and the information relating
to such Initial Selling Securityholder and the Securities and other securities
of the Company owned by Initial Selling Securityholder that is set forth in such
Registration Statement and Prospectus, as so supplemented, does not and at the
Closing Date, will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make such information, in light
of the circumstances under which they were made, not misleading and all
information furnished by or on behalf of such Initial Selling Securityholder for
use in the Registration Statement, the Preliminary Prospectus, the Prospectus,
or any amendment or supplement thereto is, and, at the Closing Date will be true
and complete in all material respects; and such Initial Selling Securityholder
is not prompted to sell the Securities to be sold by such Initial Selling
Securityholder under this Agreement by any information concerning the Company
which is not set forth in the Prospectus, as so supplemented.
(mm) Nothing has come to the attention of such Initial Selling
Securityholder to cause such Initial Selling Securityholder to believe that the
Company's representations and warranties contained in this Agreement are not
accurate in all material respects.
(nn) There is not pending or threatened against such Initial
Selling Securityholder any action, suit or proceeding (or circumstances that may
give rise to the same) which (i) questions the validity of this Agreement, the
Custody Agreement, the Power of Attorney or of any action taken or to be taken
by such Initial Selling Securityholder pursuant to or in connection with any of
the foregoing; or (ii) which is required to be disclosed in the Registration
Statement and the Prospectus which is not disclosed and such proceedings which
are summarized in all material respects.
(oo) No stamp duty or similar tax is payable by or on behalf
of the Underwriters in connection with (i) the sale of the Securities to be sold
by such Initial Selling Securityholder; (ii) the purchase by the Underwriters of
the Securities to be sold by such Initial Selling Securityholder; (iii) the
consummation by such Initial Selling Securityholder of any of its obligations
under this Agreement, the Custody Agreement or the Power of Attorney; or (iv)
resales of the Securities in connection with the distribution contemplated
hereby.
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<PAGE> 15
(pp) Except as set forth in the Prospectus, such Initial
Selling Securityholder does not have any registration rights with respect to any
securities of the Company; and such Initial Selling Securityholder does not have
any right of first refusal or other similar right to purchase any securities of
the Company upon the issuance or sale thereof by the Company or upon the sale
thereof by any other stockholder of the Company.
(qq) Such Initial Selling Securityholder has not since the
filing of the initial Registration Statement (i) sold, bid for, purchased,
attempted to induce any person to purchase, or paid anyone any compensation for
soliciting purchases of, Common Stock, or (ii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any securities of the
Company (except for the sale of the Securities to the Underwriters under this
Agreement and except as otherwise permitted by law).
(rr) Such Initial Selling Securityholder has not taken, and
will not take, directly or indirectly, any action which has constituted or which
might reasonably be expected to cause or result in stabilization of the price of
any security of the Company to facilitate the distribution of the Securities.
(ss) Such Initial Selling Securityholder will review the
Prospectus and will comply with all agreements and satisfy all conditions on its
part to be complied with or satisfied pursuant to this Agreement, the Custody
Agreement and the Power of Attorney at or prior to the Closing Date and will
advise one of its Attorneys-in-Fact prior to the Closing Date, as the case may
be, if any statement to be made on behalf of such Initial Selling Securityholder
in this Agreement contains any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading if made as of such Closing Date, as the case
may be.
(tt) Any certificate signed by or on behalf of such Initial
Selling Securityholder and delivered to the Underwriters shall be deemed a
representation and warranty by such Initial Selling Securityholder to the
Underwriters as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Securities and Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company and the Initial Selling Securityholder agree to sell to
each Underwriter, and each Underwriter, severally and not jointly, agrees to
purchase from the Company and the Initial Selling Securityholder, as the case
may be, at a price of $2.70 (90% of the public offering price) per share of
Common Stock and $.18 (90% of the public offering price) per Warrant, that
number of Securities set forth in Schedule A opposite the name of such
Underwriter, subject to such adjustment as the Representative in its sole
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<PAGE> 16
discretion shall make to eliminate any sales or purchases of fractional shares
of Common Stock or Warrants, plus any additional number of Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 1 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of the
Option Shares (up to an aggregate of an additional 195,000 shares of Common
Stock and 225,000 Warrants) at a price of $2.70 (90% of the public offering
price) per share and $.18 (90% of the public offering price) per Warrant. The
option granted hereby will expire 45 days after (i) the date the Registration
Statement becomes effective, if the Company has elected not to rely on Rule 430A
under the Rules and Regulations, or (ii) the date of this Agreement if the
Company has elected to rely upon Rule 430A under the Rules and Regulations, and
may be exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Securities upon notice by the Representative to the Company
setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representative, but shall not
be later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Date, as hereinafter defined, unless otherwise
agreed upon by the Representative and the Company. Nothing herein contained
shall obligate the Underwriters to make any over-allotments. No Option
Securities shall be delivered unless the Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
securities for, the Securities shall be made at the offices of the
Representative at 150 East Palmetto Park Road, Suite 380, Boca Raton, Florida
33432, or at such other place as shall be agreed upon by the Representative and
the Company. Such delivery and payment shall be made at 10:00 a.m. (Florida
time) on __________, 1996, or at such other time and date as shall be agreed
upon by the Representative and the Company, but not less than five (5) nor more
than ten (10) full business days after the effective date of the Registration
Statement (such time and date of payment and delivery being herein called
"Closing Date"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price for
and delivery of certificates for, such Option Securities shall be made at the
above-mentioned firm office of the Representative or at such other place as
shall be agreed upon by the Representative and the Company on the Option Closing
Date as specified in the notice from the Representative to the Company. Delivery
of the certificates for the Securities and the Option Securities, if any, shall
be made to the Underwriters against payment by the Underwriters, severally and
not jointly, of the purchase price for the Securities and the
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<PAGE> 17
Option Securities, if any, by New York Clearing House funds. In the event such
option is exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Securities then
being purchased which the number of Securities set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Securities,
subject in each case to such adjustments as the Representative in its discretion
shall make to eliminate any sales or purchases of fractional shares.
Certificates for the Securities and the Option Securities, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and shall
be in such denominations and registered in such names as the Underwriters may
request in writing at least two (2) business days prior to the Closing Date or
the Option Closing Date, as the case may be. The certificates for the Securities
and the Option Securities, if any, shall be made available to the Representative
at such office or such other place as the Representative may designate for
inspection, checking and packaging no later than 9:30 a.m. on the last business
day prior to the Closing Date or the Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to
the Representative the Representative's Warrants at a purchase price of $250,
which warrants shall entitle the holders thereof to purchase an aggregate of
110,000 shares of Common Stock and 150,000 Warrants. The Representative's
Warrants shall be exercisable for a period of five years commencing on the
effective date of the Registration Statement at a price equaling one hundred
twenty percent (120%) ($3.60 per Share and $.24 per Warrant) of the initial
public offering price of the Securities. The Representative's Warrant Agreement
and form of Warrant Certificate shall be substantially in the form filed as
Exhibit 4.__ to the Registration Statement. Payment for the Representative's
Warrants shall be made on the Closing Date.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the terms set forth
in the Prospectus. The Representative may from time to time increase or decrease
the public offering price after distribution of the Securities has been
completed to such extent as the Representative, in its sole discretion deems
advisable. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company and Initial Selling
Securityholder. The Company and Initial Selling Securityholder covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable
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and will not at any time, whether before or after the effective date of the
Registration Statement, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Act or Exchange Act
before termination of the offering of the Securities by the Underwriters of
which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative shall have objected or which is not
in compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose; (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission authority shall enter a
stop order or suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Representative,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement; and (ii) the fifth business day after the effective date of
the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations) and will furnish the Representative with copies of
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<PAGE> 19
any such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such
prospectus to which the Representative or Atlas, Pearlman, Trop & Borkson, P.A.
("Underwriters' Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information; however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Representative agrees that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable effort to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities or the Representative's Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or Underwriters' Counsel, the Prospectus, as
then amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify the Representative
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be reasonably satisfactory to Underwriters' Counsel, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may reasonably
request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its securityholders, in the manner specified in Rule
158(b) of the Rules and Regulations, and will deliver to the
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<PAGE> 20
Representative, an earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the Act and
Rule 158(a) of the Rules and Regulations, which statement need not be audited
unless required by the Act, covering a period of at least twelve (12)
consecutive months after the effective date of the Registration Statement.
(h) During a period of three years after the date hereof, the
Company will furnish to its shareholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
will deliver to the Representative:
i) Concurrently with furnishing such quarterly
reports to its shareholders, statements of income of the Company for
each quarter in the form furnished to the Company's shareholders and
certified by the Company's principal financial or accounting officer;
ii) concurrently with furnishing such annual reports
to its shareholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of operations,
shareholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
iii) as soon as they are available, copies of all
reports (financial or other) mailed to shareholders;
iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the
Commission, the NASD, NASDAQ/SmallCap or any other securities exchange;
v) every press release and every material news item
or article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on behalf
of the Company; and
vi) any additional information of a public nature
concerning the Company or its business which the Representative may
request.
During such three-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiary are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
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<PAGE> 21
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may reasonably
request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of duly
executed, legally binding and enforceable Lock-up Agreements pursuant to which
for a period of twenty-four (24) months from the effective date of the
Registration Statement, shareholders of the Company owning shares of Common
Stock and holders of securities exchangeable or exercisable for or convertible
into shares of Common Stock (owning Warrants) agree that it or he or she will
not directly or indirectly, publicly issue, offer to sell, sell, grant an option
for the sale of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein without
the prior written consent of the Representative; provided, however, that the
holders of the 300,000 Warrants included in the Registration Statement under the
Alternate Prospectus shall be permitted to sell their securities at any time
after six (6) months following the effective date of the Registration Statement.
On or before the Closing Date, the Company shall deliver instructions to the
Transfer Agent authorizing it to place appropriate legends on the certificates
representing the securities subject to the Lock-up Agreements and to place
appropriate stop transfer orders on the Company's ledgers. Except for the
issuance of shares of capital stock by the Company in connection with a
dividend, recapitalization, reorganization or similar transaction or as a result
of the exercise of warrants or outstanding options disclosed in the Registration
Statement, the Company shall not, for a period of eighteen (18) months following
the Closing Date, directly or indirectly, offer, sell, issue or transfer any
shares of its capital stock, or any security exchangeable or exercisable for, or
convertible into, shares of the capital stock, without the prior written consent
of the Representative, except the Company may issue options, not to exceed
300,000 options (without the prior written consent of the Representative)
pursuant to the Company's Stock Option Plan.
(l) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be
used, directly or indirectly, to acquire any securities issued by the Company.
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(m) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(n) The Company shall furnish to the Representative as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Section 7(1) hereof.
(o) The Company shall cause the Common Stock and Warrants to
be quoted on NASDAQ SmallCap and for a period of three years from the date
hereof, use its best efforts to maintain the NASDAQ SmallCap quotation of the
Common Stock or, upon the written consent of the Representative, quotation on a
principal stock exchange.
(p) For a period of three years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock if such transfer
sheets have been furnished to the Company by its transfer agent at no additional
cost, (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel.
(q) As soon as practicable, (i) but in no event more than five
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities; and (ii) but in no event more than 30 days from the
effective date of the Registration Statement, take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and to
continue such inclusion for a period of not less than five (5) years.
(r) Until the completion of the distribution of the
Securities, the Company shall not without the prior written consent of the
Representative and Underwriters' Counsel, issue, directly or indirectly any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering contemplated hereby, other than
trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
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<PAGE> 23
(s) For a period equal to the lesser of (i) five (5) years
from the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form SB-2 (or other appropriate form) for the
registration under the Act of the Representative's Securities.
(t) For a period of two (2) years after the effective date of
the Registration Statement, the Representative shall have the right to designate
one individual to be elected to the Company's Board of Directors (the "Board")
and the Company shall use its best efforts to cause such designee to be elected
to the Board. In the event the Representative shall not have designated such
individual at the time of any meeting of the Board or such person is unavailable
to serve, then for a period of two (2) years after the effective date of the
Registration Statement, the Company shall timely notify the Representative of
each meeting of the Board and an individual selected by the Representative shall
be permitted to attend all meetings of the Board. In addition, the Company shall
send to the Representative's designee all notices and other correspondence and
communications sent by Company to members of the Board at least two (2) days
before any meeting, if applicable. The Company shall reimburse the
Representative's designee for all reasonable expenses incurred in connection
with his service on, or attendance of, meetings of the Board to the same extent
as is provided to all non-employee members of the Board of Directors.
(u) On or before the effective date of the Registration
Statement, the Company shall have an authorized capital stock acceptable to the
Representative including, without limitation, any stock option plans of the
Company.
(v) On or before of the effective date of the Registration
Statement, the Company shall have (i) entered into an employment agreement with
each of Theodora Landgren, Charles D. Cascio, Richard J.L. Herson and Luis M.
Garcia-Barrio in the forms filed as Exhibits 10.__, 10.__, 10.__ and 10.___,
respectively, to the Registration Statement, and (ii) purchased, or will
purchase within thirty (30) days of the Closing Date term keyman life insurance
on the life of Charles D. Cascio. The policy shall provide for coverage in the
amount of $2,000,000, and the policy shall name the Company as the sole
beneficiary thereof.
(w) If the transactions contemplated by this Agreement are
consummated, during the five (5) year period from the Effective Date, the
Representative and its successors will have the right of first refusal (the
"Right of First Refusal") to act (1) as underwriter, placement agent or
investment banker for any and all public of private offerings of the securities,
whether equity, debt or a combination of equity and debt of the Company, or any
successor to or any current or future subsidiary of the Company (collectively
referred to in this Section (w) as the "Company") by the Company (the
"Subsequent Company Offerings") or any secondary offering (the "Secondary
Offering") of the Company's securities by any principal shareholder of the
Company (the "Principal
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<PAGE> 24
Shareholders") and (2) to act as the Company's investment banker on such other
transactions as may arise from time to time, including without limitation,
acting as financial advisor or intermediary in connection with merger and
acquisition opportunities "introduced to the Company" by Werbel-Roth Securities,
Inc. Accordingly, if during such period the Company intends to make a Subsequent
Company Offering, the Company receives notification from any of the such
Principal Shareholders of its securities of such holders' intention to make a
Secondary Offering, or the Company proposes a merger, acquisition or disposition
of assets, the Company shall notify the Representative in writing of such
intention and of the proposed terms of the offering or transaction. The Company
shall thereafter promptly furnish the Representative with such information
concerning the business, condition and prospects of the Company as the
Representative may reasonably request. If, within thirty (30) business days of
the receipt of such notice of intention and statement of terms, the
Representative does not accept in writing such offer to act as underwriter,
placement agent or investment banker with respect to such offering upon the
terms proposed, the Company and each of the Principal Shareholders shall be free
to negotiate terms with other underwriters with respect to such offering and to
effect such offering on such proposed terms within six (6) months after the end
of such ten (10) business days. Before the Company and/or any of the Principal
Shareholders shall accept any modified proposal from such other underwriter,
placement agent or investment banker, the Representative's preferential right
shall be reinstated in the same procedure with respect to such modified proposal
as provided above shall be adopted. The failure by the Representative to
exercise its Right of First Refusal in any particular instance shall not affect
in any way such right with respect to any other Subsequent Company Offering or
Secondary Offering.
(x) The Underwriter and its successors will have a Right of
First Refusal for a period of five (5) years from the Effective Date to purchase
for the Representative's account or to sell for the account of the Company's
principal stockholders any securities sold pursuant to Rule 144 under the Act.
Each of the principal stockholders agrees to consult with the Representative
with respect to any such sales and will offer the Representative the exclusive
opportunity to purchase or sell such securities on terms at least as favorable
to such principal stockholders as they can secure elsewhere. If the Underwriter
fails to accept in writing any such proposal for sale by such principal
stockholders within three (3) business days after receipt of a notice containing
such proposal, then the Representative shall have no claim or right with respect
to any such sales contained in any such notice. If, thereafter, such proposal is
modified in any material respect, such principal stockholders shall adopt the
same procedure as with respect to the original proposal.
(y) The Company agrees to pay the Underwriter a warrant
solicitation fee of 4.0% of the exercise price of any of the Warrants exercised
beginning one (1) year after the Effective Date (not including warrants
exercised by the Underwriter) if (a) the market price of the Company's Common
Stock on the date the Warrant is exercised is greater than the exercise price of
the Warrant, (b) the exercise of the Warrant was
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<PAGE> 25
solicited by the Underwriter, (c) the Warrant is not held in a discretionary
account, (d) disclosure of the compensation arrangement is made upon the sale
and exercise of the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Exchange Act, and (f) solicitation of the exercise is in
compliance with the NASD Notice to Members 81-38 (September 22, 1981), including
without limitation, the designation of the soliciting agent in writing by a
warrantholder.
(z) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization or
similar transaction or as a result of the exercise of warrants or outstanding
options disclosed in the Registration Statement, the Company shall not, for a
period of eighteen (18) months following the Closing Date, directly or
indirectly, offer, sell, issue or transfer any shares of its capital stock, or
any security exchangeable or exercisable for, or convertible into, shares of the
capital stock, without the prior written consent of the Representative.
(aa) The Company shall on the Closing Date, enter into a
financial advisory agreement ("Consulting Agreement") with the Representative
for a term of three (3) years commencing on the Effective Date which will
provide that the Underwriters will be paid a consulting fee of $26,000 per annum
payable in the aggregate of $78,000 on the Closing Date.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid as fees of
Underwriters' Counsel, except as provided in (iv) below) incident to the
performance of the obligations of the Company under this Agreement and the
Representative's Warrant Agreement, including, without limitation, (i) the fees
and expenses of accountants and counsel for the Company, (ii) all costs and
expenses incurred in connection with the preparation, duplication, printing,
filing, delivery and mailing (including the payment of postage with respect
thereto which fees shall not exceed $5,000) of the Registration Statement and
the Prospectus and any amendments and supplements thereto and the printing,
mailing and delivery of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreements, if any, the Selling Agreements, if any, and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriters and such dealers as the Underwriters may
request, in quantities as hereinabove stated, (iii) the printing, engraving,
issuance and delivery of the Securities including, but not limited to, (x) the
purchase by the Underwriters of the Securities and the purchase by the
Representative of the Representative's Warrants from the Company, and (y) the
consummation by the Company of any of its obligations under this Agreement and
the Representative's Warrant Agreement, (iv) the qualification of the Securities
under state or foreign securities or "Blue Sky" laws and determination of the
statues of such securities under legal investment laws, including the costs of
printing and mailing the
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<PAGE> 26
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum,"
"Legal Investments Survey," if any, and the "Final Blue Sky Memorandum" and
disbursements and fees of counsel in connection therewith, it being agreed that
Underwriter's Counsel shall perform the required "Blue Sky" legal services for
the account of the Company, which fees shall not exceed $35,000 (exclusive of
disbursements and expenses) (v) advertising costs and expenses, consisting of
the Company's travel costs and preparation expenses in connection with the "road
show," information meetings and presentations, bound volumes and prospectus
memorabilia and one "tomb-stone" advertisement in The Wall Street Journal, (vi)
fees and expenses of the transfer agent and registrar, (vii) the fees payable to
the Commission and the NASD, and (viii) the fees and expenses incurred in
connection with the listing of the Securities with the NASDAQ/SmallCap and any
other exchange.
(b) The Initial Selling Share Holder agrees that she will pay
all stock transfer taxes, stamp duties and other similar taxes, if any, payable
(i) upon the sale, issuance or delivery of the Securities sold by such Selling
Share Holder, (ii) upon the purchase by the Underwriters of the Securities sold
by such Initial Selling Security Holder, (iii) upon resales of the Securities
sold by such Initial Selling Security Holder in connection with the distribution
contemplated hereby or (iv) in connection with the consummation by such Initial
Selling Security Holder of any of its obligations under this Agreement, or the
Custody Agreement, and further authorizes the payment of any such amount (and
any amounts payable pursuant to Section 5(c) hereof) by deduction from the
proceeds of the Shares to be sold by him under this Agreement and from funds
from time to time held for his account by the Custodian under the Custody
Agreement.
(c) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 12, the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(d) hereof.
(d) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Securities and Option Securities, if any, $25,000 of which has been paid upon
the execution of the Letter of Intent between the parties hereto and $25,000 of
which was paid upon the initial filing of the Registration Statement. The
Company also agrees to pay certain due diligence fees and expenses incurred by
the Representative in connection with (i) background investigation of officers,
directors and the shareholder of the Company, pursuant to judgment, UCC and
Commission searches and (ii) due diligence meetings for syndicate members and
others.
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<PAGE> 27
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company and Initial Selling Security
Holder herein as of the date hereof and as of the Closing Date and each Option
Closing Date, if any, with respect to the Company as if they had been made on
and as of the Closing Date or each Option Closing Date, as the case may be; the
accuracy on and as of the Closing Date of the statements of the Initial Selling
Security Holder and officers of the Company made pursuant to the provisions
hereof; and the performance by the Company and the Initial Selling Security
Holder and on and as of the Closing Date and each Option Closing Date, if any,
of its or their covenants and obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 P.M., Florida time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Representative, and, at
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules of Regulations within
the prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) The Representative shall not have advised the Company or
the Initial Selling Security Holder that either the Registration Statement, or
any amendment thereto, or the Prospectus, contains an untrue statement of fact
which, in the Representative's opinion, is material, or omits to state a fact
which, in the Representative's opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from Company's Counsel, and shall have used its best efforts to
cause such counsel to deliver such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the
Representative's Warrants, the Registration Statement, the Prospectus and other
related matters as the Representative may request
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<PAGE> 28
and Underwriters' Counsel shall have received such papers and information as
they request to enable them to pass upon such matters.
(d) At the Closing Date, the Underwriters shall have received
the favorable opinion of Heller, Horowitz & Feit, P.C., counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in form and substance
reasonably satisfactory to Underwriters' Counsel, to the effect that:
i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the laws of
its jurisdiction, (B) is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction where the nature
of its properties or the conduct of its business requires such
registration and the failure to register or so qualify would have a
material adverse effect on the Company, (C) has all requisite corporate
power and authority, and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; (D) the Company is
and has been doing business in material compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state and local laws, rules and
regulations; and, (E) the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely
affect the business, condition, financial or otherwise, or the
earnings, affairs, position, prospects, value, operation, properties,
business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state and
local laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material
respects or do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made.
ii) the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business
entity;
iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization", and to our
knowledge, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement and the Representative's Warrant Agreement and as described
in the Prospectus. The Securities, the Representative's Warrants and
all other
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<PAGE> 29
securities issued or issuable by the Company conform in all material
respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued
and are fully paid and non-assessable; the holders thereof have no
rights to rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any
holders of any security of the Company. The Securities and the
Representative's Securities to be sold by the Company hereunder and
under the Representative's Warrant Agreement are not and will not be
subject to any preemptive or other similar rights of any shareholder,
have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid
and non-assessable and conform to the description thereof contained in
the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be
taken for the authorization, issue and sale of the Securities and the
Representative's Securities has been duly and validly taken; and the
certificates representing the Securities and the Representative's
Warrants are in due and proper form. Subject to compliance with the
registration provisions of the Act and applicable state registration
and qualification provisions, the Representative's Warrants constitute
valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the issuance and
delivery pursuant to this Agreement of the Securities and the
Representative's Warrants to be sold by the Company, and upon payment
in full therefor the Underwriters and the Representative, respectively,
will acquire good and marketable title to the Securities and
Representative Warrants free and clear of any pledge, lien, charge,
claim, encumbrance, security interest, or other restriction (excluding
securities law restrictions) or equity of any kind whatsoever, except
with respect to any actions that may have been taken or omitted to be
taken by the Underwriters or the Representative after the date hereof.
No transfer tax is payable by or on behalf of the Underwriters in
connection with (A) the issuance by the Company of the Securities, (B)
the purchase by the Underwriters and the Representative of the
Securities and the Representative's Securities, respectively, from the
Company, (C) the consummation by the Company of any of its obligations
under this Agreement or the Representative's Warrant Agreement, or (D)
resales of the Securities in connection with the distribution
contemplated hereby.
iv) the Registration Statement has become effective
under the Act, and, if applicable, filing of all pricing information
has been timely made in the appropriate form under Rule 430A, and no
stop order suspending the use of the Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof or
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
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<PAGE> 30
pending or, to the best of such counsel's knowledge, threatened or
contemplated under the Act.
v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments a
statements or supplements thereto (other than the financial statements
and the notes thereto and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to form in
all material respects with the requirements of the Act and the Rules
and Regulations.
vi) to the best of such counsel's knowledge, (A)
there are no agreements, contracts or other documents required by the
Act to be described in the Registration Statement and the Prospectus
and filed as exhibits to the Registration Statement other than those
described in the Registration Statement (or required to be filed under
the Exchange Act if upon such filing they would be incorporated, in
whole or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to
which the Company is a party or by which it is bound, including any
document to which the Company is a party or by which it is bound,
incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate and fairly represent the information
required to be shown by Form SB-2; or (C) there is not pending or
threatened against the Company any action, arbitration, suit,
proceeding, inquiry, investigation, litigation, legal, statutory,
regulatory, governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against, or
involving the properties or business of the Company which (x) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), (y) questions the
validity of the capital stock of the Company or this Agreement or the
Representative's Warrant Agreement, or of any action taken or to be
taken by the Company pursuant to or in connection with any of the
foregoing; (D) no statute or regulation or legal or governmental
proceeding required to be described in the Prospectus is not described
as required; and (E) there is no action, suit or proceeding, pending or
threatened, against or affecting the Company before any court or
arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) which in any manner draws into question
the validity or enforceability of this Agreement or the
Representative's Warrant Agreement;
vii) the Company has full legal right, power and
authority to enter into each of this Agreement and the Representative's
Warrant Agreement, and to
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<PAGE> 31
consummate the transactions provided for therein; and each of this
Agreement and the Representative's Warrant Agreement has been duly
authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or
delivery of this Agreement and the Representative's Warrant Agreement,
its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its
business as described in the Registration Statement, the Prospectus,
and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms
of, (A) the articles of incorporation or by-laws of the Company; (B)
any license, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders agreement, note, loan or credit agreement or
any other agreement or instrument to which the Company is a party or by
which it is or may be bound or to which any of its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or
(C) any statute, judgment, decree, order, rule or regulation applicable
to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the
Company or any of its activities or properties.
viii) no consent, approval, authorization or
order,and no filing with, any court, regulatory body, government agency
or other body (other than such as may be required under Blue Sky laws,
as to which no opinion need be rendered) is required in connection with
the issuance of the Securities pursuant to the Prospectus, the issuance
of the Representative's Warrants, and the Registration Statement, the
performance of this Agreement and the Representative's Warrant
Agreement, and the transactions contemplated hereby and thereby;
ix) the properties and business of the Company
conform in all material respects to the description thereof contained
in the Registration Statement and the Prospectus;
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x) the Company is not in breach of, or in default
under, any term or provision of any material license, contract,
indenture, mortgage, installment sale agreement, deed of trust, lease,
voting trust agreement, shareholders' agreement, partnership agreement,
note, loan or credit agreement or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other
material agreement or instrument to which the Company is a party or by
which any of the Company may be bound or to which the property or
assets (tangible or intangible) of any of the Company is subject or
affected; and the Company is not in violation of any term or provision
of its Articles of Incorporation or by-laws or in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation;
xi) the statements in the Prospectus under
"PROSPECTUS SUMMARY - THE COMPANY," "BUSINESS," "MANAGEMENT," "INITIAL
SELLING SECURITY HOLDER AND SELLING SECURITY HOLDERS," "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS," "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT," "DESCRIPTION OF SECURITIES," and
"SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel,
and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions are
correct in all material respects;
xii) the Securities have been accepted for listing on
NASDAQ/SmallCap.
xiii) the person listed under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the
Prospectus are the respective "beneficial owners" (as such phrase is
defined in Regulation 13d-3 under the Exchange Act) of the securities
set forth opposite their respective names thereunder as and to the
extent set forth therein;
xiv) except as described in the Prospectus, no
person, corporation, trust, partnership, association or other entity
has the right to include and/or register any securities of the Company
in the Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in such
registration statement;
xv) except as described in the Prospectus, there are
no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect to
the sale of the Securities hereunder or financial consulting
arrangement or any other arrangements, agreements, understandings,
payments or issuances that may affect the Underwriters' compensation,
as determined by the NASD;
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xvi) assuming due execution by the parties thereto
other than the Company, the Lock-up Agreements hereof are legal, valid
and binding obligations of parties thereto, enforceable against the
party and any subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization moratorium or
other laws of general application relating to or affecting enforcement
of creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law);
xvii) except as described in the Prospectus, the
Company does not (A) maintain, sponsor or contribute to any ERISA
Plans, (B) maintain or contribute, now or at any time previously, to a
defined benefit plan, as defined in Section 3(35) of ERISA, and (C) has
never completely or partially withdrawn from a "multi-employer plan;"
xviii) except as set forth in the Prospectus, no
officer, director of shareholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under
the Rules and Regulations) of any of the foregoing persons or entities
has or has had, either directly or indirectly, (A) an interest in the
person or entity which (x) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold by
the Company, or (y) purchases from or sells or furnishes to the Company
any goods or services, or (B) a beneficial interest in any contract or
agreement to which the Company is a party or by which they may be bound
or affected. Except as set forth in the Prospectus under "Management"
or "Certain Transactions," there are no existing material agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the
Company, and any officer, director, or Principal Shareholder of the
Company, or any affiliate or associate of any such person or entity.
Such counsel shall state that during the course of its participation in
the preparation of the Registration Statement and the Prospectus and the
amendments thereto, no facts have come to the attention of such counsel which
lead them to believe that either the Registration Statement or any amendment
thereto, at the time such Registration Statement or amendment became effective
or the Preliminary Prospectus or Prospectus or amendment or supplement thereto
as of the date of such opinion contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
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In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and that the Representative and they are
justified in relying thereon.
(e) At the Closing Date, the Underwriter shall have received
the favorable opinion of ____________________________ with respect to the
Initial Selling Security Holder dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel, to
the effect that:
i) The Initial Selling Security Holder has full
right, power and authority to enter into and to perform its obligations
under this Agreement, his Power of Attorney, Custody Agreement and to
sell, transfer and deliver the Securities to be sold by such Initial
Selling Security Holder under this Agreement.
ii) This Agreement, the Powers of Attorney and the
Custody Agreement have been duly executed and delivered by or on behalf
of the Selling Shareholder, and are the valid and binding obligations
of such Initial Selling Security Holder, enforceable against such
Initial Selling Security Holder in accordance with their respective
terms;
iii) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
including the issuance, sale and delivery of the Securities to be sold
by the Initial Selling Security Holder, will not result in a breach or
violation of, or constitute a default under, any will, license,
contract indenture, mortgage, voting trust agreement, shareholders'
agreement, deed of trust, note, loan or credit agreement, or other
agreement or instrument to which such Initial Selling Security Holder
is a party or by which such Initial Selling Security Holder is or may
be bound or to which any of such Initial Selling Security Holder's
property is or may be subject or any indebtedness, statue, judgment,
decree, order, rule or regulation applicable to such Initial Selling
Security Holder of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or
similar matters),
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domestic or foreign having jurisdiction over such Initial Selling
Security Holder or any of his or its activities or properties;
iv) To the best of such counsel's knowledge, no
consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over such
Initial Selling Security Holder, or any of his respective properties or
assets is required for the execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby,
including the issuance, sale and delivery of the Securities to be sold
by such Initial Selling Security Holder, except the registration under
the Act of the Shareholder Securities and such consents, approvals,
authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shareholder Securities to be sold by the Underwriters; and
v) Upon delivery of the Securities set forth on
Schedule A hereto to be sold by such Initial Selling Security Holder,
and the receipt of payment therefor pursuant hereto, good, valid and
marketable title to such Securities and, free and clear of all liens,
charges, encumbrances, equities, claims, pledges, security interests,
restrictions, shareholders' agreements, voting trusts, community
property rights, or defects in title whatsoever will pass to the
Underwriters.
(f) At each Option Closing Date, if any, the Underwriters
shall have received the favorable opinion of Heller, Horowitz & Feit, P.C.,
counsel to the Company, dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of such Option Closing Date the statements made by Heller,
Horowitz & Feit, P.C., in the opinion delivered on the Closing Date with respect
to the Option Securities.
(g) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
(h) Prior to each of the Closing and each Option Closing Date,
if any (1) there shall been no adverse change or development involving a
prospective change in the condition, financial or otherwise, prospects,
shareholder's equity with the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (2) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial
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condition of the Company is set forth in the Registration Statement and
Prospectus which is adverse to the Company; (3) the Company shall not be in
default under any provision of any instrument relating to any outstanding
indebtedness; (4) the Company shall not have issued any securities (other than
Securities and the Representatives Warrants) or declared or paid any dividend or
made any distribution in respect of its capital stock of any class and there has
not been any change in the capital stock or change in the debt (long or short
term) or liabilities or obligations of the Company (contingent or otherwise);
(5) no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (6)
no action, suit or proceeding, at law or in equity, shall have been pending or
threatened (or circumstances giving rise to same) against the Company or
affecting any of its properties or business before or by any court or federal,
state or foreign commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement and Prospectus; and (7) no
stop order shall have been issued under the Act and no proceedings therefor
shall have been initiated, threatened or contemplated by the Commission.
(i) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
i) The representations and warranties of the Company
in this Agreement are true and correct in all material respects, as if
made on and as of the Closing Date or the Option Closing Date, as the
case may be, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this Agreement on
its part to be performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to
the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
iii) Each Preliminary Prospectus, the Registration
Statement and the Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and information required to
be included therein; and
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iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(a) the Company has not incurred up to and including the Closing Date
or the Option Closing Date, as the case may be, other than in the
ordinary course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has not paid or
declared any dividends or other distributions on its capital stock; (c)
the Company has not entered into any transactions not in the ordinary
course of business; (d) there has not been any change in the capital
stock or long-term debt or any increase in the short-term borrowings
(other than any increase in the short-term borrowings in the ordinary
course of business) of the Company; (e) the Company has not sustained
any material loss or damage to its property or assets, whether or not
insured; (f) there is no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company or any
affiliated party of the foregoing which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth; and
(g) there has occurred no event required to be set forth in an amended
or supplemented Prospectus, which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(i) are to such documents as amended and supplemented at the date of such
certificate.
(j) At the Closing Date, if any, the Representative shall have
received a certificate of an Attorney-in-Fact for the Initial Selling Security
Holder, dated as of such date, to the effect that (i) the representations and
warranties of such Initial Selling Security Holder, contained herein and in the
Custody Agreement are true and correct with the same force and effect as though
expressly made at and as of such Closing Date, (ii) such Initial Selling
Security Holder has reviewed the Prospectus, and any supplements thereto, and
the information relating to such Initial Selling Security Holder and such
Initial Selling Security Holder's shares of Common Stock and other securities of
the Company owned by such Initial Selling Security Holder that is set forth in
the Prospectus, and any supplements thereto, does not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make such information not misleading, and all of the information furnished by or
on behalf of such Initial Selling Security Holder for use in the Prospectus is
true, correct and complete in all respects.
(k) The Underwriter shall have the obligation to satisfy the
requirements set forth by the rules and regulations of the NASD as to the amount
of compensation allowable or payable by the Underwriter and, accordingly, by the
Closing Date, the Underwriters will have received clearance from the NASD as to
the amount of compensation allowable or payable to the Underwriters, as
described in the Registration Statement.
