As filed with the Securities and Exchange Commission
on November 14, 1996 Registration No. 333-8857
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3
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:
Richard F. Horowitz, Esq. Michael Beckman, Esq.
Irving Rothstein, Esq. Beckman & Millman, P.C.
Heller, Horowitz & Feit, P.C. 116 John Street
292 Madison Avenue New York, New York 10038
New York, New York 10017 Telephone: (212) 227-6777
Telephone: (212) 685-7600 Facsimile: (212) 227-1486
Facsimile: (212) 696-9459
Charles Pearlman, Esq.
Roxanne K. Beilly, Esq.
Atlas, Pearlman, Trop &
Borkson, P.A.
New River Center, Suite 1900
200 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
Telephone: (954) 763-1200
Facsimile: (954) 766-7800
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]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SECURITY 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 $ 429,000 $ 136.54
Common Stock Purchase Warrants(6)(11) 150,000 $ .24 $ 39,000 $ 12.41
Common Stock, $.001 Par Value(7)(11) 150,000 $ 4.80 $ 780,000 $ 248.26
Common Stock, $.001 Par Value(8) 682,000 $ 3.00 $ 2,046,000 $ 620.00
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 $15,588,250 $5,125.54
=========== =========
</TABLE>
A fee for the the securities listed above has already been paid. The below
listed securities represent either securities added to the Offering or for which
there is now a higher Offering price. An additional fee is being submitted for
these securities.
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SECURITY PRICE (1) FEE
---------- ---------- -------- --------- ---
<S> <C> <C> <C> <C>
Common Stock, $.001 Par Value(12) 115,000 $ 3.00 $ 345,000 $ 104.55
Common Stock Purchase Warrants(13) 115,000 $ .20 $ 23,000 $ 6.97
Common Stock, $.001 Par Value(4)(11) 115,000 $ 4.00 $ 460,000 $ 139.39
Common Stock, $.001 Par Value(6)(11) 10,000 $ 3.90 $ 39,000 $ 11.82
Common Stock Purchase Warrants(6)(11) 10,000 $ .24 $ 2,400 $ .73
Common Stock, $.001 Par Value(7)(11) 10,000 $ 5.20 $ 52,000 $ 15.76
Common Stock, $.001 Par Value(8) 241,000 $ 3.00 $ 723,000 $ 219.09
Common Stock, $.001 Par Value(14) 110,000 $ .30 $ 33,000 $ 10.69
Common Stock Purchase Warrants(14) 150,000 $ .02 $ 3,000 $ .91
Common Stock, $.001 Par Value(14) 150,000 $ .40 $ 60,000 $ 18.18
----- --- ----------- ---------
Total $ 1,740,400 $ 527.39
=========== =========
</TABLE>
ii
(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.
(12) Includes up to 15,000 shares of Common Stock which may be purchased by
the Representative to cover over-allotments, if any.
(13) Includes up to 15,000 shares of redeemable Common Stock Purchase
Warrants which may be purchased by the Representative to cover
over-allotments, if any.
(14) Represents an increase in the proposed offering price for these
securities.
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
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>
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
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
iv
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
SUBJECT TO COMPLETION
DATED NOVEMBER 13, 1996
-----------------
THE TRANSLATION GROUP, LTD.
----------------------
1,400,000 SHARES OF COMMON STOCK AND
1,600,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
The Translation Group, Ltd. (the "Company") offers hereby 1,200,000
shares of Common Stock, $.001 par value (the "Common Stock") and its Chairman
and Chief Operating Officer offers an additional 200,000 shares for an aggregate
of 1.4 million shares of Common Stock at a price of $3.00 per share, and
1,600,000 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 a price of $.25 per Warrant, on thirty day's prior written notice
at any time after the price for the Common Stock closes at no less than $6.00
per share for a period of twenty consecutive trading days ending on the 3rd day
prior to the day on which the Company gives notice, as reported on the principal
exchange on which the Common Stock is traded. Application for listing has been
made to, and 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 THEO and THEOW, 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 482,000 shares
of Common Stock owned and being offered under an alternative prospectus by
certain selling security holders which are not being underwritten. The holders
of these shares have agreed that while these shares are being registered now,
they will only become freely tradeable in blocs of one-third every six months
beginning six months from the date hereof. Also included herewith are 300,000
warrants and the underlying Common Stock owned and being offered under an
alternative prospectus by certain founders of the Company and two executive
officers, none of which is being underwritten, the holders of which 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 Representative. The
proceeds from the sale of the securities offered by the selling security
holders, 682,000 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 OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
------ ----------- ----------
<S> <C> <C> <C> <C>
Per Share (3) $3.00 $.30 $2.70
Per Warrant $ .20 $.02 $ .18
Total $4,520,000 $452,000 $3,528,000
</TABLE>
(1) Does not include additional compensation to the Representative in the
form of (a) a non-accountable expense allowance of three percent of the
gross proceeds of this Offering ($.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 120,000
shares of Common Stock at an initial exercise price of $3.90 per share
(the "Representative's Stock") and 160,000 Warrants at an initial
exercise price of $.26 per Warrant to purchase shares of Common Stock
at $5.20 per share (the "Representative's Warrants," and collectively
with the Representative's Stock, 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 an aggregate fee of $42,300 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 $295,600 payable by the Company ($315,940 if the
over-allotment option is exercised in full), including the
Underwriters' expense allowance of $117,600 ($137,940 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 210,000 shares of
Common Stock and 240,000 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 $5,198,000, the
Total Underwriting Discount will be $519,800 and the Total Proceeds to
the Company will be $4,138,200. See "Underwriting."
WERBEL-ROTH SECURITIES, INC. MILLENNIUM SECURITIES CORP.
THE DATE OF THE PROSPECTUS IS NOVEMBER __, 1996.
2
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
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.
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.
Prior to the acquisition of BTS, TTGL's only activity was related to the
negotiations and other matters pertaining to the raising of funds under a
private placement. BTS experienced significant growth in fiscal 1996 when its
sales increased by 20% and when its operating income increased by 440% over
fiscal 1995. The primary reason for this change is the increased use of
translation tools and machine memory data bases, due to an extraordinary amount
of repeat business from existing customers, which essentially allows the
translators to increase their speed and accuracy thus bringing down costs and
allowing for higher margins. There is no assurance that this increase of gross
profit will continue, or necessarily be maintained at the current rate in the
future. 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 a five year 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. Clients
of "debis" currently include major government agencies in Germany, including the
German Ministry of the Interior and Deutsche Telecom AG.
4
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 projects, the Company would
also receive a right of first refusal for all other non-translation 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
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered
Common Stock by the Company 1,200,000 shares of Common Stock Warrants
by the Company(1) 1,600,000 redeemable Warrants.
Common Stock by Selling
Security Holders 682,000 shares of Common Stock
(200,000 of which is being
underwritten)
Warrants by Selling Security 300,000 redeemable Warrants
Holders (none of which is being
underwritten)
Price Per Share being underwritten $3.00
Price Per Warrant being underwritten $ .20
Common Stock Outstanding Before Offering 2,452,000 shares(2)
Common Stock Outstanding After Offering 3,652,000 shares(3)(4)
Comparative Common Stock Ownership Upon
Completion of Offering
Present Shareholders 2,252,000 (61.66%)(2)
Public Shareholders 1,400,000 (38.34%)(3)(4)
Estimated Net Proceeds $3,232,000 ($3,821,860 if the
over-allotment option is
exercised in full), after
deducting filing, printing,
legal, accounting and
miscellaneous expenses payable
by the Company estimated at
$178,000.
Use of Proceeds For marketing, development of
systems, purchasing advanced
information technology
products, acquiring related
companies, and for working
capital and general corporate
purposes. See "Use of
Proceeds."
Proposed NASDAQ Symbols (5)
Common Stock THEO
Warrants THEOW
- ------------------------------
</TABLE>
(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
6
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. Such shares
will be canceled by the Company and be available for reissue. See
"Certain Relationships and Related Transactions."
(3) Assumes the Representative's over allotment option for 210,000 shares
is not exercised. See "Underwriting."
(4) Excludes (i) up to 1,600,000 shares of authorized but unissued Common
Stock reserved for issuance upon exercise of the Warrants included in
the Offering (ii) up to 120,000 shares of authorized but unissued
Common Stock issuable upon exercise of the Representative's Stock
Warrants; (iii) up to 160,000 shares of authorized but unissued Common
Stock issuable upon exercise of the Warrants underlying the
Representative's Warrants; (iv) up to an additional 450,000 shares of
Common Stock (including 240,000 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
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:
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS:
YEAR ENDED MARCH 31, FIVE MONTHS ENDED AUG 31,
-------------------- -------------------------
1995 1996 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Total Revenues $2,149,135 $2,586,306 $1,104,186 $1,468,937
---------- ---------- ---------- ----------
Gross Profit 430,135 847,658 414,251 405,185
General expenses and depreciation 299,627 264,180 121,414 149,024
---------- ---------- ---------- ----------
Operating Income 130,408 583,478 292,837 256,161
Non-operating expenses, net 2,870 3,007 1,990 (1,544)
---------- ---------- ---------- ----------
Income before income taxes 127,538 580,471 290,847 257,705
Provision for income taxes 69,852 232,600 116,400 107,926
---------- ---------- ---------- ----------
Net Income(1) $ 57,686 $ 347,871 $ 174,447 $149,779
== ========== ========== ========== ========
SUMMARY BALANCE SHEET:
YEAR ENDED MARCH 31, FIVE MONTHS ENDED 8/31/96
-------------------- -------------------------
1995 1996 ACTUAL AS ADJUSTED(2)
---- ---- ------ --------------
(Unaudited)
Current assets $ 359,528 $1,207,361 $1,394,232 $4,626,232
---------- ---------- ---------- ----------
Current liabilities 232,610 430,22 478,194 478,194
Working capital $ 126,918 $ 777,133 $ 916,038 $4,148,038
Total assets 426,743 1,438,832 1,636,577 4,868,577
Stockholders' equity 194,133 1,008,604 1,158,383 4,390,383
Book value per share $ .099 $ .411 $ .472 $ 1.202
Shares outstanding(3) 1,970,000 2,452,000 2,452,000 3,652,000
</TABLE>
(1) The following is a calculation of pro forma earnings per share: (a) as if
all shares were outstanding for the entire period; and (b) as if all
shares were outstanding for the entire period after reflecting the give
back of 1,330,000 shares pursuant to the underwriting Agreement:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 FIVE MONTHS ENDED AUG 31
------------------- ------------------------
1995 1996 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Net Income $57,686 $347,871 $174,447 $149,779
(a) Pro forma Shares out-
standing 3,782,000 $ .02 $ .09 $ .05 $ .04
(b) Pro forma shares out-
standing after give-back
2,452,000 $ .02 $ .14 $ .07 $ .06
</TABLE>
(2) Gives effect to the issuance of 1,200,000 shares of Common Stock and
1,600,000 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."
(3) Includes an aggregate of 1,330,000 shares returned to the Company by
various current stockholders.
8
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 Risks Specific to the Company's Business. The following are
certain factors regarding the Company's business which investors in this
Offering should be aware.
- Difficulty in Maintaining High Growth; Fluctuations
in Gross Margins. 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. Moreover, it
should be noted that due to the nature of the
Company's business, gross margins may fluctuate
significantly from quarter-to-quarter and from
year-to-year. See "Management's Discussion and
Analysis of Financial Conditions and Results of
Operations."
- Dangers of Reliance on International Trade.
Approximately 29% of the Company's sales for the
fiscal year ended March 31, 1996 were to foreign
markets of which 22% were to the Far East. Export
sales for the year ended March 31, 1995 amounted to
48% of gross revenues principally to the Far East.
For a brief period, the Company hedged the Japanese
yen by foreign currency exchange transactions.
Foreign currency fluctuations to date have had no
impact on the Company. The Company currently only
bills at agreed amounts in US Dollars. Future markets
may include areas of political instability, and/or
currency valuation fluctuation. See "Management's
Discussion and Analysis of Financial Conditions and
Results of Operations-Foreign Currency Fluctuations."
- Ability to Remain Current with 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.
