TRUETIME INC
S-1, 1999-11-03
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<PAGE>   1

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 3, 1999

                                                  REGISTRATION NUMBER 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------

                                    FORM S-1
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------

                                 TRUETIME, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                <C>                                <C>
             DELAWARE                             3663                            94-3343279
 (State or other jurisdiction of      (Primary Standard Industrial             (I.R.S. Employer
  incorporation or organization)      Classification Code Number)            Identification No.)
</TABLE>

                                 TRUETIME, INC.
                                2835 DUKE COURT
                              SANTA ROSA, CA 95407
                                 (707) 528-1230
              (Address, including zip code, and telephone number,
       including area code, of Registrant's principal executive offices)

                             ---------------------

                              ELIZABETH A. WITHERS
                                 TRUETIME, INC.
                                2835 DUKE COURT
                              SANTA ROSA, CA 95407
                                 (707) 528-1230
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                             ---------------------

                                   Copies to:

<TABLE>
<S>                                                 <C>
                 CHARLES H. STILL                              J. KENNETH MENGES, JR., P.C.
            FULBRIGHT & JAWORSKI L.L.P.                  AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
             1301 MCKINNEY, SUITE 5100                        1700 PACIFIC AVENUE, SUITE 4100
             HOUSTON, TEXAS 77010-3095                              DALLAS, TEXAS 75201
                  (713) 651-5151                                      (214) 969-2800
</TABLE>

                             ---------------------

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this 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. [ ]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]

     If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
                                                               PROPOSED MAXIMUM       PROPOSED MAXIMUM
        TITLE OF EACH CLASS OF             AMOUNT TO BE         OFFERING PRICE       AGGREGATE OFFERING        AMOUNT OF
      SECURITIES TO BE REGISTERED          REGISTERED(1)         PER SHARE(2)             PRICE(2)         REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                 <C>                    <C>                    <C>
Common Stock ($.01 par value)..........      3,450,000              $7.00               $24,150,000             $6,714
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 450,000 shares which the underwriters have the option to purchase
    to cover over-allotments, if any.

(2) Estimated solely for the purpose of determining the registration fee
    pursuant to Rule 457(a) promulgated under the Securities Act.

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2

     THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
     MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT RELATING TO
     THESE SECURITIES FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
     EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE
     ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE OR OTHER
     JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

                 SUBJECT TO COMPLETION, DATED NOVEMBER 3, 1999
PROSPECTUS

                                3,000,000 SHARES

                                [TRUETIME LOGO]

                                  COMMON STOCK
                             ---------------------

This is the initial public offering of TrueTime, Inc. We are offering 1,500,000
shares of our common stock and the selling stockholder is offering 1,500,000
shares of our common stock for resale. No public market currently exists for our
shares. We anticipate that the initial public offering price will be between
$5.00 and $7.00 per share.

We are applying to have the shares we are offering approved for quotation on the
Nasdaq National Market under the symbol "TRUE."

                             ---------------------

THIS INVESTMENT INVOLVES SUBSTANTIAL RISK. SEE "RISK FACTORS" BEGINNING ON PAGE
6.
                             ---------------------

<TABLE>
<CAPTION>
                                                              PER SHARE              TOTAL
                                                              ----------            --------
<S>                                                           <C>                   <C>
Public offering price.......................................   $                    $
Underwriting discounts......................................   $                    $
Proceeds, before expenses, to TrueTime......................   $                    $
Proceeds, before expenses, to selling stockholder...........   $                    $
</TABLE>

                             ---------------------

TrueTime has granted the underwriters a 30-day option to purchase up to 450,000
additional shares to cover over-allotments.

TrueTime has, as additional underwriting compensation, agreed to issue to C.E.
Unterberg, Towbin warrants to purchase up to 200,000 shares of common stock at
an initial exercise price for each share equal to 110% of the offering price.

                             ---------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                             ---------------------

The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on             , 1999.

                             ---------------------

                         [C.E. UNTERBERG, TOWBIN LOGO]

                                           , 1999
<PAGE>   3

                     [product pictures or other depictions]
<PAGE>   4

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Prospectus Summary...................     1
Risk Factors.........................     6
Special Note Regarding
  Forward-Looking Statements.........    13
Use of Proceeds......................    14
Dividend Policy......................    14
Capitalization.......................    15
Dilution.............................    16
Selected Financial Data..............    17
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations......................    18
Business.............................    24
</TABLE>

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Management...........................    34
Relationship with OYO Japan and
  Related Transactions...............    41
Security Ownership of Management and
  Principal and Selling
  Stockholder........................    43
Description of Capital Stock.........    45
Shares Eligible for Future Sale......    50
Underwriting.........................    52
Legal Matters........................    54
Experts..............................    54
Where You Can Find Additional
  Information........................    54
Index to Financial Statements........   F-i
</TABLE>

                             ---------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU WRITTEN
INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO MATTERS
NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED INFORMATION.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SHARES OF COMMON STOCK OR OUR
SOLICITATION OF YOUR OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY
JURISDICTION WHERE IT WOULD NOT BE PERMITTED OR LEGAL. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CURRENT ONLY AS OF THE DATE HEREOF AND MAY CHANGE. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER AFTER THE DATE OF
THIS PROSPECTUS SHALL CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN OR THE AFFAIRS OF TRUETIME, INC. HAVE NOT CHANGED SINCE THE DATE HEREOF.
                             ---------------------

                             ABOUT THIS PROSPECTUS

     In this prospectus, "TrueTime, Inc.," "TrueTime," "we," "us" and "our"
refer to TrueTime, Inc., a Delaware corporation. Additionally, "OYO" refers to
OYO Corporation, a Japanese corporation, as well as its wholly owned subsidiary,
OYO Corporation U.S.A., a Texas corporation, and its consolidated subsidiaries,
unless the context indicates otherwise. "OYO Japan" refers to OYO Corporation, a
Japanese corporation, and "OYO U.S.A." refers to OYO Corporation U.S.A., a Texas
corporation.
<PAGE>   5

                               PROSPECTUS SUMMARY

     In the following summary, we will try to provide clear and concise
information which will help you decide whether you wish to buy our common stock.
However, the summary may not contain all the information that is important to
you and we therefore encourage you to read the entire prospectus and our
consolidated financial statements and the notes to those statements before
making your decision.

                                 TRUETIME, INC.

OUR BUSINESS

     TrueTime designs, develops, manufactures and markets precision time and
frequency products that are essential components used in telecommunications,
computer networking, e-commerce, aerospace and various other commercial markets.
Our products use a variety of external timing references, including most
importantly the Global Positioning System, or GPS, together with advanced timing
devices to provide high quality signals (frequencies) and precise time. We offer
a wide variety of products, which can be divided into the following broad
categories: (1) precise time and frequency products, (2) computer plug-in cards,
(3) computer network time servers, (4) time code products and (5) time displays.