(l) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance
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satisfactory (including the non-material nature of the changes or decreases, if
any, referred to in clause (iii) below) in all respects to the Underwriters and
Underwriters' Counsel, from ___________________:
i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of
the Act and the applicable Rules and Regulations;
ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations thereunder and that the Representative may rely
upon the opinion of ________________ with respect to the financial
statements and supporting schedules included in the Registration
Statement;
iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim
financial statements of the Company (with an indication of the date of
the latest available unaudited interim financial statements), a reading
of the latest available minutes of the shareholders and board of
directors and the various committees of the boards of directors of the
Company, consultations with officers and other employees of the Company
responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to its attention which would
lead it to believe that (A) the unaudited financial statements and
supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company
included in the Registration Statement, or (B) at a specified date not
more than five days prior to the effective date of the Registration
Statement, there has been any change in the capital stock or long-term
debt of the Company, or any decrease in the shareholder's equity or net
assets of the Company as compared with amounts shown in the
____________, 1996 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease,
setting forth the amount of such change or decrease; and (C) during the
period from _________, 1996, to a specified date not more than five (5)
days prior to the effective date of the Registration Statement, there
was any decrease in net revenues, net earnings or increase in net
earnings per common share of the Company, as compared with the
corresponding period beginning ______________, 1996, other than as set
forth in or contemplated by the Registration Statement, or, if there
was any such decrease, setting forth the amount of such decrease;
setting forth, at a date not later than five (5) days prior
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<PAGE> 39
to the date of the Registration Statement, the amount of liabilities of
the Company (including a break-down of commercial paper and notes
payable to banks).
iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company
set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of
the Company and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and
found them to be in agreement;
v) stating that they have not during the immediately
preceding five-year period brought to the attention of any of the
Company's management any "weakness," as defined in Statement of
Auditing Standard No. 60 "Communication of Internal Control Structure
Related Matters Noted in an Audit," in any of the Company's internal
controls;
vi) statements as to such other matters incident to
the transaction contemplated hereby as the Representative may
reasonably request.
(m) At Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from _____________ a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect that
they reaffirm those statements made in the letter furnished pursuant to
subsection (l) of this Section, except that the specified date referred to shall
be a date not more than five days prior to Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that they have carried out
procedures as specified in subsection (l) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Representative and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such subsection (l).
(n) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(o) No order suspending the sale of the Securities in any
jurisdiction, which in the judgment of the Representative is material to Closing
of the transaction, designated by the Representative pursuant to subsection (e)
of Section 4 hereof shall
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have been issued on either the Closing Date or the Option Closing Date, if any,
and no proceedings for that purpose shall have been instituted or shall be
contemplated.
(p) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement substantially in the form filed as Exhibit ____ to the Registration
Statement in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(q) On or before Closing Date, the Securities shall have been
duly approved for quotation on NASDAQ/SmallCap, subject to official notice of
issuance.
(r) On or before Closing Date, there shall have been delivered
to the Representative all of the Lock-up Agreements, in form and substance
reasonably satisfactory to Underwriters' Counsel.
(s) On or before the Closing Date, the Company shall have
executed and delivered to the Representative the Consulting Agreement
substantially in the form filed as Exhibit ____.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may terminate
this Agreement or, if the Representative so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company and the Initial Selling Security Holder,
severally but not jointly agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 12 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any Preliminary Prospectus, the Registration Statement or
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the Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section 7 collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, NASDAQ/SmallCap or any other securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the Prospectus, in the light of the circumstances under which they were
made), unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company or the Initial Selling
Securityholder may have at common law or otherwise.
(b) Each of the Underwriters agree severally, but not jointly,
to indemnify and hold harmless the Company, each of its directors, proposed
directors, each of its officers who has signed the Registration Statement,
counsel for the Company, the Initial Selling Share Holder, and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company and the Initial Selling
Share Holder to the Underwriters but only with respect to statements or
omissions, if any, made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any such application, provided that such written information or
omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the transactions
effected by the Underwriters in connection with this Offering. The Company
acknowledges that the statements with respect to the public offering of the
Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties
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under this Section 7, notify each party against whom indemnification is to be
sought in writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 7 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may have
otherwise). In case any such action is brought against any indemnified party,
and it notifies an indemnifying party or parties of the commencement thereof,
the indemnifying party or parties will be entitled to participate therein, and
to the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded, based upon an
opinion of counsel, that there may be defenses available to it or them which are
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel,
in addition to any local counsel, separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement
effected without its written consent; provided, however, that such consent was
not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of this Section 7 provides for indemnification in such
case or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A)
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above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of each of the contributing parties, on the one hand,
and the party to be indemnified on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages, expenses
or liabilities, as well as any other relevant equitable considerations. In any
case where each of the Company or the Initial Selling Share Holder are
contributing parties and the Underwriters are the indemnified party, the
relative benefits received by the Company or Initial Selling Share Holder on the
one hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities (before
deducting expenses) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover Page
of the Prospectus. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Initial Selling Share Holder, or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subdivision (d), the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), except to the extent that such party
or parties were adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing
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Date, as the case may be, and such representations, warranties and agreements of
the Company and the indemnity agreements contained in Section 7 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Underwriter, the Company, Selling Securityholder,
any controlling person of any Underwriter or the Company, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriters and the Representative, as the case may be.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
Florida time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for the sale to
the public; provided however, that the provisions of Sections 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such shares for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Representative's opinion will in the immediate future disrupt the financial
markets; or (ii) any material adverse change in the financial markets shall have
occurred; or (iii) if trading on the New York Stock Exchange, the American Stock
Exchange, or the over-the-counter market shall have been suspended, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iv) if the United States shall have become involved in a war
or major hostilities, or if there shall have been an escalation in an existing
war or major hostilities or a national emergency shall have been declared in the
United States; or (v) if a banking moratorium has been declared by a state or
federal authority; or (vi) if a moratorium in foreign exchange trading has been
declared; or (vii) if the Company shall have sustained a loss material or
substantial to the Company by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in the Representative's opinion, make it
inadvisable to proceed with the delivery of the Securities; or (viii) if there
shall have been such a material adverse change in the conditions or prospects of
the Company, or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities.
44
<PAGE> 45
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a), the Company shall promptly
reimburse and indemnify the Representative for all of its actual and reasonable
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriters (less amounts previously paid pursuant to Section 5(c) above).
Notwithstanding any contrary provision contained in this Agreement, if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted to the Representative, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied (including, without limitation,
pursuant to Section 6 or Section 12) then, the Company shall promptly reimburse
and indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 6(d) above). In addition, the
Company shall remain liable for all reasonable Blue Sky counsel fees and
expenses and Blue Sky filing fees. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections 6, 10, 11 and 12
hereof), and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such arrangement
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Securities, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriters, or the Company.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
45
<PAGE> 46
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company and/ or Initial Selling Security Holder. If
the Company or Selling Securityholder shall fail at the Closing Date or the
Company shall fail at any Option Closing Date, to sell and deliver the number of
Securities which it or they are obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice form the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section shall
relieve the Company or Initial Selling Security Holder from liability, if any,
in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Werbel-Roth Equities, Inc., 150 East Palmetto Park Road, Suite
380, Boca Raton, Florida 33432, Attention: Howard Roth, with a copy to Atlas,
Pearlman, Trop & Borkson, P.A., New River Center, Suite 1900, 200 East Las Olas
Boulevard, Fort Lauderdale, Florida 33301, Attention: Charles B. Pearlman, Esq.
Notices to the Company shall be directed to the Company at 7703 Maple Avenue,
Pennsauken, New Jersey 08109 Attention: Ms. Theodora Landgren, President, with a
copy to Heller, Horowitz & Feit, P.C., 292 Madison Avenue, New York, New York
10017, Attention: Irving Rothstein.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company, Selling Securityholder and
the controlling persons, directors and officers referred to in Section 7 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Securities from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida without giving
effect to the choice of law or conflict of laws principles. The parties hereto
agree that any action, proceeding or claim against it arising out of or in any
way related to this Agreement shall be brought and enforced in the courts of the
State of Florida or the United States of America for the Southern District of
Florida and irrevocably submit to such exclusive
46
<PAGE> 47
jurisdiction, and hereby irrevocably waive any objection to such exclusive
jurisdiction or inconvenient forum.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
THE TRANSLATION GROUP, LTD.
By:________________________________
Ms. Theodora Landgren, President
Confirmed and accepted as of
the date first above written. By:________________________________
Ms. Theodora Landgren
WERBEL-ROTH SECURITIES, INC.
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:______________________________
MILLENNIUM SECURITIES, CORP.
By:______________________________
47
<PAGE> 48
SCHEDULE A
<TABLE>
<CAPTION>
Number of Shares Number of Shares
to be Purchased to be Purchased
---------------- ----------------
<S> <C> <C>
Names of Underwriters
Werbel-Roth Securities Corp
Millennium Securities Corp
Total
</TABLE>
<PAGE> 1
1,300,000 SHARES OF COMMON STOCK
1,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
THE TRANSLATION GROUP, LTD
SELECTED DEALER AGREEMENT
Dear Sirs:
1. Registration under the Securities Act of 1933, as amended (the
"Act"), of the 1,300,000 shares ("Shares") of Common Stock par value $.001 per
share ("Common Stock") and 1,500,000 Redeemable Common Stock Purchase Warrants
("Warrants" and collectively with the Shares the "Securities") of The
Translation Group, Ltd., a Delaware corporation (the "Company"), as more fully
described in the final prospectus enclosed herewith (the "Prospectus"), has
become effective.(1) We are offering certain of the shares of Common Stock for
purchase by a selected group on the terms and conditions stated herein.
Authorized Public
Offering Price: $______ per Share and $____ per Warrant.
Dealers' Selling
Concession: Not to exceed $____ per Share and $___ per Warrant
payable upon termination of the Selected Dealer
Agreement, except as provided below. We reserve the
right not to pay such concession on any of the Shares
or Warrants purchased by any of the Selected Dealers
from us and repurchased by us at or below the price
stated above prior to such termination.
Reallowance: You may reallow not in excess of $_____ per Share and
$___ per Warrant as a selling concession to dealers
who are members in good standing of the National
Association of Securities Dealers, Inc. ("NASD") or
to foreign dealers who are not eligible for
membership in the NASD and who have agreed not to
sell the Shares and/or Warrants (i) to purchasers in,
or to persons who are nationals of, the United States
of America, and (ii) except in compliance with the
Interpretation with Respect to Free-Riding and
Withholding of the NASD (the "Interpretation") as to
sales outside the United States.
- --------
(1) Plus the Over-Allotment Option available to the Underwriters to
purchase up to an additional 195,000 Shares and 225,000 Warrants from the
Company.
<PAGE> 2
Delivery and
Payment: Delivery of the Shares and/or Warrants shall be made
on or about _____________, 1996 or such later date as
we may advise, at the office of Werbel-Roth
Securities, Inc., 150 E. Palmetto Park Rd., Suite
380, Boca Raton, FL 33432, or at such other place as
we shall specify on not less than one day's notice to
you. Payment for the Shares and/or Warrants is to be
made, against delivery, at the full authorized public
offering price stated above, or, if we shall so
advise you, at the public offering price less the
dealers' selling concession stated above, by a
certified or official bank check payable to the order
of Werbel-Roth Securities, Inc., in New York Clearing
House Funds.
Termination: This Agreement shall terminate at the close of
business on the 30th day following the effective date
of the Registration Statement (of which the enclosed
Prospectus forms a part), unless extended at our
discretion for a period or periods not to exceed in
the aggregate 30 additional days. We may terminate
this Agreement, whether or not extended, at any time
without notice.
2. Except as otherwise expressly provided in this Agreement, members of
the Selected Dealers may immediately offer the Shares and/or Warrants for sale
and take orders therefor only at the public offering price, subject to
confirmation and allotment by us. We, in turn, are prepared to receive orders
subject to confirmation and allotment by us. We reserve the right to reject any
order in whole or in part or to allot less than the number of Shares and/or
Warrants applied for. Orders transmitted by telephone must be promptly confirmed
by letter or telegram.
3. You, by becoming a member of the Selected Dealers, agree (a) to take
up and pay for the number of Shares and/or Warrants allotted and confirmed to
you, (b) not to use any of the Shares and/or Warrants to reduce or cover any
short position you may have, (c) upon our request, to advise us of the number of
Shares and/or Warrants purchased from us as manager of the Selected Dealers
remaining unsold by you and to resell to us any or all of such unsold Shares
and/or Warrants at the public offering price stated above, less all or such part
of the concession allowed you as we may determine, and (d) to make available a
copy of the Prospectus to all persons who on your behalf will solicit orders for
the Shares and/or Warrants prior to the making of such solicitations by such
persons. You are not authorized to give any information or to make any
representations other than those contained in the Prospectus or any supplements
or amendments thereto.
4. As contemplated by Rule 15c2-8 under the Securities Exchange Act of
1934, as amended, we agree to mail a copy of the Prospectus to any person making
a written request therefor during the period referred to in the rules and
regulations adopted
2
<PAGE> 3
under such Act, the mailing to be made to the address given in the request. You
confirm that you have delivered all preliminary prospectuses and revised
preliminary prospectuses, if any, required to be delivered under the provisions
of Rule 15c2-8 and agree to deliver all copies of the Prospectus required to be
delivered thereunder. We have heretofore delivered to you such preliminary
prospectuses as have been required by you, receipt of which is hereby
acknowledged, and will deliver such further prospectuses as may be requested by
you.
5. You agree that until termination of this Agreement you will not make
purchases or sales of the Shares and/or Warrants except (a) pursuant to this
Agreement, (b) pursuant to authorization received from us, or (c) in the
ordinary course of business as broker or agent for a customer pursuant to any
unsolicited order.
6. Additional copies of the Prospectus and any supplements or
amendments thereto shall be supplied in reasonable quantity upon request.
7. The Shares and/or Warrants are offered by us for delivery when, as
and if sold to, and accepted by, us and subject to the terms herein and in the
Prospectus or any supplements or amendments thereto, to our right to vary the
concessions and terms of offering after their release for public sale, to
approval of counsel as to legal matters and to withdrawal, cancellation or
modification of the offer without notice.
8. Upon written application to us, you shall be informed as to the
jurisdictions under the securities or blue sky laws of which we believe the
Shares and/or Warrants are eligible for sale, but we assume no responsibility as
to such eligibility or the right of any member of the Selected Dealers to sell
any of the Shares and/or Warrants in any jurisdiction. We have caused to be
filed a Further State Notice relating to such of the Shares and/or Warrants to
be offered to the public in New York in the form required by, and pursuant to,
the provisions of Article 23A of the General Business Law of the State of New
York. Upon the completion of the public offering contemplated herein, each
member of the Selected Dealers agrees to promptly furnish to us, upon our
request, territorial distribution reports setting forth each jurisdiction in
which sales of the Shares and/or Warrants were made by such member, the number
of Shares and/or Warrants sold in such jurisdiction, and any further information
as we may request, in order to permit us to file on a timely basis any report
which we as underwriter of the offering or manager of the Selected Dealers may
be required to file pursuant to the securities or blue sky laws of any
jurisdiction.
9. You, by becoming a member of the Selected Dealers represent that you
are (a) a member in good standing of the NASD, or (b) a foreign dealer, who is
not eligible for membership in said NASD and has agreed not to sell the Shares
and/or Warrants (i) to purchasers in, or to persons who are nationals of, the
United States of America, and (ii) except in compliance with (A) the
Interpretation with Respect to Free-Riding and Withholding of said NASD as to
sales outside the United States and
3
<PAGE> 4
(B) Sections 8, 24, 25 (as applicable to a non-member broker/dealer in a foreign
country) and 36 of said NASD's Rules of Fair Practice. In addition, if you are a
member of the NASD you confirm that you will not reallow any commissions to any
non-member broker/dealers, including foreign broker/dealers registered pursuant
to the Securities Exchange Act of 1934, as amended.
You hereby represent and warrant that neither you nor any of
your affiliates (as such term is defined in Rule 405 promulgated under the Act)
have received compensation of any nature from the Company pursuant to any
agreement, arrangement or understanding with the Company or otherwise during the
twelve (12) month period prior to and including the date hereof and neither you
nor any such affiliate will enter into any agreement, arrangement or
understanding with the Company for or otherwise receive compensation of any
nature from the Company during the twelve (12) month period following the date
hereof.
10. You, by becoming a member of the Selected Dealers represent that
(a) neither you nor any of your directors, officers, partners or "persons
associated with" you (as defined in the By-Laws of the NASD), nor, to your
knowledge, any "related person" (defined by the NASD to include counsel,
financial consultants and advisors, finders, members of the selling or
distribution groups, and any other persons associated with or related to any of
the foregoing) or any other broker-dealer, (i) within the last 18 months have
purchased in private transactions, or intends before, at or within six months
after the commencement of the public offering of the Shares and Warrants to
purchase in private transactions, any securities of the Company or any parent,
predecessor, or subsidiary thereof, (ii) within the last 12 months had any
dealings with any of the Company or the parent, predecessor, subsidiary or
controlling stockholder thereof or (iii) have, except as contemplated by this
Agreement, any agreement, arrangement or understanding to receive compensation
in connection with (as defined by the NASD) the distribution of the Shares and
Warrants.
11. Nothing herein shall constitute any members of the Selected Dealers
partners with us or with each other, but you agree, notwithstanding any prior
settlement of accounts or termination of this Agreement, to bear your proper
proportion of any tax or other liability based upon the claim that the Selected
Dealers constitute a partnership, association, unincorporated business or other
separate entity and a like share of any expenses of resisting any such claim.
12. We shall be the underwriter of the offering and manager of the
Selected Dealers and shall have full authority to take such action as we may
deem advisable in respect of all matters pertaining to the offering or the
Selected Dealers or any members of them. Except as expressly stated herein, or
as may arise under the Act, we shall be under no liability to any member of the
Selected Dealers as such for, or in respect of, (i) the validity or value of the
Shares and/or Warrants, (ii) the form of, or the statements contained in, the
Prospectus, the Registration Statement of which the Prospectus forms
4
<PAGE> 5
a part, any supplements or amendments to the Prospectus or such Registration
Statement, any preliminary prospectus, any instruments executed by, or obtained
or any supplemental sales data or other letters from, the Company, or others,
(iii) the form or validity of the Underwriting Agreement, or this Agreement,
(iv) the eligibility of any of the Shares and/or Warrants for sale under the
laws of any jurisdiction, (v) the delivery of the Shares and/or Warrants, (vi)
the performance by the Company, or others of any agreement on its or their part,
or (vii) any matter in connection with any of the foregoing, except our own want
of good faith.
13. If for federal income tax purposes the Selected Dealers, among
themselves or with the underwriter, should be deemed to constitute a
partnership, then we elect to be excluded from the application of Subchapter K,
Chapter 1, Subtitle A of the Internal Revenue Code of 1986, as amended, and we
agree not to take any position inconsistent with such selection. We authorize
you, in your discretion, to execute and file on our behalf such evidence of such
selection as may be required by the Internal Revenue Service.
14. All communications from you shall be addressed to us care of
Werbel-Roth Securities, Inc., 150 E. Palmetto Park Rd., Suite 380, Boca Raton,
FL 33432. Any notice from us to you shall be deemed to have been fully
authorized by the Underwriters and to have been duly given if mailed,
telegraphed or telexed to you at the address to which this letter is mailed.
This Agreement shall be construed in accordance with the laws of the State of
Florida without giving effect to conflict of laws. Time is of the essence in
this Agreement.
If you desire to become a member of the Selected Dealers,
please advise us to that effect immediately by telegram and sign and return to
us the enclosed counterpart of this letter.
Very truly yours,
WERBEL-ROTH SECURITIES, INC.,
As Representative of the several Underwriters
By:_____________________________________
Name:
Title:
5
<PAGE> 6
We accept membership in the Selected Dealers on the terms specified
above and acknowledge receipt of the final Prospectus. In purchasing any Shares
and/or Warrants, we have relied solely on the final Prospectus and on no other
statements, written or oral.
Dated: _________________, 1996
________________________________________
By:_____________________________________
6
<PAGE> 1
EXHIBIT 1.3
1,300,000 SHARES OF COMMON STOCK
1,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
THE TRANSLATION GROUP LTD.
AGREEMENT AMONG UNDERWRITERS
Boca Raton, Florida
__________, 1996
WERBEL-ROTH SECURITIES, INC.
As Representative of the
The Underwriters listed on Schedule A hereto
150 East Palmetto Park Road
Suite 380
Boca Raton, Florida 33432
Dear Sirs:
We understand that The Translation Group Ltd., a Delaware corporation
(the "Company") and Theodora Landgren, President, Cheif Operating Officer and
director of the Company ("Initial Selling Security Holder"), desires to enter
into an agreement, substantially in the form of Exhibit A hereto (the
"Underwriting Agreement"), with you and the other prospective Underwriters named
in Schedule A to the Underwriting Agreement for the sale by the Company and the
Initial Selling Securitiy Holder, of an aggregate of 1,100,000 shares of Common
Stock, par value $.001 per share, of the Company ("Shares") from the Company,
200,000 shares of Common Stock, par value $.001 per share, of the Company
("Initial Selling Security Holder's Shares") from the Initial Selleing Security
Holder and 1,500,000 Redeemable Common Stock Purchase Warrants, each of which,
upon exercise, entitles the holder thereof to purchase one share of Common Stock
during the three years following the date hereof at a price of $4.00 per share
("Warrants"), from the Company, in the respective amounts, as set forth in
Schedule A to the Underwriting Agreement. In addition, the Company has agreed to
grant to the
<PAGE> 2
Underwriters an option to purchase up to an additional 195,000 shares of Common
Stock (the "Option Shares") and 150,000 Warrants (the Option Warrants" and
collectively with the Option Shares the "Option Securities"), for the purpose of
covering over-allotments, if any, in connection with the sale of the Securities.
The Shares, Initial Selling Security Holder's Shares, Warrants and any Option
Securities purchased pursuant to the Underwriting Agreement are herein called
the "Securities".
We understand that changes may be made in those who are to be
Underwriters and in the respective number of Securities to be purchased by them,
but that the number of Securities to be purchased by us as set forth in said
Schedule A to the Underwriting Agreement will not be changed without our consent
except as provided herein or in the Underwriting Agreement. The parties on whose
behalf you execute the Underwriting Agreement are herein called the
"Underwriters."
We desire to confirm the agreement among you, the undersigned and the
other Underwriters with respect to the purchase of the Securities by the
Underwriters, severally and not jointly, from the Company and Initial Selling
Security Holder. The aggregate number of Securities which any Underwriter will
be obligated to purchase pursuant to the terms of the Underwriting Agreement is
herein called the "Underwriting Obligation" of that Underwriter.
1. Authority and Compensation of Representative. We hereby authorize
you, as our representative (the "Representative") and on our behalf, (a) to
enter into an agreement with the Company and the Initial Selling Security
Holder, in substantially the form attached hereto as Exhibit A, but with such
changes therein as in your judgment will not be materially adverse to the
Underwriters, providing for the purchase by us, severally and not jointly, from
the Company and the Initial Selleing Security Holder, at the purchase price per
share determined as set forth in said Exhibit A, of the number of Securities set
forth opposite our name in Schedule A to said Exhibit A, and our proportionate
share of the Option Securities which you determine to be purchased, (b) to
exercise all the authority and discretion vested in the Underwriters and in you
by the provisions of the Underwriting Agreement, (c) to take such action as you
in your discretion may deem necessary or advisable in order to carry out the
provisions of the Underwriting Agreement and of this Agreement, and the sale and
distribution of the Securities, and (d) to determine all matters relating to the
public advertisement of the Securities.
As our share of the compensation for your services hereunder,
we will pay to you, and we authorize you to charge to our account on the Closing
Date and on the Option Closing Date referred to in the Underwriting Agreement,
$______ per Share and $____ per Warrant in respect of the aggregate number of
Securities and Option Securities, respectively, which we shall agree to purchase
pursuant to the Underwriting Agreement.
2
<PAGE> 3
It is understood that you shall receive from the Company, as
the designee of the several Underwriters, warrants (the "Representative's
Warrants") to purchase an 110,000 shares of Common Stock and 150,000 Warrants,
each exercisable at not less than 120% of the Initial Public Offering Price, as
defined hereunder. As the designee of the several Underwriters, you shall retain
one hundred percent (100%) of such Representative's Warrants.
2. Public Offering of Securities. The sale of the Securities to the
public is to be made, as herein provided, as soon after the registration
statement relating to the Securities becomes effective as you deem advisable.
The purchase price to be paid by the Underwriters for the Securities and the
initial public offering price are to be determined by agreement between you and
the Company. The Securities shall be first offered to the public at the initial
public offering price as so determined (the "Initial Public Offering Price").
You will advise us by fax, graphic scanning, telegraph or telephone when the
Securities shall be released for offering, when the registration statement
relating to the Securities shall become effective and the price at which the
Securities is initially to be offered. We agree not to sell any of the
Securities until you have released it for that purpose. We authorize you, after
the initial public offering, to change the public offering price, the concession
and the reallowance if, in your sole discretion, such action becomes desirable
by reason of changes in general market conditions or otherwise. As used herein,
the terms "Registration Statement", "Preliminary Prospectus" and "Prospectus"
shall have the meanings ascribed thereto in the Underwriting Agreement. The
public offering price at the time in effect is herein called the "Offering
Price". After notice from you that the Securities are released for public sale,
we will offer to the public in conformity with the provisions hereof and with
the terms of offering set forth in the Prospectus such Securities as you advise
us are not reserved. Unless otherwise permitted, we will not sell any of the
Securities to any account over which we have discretionary authority.
3. Offering to Selected Dealers and Retail Sales. We authorize you to
reserve for offering and sale, and on our behalf to sell, to retail purchasers
(such sales being herein called "Retail Sales") and to dealers selected by you
(such dealers, among whom any Underwriter may be included, being herein called
"Selected Dealers") all or any part of our Securities as you, in your sole
discretion, shall determine. Such sales, if any, shall be made (a) in the case
of Retail Sales, at the Offering Price, and (b) in the case of sales to Selected
Dealers, at the Offering Price less such concession or concessions as you, in
your sole discretion, shall determine. Except for such sales as are designated
by a purchaser to be for the account of a particular Underwriter or Selected
Dealer, any sales to Selected Dealers made for our account shall be as nearly as
practicable in the ratio that the Securities reserved for our account for
offering to Selected Dealers bears to the aggregate of all Securities of all
Underwriters so reserved.
You agree to notify us promptly on the date of the public
offering as to the number of Securities, if any, which we may retain for direct
sale by us. Prior to the
3
<PAGE> 4
termination of the provisions referred to in Section 12 hereof, you may reserve
for offering and sale as hereinbefore provided any Securities theretofore
retained by us remaining unsold and we may, with your consent, retain any
Securities theretofore reserved by you remaining unsold.
We agree that, from time to time prior to the termination of
the provisions referred to in Section 12 hereof, we shall furnish to you such
information as you may request in order to determine the number of Securities
purchased by us under the Underwriting Agreement which then remain unsold, and
we shall upon your request sell to you for the account of any Underwriter as
many of such unsold Securities as you may designate at the Offering Price, less
all or any part of the concession to Selected Dealers as you, in your sole
discretion, shall determine. The provisions of Section 4 hereof shall not be
applicable in respect of any such sale.
We authorize you to determine the form and manner of any
communications or agreements with Selected Dealers. In the event that there
shall be any agreements with Selected Dealers, you are authorized to act as
manager thereunder and we agree, in such event, to be governed by the terms and
conditions of such agreements. The form of Selected Dealer Agreement attached
hereto as Exhibit B is satisfactory to us.
It is understood that any Selected Dealer to whom an offer may
be made as hereinbefore provided shall be actually engaged in the investment
banking or securities business and shall be either (i) a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") or (ii) a
dealer with its principal place of business located outside the United States,
its territories and its possessions and not registered as a broker or dealer
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), who
agrees not to make any sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents therein. Each
Selected Dealer shall agree to comply with the provisions of Section 24 of
Article m of the Rules of Fair Practice of the NASD, and each foreign Selected
Dealer who is not a member of the NASD also shall agree to comply with the
NASD's interpretation with respect to free-riding and withholding, to comply, as
though it were a member of the NASD, with the provisions of Sections 8 and 36 of
Article m of such Rules of Fair Practice, and to comply with Section 25 of
Article m thereof as that Section applies to a non-member foreign dealer. The
several Underwriters may allow, and the Selected Dealers, if any, may re-allow,
such concession or concessions as you may determine from time to time on sales
of Securities to any qualified dealer, all subject to the Rules of Fair Practice
of the NASD.
You hereby represent and warrant that neither you nor any of
your affiliates (as such term is defined in Rule 405 promulgated under the
Securities Act of 1933, as amended (the "1933 Act")) have received compensation
of any nature from the Company pursuant to any agreement, arrangement or
understanding with the Company or
4
<PAGE> 5
otherwise during the twelve (12) month period prior to and including the date
hereof and neither you nor any such affiliate will enter into any agreement,
arrangement or understanding with the Company for or otherwise receive
compensation of any nature from the Company during the twelve (12) month period
following the date hereof.
You, and any of the several Underwriters with your prior
consent, may make purchases or sales of the Securities from or to any of the
other Underwriters, at the Offering Price less all or any part of the gross
spread, and from or to any of the Selected Dealers at the Offering Price less
all or any part of the concession to Selected Dealers.
Upon your request, we will advise you of the identity of any
dealer to whom we allow such a discount and any Underwriter or Selected Dealer
from whom we receive such a discount.
4. Repurchases in the Open Market. In recognition of the importance of
distributing the Securities to bona fide investors, we agree to repurchase on
demand any Securities sold by us (otherwise than through you) which shall be
contracted for or purchased in the open market by you on behalf of any
Underwriter or Underwriters, at a price equal to the cost of such purchase plus
commissions and taxes on redelivery. Any Securities delivered on such repurchase
need not be the identical Securities originally sold by us. In lieu of delivery
of such Securities to us, you may sell such Securities in any manner for our
account and charge us with the amount of any loss or expense or credit us with
the amount of any profit, less any expense, resulting from such sale, or charge
our account with an amount not in excess of the concession to Selected Dealers.
5. Stabilization and Over-Allotment. In order to facilitate the sale
of the Securities, we authorize you on our behalf and for our account, during
the term of this Agreement, in your discretion, and without obligating you to do
so, to buy and sell Securities and any other securities of the Company in the
open market or otherwise for either long or short account, on such terms and at
such prices as you may determine and, in arranging for sales to Selected Dealers
and others, to over-allot and cover such over-allotments, provided that at no
time shall the net commitment of any Underwriter under authority of this Section
5, either for long or short account, exceed an amount equivalent to 15% of the
maximum number of Securities to be purchased by such Underwriter under the
Underwriting Agreement. During or after the term of this Agreement you may cover
any short position incurred under the preceding sentence by purchase of Option
Securities from the Company, pursuant to the option contained in Section 2 of
the Underwriting Agreement or otherwise. All purchases, sales and
over-allotments under authority of this Section shall be for the accounts of
each of the several Underwriters as nearly as practicable in proportion to their
respective Underwriting Obligations. We agree to take up at cost on demand any
Securities so purchased for our account and to deliver on demand any Securities
so sold or
5
<PAGE> 6
over-allotted for our account. We also authorize you to deliver our Securities
and any other Securities purchased by you for our account pursuant to this
Section 5, against sales made by you for our account pursuant to any provisions
of this Agreement. Notwithstanding the foregoing limitations, in the event of
default by one or more Underwriters in respect of their obligations under this
Section, each non-defaulting Underwriter shall assume its proportionate share of
the obligations of such defaulting Underwriter without relieving such defaulting
Underwriter of its liability hereunder.
In the event that you effect any stabilizing purchases
pursuant to this Section 5, you will notify each Underwriter promptly of the
date and time when the first stabilizing purchase is effected and the date and
time when stabilizing is terminated. Each Underwriter agrees that if it effects
any stabilizing purchases, it will, not later than three business days following
the day on which any such stabilizing purchase is effected, notify you of the
price, date and time at which such stabilizing purchase was effected and will
promptly notify you of the date and time when stabilizing was terminated by such
Underwriter. Each Underwriter authorizes you to file with the Securities and
Exchange Commission (the "Commission") all notices, records and reports which
may be required as a result of any transactions made pursuant to this Section 5.
We agree to advise you, from time to time upon your request
during the term of this Agreement, of the number of Securities retained by us or
purchased by us from other Underwriters and Selected Dealers remaining unsold,
and will, upon your request, release to you for the accounts of one or more of
the several Underwriters, such number of Securities as you may designate at such
price, not less than the net price to Selected Dealers nor more than the Initial
Public Offering Price, as you may determine.
If, pursuant to the provisions of the first paragraph of this
Section 5 and prior to the termination of this Agreement (or such earlier date
as you may have determined on notice to the Underwriters) you purchase or
contract to purchase any Securities which were retained by or released to us for
direct sale, which Securities were theretofore not effectively placed for
investment by us, we authorize you in your discretion either to charge our
account with an amount equal to the concession to Selected Dealers with respect
thereto or to require us to repurchase such Securities at a price equal to the
total cost of such purchase, including commissions, if any, and transfer tax on
the redelivery. Securities delivered on such repurchase need not be the
identical Securities originally purchased by and delivered to us.
Upon the termination of this Agreement, you are authorized in
your discretion, in lieu of delivering to the several Underwriters any
Securities then held for their respective accounts pursuant to this Section 5,
to sell such Securities for the accounts of each of the Underwriters at such
price or prices as you may determine and debit or credit our account for the
loss or profit resulting from such sale.
6
<PAGE> 7
6. Authority to Borrow. We authorize you to advance your own funds for
our account (charging current interest rates) and to arrange loans for our
account or the account of the Underwriters, as you may deem necessary or
advisable for the purchase, carrying, sale and distribution of the Securities or
otherwise for the purpose of carrying out this Agreement. You may execute and
deliver any notes or other instruments in connection therewith and may hold or
pledge as security therefor all or any part of our Securities and Securities
purchased hereunder for our account. Any lender is hereby authorized to accept
your instructions in all matters relating to such loans. Any part of our
Securities and Securities so held by you may be delivered to us for carrying
purposes and, if so delivered, will be redelivered to you upon demand. The
obligations of the Underwriters under loans arranged under this Section 6 shall
be several in proportion to their respective underwriting obligations. Any
lender is authorized to accept your instructions as to the disposition of the
proceeds of any such loans.
7. Allocation of Expenses and Liability. We authorize you to charge
our account with and we agree to pay (a) all transfer taxes on sales made by you
for our account, except as herein otherwise provided, and (b) our proportionate
share (based on our Underwriting Obligation) of all other expenses incurred by
you in connection with the purchase, carrying, sale and distribution of the
Securities and all other expenses arising under the terms of the Underwriting
Agreement or this Agreement. Your determination of all such expenses and your
allocation thereof shall be final and conclusive. You may at any time make
partial distributions of credit balances or call for payment of debit balances.
Funds for our account at any time in your hands may be held in your general
funds without accountability for interest. As soon as practicable after the
termination of this Agreement, the net credit or debit balance in our account,
after proper charge and credit for all interim payments and receipts, shall be
paid to or paid by us, provided that you may establish such reserves as you, in
your sole discretion, shall deem advisable to cover possible additional expenses
chargeable to the several Underwriters. Notwithstanding any settlement, we will
remain liable for any taxes on transfers for our account and for our
proportionate share (based on our Underwriting Obligation) of all expenses and
liabilities that may be incurred by or for the accounts of the Underwriters.
8. Liability for Future Claims. Neither any statement by you of any
credit or debit balance in our account nor any reservation from distribution to
cover possible additional expenses relating to the Securities shall constitute
any representation by you as to the existence or non-existence of possible
unforeseen expenses or liabilities of or charges against the several
Underwriters. Notwithstanding the distribution of any net credit balance to us
or the termination of this Agreement or both, we shall be and remain liable for,
and will pay on demand, (a) our proportionate share (based on our Underwriting
Obligation) of all expenses and liabilities which may be incurred by or for the
accounts of the Underwriters, or any of them, liability which may be incurred by
or for the accounts of the Underwriters, or any of them, based on the claim that
the Underwriters constitute an association, unincorporated business, partnership
or any
7
<PAGE> 8
separate entity, and (b) any transfer taxes paid after such settlement on
account of any sale or transfer for our account.
9. Open Market Transactions. We represent and agree that we will not
make bids or offers, or make or induce purchases or sales for our own account or
the accounts of customers, in the open market or otherwise, either before or
after the purchase of the Securities and for either long or short account, of
any Securities or any security of the same class or series, or any right to
purchase any such security except (i) as provided in this Agreement, the
Underwriting Agreement and the Selected Dealer Agreements or otherwise approved
by you, (ii) in brokerage transactions not involving solicitation of the
customer's order and (iii) in connection with option and option-related
transactions that are consistent with the "no-action" position of the Commission
under the 1934 Act. We further agree that we will not lend, either before or
after the purchase of the Securities, to any customer, Underwriter, Selected
Dealer or to any other securities broker or dealer any Securities. Prior to the
completion (as defined in Rule 10b-6 under the 1934 Act) of our participation in
the distribution, we will otherwise comply with Rule 10b-6.