9
- Plans to Make Unspecified Acquisitions with the
Proceeds Without Stockholder Approval. The Company
intends to act as a consolidator in the translation
industry and to acquire other companies in this
field. While the Company currently has no
understandings, arrangements or agreements with
respect to any acquisitions, under applicable law,
the Company is not obligated to seek stockholder
approval or disseminate information about target
companies to its stockholders prior to consummating
any transactions and has no intention of voluntarily
doing so. Thus, since a substantial portion of the
proceeds of this Offering will be used for this
purpose and such acquisitions will be made without
any oversight or input from the stockholders, a
substantial portion of the proceeds will be used
solely in management's discretion.
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.
3. Dependence on Key Personnel. The success of the Company depends in
part upon the continued successful performance of the Company's current
President and Chief Executive Officer and its Chairman and Chief Operating
Officer, each of whom have employment agreements until December 2000, 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
10
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 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, the
same two of the Company's customers accounted for approximately 43% and 28%,
respectively. The Company's policy, since the beginning of its current fiscal
year, has been to diversify its customer base so as to alleviate the risks
associated with depending on any one particular customer for business. The
initial success of this program is evidenced by the fact that during the five
month period ending August 31, 1996, the amount of sales from the same two
customers referred to above were even further reduced and accounted for
approximately only 26% and 3%, respectively, of the Company's sales. While two
other customers combined to provide approximately 35% of the Company's sales
during this period, they had never previously accounted for 10% or more of sales
and the Company does not expect them to be such principal customers in the
future. Management believes that the Company's prior concentration of sales will
continue to decline in the future as the Company diversifies its customer base,
especially following the start of the Company's acquisition program, which it
expects will commence before year end. Accordingly, the Company believes that
the loss of any individual customer will not have a material adverse impact on
the Company's future operating results and financial condition. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and "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
11
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 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. No 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 $1.80 per share
of Common Stock, or approximately 60% 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 32.45% 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 Chairman 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 795,000 shares of Common Stock (approximately 22%
of the shares of Common Stock following the Offering) for two years following
the date of this Prospectus giving management voting control over approximately
12
38.61% of the outstanding Common Stock. 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."
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 when material
changes to the Company occur so that the prospectus will contain current
information. Assuming such amendments were not required, this Prospectus would,
in any event, 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
13
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, 1,770,000 unregistered Shares of the Company's Common Stock will be
held by present stockholders. Under Rule 144 of the Act, all 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 period an amount equal to the
greater of the average weekly trading volume or 1% of the then outstanding
shares, or approximately 36,500 shares assuming only the existing shares and the
shares Common Stock offered hereby are outstanding). The holders of such
1,770,000 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, 482,000 shares of Common Stock currently held by certain
security holders are being registered hereby and will be available for sale, in
blocs of one-third every six months beginning six months after the date hereof,
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 Representative. 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; however, for 18 months the approval of the Representative is
required. 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; however for 18 months the approval of the Representative is required. 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 120,000 shares of Common Stock and 160,000 Warrants. The
Representative's Securities will be exercisable commencing one year following
the effective date of this Prospectus and will continue to be exercisable for a
period of four years thereafter at an exercise price of $3.90 per share and $.26
14
per warrant, with the warrants underlying the Representative's Warrant allowing
the purchase of Common Stock at $5.20 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 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, neither the Underwriters nor any other broker-dealer which
solicit exercise of any of the Warrants, including the Representative's
Warrants, will be able 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 later of termination of such soliciting activity or the
termination (by waiver or otherwise) of any right that any Underwriter or
soliciting broker-dealer may have to receive a fee for the exercise of warrants
following such solicitation. Accordingly, neither the Representative nor any
other soliciting broker-dealer will 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
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 $5.00 (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
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 1996, 54%
of the Company's sales were to four major customers in the high-tech area, of
which two accounted for 37% in fiscal year 1996 and 70% in the prior fiscal year
ended March 31, 1995.
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.
There was a significant increase in gross profit from 20% to
33%. The company benefitted from the increasing use of translation tools due to
the extraordinary amount of repeat business from existing customers. Therefore,
the relative stability of customers' requirements and contents permitted a more
effective use of translation memory storage, i.e. machine tool translation. In
addition, there were the gains derived from an organizational structure
established for a two million dollar level, increasing its sales by 20%.
There is no assurance that this increase of gross profit will
continue, or necessarily be maintained at the current rate in the future. In
anticipation of increasing volume, the Company has increased its production
staff to concentrate on job flow, quality control, editing and customer
communications.
17
Likewise, there can be no assurance that the type of translation products and
customer requirements will permit the use of machine tool translation of
previously stored memory data, to the previous extent.
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
debts in prior years ($36,000 in fiscal year ended March 31, 1995) 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%).
As a result of the Company's new employment agreements, it
should be noted that salary expenses will increase by approximately $180,000 per
year.
(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 used to be in
Japanese yen, at an agreed rate of exchange on a per order basis. 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. Thus, the Company could have been 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 had purchased
forward exchange contracts as a hedge against adverse currency fluctuations.
However, to further avoid this risk, the Company has recently changed its policy
and now only bills its customers in US Dollars at agreed upon amounts.
Accordingly, the Company is not impacted by exchange rate fluctuations.
FIVE MONTHS ENDED AUGUST 31, 1996 IN COMPARISON TO AUGUST 31, 1995 (UNAUDITED)
While the sales for the five months ended August 31, 1996
increased by $315,000, or 33%, over the corresponding five months ended August
31, 1995, operating income declined $37,000 or 12%. Gross profits declined from
37.5% to 27.5% of sales. Selling, general and administrative expenses remained
approximately the same in relation to sales (8%) but increased in dollar amounts
18
by $27,500 over the prior period. Accordingly, operating income declined from
$293,000 to $256,000.
The reason for the decrease in gross profit was the increasing
costs associated with new customers, different languages and changing customers'
products. These types of changes impacted the use of memory stored translation
as well as introducing new learning curves associated with additional employees.
The Company hired additional in-house Korean, Chinese and Japanese translators,
as well as increasing support staff in editing, quality control and customer
communication as foundations for its expanding business.
During the five month period ended August 31, 1996, the
Company's working capital increased by $139,000 to $916,000. Cash decreased by
$262,000 to $269,000 and receivables increased by $327,000 to $969,000. These
changes are attributable primarily to increased volume of sales and payment of
deferred offering costs and to the charges described in the previous paragraph.
See Statement of Cash Flow for other sources and uses of working capital.
The Company's two largest customers that accounted for
approximately 71% for the year ended March 31, 1995 and 37% for the year ended
March 31, 1996, accounted for 29% for the five months ended August 31, 1996. Two
other customers accounted for approximately 35% of sales for the five months
ended August 31, 1996 in comparison to approximately 9% for the year ended March
31, 1996.
19
DILUTION
At August 31, 1996, the Company had a net tangible book value of
$1,158,383, or $.47 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 August 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 1,200,000 shares of Common Stock and 1,600,000 Warrants hereby,
the pro forma net tangible book value at August 31, 1996 would have been
$4,390,383 or $1.20 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $ .73 per share (or 155%) to
the existing stockholders and an immediate dilution of $1.80 per share (or 60%)
to investors in this Offering. The following table illustrates this per share
dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price per share $ 3.00
Net tangible book value per share before offering $ .47
Increase attributable to investors in offering $ .73
-----
Net tangible book value per share after offering (1) $ 1.20
------
Dilution per share to investors in offering (2) $ 1.80
======
</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) 450,000 shares issuable upon exercise of
the Representative's over-allotment option (including shares of Common
Stock underlying the Warrants); (b) 120,000 shares of Common Stock
issuable upon exercise of the Representative's Stock Warrants; (c)
160,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Representative's Warrants; (d) 1,600,000 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."
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> <C>
Public Investors(1) 1,400,000 38.34% $4,200,000 87.06% $3.00
Current Stockholders(2) 2,252,000 61.66% $ 624,270(3) 12.94% $ .28
--------- ----- ------------ -----
Total 3,652,000 100.00% $4,824,270 100.00%
========= ====== ========== ======
</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.
20
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 $3,232,000 ($3,821,860, if the over-allotment
option is exercised in full). 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 approximately $296,000 paid or to be paid by the Company at
or around the closing of this Offering out of proceeds.
The Company intends to use such net proceeds as follows:
<TABLE>
<CAPTION>
WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT
-------------- --------------
APPROX. APPROX.
APPROX. % OF NET APPROX. % OF NET
$ AMOUNT PROCEEDS $ AMOUNT PROCEEDS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Advertising and promotion $ 300,000 9.28% $ 400,000 10.47%
Research and Systems Development $ 800,000 24.75% $1,050,000 27.47%
Purchasing advanced information
technology products $ 675,000 20.89% $ 850,000 22.24%
Acquisition of service providers $1,150,000 35.58% $1,150,000 30.09%
Working capital and general
corporate purposes $ 307,000 9.50% $ 371,860 9.73%
---------- ---- ---------- ----
TOTAL $3,232,000 100.00% $3,821,860 100.00%
========== ====== ========== ======
</TABLE>
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.
Research and development expenses relate to the estimated payments to Dr. Julius
Cherny for development of his automated translation machine pursuant to a
license agreement, currently being negotiated. 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, of which no assurance can be given.
The Company has allocated $675,000 for capital expenditures. The
Company plans to use these funds to develop its Website, upgrade its customer
communications network, continue the practice of purchasing hardware and
software, both new and "replacement" based upon customers' requirements and the
changing technology and required capital expenditures to transfer the research
results from Dr. Cherny's machine to a production mode. To the extent the
$675,000 is not used, it will be retained as additional working capital.
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 or
commercial paper. The Company has not used its current revolving line of credit
during the past six months, and it expires, in any event, on December 31, 1996.
Exercise of all the Warrants would generate approximately an additional
$7,296,000 in net proceeds to the Company. The Company intends to use such funds
for acquisitions ($6,000,000), additional research and development relating to
Dr. Cherny's project ($750,000) and working capital ($546,000). 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
CAPITALIZATION
The following table sets forth the capitalization of the Company at
August 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>
AUGUST 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 August 31, 1996,
and 3,652,000 as adjusted $ 3,782 $ 3,652
Additional paid-in capital 462,868 3,694,998
Retained earnings 691,733 691,733
------- -------
Capitalization Total $1,158,383 $4,390,383
========== ==========
</TABLE>
- ---------------
(1) Does not give effect to (a) 450,000 shares issuable upon exercise of
the Underwriter's over-allotment option (including shares of Common
Stock underlying the Warrants); (b) 120,000 shares of Common Stock
issuable upon exercise of the Representative's Stock Warrants; (c)
160,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Representative's Warrants; (d) 1,600,000 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 1,200,000 shares of Common
stock and 1,600,000 Warrants.
22
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 a five year 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 assumed contract rights with existing
debis customers in Europe. However, the Company has no obligations to assume
previous Debis obligations, will receive fees for all current and future
services 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".
In general, the Company uses various machine tools (also referred to as
translation tools "TT") that are software applications for extracting and
formatting data, for online dictionaries, for presentation of text (e.g.,
prepress) and for customer networking. On the other hand, the Company's machine
translation ("MT") abilities depend upon the storage and access to previously
translated material in machine usable form. Thus, the ability to exploit this
type of MT depends on the stability of customers, types of products, material to
be translated and customers requirements. If variables upset this storage-
access-use of previously translated material, such as occurs with first-time
customers or when translating materials in new topics, the Company will be
unable
23
to exploit this advantage. For this reason the Company is embarking on the
development of its own phased in system of document translation which would not
be limited to previously translated material. See "Research and Development."
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.
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,
24
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.
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
25
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.
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
26
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 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 ultimately would have the ability to
instantaneously translate voice from one language into another. The Company
intends to enter into a 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. The initial phase of
development will be directed towards generating specific context dictionaries,
i.e., relationships between words in different languages but in the same
context. In any given language words have multiple meanings. In addition, words
of one language do not often translate on a one to one basis, into another
language. Context is the key to translating a message from one language into
another. The first milestone of the first phase will take the many thousands of
documents already translated and amassed by the Company and organize them by
context and analyze them through the use of appropriate neural network systems
for the purpose of generating specific context dictionaries. The second
milestone of the first phase will generalize the context dictionary generator
making it capable of generating context dictionaries from written materials in
different languages on the same topic, not previously translated or amassed.
While Dr. Cherny has estimated that a working prototype can be produced in
approximately 12-15 months,
27
the project is still in its infancy and until the first two milestones are
completed (costing approximately $250,000 and $500,000, respectively) the
likelihood of the success of the project can not be predicted. It is currently
projected that following the success of the first two milestones, final
development of this machine will take approximately a further nine months with
additional costs of approximately $4 million. 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.