     Our products, incorporated as components in complex systems, allow
customers to

     - improve clarity and quality of voice, video and data in wireline,
       wireless and satellite communications,

     - authenticate the time of stock market and other e-commerce transactions,

     - monitor and control the frequency of electric utility power grids to
       prevent power black-outs and quickly locate power line faults,

     - transmit television signals at designated frequencies to meet regulatory
       requirements,

     - meet requirements for secure communications, particularly in national
       defense and security contexts, and

     - time high resolution data collected in military ranges and in space
       launches with a high degree of accuracy.

     Our customers are businesses and government agencies that have
sophisticated and demanding needs for timing with greater accuracy and
resolution than available from conventional time measuring devices. A
substantial portion of our sales is made to numerous, and usually repeat,
customers who purchase small quantities of multiple types of products and who
often have custom or semi-custom specifications. Representative of typical
customers are some of the best-known enterprises engaged in

     - telecommunications -- Lucent Technologies, PanAmSat Corporation and
       companies which were part of the old AT&T system,

     - computer networking -- Novell, Inc., Lucent Technologies and Cisco
       Systems, Inc.,

     - e-commerce -- NYSE, Nasdaq Stock Market, Chicago Mercantile Exchange,
       Chicago Board of Trade and Ameritrade Information Service,

     - power utilities -- PG&E Corporation and Bonneville Power Administration,

     - aerospace -- The Boeing Company, Northrup Grumman Corporation, FAA and
       Allied Signal Aerospace,

     - television -- CNN, Westwood One and WHDTV, the high-definition television
       model station, and

     - national defense -- separate purchasing arms of the Department of Defense
       and Hughes Network Systems, Lockheed Martin Corporation, Motorola, Inc.,
       Raytheon Systems Company, Litton Denro (a subsidiary of Litton
       Industries, Inc.) and NASA.

                                        1
<PAGE>   6

     In fiscal year 1999, we sold our products to more than 1,000 customers. We
believe that the size and diversity of our customer base reduces the business
risk inherent in dependence on a small number of large-volume customers.

     In the fiscal year ended September 30, 1999, we achieved sales of $20.6
million, an increase of 26.7% over the prior fiscal year, resulting in net
income of $2.3 million, an increase of 40.0% over the same period.

OUR INDUSTRY AND MARKET

     Our time and frequency products are integral to the expanding
communications infrastructure composed of wireline, wireless (including
satellite) and computer network technologies. The increase in demand for
precision timing is due in part to the growth in communications and computer
network systems worldwide. Growth in data, voice and video transmissions on
these networks is anticipated to lead to an increased demand for substantial
bandwidth compared to traditional voice traffic. We believe that the convergence
of wireline, wireless and computer network systems and the pervasive growth of
the Internet and e-commerce will lead to increased demand for precision time and
frequency devices.

     Precision time and frequency devices normally require use of an external
timing reference to maintain required accuracy. Currently, the predominantly
used standard is the highly accurate time reference available from GPS operated
by the U.S. Department of Defense. The demand for precision time and frequency
referenced to GPS has grown with the increased use of digital wireless
communication and is now, in addition to more traditional uses in the aerospace,
utility and broadcast industries, being incorporated into wireless, computer and
high-speed wireline networks.

     Two marketing research firms that follow the GPS industry are Frost &
Sullivan and Allied Business Intelligence. These firms provide forecasts for
industry growth by segments, including forecasts in the growth in timing
products using GPS as a timing reference. Their forecasts for future growth of
the timing product segment are consistent, but not identical. According to
forecast data from a Frost & Sullivan report we obtained

     - the aggregate North American market for GPS related timing products is
       projected to grow from $209 million to $368 million during the five-year
       period from 2000 through 2004, reflecting a compound annual growth rate
       of approximately 15% during such period.

     According to forecast data from an Allied Business Intelligence report we
obtained covering the same five-year period

     - the aggregate U.S. market for GPS related timing products is projected to
       grow from $238 million to $383 million, reflecting a compound annual
       growth rate of approximately 13% during such period.

OUR STRATEGY

     We have already established name-recognition in the time and frequency
industry. Our investments in new technology have given us the capability to
enter new segments of the timing market and allow us to reduce the time needed
to market new products. Now, our goals are to

      -- Introduce new products by

         - targeting the growing telecommunications, e-commerce, computer
           networking and digital wireless market segments,

         - increasing our research and development budget and capabilities, and

         - applying core technologies in new markets.

      -- Form strategic relationships by

         - developing alliances with companies that offer complementary products
           and technologies, and
                                        2
<PAGE>   7

         - exploring opportunities to acquire companies with technologies that
           will enhance our product lines, add new related products or add
           economies of scale to our existing operations.

      -- Continue to gain market share by

         - developing, manufacturing and marketing the highest quality precision
           time and frequency products,

         - applying new technology to current applications,

         - increasing international sales through increased marketing activities
           abroad, and

         - improving distribution channels.

CORPORATE INFORMATION

     In 1991, OYO U.S.A. acquired our business as part of its acquisition of
Kinemetrics, Inc., which manufactures and sells earthquake instrumentation.
Shortly after acquiring Kinemetrics, OYO established a new California
corporation named TrueTime, Inc., and transferred the ownership of the
Kinemetrics/ TrueTime business to the newly established corporation. In November
1999, we were reincorporated in Delaware. We are located at 2835 Duke Court,
Santa Rosa, California 95407. Our telephone number is (707) 528-1230.

                                        3
<PAGE>   8

                                  THE OFFERING

Common stock offered by TrueTime........     1,500,000 shares

Common stock offered by the selling
stockholder.............................     1,500,000 shares

Common stock to be outstanding after
this offering...........................     5,500,000 shares(1)(2)

Use of proceeds.........................     We plan to use the proceeds from
                                             this offering for general corporate
                                             purposes, including working
                                             capital, expansion into new
                                             technologies and markets, increased
                                             marketing, sales and operations
                                             capabilities and possible
                                             acquisitions of complementary
                                             businesses or technologies. We will
                                             not receive any proceeds from the
                                             sale of the shares of common stock
                                             offered by the selling stockholder.
                                             See "Use of Proceeds."

Proposed Nasdaq National Market
symbol..................................     TRUE
- ---------------------

(1) Assumes no exercise of the underwriters' over-allotment option. Unless we
    specifically state otherwise, the information in this prospectus does not
    take into account the issuance of up to 450,000 shares of common stock that
    the underwriters have the option to purchase solely to cover
    over-allotments. If the underwriters exercise their over-allotment option in
    full, 5,950,000 shares of our common stock will be outstanding after this
    offering.