10. Delivery and Payment. Upon your request, we shall deliver to you
payment for the Securities to be purchased by us under the Underwriting
Agreement in an amount equal to the Initial Public Offering Price for such
Securities less the concession to Selected Dealers. Such payment shall be made
in such form and at such time and place as may be specified in such request, and
we authorize you to make payment for such Securities against delivery thereof
for our account hereunder. If we are a member of or clear through a member of
The Depository Trust Company ("DTC"), you may, in your discretion, deliver our
Securities through the facilities of DTC.
You shall remit to us, as promptly as practicable, the amounts
received by you from Selected Dealers and retail purchasers as payment in
respect of Securities sold by you for our account pursuant to Section 3 hereof
for which payment has been received. Securities purchased by us under the
Underwriting Agreement and not reserved or sold by you for our account pursuant
to Section 3 hereof shall be delivered to us as promptly as practicable after
receipt by you. Any Securities purchased by us and so reserved which remains
unsold at any time prior to the settlement of accounts hereunder may, in your
discretion, and shall, upon your request, be delivered to us, but, until
termination of the Selected Dealer Agreements pursuant to their terms, such
delivery shall be for carrying purposes only. In case any Securities reserved
for sale in Retail Sales or to Selected Dealers shall not be purchased and paid
for in due course as contemplated hereby, we agree (a) to accept delivery when
tendered by you of any Securities so reserved for our account and not so
purchased and paid for, and (b) in case we shall have received payment from you
in respect of any such Securities, to reimburse you on demand for the full
amount which you shall have paid us in respect of such Securities.
8
<PAGE> 9
In the event of our failure to tender payment for Securities
as provided in the Underwriting Agreement, you shall have the right under the
provisions thereof to arrange for other persons, who may include you and any
other Underwriter, to purchase such Securities which we had agreed to purchase,
but without relieving us from liability for our default.
11. Blue Sky. Prior to the initial offering by the Underwriters, you
will inform us as to the states and other jurisdictions under the respective
securities or blue sky laws of which it is believed that the Securities has been
qualified for sale or is exempt from such qualification, but you do not assume
any responsibility or obligation as to the accuracy of such information or as to
the right of any Underwriter or dealer to offer or sell the Securities in any
state or other jurisdiction. You agree to file or cause to be filed, on behalf
of the Underwriters, a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York,
if necessary. If we prepare to offer Securities outside of the United States,
its territories or possessions, we will take, at our expense, all such action,
if any, as may be necessary to comply with the laws of each foreign jurisdiction
in which we propose to offer the Securities.
12. Termination. The provisions set forth in Section 2, the second
paragraph and the first sentence of the third paragraph of Section 3, Section 4,
the first sentence of Section 5 and Section 9 hereof will terminate at the close
of business on the 45th calendar day after the effective date of the
Registration Statement, unless extended or sooner terminated as hereinafter
provided. You may extend such provisions, or any of them, for a period not to
exceed 45 additional calendar days by notice to us to such effect. You may
terminate any of such provisions at any time by notice to us, and you may
terminate all such provisions at any time by notice to us to the effect that the
offering provisions of this Agreement are terminated.
13. Acknowledgment of Receipt of Registration Statement. etc. We hereby
confirm that we have examined the Registration Statement relating to the
Securities as heretofore filed by the Company with the Commission and each
amendment thereto, if any, filed through the date hereof, including any
documents filed under the 1934 Act through the date hereof and incorporated by
reference into the Prospectus, that we are willing to be named as an underwriter
therein and to accept the responsibilities of an underwriter thereunder, and
that we are willing to proceed as therein contemplated. We confirm that we have
authorized you to advise the Company on our behalf (a) as to the statements to
be included in any Preliminary Prospectus and in the Prospectus under the
heading "Underwriting" insofar as they relate to us, and (b) that there is no
other information about us required to be stated in the Registration Statement
or Prospectus. We understand that the aforementioned documents are subject to
further change and that we will be supplied with copies of any further
amendments or supplements to the Registration Statement, of any document filed
under the 1934 Act after the effective date of the Registration Statement and
before termination of the offering of the Securities by
9
<PAGE> 10
the Underwriters if such document is deemed to be incorporated by reference into
the Prospectus and of any amended or supplemented Prospectus promptly, if and
when received by you, but the making of such changes, amendments and supplements
shall not release us or affect our obligations hereunder or under the
Underwriting Agreement.
14. (a) Indemnification. We agree to indemnify and hold harmless each
other Underwriter and any person who controls any such Underwriter within the
meaning of Section 15 of the 1933 Act, to the extent that, and upon the terms on
which, we agree to indemnify and hold harmless the Company and other specified
persons as set forth in the Underwriting Agreement. Our indemnity agreement
contained in this Section 14 shall remain in full force and effect regardless of
any investigation made by or on behalf of such other Underwriter or controlling
person and shall survive the delivery of and payment for the Securities and the
termination of this Agreement and the similar agreements entered into with the
other Underwriters.
(b) Claims Against Underwriters. Each Underwriter (including
you) will pay, upon your request, as contribution, its proportionate share,
based upon its Underwriting Obligation, of any loss, claim, damage or liability,
joint or several, paid or incurred by any Underwriter (including you) to any
person other than an Underwriter, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any amendment or supplement thereto or
any Preliminary Prospectus or any other selling or advertising material approved
by you for use by the Underwriters in connection with the sale of the
Securities, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading (other than an untrue statement or alleged untrue statement or
omission or alleged omission made in conformity with written information
furnished to the Company through you by or on behalf of an Underwriter expressly
for use therein) or relating to any transaction contemplated by this Agreement;
and will pay such proportionate share of any legal or other expense reasonably
incurred by you or with your consent in connection with investigating or
defending against any such loss, claim, damage or liability, or any action in
respect thereof. In determining the amount of our obligation under this
paragraph, appropriate adjustment may be made by you to reflect any amounts
received by any one or more Underwriters in respect of such claim from the
Company pursuant to Section 7 of the Underwriting Agreement or otherwise. There
shall be credited against any amount paid or payable by us pursuant to this
paragraph any loss, claim, damage, liability or expense which is incurred by us
as a result of any such claim asserted against us, and if such loss, claim,
damage, liability or expense is incurred by us subsequent to any payment by us
pursuant to this paragraph, appropriate provision shall be made to effect such
credit, by refund or otherwise. If any such claim is asserted, you may take such
action in connection therewith as you deem necessary or desirable, including
retention of counsel for the Underwriters, and in your discretion separate
counsel for any particular Underwriter or group of Underwriters, and the fees
and disbursements of any counsel so retained by you shall be included in the
amounts payable pursuant to this paragraph.
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<PAGE> 11
In determining amounts payable pursuant to this paragraph, any loss, claim,
damage, liability or expense incurred by any person who controls any Underwriter
within the meaning of Section 15 of the 1933 Act which has been incurred by
reason of such control relationship shall be deemed to have been incurred by
such Underwriter. Any Underwriter may elect to retain, at its own expense,
separate counsel. You may settle or consent to the settlement of any such claim
on advice of counsel retained by you. A claim against or liability incurred by a
person who controls an Underwriter shall be deemed to have been made against or
incurred by such Underwriter. Whenever you receive notice of the assertion of
any claim to which the provisions of this paragraph would be applicable, you
will give prompt notice thereof to each Underwriter. If any Underwriter or
Underwriters defaults in its or their obligation to make any payments under this
paragraph, each non-defaulting Underwriter shall be obligated to pay its
proportionate share of all defaulted payments, based upon the proportion such
non-defaulting Underwriter's Underwriting Obligation bears to the Underwriting
Obligations of all nondefaulting Underwriters. Nothing herein shall relieve a
defaulting Underwriter from liability for its default.
15. Default by Underwriters. Default by any Underwriters in respect of
its obligations under the Underwriting Agreement shall not release us from any
of our obligations or in any way affect the Liability of such defaulting
Underwriter to the other Underwriters for damages resulting from such default.
In the event of such default by one or more Underwriters, you are authorized to
increase, pro rata with the other non-defaulting Underwriters, the amount of
Securities which we shall be obligated to purchase from the Company; provided,
however, that the aggregate amount of all such increases for all non-defaulting
Underwriters shall not exceed 10% of the Securities and, if the aggregate amount
of the Securities not taken up by such defaulting Underwriters exceeds such 10%,
you are further authorized, but shall not be obligated, to arrange for the
purchase by other persons, who may include you and other nondefaulting
Underwriters, of all or a portion of the Securities not taken up by such
Underwriters. In the event any such increases or arrangements are made, the
respective amounts of the Securities to be purchased by the non-defaulting
Underwriters and by any such other person or persons shall be taken as the basis
for the Underwriters' obligations under this Agreement, but this shall not in
any way affect the liability of any defaulting Underwriter to the other
Underwriters for damages resulting from such default.
In the event of default by one or more Underwriters in respect
of their obligations under this Agreement to take up and pay for any Securities
purchased, or to deliver any such Securities sold or over-allotted by you for
the respective accounts of the Underwriters or to bear their proportion of
expenses or liability pursuant to the Agreement, and to the extent that
arrangements shall not have been made by you for other persons to assume the
obligations of such defaulting Underwriter or Underwriters, each non-defaulting
Underwriter agrees to assume its proportionate share of the aforesaid
obligations of each such defaulting Underwriter without relieving any such
defaulting Underwriter of its liability therefor.
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<PAGE> 12
16. Capital Requirements. We confirm that the incurrence by us of our
obligations under this Agreement and under the Underwriting Agreement will not
place us in violation of the net capital requirements of Rule 15c3-1 under the
1934 Act or of any applicable rules relating to capital requirements of any
securities exchange to which we are subject.
17. Undertaking to Mail Prospectuses. As contemplated by Rule 15c2-8
under the 1934 Act, you agree to mail a copy of the Prospectus mentioned in the
Underwriting Agreement to any person making a written request therefor during
the period referred to in said Rule, the mailing to be made to the address given
in the request. We confirm that we have delivered all Preliminary Prospectuses
and revised Preliminary Prospectuses, if any, required to be delivered under the
provisions of Rule 15c2-8 and agree to deliver all Prospectuses required to be
delivered thereunder. We acknowledge that the copies of the Preliminary
Prospectus furnished to us have been distributed to dealers who have been
notified of the foregoing requirements pertaining to the delivery of Preliminary
Prospectuses and Prospectuses. You have heretofore delivered to us such number
of copies of Preliminary Prospectuses as have been reasonably requested by us,
receipt of which is hereby acknowledged, and will deliver such number of copies
of Prospectuses as will be reasonably requested by us.
18. General Position of the Representative. Your authority shall
include the taking of such action as you may deem advisable in respect of all
matters pertaining to any and all offers and sales of the Securities, including
the right to make any modifications which you consider necessary or desirable in
the arrangements with Selected Dealers or others. You shall be under no
liability for or in respect of the value of the Securities or the validity or
the form hereof, the Registration Statement, the Prospectus or agreements or
other instruments executed by the Company or others; or for or in respect of the
delivery of the Securities; or for the performance by the Company or others of
any agreement on its or their part; nor shall you as the Representative or
otherwise be liable under any of the provisions hereof or for any matters
connected herewith, except for want of good faith, and except for any liability
arising under the 1933 Act; and only obligations expressly assumed by you as the
Representative herein shall be implied from this Agreement. In representing the
Underwriters hereunder, you shall act as the Representative of each of them
respectively. Nothing herein contained shall constitute the several Underwriters
partners with you or with each other, or render any Underwriter liable for the
commitments of any other Underwriter, except as otherwise provided in Section 15
hereof and in Section 11 of the Underwriting Agreement. If the Underwriters
shall be deemed to constitute a partnership for Federal income tax purposes, it
is the intent of each Underwriter to be excluded from the application of
Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as
amended. Each Underwriter elects to be so excluded and agrees not to take any
position inconsistent with such election. Each Underwriter authorizes you, in
your discretion, to execute and file on behalf of the Underwriters such evidence
of election as may be required by the Internal Revenue Service. The commitments
and liabilities of each of the
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<PAGE> 13
several Underwriters are several in accordance with their respective
Underwriting Obligations and are not joint.
19. Miscellaneous. Any notice hereunder from you to us or from us to
you shall be deemed to have been duly given if sent by registered mail, telegram
or teletype, to us at our address as set forth in our Underwriters'
Questionnaire previously delivered to you, or to you at WERBEL-ROTH SECURITIES,
INC., 150 East Palmetto Park Road, Suite 380, Boca Raton, Florida 33432.
We understand that you are a member in good standing of the
NASD. We hereby confirm that we are actually engaged in the investment banking
or securities business and are either (i) a member in good standing of the NASD
or (ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the 1934 Act who agrees not to make any sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein (except that we may participate in sales to
Selected Dealers and others under Section 3 of this Agreement). We hereby agree
to comply with the provisions of Section 24 of Article m of the Rules of Fair
Practice of the NASD, and, if we are a foreign dealer and not a member of the
NASD, we also hereby agree to comply with the NASD's interpretation with respect
to free-riding and withholding and to comply, as though we were a member of the
NASD, with the provisions of Sections 8 and 36 of Article m of such Rules of
Fair Practice, and to comply with Section 25 of Article m thereof as that
Section applies to a non-member foreign dealer. In connection with sales and
offers to sell Securities made by us outside the United States, its territories
and possessions (i) we will either furnish to each person to whom any such sale
or offer is made a copy of the then current Preliminary Prospectus or the
Prospectus, as the case may be, or inform such person that such Preliminary
Prospectus or Prospectus will be available upon request, and (ii) we will
furnish to each person to whom any such sale or offer is made such prospectus,
advertisement or other offering document containing information relating to the
Securities or the Company as may be required under the law of the jurisdiction
in which such sale or offer is made. Any prospectus, advertisement or other
offering document furnished by us to any person in accordance with the preceding
sentence and any such additional offering material as we may furnish to any
person (x) shall comply in all respects with the law of the jurisdiction in
which it is so furnished, (y) shall be prepared and so furnished at our sole
risk and expense and (z) shall not contain information relating to the
Securities or the Company which is inconsistent in any respect with the
information contained in the then current Preliminary Prospectus or in the
Prospectus, as the case may be.
This instrument may be signed by or on behalf of the
Underwriters in one or more counterparts each of which shall constitute an
original and all of which together shall constitute one and the same agreement
among all the Underwriters and shall become effective at such time as all the
Underwriters shall have signed or have had
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<PAGE> 14
signed on their behalf such counterparts and you shall have confirmed all such
counterparts. You may confirm such counterparts by facsimile signature.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW OR CONFLICTS OF LAWS PRINCIPLES THEREOF.
Please confirm that the foregoing correctly states the
understanding between us by signing and returning to us a counterpart hereof.
Very truly yours,
________________________________________
Name:
As Attorney-in-Fact for each of the
several Underwriters named in Schedule A
to the Underwriting Agreement
Confirmed as of the date
first above written:
WERBEL-ROTH SECURITIES, INC.
As Representative of the
several Underwriters
By:_________________________________
Name:
Title:
14
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
THE TRANSLATION GROUP, LTD.
THE TRANSLATION GROUP, LTD., a close corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is The Translation Group, Ltd.
and the date of filing of its original Certificate of Incorporation with the
Secretary of State was July 6, 1995.
2. This Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation of this corporation
and was duly adopted in accordance with the provisions of Section 245 of the
Delaware General Corporation Law.
3. The text of the Certificate of Incorporation is hereby
amended and restated to read as herein set forth in full:
"1. The name of the corporation is The Translation Group, Ltd.
2. The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. (a) The corporation shall be authorized to issue the following
shares:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES PAR VALUE
----- ---------------- ---------
<S> <C> <C>
Common 15,000,000 $.001
Preferred 1,000,000 $.001
</TABLE>
<PAGE> 2
(b) The designations and the powers, preferences and rights,
and the qualifications or restrictions thereof are as follows:
The Preferred shares shall be issued from time to time in one
or more series, with such distinctive serial designations as
shall be stated and expressed in the resolution or resolutions
providing for the issue of such shares from time to time
adopted by the Board of Directors; and in such resolution or
resolutions providing for the issue of shares of each
particular series, the Board of Directors is expressly
authorized to fix the annual rate or rates of dividends for
the particular series; the dividend payment dates for the
particular series and the date from which dividends on all
shares of such series issued prior to the record date for the
first dividend payment date shall be cumulative; the
redemption price or prices for the particular series; the
voting powers for the particular series; the rights, if any,
of holders of the shares of the particular series to convert
the same into shares of any other series or class or other
securities of the Corporation, with any provisions for the
subsequent adjustment of such conversion rights; and to
classify or reclassify any unissued preferred shares by fixing
or altering from time to time any of the foregoing rights,
privileges and qualifications.
All the Preferred shares of any one series shall be identical
with each other in all respects, except that shares of any one
series issued at different times may differ as to the dates
from which dividends thereon shall be cumulative; and all
preferred shares shall be of equal rank, regardless of series,
and shall be identical in all respects except as to the
particulars fixed by the Board of Directors as hereinabove
provided or as fixed herein.
5. The board of directors is authorized to make, alter or repeal the
by-laws of the corporation. Election of directors need not be by written ballot.
6. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i)
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for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit."
IN WITNESS WHEREOF, said The Translation Group, Ltd. has
caused this Certificate to be signed by Charles D. Cascio its President, this
___ day of July, 1996.
THE TRANSLATION GROUP, LTD.
BY:________________________
CHARLES D. CASCIO
PRESIDENT
3
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
THE TRANSLATION GROUP, LTD.
(A Delaware Corporation)
ARTICLE I
OFFICES
1. OFFICE.
The registered office of the corporation shall be located in
the State of Delaware, County of New Castle, City of Wilmington, and the name of
the registered agent at such office shall be The Corporation Trust Company.
2. ADDITIONAL OFFICES.
The corporation may also have offices and places of business
at such other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
STOCKHOLDERS
1. CERTIFICATES REPRESENTING SHARES.
Certificates representing shares shall set forth thereon the
statements prescribed by any applicable provision of law and shall be signed by
the Chairman of the Board of Directors, President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and may be sealed with the corporate seal or a facsimile thereof. The signature
of the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
corporation itself or its employee. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
A Certificate representing shares shall not be issued until
the full amount of consideration therefor has been paid except as the General
Corporation Law may otherwise permit.
<PAGE> 2
No Certificate representing shares shall be issued in place of
any certificate alleged to have been lost, destroyed or stolen, except on
production of such evidence of such loss, destruction or theft and on delivery
to the corporation, if the Board of Directors shall so require, of a bond of
indemnity in such amount, upon such terms and secured by such surety as the
Board of Directors may in its discretion require.
2. FRACTIONAL SHARE INTERESTS.
The corporation may issue certificates for fractions of a
share where necessary to effect transactions authorized by the General
Corporation Law which shall entitle the holder in proportion to his fractional
holdings, to exercise voting rights, receive dividends and participate in
liquidating distributions; or it may pay in cash the fair value of fractions of
a share as of the time when those entitled to receive such fractions are
determined; or it may issue scrip in registered or bearer form over the manual
or facsimile signature of an officer of the corporation or of its agent,
exchangeable as therein provided for full shares, but such scrip shall not
entitle the holder to any rights of a stockholder except as therein provided.
3. SHARE TRANSFERS.
Upon compliance with provisions restricting the
transferability of shares, if any, transfers of shares of the corporation shall
be made only on the share record of the corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes due
thereon.
4. RECORD DATE FOR STOCKHOLDERS.
For the purpose of determining the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a meeting, or for
the purpose of determining stockholders entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other action,
the directors may fix, in advance, a date as the record date for any such
determination of stockholders. Such date shall not be more than sixty days nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed, the record date for the
determination of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if no notice is given, the day
on which the meeting is held; the record date for
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<PAGE> 3
determining stockholders for any other purpose shall be at the close of business
on the day on which the resolution of the directors relating thereto is adopted.
When a determination of stockholders of record entitled to notice of or to vote
at any meeting of stockholders has been made as provided in this paragraph, such
determination shall apply to any adjournment thereof, unless the directors fix a
new record date under this paragraph for the adjourned meeting.
MEANING OF CERTAIN TERMS. As used herein in respect
of the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "stockholder" or
"stockholders" refers to an outstanding share or shares and to a holder or
holders of record of outstanding shares when the corporation is authorized to
issue only one class of shares, and said reference is also intended to include
any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Certificate of
Incorporation confers such rights where there are two or more classes or series
of shares or upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the Certificate of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
5. MEETINGS.
TIME. The annual meeting shall be held on the date
fixed, from time to time, by the directors, provided, that each successive
annual meeting shall be held on a date within thirteen months after the date of
the preceding annual meeting. A special meeting shall be held on the date fixed
by the directors except when the General Corporation Law confers the right to
fix the date upon stockholders.
PLACE. Annual meetings and special meetings shall
be held at such place, within or without the State of Delaware, as the directors
may, from time to time, fix. Whenever the directors shall fail to fix such
place, or, whenever stockholders entitled to call a special meeting shall call
the same, the meeting shall be held at the office of the corporation in the
State of Delaware.
CALL. Annual meetings may be called by the
directors or by any officer instructed by the directors to call the meeting or
by the President. Special meetings may be called in like manner except when the
directors are required by the General Corporation Law to call a meeting, or
except when the stockholders are entitled by said Law to demand the call of a
meeting.
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<PAGE> 4
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE.
The notice of all meetings shall be in writing, shall state the place, date, and
hour of the meeting, and shall state the name and capacity of the person issuing
the same. The notice for a special meeting shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting. The
notice of an annual meeting shall state that the meeting is called for the
election of directors and for the transaction of other business which may
properly come before the meeting, and shall (if any other action which could be
taken at a special meeting is to be taken at such annual meeting) state the
purpose or purposes. The notice of a special meeting shall in all instances
state the purpose or purposes for which the meeting is called. If any action is
proposed to be taken which would, if taken, entitle stockholders to receive
payment for their shares, the notice shall include a statement of that purpose
and to that effect. Except as otherwise provided by the General Corporation Law,
a copy of the notice of any meeting shall be given, personally or by first class
mail, not less than ten days nor more than sixty days before the date of the
meeting, unless the lapse of the prescribed period of time shall have been
waived, to each stockholder at his record address or at such other address which
he may have furnished by notice in writing to the Secretary of the corporation.
If a meeting is adjourned to another time or place, and if any announcement of
the adjourned time or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a new record date for the adjourned meeting. Notice of a meeting need not be
given to any stockholder who submits a signed waiver of notice, in person or by
proxy, before or after the meeting. The attendance of a stockholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting shall constitute a waiver of
notice by him.
STOCKHOLDER LIST. There shall be prepared and made,
at least ten days before every meeting of stockholders, a complete list of the
stockholders, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
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<PAGE> 5
CONDUCT OF MEETING. Meetings of the stockholders
shall be presided over by any one of the following officers--the Chairman of the
Board, if any, the President, a Vice President, or, if none of the foregoing is
in office and present, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as Secretary of the meeting, but if neither the Secretary nor Assistant
Secretary is present, the chairman of the meeting shall appoint a Secretary of
the meeting.
PROXY REPRESENTATION. Every stockholder may
authorize another person or persons to act for him by proxy in all matters in
which a stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or his
attorney-in-fact. No proxy shall be valid after the expiration of three years
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except as
otherwise provided by the General Corporation Law.
INSPECTORS OF ELECTION. The directors, in advance
of any meeting, may appoint one or more inspectors to act at the meeting or any
adjournment thereof. If inspectors are not so appointed, the person presiding at
the meeting may, and, on the request of any stockholder shall, appoint one or
more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the person presiding at the meeting or any
stockholder entitled to vote thereat, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by him or them.
QUORUM. Except as the General Corporation Law and
these By-Laws may otherwise provide, the holders of a majority of
the outstanding shares shall constitute a quorum at a meeting of
stockholders for the transaction of any business. When a quorum is
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<PAGE> 6
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any stockholders. The stockholders present may adjourn the meeting
despite the absence of a quorum.
VOTING. Each share shall entitle the holder thereof
to one vote. In the election of directors, a plurality of the votes cast shall
elect. Any other action shall be authorized by a majority of the votes cast
except where the Certificate of Incorporation or the General Corporation Law
prescribe a different proportion of votes.
6. STOCKHOLDER ACTION WITHOUT MEETINGS.
Any action required to be taken, or any action which
may be taken, at any annual or special meeting of stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of the outstanding stock having not less than one-half (1/2) of the
votes entitled to vote thereon had there been an actual meeting and they were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing and shall be delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
ARTICLE III
BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITIONS.
The business of the corporation shall be managed by its Board
of Directors. The word "director" means any member of the Board of Directors.
The use of the phrase "entire board" herein refers to the total number of
directors which the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER.
Each director shall be at least eighteen years of age. A
director need not be a stockholder, a citizen of the United States, or a
resident of the State of Delaware.
The initial Board of Directors shall consist of one (1)
person. Thereafter, the number of directors constituting the
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<PAGE> 7
entire board may be fixed from time to time by action of the directors or of the
stockholders. The number of directors may be increased or decreased by action of
directors or stockholders, provided that any action of the directors to effect
such increase or decrease shall require the vote of a majority of the entire
board. No decrease shall shorten the term of any incumbent directors.
3. ELECTION AND TERM.
Directors who are elected at an annual meeting of
stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until the next annual meeting of
stockholders and until their successors have been elected and qualified. In the
interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of directors, newly created directorships
and any vacancies in the Board of Directors, including vacancies resulting from
the removal of directors for cause or without cause, may be filled by the vote
of the remaining directors then in office, although less than a quorum exists.
4. MEETINGS.
TIME. Meetings shall be held at such time as the
Board shall fix, except that the first meeting of a newly elected Board shall be
held as soon after its election as the directors may conveniently assemble.
PLACE. Meetings shall be held at such place within
or without the State of Delaware as shall be fixed by the Board.
CALL. No call shall be required for regular
meetings for which the time and place have been fixed. Special meetings may be
called by or at the direction of the Chairman of the Board, if any, the
Vice-Chairman of the Board, if any, or the President, or of a majority of the
directors in office. A regular meeting should be held quarterly.
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice
shall be required for regular meetings for which the time and place have been
fixed. Written, oral or any other mode of notice of the time and place of
special meetings shall be given to each director twenty-four hours prior to the
meeting. The notice of any meeting need not specify the purpose of the meeting.
Any requirement of furnishing a notice shall be waived by any director who signs
a waiver of notice before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
him.
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QUORUM AND ACTION. A majority of the entire Board
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least one-third of the entire
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as otherwise provided
herein or in any applicable provision of law, the vote of a majority of the
directors present at the time of the vote at a meeting of the Board, if a quorum
is present at such time, shall be the action of the Board.
CHAIRMAN OF THE MEETING. The Chairman of the Board,
if any and if present, shall preside at all meetings. Otherwise,
the President, if present, or any other director chosen by the
Board, shall preside.
5. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause or
without cause by the stockholders.
6. COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority
of the entire Board, designate from their number one or more directors to
constitute an Executive Committee which shall possess and may exercise all the
powers and authority of the Board of Directors in the management of the affairs
of the corporation between meetings of the Board (except to the extent
prohibited by applicable provisions of the General Corporation Law), and/or such
other committee or committees, which, to the extent provided in the resolution,
shall have and may exercise the powers of the Board of Directors in the
management of the business affairs of the corporation and may authorize the seal
of the corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. All such
committees shall serve at the pleasure of the Board. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
7. CONFERENCE TELEPHONE.
Any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of such Board or committee by
means of a conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time. Such
participation shall constitute presence in person at such meeting.
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<PAGE> 9
8. ACTION IN WRITING.
Any action required or permitted to be taken at any meeting of
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board or the committee, as the case may be, consent in
writing to the adoption of a resolution authorizing the action, and the
resolution and the written consents thereto are filed with the minutes of the
proceedings of the Board or committee.
ARTICLE IV
OFFICERS
1. EXECUTIVE OFFICERS.
The directors may elect or appoint a Chairman of the Board of
Directors, a President, one or more Vice Presidents (one or more of whom may be
denominated "Executive Vice President"), a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, and such other
officers as they may determine. Any two or more offices may be held by the same
person.
2. TERM OF OFFICE; REMOVAL.
Unless otherwise provided in the resolution of election or
appointment, each officer shall hold office until the meeting of the Board of
Directors following the next meeting of stockholders and until his successor has
been elected and qualified. The Board of Directors may remove any officer for
cause or without cause.
3. AUTHORITY AND DUTIES.
All officers, as between themselves and the corporation, shall
have such authority and perform such duties in the management of the corporation
as may be provided in these By-Laws, or, to the extent not so provided, by the
Board of Directors.
4. THE PRESIDENT.
The President shall be the chief executive officer of the
corporation. Subject to the direction and control of the Board of Directors, he
shall be in general charge of the business and affairs of the corporation.
5. VICE PRESIDENTS.
Any Vice President that may have been appointed, in the
absence or disability of the President shall perform the duties and exercise the
power of the President, in the order of their
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seniority, and shall perform such other duties as the Board of Directors shall
prescribe.
6. THE SECRETARY.
The Secretary shall keep in safe custody the seal of the
corporation and affix it to any instrument when authorized by the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors.
7. THE TREASURER.
The Treasurer shall have the care and custody of the corporate
funds, and other valuable effects, including securities, and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board, or whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the corporation. If required by the Board of Directors, the Treasurer shall give
the corporation a bond for such term, in such sum and with such surety or
sureties as shall be satisfactory to the Board for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
ARTICLE V
BOOKS AND RECORDS
The books of the corporation may be kept within or without the
State of Delaware, at such place or places as the Board of Directors may, from
time to time, determine. Any of the foregoing books, minutes, or records may be
in written form or in any other form capable of being converted into written
form within a reasonable time.
ARTICLE VI
CORPORATE SEAL
The corporate seal, if any, shall be in such form as the Board
of Directors shall prescribe.
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ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be as fixed by the
Board of Directors.
ARTICLE VIII
CONTROL OVER BY-LAWS
The stockholders entitled to vote in the election of directors
or the directors may amend or repeal the By-Laws and may adopt new By-Laws.
ARTICLE IX
INDEMNITY
Any person who was or is a party or threatened to be made a
party to any threatened, pending or completed action, suit or proceedings,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he or she is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, join venture, trust or other
enterprise (including employee benefit plans) (hereinafter an "indemnitee"),
shall be indemnified and held harmless by the corporation to the fullest extent
authorized by the General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification than
permitted prior thereto), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such indemnitee in connection with such action, suit or proceeding, if the
indemnitee acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe such
conduct was unlawful. The termination of the proceeding, whether by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe such conduct was
unlawful.
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Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (including employee benefit plans) shall be indemnified and
held harmless by the corporation to the fullest extent authorized by the General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification than permitted prior thereto),
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court in which such suit or action was
brought, shall determine upon application, that despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such Court
shall deem proper.
All reasonable expenses incurred by or on behalf of the
indemnitee in connection with any suit, action or proceeding, may be advanced to
the indemnitee by the corporation.
The rights to indemnification and to advancement of expenses
conferred in this section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the certificate of
incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
The indemnification and advancement of expenses provided by
this section shall continue as to a person who has ceased to be a director
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
If any provision of this Article is determined to be
unenforceable in whole or in part, such provision shall nonetheless be enforced
to the fullest extent permissible it being the intent of this Article to provide
indemnification to all persons eligible hereunder to the fullest extent
permitted under law. Accordingly, if the law is changed in any way, whether by
act of the Legislature or by a court, these provisions shall be deemed amended
to include such changes.
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EXHIBIT 4.4
--------------------------------------------------------------
THE TRANSLATION GROUP, LTD.
AND
WERBAL-ROTH SECURITIES, INC.
-------------
REPRESENTATIVE'S
WARRANT AGREEMENT
Dated as of _________, 1996
--------------------------------------------------------------
<PAGE> 2
REPRESENTATIVE'S WARRANT AGREEMENT ("Agreement") dated as of
__________, 1996 between THE TRANSLATION GROUP, LTD., a Delaware corporation
(the "Company") and WERBAL ROTH SECURITIES, INC. ("Werbal-Roth") (Werbal-Roth is
hereinafter referred to variously as the "Holder" or the "Representative").
W I T N E S S E T H:
WHEREAS, the Company proposed to issue to the Representative warrants
("Representative's Warrants") to purchase up to an aggregate 110,000 shares
("Shares") of common stock, par value $.001 per Share, of the Company ("Common
Stock") and 150,000 Redeemable Common Stock Purchase Warrants ("Warrants"), each
of which, upon exercise, entitled the owner thereof to purchase one share of
Common Stock during the three years following the date hereof at a price of
$4.80. The Shares, Warrants and shares of Common Stock underlying the Warrants
are hereinafter collectively referred to as the "Securities"; and
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Representative and the Company to act as the Representative in connection with
the Company's proposed public offering of up to 1,000,000 shares of Common Stock
at a public offering price of $3.00 per share of Common Stock and 1,500,000
Warrants at a public offering price of $.20 per Warrant (the "Public Offering");
and
WHEREAS, the Representative's Warrants to be issued pursuant to this
Agreement will be issued on the Closing Date (as such term is defined in the
Underwriting Agreement) by the Company to the Representative in consideration
for, and as part of the Representative's compensation in connection with, the
Representative acting as the Representative pursuant to the Underwriting
Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of Two Hundred Fifth ($250.00),
the agreements herein set forth and other good and valuable consideration,
hereby acknowledged, the parties hereto agree as follows:
1. Grant. The Holder is hereby granted the right to purchase, at any
time from ________, 1996 until 5:30 P.M., Florida time, on ________, 2001 up to
an aggregate of 110,000 Shares at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) of $3.60 per Share and 150,000
Warrants at an initial exercise price (subject to adjustment as provided in
Section 8 hereof) of $.24 per Warrant, subject to the terms and conditions of
this Agreement. Except as set forth herein, the Securities issuable upon
exercise of the Representative's Warrants are in all respects identical to the
Securities being purchased by the Underwriters for resale to the public pursuant
to the terms and provisions of the Underwriting Agreement.
<PAGE> 3
2. Warrant Certificates. The warrant certificates evidencing the
Representative's Warrants (the "Warrant Certificates") delivered and to be
delivered pursuant to this Agreement shall be in the form set forth in Exhibit
A, attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions, and other variations as required or permitted by this
Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Representative's Warrants
initially are exercisable at an initial exercise price (subject to adjustment as
provided in Section 8 hereof) per Security set forth in Section 6 hereof payable
by certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender of a Warrant
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter defined) for the
Securities purchased at the Company's principal offices located at 7703 Maple
Avenue, Pennsauken, New Jersey 08109), the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the Securities so purchased. The purchase rights represented
by each Warrant Certificate are exercisable at the option of the Holder thereof,
in whole or in part (but not as to fractional Securities). The Representative's
Warrants may be exercised to purchase all or part of the Securities represented
thereby. In the case of the purchase of less than all the Representatives's
Warrant Securities purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the
Securities purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Representative's Warrants shall have
the right at any time and from time to time to exercise the Representative's
Warrants in full or in part by surrendering the Warrant Certificate in the
manner specified in Section 3.1 as payment of the aggregate Exercise Price. The
number of Representative's Warrants to be surrendered in payment of the
aggregate Exercise Price for the Warrants to be exercised shall be determined by
multiplying the number of Representative's Warrants to be exercised by the
Exercise Price per Security, and then dividing the product thereof by an amount
equal to the Market Price (as defined below) minus the Exercise Price. Solely
for the purposes of this paragraph, Market Price shall be calculated either (i)
on the date which the form of election attached hereto is deemed to have been
sent to the Company pursuant to Section 13 hereof ("Notice Date") or (ii) as the
average of the Market Prices for each of the five trading days preceding the
Notice Date, whichever of (i) or (ii) is greater.
3.3 Definition of Market Price. As used herein, the phrase
"Market Price" at any date shall be deemed to be (i) when referring to the
Common Stock, the average of the last reported sale prices for the last thirty
(30) trading days, as officially reported
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by the National Association of Securities Dealers Automated Quotation System,
Inc. Small Cap Market ("NASDAQ") or by the principal securities exchange on
which the Common Stock is listed or admitted to trading, or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, or
quoted by NASDAQ, the average closing bid price as furnished by the NASD through
NASDAQ or similar organization if NASDAQ is no longer reporting such
information, or if the Common Stock is not quoted on NASDAQ, as determined in
good faith by resolution of the Board of Directors of the Company, based on the
best information available to it.