However, in any event, if the first two milestones are successful, even if the
instantaneous voice translation machine is ultimately never completed, the
Company will still benefit from using the specific and general context
dictionary generators.
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.
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 written employment
agreements with each of Ms. Landgren and Messrs. Charles and Michael Cascio. See
"Management Employment Agreements".
28
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.
29
MANAGEMENT
The directors and/or executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
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
Gary M. Schlosser 46 Director
THEODORA LANDGREN has been the Chairman of the Board of Directors 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 Stockholm, 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 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 publicly 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 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
30
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. 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 securities industry.
Dr. Cherny has published numerous papers and authored several books dealing with
Finance, Accounting and Advanced Mathematical Theory.
GARY M. SCHLOSSER was appointed a Director in August 1996. Since August 1, 1994,
Mr. Schlosser has been the President and a director of Jefferson Bank of New
Jersey. From October 1989 through July 1994 he was Executive Vice President of
Glendale National Bank of New Jersey and prior thereto, from July 1988, he was
President of Glendale Mortgage Services Corporation, a subsidiary of Atlantic
Bancorporation. Mr. Schlosser is a member of the Camden County Bankers
Association and the South Jersey Security Bankers Association.
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 five directors of the
Company. The bylaws permit the Board of Directors to fill any vacancy and the
new director may
31
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. While the
Representative has the right to designate a member to the Board of Directors
during the next two years, it has advised the Company that it has no current
intent to exercise this right.
32
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, of
which $8,462 was paid to its then chief executive officer, Michael Cascio.
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 $104,000
each 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 and potential management of possible future acquired
companies. 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, 2,200,000 of which shares
may not be issued for 18 months from the date of this prospectus, without the
consent of the Representative. 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.
The Plans are currently 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
33
Stock thereunder. The price payable for the shares of Common Stock under each
option will be fixed by the Committee at the time of the grant, but, for
incentive stock options, 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, and 85% of
such price for non-qualified stock options. The above notwithstanding, the
Company intends shortly to amend the Option Plan so it will conform to the
recent revisions of Rule 16b-3.
There are currently no outstanding stock options. On the date of this
Prospectus the Company plans to issue 100,000 options to each of its Chairman
and President. Pursuant to agreement with the Representative, the Company will
not issue more than an additional 100,000 stock options, for a total of 300,000
stock options, during the 18 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
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. The Company
believes the terms of these agreements are within industry norms. 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 transaction with BTS, as a
shareholder of BTS, Ms. Landgren received a pro rata amount of stock in the
Company, amounting to 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.
As a prerequisite for the Representative entering into this transaction
with the Company, it required that not more than 2,452,000 shares of Common
Stock be outstanding. In order to meet this limit an aggregate of 1,330,000
shares of Common Stock were returned to the Company by various stockholders
including Ms. Landgren (585,000 shares), Mr. Cascio and his family members
(600,000 shares) and Mr. Herson (15,000 shares). In an attempt to compensate
such people for their loss, on May 24, 1996, the Company granted 100,000
warrants, to each of Ms. Theodora Landgren and Mr. Charles Cascio. These
warrants are identical in all respects to the 1,600,000 Warrants being offered
by the Company hereby and, while they are being registered herewith, they are
subject to restrictions on transferability for 18 months. See "Selling Security
Holders."
It is the Company's policy that all transactions with its officers,
directors or stockholders will be made on terms no less favorable to it than
those available from unaffiliated parties.
35
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
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% 21.77%(4)
(1)(2)(3)
Charles D. Cascio 400,000 16.31% 10.95%
(1)(2)(3)(5)
Michael C. Cascio 100,000 4.08% 2.74%
(1)(2)(6)
Richard J.L. Herson 115,000 4.69% 3.15%
(1)(2)
All Executive Officers and
Directors as a Group 1,385,000 56.48% 38.61%
</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) Does not include 100,000 Warrants subject to restrictions on
transferability for 18 months following the date hereof which are being
registered herewith.
(4) Reflects the sale of 200,000 shares of Common Stock in this Offering.
Includes an additional 225,000 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. Without including such shares, Ms.
Landgren will own approximately 15.61% after the Offering. The parties
to the Voting Trust Agreement are Mark Schindler, Eugene Stricker,
Richard Gray, Donna Gray, Steven Gray, David Gray, Joyce Gray, Alvin
Horowitz and Steven Gray as custodian for Samuel and Emily Gray, minor
children.
(5) Father of Michael Cascio. Does not include an aggregate of 200,000
shares owned by adult, independent children of Mr. Cascio. Mr. Cascio
disclaims beneficial interest in such shares.
(6) Son of Charles Cascio.
37
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 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
38
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 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, at no cost, 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 Representative, 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 Representative. The other 40,000 warrants are identical to the
Warrants offered by the Company except that each is exercisable at $1.50 per
share until January 17, 2001 and they do not have registration rights.
39
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, however,
such issuance is subject to the approval of the Representative for a period of
18 months.
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 3,652,000
shares of Common Stock outstanding (3,862,000 shares if the Underwriter's
over-allotment option is exercised in full). Of these shares, the 1,400,000
shares sold in this offering (1,610,000 shares if the Underwriter's
over-allotment option is exercised in full) 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. In addition, another
482,000 shares of Common Stock held by selling security holders are being
registered now which will be freely tradeable in blocs of one-third every six
months beginning six months from the date hereof. Except as described below, all
of the remaining 1,770,000 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 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 36,500 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; additionally, the holders of the 1,770,000 shares (officers,
directors, founders and their families) have agreed not to make any public sales
for a period of two years from the date of this Prospectus, without prior
written consent of the Representative.
Of the 2,452,000 shares of Common Stock currently outstanding, 682,000
are being registered herewith.
40
As a result of this Offering, an additional 1,600,000 shares of Common
Stock (1,840,000 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
Representative such warrants and the Common Stock underlying them are restricted
from transfer for 18 months.
As of the date hereof and prior to the Offering, 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
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 1,400,000 shares of Common Stock and 1,600,000 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.
NUMBER
UNDERWRITER OF SHARES OF WARRANTS
----------- --------- -----------
Werbel-Roth Securities, Inc. 650,000 700,000
Millennium Securities Corp. 750,000 900,000
Total 1,400,000 1,600,000
========= =========
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
$.18 per share of Common Stock and $.0012 per warrant.
The Company has granted the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 210,000 shares of
Common Stock and 240,000 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 Representative will (i) receive a Warrant solicitation fee equal to
4% of the exercised price of all Warrants it causes to be exercise commencing
one year from the date of this prospectus and (ii) enter into a three year
consulting agreement with the Company providing for a fee equal to $15,326.67
per annum, payable in full ($45,980) at the closing of this Offering. Also,
during the three years beginning on the date hereof, the Representative has the
right of first refusal on future transactions by the Company and to act as
broker on all Rule 144 sales.
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, warrants (the "Representative's Warrants") to purchase
120,000 shares of Common Stock of the Company at an exercise price of $3.90 per
share and 160,000 Warrants at an exercise price of $.26 per warrant. Other than
a higher exercise price, the redemption feature and no anti-dilution protection
for any issuance of securities below the initial offering price of the Company's
Securities offered hereby, the Warrants underlying the Representative's Warrants
42
are identical in all respects to the Warrants offered to the public hereby, as
to which they will be treated pari passu with the public Warrants. The Warrants
issuable upon exercise of the Representative's Warrants will entitle the holder
to purchase shares of Common Stock at a price of $5.20 per share or 130% of the
then exercise price of the Warrants offered to the public hereby, for a period
of three years commencing on the date hereof. The Representative's Warrants will
not be transferable for one year from the date hereof except to officers and
partners of the Underwriters or members of the selling group and are exercisable
during the four year period commencing one year from the date of this
Prospectus. Any profit realized upon any resale of the Representative's Warrants
or upon any sale of the underlying securities thereof 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 Warrant and the 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 the
underlying securities at the Company's expense during the seven years following
the date of this Prospectus.
The Company has also agreed, for a period of two years from the date of
this Prospectus, if so requested by the Representative, to nominate and use its
best efforts to elect a designee of the Representative as a director of the
Company or, at the Representative's option, as a non-voting advisor to the
Company's Board of Directors. The Representative has not yet exercised its right
to designate such a person.
The Company has agreed, in connection with the exercise of the Warrants
pursuant to solicitation (commencing one year from the date of this Prospectus),
to pay to the Representative a fee of four percent of the exercise price for
each Warrant exercised, provided however, that the Representative will not be
entitled to received such compensation in Warrant exercise transactions in which
(i) the market price of Common Stock at the time of the exercise is lower than
the exercise price of the Warrants, (ii) the Warrants are held in any
discretionary account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in this Prospectus, in documents
provided to holders of Warrants at the time of exercise; (iv) the exercise of
the Warrants is unsolicited; or (v) the transaction was in violation of Rule
10b-6 promulgated under the Exchange Act.
The Company has agreed with the Representative that for a period of 18
months from the date of this Prospectus, the Company will not sell or otherwise
issue any securities of the Company except as contemplated by this Prospectus or
pursuant to employee benefit plans without the prior written consent of the
Representative.
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
43
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.
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 Representative. Other
than the minimal incremental costs of preparing this Prospectus and a
registration fee to the SEC, the Company is not paying any costs relating to the
sales by the Selling Stockholders. 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 be required to cease
making a market in the
44
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
Chairman, Chief Operating Officer and a Director of the Company. After the
Offering, Ms. Landgren will directly own 550,000 shares representing 15.60% of
the outstanding shares of Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."
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 & Millman, 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.
45
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 principles.
As discussed in Notes 1, 2 and 3 to the consolidated financial statements
the consolidated financial data reflect the result of a business
combination merger, accounted for as a recapitalization.