(2) Excludes 1,650,000 shares of common stock reserved for issuance under our
    stock option plans, of which up to 810,000 shares of common stock will be
    issuable upon exercise of options that the Board of Directors intends to
    grant to the directors, advisors, officers and certain key employees on or
    about the date of this offering. These options will be exercisable at the
    offering price. Also, excludes 200,000 shares issuable upon exercise of
    outstanding warrants issued to the underwriters in connection with this
    offering. For information on these warrants, see "Underwriting."

     All information in this prospectus relating to the number of shares of our
common stock and options and warrants to purchase our common stock has been
adjusted to reflect the initial issuance of our common stock to our sole
stockholder on November 1, 1999, in connection with the reincorporation of our
predecessor, a California corporation of the same name, in Delaware.

                                        4
<PAGE>   9

                             SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                     YEAR ENDED SEPTEMBER 30,
                                                            ------------------------------------------
                                                               1997            1998            1999
                                                            ----------      ----------      ----------
                                                             (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                         <C>             <C>             <C>
STATEMENT OF OPERATIONS DATA
Sales.....................................................   $13,894         $16,297         $20,645
Cost of sales.............................................     5,783           7,537           9,076
                                                             -------         -------         -------
Gross profit..............................................     8,111           8,760          11,569
Operating expenses:
  Selling, general and administrative.....................     3,906           4,395           5,905
  Research and development................................     1,855           1,873           2,155
                                                             -------         -------         -------
          Total operating expenses........................     5,761           6,268           8,060
                                                             -------         -------         -------
Income from operations....................................     2,350           2,492           3,509
Interest and other income (expense), net..................        10             249             305
                                                             -------         -------         -------
Income before income taxes................................     2,360           2,741           3,814
Provision for income taxes................................       964           1,122           1,547
                                                             -------         -------         -------
Net income................................................   $ 1,396         $ 1,619         $ 2,267
                                                             =======         =======         =======
Earnings per share -- basic and diluted...................   $  0.35         $  0.40         $  0.57
Weighted average shares outstanding as adjusted for
  reincorporation -- basic and diluted....................     4,000           4,000           4,000
</TABLE>

<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30, 1999
                                                              ------------------------
                                                                               AS
                                                              HISTORICAL   ADJUSTED(1)
                                                              ----------   -----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>          <C>
BALANCE SHEET DATA
Cash and cash equivalents...................................   $ 3,539       $11,684
Working capital.............................................    10,808        18,953
Total assets................................................    15,491        23,636
Stockholders' equity........................................    12,753        20,898
</TABLE>

- ---------------------

(1) As adjusted to reflect this offering and the application of the net proceeds
    therefrom.

                                        5
<PAGE>   10

                                  RISK FACTORS

     An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the financial and other information contained in this prospectus, before
you decide whether to buy our common stock. Additional risks and uncertainties,
including those generally affecting the market in which we operate or that we
currently deem immaterial, may also impair our business. If any of these risks
actually occur, our business, financial condition and results of operations will
likely suffer. In such case, the trading price of our common stock could
decline, and you might lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS

  OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO KEEP UP WITH RAPID TECHNOLOGICAL
  CHANGE AND PRODUCT OBSOLESCENCE.

     If we fail to maintain our technological leadership and good reputation
with our customers, the value of your investment will decrease. The markets for
timing and frequency products are characterized by continual and rapid
technological developments that have resulted in, and will likely continue to
result in, substantial improvements in product function and performance. Our
success will depend on our ability to anticipate changes in technology and
industry requirements and to respond to technological developments on a timely
basis, either internally or through strategic alliances.

     We will likely be constantly threatened by current competitors or new
market entrants who may develop new technologies or products or establish new
standards that could render our products obsolete and unmarketable. Thus, we can
offer no assurances that we will be successful in developing and marketing, on a
timely and cost effective basis, product enhancements or new products that
respond to technological developments, that are accepted in the marketplace or
that comply with industry standards.

  WE RELY ON A LIMITED NUMBER OF SUPPLIERS FOR CERTAIN CRITICAL COMPONENTS, AND
  WE USE A SINGLE SUPPLIER FOR VIRTUALLY ALL OF ONE OF OUR GPS-BASED COMPONENTS,
  MAKING US SUBJECT TO SUPPLY AND QUALITY CONTROL PROBLEMS.

     Most of our products incorporate certain components or technology supplied
in part by third parties. From time to time, delays and disruptions in our
supply chain, including some such disruptions in recent periods. To date, these
delays and disruptions have not materially adversely affected our business.
Wherever possible, we try to develop multiple sources of supply, but we do not
always succeed. To the extent that we experience significant supply or quality
control problems with our vendors, these problems can cause us to have
difficulty in controlling our quality and can have a significant adverse effect
on our ability to meet future production and delivery commitments to our
customers.

     Currently, Trimble Navigation, Inc. provides virtually all of a key
component for our GPS-based products. In addition, we believe that Trimble has
begun competing in markets similar to our own. While we have attempted to
address this single-supplier risk by entering into purchase agreements with
Trimble that will secure our supply of the components for the next year or so,
by attempting to establish alternative supply arrangements and by taking steps
to develop our own proprietary products in this area, there can be no assurances
that we will be able to obtain adequate supplies of this component in the
future. If we are unable to obtain adequate supplies of this component for any
reason, we will likely experience delays or reductions in production and
increased expenses while we redesign our GPS-based products or accelerate the
introduction of new GPS-based products that do not use this component. Our
profitability will be negatively affected if we experience inadequate supplies
of any key components.

  PROTECTION OF OUR INTELLECTUAL PROPERTY MAY BE INADEQUATE AND WE MAY FACE
  INFRINGEMENT RISKS.

     Historically, we have not filed patents to protect our intellectual
property. While we hope our intellectual property is adequately protected by our
confidential trade-secret protection plans and programs, we cannot be sure that
our competitors will be prevented from gaining access to our proprietary and

                                        6
<PAGE>   11

confidential technologies. Furthermore, although we have applied for a patent
related to a computer network timing product, we can offer no assurances that a
patent will be issued for this patent application or other future applications
and, if issued, that any patents will be enforceable.

     We do not know of any instances where our products violate the intellectual
property rights of others or inappropriately use their technology. However,
high-tech industries are often very litigious. Therefore, we face the risk of
adverse claims and litigation alleging infringement of other people's
intellectual property rights. These claims could result in costly litigation and
divert management's attention from other matters. Alternatively, these claims
could practically require us to obtain licenses in order to use, manufacture and
sell certain of our products, regardless of the merit of the infringement
claims, in order to maintain business levels. We cannot be certain that any
necessary licenses will be available or that, if available, they can be obtained
on reasonable terms acceptable to us.