4. Issuance of Certificates. Upon the exercise of the Representative's
Warrants, the issuance of certificates for the Securities, underlying such
Representative's Warrants shall be made forthwith (and in any event within three
(3) business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Sections 5
and 7 hereof) be issued in the name of, or in such names as may be directed by,
the Holder thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of the
Holder, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
Securities shall be executed on behalf of the Company by the manual or facsimile
signature of the then Chairman or Vice Chairman of the Board of Directors or
President or Vice President of the Company. Warrant Certificates shall be dated
the date of execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
5. Restriction on Transfer of Representative's Warrants. The Holder of
a Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Representative's Warrants are being acquired as an investment and not with a
view to the distribution thereof; that the Representative's Warrants may not be
sold, transferred, assigned hypothecated or otherwise disposed of, in whole or
in part, for a period of one (1) year from the date hereof, except to
underwriters participating in the Public Offering, officers and/or directors, of
the Representative.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $3.60 per Share and $.24 per Warrant. The adjusted exercise price shall be
the price which shall result from time to time from any and all adjustments of
the initial exercise price in accordance with the provisions of Section 8
hereof.
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6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The
Representative's Warrants, the Shares, the Warrants and any of the other
Securities issuable upon exercise of the Representative's Warrants have not been
registered under the Securities Act of 1933, as amended (the "Act"). Upon
exercise, in part or in whole, of the Representative's Warrants, certificates
representing the Securities, and any of the other Securities issuable upon
exercise of the Representative's Warrants shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not be offered or sold except pursuant to (i)
an effective registration statement under the Act, (ii) to the
extent applicable, Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of securities), or
(iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
7.2 Piggyback Registration. If, at any time during the period
commencing one (1) year from the date hereof and expiring four (4) years
thereafter, the Company proposes to register any of its securities under the Act
(other than in connection with a merger or pursuant to Form S-8) it will give
written notice by registered mail, at least thirty (30) days prior to the filing
of each such registration statement, to the Representative and to all other
Holders of the Representative's Warrants and/or the Securities of its intention
to do so. If the Representative or other Holders of the Representative's
Warrants and/or Securities notify the Company within twenty (20) business days
after receipt of any such notice of its or their desire to include any
Securities in such proposed registration statement, the Company shall afford the
Representative and such Holders of the Representative's Warrants and/or
Securities the opportunity to have any such Representative's Warrant Securities
registered under such registration statement. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering delivers a written
opinion to the Company that the total number of securities which such Holders,
the Company and other persons or entities intend to include in such offering
exceeds the number which can reasonably be sold in such offering, then the
securities to be offered for the account of the Holders will be reduced pro rata
to the extent necessary to reduce the total number of securities to be included
in such offering to the number recommended by such managing underwriter.
Notwithstanding the provisions of this Section 7.2, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.2
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(irrespective of whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof.
7.3 Demand Registration.
(a) At any time commencing one (1) year after the
effective date of the Registration Statement and expiring four (4) years
thereafter, the Holders of the Representative's Warrants and/or Securities
representing a "Majority" (as hereinafter defined) of such Securities (assuming
the exercise of all of the Representative's Warrants) shall have the right
(which right is in addition to the registration rights under Section 7.2
hereof), at its expense, exercisable by written notice to the Company, to have
the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Representative and Holders, in order to comply with the provisions of the Act,
so as to permit a public offering and sale of their respective Securities for
nine (9) consecutive months by such Holders and any other Holders of the
Representative's Warrants and/or Securities who notify the Company within ten
(10) days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written
notice of any registration request under this Section 7.3 by any Holder or
Holders to all other registered Holders of the Representative's Warrants and the
Securities within ten (10) days from the date of the receipt of any such
registration request.
7.4 Covenants of the Company with Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) Subject to Section 7.3, the Company shall use its
best efforts to file a registration statement within thirty (30) days of receipt
of any demand therefor, shall use its best efforts to have any registration
statements declared effective as soon as reasonably practicable, and shall
furnish each Holder desiring to sell Securities such number of prospectuses as
shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees
and expenses of Holder(s)' counsel and any underwriting or selling commissions),
fees and expenses in connection with all registration statements filed pursuant
to Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees (not to exceed
$35,000) and expenses. If the Company shall fail to comply with the provisions
of Section 7.4(a), the Company shall, in addition to any other equitable or
other relief available to the Holder(s) be liable for any or all damages
sustained by the Holder(s) requesting registration of their Securities.
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(c) The Company will take all necessary action which
may be required in qualifying or registering the Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided that
the Company shall not be obligated to (i) execute or file any general consent to
service of process or to qualify as a foreign corporation to do business under
the laws of any such jurisdiction and (ii) "blue sky" Securities only in those
states where the Company's initial public offering was registered under the
state securities or blue sky laws.
(d) The Company shall indemnify the Holder(s) of the
Warrant to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify each of the Underwriters contained in Section 7
of the Underwriting Agreement.
(e) The Holder(s) of the Securities to be sold
pursuant to a registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company, its officers and directors,
and its counsel and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
all loss, claim, damage or expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which they may become subject under the Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such Holders,
or their successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the Underwriting Agreement pursuant to which the
Underwriters have agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be
construed as requiring the Holder(s) to exercise their Warrants prior to the
initial filing of any registration statement or the effectiveness thereof.
(g) The Company shall furnish to each Holder
participating in the offering and to each underwriter, if any, a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants
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who have issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(h) The Company shall as soon as practicable after
the effective date of the registration statement, and in any event within 15
months thereafter, make "generally available to its security holders" (within
the meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration statement.
(i) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriters, copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriters to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the National
Association of Securities Dealers, Inc. ("NASD"). Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
or underwriter shall reasonably request. Prior to any such investigation, a
Holder shall execute a confidentiality agreement with the Company.
(j) The Company shall enter into an underwriting
agreement with the managing underwriters selected for such underwriting by
Holders holding a Majority of the Securities requested to be included in such
underwriting, which may be the Representative. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their Securities
and may, at their option, require that any or all the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such Holders. Such
Holders shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
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(k) For purposes of this Agreement, the term
"Majority" in reference to the Holders of Representative's Warrants or
Securities, shall mean in excess of fifty percent (50%) of the then outstanding
Representative's Warrants or Securities that (i) are not held by the Company, an
affiliate, officer, creditor, employee or agent thereof or any of their
respective affiliates, members of their family, persons acting as nominees or in
conjunction therewith and (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
7.5 Obligation of Holder. In connection with any registration
under Section 7.2 or 7.3 hereof, each Holder desiring to sell Securities shall
deliver to the Company a representation letter in form reasonably acceptable to
the Company, as to compliance with Rule 10b-6 and shall deliver such additional
information to the Company concerning the Holder and his intended plan of
distribution.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Computation of Adjusted Exercise Price. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances or
sales referred to in Section 8.7 hereof), including shares held in the Company's
treasury and shares of Common Stock issued upon the exercise of any options,
rights or warrants to subscribe for shares of Common Stock and shares of Common
Stock issued upon the direct or indirect conversion or exchange of securities
for shares of Common Stock, for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance or sale of such shares, or
without consideration, then forthwith upon such issuance or sale, the Exercise
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by dividing
(i) an amount equal to the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to the issuance or sale of such shares, multiplied
by the Exercise Price in effect immediately prior to such issuance or sale, and
(b) the aggregate of the amount of all consideration, if any, received by the
Company upon such issuance or sale, by (ii) the total number of shares of Common
Stock outstanding immediately after such issuance or sale; provided, however,
that in no event shall the Exercise Price be adjusted pursuant to this
computation to an amount in excess of the Exercise Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
shares of Common Stock, as provided by Section 8.3 hereof.
For the purposes of this Section 8 the term Exercise Price
shall mean the Exercise Price per Share or per Warrant set forth in Section 6
hereof, as adjusted from time to time pursuant to the provisions of this Section
8.
For the purposes of any computation to be made in accordance
with this Section 8.1, the following provisions shall be applicable:
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(a) In case of the issuance or sale of shares of
Common Stock for a consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the amount of cash
received by the Company for such shares (or, if shares of Common Stock are
offered by the Company for subscription, the subscription price, or, if either
of such securities shall be sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price) before
deducting therefrom any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or others performing
similar services, or any expenses incurred in connection therewith.
(b) In case of the issuance or sale (otherwise than
as a dividend or other distribution on any stock of the Company) of shares of
Common Stock for a consideration part or all of which shall be other than cash,
the amount of the consideration therefor other than cash shall be deemed to be
the value of such consideration as determined in good faith by the Board of
Directors of the Company and shall include any amounts payable to security
holders or any affiliates thereof, including without limitation, pursuant to any
employment agreement, royalty, consulting agreement, covenant not to compete,
earnout or contingent payment right or similar arrangement, agreement or
understanding, whether oral or written; all such amounts being valued for the
purposes hereof at the aggregate amount payable thereunder, whether such
payments are absolute or contingent, and irrespective of the period or
uncertainty of payment, the rate of interest, if any, or the contingent nature
thereof.
(c) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(d) The reclassification of securities of the Company
other than shares of Common Stock into securities including shares of Common
Stock shall be deemed to involve the issuance of such shares of Common Stock for
a consideration other than cash immediately prior to the close of business on
the date fixed for the determination of security holders entitled to receive
such shares, and the value of the consideration allocable to such shares of
Common Stock shall be determined as provided in subsection (ii) of this Section
8.1.
(e) The number of shares of Common Stock at any one
time outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities exclusive of any option under the Company 1996 Stock
Option Plan and any additional options which are not vested or then exercisable.
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8.2 Options, Rights, Warrants and Convertible and Exchangeable
Securities. In case the Company shall at any time after the date hereof issue
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share less than the Exercise Price in effect immediately
prior to the issuance of such options, rights or warrants, or such convertible
or exchangeable securities, or without consideration, the Exercise Price in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making a computation in accordance with the
provisions of Section 8.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable under such options, rights or warrants shall
be deemed to be issued and outstanding at the time such options, rights or
warrants were issued, and for a consideration equal to the minimum purchase
price per share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as consideration
received on the issue or sale of shares in accordance with the terms of the
Warrants), if any, received by the Company for such options, rights or warrants.
(b) The aggregate maximum number of shares of Common
Stock issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or sale of
shares of Common Stock in accordance with the terms of the Warrants) received by
the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof.
(c) If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to in subsection
(a) of this Section 8.2, or in the price per share at which the securities
referred to in subsection (b) of this Section 8.2 are convertible or
exchangeable, such options, rights or warrants or conversion or exchange rights,
as the case may be, shall be deemed to have expired or terminated on the date
when such price change became effective in respect of shares not theretofore
issued pursuant to the exercise or conversion or exchange thereof, and the
Company shall be deemed to have issued upon such date new options, rights or
warrants or convertible or exchangeable securities at the new price in respect
of the number of shares issuable upon the exercise of such options, rights or
warrants or the conversion or exchange of such convertible or exchangeable
securities, provided, however, in no event shall the adjustment provide the
Holder with any greater rights arising from consecutive adjustments than if the
last adjustment occurred initially.
8.3 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall
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forthwith be proportionately decreased in the case of subdivision or increased
in the case of combination.
8.4 Adjustment in Number of Securities. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 8, the number
of Securities issuable upon the exercise at the adjusted Exercise Price of each
Representative's Warrant shall be adjusted to the nearest full amount by
multiplying a number equal to the Exercise Price in effect immediately prior to
such adjustment by the number of Securities issuable upon exercise of the
Representative's Warrants immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value. In the event that the Company shall after the date hereof issue
securities with greater or superior voting rights than the shares of Common
Stock outstanding as of the date hereof, the Holder, at its option, may receive
upon exercise of any Representative's Warrant either shares of Common Stock or a
like number of such securities with greater or superior voting rights.
8.6 Merger or Consolidation. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Representative's Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Representative's Warrant) to
receive, upon exercise of such Representative's Warrant, the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation or merger, by a holder of the number of shares of Common Stock of
the Company for which such Representative's Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Representative's
Warrants, the Shares issuable upon the exercise of the Representative's
Warrants; the Warrants issuable upon the exercise of the Representative's
Warrants, and the shares of Common Stock issuable upon the exercise of the
Warrants;
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(b) If the amount of said adjustment shall be less
than two cents (2(cents)) per Security, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents (2(cents)) per Security.
(c) Upon the issuance of up to 300,000 Shares of
Common Stock under the Company's Stock Option Plan.
8.8 Dividends and Other Distributions. In the event that the
Company shall at any time prior to the exercise of all Representative's Warrants
declare a dividend (other than a dividend consisting solely of shares of Common
Stock) or otherwise distribute to its stockholders any assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other thing of value, the
Holders of the unexercised Representative's Warrants shall thereafter be
entitled, in addition to the shares of Common Stock or other securities and
property receivable upon the exercise thereof, to receive, upon the exercise of
such Representative's Warrants, the same property, assets, rights, evidences of
indebtedness, securities or any other thing of value that they would have been
entitled to receive at the time of such dividend or distribution as if the
Representative's Warrants had been exercised immediately prior to such dividend
or distribution. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this subsection 8.8.
9. Exchange and Replacement of Representative's Warrant Certificates.
Each Representative's Warrant Certificate is exchangeable without expense, upon
the surrender thereof by the registered Holder at the principal executive office
of the Company, for a new Representative's Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same number of
Securities in such denominations as shall be designated by the Holder thereof at
the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Representative's Warrants, if mutilated, the Company will make and deliver a
new Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Representative's Warrants or Warrants, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of a share of Common Stock
or other securities, properties or rights.
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11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Representative's
Warrants and Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Representative's
Warrants and payment of the Exercise Price therefor, all shares of Common Stock
and other securities issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any shareholder. As long as the Representative's Warrants shall be outstanding,
the Company shall use its best efforts to cause all Shares and Warrants issuable
upon the exercise of the Representative's Warrants to be listed (subject to
official notice of issuance) on all securities exchanges on which the Shares and
Warrants issued to the public in connection herewith may then be listed and/or
quoted on NASDAQ/Small Cap.
12. Notices to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Representative's Warrants and their exercise, any
of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the
13
<PAGE> 15
issuance of any convertible or exchangeable securities, or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered by hand or overnight service, or mailed by registered or
certified mail, return receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holders.
14. Supplements and Amendments. The Company and the Representative may
from time to time supplement or amend this Agreement without the approval of any
holders of Warrant Certificates (other than the Representative) in order to cure
any ambiguity, to correct or supplement any provision contained herein which may
be defective or inconsistent with any provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Representative may deem necessary or desirable and which the Company and
the Representative deem shall not adversely affect the interests of the Holders
of Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of
business on ____________, 2001. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until the
close of business on May 16, 2004.
17. Governing Law; Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Florida and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Representative and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
Florida or of the United States of America for the Southern District of Florida,
and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Representative and
14
<PAGE> 16
the Holders hereby irrevocably waive any objection to such exclusive
jurisdiction or inconvenient forum. Any such process or summons to be served
upon any of the Company, the Representative and the Holders (at the option of
the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
13 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim. The
Company, the Representative and the Holders agree that the prevailing party(ies)
in any such action or proceeding shall be entitled to recover from the other
party(ies) all of its/their reasonable legal costs and expenses relating to such
action or proceeding and/or incurred in connection with the preparation
therefor.
18. Entire Agreement; Modification. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. Severability. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Warrant Certificates or
Securities any legal or equitable right, remedy or claim under this Agreement;
and this Agreement shall be for the sole benefit of the Company and the
Representative and any other registered Holders of Warrant Certificates or
Warrant Securities.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
15
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
THE TRANSLATION GROUP, LTD.
By:____________________________
Theodora Landgren, President
WERBAL-ROTH SECURITIES , INC.
By:____________________________
Howard Roth, President
16
<PAGE> 1
EXHIBIT 4.5
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., FLORIDA TIME, __________, 2001
No. W- Warrants to Purchase
_____ Shares of Common Stock and
______ Redeemable Common Stock
Purchase Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ______________________________,
or registered assigns, is the registered holder of Warrants ("Warrants") to
purchase initially, at any time from ____________, 1996 until 5:30 p.m. Florida
time on ___________, 2001 ("Expiration Date"), up to ____________ fully-paid and
non-assessable shares of Common Stock par value $.001 per share ("Common Stock")
of THE TRANSLATION GROUP, LTD., a Delaware corporation (the "Company") and/or up
to ___________ fully-paid and non-assessable Redeemable Common Stock Purchase
Warrants ("Underlying Warrants"), (one share of Common Stock referred to
individually as a "Share," one underlying warrant referred to individually as a
"Underlying Warrant" and the Shares and Underlying Warrants collectively as the
"Securities") at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $3.60 per Share and $.24 per Warrant upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein
and in the Representative's Warrant Agreement dated as of ___________, 1996
among the Company and WERBAL-ROTH SECURITIES, INC. (the "Warrant Agreement").
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House funds payable to the order of the Company or by
surrender of this Warrant Certificate.
No Warrant evidenced by this Warrant Certificate may be exercised after
5:30 p.m., Florida time, on the Expiration Date, at which time all Warrants
evidenced hereby, unless exercised prior thereto, shall thereafter be void.
<PAGE> 2
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants evidenced by the Warrant Certificate,
including the right of the Company to repurchase the Warrants under certain
circumstances.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter or otherwise impair, the rights of the holder
as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Warrant Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ___________, 1996
THE TRANSLATION GROUP, INC.
By:_____________________________________
Name:
Title:
3
<PAGE> 4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate, to purchase:
/ /__________________ shares of Common Stock; and/or
/ /__________________ Redeemable Common Stock Purchase Warrants;
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of The Translation
Group, Inc., the amount of $__________, all in accordance with the terms of
Section 3.1 of the Representative's Warrant Agreement dated as of ____________,
1996 among The Translation Group, Inc. and Werbal- Roth Securities, Inc. The
undersigned requests that a certificate for such securities be registered in the
name of _______________________, whose address is______________________________
and that such Certificate be delivered to ______________________________ whose
address is ____________________________________________________ .
Dated:_______________ Signature:________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
__________________________________________ (Insert
Social Security or Other Identifying Number of
Holder)
4
<PAGE> 5
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate to purchase:
/ /__________________ shares of Common Stock; and/or
/ /__________________ Redeemable Common Stock Purchase Warrants;
and herewith tenders in payment for such securities __________ Warrants all in
accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of _____________, 1996 among The Translation Group, Inc. and
Werbal-Roth Securities, Inc. The undersigned requests that a certificate for
such securities be registered in the name of __________________________, whose
address is __________________________________________________________ and that
such Certificate be delivered to ___________________________ whose address is
_________________________________.
Dated:_______________ Signature:________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
__________________________________________ (Insert
Social Security or Other Identifying Number of
Holder)
5
<PAGE> 6
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED _____________________________________ hereby sells,
assigns and transfers unto
_______________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated:_______________ Signature:________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
__________________________________________ (Insert
Social Security or Other Identifying Number of
Holder)
6
<PAGE> 1
Exhibit 4.7
Offeree No:________
THE TRANSLATION GROUP, LTD.
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
-----------------
TOTAL OFFERING
$500,000
100 UNITS AT $5,000 PER UNIT
(EACH UNIT CONSISTS OF 4,000 SHARES OF COMMON STOCK AT $1.25 EACH)
ACCREDITED INVESTORS ONLY
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A
HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD
THE LOSS OF HIS ENTIRE INVESTMENT.
SEE "RISK FACTORS."
-----------------
Placement Agent:
MILLENNIUM SECURITIES CORP.
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
212-909-0530
ATTN: RICHARD A. SITOMER
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC") OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
CERTAIN OF THE INFORMATION CONTAINED IN THIS MEMORANDUM IS CONFIDENTIAL AND
PROPRIETARY TO THE COMPANY, AND IS BEING SUBMITTED TO PROSPECTIVE ACCREDITED
INVESTORS SOLELY FOR SUCH INVESTORS' CONFIDENTIAL USE WITH THE EXPRESS
UNDERSTANDING THAT, WITHOUT SUCH PRIOR EXPRESS PERMISSION OF THE COMPANY, SUCH
PERSON WILL NOT RELEASE THIS DOCUMENT OR DISCUSS THE INFORMATION CONTAINED
HEREIN OR MAKE REPRODUCTIONS OF OR USE THIS MEMORANDUM FOR ANY PURPOSE OTHER
THAN THE EVALUATION OF A POTENTIAL INVESTMENT IN THE COMPANY. THIS MEMORANDUM
MAY NOT BE REPRODUCED, IN WHOLE OR IN PART, AND IT IS ACCEPTED WITH THE
UNDERSTANDING THAT IT WILL BE RETURNED ON REQUEST IF THE RECIPIENT DOES NOT
PURCHASE THE SECURITIES OFFERED HEREBY.
- -----------------
The date of this Memorandum is DECEMBER 7, 1995.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY OF SUBSCRIPTION PROCEDURES ........................................ 3
JURISDICTIONAL NOTICES .................................................... 6
SUMMARY OF THE OFFERING ................................................... 10
THE COMPANY ............................................................... 12
RISK FACTORS .............................................................. 12
USE OF PROCEEDS ........................................................... 17
DIVIDENDS ................................................................. 18
CAPITALIZATION ............................................................ 18
SUMMARY OF FINANCIAL INFORMATION .......................................... 19
THE STOCK EXCHANGE AGREEMENT .............................................. 20
BUSINESS .................................................................. 21
MANAGEMENT ................................................................ 26
DESCRIPTION OF SECURITIES ................................................. 31
THE OFFERING .............................................................. 34
LEGAL MATTERS ............................................................. 37
ADDITIONAL INFORMATION .................................................... 38
FINANCIAL STATEMENTS
EXHIBITS
</TABLE>
i
<PAGE> 3
THE TRANSLATION GROUP, LTD.
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
---------------
TOTAL OFFERING
$500,000
100 UNITS AT $5,000 PER UNIT
(EACH UNIT CONSISTS OF 4,000 SHARES OF COMMON STOCK AT $1.25 EACH)
The Translation Group, Ltd., a Delaware corporation (the "Company, or "TTGL"),
is offering for sale to persons who qualify as "accredited investors" (as
hereinafter defined) an aggregate of 400,000 shares (the "Shares") of Common
Stock, $.001 par value (the "Common Stock"), in units of 4,000 Shares each (the
"Units"). The Units are being offered on an "all-or-nothing" basis within 30
days from the date hereof unless extended for up to two additional 30 day
periods.
TTGL has entered into a stock exchange agreement ("Stock Exchange Agreement")
with Bureau of Translation Services, Inc. ("BTS"), pursuant to which TTGL will
issue an aggregate of 1,510,000 shares of its Common Stock to shareholders of
BTS so that BTS will become a wholly-owned subsidiary of the Company (the "Stock
Exchange"). The Stock Exchange will become effective when TTGL fully completes
this Offering. The term "Company" as used herein shall be deemed a reference to
The Translation Group, Ltd., assuming consummation of the Stock Exchange.
THE UNITS ARE BEING OFFERED WITHOUT REGISTRATION UNDER THE ACT IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) AND/OR SECTION 3(b) OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND REGULATION D PROMULGATED
THEREUNDER TO "ACCREDITED INVESTORS" ONLY (AS DEFINED IN THE ACT).
<TABLE>
<CAPTION>
================================================================================
Price to Placement Proceeds
Investors Agent Fee(1) to Company(2)
================================================================================
<S> <C> <C> <C>
Per Share $ 1.25 $ .125 $ 1.125
- --------------------------------------------------------------------------------
Total $500,000 $50,000 $450,000
================================================================================
See footnotes on following page.
</TABLE>
MILLENNIUM SECURITIES CORP.
<PAGE> 4
(1) TTGL will use its best efforts to sell (through Millennium Securities
Corp., its placement agent and hereinafter the "Placement Agent" or
"Millennium"), on an "all- or-nothing" basis, 400,000 shares of Common
Stock for $1.25 per Share (in units of 4,000 shares for $5,000) within
30 days from the date hereof unless extended by mutual agreement
between the Company and its Placement Agent for up to two additional 30
day periods. The principals of TTGL and BTS, their current stockholders
and members of their respective families, their friends and associates
have the right to purchase part of the Offering at the same price as is
offered to non- affiliated accredited investors. TTGL currently intends
to hold the initial public offering of TTGL (the "IPO"), following the
closing of this Offering and the Stock Exchange. All subscription
proceeds will be held in a special account of TTGL until $500,000 has
been raised. At that point the subscription proceeds will be deposited
in TTGL's account and the Stock Exchange will occur. If $500,000 is not
collected during the Offering period, the funds collected and held will
be refunded to the investors and the Stock Exchange will not take
place. The Shares will be included in the registration statement for
the Company's IPO, but will continue to carry restrictions on
transferability for six months following the IPO at which time
one-third (1/3) of such Shares shall become freely transferable, with
one-half (1/2) of the remaining Shares becoming freely transferable six
months thereafter and the balance after the following six months. See
"The Offering", "Certain Transactions" and "Description of
Securities-Registration Rights." The Placement Agent will receive a
placement agent fee in the amount of $.125 (10%) per Share. In
addition, the Company has agreed to pay the Placement Agent a
non-accountable expense allowance of 3% of the gross amount raised in
the Offering. In addition, the Placement Agent will receive five year
warrants to purchase Common Stock equal to 10% of the amount of Shares
sold in this Offering, exercisable at $1.50 per share. The Company has
also agreed to indemnify the Placement Agent against certain
liabilities, including liabilities under the Act.
(2) Before deducting the non-accountable expenses of the Placement Agent,
payable by the Company in connection with this offering of $15,000 and
before deducting legal, accounting and miscellaneous expenses of this
offering estimated at $35,000.
2
<PAGE> 5
SUMMARY OF SUBSCRIPTION PROCEDURES
The prospective investor has received herewith a package containing
certain documents for use in subscribing to purchase Units. In order to
subscribe for Units, a prospective investor must complete, execute and deliver
to Millennium Securities Corp., at 110 East 59th Street, 6th Floor, New York, NY
10022, Attention: Richard A. Sitomer, the following items;
1. One copy of the Subscription Agreement (in the form annexed hereto
as Exhibit A) (the "Subscription Document"), by means of which the prospective
investor will subscribe to purchase Shares;
2. A check payable to "The Translation Group, Ltd." in the amount of
$5,000 for each Unit subscribed for (4,000 shares for $1.25 per share); and
3. The Prospective Purchaser Questionnaire (in the form annexed hereto
as Exhibit B).
Following acceptance by the Company and the Placement Agent, the
Company will execute and deliver to each subscriber, a certificate representing
the investor's Common Stock.
These securities are offered by the Company through its Placement
Agent, subject to prior sale, allotment and withdrawal, cancellation or
modification of the offer with notice and subject to the approval of legal
matters by counsel for the Company and the Placement Agent. The Company and the
Placement Agent reserve the right to reject any order for the purchase of the
securities in whole or in part.
3
<PAGE> 6
THE COMPANY AND THE PLACEMENT AGENT EACH RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART FOR ANY REASON OR TO
ALLOT ANY SUBSCRIBER LESS THAN THE NUMBER OF UNITS SUBSCRIBED FOR.
OFFICERS, DIRECTORS AND SHAREHOLDERS OF THE COMPANY AND THEIR AFFILIATES MAY
PURCHASE UNITS PURSUANT TO THIS OFFERING.
THE SALE, TRANSFER OR OTHER DISPOSITION OF ANY SECURITIES PURCHASED PURSUANT
HERETO IS RESTRICTED BY APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
THE OFFERING PRICE OF THE SECURITIES TO WHICH THIS MEMORANDUM RELATES HAS BEEN
DETERMINED BY THE COMPANY AND THE PLACEMENT AGENT AND DOES NOT NECESSARILY BEAR
ANY RELATIONSHIP TO THE ASSETS, BOOK VALUE OR POTENTIAL EARNINGS OF THE COMPANY
OR ANY OTHER RECOGNIZED CRITERIA OF VALUE.
EACH OFFEREE MAY, IF HE SO DESIRES, MAKE INQUIRIES OF THE COMPANY WITH RESPECT
TO THIS COMPANY'S BUSINESS OR ANY OTHER MATTERS RELATING TO THE COMPANY AND AN
INVESTMENT IN THE SECURITIES THEREOF, AND MAY OBTAIN ANY ADDITIONAL INFORMATION
WHICH SUCH PERSONS DEEM TO BE NECESSARY IN CONNECTION WITH MAKING ANY INVESTMENT
DECISION IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED IN THIS
MEMORANDUM (TO THE EXTENT THAT THE COMPANY POSSESSES SUCH INFORMATION OR CAN
ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE). IN CONNECTION WITH SUCH
INQUIRY, ANY DOCUMENTS WHICH ANY OFFEREE WISHES TO REVIEW WILL BE MADE AVAILABLE
FOR INSPECTION AND COPYING OR PROVIDED, UPON REQUEST, SUBJECT TO OFFEREE'S
AGREEMENT TO MAINTAIN SUCH INFORMATION IN CONFIDENCE AND TO RETURN SAME TO THE
COMPANY IF THE RECIPIENT DOES NOT PURCHASE THE SECURITIES OFFERED HEREUNDER. ANY
SUCH INQUIRIES OR REQUESTS FOR ADDITIONAL INFORMATION OR DOCUMENTS SHOULD BE
MADE IN WRITING TO THE COMPANY, ADDRESSED AS FOLLOWS: MILLENNIUM SECURITIES
CORP., 110 EAST 59TH STREET, NEW YORK, NEW YORK 10022, 212-909-0530, ATTN:
RICHARD A. SITOMER.
NO PERSON, OTHER THAN AS PROVIDED FOR HEREIN, HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
MEMORANDUM IN CONNECTION WITH THE OFFER BEING MADE HEREBY, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
4
<PAGE> 7
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH
SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO.
THIS OFFERING IS MADE, AND SALES OF UNITS WILL BE MADE, ONLY TO PURCHASERS WHO
QUALIFY AS "ACCREDITED INVESTORS" UNDER REGULATION D PROMULGATED UNDER THE ACT.
THERE IS NO TRADING MARKET FOR UNITS OF THE COMPANY'S COMMON STOCK AND THERE CAN
BE NO ASSURANCE THAT SUCH A MARKET WILL DEVELOP IN THE FUTURE. THE SALE,
TRANSFER OR OTHER DISPOSITION OF ANY SECURITIES PURCHASED PURSUANT HERETO IS
SUBSTANTIALLY RESTRICTED BY APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM AS
LEGAL, INVESTMENT OR TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR
ADVISORS AS TO LEGAL, INVESTMENT, TAX AND RELATED MATTERS CONCERNING AN
INVESTMENT BY SUCH PROSPECTIVE INVESTORS IN THE COMPANY, ESPECIALLY, BUT WITHOUT
LIMITATION, WITH REGARD TO SECTION 83 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED.
THE STATEMENTS CONTAINED HEREIN ARE BASED ON INFORMATION BELIEVED BY THE COMPANY
TO BE RELIABLE. NO WARRANTY CAN BE MADE AS TO THE ACCURACY OF SUCH INFORMATION
OR THAT CIRCUMSTANCES HAVE NOT CHANGED SINCE THE DATE SUCH INFORMATION WAS
SUPPLIED. NEITHER THE DELIVERY OF THIS MEMORANDUM NOR ANY SALES HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS MEMORANDUM CONTAINS
SUMMARIES OF CERTAIN PROVISIONS OF DOCUMENTS RELATING TO THE PURCHASE OF THE
UNITS, AS WELL AS SUMMARIES OF VARIOUS PROVISIONS OF RELEVANT STATUTES AND
REGULATIONS. SUCH SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN
THEIR ENTIRETY BY REFERENCE TO THE TEXTS OF THE ORIGINAL DOCUMENTS, STATUTES AND
REGULATIONS, WHICH ARE AVAILABLE UPON REQUEST.
IT IS THE RESPONSIBILITY OF ANY PERSON WISHING TO PURCHASE THE UNITS TO SATISFY
HIMSELF AS TO THE FULL OBSERVANCE OF THE LAWS OF ANY RELEVANT TERRITORY OUTSIDE
THE UNITED STATES IN CONNECTION WITH ANY SUCH PURCHASE, INCLUDING OBTAINING ANY
REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER APPLICABLE
FORMALITIES.
5
<PAGE> 8
JURISDICTIONAL NOTICES
FOR RESIDENTS OF ALL STATES:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID
ACTS AND LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT
AND SUCH LAWS PURCHASE TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD
BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE
SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONNECTICUT RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE
CONNECTICUT UNIFORM SECURITIES ACT AND, THEREFORE, CANNOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACT OF THIS
STATE, IF SUCH REGISTRATION IS REQUIRED, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
DELAWARE RESIDENTS:
THESE SECURITIES ARE OFFERED FOR SALE IN THE STATE OF DELAWARE PURSUANT TO
REGISTRATION WITH THE SECURITIES COMMISSIONER OF THE STATE OF DELAWARE, BUT SUCH
REGISTRATION IS PERMISSIVE ONLY AND DOES NOT CONSTITUTE A FINDING THAT THIS
MEMORANDUM IS TRUE, COMPLETE, AND NOT MISLEADING, NOR HAS THE SECURITIES
COMMISSIONER PASSED IN ANY WAY UPON THE MERITS OF, RECOMMENDED, OR GIVEN
APPROVAL TO SUCH SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
6
<PAGE> 9
FLORIDA RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT IN
RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN. ANY SALE MADE PURSUANT TO
SUCH EXEMPTION PROVISIONS IS VOIDABLE BY THE PURCHASER WITHIN THREE (3) DAYS
AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY THE PURCHASER TO THE ISSUER,
AN AGENT OF THE ISSUER OR AN ESCROW AGENT. A WITHDRAWAL WITHIN SUCH THREE (3)
DAY PERIOD WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY PERSON. TO ACCOMPLISH
THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY
AT THE ADDRESS SET FORTH IN THIS MEMORANDUM, INDICATING HIS INTENTION TO
WITHDRAW.
SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED THIRD BUSINESS DAY. IT IS ADVISABLE TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO
TO EVIDENCE THE TIME IT WAS MAILED. IF THE REQUEST IS MADE ORALLY, IN PERSON OR
BY TELEPHONE, TO AN OFFICER OF THE COMPANY, A WRITTEN CONFIRMATION THAT THE
REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.
MARYLAND RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE MARYLAND SECURITIES ACT, BY REASON OF SPECIFIC
EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THIS OFFERING.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES ACT OF THIS STATE, IF SUCH REGISTRATION IS REQUIRED, OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE COMMISSIONER OF SECURITIES OF THE STATE OF
MARYLAND NOR HAS THE COMMISSIONER OF SECURITIES OF THE STATE OF MARYLAND PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
MASSACHUSETTS RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE MASSACHUSETTS UNIFORM SECURITIES ACT, BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT,
IF SUCH REGISTRATION IS REQUIRED.
7
<PAGE> 10
NEW JERSEY RESIDENTS:
THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM HAS NOT BEEN FILED WITH OR
REVIEWED BY THE BUREAU OF THE SECURITIES OF THE DEPARTMENT OF LAW AND PUBLIC
SAFETY OF THE STATE OF NEW JERSEY PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY
GENERAL OF NEW JERSEY HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NEW YORK RESIDENTS:
THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN FILED WITH OR
REVIEWED BY THE ATTORNEY GENERAL OF THE STATEMENT OF NEW YORK PRIOR TO ITS
ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
ARE UNLAWFUL.
PENNSYLVANIA RESIDENTS:
RESIDENTS OF THE COMMONWEALTH OF PENNSYLVANIA CAN ONLY TRANSFER THESE SECURITIES
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 203(d) OF THE PENNSYLVANIA
SECURITIES ACT AND ARE SUBJECT TO THE FOLLOWING CONDITIONS:
A. EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR THESE
SECURITIES BEING OFFERED HEREBY AGREES NOT TO SELL THESE
SECURITIES FOR A PERIOD OF 12 MONTHS AFTER THE DATE OF
PURCHASE.
B. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
PENNSYLVANIA SECURITIES ACT AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS THEY ARE SO REGISTERED OR AN EXEMPTION
FROM THE REGISTRATION PROVISIONS OF THE ACT BECOMES
AVAILABLE.
EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR SHARES HAS THE RIGHT, PURSUANT TO
SECTION 207 OF THE PENNSYLVANIA SECURITIES ACT OF 1972, TO WITHDRAW HIS
SUBSCRIPTION FOR SHARES AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN TWO
BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS WRITTEN BINDING
CONTRACT OF PURCHASE. WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO SUCH
PERSON. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR
TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THE MEMORANDUM, INDICATING
HIS INTENTION TO WITHDRAW.