Votta & Company
Haddonfield, New Jersey
May 1, 1996
(July 1, 1996 as to Note 17)
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31,
MARCH 31, MARCH 31, 1996
1996 1995 (UNAUDITED)
---- ---- -----------
ASSETS:
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents (Note 2) $530,340 $2,238 $268,822
Accounts receivable, net of allowance for
doubtful accounts of $20,000, $65,000,
and $7000 respectively (Notes 2 and 4) 642,481 325,665 969,473
Prepaid rent (Note 12) 31,625
Deferred offering costs (Note 19) 34,540 155,937
--------- ------- -----------
Total current assets 1,207,361 359,528 1,394,232
--------- ------- -----------
Property and equipment (Notes 2 and 15) 362,178 165,429 406,524
Less: accumulated depreciation and amortization (189,466) (114,715) (220,776)
----------- --------- -------------
Net property and equipment 172,712 50,714 185,748
---------- --------- ------------
Other assets (Note 8) 58,759 16,501 56,597
----------- --------- -------------
TOTAL ASSETS $1,438,832 $426,743 $1,636,577
=========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 55,834 $ 22,008 $ 130,210
Accrued liabilities 26,000 23,870 8,590
Accrued income taxes (Notes 2 and 16) 115,000 7,882
Deferred income taxes (Notes 2 and 16) 233,394 115,794 339,394
Line of credit (Note 6) 40,000
Notes payable (Note 7) 23,056
----------- --------- -------------
Total current liabilities 430,228 232,610 478,194
----------- --------- ------------
Stockholders' equity:
Common stock (Notes 3,9,10,11,17 and 19):
$1 par value, 1000 shares authorized,
50 outstanding 50
$.001 par value, 5,000,000 shares authorized
3,782,000 outstanding 3,782 3,782
Preferred stock, $.001 par value,
1,000,000 authorized,
none outstanding (Note 14)
Additional paid in capital (Notes 3, 9 and 10) 462,868 462,868
Retained earnings 541,954 194,083 691,733
--------- -------- ------------
Total stockholders' equity 1,008,604 194,133 1,158,383
--------- -------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,438,832 $426,743 $1,636,577
=========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-1
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
AND THE FIVE MONTH PERIODS ENDED
AUGUST 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31,
MARCH 31, MARCH 31, 1996 1995
1996 1995 (UNAUDITED) (UNAUDITED)
---- ---- ---------- ----------
<S> <C> <C> <C> <C>
Revenue (Notes 2, 3 and 5) $2,586,306 $2,149,135 $1,468,937 $1,104,186
Cost of services provided 1,738,648 1,719,100 1,063,752 689,935
----------- ----------- ----------- ------------
Gross profit 847,658 430,035 405,185 414,251
Selling, general and
administration expense 189,429 244,290 117,714 90,214
Depreciation and amortization
(Notes 2 and 15) 74,751 55,337 31,310 31,200
------------ ------------ ------------ ------------
Operating income 583,478 130,408 256,161 292,837
----------- ----------- ----------- -----------
Non-operating income (expense)
Other income 220 696 1,544
Interest expense (Notes 6 and 7) (3,227) (3,566) 0 (1,990)
------------- ------------- --------------- -------------
(3,007) (2,870) 1,544 (1,990)
------------ ------------- ------------ -------------
Income before income taxes 580,471 127,538 257,705 290,847
Provision for income taxes
(Notes 2 and 16) 232,600 69,852 107,926 116,400
--------- ---------- --------- ----------
Net income (Note 3) $ 347,871 $ 57,686 $ 149,779 $ 174,447
======== ======== ========= ==========
Net income per common share
outstanding (Note 2) $.18 $.04 $.04 $.11
==== ==== ==== ====
Weighted average shares
outstanding
(Notes 2, 3, 9, 10 and 11) 1,964,400 1,510,000 3,782,000 1,510,000
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-2
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1996 AND 1995
AND THE FIVE MONTH PERIODS ENDED
AUGUST 31, 1996 AND 1995(UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31,
MARCH 31, MARCH 31, 1996 1995
1996 1995 (UNAUDITED) (UNAUDITED)
---- ---- ---------- ----------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income $347,871 $57,686 $149,779 $174,447
Depreciation and amortization 74,751 55,337 31,310 31,200
CHANGE IN OPERATING ASSETS
AND LIABILITIES:
Accounts receivable (316,816) ( 9,073) (326,992) (148,609)
Prepaid rent 31,625 (31,625) 2,162 14,125
Other assets ( 42,258) (15,151) 2,162 (10,568)
Accounts payable 33,826 (76,708) 74,376 49,799
Accrued liabilities 2,130 ( 2,350) (17,410) (714)
Accrued income taxes 107,118 7,882 (115,000) 121,337
Deferred income taxes 117,600 35,329 106,000 (4,937)
------- --------- --------- -----------
Net cash flows provided by
operating activities 355,847 21,327 (95,775) 226,080
------- --------- ----------- --------
CASH FLOWS (USED FOR)
INVESTING ACTIVITIES
Purchase of property and equipment (196,749) (54,975) (44,346) (103,045)
--------- ---------- ----------- ---------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Issuance of common stock 446,600
Deferred offering costs (34,540) (121,397)
Net borrowings (payments) under
line of credit 40,000 40,000
Payment on long-term debt (3,056) ( 1,223) (33,294)
---------- --------- --------- ----------
Net cash flows provided by
(used in) financing activities 369,004 38,777 (121,397) (33,294)
------- ------ --------- --------
Net increase in cash and
cash equivalents 528,102 5,129 (261,518) 89,741
Cash and cash equivalents,
beginning of year 2,238 ( 2,891) 530,340 2,238
--------- ---------- ------- --------
Cash and cash equivalents,
end of year $530,340 $ 2,238 $268,822 $91,979
======= ======= ======= ======
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest $ 3,227 $ 3,556 $ 0 $ 2,238
======== ====== ========== ======
Taxes $ 8,933 $ 9,725 $ 5,069 $ 4,900
========= ======= ========== =======
</TABLE>
See accompanying notes to consolidated financial statements
F-3
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON PAID-IN RETAINED STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS EQUITY
------ ----- ------- -------- ------
YEAR ENDED MARCH 31, 1995:
- --------------------------
<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, 1995 50 50 --- 194,083 194,083
YEAR ENDED MARCH 31, 1996:
- --------------------------
Formation of TTGL 1,770,000 1,770 --- 1,770
Conversion of note 20,000 20 19,980 --- 20,000
Recapitalization 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 1,088,604
FIVE MONTHS ENDED AUGUST
31, 1996 (unaudited): --- --- --- 149,779 149,779
- --------------------- ------ ------ ------ -------- --------
Balance at August 31, 1996 3,782,000 $3,782 $462,868 $691,733 $1,158,383
========= ====== ======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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
BTS. The acquisition is being accounted for as a recapitalization of BTS
as of January 17, 1996. Accordingly the consolidated financial statements
include the results of operations of BTS for all periods reported upon and
the results of operations of TTGL from January 17, 1996.
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.
REVENUE RECOGNITION
-------------------
Revenues are recognized on the accrual method of accounting upon billing
to customers. Customers are billed upon completion of project milestones
which are defined at the beginning of the projects.
F-5
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 of the Company's German
office 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 results of foreign operations are immaterial to the
financial statements taken as a whole.
The Company occasionally entered into foreign currency forward exchange
contracts as hedges to limit the effect of exchange rate fluctuations. At
March 31, 1996, the Company had no foreign currency exchange contracts in
effect. As of March 31, 1995, approximately $55,000 of foreign exchange
contracts were outstanding, denominated in Japanese Yen.
Gains and losses from exchange rate fluctuations were immaterial for the
years ended March 31, 1996 and 1995.
FISCAL YEAR
-----------
The Company's fiscal year ends on March 31.
UNAUDITED INTERIM
-----------------
The financial statements as of August 31, 1996 and for the five months
ended August 31, 1996 and 1995 are unaudited. In the opinion of
management, all adjustments consisting only of normal recurring items
considered necessary for a fair presentation have been included.
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.
F-6
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost and consisted of the following:
AUGUST
March 31, March 31, 31,1996
1995 1996 (UNAUDITED)
---- ---- -----------
Furniture and fixtures $ 26,174 $ 15,366 $ 33,850
Computer equipment 221,212 126,600 250,254
Software 114,792 23,463 122,420
-------- --------- --------
Total $362,178 $ 165,429 $406,524
======== ========= ========
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. For the five months ended
August 31, 1996 depreciation expense was $31,310 (unaudited).
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.
F-7
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
EARNINGS PER COMMON SHARE
-------------------------
In calculating average earnings per common share, the following weighted
average shares outstanding were used:
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
-------------- -------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C> <C> <C>
TTGL SHARES ISSUED
TO BTS SHAREHOLDERS 1,510,000 1,510,000 1,510,000 1,510,000
TTGL SHARES
(2,272,000) ISSUED FOR
PERIOD AFTER MERGER 454,400 0.0 2,272,000 0.0
--------- --------- --------- ---------
TOTAL 1,964,400 1,510,000 3,782,000 1,510,000
========= ========= ========= =========
</TABLE>
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, with 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. TTGL had no significant operations prior to the merger.
Concurrent with the merger, TTGL issued 482,000 shares pursuant to a
private placement offer (Note 9).
For financial reporting purposes, the above acquisition is accounted for
as a recapitalization of BTS. All financial information prior to the
merger reflect the results of operations of BTS only. Subsequent to the
merger, the financial statements reflect the consolidated results of
operations of TTGL and BTS. For the year ended March 31, 1996, the
consolidated results of operations of the companies consisted of the
following:
TTGL BTS
---- ---
Revenue -0- $ 2,586,306
========= ===========
Net Income(Loss) $( 1,562 ) $ 349,433
========= ===========
F-8
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 71% 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).
For the five month period ended August 31, 1996, four customers
represented 73% of the company's revenue. For the five month period ended
August 31, 1995, three customers represented 50% of the Company's revenue.
For the years ended March 31, 1996 and 1995, 29% and 48%, respectively, of
the Company's revenues were to foreign markets. For the five month period
ended August 31, 1996 and 1995, 34% and 30%, respectively, of the
Company's revenues were to foreign markets
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.
F-9
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - NOTES PAYABLE
Outstanding debt at March 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
August 31,1996
1996 1995 (unaudited)
---- ---- -----------
<S> <C> <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 $ -0-
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 -0-
---- ------- ----
Total debt $-0- $ 23,056 $-0-
=== ======= ===
</TABLE>
NOTE 8 - RELATED PARTY TRANSACTIONS
-----------------------------------
Other assets include a loan to an officer of the Company at March 31, 1996
and 1995, in the amounts of $35,000 and $12,000 respectively, and at
August 31, 1996 of $40,600 (unaudited).
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.
F-10
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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.
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.
F-11
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 $273,000 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.
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.
F-12
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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>
March 31, March 31, August
1996 1995 1996
(unaudited)
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 88,000 $ 17,990 $ -0-
State 26,556 8,651 -0-
--------- --------- ---------
114,556 26,641 -0-
--------- --------- ---------
Deferred:
Federal 92,217 34,343 92,464
State 25,827 8,868 15,462
--------- --------- ---------
118,044 43,211 107,926
--------- --------- ---------
$ 232,600 $ 69,852 $ 107,926
========= ========= =========
Components of Deferred
Tax Assets and Liabilities:
Accounts Receivable $ 257,136 $ 130,266 $ 387,789
Accounts payable and
Accrued liabilities ( 23,742) (14,472) (48,395)
--------- --------- ---------
$ 233,394 $ 115,794 $ 339,394
========= ========= =========
Reconciliation of effective income tax rate:
Federal income tax rate 34.0% 34.0% 34.0%
State taxes, net of
Federal income tax benefit 6.0% 6.0% 6.0%
Tax effect of non-deductible
expenses -- 15.0% 1.8%
----- ----- ----
40.0% 55.0% 41.8%
====== ===== =====
</TABLE>
F-13
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 19),
Ms. Landgren will have sole voting control of the Company `s majority
voting stock for up to two years after the Initial Public Offering.
NOTE 18 - STATEMENT OF CASH FLOWS
---------------------------------
As part of the private placement offering (NOTE 9), the Company converted
a $20,000 note payable into 20 shares of common stock in a non-cash
transaction.
NOTE 19 - 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.
F-14
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
Page
----
Additional Information..................................................... 3
Prospectus Summary......................................................... 4
Risk Factors............................................................... 9
Management's Discussion and Analysis of Financial Conditions and
Results of Operations................................................. 17
Dilution................................................................... 20
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.............................................................. 45
Experts.................................................................... 45
Index to Financial Statements..............................................
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.
1,400,000 SHARES OF COMMON STOCK
AND 1,600,000 REDEEMABLE COMMON
STOCK WARRANTS
THE TRANSLATION GROUP, LTD.
PROSPECTUS
WERBEL-ROTH SECURITIES, INC.
MILLENNIUM SECURITIES CORP.
,1996
[ALTERNATE PROSPECTUS PAGES]
SUBJECT TO COMPLETION
DATED NOVEMBER 14, 1996
-----------------
THE TRANSLATION GROUP, LTD.
----------------------
482,000 SHARES OF COMMON STOCK
300,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
300,000 SHARES UNDERLYING THE WARRANTS
This Prospectus covers the offer and proposed sale of 482,000 shares of
Common Stock, $.001 par value (the "Common Stock") of The Translation Group,
Ltd. (the "Company") and 300,000 Common Stock Purchase Warrants (the "Private
Warrants" and collectively with the 482,000 shares of Common Stock and the
300,000 shares of Common Stock underlying the Private Warrants, the
"Securities"), 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. Beginning one year from the date hereof
unless earlier permitted by the Representative (as defined below), the Private
Warrants may be redeemed, at a price of $.25 per warrant, upon written notice of
not less than thirty days provided that the closing price for the Common Stock
has been at least $6.00 per share for a period of twenty consecutive trading
days ending on the 3rd day prior to the day the Company gives notice, as
reported on the principal exchange on which the Common Stock is traded.
Application for listing has been made to, and the Common Stock and Private
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 THEO and THEOW, respectively. Prior to this offering,
there has been no public market for the Common Stock or the Warrants and no
assurance can be given that any such market will develop, or if developed, will
be sustained. See "Description of Securities."
The shares of Common Stock offered hereby are restricted from transfer
for six months from the date hereof at which time one-third of such shares will
become freely transferable with one-half of the remaining shares becoming freely
transferable six months thereafter and the balance six months thereafter. The
holders of the Private 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 Representative. The proceeds from the sale of the
Securities will not inure to the benefit of the Company, but rather to such
holders (the "Selling Securityholders"). See "Selling Security Holders."