  WE FACE THE RISK OF OUR PRODUCTS AND SOFTWARE BEING NON-Y2K COMPLIANT, LEADING
  TO POSSIBLE CLAIMS AGAINST US BY OUR CUSTOMERS, AND THE RISK OF OTHER Y2K
  RELATED ISSUES.

     We sell products and software that could fail at the transition between
December 31, 1999 and January 1, 2000, leading to claims against us by our
customers. At the Y2K transition date, certain computers and information
technology equipment may not continue to work properly. Although the latest
versions of our software are designed to be Y2K compliant, it is not possible to
determine with complete accuracy that all Y2K problems affecting our products
have been identified or corrected due to their complexity and the fact that
these products interact with other third party vendor products and operate on or
with computer systems that are not under our control.

     A small number of customers who had older TrueTime products and had not
checked their equipment for Y2K compliance reported product failure following
August 21, 1999, the date when the GPS counter rolled over from 1024 to 0000, as
it was designed to do. While these customers had not had their products updated
and the costs of servicing the customers were not material, this could be
indicative of claims by customers having older TrueTime products on January 1,
2000. A significant number of operational inconveniences and inefficiencies may
divert our time and attention and financial and human resources from our
ordinary activities, and a lesser number of serious system failures and customer
claims may result from the Y2K issue.

     While we have not to date experienced any declines in orders nor have our
customers advised us of any intentions in that regard, other companies in
computer-related industries have recently reported some decreases in sales and
orders and have attributed those decreases to the postponement of purchases
until after the Y2K event. There can, however, be no assurances that we will not
be adversely affected by any such decisions by our customers.

  INTENSE COMPETITION CAN NEGATIVELY AFFECT OUR PROFITABILITY AND FUTURE BECAUSE
  MANY OF OUR COMPETITORS HAVE GREATER RESOURCES AND BROADER PRODUCT OFFERINGS
  THAN WE HAVE.

     Many of our existing and potential competitors have substantially greater
marketing, financial and technical resources. In addition, some of our
competitors have broader product offerings and manufacture internally certain
critical components of time and frequency products. Currently, we neither have a
complete offering of precision time and frequency products nor do we manufacture
internally certain critical components, placing us at a disadvantage to some of
our competitors. In addition, we believe that some of our competitors have
obtained and maintained business that loses money in order to maintain a
competitive advantage with regard to specific customers or products. If our
competitors were to use such tactics in the future, we would be unable to
maintain our market position without incurring a negative impact on our
profitability.

     The race for a leading position in new technological advances is always
very competitive. Advances in technology may reduce the cost for potential
competitors to gain market entry, particularly for less expensive time and
frequency products. We cannot assure you that sales of our products will
continue at current volumes or prices in any event but especially if our current
competitors or new market entrants
                                        7
<PAGE>   12

introduce new products with better features, better performance, lower prices or
having other characteristics that are more attractive than our own. Competitive
pressures or other factors also may result in significant price competition that
could have a material adverse effect on our results of operations.

  THE FAILURE OF OUR INDUSTRY TO GROW AS FORECASTED WILL MATERIALLY ADVERSELY
  AFFECT OUR FUTURE PERFORMANCE.

     Our future successful performance is inextricably tied to the growth of our
industry. While we do not disagree with the overall market growth forecasts
cited in this prospectus from Frost & Sullivan and Allied Business Intelligence
reports, we did not participate in making such forecasts or in developing the
assumptions upon which they are based or the methodology used in developing
necessary data. Accordingly, we cannot assure you that such forecasted growth
can be achieved or that assumptions upon which such forecasts are based will
prove to be accurate. As is the case with all forward-looking information
contained in this prospectus, actual events or results may differ materially
from forecasted data. Moreover, even if our industry grows as forecast, there
can be no assurance that we will be able to grow consistently with our industry.

  IF OUR RELATIONSHIPS WITH OUR REPRESENTATIVES ARE IMPAIRED, OUR BUSINESS WILL
  SUFFER.

     More than 80% of our orders come through our 26 domestic and worldwide
sales representative organizations. Many of these representatives act as
relationship brokers and the loss of any of these key distributors could have a
negative effect on our sales.

  IF WE FAIL TO ATTRACT AND RETAIN KEY EMPLOYEES, OUR BUSINESS WILL SUFFER.

     Our success depends upon attracting and retaining highly skilled
professionals. A number of our employees are highly skilled engineers and other
technical professionals, and our failure to continue to attract and retain such
individuals could adversely affect our ability to compete in the industry. In
addition, our success will depend to a significant extent upon the abilities and
efforts of several members of our senior management.

  MANY OF OUR KEY CUSTOMERS ARE UNITS OF THE U.S. GOVERNMENT AND ENTITIES THAT
  ARE DEPENDENT UPON THE U.S. GOVERNMENT FUNDING FOR PURCHASES.

     Our defense, military and aerospace based business depends largely on U.S.
government expenditures, whether directly with us or indirectly with our
customers who contract with the U.S. government. In recent years, units of the
U.S. government have collectively accounted for approximately 21% to 28% of our
annual revenues. There can be no assurances as to whether future governmental
spending will adequately support our business in those areas, and substantial
decreases in government spending or loss of U.S. governmental customers could
materially and adversely affect our operations.

  OUR MARKET IS SEGMENTED INTO A LIMITED NUMBER OF CUSTOMER GROUPS, THE LOSS OR
  CHANGE OF WHICH COULD SIGNIFICANTLY DECREASE OUR SALES.

     While we sell our products to a large number of individual customers, the
number of customer groups is limited. These groups include telecommunications,
computer networking, aerospace, military, satellite, U.S. government and power
utility customers. The loss, or changes in the purchasing behavior, of one or
more of these groups of customers could cause a material decrease in the sale of
our products.

  THE FAILURE OF GPS AND OTHER TIME AND FREQUENCY REFERENCES WOULD CREATE
  PROBLEMS FOR OUR PRODUCTS AND DISRUPT OUR SALES.

     The time and frequency products that we manufacture rely upon the
availability of highly accurate timing references, primarily GPS operated by the
U.S. Department of Defense, and to a lesser degree, other timing references
operated by the U.S. National Institute of Science and Technology and other
outside signal sources. The failure of these timing references, particularly
GPS, would create many problems for our products and our customers and seriously
disrupt the sale of our products.
                                        8
<PAGE>   13

  IF OUR PRODUCTS FAIL TO PERFORM ACCORDING TO SPECIFICATION OR PROVE TO BE
  UNRELIABLE, OUR CUSTOMER RELATIONSHIPS AND INDUSTRY REPUTATION MAY BE
  ADVERSELY AFFECTED.