8
<PAGE> 11
SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED SECOND BUSINESS DAY. IT IS ADVISABLE TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND TO
EVIDENCE THE TIME IT WAS MAILED. IF THE REQUEST IS MADE ORALLY, IN PERSON OR BY
TELEPHONE, TO THE COMPANY, A WRITTEN CONFIRMATION THAT THE REQUEST TO WITHDRAW
HAS BEEN RECEIVED SHOULD BE REQUESTED.
TENNESSEE RESIDENTS:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED
THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 12
SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, appearing elsewhere in this
Memorandum. Each prospective investor is urged to read this Memorandum in its
entirety. Unless otherwise indicated, all share and per share data and
information in this Memorandum have been adjusted to give retroactive effect to
consummation of the acquisition of BTS referenced under the caption "The
Company" below.
THE COMPANY........ The information contained in this Memorandum is
presented on the assumptions as to the completion of
the Stock Exchange (see "Business") and of this
financing. Accordingly, the Company is defined to
include "The Translation Group, Ltd.", after giving
effect to the acquisition of "Bureau of Translation
Services, Inc.", and completion of the financing.
BUSINESS........... The Translation Group, Ltd. ("TTGL") was incorporated
under the laws of the State of Delaware on July 7,
1995, specifically to acquire 100% of Bureau of
Translation Services, Inc., ("BTS") a Pennsylvania
corporation located in Haddonfield, New Jersey and
incorporated in 1984. Located in Pennsauken, New
Jersey, The Translation Group, Ltd. will function as
the parent company.
SECURITIES BEING
OFFERED............ 100 Units, each Unit consisting of 4,000 Shares.
PURCHASE PRICE..... $5,000 per Unit ($1.25 per Share).
SECURITIES
OUTSTANDING........ As of the Closing Date, the Company will have
outstanding 3,700,000 shares of common stock,
including 1,510,000 shares to be issued in connection
with the acquisition of Bureau of Translation
Services, and including the 400,000 Shares to be sold
in this offering.
USE OF PROCEEDS.... Upon completion of this financing, net proceeds to
the Company from the sale of the Shares will be
approximately $400,000, after deduction of all
expenses of this offering. The Company intends to use
the net proceeds for acquisitions, research and
development of its Machine Translation System,
marketing, up-front expenses of the IPO, general and
administrative and working capital.
PLACEMENT AGENT.... MILLENNIUM SECURITIES CORPORATION is acting as
Placement Agent in the sale of the securities offered
hereby. It will receive $65,000 consisting of a 10%
placement fee and a 3% non-accountable expense
allowance.
10
<PAGE> 13
SALES TO
INVESTORS.......... The offering of the Units has not been registered
under the Act. The Shares are being offered in
reliance upon the exemption under Sections 4(2)
and/or 3(b) of the Act and the provisions of
Regulation D promulgated thereunder ("Regulation D").
Sales of the Units will be made only to "accredited
investors" as such term is defined in rule 501(a) of
Regulation D. See "Terms of the Offering - Investor
Suitability Standards".
REGISTRATION
RIGHTS............. The Shares will be included in the registration
statement for the Company's IPO, but will continue to
carry restrictions on transferability for six months
following the IPO at which time one-third (1/3) of
such Shares shall become freely transferable, with
one-half (1/2) of the remaining Shares becoming
freely transferable six months thereafter and the
balance after the following six months.
RISK FACTORS....... The securities offered hereby are highly speculative
and involve a high degree of risk and, therefore,
should not be purchased by anyone who cannot afford
the loss of its, his or her entire investment.
Prospective investors should carefully review and
consider the factors set forth under "Risk Factors",
as well as the other information contained herein,
before subscribing for any of the Units.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE> 14
THE COMPANY
TTGL was formed on July 7, 1995, under the laws of the State of
Delaware and has entered into an agreement with BTS (a Pennsylvania corporation
formed in 1984) and the shareholders of BTS that provides for TTGL to acquire
BTS as a wholly owned subsidiary through an exchange of stock upon the
completion of this Offering. TTGL's corporate office is located at 7703 Maple
Avenue, Pennsauken, New Jersey 08109, at which its telephone number is (609)
234-3097. References throughout this Memorandum to the "Company" are references
to the consolidated parent and subsidiary entity created by the acquisition of
BTS by TTGL.
RISK FACTORS
The purchase of the Shares involves a high degree of risk, including,
but not necessarily limited to, the risks described below. Before subscribing
for Shares, each prospective investor should consider carefully the general
investment risks enumerated elsewhere in this Memorandum and the following risk
factors, as well as the other information contained in this Memorandum.
1. Necessity of Successful Stock Exchange. In order for TTGL to have
any significant opportunity for commercial success and profitability, it must
successfully complete its proposed Stock Exchange with BTS, which will occur
simultaneously with the closing of this Offering. TTGL's ability to achieve
profitability will depend on completing the Stock Exchange and successfully
expanding BTS's product commercialization, which in turn requires the full
subscription of this Offering and the Company's ability to shortly raise
additional significant capital. There can be no assurance that following the
Stock Exchange, the Company will continue to market BTS's services and products
on a commercially successful basis or that continued profitability will be
achieved. See "The Stock Exchange Agreement."
2. Special Factors Regarding BTS. Simultaneously with the closing of
this Offering, TTGL intends to acquire BTS as a wholly-owned subsidiary. Thus,
the business of TTGL will be the business of BTS and the ultimate success of
TTGL will depend upon the success of BTS. See "Business." The following are
certain factors regarding BTS of which investors in this Offering should be
aware.
- International Trade. Approximately 40% of BTS's sales
are to foreign markets. Such markets include areas of
political instability, currency valuation
fluctuation, and local customs and habits.
- Evolving Technology. BTS's business is concentrated
in the high technology niche of the translation
industry. Thus, BTS is heavily dependent upon its
ability to adapt as the computer and related software
industries continue to develop new products thereby
causing current state of the art technology to become
quickly out of date. It is
12
<PAGE> 15
unclear if the company will be able to expand or even
continue in its niche.
- Reliance upon Software Marketing License. BTS
currently holds a five year exclusive marketing
license in North America to a product developed by
debis Systemhaus KSP ("debis"), a wholly-owned
subsidiary of Daimler-Benz, and a non-exclusive
license elsewhere. While BTS believes that its
relationship with debis is good, no assurance can be
given that the marketing license will always be
available to the Company or that the product, not yet
marketed in North America, will be commercially
successful.
3. Dilution Resulting from Anticipated Public Offering. It is
currently contemplated that the Company will file a registration statement with
the SEC for a public offering of its securities shortly after this private
offering is completed. There can be no assurance that any other public offering
will be completed. The public offering, or issuance of securities to other
investors, would lessen the percentage of TTGL owned by stockholders acquiring
securities in this Offering. See "The Offering - Plan of Distribution."
4. Potential Need for Additional Financing. TTGL expects that
significant additional funding will be required following the Stock Exchange for
the combined entity to expand the marketing of its services, development of
technology and the licensing or sale thereof and it will be required to raise
additional funds through alternative financing methods to fund operations;
including the proposed initial public offering of its securities discussed
above. (See "Risk Factors - Dilution Resulting from Future Securities
Offerings.") There can be no assurance that the Company will be able to obtain
additional funding when needed, or that such funding, if available, will be
obtainable on terms acceptable to the Company.
5. Dependence on Key Personnel. The success of the Company
following the Stock Exchange depends in part upon the continued successful
performance of BTS's current Chief Executive Officer, and President, Ms.
Theodora Landgren and other key employees for the continued research,
development, marketing and operation of the combined entity. Although BTS has
employed, and the combined entity will employ in the future, additional
qualified employees as well as retaining consultants having significant
experience, if Ms. Landgren and such other key employees fail to perform any of
their duties for any reason whatsoever, the ability of the combined entity to
market, operate and support its products may be adversely affected. While BTS is
located in areas where the available pool of people is substantial, there is
significant competition for qualified personnel. See "Management".
6. Competition. Although BTS believes that the services it
provides are unique in several ways, and that the process it uses have been
developed over a period of time and are part of its "trade secrets" and
"know-how" and are considered as its intellectual properties, Berlitz and AT&T,
among others, claim to provide similar services to those provided by BTS, and
other competitive products similar to its products are currently being
13
<PAGE> 16
marketed. Moreover, there can be no assurance that there are no products that
would compete effectively with BTS's proposed products or that other companies,
many of which have financial resources, research and development capabilities,
marketing staffs and facilities greater than those of the Company, are not
currently developing, or in the future will not develop, products that may have
advantages over BTS's proposed products or that may undercut what the Company
believes are the advantages of the Company's products.
7. Patents and Protection of Proprietary Information. Currently,
BTS's services and work in tools (i.e., pieces of software that make the
translation quicker) are not protected by patents and/or copyrights and BTS
relies on its prior development activities that has resulted in a body of
information and processes that it has designated as "trade secrets" and
"know-how" and is considered as its intellectual property. However, the
commercial success of the Company may in the future depend, in part, upon the
ability of the Company to obtain strong patent protection. Accordingly, the
Company may file or cause to be filed on its behalf patent applications, where
appropriate, relating to new developments or improvements to technology or the
uses of products thereof. Given the importance of the proprietary information to
the Company, there are significant risks that the Company's failure to obtain
patent protection, preserve its trade secrets or operate without infringing upon
the proprietary rights of others may significantly and adversely effect the
Company. No assurance of obtaining patent protection can be given. There is also
no assurance that (i) any patents will be issued to the Company; (ii) any issued
patents will prove enforceable; or, (iii) the Company will derive any
competitive advantage therefrom. To the extent that any patents do not issue,
the Company may be subject to more competition. The issuance of patents, in some
but not all aspects of a product, may be insufficient to prevent competitors
from essentially duplicating the product by designing around the patented
aspects. In addition, there is no assurance that the Company's products or
processes will not infringe patents owned by others. In any event, the Company
will continue to rely on what it believes to be its proprietary know-how.
However, there can be no assurance that the obligation to maintain the
confidentiality of such proprietary information will not wrongfully be breached
by employees, consultants, advisors, suppliers or others, or that the
proprietary know-how will not otherwise become known or be independently
developed by competitors in such a manner that the Company has no practical
recourse.
8. Need to Increase Marketing Capability. In order to achieve
continued growth following the Stock Exchange, the Company will have to expand
its marketing and sales and develop a network of marketing and sales
representatives. There can be no assurance that the Company will be able to
build such a marketing staff or sales force, that the cost of establishing such
a marketing staff or sales force will not exceed any product revenues, or that
the Company's direct sales and marketing efforts will be successful. There can
be no assurance that such marketing and sales efforts will compete successfully
against other companies. Alternatively, the Company may enter into co-marketing
or other licensing arrangement. To enter into co-marketing or other licensing
arrangements, the Company must establish and maintain corporate relationships.
There can be no assurance that such corporate relationships can be established
or maintained on terms acceptable to the Company, if at all. To the extent the
Company enters into co-marketing or other licensing arrangements, any revenues
received by the Company will be dependent on the efforts of
14
<PAGE> 17
third parties, and there can be no assurance that such efforts will be
successful. Although the Company believes that future corporate partners, if
any, will have an economic motivation to commercialize any such products, the
Company may not have any control over such partners' commercialization efforts.
See "Business - Services and Clients."
9. Voting Control; Potential Anti-Takeover Effect; Voting Trust.
After the completion of this Offering and the Stock Exchange, the founders of
the Company along with the shareholders of BTS would directly own approximately
89% of the Company's outstanding Common Stock and, accordingly, would control
the Company's affairs. In addition, the Company will be subject to provisions of
the General Corporation Law of the State of Delaware respecting business
combinations which could, under certain circumstances, also hinder or delay a
change in control. Also, certain of the current stockholders of TTGL have agreed
to give voting control of their securities to Ms. Theodora Landgren, the
President of BTS, so that she will have sole voting control of a majority of the
Company's voting stock for two years after the Company's IPO, if any. See
"Management - Security Ownership of Certain Beneficial Owners and Management."
10. No Payment of Dividends. Neither TTGL nor BTS has paid any
dividends on its Common Stock. For the foreseeable future following the Stock
Exchange, the Company anticipates that all earnings, if any, that may be
generated from the Company's operations will be used to finance the growth of
the Company and that cash dividends will not be paid to holders of the Common
Stock. See "Dividends."
11. Arbitrary Determination of Offering Price. The offering price
of the Common Stock has been arbitrarily determined by negotiation between TTGL
and the Placement Agent and bears no necessary relationship to the assets, book
value, operating or financial results or net worth of the Company or BTS or
other generally accepted criteria of value and should not be considered as
indicating any intrinsic value for the Common Stock. No independent appraisal of
the value of the Shares has been obtained in connection with this Offering.
12. Restrictions on Transferability. The offer and sale of the
Units has not been registered under the Act or the securities laws of any
jurisdiction in reliance on exemptions from registration. As a result, this
Memorandum has not been reviewed by any Federal or state securities commission
or official and prospective investors do not benefit from any additional
disclosure or requirements which might have been imposed by any such commission
or official. The Common Stock may not be resold unless such resale is
subsequently registered under the Act and the applicable state securities laws
or, in the opinion of counsel to the Company, an exemption from registration is
available. In addition, although the Shares have registration rights, they are
subject to certain restrictions of transfer set forth in the Subscription
Agreement to be executed by each investor. See "Description of Securities -
Restrictions on Transfer of Securities."
13. Absence of Public Market. There is no public market for Shares
of the Common Stock and no assurance can be given that such a market will
develop or, if developed, that it will be sustained. Hence, there can be no
assurance that purchasers of
15
<PAGE> 18
the Shares will be able to sell them should they desire to do so. As a result,
an investor must be prepared to continue to bear the economic risk of his
investment for an indefinite period of time. Any market for the Shares offered
hereby that may develop, in all likelihood, will be a limited one, and if such a
market does develop, the price of such Shares may be volatile.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE> 19
USE OF PROCEEDS
After deduction of all expenses of this offering, net proceeds to the
Company from the sale of the Shares will approximate $400,000. The Company
intends to use such net proceeds approximately as follows:
<TABLE>
<CAPTION>
PROCEEDS FROM
ITEM OFFERING
---- -------------
<S> <C>
Research & Development of
Machine Translation System $100,000
Marketing 100,000
General and Administrative 80,000
Working Capital 90,000
Up-front expenses of IPO 30,000
------
$400,000
========
</TABLE>
The foregoing table represents TTGL's best estimate of the allocation
of the proceeds of this Offering based upon the current state of BTS's
development, current plans and the current economic and industry conditions, and
is subject to reapportionment of proceeds among the categories listed above or
to new categories. While TTGL expects that the net proceeds of this Offering
will be sufficient for it to operate for the next twelve months, if the Offering
is not fully subscribed the Company may not have sufficient funds to proceed
with its current business plans. In any event, the Company will be relying upon
its ability to obtain an underwriter and the subsequent successful conclusion of
its initial public offering of securities so as to provide it with such
necessary funds to expand its business and continue its operations into 1997 and
beyond. There can be no assurance that such a public offering can be completed
or other additional financing will be available or, if available, that it can be
obtained on terms which are commercially feasible or which management deems
acceptable.
The expenses incurred in developing and pursuing the Company's business
plans cannot be predicted with any degree of certainty. Specific allocations of
proceeds will ultimately depend on the progress and timing of the Company's
development, assessments as to market potential and competitive products and
establishing relationships with potential manufacturers and/or distributors.
Until used, the Company intends to invest the proceeds of this Offering in
certificates of deposit and other short-term investments.
17
<PAGE> 20
DIVIDENDS
It is currently anticipated by management that, for the foreseeable
future, the Company will not be in a position to pay cash dividends on the
Common Stock and that all earnings, if any, of the Company will be retained for
investment in the Company's business.
CAPITALIZATION
The capitalization of TTGL, as of October 31, 1995 and as adjusted to
give effect to the issuance and sale of the Shares offered hereby and to the
Stock Exchange, assuming the sale of all Shares offered, is as follows:
<TABLE>
<CAPTION>
Amount to be
Outstanding
Amount Amount to be After Offering
Amount Currently Outstanding and Stock
Title of Class Authorized Outstanding After Offering Exchange
-------------- ---------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Common Stock 5,000,000 1,790,000 2,190,000 3,700,0001
$.001 Par Value Shares Shares Shares Shares
Per Share
Preferred Stock 1,000,000 -0- -0- -0-
$.001 Par Value Shares
Per Share
</TABLE>
- --------
(1) Pursuant to agreement with the Placement Agent, the Company has agreed,
via contributions by stockholders other than investors in this Offering, to
reduce the number of shares outstanding prior to the initial public offering to
2,700,000.
18
<PAGE> 21
SUMMARY OF FINANCIAL INFORMATION
As TTGL is a start-up company without any operations, it has no
financial information. The following financial information of BTS does not
purport to be complete and is qualified in its entirety by the more detailed
financial information contained elsewhere herein.
<TABLE>
<CAPTION>
12 MONTH PERIOD 5 MONTH PERIOD
FROM FROM
APRIL 1, 1994 TO APRIL 1, 1995 TO
MARCH 31, 1995 AUGUST 30,1995
---------------- ----------------
(unaudited)
Statement of Operations Data:
<S> <C> <C>
Revenues....................... $2,149,135 $1,103,914
Gross Profit................. 739,344 534,012
Net Income (Loss) Before Taxes. 127,538 306,508
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31, 1995,
AUGUST 31, AS ADJUSTED FOR THE
1995 SALE OF 400,000 SHARES
-----------------------------------------------------
Balance Sheet Data:
<S> <C> <C>
Cash and Cash Equivalents(1)..... $ 87,344 $ 487,444
Accounts Receivable.............. 509,460 509,460
Total Assets..................... 747,265 1,147,265
Total Stock Holders Equity....... 396,641 796,641
</TABLE>
- ------------------
(1) Cash and cash equivalent as of August 31, 1995, as adjusted, reflects
the sale of 400,000 shares of Common Stock at a price per Share of
$1.25, less estimated commissions and expenses of $100,000.
19
<PAGE> 22
THE STOCK EXCHANGE AGREEMENT
The Translation Group, Ltd. and Bureau of Translation Services have
entered into an Agreement and Plan of Reorganization dated December 7, 1995,
among TTGL, BTS and the shareholders of BTS ("Stock Exchange Agreement")
pursuant to which the Bureau of Translation Services will become a wholly owned
subsidiary of The Translation Group, Ltd. Pursuant to the Stock Exchange
Agreement, all issued and outstanding shares of Bureau of Translation Services
Common Stock will be exchanged for 1,510,000 shares of Common Stock of The
Translation Group, Ltd.
The Stock Exchange Agreement provides, among other things, for
continued employment by the Company of Ms. Theodora Landgren, sole officer and
director of Bureau of Translation Services, and the election of Ms. Landgren to
the Company's Board of Directors. Ms. Landgren will also function as Chairman
and COO of the Company following the Stock Exchange. Ms. Landgren's employment
agreement will also provide for additional shares to be earned by her based upon
future earnings of BTS, the specific details of which are yet to be determined
by the Board.
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BUSINESS
HISTORY
The Translation Group, Ltd. ("TTGL") was organized under the laws of
Delaware in July of 1995. It is a condition precedent to the consummation of the
Stock Exchange that this Offering be completed. The Translation Group, Ltd. will
operate as the parent company and Bureau of Translation Services, a Pennsylvania
corporation formed in 1984 ("BTS"), will be the operating company.
BUSINESS OF BTS
BTS provides a service of the translation of conventional documents and
software written in one language into other languages. BTS's headquarters is
located in Haddonfield, New Jersey, where it leases 4,000 square feet of space.
It also leases 2,000 square feet of space in Westmont, New Jersey wherein it
houses its Japanese Projects Center. A European office is maintained near
Heidelberg, Germany.
BTS functions in the so-called "high tech" niche of the translation
industry, providing translation, localization, software and tools to a range of
world wide companies who have needs in computer related hardware and/or software
fields, referred to in the industry as Informational Technology ("IT").
Localization is the art of converting contracts, marketing tools, advertising,
engineering specs, computer hardware and software support materials, packaging,
TV shows, etc. into local languages, giving careful consideration to custom and
tradition indigenous to the local area.
Effective May 24, 1995, BTS entered into an Agreement with debis
Systemhaus KSP- Kommerzielle Systeme und Projekte GmbH ("debis"), a wholly owned
subsidiary of Daimler Benz, whereby BTS acquired license rights to a software
product known as KEYTERM. KEYTERM is a concept-oriented database running under
UNIX for developing and maintaining glossaries. It has a customizable structure
for entering terminology and lexicographical information. The product has been
in use in Germany for several years and is being further developed, marketed and
supported by BTS. Further, BTS will be assuming contract rights with existing
debis customers in Germany and France and will have the exclusive right to
market KEYTERM throughout North America, and elsewhere non- exclusively.
Finally, under the May 24, 1995 Agreement, BTS is allowed to use the indication
"Bureau of Translation Services in partnership with debis Systemhaus".
COMPETITIVE POSITION
BTS believes it has a good position in the localization industry, in
part because it entered this market early. Initially, BTS provided translation
of technical material in various industries heavily weighted toward engineering
and analytical instrumentation. However, by the mid-1980's, BTS recognized the
opportunity in the computer industry. Thus, the
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<PAGE> 24
Company made the transition from a "generic" translation bureau, to one whose
business emphasizes translation services in the Information Technology field
(IT).
The Company has leveraged ten years of localization experience into a
set of processes which it considers its principal competitive advantage. Every
operational process, from bidding through delivery of the completed project, is
scrupulously tracked and accounted for, making job costing accurate and
predictable, while at the same time offering its customers savings over others
in the industry. BTS believes it is the only company in its industry, to
reimburse clients when a job comes in under the estimated cost. The Company
seeks to build long-term relationships with clients, most of whom continue to
work with BTS over several years and many projects.
At present, key markets for BTS services are customers located in
Japan, Europe (including Scandinavia) and in "the Americas" the dialects of
Canadian French, Latin American Spanish and Brazilian Portuguese. BTS does not
provide Middle and Near Eastern languages, although it is planning an Israeli
presence. Growth markets are primarily in Asia. Japanese now represents BTS's
largest single language, by volume, and the Company believes that Chinese will
also become significant in the near future, although no assurance can be given
that the Company will realize any significant revenues from this market.
SERVICES AND CLIENTS
BTS provides translation and localization services (i.e., translating
so that the result is reader friendly using local dialect so that it is easily
readable and not stilted) to a range of industries and sectors, but has a very
strong bent towards IT companies. During 1994, approximately 80% of BTS's
revenues came from localization work for software publishers, computer hardware
manufacturers and computer and peripherals vendors. BTS also has an active
business in the legal area, translating depositions, patents, and material
relating to international law suits for large law firms in the Philadelphia
area.
BTS has a large number of IT-based clients. Significant customers
include Compaq Computer Corporation, for whom BTS localizes software and the
translation of the technical instructions, manuals and the like for Compaq's
Systems Division, accounting for a substantial amount of work that is generated
from Compaq. BTS also has a long-standing relationship with SAP-AG (a leading
software producer) whereby BTS is responsible for Japanese translation of its
"Financial Accounting" support materials. The strong relationships BTS has
developed with its IT clients has also generated a volume of more conventional
translation work. For example, BTS is translating software messages and
conventual documentation for Okidata, a peripherals manufacturer that was
originally a BTS localization client. Because many American companies have a
large number of Hispanic and Vietnamese employees in the United States, BTS has
been engaged to translate corporate personnel material into Spanish and
Vietnamese.
At the request of clients, BTS has also recently expanded its software
localization services to include video and multi-media translation. While these
translation contracts require an investment in equipment and facilities, BTS and
the Company believe the costs are justified by the higher value contracts
generated by this application. BTS has also been
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<PAGE> 25
working in the media sector for several years, translating copy for a client who
places "info- mercials" (commercial advertisements presented through an
information format) on a number of European broadcast channels, and for whom BTS
has translated the product literature, packaging labels and even TV scripts. In
addition, BTS has been testing and exploring multimedia localization. Currently,
BTS performs multimedia localization using external studio facilities. If it
proves feasible and attractive, BTS may consider establishing its own studio,
and broaden its localization services to full multimedia capability. BTS sees
multimedia localization as similar, in process, to other software localization
that it already performs, and while it adds a layer or two of additional
technical complexity, it does not require a substantially different skill set.
THE TRANSLATION PROCESS
The Company considers its highly detailed project management, tracking
and costing procedures to be at the heart of its specialized services. In the
view of BTS, much of what passes for "process" and "quality" in the localization
business is of a very low standard. BTS places a strong emphasis on efficient
processes, and believes that centralized project management is essential to
efficiency. Thus, even when a project may have team members in many different
locations, most work is coordinated centrally in the United States via
electronic communication. Certain core functions such as editing, proofreading,
desktop publishing and client coordination are part of central project
management. In preparing work for translation into multiple languages the
project editor may identify problems or issues which are relevant across the
entire project. Similarly, in a multiple-language project, problems may be
picked up by the translators in one or two languages that are relevant to
others. BTS believes that central control of the process is the only way certain
situations can be adequately handled, such as identification of software bugs.
All BTS translators are native speaking professionals in the target
language, and generally are required to know the subject matter of the area in
which they translate. In addition, a project must have technically knowledgeable
staff in the source language, preferably a specialist in that area.
The BTS project manager often has a direct phone line for customers,
who call him or her directly. BTS supports an extensive range of communications
facilities linking its internal systems to both clients and translators. These
include an in-house local area network ("LAN"), dial-up bulletin board (BBS),
modem transfer and multiple Internet and CompuServe connections. Some BTS staff
have remote connections to clients' LANs as well. Most translation projects use
one or the other of the following processes to exchange files:
-the client dials into BTS's own systems and "drops off" files, usually
via FTP (file transfer protocol) at any time; the files are then picked
up, and entered into the translation process.
-the client shares a common messaging platform with BTS (either
LAN-to-LAN or using a wide-area service provider) and files are sent
back and forth on the internal network systems between BTS and the
client.
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<PAGE> 26
-the client is connected via a high speed dedicated line directly to
the BTS network and several BTS machines may be connected, via a
Router, directly through this line so that translators are able to work
directly inside the client environment.
Files are prepared for translation by BTS technical staff and are
distributed electronically to translators either locally or abroad. Translated
versions are returned to BTS's central project management for checking and
proofing (and also compilation, if software is involved) and the target language
versions are distributed to appropriate client locations which may be multiple
locations or a central site.
In term of process, BTS considers itself an extension of the client's
documentation department. All project activities are closely tracked using
spreadsheets which are fully available to the client. Thus, the client always
knows the status of the project.
TRANSLATION TOOLS
BTS has an internal IT standard which is based around a Novell LAN,
Windows NT for handling Japanese, and Microsoft applications. All client
projects, however, are handled on a purely customized basis.
As BTS uses increasingly advanced technological translation tools
(i.e., pieces of software that make the translation quicker), the most notable
impact has been a change in the structure of the project team. Under the old,
"pre-tools" model, a typical project might consist of a project manager with 50
translators and editors working in various languages. Translation tools have
created an entirely new type of team, particularly where translation memory
databases are used to leverage previously translated material for re-use in new
or updated programs and documentation. The same project team might now include a
project manager, 2 technical analysts, 5 technical clerks and 15
translators/editors.
BTS believes it was one of the first extensive outside commercial users
of a workbench environment for software translation called XL8. The XL8 was
designed to translate and test software message strings and help files. The XL8
manager's station controls the environment, and translators (including home
workers) use a translator's station, for which BTS owns site licenses. In
general, BTS is satisfied with the product as a tool, though it has required a
substantial amount of customization by BTS to be effective, due partly, BTS
believes, to its being an early user. XL8 is now being used by BTS for several
European languages. Its advantages over manual efforts are versatility, language
independence, and easy file handling.
BTS has followed the progress of machine translation (MT) over the
years. After much careful review and consideration, BTS concluded that to the
best of its knowledge no one system exists that meets its standards of accuracy,
efficiency and efficacy. Therefore, BTS intends to complete its own MT system
which it hopes will be capable of automatic document translation. No assurance
can be given that other companies will not develop a competitive machine which
could have an adverse affect on the Company.
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For BTS the fastest growing translation market at the moment is for
Asian languages. BTS's business in Japan is primarily in translation for
manufacturers of applications software, including a substantial volume of
Unix-based systems and customized implementations. The principal applications
are financial and manufacturing, with systems encompassing everything from order
entry to distribution. The Company believes these are strong growth application
areas in Asia.
EMPLOYEES
The Company presently employs twenty-eight (28) full-time people,
comprised of two (2) Executives, three (3) in Administrative positions, two (2)
in Sales and Marketing, and twenty-one (21) in Translation. In addition, the
Company also employs full time tele- workers and uses independent translators on
an as-needed basis.
COMPETITION
The Company competes with a number of other companies, including
Berlitz and AT&T, offering similar services. Most of these competitors have
substantially greater financial resources, more extensive experience, and better
established research and development, marketing and servicing capabilities than
the Company. The Company now competes primarily on the basis of faster delivery
and, in its opinion, higher quality. It anticipates that technological changes
may occur in the industry and introduction by the Company's competitors of
innovative products with better performance characteristics could adversely
affect the Company.
SUPPLIES AND MATERIALS
The materials and supplies used to produce the Company's products are
obtainable from a wide variety of suppliers. There is not currently, nor has
there been in the recent past, a shortage of any of these materials. The Company
believes that its current sources of supply are adequate to meet it future
needs.
RESEARCH AND DEVELOPMENT
The Company has devoted little resources to formal research and
development. On the other hand, monies have been spent continually, and charged
to operations, for the continuing development of company tailored processes and
disciplines used in the translation field. The Company anticipates investing
increasing amounts on research and development in the foreseeable future.
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<PAGE> 28
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers
and directors of the Company following the Stock Exchange. Directors are elected
to serve until the next annual meeting of stockholders and the executive
officers of the Company serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Position Since
- ---- --- -------- -----
<S> <C> <C> <C>
Theodora Landgren 49 Chairman and 1995
Chief Operating Officer
Michael C. Cascio 31 Director, President and 1995
Chief Executive Officer
Richard J.L. Herson 73 Director, Secretary, 1995
Treasurer
</TABLE>
Currently the officers and directors of the TTGL are Messrs. Cascio and
Herson who hold the same positions as they will following the Stock Exchange;
and the sole current officer and director of BTS is Ms. Landgren.
Theodora Landgren has been Chairman and President of BTS since the
founding of that firm in 1983. Prior to starting BTS she studied linguistics and
computer programming at several universities including the Universities of
Denver and Innsbruck and USC. Ms. Landgren is active in the American
Translator's Association (ATA), Society of Technical Communication (STC) and was
recently elected to the executive committee of the Localization Industry
Standards Association (LISA).
Michael Cascio has been President, CEO and a Director of TTGL since
inception. Since 1995 Mr. Cascio practices law in his own firm, The Law Offices
of Michael C. Cascio. From 1991 through 1994, he was a litigation associate with
several New Jersey law firms including Parker, McCay and Criscuolo. Mr. Cascio
holds a Juris Doctor from Rutgers University School of Law, and a Bachelor of
Arts Degree in History from the University of Delaware. Mr. Cascio will only
devote a portion of his time for the Company in the beginning as he completes
some current obligations and he anticipates devoting more of his time to the
Company in the future.
Richard Herson has been Secretary, Treasurer and a Director of TTGL
since inception. Mr. Herson was previously a General Partner in the firm of
Hertz, Herson and Company, CPA's with offices in New York, Boston and Charlotte.
He is currently President of Entrepren Associates, Inc. a consulting firm, and
Secretary of the Bruner Foundation, where he is responsible for its investments
and accounting operations. He holds a Bachelor's
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<PAGE> 29
Degree from the City College of New York and an M.S. in Accounting from Columbia
University.
EXECUTIVE COMPENSATION
The Company will have three executive officers following the Stock
Exchange. Set forth below is the annual compensation to be paid to such persons.
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name Remuneration
---- ------------
<S> <C> <C>
Theodora Landgren $120,000
Michael C. Cascio $40,000
Richard J. L. Herson $25,000
</TABLE>
The Company has entered into an Employment Agreement with Ms. Landgren,
effective on the date of the closing of the Stock Exchange. The Agreement is for
five years with annual compensation of $120,000 and provides for annual cost of
living adjustments and performance based bonuses and stock options awards. The
Company has also entered into an Employment Agreement with Mr. Michael Cascio on
terms similar to Ms. Landgren's. The Agreement also contains clauses regarding
confidentiality and non-competition. In addition, TTGL has entered into Business
Consulting Agreements with each of Mr. Charles Cascio ($80,000 per anum) and
Messrs. Mark Schindler ($16,000 per anum) and Richard Gray ($16,000 per anum)
and Dr. Eugene Stricker ($16,000 per anum). The Business Consulting Agreements
of Messrs. Gray and Schindler and Dr. Stricker provide for payments to begin
following the close of the IPO, if any, are for five years and provide for
annual cost of living adjustments. They also provide that at any time after six
months following the Company's initial public offering, based upon management's
performance review, the Company may buy out the value of the balance of such
Business Consulting Agreements at a discounted rate to be negotiated but within
the range of 60-70% of the remaining cash value, excluding any cost of living
adjustments. Messrs. Schindler and Gray and Dr. Stricker are experienced in
corporate business and acquisitions and will provide consulting services to the
Company in such areas. Mr. Charles Cascio will provide consulting services in
marketing and new product development and following the Company's initial public
offering will become a full time employee in a similar role pursuant to the
terms of an Employment Agreement which will be similar to Ms. Landgren's. Mr.
Herson will begin to receive compensation following the close of the IPO.
COMPENSATION OF DIRECTORS
Directors of the Company are not compensated for their services, in
that capacity.
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<PAGE> 30
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Memorandum,
certain information (before and after giving effect to this Offering and the
Stock Exchange with respect to the shares of Common Stock owned by (i) each
person who is known by the Company to own beneficially more than 5% of the
shares of any class of Common Stock, (ii) each director of the Company who owns
shares, and (iii) the executive officers and directors of the Company as a
group. Unless otherwise indicated, all shares of Common Stock are owned by the
individual named as sole record and beneficial owner with exclusive power to
vote and dispose of such shares.
<TABLE>
<CAPTION>
Percentage
of Class
Percentage Percentage After
Shares of Class of Class Offering and
Owned Before After Stock
Name and Address Beneficially Offering Offering Exchange
- ---------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Theodora Landgren -0- N/A N/A 36.62%
(1)(2)
Kurt Ramin(1)(3) -0- N/A N/A 4.19%
Michael C. Cascio 900,000 50.28% 41.10% 24.32%
(1)(4)(7)
Sean Cascio (1)(5)(7) 200,000 1 1.17% 9.13% 5.41%
Christine Cascio 200,000 1 1.17% 9.13% 5.41%
(1)(6)(7)
Richard Herson 130,000 7.26% 5.94% 3.51
(1)(7)
Mark Schindler (7) 113,000 6.31% 5.16% 3.03%
200 E. 69th St.
New York, NY
Eugene Stricker (7) 113,000 6.31% 5.16% 3.03%
42 Barrett Road
Lawrence, NY
Richard Gray (7) 114,000 6.37% 5.21% 3.08%
9170 SW 14th St.
Boca Raton, Fl
All Executive
Officers and
Directors as a Group 980,000 54.47% 44.29% 63.11%
</TABLE>
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<PAGE> 31
(1) Uses the Company's address.
(2) Upon the completion of the stock exchange, she will own 1,355,000
Shares. Pursuant to agreement with the Placement Agent, prior to the
Company's initial public offering, she will return 500,000 shares of
common Stock to the Company.
(3) Upon the completion of the Stock Exchange, he will own 155,000 shares.
(4) Brother of Sean and Christine Cascio. Pursuant to agreement with the
Placement Agent, prior to the Company's initial public offering, he
will return 500,000 shares of Common Stock to the Company.
(5) Brother of Michael and Christine Cascio.
(6) Sister of Sean and Michael Cascio.
(7) Pursuant to Stock Exchange Agreement, will place all shares in voting
trust for the benefit of Theodora Landgren for approximately the next
two years.