Simultaneously herewith, the Company is offering, as part of its
initial public offering (the "IPO"), 1,200,000 shares of Common Stock and its
Chairman and Chief Operating Officer is offering an additional 200,000 shares
for an aggregate of 1.3 million shares of Common Stock at a price of $3.00 per
share, and 1,600,000 Redeemable Common Stock Purchase Warrants (the "IPO
Warrants" and collectively with the Private Warrants, the "Warrants").
All of the Warrants contain identical terms.
The offering price of the Common Stock in the IPO and the exercise
price of the Warrants have been arbitrarily determined by the Company and
Werbel-Roth Securities, Inc., the representative of the Underwriters for the IPO
(the "Representative") and bear no relationship to the Company's assets, book
value, results of operations or other generally accepted criteria of value.
The Company intends to furnish its security holders with annual reports
containing audited financial statements and the audit report of the independent
certified public accountants and such interim reports as it deems appropriate or
as may be required by law.
The Company's fiscal year ends March 31.
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 OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of the Prospectus is November __, 1996.
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby are restricted from transfer
for six months from the date hereof at which time one-third of such shares will
become freely transferable with one-half of the remaining shares becoming freely
transferable six months thereafter and the balance six months thereafter.
Subject to the previous sentence, the Securities offered hereby may be sold from
time to time directly by the Selling Security holder. Alternatively, the Selling
Securityholders may from time to time offer such Securities through
underwriters, dealers or agent. The distribution of the Securities by the
Selling Securityholders may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary broker's
transactions, privately-negotiated transactions or through sales to one or more
broker-dealers for resale of such shares as principals, including the
Underwriters, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders in connection with such sales of Securities. The Selling
Securityholders and intermediaries through whom such Securities are sold may be
deemed "underwriters" within the meaning of the Securities Act with respect to
the Securities offered, and any profits realized or commission received may be
deemed underwriting compensation. The Selling Securityholders may also transfer
the Securities pursuant to applicable exemptions from registration under the
Securities Act including Rule 144 under such Act.
At the time a particular offer of the Securities is made by or on
behalf of a Selling Securityholder, to the extent required, a Prospectus will be
distributed which will set forth the number of shares of Common Stock and
Warrants being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, if any, the purchase price paid by
any underwriter for the shares of Common Stock and Warrants purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.
Under the Securities Act of 1934, as amended (the "Exchange Act"), and
the regulations thereto, any person engaged in a distribution of the Securities
of the Company offered by this Prospectus may not simultaneously engage in
market-making activities with respect to such securities of the Company during
the applicable "cooling off" period (nine days) prior to the commencement of
such distribution. In addition, and without limiting the foregoing, the Selling
Securityholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including without limitation, Rule 10B-6
and 10B-7, in connection with transactions in such Securities, which provisions
may limit the timing of purchases and sales of such Securities by the Selling
Securityholders.
There are no current or future plans, arrangements or understandings of
or known by the underwriters with respect to engaging in transactions with the
Selling Securityholders, including transactions involving short selling. The
Selling Securityholders are not obligated to sell the Securities through the
underwriters.
The Representative will receive a Warrant solicitation fee equal to 4%
of the exercise price of all Warrants it causes to be exercised.
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 Securityholders") 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. Other
than the minimal incremental costs of preparing this Prospectus and a
registration fee to the SEC, the Company is not paying any costs relating to the
sales by the Selling Securityholders. The following disclosure regarding Reoffer
Shares and Selling Securityholders is also applicable to the Private Warrants,
their underlying Common Stock and their holders.
Each of the Selling Securityholders and intermediaries to whom such
securities may be sold 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 Securityholders may sell the Reoffer Shares from time to time for his
own account in the open market at the prices prevailing
2
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
Securityholders will inure entirely to their benefit and not to that of the
Company.
Except as indicated below, none of the Selling Securityholders 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 Securityholders 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 Securityholders 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
may be required to deliver a current prospectus in connection with the offer or
sale of the Reoffer Shares. In the absence of a current prospectus, if required,
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 Securityholders 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 Securityholders 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 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.
3
<TABLE>
<CAPTION>
============================================================================================================================
Names Shares Shares Shares
Held Offered owned After
Sale
============================================================================================================================
<S> <C> <C> <C>
Barry & Rosalind Kaplan 4,000 4,000 -0-
Mitchell Kurk 4,000 4,000 -0-
Ross Allen 20,000 20,000 -0-
Michael Hadden 20,000 20,000 -0-
George Langer 20,000 20,000 -0-
David Medich 20,000 20,000 -0-
James Miller 20,000 20,000 -0-
Robert Dumano 20,000 20,000 -0-
Bryan Saterbo 20,000 20,000 -0-
Joseph Savage 20,000 20,000 -0-
Achyut Saharabudhe 20,000 20,000 -0-
Gary Spieler, IRA 20,000 20,000 -0-
Scott Sosnick 20,000 20,000 -0-
C. Ray Council 16,000 16,000 -0-
Seth Markowitz 8,000 8,000 -0-
Richard Lasnier 4,000 4,000 -0-
Gloria Tempchin 4,000 4,000 -0-
Lee-Dan, Ltd. 80,000 80,000 -0-
Arthur Brown 20,000 20,000 -0-
Greg Opinski 20,000 20,000 -0-
David Gray 16,000 16,000 -0-
Shalom Maidenbaum 12,000 12,000 -0-
Richard Gray 10,000 10,000 -0-
Milton Ackerman 8,000 8,000 -0-
Irwin Strauss 8,000 8,000 -0-
Simon Barukhin 4,000 4,000 -0-
Solomon Bolder 4,000 4,000 -0-
Daniel Ehrlich 4,000 4,000 -0-
Marcus Ehrlich 4,000 4,000 -0-
Susan Felton 4,000 4,000 -0-
Sherry Hirschman 4,000 4,000 -0-
Seth Roslyn 4,000 4,000 -0-
Naomi Selbst 4,000 4,000 -0-
Sheila Schwartzberg 4,000 4,000 -0-
Marilyn Slonim 4,000 4,000 -0-
Jeremy Weinstein 4,000 4,000 -0-
Abraham Weiss 4,000 4,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>
4
<TABLE>
<CAPTION>
============================================================================================================================
Names Warrants Warrants Warrants
Held Offered owned After
Sale
============================================================================================================================
<S> <C> <C> <C>
Theodora Landgren(1) 100,000 100,000 -0-
Charles Cascio(2) 100,000 100,000 -0-
Mark Schindler(3) 33,000 33,000 -0-
Eugene Stricker(3) 33,000 33,000 -0-
Richard Gray(4) 25,000 25,000 -0-
Donna Gray 2,000 2,000 -0-
Steven Gray 2,000 2,000 -0-
David Gray 1,000 1,000 -0-
Joyce Gray 1,000 1,000 -0-
Alvin Horowitz 1,000 1,000 -0-
Steven Gray, as custodian
for Emily Gray 1,000 1,000 -0-
Steven Gray, as custodian
for Samuel Gray 1,000 1,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>
(1) The Chairman and Chief Operating Officer. Ms. Landgren currently
owns 770,000 shares representing approximately 31.40% of the outstanding stock.
Following this Offering and the IPO, Ms. Landgren will own approximately 15.61%
of the outstanding stock.
(2) The President and Chief Executive Officer. Mr. Cascio currently
owns 400,000 shares representing approximately 16.31% of the outstanding stock.
Following this Offering and the IPO, Mr. Cascio will own approximately 10.95% of
the outstanding stock.
(3) Currently owns 75,000 shares representing approximately 3.06% of
the outstanding stock. Following this Offering and the IPO, the balance will
represent approximately 2.05% of the outstanding stock.
(4) Currently owns 60,000 shares representing approximately 1.74% of
the outstanding stock. Following this Offering and the IPO, the balance will
represent approximately 1.64% of the outstanding stock.
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.
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.
5
- --------------------------------------------------------------------------------
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
Page
Additional Information........................................................
Prospectus Summary............................................................
Risk Factors..................................................................
Management's Discussion and Analysis
of Financial Conditions and
Results of Operations.......................................................
Dilution......................................................................
Use of Proceeds...............................................................
Capitalization................................................................
Business......................................................................
Management....................................................................
Executive Compensation........................................................
Certain Relationships and Related
Transactions................................................................
Disclosure of Commission Position on
Indemnification For Securities Act
Liability...................................................................
Security Ownership of Certain
Beneficial Owners and Management............................................
Description of Securities.....................................................
Underwriting..................................................................
Selling Security Holders......................................................
Legal Matters.................................................................
Experts.......................................................................
Index to Financial Statements............................................
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
482,000 SHARES OF COMMON STOCK
300,000 REDEEMABLE COMMON
STOCK WARRANTS
300,000 SHARES UNDERLYING WARRANTS
THE TRANSLATION GROUP, LTD.
------------------------
PROSPECTUS
-----------------------
, 1996
6
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.
Securities and Exchange Commission Fee.................... $ 5,653.00
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
Printing and engraving.................................... $ 26,281.00
Miscellaneous............................................. $ 9,019.00
-----------
TOTAL............................................ $178,000.00
===========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In July 1995, the Registrant sold an aggregate of 1,770,000 shares of
Common Stock at par value ($.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 granted at no cost a total of 300,000 warrants
to certain of its founders. See "Description of Securities - Warrants." The
issuance was exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933.
ITEM 27. EXHIBITS
The following exhibits were filed as part of SB-2 Registration Statement dated
July 25, 1996 (Registration No. 333-8857):
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
4.4 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.
10.5 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
The following exhibits were filed as part of Amendment No. 1 to the SB-2
Registration Statement dated September 19, 1996:
1.1.1 Revised Form of Underwriting Agreement
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 Charles Cascio
dated as of December 7, 1995, as amended.
10.4 Agreement between the Bureau of Translation Services, Inc. and
debis Systemhaus KSP-Kommerzielle Systeme und Projekte GmbH
dated May 24, 1995.
10.5 Voting Trust Agreement between Ms. Theodora Landgren and
various stockholders dated as of September 11, 1995.
23.3 Consent of Votta and Company
The following exhibits were filed as part of Amendment No. 2 to the SB-2
Registration Statement dated October 17, 1996:
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
4.3 Form of Warrant Agreement
23.4 Consent of Votta and Company
The following exhibits are filed herewith:
1.1.2 Revised Underwriting Agreement
4.3.1 Revised Form of Warrant Agreement
4.4.1 Form of Revised Representative's Warrant Agreement
4.5.1 Form of Revised Representative's Warrant
10.6 Consulting Agreement between the Represenrative and the
Registrant
23.5 Consent of Votta and Company
II-2
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 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.
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-3
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 12th day of November, 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> <C>
/s/ Theodora Landgren Chairman and Chief Operating Officer November 12, 1996
Theodora Landgren
/s/ Charles D. Cascio President, Chief Executive Officer and
Charles D. Cascio Director November 12, 1996
/s/ Richard J.L. Herson Chief Accounting Officer and Director November 12, 1996
Richard J.L. Herson (Principal Financial Officer)
/s/ Julius Cherny Director November 12, 1996
Julius Cherny
/s/ Gary M. Schlosser Director November 12, 1996
Gary M. Schlosser
</TABLE>
EXHIBIT INDEX
1.1.2 Revised Underwriting Agreement
4.3.1 Revised Form of Warrant Agreement
4.4.1 Form of Revised Representative's Warrant Agreement
4.5.1 Form of Revised Representative's Warrant
10.6 Consulting Agreement between the Represenrative and the
Registrant
23.5 Consent of Votta and Company
Exhibit 1.1.2
1,400,000 Shares of Common Stock
1,600,000 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, Chairman, Chief Operating Officer and Director ("Initial
Selling Securityholder") and the purchase by the Underwriters, acting severally
and not jointly, of an aggregate of 1,200,000 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 Securityholder and 1,600,000
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
1
$4.00 per share ("Warrants"), from the Company, in the respective amounts, 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 210,000 shares of Common Stock (the "Option Shares") and
240,000 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 120,000 shares of Common Stock and
160,000 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. 333-8857), 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
2
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 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
3
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, 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,
4
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.
(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
5
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 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
6
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 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)
7
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, 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
8
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 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.
9
(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.
(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, set forth in the Alternative Prospectus
contained as part of the Registration Statement, of an aggregate 482,000 shares
of Common Stock shall be permitted to sell their securities as described in the
Registration Statement and 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 eighteen (18) 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
10
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 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
11
"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.