     Our customers require demanding specifications for product performance and
reliability. Because our precision time and frequency products are complex and
often use state-of-the-art components, processes and techniques, undetected
errors and design flaws may occur. Product defects result in higher product
service and warranty and replacement costs and may cause serious damage to our
customer relationships and industry reputation, all of which will negatively
impact our business.

  IF WE ARE UNABLE TO EXPAND OUR PRODUCTION CAPACITY TO MAINTAIN COMPETITIVE
  DELIVERY TIMES, WE WILL LIKELY LOSE CUSTOMERS.

     Our production capacity and ability to fill orders for our customers on a
timely basis is limited by our equipment, the size of our production facilities,
the ability of our suppliers to meet our needs and our human resources. These
resources in turn are limited by the availability of capital and the time
required to increase capacity, particularly to construct additional facilities
and to hire and train employees. We cannot assure you that we will have
sufficient capital and resources to expand our production capacity and to
maintain delivery times which our customers consider appropriate. Further, an
increase in our delivery times may result in loss of customers.

  WE MAY NOT HAVE ENOUGH DEMAND FOR OUR PRODUCTS TO REALIZE A RETURN ON OUR
  INCREASED CAPACITY.

     To meet our goals for future growth, we plan to move into new, larger
manufacturing and office facilities in the first calendar quarter of 2000, using
a portion of the proceeds of this offering to build out and equip the new
facilities. The additional manufacturing capacity provided by the new facilities
and equipment will allow us to more than double our output given sufficient
market demand. However, after increasing our production capacity, we may find
that demand for our products does not remain sufficiently high for us to realize
a satisfactory return on the capital we have spent to increase capacity.

  OYO WILL BE IN A POSITION TO CONTROL MATTERS REQUIRING A STOCKHOLDER VOTE,
  WHICH MAY MATERIALLY AND ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK
  OR DENY OUR STOCKHOLDERS AN OPPORTUNITY TO REALIZE A PREMIUM ON THEIR SHARES.

     Upon completion of this offering, OYO will beneficially own 45.5% of our
outstanding common stock (42.0% if the underwriters exercise their
over-allotment option in full). As a practical matter, with this substantial
ownership, OYO will have sufficient voting power to control our management, as
well as the outcome of matters submitted to our stockholders for approval,
including the election of directors and any merger, consolidation or sale of
substantially all our assets. The concentration of ownership of our common stock
could delay or prevent proxy contests, mergers, tender offers, open-market
purchase programs or other purchases of our common stock that could give you the
opportunity to realize a premium over the then-prevailing market price for our
common stock.

  SEVERAL MEMBERS OF OUR BOARD COULD HAVE CONFLICTS OF INTERESTS WITH TRUETIME.

     Several members of our Board of Directors also serve as officers or
directors of the selling stockholder and its parent company. Satoru Ohya, who
will be appointed as a member of our Board of Directors immediately prior to the
closing of this offering, is the President of OYO Japan, as well as a director
of various of its affiliates. Katsuhiko Kobayashi, the Chairman of our Board of
Directors, is a Managing Director of OYO Japan and a director and officer of OYO
U.S.A. and serves in various other director and officer positions with respect
to other subsidiaries of OYO U.S.A. Charles H. Still, who will be appointed as a
member of our Board of Directors immediately prior to the closing of this
offering and currently serves as our Secretary, is the Secretary of OYO U.S.A.
and of various of its other subsidiaries and, through his law firm, serves as
regular legal counsel to OYO Japan, OYO U.S.A. and various of their other
affiliates. While no specific conflicts of interest are known to exist at
present, it is possible that conflicts of interest may arise with respect to the
relationship between OYO and us.

                                        9
<PAGE>   14

  AFTER THIS OFFERING OUR HISTORICAL SOURCE OF FINANCING WILL NO LONGER BE
  AVAILABLE.

     Prior to this offering, we have operated as a wholly owned subsidiary of
OYO. We have been a participant in various financing, cash management and
service arrangements provided by OYO to us and to its other subsidiaries and
have relied on the financial strength of OYO to assist us if financing needs
arose. In the past, we have not needed to call upon OYO for direct financial
assistance. However, we cannot be sure that additional financing will not be
required in the future, and if required, we may find that financing is not
available on terms that we consider acceptable. As a result of this offering,
OYO's stockholdings in TrueTime will be reduced from 100% to 45.5% or less, and
we can no longer rely on OYO for financial support.

     As a result of no longer being a wholly owned subsidiary of OYO, we have
entered into agreements with OYO providing for, among other things, our
separation from the activities of that company and, to the extent needed, for
the provision of various services to us on an interim basis until we have in
place systems and programs to allow us to complete our separation from OYO.
While these services have not been substantial in the past, and we have borne
our part of the costs thereof, none of these agreements resulted from
disinterested negotiations.

  WE ARE UNABLE TO FORECAST ACCURATELY FLUCTUATIONS IN QUARTERLY PERFORMANCE,
  WHICH CAN IMPACT INVENTORIES, OPERATING RESULTS, CASH FLOW AND CUSTOMER
  RELATIONSHIPS.

     Historically, the rate of incoming orders for our products has varied
substantially from quarter to quarter. We attempt to accurately forecast orders
for our products and commence purchasing and manufacturing prior to the receipt
of such orders. However, it is highly unlikely that we will consistently
accurately forecast the timing and rate of orders. This aspect of our business
makes our planning inexact and, in turn, affects our shipments, costs,
inventories, operating results and cash flow for any given quarter. In addition,
our quarterly operating results are affected by competitive pricing,
announcements regarding new product developments and cyclical conditions in the
industry. Accordingly, we may experience wide quarterly fluctuations in our
operating performance and profitability, which may adversely affect our stock
price even if our year to year performance is more stable, which it also may not
be. In addition, many of our products require significant manufacturing time,
making it difficult to increase production on short notice. If we are unable to
satisfy unexpected customer orders, our business and customer relationships
could suffer.

  THERE ARE RISKS INVOLVED IN OUR INTERNATIONAL MARKETING.

     Sales by our international representatives accounted for approximately 17%
of our sales during fiscal years 1998 and 1999. All of our sales are made in
U.S. dollars. However, international sales are subject to special risks inherent
in doing business outside the United States, all of which may disrupt
international markets, including the risks of war, civil disturbances, embargo
and government activities.