STOCK OPTION PLAN
The Company adopted a Stock Option Plan (the "Option Plan") on November
29, 1995. Under the Option Plan, 2,500,000 shares of the Company's Common Stock
(subject to certain adjustments) are reserved for issuance upon the exercise of
options. Options granted under the Option Plan may be either (i) options
intended to constitute incentive stock options under Section 422A of the
Internal Revenue Code of 1986, as amended, or any corresponding provisions of
succeeding law (the "Code") or (ii) non-qualified stock options. Stock
appreciation rights may be granted in association with options. Incentive stock
options may be granted under the Option Plan to employees (including officers
and directors who are employees) of the Company or a parent corporation or a
subsidiary corporation thereof on the date of grant. Non-qualified options may
be granted to (i) officers and directors of the Company or a parent corporation
or a subsidiary thereof on the date of the grant, without regard to whether they
are employees, and (ii) consultants or advisors to, or agents or independent
representatives of, the Company.
By its terms, the Option Plan is to be administered by a committee (the
"Committee") appointed by the Board of Directors which shall consist of either
the entire Board of Directors, all of whom must be disinterested persons, or by
a committee of two or more directors), all of whom must be disinterested persons
and who serve at the discretion of the Board of Directors. Subject to the
provisions of the Option Plan, the Committee has the authority to determine the
persons to whom options will be granted, the exercise price, the term during
which options may be exercised and such other terms and conditions as it deems
appropriate.
The aggregate fair market value of shares issuable pursuant to incentive stock
options granted in any calendar year to an employee or officer may not exceed
$100,000 subject to certain carryovers from previous years. Incentive stock
options granted under the Option Plan may not have an exercise price less than
the fair market value of the Common Stock on the date of the grant (or 110% of
the fair market value in the case of employees holding ten percent or more of
the voting stock of the Company) and non-qualified options may not have an
exercise price less than 50% of fair market value of a share of Common Stock on
the date the option is granted. Options granted under the Option Plan will
expire not more than ten years from the date of the grant subject to earlier
termination under the Option
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<PAGE> 32
Plan. The term of an incentive stock option granted to a 10% holder shall be no
more than 5 years from the date of the grant.
Under the Option Plan, participants may be granted stock appreciation rights in
connection with, or separately from, options. Each stock appreciation right
consists of a right to receive, upon exercise, either cash or shares of Common
Stock, as determined in the discretion of the Committee, equal to the amount by
which the shares of Common Stock on the date the stock appreciation right is
exercised exceeds the per share option price. If stock appreciation rights are
exercised, only the number of shares actually delivered upon the exercise of
such stock appreciation rights will be charged against the maximum number of
shares which may be issued under the Option Plan.
As of the date hereof, no options have been granted under the Option Plan.
However, on the date of the company's IPO, Ms. Landgren will be granted options
to purchase 100,000 shares of Common Stock, Mr. Charles Cascio will be granted
75,000 options and Mr. Michael Cascio will be granted 25,000 options.
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<PAGE> 33
DESCRIPTION OF SECURITIES
The following are brief descriptions of the securities offered hereby
and other securities of TTGL. The rights of the holders of shares of TTGL's
capital stock are established by its Certificate of Incorporation and Bylaws and
Delaware Law. The following statements do not purport to be complete or give
full effect to statutory or common law, and are subject in all respects to the
applicable provisions of the Certificate of Incorporation, Bylaws and state law.
COMMON STOCK
The Company is authorized to issue an aggregate of 5,000,000 shares of
Common Stock, .001 par value per share, of which 1,790,000 shares are issued and
outstanding. Upon completion of this Offering, there will be a total of
2,190,000 shares of Common Stock outstanding and an aggregate of 3,700,000
shares of Common Stock outstanding following the Stock Exchange.
Holders of Common Stock are entitled to receive dividends when, as and
if declared by the Company's Board of Directors out of funds legally available
therefor. In the event of liquidation, dissolution or winding up of the Company,
after payment of debts, expenses and preference rights of preferred stock, if
any, holders of the Common Stock are entitled to share ratably in the
distribution of the remaining assets. Holders of Common Stock have no preemptive
or other subscription rights, conversion rights, or redemption or sinking fund
provisions in their favor with respect to the shares of Common Stock. Each
holder of Common Stock is entitled to one vote per share on all matters
submitted to a vote of holders of such stock. The holders of Common Stock do not
have the right of cumulative voting in the election of directors. All of the
outstanding shares of Common Stock are, and the Shares of Common Stock offered
hereby will be, when issued against the consideration set forth in the
Memorandum, fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors is authorized to issue up to 1,000,000 shares of
Preferred Stock without any further vote or action by the stockholders, in one
or more series, and to fix the rights, preferences and privileges and
qualifications thereof including, without limitation, liquidation preference,
voting rights and the limitation or exclusion thereof. The issuance of Preferred
Stock could decrease the amount of earnings and assets available for
distribution to holders of Common Stock or adversely affect the rights and
powers, including voting rights, of the holders of Common Stock, and may have
the effect of delaying, deferring or preventing a change in the control of TTGL
or the Company.
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<PAGE> 34
WARRANTS
At the close of this Offering, Warrants will be issued to the Placement
Agent to purchase 40,000 Shares.
Each Warrant will entitle the registered holder thereof to purchase one
share of Common Stock at $1.50 per share (subject to adjustment as described
below) for a period of five years commencing six months after issuance. A holder
of Warrants may exercise such Warrants by surrendering the certificate
evidencing such Warrants, together with the form of election to purchase
attached thereto properly completed and executed and the payment of the exercise
price and any transfer tax. If less than all of the Warrants evidenced by a
Warrant certificate are exercised, a new certificate will be issued for the
remaining number of Warrants. The holders of the Warrants have one "demand
registration" right and "piggy back" registration rights, all at the Company's
expense.
The Company has authorized and reserved for issuance a number of shares
of Common Stock sufficient to provide for the exercise of the Warrants. When
issued, each share of Common Stock will be fully paid and nonassessable. Warrant
holders will not have any voting or other rights as shareholders of the Company
unless and until Warrants are exercised and shares issued pursuant thereto. The
exercise price and the number of shares of Common Stock issuable upon the
exercise of each Warrant are subject to adjustment in the event of a stock
split, stock dividend, recapitalization, merger, consolidation or certain other
events.
RESTRICTIONS ON TRANSFER OF SECURITIES
The Shares of Common Stock to be issued in the Offering are not, and at
the time of issuance will not be, registered under the Act, in reliance upon an
exemption from registration contained in Regulation D promulgated thereunder.
Each Investor in this Offering will represent in his Subscription Agreement that
the Shares are being acquired for investment for the Investor's own account, not
as a nominee or agent and not with a view to the sale or distribution of any
part thereof, and the Investor has no present intention of selling, granting,
participating in a distribution of or otherwise distributing such Shares.
Furthermore, none of the Shares may be sold, transferred or otherwise disposed
of without registration under the Act or an exemption therefrom, and in the
absence of such registration or exemption, such securities must be held
indefinitely. The Shares will be stamped with a legend stating that any transfer
will be invalid unless a Registration Statement under the Act is in effect as to
such transfer or in the opinion of counsel to the Company such registration is
unnecessary in order for such transfer to comply with the Act. The Shares will
also be stamped with a legend indicating that regardless of the existence of an
effective registration statement, investors in the Shares offered hereby may not
sell such Shares of Common Stock without certain restrictions for a period of
eighteen months from the date of the closing of the Company's initial public
offering, except with the prior written consent of the managing underwriter of
such initial public offering.
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<PAGE> 35
REGISTRATION RIGHTS
The Shares will be included in the registration statement for the
Company's IPO (if successfully completed), but will continue to carry
restrictions on transferability for six months following the IPO at which time
one-third (1/3) of such Shares shall become freely transferable, with one-half
(1/2) of the remaining Shares becoming freely transferable six months thereafter
and the balance after the following six months.
TRANSFER AGENT
The Company intends to engage American Stock Transfer & Trust Company
to act as Transfer Agent for its Common Stock.
LIMITATION UPON DIRECTOR'S LIABILITY
The Certificate of Incorporation of the Company provides that members of its
Board of Directors shall not be subject to personal liability to the Company or
any of its stockholders for any monetary damages for breach of fiduciary duty,
except liability for (i) any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) paying a
dividend or approving a stock repurchase or redemption which was illegal under
Delaware General Corporation Law; (iv) any transaction from which the director
derived an improper personal benefit, or (v) any act or omission occurring prior
to the adoption by the Company of the provision eliminating directors' personal
liability.
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<PAGE> 36
THE OFFERING
SECURITIES OFFERED
The Company is offering up to 400,000 shares of the Company's Common
Stock, par value $.001 per share, at a price of $1.25 per Share. See
"Description of Securities."
SIZE OF OFFERING
The Company is offering, on a "best efforts, all-or-none" basis,
400,000 Shares of Common Stock at $1.25 per Share with a minimum required
investment for each investor of 4,000 Shares for $5,000. The Company, in its
sole and absolute discretion, may accept subscriptions for less than such
amount. The Units are offered only to prospective investors meeting certain
investor suitability standards. See "Investor Suitability Standards" below. The
offering of the Units commences on the date of this Memorandum and will
terminate thirty (30) days later, unless extended by the Company and the
Placement Agent for up to two additional 30-day periods.
PLAN OF DISTRIBUTION
The Company will offer and sell the Units in a private offering which
meets the requirements of Regulation D promulgated pursuant to the Securities
Act of 1933, as amended. The Company and Millennium Securities Corp. have
entered into a Letter of Intent pursuant to which Millennium has been retained
by the Company as its exclusive agent to offer and sell the Shares on a
best-efforts basis during the thirty (30) day period commencing on the date
hereof subject to a further extension of such offering period for two additional
thirty (30) day periods by mutual agreement of the Company and the Placement
Agent. The Placement Agent has also agreed to give first priority to interested
investors referred by the Company. The Company has agreed to pay to the
Placement Agent a selling commission of 10% of the dollar amount of Shares sold
($50,000 if all the Shares offered are sold) and pay a non-accountable expense
allowance of 3% of the dollar amount of the Shares sold ($15,000 if all the
Shares offered are sold). The Placement Agent will also be able to purchase for
$100, warrants to purchase for 5 years up to 40,000 Shares at a price of $1.50
per share of Common Stock.
The Company's Letter of Intent with Millennium also states that
Millennium will use its best efforts to form a consortium to underwrite the
Company's initial public offering, at which time it is currently anticipated
that it shall offer to the public 1,000,000 shares of Common Stock, and
1,000,000 Redeemable Common Stock Purchase Warrant, which securities shall be
separately sold, registered and transferable. There can be no assurance that the
Company's initial public offering will be successfully completed. See "Risk
Factors".
34
<PAGE> 37
INVESTOR SUITABILITY STANDARDS
The Offering of the Shares offered herewith is being made without
registration under the Securities Act in reliance on the exemption provided by
Regulation D and without registration in certain states and other jurisdictions
in reliance on similar exemptions under applicable state laws. Each person
acquiring Shares must represent, by executing the Subscription Agreement, that,
among other things, he or she is acquiring the Units for his or her own account
for investment, without any intention to resell, distribute, pledge or in any
way transfer or dispose of his or her Units.
Investment in the Units involves a high degree of risk and is suitable
only for persons of substantial means who have no need for liquidity in their
investments. The Company will only accept a subscription from an investor who is
an accredited investor under Regulation D of the Securities Act, as described
below, or is not a "U.S. person" or purchasing for the account or benefit of a
U.S. person as defined in Rule 902(o) of Regulation S of the Securities Act. An
"accredited investor" is one who:
(a) if a natural person, has at the time of subscription, either
individually or jointly with his or her spouse, a net worth in excess of
$1,000,000; or
(b) if a natural person, has had in each of the two most recent tax
years prior to the time of subscription an individual annual income in excess of
$200,000 and reasonably expects an individual income in excess of $200,000 in
the current tax year; or
(c) if a natural person, has had in each of the two most recent tax
years prior to the time of subscription joint annual income with his or her
spouse in excess of $300,000 and reasonably expects a joint income in excess of
$300,000 in the current tax year; or
(d) if other than a natural person, is an entity all of the equity
owners of which meet the conditions set forth in (a), (b) or (c) above; or
(e) is otherwise an "accredited investor" within the meaning of
Regulation D, Rule 501(a) (17 C.F.R.Section 230.501(a)) promulgated pursuant to
the Securities Act.
Any purchaser meeting one of the tests listed in (a) through (e) is referred to
herein as an "Accredited Investor." Additional suitability requirements may be
imposed by the state or foreign jurisdiction in which a prospective investor
resides.
SUBSCRIPTION PROCEDURES
In order to subscribe to purchase the Units, a prospective investor
must follow the instructions set forth on page iii of this Memorandum under
"Summary of Subscription Procedures." Those instructions direct a potential
investor to complete and execute the documents described below and to deliver
them, together with a check payable to "The Translation Group, Ltd." to:
35
<PAGE> 38
Millennium Securities Corp.
110 East 59th Street, 6th Floor
New York, New York 10022
Attention: Richard A. Sitomer
Copies of the documents described below have been delivered to potential
investors with this Memorandum and may also be obtained, upon request, from
Millennium at the address set forth above. The form of each of the Subscription
Documents is included as an Exhibit to this Memorandum.
Subscription Agreement. By completing, executing and delivering the
Subscription Agreement, a prospective investor will have agreed to purchase the
number of Units subscribed for and to make payment to TTGL, as described below
under "Payment of Subscription Price," in the amount of $5,000 per Unit, subject
to acceptance by TTGL and the Placement Agent of such subscription.
Corporations, partnerships and trustees, agents or other persons acting
in a representative capacity are required, except at the discretion of the
Placement Agent, to furnish with the Subscription Agreement further evidence
that such subscriber has the authority to invest in the Units or an opinion of
counsel acceptable to TTGL and the Placement Agent to the effect that the
subscriber has such authority.
Purchaser Questionnaires. In order to enable TTGL and the Placement
Agent to comply with the provisions of Regulation D and thereby to be assured
that the offering and sale of the Units will be exempt from the registration
provisions of the Securities Act and the securities laws of certain states and
foreign jurisdictions, all potential investors must accurately complete, execute
and deliver an appropriate prospective Purchaser Questionnaire in the form
furnished with the Subscription Agreement.
PAYMENT OF SUBSCRIPTION PRICE
On entering into the Subscription Agreement, each prospective investor
who subscribes to purchase Units will have agreed to make an investment in the
amount of $5,000 for each Unit subscribed for (consisting of 4,000 Shares). Each
prospective investor must deliver to the Placement Agent, concurrently with
delivery of the documents specified above under "Subscription Procedures", a
check payable to "The Translation Group, Ltd." in the amount of $5,000 for each
Unit subscribed for.
The Company and the Placement Agent will have the right, in each of
their sole discretion, to reject the subscription of any potential investor. If
the Offering is oversubscribed, the Placement Agent may prorate any or all
subscriptions received or reject any subscription entirely. Prospective
investors will be notified of the acceptance or rejection of their subscriptions
promptly following the Closing. All amounts paid by a potential investor whose
subscription has been rejected will be promptly returned, without interest.
36
<PAGE> 39
LEGAL MATTERS
The validity of the shares of Common Stock will be passed upon for the
Company by Heller, Horowitz & Feit, P.C., New York, New York, and for the
Placement Agent by Beckman & Millman, New York, New York. No counsel has been
engaged to represent the interests of the investors in the Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
37
<PAGE> 40
ADDITIONAL INFORMATION
Each prospective investor or his representative may, if he so desires, make
inquiries concerning the terms and conditions of this offering or any other
matters set forth herein, and may obtain any additional information which such
person deems to be necessary in order to verify the accuracy of the information
contained in this Confidential Private Offering Memorandum (to the extent that
the Company possesses such information or can acquire it without unreasonable
effort or expense). In connection with such inquiry, any documents which any
prospective investor or his representative may wish to review will be made
available for inspection and copying at the expense of the prospective investor.
Prospective investors may be required to execute non-disclosure agreement to
receive information determined by the Company to contain proprietary,
confidential, or otherwise sensitive information. Any such requests or inquiries
should be made in writing to the Placement Agent, addressed as follows:
MILLENNIUM SECURITIES CORP.
110 EAST 59TH STREET
NEW YORK, NEW YORK 10022
(212) 909-0530
ATTN: Richard A. Sitomer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
<PAGE> 41
EXHIBIT A
Name of Investor _________________________
Number of Units __________________________
Total Amount Paid ________________________
THE TRANSLATION GROUP, LTD.
SUBSCRIPTION AGREEMENT
AND
INVESTMENT REPRESENTATION AGREEMENT
The Translation Group, Ltd.
7703 Maple Avenue
Pennsauken, NJ 08109
This Subscription Agreement is made by and between The Translation
Group, Ltd., a Delaware corporation (the "Company"), and the undersigned person
(the "Investor") who is subscribing hereby for the number of shares of Company
Common Stock (which, as offered in blocs of 4,000, are hereinafter referred to
as "Units" unless otherwise specifically indicated) set forth below, pursuant to
the Private Placement Memorandum (the "Memorandum") prepared by the Company and
its Placement Agent, Millennium Securities Corp., dated December 7, 1995,
heretofore delivered to the Investor. In consideration of the Company's
agreement to sell the Units to the Investor, upon the terms and conditions set
forth herein, the Investor agrees and represents as follows:
A. SUBSCRIPTION
1. The Investor hereby subscribes for the number of Units set forth on
the signature page of this Subscription Agreement at a price per Unit of $5,000.
Simultaneously with the delivery of this Subscription Agreement to the Company
for the offering to which the Memorandum relates, the Investor is also
delivering to the Company a check in the amount of the aggregate purchase price
shown on the signature page of this agreement made payable to "The Translation
Group, Ltd."
2. The Investor hereby acknowledges receipt of a copy of the
Memorandum. The Investor understands that the payment accompanying this
Subscription Agreement (if accepted by the Company and the Placement Agent) will
be held in a special account of the Company until all the Units are sold and
will then be turned over to the Company and utilized by it for its business
purposes as and when the Company deems it necessary and/or advisable.
<PAGE> 42
3. The Investor understands, acknowledges and agrees that:
(a) This subscription may be accepted or rejected in whole or in part
by either the Company or the Placement Agent, in its sole
discretion, and may not be revoked by the Investor (unless as
permitted by state law) and that, upon termination of the
offering, the Investor will be promptly notified by the Company
whether his subscription has been accepted. If a subscription is
not accepted, all funds tendered therewith shall be refunded and
returned promptly without interest.
(b) Shares of Common Stock comprising the Unit(s) subscribed for
herein shall not be deemed issued to, or owned by, the Investor
until the Company shall issue in the name of the Investor a stock
certificate evidencing his ownership of such shares.
(c) No federal or state agency has made any finding or determination
as to the adequacy of the information set forth in the Memorandum
or as to the fairness of this offering for investment, nor any
recommendation or endorsement of the Units or the offering.
(d) Because neither the Units nor any of their components have been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws, the economic risk
of the investment must be borne indefinitely by the Investor, and
neither the Units nor any of their components can be sold,
transferred or otherwise disposed of unless subsequently
registered under the Securities Act and applicable state
securities laws or an opinion of counsel satisfactory to the
Company is delivered to the Company to the effect that
registration under the Securities Act and those state securities
laws is not required. The Investor also understands that even
though the shares of Common Stock comprising the Units will be
registered under the Securities Act and certain state securities
laws at the time of the Company's initial public offering,
whenever, if ever, that will be, the shares of Common Stock will
still be subject to certain restrictions of transfer for up to 18
months following such initial public offering. In the Interim,
Rule 144, adopted under the Securities Act, governing the possible
disposition of the Units or its components is not currently
available to the Investor for the purpose of selling the Units or
its components and may not be available in the future.
(e) All securities purchased pursuant to this Agreement shall bear a
legend restricting their transfer in substantially the following
form unless and until they are registered for sale and sold
pursuant to an effective registration statement under the
Securities Act.
2
<PAGE> 43
The securities represented by this certificate have
not been registered under the Securities Act of 1993, as
amended (the "Securities Act"), or any applicable state
securities laws. Any transfer of such securities will be
invalid unless a registration statement under the Securities
Act and any applicable state securities laws is in effect as
to such transfer or, in the opinion of counsel to the
Company, such registration is unnecessary in order for such
transfer to comply with the Securities Act and any
applicable state securities laws.
In addition, the Company may, if and when it utilizes
the services of an independent transfer agent, cause a stop
transfer order to be placed with such transfer agent against
all such certificates.
(f) The Investor understands and acknowledges that this Subscription
Agreement is being offered to him at the price per share indicated
in the Private Placement Memorandum and with the understanding
that the right to subscribe herein is on a basis of the right to
subscribe for 4,000 shares of Company Common Stock for $1.25 per
share of Common Stock, or $5,000 per Unit.
B. REPRESENTATION AND WARRANTIES
1. The Investor hereby represents and warrants that:
(a) The Investor is acquiring the Units for investment for his own
account and not with a view to distribution or resale, and is not
holding all or any portion of the Units for any other person.
(b) The Investor's overall commitment to investments which are not
readily marketable is not disproportionate to his net worth, and
his investment in the Units will not cause such overall commitment
to become excessive.
(c) The Investor has the financial ability and an adequate net worth
and means of providing for his current needs and possible personal
contingencies to sustain a complete loss of his investment in the
Company, and he has no need for liquidity in his investment in the
Units.
(d) The Investor has evaluated and understands the high risks and
terms of investing in the Company and considers himself to possess
experience and sophistication as an Investor which are adequate
for the evaluation of the merits and risks associated with the
Units.
3
<PAGE> 44
(e) Prior to subscribing for the Units, the Investor has made an
independent investigation of the Company and its business (both
proposed and present) and has had available to him all information
with respect thereto which was needed by him to make an informed
decision. The Investor has carefully read the Memorandum. The
Company has made available to him and/or his attorney and/or his
accountant all documents that he or they have requested relating
to investment in the Company and has provided answers to all of
his or their questions concerning the offering and an investment
in the Company. In evaluating the suitability of an investment in
the Company and acquiring his Units, the Investor has not been
furnished with or relied upon any representations or other
information (whether oral or written) other than as set forth in
the Memorandum or as contained in any documents or written answers
to questions furnished to him by the Company.
(f) The Investor has discussed with his professional, legal, tax
and/or financial advisors the suitability of an investment in the
Company for his particular financial situation and the aggregate
purchase price indicated herein for the Units subscribed for does
not exceed ten percent (10%) of the Investor's net worth.
(g) If this Subscription Agreement is executed and delivered on behalf
of a partnership, corporation, trust or other entity, the
undersigned has been duly authorized to execute and deliver this
Subscription Agreement and the signature of the undersigned on
this Subscription Agreement is binding upon such partnership,
corporation, trust or other entity.
(h) The Investor, (i) if an individual, is a bona-fide resident of the
state set forth in his residence address below or (ii) if a
corporation, trust, partnership or other entity, has its principal
place of business in the state set forth in its address below.
(i) In making the decision to purchase the Units subscribed for
herein, the Investor has relied solely upon independent
investigations made by or on behalf of the Investor.
(j) The Units subscribed for herein are being acquired by the Investor
in good faith solely for the Investor's own personal account, for
investment purposes only, and are not being purchased with a view
to, or for the resale, distribution, subdivision or
fractionalization thereof.
(k) The Investor agrees that he will not sell, transfer, pledge, offer
for sale or otherwise transfer any of the Units in the absence of
an effective registration relating thereto under the Securities
Act or evidence that such registration
4
<PAGE> 45
under the Securities Act is not required in connection with such
transfer, including, at the Company's option, an opinion of
counsel satisfactory to the Company to that effect and until the
restrictive period described in the Memorandum has passed.
(l) The Investor understands that neither the Units nor their
components (as aforesaid) have been registered under the
Securities Act or any state securities laws; that the Units cannot
be sold, transferred, pledged, offered for sale or otherwise
transferred unless they are registered under the Securities Act
and applicable state securities laws, or pursuant to an exemption
from such registration requirements; and that the Investor must
bear the economic risk of this investment for an indefinite period
of time because the Units have not been registered under the
Securities Act or any state securities laws, and, therefore,
cannot be sold, transferred, pledged, offered for sale or
otherwise transferred unless they are subsequently registered or
unless exemptions from such registration requirements are
available. The Investor has been advised that even though the
Company is obligated, and so intends (but cannot assure that it
will), to cause the shares of Common Stock comprising the Units
sold in this offering to be registered under the Securities Act
and certain state securities laws, the Investor may still not sell
all of such shares of Common Stock for up to 18 months following
such registration. The Investor understands that Rule 144
promulgated under the Securities Act may not be applicable to the
shares of Common Stock comprising the Units, and further
understands that the Company is not currently and will not be
obligated to make the filings and reports necessary to make
publicly available the information which is a condition precedent
to the availability of Rule 144 unless it files a Registration
Statement with the Securities and Exchange Commission which is
subsequently declared effective. The Investor further understands
that, if the Investor desires to sell or transfer all or any part
of the Units (or the underlying shares) acquired hereby, the
Company may require the Investor's counsel to provide a legal
opinion that the transfer may be made without registration under
the Securities Act. In addition, other restrictions discussed
elsewhere herein (as in paragraph D hereof) and in the Memorandum
may be applicable. The Investor agrees that the Units subscribed
for are subject to the restrictions on transfer described and/or
referred to herein and in the Memorandum and the Investor
understands that the Company may issue stop transfer orders with
the Company's transfer agent to enforce such restrictions.
(m) The Investor understands that all of the representations and
warranties of the Investor contained herein, and all information
furnished by the Investor to the Company, must be true, correct
and complete in all respects and are being relied upon by the
Company and the Placement Agent.
5
<PAGE> 46
(n) The Investor is aware that there is presently no market for the
resale of the Company's securities and that no market may exist in
the future for such resale.
(o) The Investor is neither a member of, affiliated with or employed
by a member of the National Association of Securities Dealers, nor
is he employed by or affiliated with a broker-dealer registered
with the Securities and Exchange Commission or with any state
regulatory authority unless otherwise indicated on Exhibit A
hereto.
(p) The Investor understands that the Company was incorporated in July
of 1995 and that there have been no commercial operations and
there is no operating history of the Company. The Investor further
understands that (i) the Company's Units are a speculative
investment that involve a substantial risk and the Investor may
lose his entire investment and that (ii) this offering is being
made in reliance upon Regulation D promulgated under the
Securities Act and/or such other exemptions as may be available to
the Company under the Securities Act. The Investor acknowledges
receipt of advice regarding limitations concerning resale of
securities in accordance with Rule 502(d), which Rule states in
part that securities acquired under Regulation D shall have the
same status as securities acquired under Section 4(2) of the
Securities Act and, accordingly, cannot be resold without
registration under the Securities Act or an exemption therefrom.
C. OFFERING ONLY FOR "ACCREDITED INVESTORS"
The Investor is an "accredited investor," as that terms is defined in
Regulation D under the Securities Act (an "Accredited Investor"), because the
Investor falls into at least one of the following definitions of that term
(INDICATE YES OR NO TO THE APPLICABLE DEFINITION(S)):
(1) The Investor is a natural person who satisfies at least one of the
following tests at the time of the sale of the Units to him:
____ The Investor, either individually or together with the
Investor's spouse, has a net worth in excess of $1,000,000.
____ The Investor had an individual income (not including the
income of the Investor's spouse) in excess of $200,000 in
each of the two most recent years, or the Investor had a
joint income with the Investor's spouse in excess of
$300,000 in each of the two most recent years, and the
Investor's individual or joint income, as the case may be,
is expected to meet the same income levels in the current
year.
6
<PAGE> 47
____ (2) The Investor is a bank as defined in Section 3(a)(2) of the
Securities Act or a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities
Act, whether acting in its individual or fiduciary capacity.
____ (3) The Investor is a broker or dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934, as amended.
____ (4) The Investor is an insurance company as defined in Section 2(13)
of the Securities Act.
____ (5) The Investor is an investment company registered under the
Investment Company Act of 1940, as amended, or a business
development company as defined in Section 2(a)(48) of that Act.
____ (6) The Investor is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958, as amended.
____ (7) The Investor is a plan established and maintained by a State, its
political subdivisions, or an agency or instrumentality of a State
or its political subdivisions, for the benefit of its employees,
which plan has total assets in excess of $5,000,000.
(8) The Investor is an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, as amended, with
any of the following characteristics:
A plan where all of the participants are Accredited
____ Investors by satisfying one of the tests set forth in 1
above.
____ A plan that is a self-directed plan and its participants
are, and its investment decisions are made solely by,
persons who are Accredited Investors by satisfying one of
the tests set forth in 1 above.
____ A plan where the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which
is either a bank, savings and loan association, insurance
company or registered investment adviser.
____ A plan that has total assets in excess of $5,000,000.
7
<PAGE> 48
____ (9) The Investor is a private business development company as
defined in Section 202(a)(22) of the Investment Advisors Act of
1940, as amended.
____ (10) The Investor is an Individual Retirement Account (IRA) in which
the participant is an Accredited Investor by satisfying one of
the tests set forth in 1 above.
____ (11) The Investor is a Keogh Plan in which the participant is an
Accredited Investor by satisfying one of the tests set forth in
1 above.
____ (12) The Investor is a trust with any of the following
characteristics:
____ The trust may be amended or revoked at any time by the
grantors and all of the grantors are Accredited Investors
by satisfying one of the other definitions of an Accredited
Investor described in this Subscription Agreement.
____ The trust has total assets in excess of $5,000,000, was not
formed for the specific purpose of acquiring the Units
offered and its purchase is directed by a "sophisticated
person" as described in Rule 506(b)(2)(ii) of Regulation D
under the Securities Act.
____ (13) The Investor is an organization described in Section 501(c)(3)
of the Internal Revenue Code, as amended, a corporation,
Massachusetts or similar business trust, or a partnership, not
formed for the specific purpose of acquiring the securities
offered in this offering and which has total assets in excess of
$5,000,000.
____ (14) The Investor is a director or executive officer of the Company.
____ (15) The Investor is a general partnership that was not formed for
the specific purpose of investing in this offering and in which
all of the general partners are Accredited Investors by
satisfying one of the other definitions of an Accredited
Investor described in this Subscription Agreement.
____ (16) The Investor is a limited partnership that was not formed for
the specific purpose of investing in this offering and in which
all of the general partners and all of the limited partners are
Accredited Investors by satisfying one of the other definitions
of an Accredited Investor described in this Subscription
Agreement.
____ (17) The Investor is a corporation that was not formed for the
specific purpose of investing in this offering and in which all
of the owners of stock are
8
<PAGE> 49
Accredited Investors by satisfying one of the other definitions
of an Accredited Investor described in this Subscription
Agreement.
D. MISCELLANEOUS
1. The Investor understands that no assurance can be given nor is any
representation made by the Company that any Registration Statement will be
effectuated shortly hereafter, or ever.
2. The Investor understands that the foregoing representations,
warranties, agreements, undertakings and acknowledgments are made by the
Investor with the intent that they be relied upon in determining the Investor's
suitability as a purchaser of the Company's Units. In addition, the Investor
agrees to notify the Company and the Placement Agent, in writing, immediately of
any change in any representation, warranty or other information that relates to
the Investor.
3. If more than one person is signing this Agreement, each representation,
warranty and undertaking herein shall be a joint and several representation,
warranty and undertaking of each such person. If the Investor is a partnership,
corporation, trust or other entity, the Investor further represents and warrants
that (i) the Investor has enclosed with this Agreement copies of its constituent
documents evidencing its formation and current existence and appropriate
evidence of the authority of the individual executing this Agreement to act on
behalf of the Investor, and (ii) the Investor was not specifically formed to
acquire the Units subscribed for herein. If the Investor is a partnership, the
Investor further represents that the funds to make this investment were not
derived from additional capital contributions of the partners of such
partnership.
4. All pronouns contained herein and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the parties thereto may require.
5. This Subscription Agreement shall be irrevocable, unless otherwise
required by State law. This Subscription Agreement and the Investor's investment
shall be governed by and construed in accordance with the laws of the State of
New York.
6. This Subscription Agreement may not be assigned by the Investor and any
attempt by the Investor to assign this Agreement shall nullify and void this
Agreement. Subject to the preceding sentence, this Subscription Agreement shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and permitted assigns of the
Investor.
7. Capitalized terms used in this Subscription Agreement, if not otherwise
defined herein, shall have the respective meanings attributed to those terms in
the Memorandum.
9
<PAGE> 50
Number of Units at $5,000
per unit Subscribed for _________________
Total Purchase Price: $ ______________
_____________________________
(Signature of the Investor)
_____________________________
Title, if applicable
______________________________________________________
(Print exact name in which certificate is to be issued)
The Investor's Name and Residence ____________________
Address (please print or type):
____________________
____________________
____________________
The Investor's Mailing Address, ____________________
if other than Residence Address
(please print or type): ____________________
____________________
If Investor is not a natural person,
please indicate State of formation
(please print or type) and furnish
the documentation described in
Paragraph D.3(i) of this Agreement ____________________
10
<PAGE> 51
The Investor's Social Security No.
or Tax Identification No. ____________________
Dated:_________________, 1995
Accepted:
THE TRANSLATION GROUP, LTD.
By ___________________________
Michael Cascio, President
Dated:_________________, 1995
11
<PAGE> 52
EXHIBIT A
THE TRANSLATION GROUP, LTD.
See Paragraph B(1)(o) Hereof
NASD ASSOCIATION OR AFFILIATION
If none, so indicate and sign. ____________________________
If any association or affiliation, indicate below, including license(s) held.
___________________________
(Signature of the Investor)
___________________________
Title, if applicable
12
<PAGE> 53
EXHIBIT B
PROSPECTIVE PURCHASER QUESTIONNAIRE
The Translation Group, Ltd.
7703 Maple Avenue
Pennsauken, NJ 08109
Re: Proposed offering of Units of shares of Common Stock
of The Translation Group, Ltd. (the "Company")
Gentlemen:
My name is _____________________________.
I am furnishing you with the information contained herein to
enable you to determine whether I (or, if applicable, the entity which I
represent) may purchase the Company's Units (the "Units"), each Unit consisting
of a 4,000 shares of the Company's Common Stock, par value $.001, for $1.25 per
share or $5,000 per Unit; pursuant to Regulation D ("Regulation D") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and any
applicable state or foreign securities laws.
I understand (i) that the Company will rely upon the
information contained herein for purposes of such determination, (ii) that the
Units and their components will not be registered with the Securities and
Exchange Commission nor with the securities regulatory authority of any state in
reliance upon the exemption from registration provided by Regulation D and
similar exemptions under the state securities laws, and (iii) that the request
by the Company that I complete this Questionnaire does not constitute an offer
of the Units to me or, if applicable, to the entity which I represent.
I represent to the Company (i) that the information contained
herein is complete and accurate and may be relied upon by the Company, (ii)
that, if I am completing this Questionnaire on behalf of an entity, I have full
authority to do so and to provide the information and make the representations
called for herein, and (iii) that I will notify the Company and its Placement
Agent immediately of any material change in any of such information occurring
prior to the closing of the purchase of Units by me (or, if applicable, by the
entity which I represent).
All information furnished herein is being furnished for the
sole use of the Company and its Placement Agent, and each of their counsel and
with the understanding that such information will be held in confidence by such
persons, except that this Questionnaire, and the information set forth herein,
may be furnished to such parties as the Company and its Placement Agent deem
desirable to establish compliance with applicable securities laws.
<PAGE> 54
IN THIS QUESTIONNAIRE, "PROSPECTIVE PURCHASER" REFERS TO THE PERSON TO
WHOM UNITS WOULD ULTIMATELY BE SOLD.
ALL INFORMATION IS CONFIDENTIAL
1. NAME OF PROSPECTIVE PURCHASER
Name:_________________________________________________________________
Date of Birth (or, if an entity, Date of organization):_______________
Citizenship (or State of Organization):_______________________________
Social Security or Tax Identification No.:____________________________
2. PRINCIPAL ADDRESS OF PROSPECTIVE PURCHASER
(Residence, if individual; Principal Place of Business, if entity)
Street:_______________________________________________________________
City:________________________ State:____________ Zip Code:__________
Telephone Number: (___)____________________
3. BUSINESS ADDRESS OF UNDERSIGNED (If different from above)
Company Name:_________________________________________________________
Street:_______________________________________________________________
City:________________________ State:____________ Zip Code:__________
Telephone Number: (___)________________________
4. COMMUNICATIONS SHOULD BE SENT TO (check one):
Principal Address:____________________________________________________
Other Business Address:_______________________________________________
2
<PAGE> 55
5. EDUCATION (Individuals Only)
Give name of institution, degree and year degree received.
High School: (Diploma, 19 )
----------------------------------------------------------
College: ( 19 )
--------------------------------------------------------------
Graduate School: ( 19 )
------------------------------------------------------
Other: ( 19 )
----------------------------------------------------------------
6. BUSINESS EXPERIENCE/HISTORY
(If retired, please indicate such fact and refer to last occupation
prior to retirement.)