(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 and Charles D. Cascio in the forms filed as Exhibits 10.2 and
10.3, 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 Theodora Landgren. 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
12
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 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
13
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.
(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
14
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.
(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.
15
(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
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 210,000 shares of Common
Stock and 240,000 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.
16
(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 three (3) nor more
than seven (7) 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 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
120,000 shares of Common Stock and 160,000 Warrants. The Representative's
Warrants shall be exercisable for a period of five years commencing one year
following the effective date of the Registration Statement at a price equaling
one hundred thirty percent (130%) ($3.90 per Share and $.26 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 4.4 to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
17
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
Security holder. 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 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
18
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 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
19
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 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;
20
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.
(j) The Company will furnish to the Representative or on the
Represen- tative'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)
21
or dispose of any beneficial interest therein without the prior written consent
of the Representative; provided, however, that the holders, set forth in the
Alternate Prospectus contained as part of the Registration Statement, of an
aggregate 482,000 shares of Common Stock shall be permitted to sell their
securities as described in the Registration Statement and 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
eighteen (18) 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.
(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
22
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.
(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
23
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 the effective date of the Registration
Statement, the Company shall have (i) entered into an employment agreement with
each of Theodora Landgren and Charles D. Cascio in the forms filed as Exhibits
10.2 and 10.3, 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 Theodora Landgren. 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 three (3) 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 or 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 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
24
(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 three (3) 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 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) 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 $15,326.67 per
annum, payable in full ($45,980) on the Closing Date.
5. Payment of Expenses.
25
(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 "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 Securityholder, (iii) upon resales of the Securities
sold by such Initial Selling Securityholder in connection with the distribution
contemplated hereby or (iv) in connection with the consummation by such Initial
Selling Securityholder 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
26
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. 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.
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 Securityholder
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
Securityholder and officers of the Company made pursuant to the provisions
hereof; and the performance by the Company and the Initial Selling
Securityholder 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
27
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 Securityholder 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 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
28
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 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.
29
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
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
30
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 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
31
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;
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, agreement with any
shareholder, 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," "SELLING
SECURITYHOLDERS," "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
32
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;
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
33
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).
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 Heller, Horowitz & Feit, P.C. with respect to the
Initial Selling Securityholder dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel, to
the effect that:
34
i) The Initial Selling Securityholder 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
Securityholder 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 Securityholder, enforceable against such
Initial Selling Securityholder 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 Securityholder, 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 Securityholder is
a party or by which such Initial Selling Securityholder is or may be
bound or to which any of such Initial Selling Securityholder's property
is or may be subject or any indebtedness, statue, 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 (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign having jurisdiction over such
Initial Selling Securityholder 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 Securityholder, 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 Securityholder, 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 Securityholder,
and the receipt of payment therefor pursuant hereto, good, valid and
marketable title to such Securities and,
35
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 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.
36
(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
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.
37
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
Securityholder, dated as of such date, to the effect that (i) the
representations and warranties of such Initial Selling Securityholder, 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 Securityholder has reviewed the Prospectus, and any supplements
thereto, and the information relating to such Initial Selling Securityholder and
such Initial Selling Securityholder's shares of Common Stock and other
securities of the Company owned by such Initial Selling Securityholder 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 Securityholder 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 to the Underwriters 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 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 Votta and Company:
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 Votta and Company with respect to the financial
statements and supporting schedules included in the Registration
Statement;
38
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 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;
39
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 Votta and Company 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 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 4.4 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.
40
(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 the Representative's 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 Securityholder,
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 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
41
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 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
42
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) 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)
43
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 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.
44
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, and such events have a material and adverse impact on the market for
the Securities; 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 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 (vii) if there shall have been such a material adverse change
in the conditions or prospects of the Company as in the Representative's
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities; or (viii) if there shall have been a material
adverse change in the general market, political or economic conditions, in the
United States or elsewhere, that have a material and adverse impact on the
securities market generally
(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
45
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.
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
46
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 Securityholder. 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 from 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 Securityholder 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 Securities, 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
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, Chairman
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:______________________________
48
SCHEDULE A
Number of Shares Number of Shares
Names of Underwriters to be Purchased to be Purchased
- --------------------- ---------------- ----------------
Werbel-Roth Securties Corp. 650,000 700,000
(747,500 (805,000
including over- including over-
allotment) allotment)
Millennium Securities Corp. 750,000 900,000
(862,500 (1,035,000
including over- including over-
allotment) allotment)
Total 1,400,000 1,600,000
========= =========
Exhibit 4.3.1
COMMON STOCK PURCHASE WARRANT AGREEMENT
THIS AGREEMENT, dated as of this ____ day of ________, 1996,
is between THE TRANSLATION GROUP, LTD., a Delaware corporation (the "Company"),
WERBEL- ROTH SECURITIES, INC. (the "Underwriter") and AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent (the "Warrant Agent").
RECITALS
A. The Company is issuing, in connection with a public
offering, up to 1,200,000 shares of the Company's common stock, $.001 par value
(the "Common Stock"), and up to 1,600,000 Common Stock Purchase Warrants (the
"Public Warrants" or "Warrants"), not including, in both cases, over-allotments.
B. The Company has as of the date hereof 300,000 issued and
outstanding Common Stock Purchase Warrants, which shall be treated herein as
Public Warrants.
C. One Warrant entitles the registered holder to purchase one
share of Common Stock.
D. The Company desires to provide for the issuance of
certificates representing the Warrants.
E. The Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of certificates representing the
Warrants and the exercise of the Warrants.
AGREEMENTS
In consideration of the recitals and the mutual agreements set
forth below, and for the purpose of defining the terms and provisions of the
Warrants and the certificates representing the Warrants and the respective
rights and obligations thereunder of the Company, the holders of certificates
representing the Warrants and the Warrant Agent, the parties agree as follows:
1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require.
(a) "Common Stock" shall mean common stock of the
Company of any class, whether now or hereafter authorized, which has the right
to participate in the distribution of earnings and assets of the Company without
limit as to amount or percentage, which at the date hereof consists of 15
million shares of authorized Common Stock, $.001 par value per share, and as
further defined in section 8(e) below.
(b) "Warrant Expiration Date" shall mean 5:00 p.m.
(New York City time) on ____________, 1999, or if such a date shall in the State
of New York be a holiday or a day on which banks are authorized to close, then
5:00 p.m. (New York City time) on the next following day which in the State of
New York is not a holiday on which banks are authorized to close. Unless
exercised during the Warrant Exercise Period, the Warrants will automatically
expire. The Warrants may be called for redemption and the expiration date
therefor accelerated, on the terms and conditions set forth in sections 4(b) and
4(c) of this Agreement. If so called for redemption, Warrant Certificate holders
shall have a period of at least thirty (30) days after the date of the call
notice within which to exercise the Warrants. However, Warrant Certificate
holders will receive the redemption price only if such certificates are
surrendered to the Corporate Office (defined below) within the redemption
period.
(c) "Warrant Exercise Period" shall mean from
___________, 1996 until the Warrant Expiration Date.
(d) "Corporate Office" shall mean the office of
the Warrant Agent (or its successor) at which at any particular time its
principal business is conducted, currently located at 40 Wall Street, New York,
New York 10005.
(e) "Exercise Date" shall mean the date a
certificate representing a Warrant is surrendered for exercise. "Surrender" for
purposes hereof shall mean in the event of (i) personal delivery by a Registered
Holder, the date it is received by the Warrant Agent, (ii) mailing, the postmark
date, and (iii) delivery by a messenger or similar service the date of dispatch,
as reflected on the delivery receipt.
(f) "Purchase Price" shall mean $4.00 per share
for the Public Warrants, unless such purchase price has been adjusted as
hereinafter provided. Each Warrant is exercisable for one share of Common Stock
upon payment of the Purchase Price at any time during the Warrant Exercise
Period. The Warrants, which are being publicly offered pursuant to a
registration statement and prospectus filed by the Company with the Securities
and Exchange Commission, will trade on NASDAQ (as defined below) as a small cap
issue under the symbol [THEOW] immediately after the effective date of such
registration statement.
(g) "Registered Holder" shall mean the person or
persons in whose name or names any certificates representing the Warrants shall
be registered from time to time on the books maintained by the Warrant Agent
pursuant to section 6.
(h) "Subsidiary" or "Subsidiaries" shall mean any
corporation or corporations, as the case may be, of which stock having ordinary
power to elect a majority of the Board of Directors of such corporation
(regardless of whether or not at the time stock of any other class or classes of
such corporation shall have or may have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned by
2
the Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
(i) "Transfer Agent" shall mean American Stock
Transfer & Trust Company or its authorized successor.
(j) "Warrant Certificate" shall mean a certificate
representing Warrants.
2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall entitle the Registered
Holder thereof to purchase one share of Common Stock upon its exercise. The
Warrants will be separately transferable once the Underwriter determines to
separate the Units.
(b) Upon closing of the offering, Warrant
Certificates representing an aggregate of not more than 1,900,000 Warrants (or
up to 2,140,000 in the event the Underwriters over-alotment option is exercised)
to purchase an aggregate of not more than a like number of shares of Common
Stock, shall be executed by the Company and delivered to the Warrant Agent and
shall be countersigned, issued and delivered by the Warrant Agent upon written
order of the Company signed by its President or a Vice President and its
Treasurer or an Assistant Treasurer or its Secretary or Assistant Secretary.
(c) From time to time, up to the Warrant
Expiration Date, plus such additional time as may reasonably be required to
perform, accomplish and complete necessary administrative functions connected
with the exercise of the Warrants, the Warrant Agent, in its capacity as the
Company's Transfer Agent, shall countersign and deliver stock certificates
representing an aggregate of not more than 1,900,000 shares of Common Stock, or
up to 2,140,000 in the event the Underwriters over-alotment option is exercised
(subject to adjustment pursuant to section 8 of this Agreement), upon the
exercise of the Warrants pursuant to the terms of this Agreement.
(d) From time to time, up to the Warrant
Expiration Date, the Warrant Agent shall countersign and deliver Warrant
Certificates in required whole number denominations to the persons entitled
thereto in connection with any transfer or exchange permitted under this
Agreement. Except as provided in section 7 hereof, no Warrant Certificates shall
be issued except (i) Warrant Certificates initially issued hereunder, (ii) upon
the exercise of any Warrants, to evidence the unexercised Warrants held by the
exercising Registered Holder and (iii) upon any transfer or exchange of
Warrants.
3
3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be
substantially in the form annexed hereto as Exhibit A (the provisions of which
are hereby incorporated herein) and may have such letters, numbers or other
marks of identification or designation and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
automated quotation system on which the Warrants may be listed, or to conform to
usage. The Warrant Certificates shall be dated the date of issuance thereof
(whether upon initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates). Warrant Certificates shall be
numbered serially with the letters, "__" on Warrant Certificates of all
denominations.
(b) Warrant Certificates shall be executed on
behalf of the Company by its President or any Vice President and its Treasurer
or an Assistant Treasurer or its Secretary or an Assistant Secretary, by manual
signatures or by facsimile signatures printed thereon. Warrant Certificates
shall be manually countersigned by the Warrant Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Warrant Certificates shall cease to hold such
position with the Company before the date of issuance of the Warrant
Certificates or before countersignature by the Warrant Agent and issue and
delivery thereof, such Warrant Certificates, nevertheless, may be countersigned
by the Warrant Agent, issued and delivered with the same force and effect as
though the person who signed such Warrant Certificates had not ceased to be such
officer of the Company.
4. Exercise; Redemption.
(a) Each Warrant represented by a Warrant
Certificate may be exercised during the Warrant Exercise Period, upon the terms
and subject to the conditions set forth herein and in the Warrant Certificate. A
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date, provided that the Warrant Certificate
representing such Warrant, with the appropriate exercise form thereon duly
executed by the Registered Holder thereof or his or her attorney duly authorized
in writing, together with payment in cash, or by official bank or certified
check made payable to the Company, of an amount equal to the Purchase Price has
been timely received by the Warrant Agent. Payment must be made in United Sates
funds. The person entitled to receive the securities deliverable upon such
exercise shall be treated for all purposes as the holder of such securities as
of the close of business on the Exercise Date. The Company shall not be
obligated to issue any fractional share interests or fractional warrant
interests upon the exercise of any Warrants. Computations resulting in the
issuance of fractional shares be rounded to the nearest whole share. As soon as
practicable on or after the Exercise Date and in any event within 10 days after
having received authorization from the
4
Company, the Warrant Agent, on behalf of the Company, shall cause to be issued
to the person or persons entitled to receive the same a certificate or
certificates for the shares of Common Stock, and the Warrant Agent shall deliver
the same to the person or persons entitled thereto. No adjustment shall be made
in respect of cash dividends on any shares delivered upon exercise of any
Warrant. Upon the exercise of any Warrants, the Warrant Agent shall promptly
notify the Company in writing of such fact and of the number of securities
delivered upon such exercise and shall cause all payments of an amount in cash
or check made payable to the order of the Company, equal to the Purchase Price,
less any Warrant solicitation fee, as hereinafter described.