     International sales are also generally subject to the risk of compliance
with additional international laws, including tariff regulations and import and
export restrictions. Sales in foreign countries may require prior United States
government approval in the form of an export license. We can offer no assurance
that we will not experience difficulties in connection with future international
sales.

  WE FACE CREDIT RISKS BY SELLING TO CUSTOMERS ON OPEN ACCOUNT.

     We sell our products to customers on open terms. While such terms typically
obligate the purchaser to pay within 30 days of invoice, certain customers pay
later and some never pay. On average, payments are received approximately 60
days after shipment. While our history in collecting accounts receivable has
been satisfactory and our bad debt write-offs have been immaterial, we cannot
assure you that our accounts receivable collection experience will not worsen
and lead to bad debt write-offs which would seriously affect our profitability
and financial condition.

                                       10
<PAGE>   15

  POTENTIAL FUTURE ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR
  BUSINESS, DILUTE SHAREHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATION RESULTS.

     We may acquire other businesses in the future, which may complicate our
management tasks. These acquisitions may be in the precise timing industry or
other business areas that, although complimentary to our business, may be in
areas in which we currently do not compete and may not have prior management or
operating experience. We may need to integrate entirely new operations and
distinct corporate cultures. Such integration efforts may not succeed or may
distract our management from operating our existing business. Our failure to
manage future acquisitions successfully could seriously harm our operating
results. Further, our shareholders' equity could be diluted if we finance the
acquisitions by issuing equity securities.

  WE FACE CERTAIN RISKS ASSOCIATED WITH GOVERNMENT REGULATIONS AND GOVERNMENT
  ACTIONS.

     Our operations are subject to a variety of federal, state and local
environmental regulations related to the storage, use, discharge and disposal of
toxic or other hazardous substances used in our manufacturing process. Our
failure to comply with current or future regulations could result in the
imposition of substantial fines, suspension of production, alteration of our
manufacturing processes or cessation of operations. We could also be required to
undertake expensive remediation efforts. The imposition of liabilities or
penalties from noncompliance with environmental regulations could have a
material adverse effect or our business, financial condition and results of
operations.

     Most of our domestic telecommunications customers are subject to
supervision by federal and state regulatory agencies, including the Federal
Communications Commission. Although we are not directly affected by any such
regulation and legislation, the effects of new legislation or changes in the
interpretation of existing regulation on our customers may adversely impact our
business.

RISKS RELATED TO THIS OFFERING AND SECURITIES MARKETS

  YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.

     You will incur an immediate and substantial dilution of $2.35 per share in
the net tangible book value per share of our common stock from the initial
offering price, assuming an initial public offering price of $6.00 per share. In
addition, the exercise of options and warrants to be outstanding immediately
after the consummation of this offering could cause you additional substantial
dilution.

  A SIGNIFICANT AMOUNT OF THE NET PROCEEDS OF THIS OFFERING ARE UNALLOCATED, AND
  WE WILL HAVE BROAD DISCRETION IN HOW WE USE THESE PROCEEDS.

     We have not designated any specific uses for a significant portion of our
net proceeds from this offering other than general working capital purposes.
Therefore, we will have broad discretion in how we use these net proceeds. While
we intend to use the remaining net proceeds for working capital in anticipation
of expanded business, we may ultimately use the proceeds for business expansion
in other ways and for other general corporate purposes. Investors will,
therefore, be relying on the judgment of our management regarding the
application of our net proceeds from this offering.

  WE DO NOT CURRENTLY INTEND TO PAY DIVIDENDS.

     We do not anticipate declaring or paying dividends on our common stock in
the foreseeable future because we plan to retain the cash generated from our
operations to support the cash demands which may be required to expand our
company. Investors who anticipate a need for immediate income from their
investments should not purchase shares of our common stock.

  ANTI-TAKEOVER PROVISIONS IN OUR GOVERNING DOCUMENTS AND DELAWARE LAW COULD
  PREVENT OR DELAY A CHANGE IN CONTROL OF OUR COMPANY.

     Our governing documents contain provisions that make it more difficult to
implement certain corporate actions and may delay, deter or prevent a change in
control. You might consider a change in

                                       11
<PAGE>   16

control in your best interest because you might receive a premium for your
common stock. Examples of these provisions include

     - a vote of more than two-thirds of the outstanding voting stock is
       required for stockholders to amend specified provisions of our
       Certificate of Incorporation and Bylaws;

     - our board of directors is divided into three classes, each serving
       three-year terms; and

     - members of our board of directors may be removed only for cause.

     Our board of directors has the ability, without stockholder action, to
issue shares of preferred stock that could, depending on their terms, delay,
discourage or prevent a change in control of TrueTime. In addition, the Delaware
General Corporation Law, under which we are incorporated, contains provisions
that impose restrictions on business combinations, such as mergers, between us
and a holder of 15% or more of our voting stock. You should read "Description of
Capital Stock" for a more complete description of these provisions.

                                       12
<PAGE>   17

               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute
forward-looking statements. These statements relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," "likely" or
"continue" or the negative of such terms or other comparable terminology. These
statements are only predictions. Actual events or results may differ materially.
In evaluating these statements, you should specifically consider various
factors, including the risks outlined under "Risk Factors." These factors may
cause our actual results to differ materially from any forward-looking
statement.

     Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements, and you are encouraged to exercise
caution in considering such forward-looking statements. Moreover, neither we nor
any other person assumes responsibility for the accuracy and completeness of
these statements. We are not under any duty to update any of the
forwarding-looking statements after the date of this prospectus to conform these
statements to actual results.

                                       13
<PAGE>   18

                                USE OF PROCEEDS

     We estimate the net proceeds from the sale of the 1,500,000 shares of
common stock offered by us will be approximately $     , assuming an initial
public offering price of $     per share, after deducting estimated underwriting
discounts and commissions and estimated offering expenses. Our net proceeds from
this offering are estimated to be $     if the underwriters' over-allotment
option is exercised in full.

     We plan to use the proceeds from this offering together with our existing
funds, for general corporate purposes, including working capital, expansion of
new technologies and markets, increased marketing, sales and operations
capabilities and possible acquisitions of complementary businesses or
technologies. Approximately $1.0 million of our working capital will be used to
build out and equip a new office and manufacturing facility that we plan to
occupy under a long-term lease in the first calendar quarter of 2000. Pending
these uses, we will invest the net proceeds of this offering in investment
grade, interest-bearing securities. In addition, we anticipate that this
offering will create a public market for our common stock to facilitate our
future access to public capital markets and permit the creation of equity
incentives for our employees through stock plans tied to publicly traded
securities.

                                DIVIDEND POLICY

     We currently intend to retain all available funds and any future earnings
for use in the operation and expansion of our business and do not anticipate
paying any cash dividends in the foreseeable future.