Principal Business or Occupation of Prospective Purchaser:
______________________________________________________________________
(Individuals Only) Position and Duties with the Company named in
Question 3 above (or last employer):__________________________________
______________________________________________________________________
Any other occupations or duties during the five years prior to
employment described above:
______________________________________________________________________
______________________________________________________________________
7. INVESTMENT ADVICE
(A) I (or the entity which I represent) will utilize the services
of a Purchaser Representative in connection with this
investment
Yes __________ No __________
Name:_________________________ Telephone: (___)______________________
Firm:_________________________ Address:______________________________
______________________________
______________________________
3
<PAGE> 56
(B) I (or the entity which I represent) will have an attorney,
accountant, investment advisor or other consultant review this
investment.
Yes __________ No __________
Name:_________________________ Telephone: (___)______________________
Address:______________________________
______________________________
______________________________
8. The following may be contacted as credit references (please list at
least one bank or other financial institution):
(A) Name_________________________________________________________
Firm_________________________________________________________
Address______________________________________________________
City______________________ State______________ Zip_________
Telephone (___)_________ Account or Reference No.___________
(B) Name_________________________________________________________
Firm_________________________________________________________
Address______________________________________________________
City______________________ State______________ Zip_________
Telephone (___)_________ Account or Reference No.___________
Signature of Prospective Purchaser_____________________________________________
Printed name of signatory______________________________________________________
Title, if representative of an entity__________________________________________
Date ____________________, 1995
4
<PAGE> 1
EXHIBIT 5
[HELLER, HOROWITZ & FEIT, P.C. LETTERHEAD]
July 18, 1996
The Translation Group, Ltd.
7703 Maple Avenue
Pennsauken, New Jersey 08109
Gentlemen:
As counsel for your Company, we have examined your Articles of
Incorporation, By-Laws, such other corporate records, documents and proceedings
and such questions of law as we have deemed relevant for the purpose of this
opinion.
We have also, as such counsel, examined the Registration
Statement (the "Registration Statement") of your Company on Form SB-2, covering
the registration under the Securities Act of 1933, as amended, of the proposed
offer and resale of (i) up to 1,295,000 shares of Common Stock, par value $.001
(the "Common Stock"), (ii) up to 1,725,000 Common Stock Purchase Warrants (the
"Public Warrants"), (iii) up to 1,725,000,000 shares of Common Stock underlying
the Public Warrants, (iv) 100,000 options issuable to the underwriter to acquire
110,000 shares of Common Stock and 150,000 Common Stock Purchase Warrants (the
"Underwriter's Warrants"), (v) 150,000 shares of Common Stock underlying the
Underwriter's Warrants, (vi) 441,000 additional shares of Common Stock being
registered on behalf of selling stockholders, (vii) 300,000 additional Common
Stock Purchase Warrants being registered on behalf of selling warrantholders
(the "Private Warrants") and (viii) 300,000 shares of Common Stock underlying
the Private Warrants (collectively, items (i) - (viii), the "Registered
Securities"). Our review has also included the exhibits and forms of prospectus
(the "Prospectus") for the resale of the Registered Securities.
On the basis of such examination, we are of the opinion that:
1. The Company is a corporation duly authorized and validly
existing and in good standing under the laws of the State of Delaware, with
corporate power to conduct the business which it conducts as described in the
Registration Statement.
2. The Common Stock identified in items (i), (iii), (iv), (v),
(vi) and (viii) above have been duly and validly
<PAGE> 2
[HELLER, HOROWITZ & FEIT, P.C. Letterhead]
The Translation Group, Ltd.
July 18, 1996
Page 2
authorized and created and, as to the Common Stock identified in item (vi) has
been duly and validly issued and is nonassessable, and as to the Common Stock
identified in items (i), (iii), (iv), (v) and (viii) subject to the payment
therefore pursuant to the terms contemplated in the Prospectus, will be duly and
validly issued as fully paid and nonassessable shares of Common Stock of the
Company.
3. The Warrants identified in items (ii), (iv) and (vii) above
have been duly and validly authorized and created (and in the case of item
(vii), issued and nonassessable) and when exercised in accordance their
respective terms, the shares of Common Stock identified in items (ii), (v) and
(viii) above will be issued as fully paid and nonassessable shares of Common
Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name in the Prospectus under
the caption "Legal Matters."
Very truly yours,
HELLER, HOROWITZ & FEIT, P.C.
HH&F:mm
<PAGE> 1
EXHIBIT 10.1
LEASE AGREEMENT
1. PARTIES.
THIS LEASE AGREEMENT, dated January 18, 1995, is between:
J.C.G. PARTNERSHIP
referred to in this Lease as Landlord, and:
THE BUREAU OF TRANSLATION SERVICES, INC.
referred to in this Lease as Tenant.
2. DEMISED PREMISES.
LET IT BE KNOWN, by this written agreement that for and in consideration of
the rent to be paid, and the other responsibilities, covenants, and duties
to be performed by Tenant as specified below, Landlord hereby rents to
Tenant the property located at:
44 Tanner Street
Haddonfield, New Jersey
Landlord shall have the right to use all or any part of the roof over the
Demised Premises for any purpose.
3. USE.
Tenant agrees to occupy and use the premises for:
translation services business
and for no other purpose. Tenant recognizes that the specific limited use
prescribed herein is a material consideration to Landlord. Tenant shall not
allow any other person or business to occupy or use the premises without
Landlord's prior written permission.
4. TERM AND COMMENCEMENT DATE.
A. The term of this Lease shall commence March 1, 1995 and shall end
February 28, 1998.
B. Surrender at End of Term; Waiver. Tenant shall surrender possession of
the Demised Premises at the expiration of the term of this Lease, or
upon its sooner termination. Tenant shall leave the Demised Premises
broom clean and free from all debris, and in as good condition and
repair as at the commencement of the term, except for reasonable wear
and tear between the last required repair, replacement, or restoration
made by Tenant pursuant to its obligations hereunder or under any and
all renewals or extensions of the Lease term. Tenant shall deliver to
Landlord all keys or other entry devices for the Demised Premises and
its appurtenances.
TENANT WAIVES ALL RIGHT TO ANY NOTICE WHICH MAY BE REQUIRED UNDER ANY
LAWS NOW OR HEREAFTER ENACTED AND IN FORCE, INCLUDING THE PENNSYLVANIA
LANDLORD AND TENANT ACT OF 1951, ACT OF APRIL 6, 1951, AS AMENDED,
TENANT AGREES TO GIVE UP POSSESSION OF THE DEMISED PREMISES AT THE END
OF THE TERM OR ANY RENEWAL TERM WITHOUT FURTHER NOTICE FROM LANDLORD.
C. Holding Over. Tenant shall not remain in possession of the Demised
Premises after termination of this Lease without the express written
consent of Landlord.
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<PAGE> 2
D. Failure to Surrender Possession. The parties recognize and agree
that the damage to Landlord resulting from any failure by Tenant
to timely surrender possession of the premises will be
substantial, will exceed the amount of the monthly installments
of rent payable hereunder, and will be impossible to measure
accurately.
Tenant therefore agrees that if possession of the premises is
not surrendered to Landlord upon the expiration date or sooner
termination of the Lease, in addition to any other rights or
remedies Landlord may have hereunder or at law, Tenant shall pay
to Landlord, as liquidated damages, for each month and for each
portion of any month during which Tenant holds over in the
premises after the expiration date or sooner termination of this
Lease, a sum equal to 150% of the aggregate of that portion of
the base annual rent and Additional Rent that was payable under
this Lease during the last month of the term.
Nothing herein contained shall be deemed to permit Tenant to
retain possession of the premises after the expiration date or
sooner termination of the Lease.
The provisions of this Article shall survive the expiration date
or sooner termination of this Lease.
5. RENT.
For the period March 1, 1995 through February 29, 1996, Tenant
covenants and agrees to pay as base rent, the amount of Thirty
Four Thousand Five Hundred and no/100 Dollars ($34,500.00) on or
before March 30, 1995.
During the period March 1, 1996 through February 28, 1998 Tenant
covenants and agrees to pay as base rental the amount of Sixty
Nine Thousand and no/100 Dollars ($69,000) in equal monthly
installments of Two Thousand Eight Hundred Seventy-Five and
no/100 Dollars ($2,875.00)
All monthly rental payments shall be made ON THE FIRST DAY OF
EACH AND EVERY MONTH IN ADVANCE without set-off or deduction
except as expressly provided for in this Agreement, at the
office of the Landlord, 5 West 10th Street, Erie, Pennsylvania
16501, or at such other place as the Landlord may designate in
writing.
6. TAX ESCALATION CLAUSE.
The Tenant agrees to pay, as additional rent, any increases in
real estate taxes levied against the land and building of which
the demised premises are a part, over and above the real
Page 2
<PAGE> 3
estate taxes levied against the same during the calendar year 1995. Such
additional amounts shall be paid within thirty (30) days after demand by
the landlord. The amount payable by the Tenant for said tax increases
shall be equitably adjusted for any partial calendar year during which
the lease commences or expires.
7. SECURITY DEPOSIT.
Tenant agrees to pay a security deposit of $2,875.00 at the time of
signing this lease. Landlord may deduct from this deposit the cost of
any damages to the premises other than normal wear, the cost of any
cleaning or removal of trash not completed by Tenant, any unpaid amount
due under this lease, and the cost of any damage or loss suffered by
Landlord due to Tenant's default or failure under any of its provisions;
however, the total amount of such costs shall not be limited by the
amount of the deposit.
Landlord shall return the deposit without interest, less any
deductions, within 30 days of the termination of this lease, or the
surrender of the premises and all keys to Landlord, whichever occurs
first.
8. UTILITIES.
Tenant agrees to pay for all utility services rendered or furnished to
the Demised Premises including, but not limited to heat, water,
electricity, sprinkler charges, fire line charges, sewer rental, sewage
treatment facilities and the like, telephone service, trash collection
and disposal, recycling charges, as well as any municipal or
governmental charges, together with all taxes levied thereon, or other
charges, together with all taxes levied thereon, or other charges of any
kind on such utilities and governmental charges, relating to the Demised
Premises during the term of this Lease, or any extension or renewal
thereof.
It is understood that water and sewer charges will initially be paid by
the Landlord and re-billed to the Tenant. Tenant shall pay the cost of
said water and sewer charges within thirty (30) days from Landlord's
billing as additional rent.
9. SUBLEASE OR ASSIGNMENT.
Tenant shall not sublet the Demised Premises or assign this Lease
without the Landlord's prior written consent. However, no sublease or
assignment shall in any event relieve the Tenant from the faithful
performance of all the responsibilities, covenants and duties of this
Lease, including the payment of rent. In determining whether to grant or
deny consent to the Tenant's sublet or assignment request, the Landlord
may consider any factor. Landlord and Tenant agree that any one of the
following factors will be reasonable grounds for deciding the Tenant's
request:
A. Financial strength of the proposed subtenant/assignee must be
at least equal to that of the existing Tenant;
B. Business reputation of the proposed subtenant/assignee must be
in accordance with generally acceptable commercial standards;
C. Managerial and operational skills of the proposed
subtenant/assignee must be equal to those of the existing
Tenant;
D. Use of the premises by the proposed subtenant/assignee will not
violate or create any potential violation of any laws,
ordinances or regulation;
E. Use of the premises by the proposed subtenant/assignee will not
violate any other agreements affecting the Demised Premises.
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<PAGE> 4
10. SUBORDINATION CLAUSE.
This Lease shall be subject and subordinate at all times to the lien of any
mortgages now or hereafter placed on the land and building of the Demised
Premises by the Landlord. Tenant covenants and agrees to execute and
deliver to the Landlord covenants and agrees to execute and deliver to the
Landlord upon demand, any instrument subordinating this Lease to the lien
of any present or future mortgage as may be requested by any mortgagee of
the premises. Tenant hereby appoints Landlord its attorney-in-fact,
irrevocably during the term of this lease, to execute, for and in the name
of the Tenant, any such subordination instrument that may be required by
any mortgagee. This Lease shall also be subject to all present and future
easements.
Tenant shall look solely to the estate and property of the Landlord in the
land and building comprising the Demised Premises, for the collection of
any judgment (or other judicial process) requiring the payment of money by
Landlord in the event of any default or breach by Landlord with respect to
any of the terms, covenants and conditions of this Lease to be observed
and/or performed by Landlord, and no other property or assets of the
Landlord shall be subject to levy, execution or other enforcement
procedures for the satisfaction of Tenant's remedies.
11. DAMAGE AND DESTRUCTION.
If, during the term of this Lease, the building is so injured by fire or
other casualty, that the Demised Premises are rendered wholly unfit for
occupancy and cannot be repaired, in Landlord's sole opinion, within one
hundred twenty (120) days from the happening of such injury, then the
Landlord, at its option, may terminate this Lease from the date of such
injury. In such case, Tenant shall pay the rent apportioned to the time of
injury and shall immediately surrender the premises to the Landlord, who
may enter upon and repossess the same.
If such injury can be repaired within one hundred twenty (120) days after
the casualty, Landlord may or may not elect to repair the Demised Premises.
If the Landlord elects not to repair, it shall give the Tenant notice of
such election within thirty (30) days of the injury, and this Lease shall
terminate from the date of injury. If the Landlord elects to repair the
Demised Premises, the Landlord may enter upon the same, for the purpose of
performing the repair work, and this Lease shall not be affected, except
that the rent shall be equitably apportioned or suspended during the period
in which such repairs are being made. If Landlord elects to repair,
Landlord shall not be required to repair, rebuild or restore any
improvements or alterations made by Tenant after the inception of this
Lease. Tenant, at its sole cost, shall diligently repair Tenant's trade
fixtures, personal property, and any improvements or alterations made by
Tenant to a condition of equal quantity, quality and aesthetics as existed
prior to the occurrence of the damage and destruction.
If the Demised Premises is so slightly injured by fire or casualty, as not
to be rendered unfit for occupancy, then the Landlord agrees to repair the
Demised premises, except during the last two (2) years of the term of this
Lease, or any renewal or extension, within a reasonable time following said
injury. In such case, the Tenant shall continue to pay the rent as though
there had been no injury. If the fire or casualty occurs in the final two
(2) years of the term of this Lease, or any extension or renewal, Landlord
may elect not to repair and terminate the Lease within thirty (30) days of
the injury.
Page 4
<PAGE> 5
12. INSPECTION OF THE PREMISES.
Tenant certifies that Tenant has inspected the premises prior to
signing this Lease agreement, Tenant accepts the entire premises
as is. No representation or warranty has been made by Landlord
regarding the condition of the premises or its suitability for
Tenant's use, as of March 1, 1995.
13. REPAIRS AND MAINTENANCE.
A. At all times, during this Lease, or its extension or renewal,
Tenant shall faithfully maintain and keep in good order and
repair, which repair shall include replacements as needed, all
parts of the interior and exterior of the Demised Premises that
are not expressly stated below as Landlord's responsibility.
Landlord shall be required to make no repairs or improvements
during the term of this Lease except that Landlord agrees to
keep in good order and repair the roof and supporting structures
of the building.
B. Tenant agrees, at its sole cost, to annually secure qualified
professional inspection and maintenance contracts for the
heating and air conditioning system within the Demised Premises
and shall provide Landlord copies of all said service contracts,
inspection reports and maintenance and/or repair orders
bi-annually, but, in any case, no later than June 1st and
November 1st.
C. Tenant, at its sole cost, shall remove all snow and ice from
the sidewalks, and parking areas within the Demised premises,
and shall keep them clean and free from rubbish at all times
during the term of this Lease. Tenant, at its sole cost, will
keep the asphalted and/or paved areas of the Demised Premises in
good order and repair, and shall clean, sweep, re-strip, and
re-surface as necessary.
Tenant shall not permit any storage or dumping of asphalt
materials, and/or by-products, gravel, hazardous waste, or any
other such materials on the Demised Premises. Tenant shall not
store hazardous materials on the premises.
Tenant shall not install any satellite dish antenna or any
appurtenance or equipment outside the Demised Premises, onto the
building, or onto the roof structure of the building, without
first securing Landlord's permission which will not be
unreasonably withheld. Tenant agrees to perform any such
installation in a manner approved by Landlord.
D. Tenant agrees to cut any grass area on the Demised Premises one
time each week during the spring, summer and fall months and to
apply fertilizer twice a year. Tenant shall not permit weeds to
grow taller than four (4) inches from the ground level. Tenant
shall keep any fences free and clear of all weeds. Tenant shall
keep entire exterior of Demised Premises clear of all debris.
Tenant shall not allow new trees to grow at random on the
premises, and shall properly maintain all landscaped areas and
natural areas, free from overgrowth, which obligation shall
include shrub and tree replacement if necessary.
E. Tenant shall pay all costs or expenses necessary for performing
its obligations to repair and maintain the Demised Premises, its
appurtenances and equipment without recourse to Landlord. If
after notice given by Landlord, Tenant fails to maintain
property as described above, Landlord may authorize the
completion of the work and
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<PAGE> 6
charge Tenant the cost as Additional Rent, plus 15% for overhead
and profit. Tenant shall pay Landlord such Additional Rent
within ten (10) days of Landlord's billing. Landlord shall not
be liable by reason of any injury to, or interference with,
Tenant's business arising from the making of any repairs,
alterations, additions or improvements in or to the Demised
Premises or to any appurtenances or equipment therein. There
shall be no abatement of rent because of such work by Landlord.
14. LANDLORD'S RIGHT TO ENTER AND LABEL THE PREMISES.
Landlord reserves the right to label the premises for rent or sale during
the four months prior to the expiration of this Lease, or upon Tenant's
uncured default hereunder.
Landlord reserves the right to enter the premises (accompanied by others if
so desired by Landlord) during reasonable hours to examine the condition of
the premises, or for the purpose of making repairs or showing the premises
for rent or sale. Landlord reserves the right to enter the premises at any
time for the purpose of protecting the premises from damage.
If Tenant should leave the premises permanently or temporarily during the
term of this Lease, Landlord or his employees or agents shall have the
right, and are authorized by Tenant, at Tenant's sole expense, charged as
additional rent, to enter the same for the purpose of protecting the
premises from freezing and bursting of water pipes, fire or other casualty,
or any other damage which might threaten the premises by Tenant's absence
or inaction.
Any entry by Landlord, his employees, or agents shall in no way be
considered as a forcible entry or trespass, and Tenant waives all right of
action at law for forcible entry or trespass.
15. ALTERATIONS AND IMPROVEMENTS.
No structural changes or alterations shall be made by Tenant upon the
Demised Premises without the prior written approval of Landlord (to be
given or refused within fifteen (15) days after receipt of the written
request from Tenant, accompanied by a detailed description and plan). All
such work shall be done in a good workmanlike manner, in conformity with
all applicable building and zoning laws, ordinances, rules and regulations.
All costs thereof shall promptly be paid by Tenant, and it shall under no
circumstances allow or permit any liens for labor or materials to attach to
the Demised Premises.
Any alterations, additions and improvements which may be made to the
premises by either Tenant or Landlord, at Landlord's option, shall be and
remain part of the Demised Premises, and shall be surrendered to Landlord
upon the termination of this Lease, provided, however, that if Tenant has
fully complied with all of the covenants and conditions of this Lease, then
all trade fixtures and other personal and portable property all trade
fixtures and other personal and portable property and equipment installed
by Tenant may be removed by Tenant at Tenant's expense. Tenant shall at its
own cost and expense, repair all damage to the Demised Premises caused by
such removal and shall leave the premises in a good and useable condition,
ordinary wear and tear excepted between the last necessary repair,
replacement, or restoration required to be made by Tenant hereunder.
16. SIGN CLAUSE.
Tenant agrees that it will not erect any signs without first obtaining
Landlord's prior written approval as to size, color, type and location of
permitted signs, and unless such signs conform to all applicable
governmental regulations. Tenant
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<PAGE> 7
agrees to maintain its sign in a good state of repair and save the
Landlord harmless from any loss, cost or damage resulting from the
erection, maintenance, existence, or removal of the same. Upon
vacating the Demised Premises, the Tenant agrees to remove all signs
and repair, at its sole cost, all damage caused by such removal.
17. COMPLIANCE WITH LAWS.
Tenant agrees that it will at all times conduct its business on the
Demised Premises in such manner as to observe all federal, state,
and municipal laws and ordinances pertaining to the Demised
Premises, and its uses by Tenant.
Tenant agrees to comply with all rules, orders, regulations or
requirements of the National Fire Protection Association, the local
fire authority, or any similar body, and the insurance companies
providing coverage for the Demised Premises.
If Tenant installs any electrical equipment that overloads the lines
in the Demised Premises or the building in which the Demised
Premises are located, Tenant shall, at its own cost and expense,
promptly make whatever changes are necessary to remedy such
condition.
Tenant agrees to comply with all rules, orders regulations or
requirements of the Board of Health, the Zoning Board, and other
municipal authorities, and to commit no illegal acts in or on the
Demised Premises. Tenant shall also keep the premises free from any
nuisance or accumulation of debris or trash.
18. TENANT'S ENVIRONMENTAL OBLIGATIONS.
Tenant warrants and represents that it, at its sole expense, will
comply with all relevant environmental laws, regulations and
ordinances as they pertain to the Demised Premises in effect during
the term of this Lease.
Tenant shall, at Tenant's own expense, comply with all laws
regulating the use, generation, storage, transportation, or disposal
of Hazardous Substances ("Laws").
Tenant shall, at Tenant's own expense, make all submissions to,
provide all information required by, and comply with all
requirements of all governmental authorities (the "Authorities")
under the laws.
Should any Authority or any third party demand that a clean-up plan
be prepared and that a clean-up be undertaken because of any
deposit, spill, discharge, or other release of Hazardous Substances
that occurs during the term of this Lease, at or from the Demised
Premises, or which arises at any time from Tenant's use or occupancy
of the Demised Premises, then Tenant shall, at Tenant's own expense,
prepare and submit the required plans and all related bonds and
other financial assurances; and Tenant shall carry out all such
clean-up plans, at no expense to Landlord.
Tenant shall promptly provide all information regarding the use,
generation, storage, transportation, or disposal of Hazardous
Substances that is requested by the Authorities or Landlord. If
Tenant fails to fulfill any duty imposed under this Article within a
reasonable time, Landlord may, at its sole option, do so, at
Tenant's sole cost, charged as Additional Rent hereunder. In such
case, Tenant shall cooperate with Landlord in order to prepare all
documents Landlord deems necessary or appropriate to determine the
applicability of the Laws to the Demised Premises and Tenant's use
thereof,and for compliance therewith, and Tenant shall execute all
documents promptly upon Landlord's request. No such action by
Landlord and no attempt by Landlord to mitigate
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<PAGE> 8
damages under any Law shall constitute a waiver of any of
Tenant's obligations under this Article.
Tenant shall indemnify, defend, and hold harmless Landlord, the
manager of the property, and their respective officers,
directors, beneficiaries, shareholders, partners, agents,
employees and mortgagees from all fines, suits, procedures,
claims, and actions of every kind, and all costs associated
therewith (including attorneys' and consultants' fees) arising
out of or in any way connected with any deposit, spill,
discharge, or other release of Hazardous Substances that occurs
during the term of this Lease, at or from the Demised Premises,
or which arises at any time from Tenant's use or occupancy of
the Demised Premises, or from Tenant's failure to provide all
information, make all submissions, and take all steps required
by all Authorities under the Laws and all other environmental
laws.
Tenant's obligations and liabilities under this Article shall
survive the cancellation, termination or expiration of this
Lease.
19. CONDEMNATION.
Should the entire area of the Demised Premises, or such a
substantial portion thereof as to materially interfere with or
curtail Tenant's operation of its business, be taken by
condemnation, this Lease shall be void and of no effect from the
effective date of such taking, and Landlord and Tenant shall be
under no further obligation to each other, save that Landlord
shall return to Tenant any portion of unearned rental paid in
advance. It is specifically understood and agreed that Tenant
shall have no interest in, nor shall it be entitled in any way
to share in any condemnation award received by Landlord for the
land or building, or for the unexpired term of this Lease.
In the event of such condemnation, Tenant shall be entitled to
recover for any damages to Tenant's business conducted in the
Demised Premises, provided that such reimbursement can be
recovered from the condemning authority without reducing or
affecting Landlord's award.
In the event that only a part of the Demised Premises is taken
by condemnation, such that the taking does not materially
interfere with or curtail Tenant's operation of its business,
Landlord shall equitably abate the rent in the proportion the
expropriated square foot area bears to the total square foot
area of the Demised Premises as of the date Tenant's possession
is interfered with. In no event shall any rent reduction be more
than fifteen (15%) percent of the Annual Rent.
20. DEFAULT CLAUSE.
During the term of this Lease, or any of its renewals, if any of
the following conditions occur, and as often as they may occur:
A. Upon the failure of Tenant to pay any installment or
installments of rent or additional rent due, and if such failure
continued beyond ten (10) days; or
B. Upon the failure of Tenant to keep and faithfully perform all
of the covenants responsibilities and agreements in this Lease;
or
C. If Tenant shall make any attempt, manifest any intention, or
remove any goods or effects of Tenant out of, or off of, the
premises except in the normal course of Tenant's business; or
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D. Upon Tenant's failure to conduct and operate its business upon
the Demised Premises in conformity with Article 3 hereof; or
E. Tenant's Bankruptcy as defined in Article 24; or
F. If there shall be recorded against Tenant a lien by any taxing
authority, or contractor, subcontractor or materialman in excess
of $1,000, or a judgment by any party in an amount greater than
$1,000, and such lien or judgment shall not have been satisfied,
discharged, appealed, with all proceedings stayed, or bonded
over within thirty (30) days following entry of said lien or
judgment.
LANDLORD MAY PROCEED to recover possession of the premises as provided
by law and/or to collect, as provided by law, all rent and additional
rent due, including, if Landlord shall elect, the entire amount of rent
for the full term of this Lease as though the entire amount were due on
the first day of the term in advance, along with interest, costs of
suit, and 10% added for reasonable attorneys' fees, and Landlord may
demand this amount from the proceeds of any sale that may occur of
Tenant's goods.
TENANT SPECIFICALLY WAIVES PRIOR NOTICE TO VACATE, AND LANDLORD MAY
PROCEED WITH ANY ACTION AT LAW WITHOUT PRIOR NOTICE.
In the event of a default by Tenant as specified above or under any of
the terms of this Lease, Landlord may, at his option, and without prior
notice to Tenant:
A. Take immediate possession of the premises, as though this Lease
had expired. This action shall under no circumstances be
considered as an eviction of Tenant, nor as forcible entry, nor
a holding back of the premises from Tenant, Tenant having
forfeited possession by such default; and/or
B. Declare this Lease null and void and demand possession of the
premises from Tenant, using any rights or remedies as provided
by law.
C. CONFESSION OF JUDGMENT FOR POSSESSION. FOR VALUE RECEIVED, IN
ADDITION TO ANY AND ALL REMEDIES PROVIDED HEREUNDER OR BY LAW, UPON ANY
MATERIAL DEFAULT BY TENANT REMAINING AFTER EXPIRATION OF ANY APPLICABLE CURE
PERIOD HEREUNDER, TENANT HEREBY EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD
WITHIN THE COMMONWEALTH OR PENNSYLVANIA, OR IF THE DEMISED PREMISES ARE LOCATED
ELSEWHERE, WITHIN THAT STATE, TO APPEAR FOR TENANT, AND FOR ANY OTHER PERSONS
CLAIMING UNDER, BY OR THROUGH TENANT, AND, WITH OR WITHOUT COMPLAINT FILED,
CONFESS JUDGMENT FORTHWITH AGAINST TENANT AND SUCH OTHER PERSONS AND IN FAVOR
OF LANDLORD, WITH AN AMICABLE ACTION OF EJECTMENT FOR THE PREMISES, WITH
RELEASE OF ALL ERRORS. LANDLORD MAY FORTHWITH ISSUE A WRIT OR WRITS OF
EXECUTION FOR POSSESSION OF THE PREMISES AND, AT LANDLORD'S OPTION, FOR THE
AMOUNT OF ALL COSTS, WITHOUT LEAVE OF COURT, AND LANDLORD MAY, BY LEGAL
PROCESS, UPON TWENTY FOUR (24) HOUR NOTICE POSTED AT THE PREMISES, RE-ENTER AND
EXPEL TENANT FROM THE PREMISES, AND ALSO ANY PERSONS HOLDING UNDER TENANT. THE
AUTHORITY AND POWER CONTAINED HEREIN SHALL NOT BE EXHAUSTED BY ONE EXERCISE
THEREOF, BUT JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME AND AS
OFTEN AS THERE IS AN OCCURRENCE OF ANY DEFAULT DESCRIBED HEREIN, AND
FURTHERMORE SUCH AUTHORITY AND POWER MAY BE EXERCISED DURING THE TERM AND ANY
EXTENSION
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OR RENEWAL THEREOF, OR AFTER THE EXPIRATION OF EARLIER TERMINATION OF
THE TERM HEREOF.
D. CONFESSION OF JUDGMENT FOR MONEY DAMAGES. FOR VALUE RECEIVED, IN
ADDITION TO ANY AND ALL REMEDIES PROVIDED HEREUNDER OR BY LAW, UPON ANY
MATERIAL DEFAULT BY TENANT REMAINING AFTER EXPIRATION OF ANY APPLICABLE
CURE PERIOD HEREUNDER, TENANT HEREBY EMPOWERS ANY PROTHONOTARY OR ANY
ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE
TO APPEAR FOR TENANT WITH DECLARATION FILED, AND CONFESS JUDGMENT
AGAINST TENANT IN FAVOR OF LANDLORD, IT SUCCESSORS OR ASSIGNS, AS OF
ANY TERM, FOR ANY AMOUNT TO WHICH LANDLORD WOULD BEEN ENTITLED AS A
REMEDY UNDER THIS ARTICLE INCLUDING ALSO AN ATTORNEY'S FEE FOR
COLLECTION OF SAME OF FIVE (5%) OF THE TOTAL AMOUNT OF SUCH DAMAGES,
TOGETHER WITH COSTS OF SUIT, AND TENANT HEREBY WAIVES ALL ERRORS,
DEFECTS AND IMPERFECTIONS IN ENTERING SAID JUDGMENT OR IN ANY WRIT,
OR PROCESS, OR PROCEEDING THEREON OR THERETO OR IN ANY WISE TOUCHING OR
CONCERNING THE SAME; AND FOR THE CONFESSION AND ENTRY OF SUCH JUDGMENT,
THIS LEASE OR A TRUE AND CORRECT COPY THEREOF SHALL BE SUFFICIENT
WARRANT AND AUTHORITY. THE AUTHORITY AND POWER CONTAINED HEREIN SHALL
NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED
AS AFORESAID FROM TIME TO TIME AND AS OFTEN AS THERE IS AN OCCURRENCE
OF ANY DEFAULT DESCRIBED HEREIN, AND FURTHERMORE SUCH AUTHORITY AND
POWER MAY BE EXERCISED DURING THE TERM AND ANY EXTENSION OR RENEWAL
THEREOF, OR AFTER THE EXPIRATION OR EARLIER TERMINATION OF THE TERM
HEREOF.
21. LANDLORD'S COSTS DUE TO TENANT'S DEFAULT.
Should Tenant fail to comply with any of the covenants, conditions or
responsibilities of this Lease, or fail to pay any rent, or additional rent
due under this Lease, then Landlord shall be entitled to collect all costs
incurred for loss of interim rent, advertising, brokerage fees, decorating
and preparing the premises for another occupant, attorney's fees, court
costs, cost of time spent by Landlord and Landlord's employee in securing
another occupant for the premises, and all other costs incurred by Landlord
by virtue of Tenant's default, which shall be collectible as additional
rent.
22. LANDLORD'S ENFORCEMENT RIGHTS TO BE PRESERVED.
It is agreed that Landlord's acceptance of any rent or other amount after
it has become due, or any failure of Landlord to enforce any of its rights
under this Lease, shall in no way be considered as waiving its right to
collect or enforce the same. Any attempt to collect rent or other amounts
by one proceeding shall not waive Tenant's right to collect the same by any
other proceeding. Landlord reserves the right to apply any payments toward
delinquent rent, current rent, or any other amounts due under this Lease at
Landlord's option.
23. TENANT'S BANKRUPTCY.
Upon filing of a petition by or against Tenant, under the Bankruptcy Code
and upon such filing of the petition, Tenant, as debtor or as debtor in
possession, agrees:
A. To perform promptly and fully each and every obligation of Tenant
under this Lease, until such time as this Lease is either rejected or
assumed by order of a United States Bankruptcy Court or other United
States Court of competent jurisdiction; or deemed rejected by operation
of law, pursuant to 11 U.S.C. Section 365(c)(4).
B. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord hereunder, whether or not
expressly denominated as rent,
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shall constitute "rent" for the purposes of Section 502(b)(7) of
the Bankruptcy Code, including, without limitation, reasonable
attorney's fees incurred by Landlord by reason of Tenant's
bankruptcy.
C. Included within and in addition to any other conditions or
obligations imposed upon Tenant in the event of assumption
and/or assignment are the following:
1. In the event of assignment, the execution and delivery
to Landlord of any instrument by which the assignee
assumes all of the obligations arising under this Lease
from and after the date of assignment pursuant to the
provisions of the Bankruptcy Code.
2. The cure of any defaults and the compensation of
pecuniary loss resulting from any such default, within
thirty (30) days after assumption.
3. In the event of assignment, the assignee may not
exercise any option to extend the Term of the Lease.
4. Adequate assurance of future performance under
the Lease, for the purposes of assumption and/or
assignment, shall include adequate assurance:
(i) of the source of rent and other consideration
due under the Lease, and in the event of
assignment, that the financial condition and
operating performance of the proposed assignee and
its guarantors, if any, shall be at least equal to
the financial condition and operating performance
of Tenant and its guarantors, if any, as of the
time Tenant became the lessee under the Lease;
(ii) that any Percentage Rent due under the Lease will
not decline substantially.
5. The adequate assurance and demonstration in writing by
a debtor, debtor in possession or assignee of such
debtor in possession of such party's sufficient
background, including, but not limited to, substantial
experience and financial ability to operate out of the
Demised Premises pursuant to the terms and conditions of
this Lease and to meet all other reasonable criteria of
Landlord as did Tenant upon execution of this Lease.
6. The Demised Premises, at all times, remain a single
store and no physical changes of any kind are made
thereto unless in compliance with the applicable
provisions of this Lease.
D. Nothing contained in this Article shall be deemed in any manner
to limit Landlord's rights and remedies under the Bankruptcy
Code, as presently existing or as may hereafter be amended.
E. No default of this Lease by Tenant, either prior to or
subsequent to the filing of any such petition, shall be deemed
to have been waived unless expressly done so in writing by
Landlord.
24. WAIVER OF LIABILITY BY TENANT.
Landlord and Landlord's agents and employees shall not be liable for,
and Tenant waives all claims for damage to person or property sustained
by Tenant or any person claiming through
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Tenant resulting from any accident or occurrence in, upon or about the
Demised Premises, unless due to the negligence of Landlord, its agents
or employees.
Said waiver shall include, but not be limited to claims for damage
resulting from: (a) any equipment or appurtenances becoming out of
repair; (b) injury done or occasioned by wind; (c) any defect in or
failure of plumbing, heating, or air-conditioning equipment, electric
wiring, gas, water and steam pipes, stairs, rails or walks; (d) broken
glass; (e) the backing up of any sewer pipe or downspout; (f) the
bursting, leaking, or running of any tank, tub, washstand, water closet,
waste pipe, drain or any other pipe or tank in, upon or about the
Demised Premises; (g) the escape of steam or hot water; (h) water, snow
or ice being upon or coming through the roof, skylight, trap door,
stairs, walks, or any other place upon or near the premises; (i) the
falling of any fixture, plaster or stucco; and (j) any act, omission or
negligence of trespassers, co-tenants, or of other persons or occupants
of the building or adjoining or contiguous buildings or of owners of
adjacent or contiguous property.