(b) If at the time of exercise of any Warrant
after ____________, 1996 (i) the market price of the Company's Common Stock is
equal to or greater than the then Purchase Price of the Warrant, (ii) the
exercise of the Warrant is solicited by the underwriter at such time while the
Underwriter is a member of the National Association of Securities Dealers, Inc.
("NASD"), (iii) the Warrant is not held in a discretionary account, (iv)
disclosure of the compensation arrangement is made in documents provided to the
holders of the Warrants; and (v) the solicitation of the exercise of the Warrant
is not in violation of Rule 10b-6 (as such rule or any successor rule may be in
effect as of such time of exercise) promulgated under the Securities Exchange
Act of 1934, then the Underwriter shall be entitled to receive from the Company
upon exercise of each of the Warrant(s) so exercised a fee of four percent (4%)
of the aggregate price of the Warrants so exercised (the "Exercise Fee"). The
procedures for payment of the warrant solicitation fee are set forth in
subparagraph (c) below.
(c) (1) Within five (5) days of the last day of
the each month commencing with ____________ 1997, the Warrant Agent will notify
the Underwriter of each Warrant Certificate which has been properly completed
for exercise by holders of Warrants during the last month. The Company and
Warrant Agent shall determine, in their sole and absolute discretion, whether a
Warrant Certificate has been properly completed. The Warrant Agent will provide
the Underwriter with such information, in connection with the exercise of each
Warrant, as the Underwriter shall reasonably request.
(2) The Company hereby authorizes and
instructs the Warrant Agent to deliver to the Underwriter the Exercise Fee
promptly after receipt by the Warrant Agent from the Company of a check payable
to the order of the Underwriter in the amount of the Exercise Fee. The Warrant
Agent shall not issue the shares of Common Stock issuable upon exercise of the
Warrants until receipt and forwarding of such check to the Underwriter. In the
event that an Exercise Fee is paid to the Underwriter with respect to a Warrant
which the Company or the Warrant Agent determines is not properly completed for
exercise or in respect of which the Underwriter is not entitled to an Exercise
Fee, the Underwriter will promptly return such Exercise Fee to the Warrant Agent
which shall forthwith return such fee to the Company.
The Underwriter and the Company may at any time, after
_________________, 1997, and during business hours, examine the records of the
Warrant Agent, including its
5
ledger of original Warrant certificates returned to the Warrant Agent upon
exercise of Warrants. Notwithstanding any provision to the contrary, the
provisions of this paragraph and of subparagraph (b) above may not be modified,
amended or deleted without the prior written consent of the Underwriter.
(d) The Warrants may be redeemed at any time
during the exercise period by the Company beginning on ____________, 1997,
unless earlier permitted by the Underwriter, on 30 days' prior written notice to
all Registered Holders of the Warrants, at a redemption price of $.25 per
Warrant, if the closing bid price of the Common Stock as reported by the
National Association of Securities Dealers Automated Quotation System (NASDAQ)
(or a national securities exchange or the National Quotation Bureau or the NASD
Bulletin Board, as the case may be) is at least $6.00 on 20 consecutive trading
days ending three (3) days prior to the date of the written notice of
redemption. All Warrants must be redeemed if any are redeemed.
(e) If the Company calls the Warrants for
redemption, the price at which such Warrants are to be redeemed shall not be
paid to any Warrant holder unless the certificates representing such Warrants
are surrendered to the Corporate Office within the redemption period specified
in the Company's notice to Registered Holders. At the end of any such redemption
period respecting Warrants called for redemption, any Warrants not exercised or
tendered for redemption shall expire and the certificate(s) therefor shall
become void.
5. Reservation of Shares; Listing; Payment of Taxes, Etc.
(a) The Company covenants that it will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issue upon exercise of Warrants, such number of shares of Common
Stock as shall then be issuable upon the exercise of all outstanding Warrants.
The Company covenants that all shares of Common Stock which shall be issuable
upon exercise of Warrants shall be duly and validly issued any fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange or automated quotation system, if any, on which the
other shares of outstanding Common Stock of the Company are then listed.
(b) If any Common Stock reserved for issuance upon
exercise of Warrants hereunder requires registration with or approval of any
governmental authority under any federal or state law, before such securities
may be validly issued or delivered upon such exercise, then the Company
covenants that it will in good faith and as expeditiously as possible endeavor
to secure such registration or approval, as the case may be; provided, however,
that the Company need not endeavor to seek such registration or approval in a
state in which the Warrants were not sold by the Company pursuant to the
registration statement unless an exemption from registration under such state's
laws is available; provided, further, that Warrants may not be exercised by, or
shares of Common
6
Stock issued to, any Registered Holder in any state in which such exercise would
be unlawful.
(c) The Company shall pay all documentary, stamp
or similar taxes and other governmental charges that may be imposed with respect
to the issuance of Warrants, or the issuance or delivery of any shares upon
exercise of Warrants; provided, however, that if shares of Common Stock are to
be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent, unless it is acting as
such, is hereby irrevocably authorized to requisition the Company's Transfer
Agent from time to time for certificates representing shares of Common Stock
required upon exercise of the Warrants, and the Company will authorize its
Transfer Agent to comply with all such requisitions. The Company will file with
the Warrant Agent a statement setting forth the name and address of its Transfer
Agent for shares of Common Stock or other capital stock issuable upon exercise
of the Warrants and of each successor Transfer Agent.
6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for
other Warrant Certificates representing an equal aggregate number of Warrants or
may be transferred in whole or in part. Warrant Certificates to be so exchanged
shall be surrendered to the Warrant Agent at its Corporate Office, accompanied
by an Assignment, when necessary, and the Company shall execute and the Warrant
Agent shall countersign, issue and deliver in exchange therefor the Warrant
Certificate(s) which the Registered Holder shall be entitled to receive.
(b) The Warrant Agent shall keep at such office,
books in which, subject to such reasonable regulations as it may prescribe, it
shall register Warrant Certificates and the transfer thereof. Upon due
presentment for registration of transfer of any Warrant Certificate at such
office, the Company shall execute and the Warrant Agent shall issue and deliver
to the transferee or transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates
presented for registration or transfer, or for exchange or exercise, the
subscription form on the reverse thereof shall be duly endorsed, or be
accompanied by a written instrument or instruments of transfer and subscription,
in form satisfactory to the Company and the Warrant Agent, duly executed by the
Registered Holder thereof or his or her attorney duly authorized in writing.
7
(d) The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
upon any exchange, registration or transfer of any Warrant Certificates.
(e) All Warrant Certificates surrendered for
exercise or for exchange in case of mutilated Warrant Certificates shall be
promptly canceled by the Warrant Agent and thereafter retained by the Warrant
Agent until termination of the agency.
(f) Prior to due presentment for registration of
transfer thereof the Company and the Warrant Agent may deem and treat the
Registered Holder of any Warrant Certificate as the absolute owner thereof and
of each Warrant represented thereby (notwithstanding any notations of ownership
or writing thereon made by anyone other than the Company or the Warrant Agent)
for all purposes and shall not be affected by any notice to the contrary.
7. Loss or Mutilation. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and the
loss, theft, destruction or mutilation of any Warrant Certificate and (in the
case of loss, theft or destruction) of indemnity satisfactory to them, and (in
the case of mutilation) upon surrender and cancellation thereof, the Company
shall execute and the Warrant Agent shall countersign and deliver a new Warrant
Certificate representing an equal aggregate number of Warrants. Applicants for a
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
8. Adjustments to Exercise Price and Number of Securities.
(a) 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 subparagraph (g) of this section 8), 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 Purchase Price in effect immediately prior to the issuance or sale of
such shares, or without consideration, then forthwith upon such issuance or
sale, the Purchase 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 Purchase 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 Purchase Price be adjusted
pursuant to this computation to an amount in excess
8
of the Purchase Price in effect immediately prior to such computation, except in
the case of a combination of outstanding shares of Common Stock, as provided by
subparagraph (c) of this section 8.
For the purposes of any computation to be made in accordance
with this subparagraph (a), the following provisions shall be applicable:
(i) 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.
(ii) 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.
(iii) 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.
(iv) 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 subparagraph (a) of
this section 8.
9
(v) 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.
(b) 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 Purchase Price in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration, the
Purchase 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 subparagraph (a) of this section 8., provided
that:
(i) 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.
(ii) 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.
(iii) If any change shall occur in the
price per share provided for in any of the options, rights or warrants referred
to in subparagraph (i) of section 8(b), or in the price per share at which the
securities referred to in subparagraph (ii) of this section 8(b) 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
10
provide the Holder with any greater rights arising from consecutive adjustments
than if the last adjustment occurred initially.
(c) Subdivision and Combination. In case the
Company shall at any time subdivide or combine the outstanding shares of Common
Stock, the Purchase Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
(d) Adjustment in Number of Securities. Upon each
adjustment of the Purchase Price pursuant to the provisions of this section 8,
the number of securities issuable upon the exercise at the adjusted Purchase
Price of each Warrant shall be adjusted to the nearest full amount by
multiplying a number equal to the Purchase Price in effect immediately prior to
such adjustment by the number of securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Purchase Price.
(e) 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 Registered Holder, at its
option, may receive upon exercise of any Warrant either shares of Common Stock
or a like number of such securities with greater or superior voting rights.
(f) 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 Registered Holder a supplemental warrant agreement
providing that the holder of each Warrant then outstanding or to be outstanding
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of such 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 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.
(g) No Adjustment of Purchase Price in Certain
Cases. No adjustment of the Purchase Price shall be made:
11
(i) Upon the issuance or sale of the
Warrants, the shares issuable upon the exercise of the Warrants; the securities
issuable upon the exercise of the Representative's warrants, and the shares of
Common Stock issuable upon the exercise of any of them;
(ii) If the amount of said adjustment
shall be less than two cents (2(cent)) 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(cent)) per security;
(iii) Upon the issuance of up to 300,000
Shares of Common Stock under the Company's Stock Option Plan; or
(iv) Upon the issuance of shares Common
Stock upon exercise of the 340,000 warrants currently outstanding.
(h) Dividends and Other Distributions. In the
event that the Company shall at any time prior to the exercise of all Warrants
fix a record date for the determination of stockholders entitled to receive
(including any such distribution made to the stockholders of the Company in
connection with consolidation or merger in which the Company is the continuing
corporation in a distribution to all holders of Common Stock) evidence of its
indebtedness, cash, or assets (other than distributions and dividends payable in
shares of Common Stock), or rights, options,or warrants to subscribe for or or
purchase shares of Common Stock, or securities convertible into, or exchangeable
for, shares of Common Stock in a distribution to all holders of Common Stock,
then, in each case, the Purchase Price in effect at the time of such record date
shall be adjusted by multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, the numerator of which shall be the market
price per share of Common Stock on such record date, less the fair market value
(as determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of the portion of the
evidence of indebtedness or assets so to be distributed, or such rights,
options, or warrants, or convertible or exchangeable securities, or the amount
of cash, applicable to one share of Common Stock, and the denominator of which
shall be the market price per share of Common Stock on such record date. Such
adjustment shall be made successively whenever any event listed above shall
occur and become effective at the close of business on such record date.
9. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and
in a ministerial capacity for the Company, and its duties shall be determined
solely by the provisions hereof. The Warrant Agent shall not, by issuing and
delivering Warrant Certificates or by any other act hereunder, be deemed to make
any representations as to the validity or value or
12
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
(b) The Warrant Agent shall not at any time (i) be
liable for any recital or statement of fact contained herein or for any action
taken, suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with
counsel for the Company and shall incur no liability or responsibility for any
action taken, suffered or omitted by it in good faith in accordance with the
opinion or advice of such counsel.