                                       14
<PAGE>   19

                                 CAPITALIZATION

     The following table sets forth our capitalization as of September 30, 1999:

     - on an actual basis to reflect our capitalization as of September 30,
       1999, with adjustments for the reincorporation of the company in Delaware
       on November 1, 1999, and our resulting new certificate of incorporation,
       providing for an authorized capital stock of 20,000,000 shares of common
       stock and 1,000,000 shares of undesignated preferred stock, and a
       conversion of all the outstanding common stock of our predecessor into
       4,000,000 outstanding shares of our common stock upon such
       reincorporation; and

     - on an as adjusted basis to reflect our capitalization as of September 30,
       1999, with the preceding adjustments reflected on the "actual" basis plus
       the receipt of the estimated net proceeds from our sale of 1,500,000
       shares of common stock at an assumed initial public offering price of
       $6.00 per share.

     None of the columns reflects (1) 1,650,000 shares of common stock reserved
for issuance under our stock-based award plans, of which approximately 810,000
shares are subject to options estimated to be outstanding immediately upon
consummation of this offering, (2) up to 200,000 shares which C.E. Unterberg,
Towbin may purchase at 110% of the offering price upon exercise of warrants to
be issued in connection with this offering or (3) 450,000 shares of common stock
that the underwriters have the option to purchase solely to cover
over-allotments.

     The table below should be read in conjunction with our balance sheet as of
September 30, 1999, and the related notes, which are included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
                                                                      AS OF
                                                               SEPTEMBER 30, 1999
                                                              ---------------------
                                                                             AS
                                                               ACTUAL     ADJUSTED
                                                              --------    ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                   SHARE DATA)
<S>                                                           <C>         <C>
Cash and cash equivalents...................................  $ 3,539      $11,684
                                                              =======      =======
Stockholders' equity:
  Preferred stock, Actual and As Adjusted -- $.01 par value,
     1,000,000 shares authorized, no shares issued and
     outstanding............................................       --           --
  Common stock and additional paid-in capital,
     Actual -- $.01 par value, 20,000,000 shares authorized,
     4,000,000 shares issued and outstanding; As
     Adjusted -- 20,000,000 shares authorized, 5,500,000
     shares issued and outstanding..........................  $ 4,730      $12,875
  Retained earnings.........................................    8,023        8,023
                                                              -------      -------
          Total stockholders' equity........................   12,753       20,898
                                                              -------      -------
          Total capitalization..............................  $12,753      $20,898
                                                              =======      =======
</TABLE>

                                       15
<PAGE>   20

                                    DILUTION

     Our net tangible book value as of September 30, 1999, was approximately
$11.9 million, or $2.98 per share after giving effect to the reincorporation in
Delaware on November 1, 1999. Net tangible book value per share represents the
amount of our total tangible assets at September 30, 1999, reduced by the amount
of our total liabilities and divided by the total number of shares of common
stock outstanding. Dilution in net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the pro forma net tangible book value per share of
common stock immediately after the completion of this offering. After giving
effect to the sale of 1,500,000 shares of common stock offered by us at an
assumed initial public offering price of $6.00 per share, and after deducting
the underwriting discount and estimated offering expenses payable by us, our pro
forma net tangible book value at September 30, 1999, would have been
approximately $20.1 million or $3.65 per share of common stock. This represents
an immediate increase in pro forma net tangible book value of $0.67 per share to
the existing stockholder and an immediate dilution of $2.35 per share to new
investors of common stock. The following table illustrates this dilution on a
per share basis:

<TABLE>
<S>                                                           <C>     <C>
Assumed initial public offering price per share.............          $6.00

  Net tangible book value per share before offering.........  $2.98

  Increase per share attributable to new investors..........   0.67
                                                              -----

Pro forma net tangible book value per share after this
  offering..................................................           3.65
                                                                      -----

Dilution per share to new investors.........................          $2.35
                                                                      =====
</TABLE>

                                       16
<PAGE>   21

                            SELECTED FINANCIAL DATA

     The following statement of operations data for the years ended September
30, 1997, 1998 and 1999, and the balance sheet data as of September 30, 1998 and
1999, are derived from our audited financial statements appearing elsewhere in
this prospectus. The selected financial data shown below as of September 30,
1995, 1996 and 1997, and for the years ended September 30, 1995 and 1996, are
derived from our unaudited financial statements. In our opinion, such unaudited
financial information includes all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of our results of
operations for the periods then ended and our financial position as of such
date. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and the related notes thereto included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
                                                          YEAR ENDED SEPTEMBER 30,
                                       --------------------------------------------------------------
                                           1995           1996           1997        1998      1999
                                       ------------   ------------   ------------   -------   -------
                                       (UNAUDITED)    (UNAUDITED)
                                                  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                    <C>            <C>            <C>            <C>       <C>
STATEMENT OF OPERATIONS DATA
Sales................................    $11,260        $11,292        $13,894      $16,297   $20,645
Cost of sales........................      4,978          5,111          5,783        7,537     9,076
                                         -------        -------        -------      -------   -------
Gross profit.........................      6,282          6,181          8,111        8,760    11,569
Operating expenses:
  Selling, general and
     administrative..................      2,960          2,960          3,906        4,395     5,905
  Research and development...........      1,480          1,840          1,855        1,873     2,155
                                         -------        -------        -------      -------   -------
          Total operating expenses...      4,440          4,800          5,761        6,268     8,060
                                         -------        -------        -------      -------   -------
Income from operations...............      1,842          1,381          2,350        2,492     3,509
Interest and other income (expense),
  net................................         (5)            37             10          249       305
                                         -------        -------        -------      -------   -------
Income before income taxes...........      1,837          1,418          2,360        2,741     3,814
Provision for income taxes...........        754            588            964        1,122     1,547
                                         -------        -------        -------      -------   -------
Net income...........................    $ 1,083        $   830        $ 1,396      $ 1,619   $ 2,267
                                         =======        =======        =======      =======   =======
Earnings per share -- basic and
  diluted............................    $  0.27        $  0.21        $  0.35      $  0.40   $  0.57
Weighted average shares outstanding
  as adjusted for
  reincorporation -- basic and
  diluted............................      4,000          4,000          4,000        4,000     4,000
</TABLE>

<TABLE>
<CAPTION>
                                                            AS OF SEPTEMBER 30,
                                       --------------------------------------------------------------
                                           1995           1996           1997        1998      1999
                                       ------------   ------------   ------------   -------   -------
                                       (UNAUDITED)    (UNAUDITED)    (UNAUDITED)
                                                               (IN THOUSANDS)
<S>                                    <C>            <C>            <C>            <C>       <C>
BALANCE SHEET DATA
Cash and cash equivalents............    $    --        $    --        $    --      $    38   $ 3,539
Working capital......................      3,981          6,030          7,381        8,641    10,808
Total assets.........................      6,701          9,071         11,018       12,160    15,491
Stockholders' equity.................      5,405          7,471          8,867       10,486    12,753
</TABLE>

                                       17
<PAGE>   22

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with our financial
statements and the related notes that appear elsewhere in this prospectus. The
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and elsewhere in this prospectus, particularly in "Risk Factors."