25. INSURANCE AND INDEMNIFICATION.
A. Tenant covenants and agrees to obtain and have in force at
Tenant's sole cost and expense prior to Tenant's possession of
the Demised Premises, and to keep in force continuously
thereafter until the expiration of the entire term of this
Lease:
1. Comprehensive general liability insurance with product
liability and blanket contractual coverage, insuring the
Tenant against any and all losses, claims, demands, or
actions for personal injury, death of any one or more
persons and property damage which arise directly or
indirectly out of the business or other activity
conducted by Tenant, its agents, employees, invitees,
contractors, concessionaires, subtenants, licensees,
servants or contractors on or about the Demised
Premises. Said liability insurance shall be written with
limits not less than $1,000,000 per occurrence and
$5,000,000 in the aggregate, and shall name the Landlord
as an additional insured party.
2. Fire and casualty insurance written with the special
cause of loss form naming Landlord as an insured and as
loss payee, in an amount adequate to cover the full
replacement cost of all leasehold or building
improvements in the Demised Premises which were
constructed by Tenant during the term of this Lease. If
Landlord has placed a mortgage against the Demised
Premises, said insurance shall also provide coverage for
Landlord's Mortgagee under the customary standard
mortgagee form.
B. Said insurance (which may be written to include the Demised
Premises in conjunction with other premises owned or operated by
Tenant) shall be written by a responsible insurance company or
companies acceptable to the Landlord. Tenant shall deliver to
Landlord at least 15 days prior to the time such insurance is
first required to be carried by the Tenant and thereafter at
least 15 days prior to the expiration of any such policy, an
insurance certificate evidencing said coverage which shall
include a statement that said insurance may not be cancelled or
reduced except upon 10 days prior written notice to the Landlord
by certified mail. Tenant shall be solely responsible for
payment of premiums for such insurance. In the event Tenant
fails to furnish such insurance, the Landlord may obtain such
insurance, and
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the premiums shall be deemed additional rent to be paid by
Tenant to the Landlord upon demand. It is agreed that any
statements made in this Lease concerning minimum insurance
requirements cannot be construed by the Tenant as indicating
either the adequacy or sufficiency of insurance required for the
Tenant's purposes, nor shall such requirements be used to define
the responsibility of the Tenant to repair, restore or replace
as otherwise covered in this Lease.
C. Tenant will defend, indemnify and hold Landlord harmless from
and against any and all claims, demands and suits at law or in
equity (whether well founded or not) in connection with any
accident, injury to or death of any person or damage to or
destruction of property whatsoever caused to any person(s) or
property arising directly or indirectly out of the business
conducted in the Demised Premises, or arising directly or
indirectly from any act or omission of Tenant or any
concessionaire or subtenant or their respective licensees,
servants, agents, employees or contractors occurring in or about
the Demised Premises, and from and against any and all costs,
expenses and liability incurred in connection with any such
claim or proceeding brought thereon, including court costs and
attorney fees incurred in connection with any claim, demand or
proceeding brought thereon. The comprehensive general liability
coverage maintained by Tenant pursuant to Section A above shall
specifically insure the contractual obligations of Tenant as set
forth in this Lease. This indemnity and hold harmless provision
shall not, however, include claims caused by Landlord's
negligence, Landlord's failure to perform repairs for which
Landlord is responsible under this Lease, nor Landlord's default
in the performance of any other covenants and agreements which
are Landlord's responsibility under this Lease.
D. The minimum limits of the comprehensive general liability
insurance policy shall in no way limit or diminish Tenant's
liability under Section C hereof, and shall be subject to
increase from time to time if Landlord, in the exercise of its
reasonable judgment, shall deem the same necessary. In the event
Landlord shall demand additional general liability coverage,
Tenant shall provide evidence of said coverage within 30 days
after Landlord's demand.
E. Landlord shall, at Tenant's expense, maintain a policy or
policies of insurance covering the Demised Premises. Said
insurance shall include the full replacement cost required to
restore the Demised Premises to the condition it exists at the
inception of this Lease; boiler and machinery insurance covering
any boiler or air conditioning equipment on the Demised
Premises; elevator coverage with respect to any elevator within
the Demised Premises; plate glass insurance with respect to all
plate and other glass within the Demised Premises; rent loss
insurance; and Landlord's general liability insurance relating
to the Demised Premises with liability limits deemed appropriate
by Landlord. Tenant shall pay the cost of said insurance
provided by the Landlord within thirty (30) days from Landlord's
billing as additional rent.
F. Each property and casualty insurance policy carried by either
Landlord or Tenant insuring the Demised Premises, including
improvements, alterations and changes in and to the Demised
Premises and Tenant's trade fixtures and other contents therein,
shall be written in a manner to provide that the insurance
company waives all right of recovery by way of subrogation
against the other party in connection with any loss or damage to
the Demised
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Premises, property or business caused by and of the perils covered by
said policies. To the extent that the policy or policies involved can
be so written and maintained in effect, neither party shall be liable
to the other party for any covered loss or damage.
26. TITLE AND QUIET ENJOYMENT.
Landlord affirms to Tenant that Landlord has the right and authority to
enter into, execute, and deliver this Lease.
Landlord further affirms that if Tenant pays the rent and the additional
rent, and performs the duties, covenants, and responsibilities of this
Lease, then Tenant shall have, and may peacefully and quietly hold and
enjoy the premises for the term of this Lease.
27. NOTICES.
Any written notice to the Tenant shall be addressed to the Tenant at:
44 TANNER STREET
HADDONFIELD, NJ
or to such other place as Tenant may from time to time specify to the
Landlord in writing.
Written notice to the Landlord shall be addressed to the Landlord at:
5 WEST 10TH STREET
ERIE, PA 16501
ATTN: LEASE ADMINISTRATOR
or to such place as Landlord may from time to time specify to the Tenant
in writing.
Any notice to the Landlord or Tenant may be sent by first class mail, or by
certified or registered mail, with return receipt, or delivered to the
Landlord or Tenant personally.
28. SEVERABILITY.
It is agreed that in the event one or more provisions of this Lease are
found to be un-enforceable due to applicable laws now in effect, or which
come into effect during the term of this Lease, the remainder of this
agreement shall not be affected, and shall remain in full force and
effect.
29. LEASE NOT BINDING UNTIL SIGNED BY PARTIES.
The submission of this document for examination does not constitute an
option or offer to lease the subject property. This document shall have no
binding effect on the parties unless executed by the Landlord and the
Tenant, and a fully executed copy if delivered to the Tenant.
30. EXONERATION OF INDIVIDUALS.
The Landlord or any successor in interest that may be an individual, joint
venture, tenancy in common, firm or partnership, general or limited, shall
not be subject to personal liability on such individual or on the members
of such joint venture, tenancy in common, firm or partnership in respect to
any of the covenants or conditions of this Lease. The Tenant shall look
solely to the equity of the Landlord in the Tenant shall look solely to the
equity of the Landlord in the property and the rents, issues and profits
derived therefrom for the satisfaction of the remedies of the Tenant in the
event of a breach by the Landlord. It is mutually agreed that this Article
is and shall be considered an integral part of the aforesaid Lease.
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31. BROKER'S STATEMENT.
Landlord and Tenant acknowledge that each has read and understands the
terms and conditions stated in this Lease, and that neither has relied upon
any representation which may have been made by the Broker or Broker's
representatives, employees, or agents. Landlord and Tenant further agree
that they shall each hold the Broker, and/or Broker's agents, employees or
representatives, harmless from any claim or action which may be brought
pursuant to this Lease Agreement.
32. IT IS FURTHER AGREED AS FOLLOWS:
A. Landlord agrees to paint all previously painted surfaces of the ground
floor interior of the Demised Premises.
B. Landlord agrees to provide Tenant a $10.00 per square yard carpeting
allowance covering 3,000 square feet of ground floor area. It is agreed
that said allowance totals $3,333.00. Tenant agrees to submit a sample
of the proposed carpeting for Landlord's approval prior to installation
which will not be unreasonably withheld.
C. Tenant is hereby given the right to sublet the basement of the Demised
Premises to Conroy-Griese Sales, Inc. and to Joseph A. Riggs, Jr./Riggs
Real Estate Management Company, Inc. at rents of $600.00 per month and
$100.00 per month, respectively, for a term not to exceed the term of
this Lease. Landlord agrees to assign the present month-to-month Lease
Agreements with Conroy-Griese Sales, Inc. and Joseph A. Riggs,
Jr./Riggs Real Estate Management Company, Inc. to The Bureau of
Translation Services, Inc. as of the effective date of this Lease,
March 1, 1995.
32. ENTIRE AGREEMENT.
This Lease contains the entire agreement and contract between the Landlord
and the Tenant. No representative or employee of Landlord has been
authorized to make any representations or promises with reference to this
Lease Agreement, or to alter or modify its terms in any way. No additions,
changes, or modifications shall be binding unless reduced to writing,
signed by both Landlord and Tenant, and attached to this Lease.
The captions printed above the various provisions of this Lease are for
ease of reading only, and do not form a part of this agreement.
Within this agreement, the use of either singular or plural language shall
also include the other, and the use of any gender shall also include any
other gender.
LANDLORD AND TENANT AFFIRM, BY SIGNING THIS LEASE THAT THEY HAVE READ THE
ENTIRE AGREEMENT, AND FULLY UNDERSTAND ALL OF ITS PROVISIONS. LANDLORD AND
TENANT HAVE PREPARED THIS WRITTEN DOCUMENT IN ORDER TO SPECIFY, CONFIRM, AND
MAKE THEIR AGREEMENT KNOWN, AND HAVE SIGNED AND SEALED IT BELOW, BOTH INTENDING
TO BE LEGALLY BOUND BY ALL OF ITS COVENANTS AND PROVISIONS.
WITNESS: J.C.G. PARTNERSHIP:
/s/ Cynthia Kuhn /s/ John R. Baldwin L.S.
- ---------------------------- ----------------------------
By: John R. Baldwin, Partner
ATTEST: THE BUREAU OF TRANSLATION SERVICES, INC.:
/s/ Judy Edell /s/ Theodora Landgren L.S.
- ---------------------------- -------------------------------
By: Theodora Landgren, President
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<PAGE> 1
EXHIBIT 10.5
THE TRANSLATION GROUP, LTD.
a Delaware Corporation
1995 Incentive and Non-Qualified Stock Option Plan
1. Purpose. The purposes of this 1995 Incentive and Non-Qualified Stock
Option Plan are to attract and retain the best available personnel, to provide
additional incentive to the Employees, Consultants and Outside Directors of The
Translation Group Ltd., a Delaware corporation (the "Company"), and to promote
the success of the Company's business.
Options granted hereunder may, consistent with the terms of
this Plan, be either Incentive Stock Options or Nonstatutory Stock Options, at
the discretion of the Committee and as reflected in the terms of the written
option agreement.
2. Definitions. As used in this Plan, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder.
(c) "Commission" means the United States Securities and
Exchange Commission.
(d) "Committee" means the Committee appointed by the Board or
otherwise determined in accordance with Section 4(a) of this Plan.
(e) "Common Stock" means the common stock of the Company, par
value $0.001 per share.
(f) "Consultant" means any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services; provided that the term Consultant
shall not include directors who are not compensated for their services or are
paid only a director's fee by the Company.
(g) "Continuous Status as an Employee, Consultant or Outside
Director" means the absence of any interruption or termination of service as an
Employee, Consultant or Outside Director, as applicable. Continuous Status as an
Employee, Consultant or Outside Director shall not be considered interrupted in
the case of sick leave or military leave, any other leave provided pursuant to a
written policy of the Company in effect at the time of determination, or any
other leave of absence approved by the Board or the Committee; provided that
such leave is for a period of not more than the greatest of (i) 90 days, (ii)
the date of the resumption of such service upon the expiration of such leave
which is guaranteed by contract or statute or is provided in a written policy of
the Company which
<PAGE> 2
was in effect upon the commencement of such leave, or (iii) such period of leave
as may be determined by the Board or the Committee in its sole discretion.
(h) "Disinterested Person" shall have the meaning set forth in
Rule 16b-3(d)(3), or any successor definition adopted by the Commission,
provided the person is also an "outside director" under Section 162(m) of the
Code.
(i) "Employee" means any person employed by the Company or any
Parent or Subsidiary of the Company, including employees who are also officers
or directors or both of the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations promulgated
thereunder.
(k) "Holder" means the recipient of a Stock Appreciation
Right.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, and the rules and regulations promulgated thereunder.
(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to this
Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee, Consultant or Outside
Director who receives an Option.
(q) "Outside Director" means any member of the Board of
Directors of the Company who is not an Employee or Consultant.
(r) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1995 Incentive and Non-Qualified Stock
Option Plan of The Translation Group, Ltd., as amended from time to time.
2
<PAGE> 3
(t) "Rule 16b-3" means Rule 16b-3, as promulgated by the
Commission under Section 16(b) of the Exchange Act, as such rule is amended from
time to time and as interpreted by the Commission.
(u) "Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules and regulations promulgated thereunder.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of this Plan.
(w) "Stock Appreciation Right" means a right, the value of
which is determined relative to appreciation in value of Shares pursuant to an
award granted under Section 12 hereof.
(x) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Scope of Plan. Subject to the provisions of Section 10 of this Plan,
and unless otherwise amended by the Board and approved by the stockholders of
the Company as required by law, the maximum aggregate number of Shares issuable
under this Plan is 2,500,000, and such Shares are hereby made available and
shall be reserved for issuance under this Plan. The Shares may be authorized but
unissued, or reacquired, Common Stock.
If an Option shall expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares subject
thereto shall (unless this Plan shall have terminated) become available for
grants of other Options under this Plan.
4. Administration of Plan.
(a) Procedure. This Plan shall be administered by the
Committee appointed pursuant to this Section 4(a). The Committee shall consist
of two or more Outside Directors appointed by the Board, but all Committee
members must be Disinterested Persons. If the Board fails to appoint such
persons, the Committee shall consist of all Outside Directors who are
Disinterested Persons.
(b) Powers of Committee. Subject to Section 5(b) below and
otherwise subject to the provisions of this Plan, the Committee shall have full
and final authority in its discretion to: (i) grant Incentive Stock Options and
Nonstatutory Stock Options, (ii) determine, upon review of relevant information
and in accordance with Section 7 below, the Fair Market Value of the Common
Stock; (iii) determine the exercise price per share of Options to be granted, in
accordance with this Plan, (iv) determine the Employees and Consultants to whom,
and the time or times at which, Options shall be granted, and the
3
<PAGE> 4
number of shares to be represented by each Option; (v) cancel, with the consent
of the Optionee, outstanding Options and grant new Options in substitution
therefor; (vi) interpret this Plan; (vii) accelerate or defer (with the consent
of Optionee) the exercise date of any Option; (viii) prescribe, amend and
rescind rules and regulations relating to this Plan; (ix) determine the terms
and provisions of each Option granted (which need not be identical) by which
Options shall be evidenced and, with the consent of the holder thereof, modify
or amend any provisions (including without limitation provisions relating to the
exercise price and the obligation of any Optionee to sell purchased Shares to
the Company upon specified terms and conditions) of any Option; (x) require
withholding from or payment by an Optionee of any federal, state or local taxes;
(xi) appoint and compensate agents, counsel, auditors or other specialists as
the Committee deems necessary or advisable; (xii) correct any defect or supply
any omission or reconcile any inconsistency in this Plan and any agreement
relating to any Option, in such manner and to such extent the Committee
determines to carry out the purposes of this Plan, and; (xiii) construe and
interpret this Plan, any agreement relating to any Option, and make all other
determinations deemed by the Committee to be necessary or advisable for the
administration of this Plan, even in conflict with an express provision of the
Plan.
A majority of the Committee shall constitute a quorum at any
meeting, and the acts of a majority of the members present, or acts unanimously
approved in writing by the entire Committee without a meeting, shall be the acts
of the Committee. A member of the Committee shall not participate in any
decisions with respect to himself under this Plan.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all Optionees and any other holders of any Options granted under this Plan.
5. Eligibility.
(a) Options may be granted to any Employee, Consultant or
Outside Director as the Committee may from time to time designate, provided that
(i) Incentive Stock Options may be granted only to Employees, and (ii) Options
may be granted to Outside Directors only in accordance with the provisions of
Section 5(b) below. In selecting the individuals to whom Options shall be
granted, as well as in determining the number of Options granted, the Committee
shall take into consideration such factors as it deems relevant in connection
with accomplishing the purpose of this Plan. Subject to the provisions of
Section 3 above, an Optionee may, if he or she is otherwise eligible, be granted
an additional Option or Options if the Committee shall so determine.
(b) All grants of Options to Outside Directors under this Plan
shall be automatic and non-discretionary and shall be made strictly in
accordance with the following provisions:
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(i) No person shall have any discretion to select
which Outside Directors shall be granted options or to determine the number of
Shares to be covered by options granted to Outside Directors; provided, that
nothing in this Plan shall be construed to prevent an Outside Director from
declining to receive an Option under this Plan.
(ii) Each Outside Director shall be automatically
granted an option to purchase 10,000 Shares (subject to adjustment as provided
in Section 10 below) on the date a registration statement for the Company's
initial public offering is declared effective by the Commission. Commencing in
1997, each Outside Director shall be automatically granted on the first business
day following their election (or re-election, as the case may be), an option to
purchase 10,000 Shares (subject to adjustment as provided in Section 10 below).
(iii) The terms of each Option granted under this
Section 5(b) shall be as follows:
(A) the term of the Option shall be ten (10)
years;
(B) the Option shall become exercisable
cumulatively with respect to one-quarter of
the Shares on each of the first, second,
third and fourth anniversaries of the date
of grant; provided, however, that in no
event shall any option be exercisable prior
to obtaining stockholder approval of this
Plan; and
(C) the exercise price per share of Common
Stock shall be 100% of the "Fair Market
Value" (as defined in Section 7(b) below) on
the date of grant of the Option.
(c) Each Option granted under Section 5(b) above shall be a
Nonstatutory Stock Option. Each other Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. Notwithstanding such designations, if and to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company) exceeds
$100,000, such options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 5(c), Options shall be taken into account in the order
in which they are granted, and the Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(d) This Plan shall not confer upon any Optionee any right
with respect to continuation of employment by or the rendition of services to
the Company or any Parent or Subsidiary, nor shall it interfere in any way with
his or her right or the right of the
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<PAGE> 6
Company or any Parent or Subsidiary to terminate his or her employment or
services at any time, with or without cause. The terms of this Plan or any
Options granted hereunder shall not be construed to give any Optionee the right
to any benefits not specifically provided by this Plan or in any manner modify
the Company's right to modify, amend or terminate any of its pension or
retirement plans.
6. Term of Plan. This Plan shall become effective upon its adoption by
the Board of Directors of the Company (such adoption to include the approval of
at least two Outside Directors) subject to the approval thereof by vote of the
holders of a majority of the outstanding shares of the Company present, or
represented, and entitled to vote at a meeting to be duly held (or through
written consents in lieu of a meeting) in accordance with the applicable laws of
the State of Delaware. Such meeting shall be held within twelve months of the
adoption of the Plan by the Board of Directors. The Plan shall terminate no
later than October 31, 2004. No grants shall be made under this Plan after the
date of termination of this Plan. Any termination, either partially or wholly,
shall not affect any Options then outstanding under this Plan.
7. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Committee as follows:
(i) In the case of an Incentive Stock Option granted
to any Employee, the per Share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of grant, but if granted to an Employee
who, at the time of the grant of such Incentive Stock Option, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of
grant.
(ii) With respect to (i) above, the per Share
exercise price is subject to adjustment as provided in Section 10 below. For
purposes of this Section 7(a), if an Option is amended to reduce the exercise
price, the date of grant of such option shall thereafter be considered to be the
date of such amendment.
(b) Fair Market Value. The "Fair Market Value" of the Common
Stock shall be determined by the Committee in its discretion; provided, that if
the Common Stock is listed on a stock exchange, the Fair Market Value per Share
shall be the closing price on such exchange on the date of grant of the Option
as reported in the Wall Street Journal (or, (i) if not so reported, as otherwise
reported by the exchange, and (ii) if not reported on the date of grant, then on
the last prior date on which a sale of the Common Stock was reported); or if not
listed on an exchange but traded on the National Association of Securities
Dealers Automated Quotation National Market System ("NASDAQ"), the Fair
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<PAGE> 7
Market Value per Share shall be the closing price per share of the Common Stock
for the date of grant, as reported in the Wall Street Journal (or, (i) if not so
reported, as otherwise reported by NASDAQ, and (ii) if not reported on the date
of grant, then on the last prior date on which a sale of the Common Stock was
reported); or, if the Common Stock is otherwise publicly traded, the mean of the
closing bid price and asked price for the last known sale.
(c) Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Committee (and in the case of an Incentive Stock Option,
shall be determined at the time of grant) and may consist entirely of (i) cash;
(ii) check; (iii) the Optionee's personal interest bearing full recourse
promissory note with such terms and provisions as the Committee may authorize
(provided that no person who is not an Employee of the Company may purchase
Shares with a promissory note); (iv) other Shares of Common Stock which have a
Fair Market Value on the date of surrender (determined without regard to any
limitations on transferability imposed by securities laws) equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (v) any combination of such methods of payment; or (iv) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable laws.
(d) Withholding. No later than the date as of which an amount
first becomes includable in the gross income of the Optionee for Federal income
tax purposes with respect to an option, the Optionee shall pay to the Company
(or other entity identified by the Committee), or make arrangements satisfactory
to the Company or other entity identified by the Committee regarding the payment
of, any Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Company to obtain
a current deduction. Unless otherwise determined by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock underlying
the subject option, provided that any applicable requirements under Section 16
of the Exchange Act are satisfied so as to avoid liability thereunder. The
obligations of the Company under this Plan shall be conditional upon such
payment or arrangements, and the Company shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment otherwise due to the
Optionee.
8. Options.
(a) Term of Option. The term of each Option granted (other
than an Option granted under Section 5(b) above) shall be for a period of no
more than ten (10) years from the date of grant thereof or such shorter term as
may be provided in the Option agreement. However, in the case of an Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option
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<PAGE> 8
shall be five (5) years from the date of grant thereof or such shorter time as
may be provided in the Option Agreement.
(b) Exercise of Options.
(i) Procedure for Exercise; Rights as a Stockholder.
Any Option granted under this Plan (other than an Option granted pursuant to
Section 5(b) above) shall be exercisable at such times and under such conditions
as determined by the Committee, including performance criteria with respect to
the Company and/or the Optionee, and as shall otherwise be permissible under the
terms of this Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Committee, consist of any
consideration and method of payment allowable under Section 7 of this Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. If the
exercise of an Option is treated in part as the exercise of an Incentive Stock
Option and in part as the exercise of a Nonstatutory Stock Option pursuant to
Section 5(b) above, the Company shall issue a separate stock certificate
evidencing the Shares treated as acquired upon exercise of an Incentive Stock
Option and a separate stock certificate evidencing the Shares treated as
acquired upon exercise of a Nonstatutory Stock Option and shall identify each
such certificate accordingly in its stock transfer records. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 10 of this
Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
this Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(ii) Method of Exercise. An Optionee may exercise an
Option, in whole or in part, at any time during the option period by the
Optionee's giving written notice of exercise on a form provided by the Committee
(if available) to the Company specifying the number of shares of Common Stock
subject to the Option to be purchased. Such notice shall be accompanied by
payment in full of the purchase price by cash or check or such other form of
payment as the Company may accept. If approved by the Committee,
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<PAGE> 9
payment in full or in part may also be made (A) by delivering Common Stock
already owned by the Optionee having a total Fair Market Value on the date of
such delivery equal to the exercise price of the subject Option; (B) by the
execution and delivery of a note or other evidence of indebtedness (and any
security agreement thereunder) satisfactory to the Committee; (C) by authorizing
the Company to retain shares of Common Stock which would otherwise be issuable
upon exercise of the Option having a total Fair Market Value on the date of
delivery equal to the exercise price of the subject Option; (D) by the delivery
of cash by a broker-dealer to whom the Optionee has submitted an irrevocable
notice of exercise (in accordance with Part 220, Chapter II, Title 12 of the
Code of Federal Regulations, so-called "cashless" exercise); or (E) by any
combination of the foregoing. In the case of an Incentive Stock Option, the
right to make a payment in the form of already owned shares of Common Stock of
the same class as the Common Stock subject to the Option may be authorized only
at the time the Option is granted. No shares of Common Stock shall be issued
until full payment therefor has been made. An Optionee shall have all of the
rights of a stockholder of the Company holding the class of Common Stock that is
subject to such Option (including, if applicable, the right to vote the shares
and the right to receive dividends), when the Optionee has given written notice
of exercise, has paid in full for such shares and such shares have been recorded
on the Company's official stockholder records as having been issued or
transferred.
(iii) Termination of Status as an Employee,
Consultant or Outside Director. If an Optionee's Continuous Status as an
Employee, Consultant or Outside Director (as the case may be) is terminated for
any reason whatever, such Optionee may, but only within such period of time as
provided in the Option agreement, after the date of such termination (but in no
event later than the date of expiration of the term of such Option as set forth
in the Option agreement and determined by the Committee), exercise the Option to
the extent that such Employee, Consultant or Outside Director was entitled to
exercise it at the date of such termination pursuant to the terms of the Option
agreement. To the extent that such Employee, Consultant or Outside Director was
not entitled to exercise the Option at the date of such termination, or if such
Employee, Consultant or Outside Director does not exercise such Option (which
such Employee, Consultant or Outside Director was entitled to exercise) within
the time specified in the Option agreement, the Option shall terminate.
(iv) Company Loan or Guarantee. Upon the exercise of
any Option and subject to the pertinent Option agreement and the discretion of
the Committee, the Company may at the request of the Optionee; (A) lend to the
Optionee, with recourse, an amount equal to such portion of the option exercise
price as the Committee may determine; or (B) guarantee a loan obtained by the
Optionee from a third-party for the purpose of tendering the option exercise
price.
9. Non-transferability of Options. An Option granted hereunder shall by
its terms not be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner
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<PAGE> 10
other than by will or the laws of descent and distribution. An Option shall also
be transferable to the extent such transfer will not cause either the Option or
the Plan to no longer qualify as an Incentive Stock Option under the Code or as
meeting the requirements of Rule 16b-3. An Option may be exercised during the
Optionee's lifetime only by the Optionee.
10. Adjustments Upon Changes in Capitalization or Merger.
(a) Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock which have
been authorized for issuance under this Plan but as to which no Options have yet
been granted or which have been returned to this Plan upon cancellation or
expiration of an Option, and the number of shares of Common Stock subject to
each outstanding Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock of the Company. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Committee. The Committee may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Committee and give each Optionee the right to exercise his or
her Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
(c) Sale or Merger. "Sale" means: (i) sale (other than a sale
by the Company) of securities entitled to more than 75% of the voting power of
the Company in a single transaction or a related series of transactions; or (ii)
sale of substantially all of the assets of the Company; or (iii) approval by the
stockholders of the Company of a reorganization, merger or consolidation of the
Company, as a result of which the persons who were the stockholders of the
Company immediately prior to such reorganization, merger or consolidation do not
own securities immediately after the reorganization, merger or consolidation
entitled to more than 50% of the voting power of the reorganized, merged or
consolidated company. Immediately prior to a Sale, each Optionee may exercise
his or her Option as to all Shares then subject to the Option, regardless of any
vesting conditions otherwise expressed in the Option. Voting power, as used in
this Section 10(c), shall refer to those securities entitled to vote generally
in the election of directors, and securities of the Company not entitled to vote
but which are convertible into, or exercisable for, securities of the Company
entitled to vote generally in the election of directors shall be counted as
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<PAGE> 11
if converted or exercised, and each unit of voting securities shall be counted
in proportion to the number of votes such unit is entitled to cast.
(d) Purchased Shares. No adjustment under this Section 10
shall apply to any purchased Shares already deemed issued at the time any
adjustment would occur.
(e) Notice of Adjustments. Whenever the purchase price or the
number or kind of securities issuable upon the exercise of the Option shall be
adjusted pursuant to Section 10, the Company shall give each Optionee written
notice setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, and the method by which such adjustment was
calculated.
(f) Mitigation of Excise Tax. If any payment or right accruing
to an Optionee under this Plan (without the application of this Section), either
alone or together with other payments or rights accruing to the Optionee from
the Company or an affiliate ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Code and regulations thereunder),
the Committee may in each particular instance determine to (i) reduce such
payment or right to the largest amount or greatest right that will result in no
portion of the amount payable or right accruing under the Plan being subject to
an excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code, or (ii) take such other actions, or make such
other arrangements or payments with respect to any such payment or right as the
Committee may determine in the circumstances. Any such determination shall be
made by the Committee in the exercise of its sole discretion, and such
determination shall be conclusive and binding on the Optionee. The Optionee
shall cooperate as may be requested by the Committee in connection with the
Committee's determination, including providing the Committee with such
information concerning such Optionee as the Committee may deem relevant to its
determination.
11. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Committee makes the determination
granting such Option. Notice of the determination shall be given to each
Employee, Consultant or Outside Director to whom an Option is so granted within
a reasonable time after the date of such grant. If the Committee cancels, with
the consent of Optionee, any Option granted under this Plan, and a new Option is
substituted therefor, the date that the canceled Option was originally granted
shall be the date used to determine the earliest date for exercising the new
substituted Option under Section 7 so that the Optionee may exercise the
substituted Option at the same time as if the Optionee had held the substituted
Option since the date the canceled Option was granted, unless the canceled
Option shall have a new exercise price, in which case, the date of grant shall
be the date the Committee makes the determination to grant the substituted
Option.
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<PAGE> 12
12. Stock Appreciation Rights. An award of a Stock Appreciation Right
shall entitle the Holder, subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right over (ii) a
specified price which shall not be less than 100% of the Fair Market Value of
such Shares as of the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connection and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Option agreement. Notwithstanding anything to the contrary
stated in this Plan, no Stock Appreciation Right shall be exercisable prior to
six months from the date of grant except in the event of the death or Disability
of the Holder. No Stock Appreciation Right shall be exercisable at any time
after its term. When a Stock Appreciation Right is no longer exercisable, it
shall be deemed to have lapsed or terminated. Except as otherwise provided in
the applicable Option agreement, upon exercise of a Stock Appreciation Right,
payment to the Holder (or to his or her Successor) shall be made in the form of
cash, Stock or a combination of cash and Stock as promptly as practicable after
such exercise. The Option agreement may provide for a limitation upon the amount
or percentage of the total appreciation on which payment (whether in cash and/or
Stock) may be made in the event of the exercise of a Stock Appreciation Right.
Any election by a Holder to receive cash in full or partial
settlement of a Stock Appreciation Right, and any exercise of a Stock
Appreciation Right for cash, may be made only by a request filed with the
Corporate Secretary of the Company during the period beginning on the third
business day following the date of release for publication by the Company of
quarterly or annual summary statements of earnings and ending on the twelfth
business day following such date. Within thirty (30) days after the receipt by
the Company of a request to receive cash in full or partial settlement of a
Stock Appreciation Right or to exercise such Stock Appreciation Right for cash,
the Committee shall, in its sole discretion, either consent to or disapprove, in
whole or in part, such request.
If the Committee disapproves in whole or in part any election
by a Holder to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise such Stock Appreciation Right for cash, such
disapproval shall not affect such Holder's right to exercise such Stock
Appreciation Right at a later date, to the extent that such Stock Appreciation
Right shall be otherwise exercisable, or to elect the form of payment at a later
date, provided that an election to receive cash upon such later exercise shall
be subject to the approval of the Committee. Additionally, such disapproval
shall not affect such Holder's right to exercise any related Option or Options
granted to such Holder Under the Plan.
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In no event will a Holder of a Stock Appreciation Right who is
subject to the reporting requirements of Section 16(a) of the Exchange Act be
entitled to make such a request or receive cash in full or partial payment of
such Stock Appreciation Right until the Company shall have satisfied the
applicable requirements of Rule 16(b)-3(e)(1) promulgated under the Exchange Act
for the specified periods.
13. Amendment and Termination of Plan.
(a) Amendment and Termination. The Board or the Committee may
amend, waive or terminate this Plan, including any express provision contained
herein, from time to time in such respects as it shall deem advisable; provided
that, to the extent necessary to comply with Rule 16b-3 or with Section 422 of
the Code (or any other successor or applicable law or regulation), the Company
shall obtain stockholder approval of any Plan amendment in such a manner and to
such a degree as is required by the applicable law, rule or regulation.
Notwithstanding the foregoing, neither the provisions of Section 5(b) of this
Plan, nor any other provisions pertaining to the automatic option grants to
Outside Directors, shall be amended more than once every six months, other than
to comport with changes in the Code or other applicable laws or any rules or
regulations promulgated thereunder.
(b) Effect of Amendment or Termination. Any such amendment or
termination of this Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Committee, which agreement must be in writing and signed by the Optionee and
the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, and the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Option shall be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in
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the grant. The Company shall not be required to issue or deliver any
certificates for shares of Common Stock, cash or other property prior to (a) the
listing of such shares on any stock exchange (or other public market) on which
the Common Stock may then be listed (or regularly traded), (b) the completion of
any registration or qualification of such shares under federal or state law, or
any ruling or regulation of any government body which the Committee determines
to be necessary or advisable, and (c) the satisfaction of any applicable
withholding obligation in order for the Company or an affiliate to obtain a
deduction with respect to the exercise of an Option. The Company may cause any
certificate for any share of Common Stock to be delivered to be properly marked
with a legend or other notation reflecting the limitations on transfer of such
Common Stock as provided in this Plan or as the Committee may otherwise require.
The Committee may require any person exercising an Option to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares of Common Stock in
compliance with applicable law or otherwise. Fractional shares shall not be
delivered, but shall be rounded to the next lower whole number of shares.
16. Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Option until, after
proper exercise of the Option or other action required, such shares shall have
been recorded on the Company's official stockholder records as having been
issued or transferred. Subject to the preceding Section and upon exercise of the
Option or any portion thereof, the Company will have thirty (30) days in which
to issue the shares, and the Optionee will not be treated as a stockholder for
any purpose whatsoever prior to such issuance. No adjustment shall be made for
cash dividends or other rights for which the record date is prior to the date
such shares are recorded as issued or transferred in the Company's official
stockholder records, except as provided herein or in an agreement.
17. Best Efforts To Register. If there has been a public offering, the
Company may register under the Securities Act the Common Stock delivered or
deliverable pursuant to Options on Commission Form S-8 if available to the
Company for this purpose (or any successor or alternate form that is
substantially similar to that form to the extent available to effect such
registration), in accordance with the rules and regulations governing such
forms, as soon as such forms are available for registration to the Company for
this purpose. The Company will, if it so determines, use its good faith efforts
to cause the registration statement to become effective as soon as possible and
will file such supplements and amendments to the registration statement as may
be necessary to keep the registration statement in effect until the earliest of
(a) one year following the expiration of the option period of the last Option
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Optionees have disposed of all shares
delivered pursuant to any Option. The Company may delay the foregoing actions at
any time and from time to time if the Committee determines in its discretion
that any such registration would materially and adversely affect the Company's
interests or if there is no material benefit to Optionees.
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18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to permit the exercise of all Options outstanding under this Plan.
The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained for any
reason.
19. Option Agreements. Options shall be evidenced by written Option
agreements in such form as the Committee shall approve.
20. Information to Optionees. To the extent required by applicable law,
the Company shall provide to each Optionee, during the period for which such
Optionee has one or more Options outstanding, copies of all annual reports and
other information which are provided to all stockholders of the Company. Except
as otherwise noted in the foregoing sentence, the Company shall have no
obligation or duty to affirmatively disclose to any Optionee, and no Optionee
shall have any right to be advised of, any material information regarding the
Company or any Parent or Subsidiary at any time prior to, upon or otherwise in
connection with, the exercise of an Option.
21. Funding. Benefits payable under this Plan to any person shall be
paid directly by the Company. The Company shall not be required to fund or
otherwise segregate assets to be used for payment of benefits under this Plan.
22. Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with this
Plan or any option granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding; provided that within 60 days after
institution of any such action, suit or proceeding a Committee member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the same. The foregoing right of indemnification shall not be exclusive
and shall be independent of any other rights of indemnification to which such
persons may be entitled under the Company's Certificate of Incorporation or
by-laws, by contract, as a matter of law, or otherwise.
23. Controlling Law. This Plan shall be governed by the laws of the
State of New York applicable to contracts made and performed wholly in New York
between New York residents.
15
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[Letterhead of Votta & Company]
We hereby consent to the use in the Registration Statement on Form
SB-2 of The Translation Group, Ltd. of our report dated May 1, 1996 (July 1,
1996 as to Note 17), appearing in the Prospectus, which is part of this
Registration Statement, and to the reference to us as "Experts" in such
Prospectus.
Votta & Company
Haddonfield, New Jersey
July 25, 1996