(d) Any notice, statement, instruction, request,
direction, order or demand of the Company shall be sufficiently evidenced by an
instrument signed by its President, a Vice President, its Treasurer, an
Assistant Treasurer, its Secretary, or an Assistant Secretary (unless other
evidence in respect thereof is herein specifically prescribed). The Warrant
Agent shall not be liable for any action taken, suffered or omitted by it in
accordance with such notice, statement, instruction, request, direction, order
or demand.
(e) The Company agrees to pay the Warrant Agent
the usual and customary compensation it normally receives for its services of
this nature and to reimburse it for its reasonable expenses hereunder; it
further agrees to indemnify the Warrant Agent and save it harmless against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for anything done or omitted by the Warrant Agent in the execution of its
duties and powers hereunder except those arising as a result of the Warrant
Agent's negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be
discharged from all further duties and liabilities hereunder (except liabilities
arising as a result of the Warrant Agent's own negligence or willful
misconduct), after giving 30 days' prior written notice to the Company. At least
15 days prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to each
Registered Holder at the Company's expense. Upon such resignation the Company
shall appoint in writing a new warrant agent. If the Company shall fail to make
such appointment within a period of 30 days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then any Registered
Holder may apply in any court of competent jurisdiction for the appointment of a
new warrant agent. After acceptance in writing of such appointment by the new
warrant agent is received by the Company, such new warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named herein as the warrant agent, without any
13
further assurance, conveyance, act or deed; provided, however, that if for any
reason it shall be necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed and delivered by the resigning
Warrant Agent. Not later than the effective date of any such appointment the
Company shall file notice thereof with the resigning Warrant Agent and shall
forthwith cause a copy of such notice to be mailed to each Registered Holder.
(g) Any corporation into which the Warrant Agent
or any new warrant agent may be converted or merged or any corporation resulting
from any consolidation to which the Warrant Agent or any new warrant agent shall
be a party or any corporation succeeding to the corporate trust business of the
Warrant Agent shall be a successor warrant agent under this Agreement without
any further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding paragraph.
Any such successor warrant agent shall promptly cause notice of its succession
as warrant agent to be mailed, at its expense, to the Company and to each
Registered Holder.
(h) The Warrant Agent, its subsidiaries and
affiliates, and any of its or their officers or directors, may buy and hold or
sell Warrants or other securities of the Company and otherwise deal with the
Company in the same manner and to the same extent and with like effect as though
it were not the Warrant Agent. Nothing herein shall preclude the Warrant Agent
from acting in any other capacity for the Company or for any other legal entity.
10. Modification of Agreement. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement (a) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (b) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant Certificates;
provided, however, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of the
Registered Holders representing not less than 50% of the Warrants then
outstanding; provided, further, that no change shall be made in the terms or
provisions of any Warrant which would adversely affect such registered Holders,
other than such changes as are expressly permitted by this Agreement as
originally executed, without the consent in writing of the Registered Holders of
the Warrants affected.
11. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when mailed, first-class postage prepaid, when delivered to a telegraph
office for transmission, or when delivered to any commercial overnight air
courier service or other commercial messenger or delivery service which
regularly retains its receipts; if to a Registered Holder, at the
14
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company at 7703 Maple Avenue, Pennsauken, New Jersey 08109,
Attention: President, or at such other address as may have been furnished to the
Warrant Agent in writing by the Company, with a copy to the Company's counsel,
Heller, Horowitz & Feit, 292 Madison Avenue, New York, New York 10017,
Attention: Irving Rothstein, Esq.; and, if to the Warrant Agent, at the
Corporate Office.
12. Governing Law; Section Headings. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
Section headings in this Agreement appear for convenience of reference only and
shall not be used in any interpretation of this Agreement.
13. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the Registered Holders from time to time of Warrant
Certificates or any of them. Nothing in this Agreement shall be construed to
confer any right, remedy or claim upon any other person.
14. Counterparts. This Agreement may be executed in
counterparts, which taken together shall constitute a single document.
THE TRANSLATION GROUP, LTD.
BY: _________________________
AMERICAN STOCK TRANSFER & TRUST
COMPANY
BY: _________________________
Authorized Officer
15
Exhibit 4.4.1
--------------------------------------------------------------
THE TRANSLATION GROUP, LTD.
AND
WERBAL-ROTH SECURITIES, INC.
-------------
REPRESENTATIVE'S
WARRANT AGREEMENT
Dated as of _________, 1996
--------------------------------------------------------------
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 120,000 shares
("Shares") of common stock, par value $.001 per Share, of the Company ("Common
Stock") and 160,000 Redeemable Common Stock Purchase Warrants ("Warrants"). 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 1,200,000 shares of Common Stock
at a public offering price of $3.00 per share of Common Stock and 1,600,000
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 ________, 1997 until 5:30 P.M., Florida time, on ________, 2001 up to
an aggregate of 120,000 Shares at an initial exercise price (subject to
adjustment as provided in Section 8 hereof) of $3.90 per Share and 160,000
Warrants at an initial exercise price (subject to adjustment as provided in
Section 8 hereof) of $.26 per Warrant, 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 $5.20, 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.
2. Warrant Certificates. The warrant certificates evidencing the
Representa- tive'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
2
of the last reported sale prices for the last thirty (30) trading days, as
officially reported 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 officers
or partners of the underwriters and members of the selling group participating
in the Public Offering.
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 $3.90 per Share and $.26 per Warrant. The adjusted exercise price shall be
the price which shall result
3
from time to time from any and all adjustments of the initial exercise price in
accordance with the provisions of Section 8 hereof.
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 all other Securities
issuable upon exercise of the Warrants have been registered under the Securities
Act of 1933, as amended (the "Act").
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 (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
4
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 the Company's 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.
(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.
5
(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 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.
6
(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.
(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
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 any shares of Common Stock (other than the issuances or sales
referred to in Section 8.7 hereof), as set forth in this Section 8, then
forthwith upon such issuance, the Exercise Price shall (until another such
issuance) 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
of such shares, multiplied by the Exercise Price in effect immediately prior to
such issuance, and (b) the aggregate of the amount of all consideration, if any,
received by the Company upon such issuance, by (ii) the total number of shares
of Common Stock outstanding immediately after such issuance; 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:
(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
8
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 (b) 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 300,000 shares issuable upon
options under the Company's 1996 Stock Option Plan and any additional options
which are not vested or then exercisable.
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
9
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 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.
10
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;
(b) If the amount of said adjustment shall be less
than two cents (2(cent)) 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(cent)) per Security.
(c) Upon the issuance of up to 300,000 Shares of
Common Stock under the Company's Stock Option Plan.
11
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
fix a record date for the determination of stockholders entitled to receive
(including any such distribution made to the stockholders of the Company in
connection with consolidation or merger in which the Company is the continuing
corporation in a distribution to all holders of Common Stock) shares of Common
Stock, evidence of its indebtedness, cash or assets or rights, options or
warrants to subscribe for or purchase shares of Common Stock, or securities
convertible into, or exchangeable for, shares of Common Stock in a distribution
to all holders of Common Stock, then, in each case, the Exercise Price in effect
at the time of such record date shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Market Price per share of Common Stock on such
record date, less the fair market value (as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidence of indebtedness or assets
so to be distributed, or such shares, rights, options or warrants or convertible
or exchangeable securities, or the amount of cash, applicable to one share of
Common Stock, and the denominator of which shall be the Market Price per share
of Common Stock on such Record Date. Such adjustment shall be made successively
whenever any event listed above shall occur and become effective at the close of
business on such record date.
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.
12
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
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
14
jurisdiction, which jurisdiction shall be exclusive. The Company, the
Representative and 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
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:____________________________
Charles D. Cascio, President
WERBAL-ROTH SECURITIES , INC.
By:____________________________
Howard Roth, President
16
Exhibit 4.5.1
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 CERTIFI- CATE IS
RESTRICTED FOR ONE YEAR 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 ____________, 1997 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 $3.90 per Share and $.26 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.
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.
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.
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By:_______________________________
Name:
Title:
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[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)
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[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)
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[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
Exhibit 10.6
CONSULTING AGREEMENT
This Agreement, entered into as of _____________________,
1996, acknowledges and confirms the terms of our corporate finance agreement
(the "Agreement") as follows:
1. The Translation Group, Ltd., with its executive
offices located at 7703 Maple Avenue, Pennsauken, New Jersey 08109 (the
"Company"), hereby engages Werbel-Roth Securities, Inc. (the "Consultant") and
Consultant hereby agrees to render services to the Company as its corporate
finance consultant, financial advisor and investment banker.
2. During the term of this Agreement.
(a) Consultant shall provide advice to, and
consult with, the Company concerning financial planning, corporate organization
and structure, financial matters in connection with the operation of the
business of the Company, private and public equity and debt financing,
acquisitions, mergers and other similar business combinations and shall review
and advise the Company regarding its overall progress, needs and financial
condition. Said advice and consultation shall be provided by Consultant to the
Company in such form, manner and place as the Company reasonably requests except
that Consultant shall provide such services from its principle place of business
during such hours as may be determined by Consultant.
(b) The services of Consultant are non-exclusive
and subject to paragraph 5 hereof, Consultant may render services of the same or
similar nature, as herein described, to an entity whose business is in
competition with the Company, directly or indirectly.
3. The Company shall pay to Consultant for its
consulting services hereunder the annual sum of Fifteen Thousand Three Hundred
Twenty Six Dollars and Sixty-Seven Cents ($15,326.67) for the Term (as defined
herein), which aggregate amount of Forty Five Thousand Nine Hundred Eighty
Dollars ($45,980) shall be paid at closing of the Company's initial public
offering ("Closing") pursuant to the Company's registration statement filed with
the Securities and Exchange Commission on Form SB-2, File No. 333-8857. The
Company will also reimburse Consultant, promptly upon receipt of invoices
therefore, for out-of-pocket expenses incurred in connection with its services
hereunder. All expenses in excess of $25.00 shall be approved in advance by the
Company.
4. The term of this Agreement shall be for three years
commencing on the Closing (the "Term").
5. Consultant will not disclose to any other person,
firm, or corporation, nor use for its own benefit, during or after the term of
this Agreement, any trade secrets or other information designated as
confidential by the Company which is acquired by Consultant in the course of
performing services hereunder. (A trade secret is information not generally
known to the trade which gives the Company an advantage over its competitors.
Trade secrets can include, by way of example, products or services under
development, production methods and processes, sources of supply, customer
lists, marketing plans and information concerning the filing or pendency of
patent applications).
6. The Company agrees to indemnify and hold Consultant,
its affiliates, control person, officers, employees and agents (collectively,
the "Indemnified Persons") harmless from and against all losses, claims,
damages, liabilities, costs or expenses (including reasonable attorneys' and
accountants' fees) joint and several arising out of the performance of this
Agreement, whether or not Consultant is a party to such dispute. This indemnity
shall not apply, however, where a court of competent jurisdiction has made a
final determination that Consultant engaged in gross recklessness and/or willful
misconduct in the performance of its services hereunder which gave rise to the
loss, claim, damage, liability, cost or expense sought to be recovered hereunder
(but pending any such final determination, the indemnification and reimbursement
provision of this Agreement shall apply and the Company shall perform its
obligations hereunder to reimburse Consultant for its expenses).
The provisions of this paragraph (6) shall survive the
termination and expiration of this Agreement.
7. This Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and supersedes and cancels
any prior communications, understandings, and agreements between the parties.
This Agreement cannot be modified or changed, not can any of its provisions be
waived, except by written agreement signed by all parties.
8. This Agreement shall be governed by the laws of the
State of Florida any dispute arising out of this Agreement shall be adjudicated
in the courts of the State of Florida or in the federal court for the Southern
District of Florida, and the Company hereby agrees that service of process upon
it by registered mail at the address shown in this Agreement shall be deemed
adequate and lawful.
9. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of _______________, 1996.
WERBEL-ROTH SECURITIES, INC.
By:________________________________
Name: Howard Roth
Title: President
ACCEPTED AND AGREED to this
_____ day of ___________, 1996
THE TRANSLATION GROUP, INC.
By:________________________________
Name: Charles D. Cascio
Title: President
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VOTTA & COMPANY
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
19 CHESTNUT STREET
HADDONFIELD, NEW JERSEY 08033
(609) 795-8188
FAX: (609) 795-7310
We hereby consent to the use in the Registration Statement of
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.
Votta & Company
Haddonfield, New Jersey
November 13, 1996