OVERVIEW

     TrueTime designs, develops, manufactures and markets precision time and
frequency products that are essential components used in telecommunications,
computer networking, e-commerce, aerospace and various other commercial markets.
Our products use a variety of external timing references, including most
importantly GPS together with advanced timing devices to provide high quality
frequencies and precise time. We offer a wide variety of products, which can be
divided into the following broad categories: (1) precise time and frequency
products, (2) computer plug-in cards, (3) computer network time servers, (4)
time code products and (5) time displays.

     In recent years, the time and frequency industry has undergone changes in
(1) its conversion from other timing sources to primarily GPS sources, (2) the
increasing utilization of timing and frequency in computer networks and the
Internet, and (3) the increasing need for higher-accuracy frequencies for
broader-communications bandwidth in wireline, wireless (cellular/radio) and
satellite communications.

     We have developed and introduced products for these and other markets that
have contributed to increased sales. As a result, sales have increased from
$11.3 million in the fiscal year 1995 to $20.6 million in the fiscal year 1999.

     We generate revenues primarily from sales of our products. We also receive
small amounts of revenue, which are included in sales, from service and
non-recurring engineering charges. We record sales when a product ships and
title passes. In fiscal 1999, our sales came from over 1,000 different customers
and we sold dozens of different products.

     We ship most products within 60 days of the date they are ordered, so order
backlog is not a satisfactory predictor of our future performance. Since we do
not maintain a substantial backlog and customer ordering patterns fluctuate, we
experience variations in results from quarter to quarter.

     Cost of goods sold includes direct material, direct labor and the overhead
associated with the manufacturing of products.

     We expense selling, commissions, general and administrative costs in the
period in which they are incurred. Research and development costs are also
expensed as they are incurred. Capital expenditures are capitalized and
depreciated, usually over a five-year life.

     Net income has increased from $1.1 million in fiscal year 1995 to $2.3
million in fiscal year 1999.

                                       18
<PAGE>   23

RESULTS OF OPERATIONS

     The following table sets forth for fiscal 1997, 1998 and 1999, the
percentage of income statement items to total sales:

<TABLE>
<CAPTION>
                                                           YEAR ENDED SEPTEMBER 30,
                                                          ---------------------------
                                                          1997       1998       1999
                                                          -----      -----      -----
<S>                                                       <C>        <C>        <C>
Sales..................................................   100.0%     100.0%     100.0%
Cost of sales..........................................    41.6       46.2       44.0
                                                          -----      -----      -----
Gross profit...........................................    58.4       53.8       56.0
Operating expenses:
  Selling, general and administrative..................    28.1       27.0       28.6
  Research and development.............................    13.4       11.5       10.4
                                                          -----      -----      -----
     Total operating expenses..........................    41.5       38.5       39.0
                                                          -----      -----      -----
Income from operations.................................    16.9       15.3       17.0
Interest and other income, net.........................     0.1        1.5        1.5
                                                          -----      -----      -----
Income before income taxes.............................    17.0       16.8       18.5
Provision for income taxes.............................     7.0        6.9        7.5
                                                          -----      -----      -----
Net income.............................................    10.0%       9.9%      11.0%
                                                          =====      =====      =====
</TABLE>

YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO YEAR ENDED SEPTEMBER 30, 1998

     Sales. Sales for fiscal 1999 were $20.6 million, an increase of $4.3
million, or 26.7%, from $16.3 million in fiscal 1998. The increase in sales is
attributable to increased demand for our products, the introduction of new
products and an increased number of customers purchasing our products during the
year.

     Cost of Sales. Cost of sales for fiscal 1999 was $9.1 million, and increase
of $1.5 million, or 20.4%, from $7.5 million in fiscal 1998. Cost of sales
decreased as a percentage of total sales to 44.0% in fiscal 1999 from 46.2% in
fiscal 1998. Such percentage decrease is the result of decreased material, labor
and overhead costs as a percentage of sales resulting from economies of scale.

     Operating Expenses. Operating expenses for fiscal 1999 were $8.1 million,
an increase of $1.8 million, or 28.6%, from $6.3 million in fiscal 1998.
Operating expenses increased as a percentage of total sales to 39.0% in fiscal
1999 from 38.5% in fiscal 1998. Selling, general and administrative expenses for
fiscal 1999 were $5.9 million, an increase of $1.5 million, or 34.4%, from $4.4
million in fiscal 1998. Selling, general and administrative expenses increased
as a percentage of total sales to 28.6% in fiscal 1999 from 27.0% in fiscal 1998
because we increased our sales, customer service and administration teams to
support further growth. Research and development expenses for fiscal 1999 were
$2.2 million, an increase of $300,000, or 15.1%, from $1.9 million in fiscal
1998. Research and development expenses decreased as a percentage of total sales
to 10.4% in fiscal 1999 from 11.5% in fiscal 1998 because we did not increase
research and development expenses as fast as we increased sales.

     Interest and Other Income (Expense), Net. Interest and other income
(expense), net for fiscal 1999 was $305,000, an increase or $56,000 or 22.5%,
from $249,000 in fiscal 1998. This income was earned on our cash deposits held
in OYO U.S.A.'s central cash management system. Such increase is attributable to
an increase in the level of our deposits held by OYO U.S.A.

     Income Taxes. TrueTime's effective income tax rate for the year ended
September 30, 1999 was 40.6% compared to 40.9% for the year ended September 30,
1998. Our effective income tax rate differs from the statutory federal rate of
34% primarily as a result of the effect of state income taxes.

                                       19
<PAGE>   24

YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO YEAR ENDED SEPTEMBER 30, 1997

     Sales. Sales for fiscal 1998 were $16.3 million, an increase of $2.4
million, or 17.3%, from $13.9 million in fiscal 1997. The increase in sales is
attributable to increased demand for our products, increased numbers of
customers and increased purchases per customer.

     Cost of Sales. Cost of sales for fiscal 1998 was $7.5 million, an increase
of $1.8 million, or 30.3%, from $5.8 million in fiscal 1997. Cost of sales
increased as a percentage of total sales to 46.2% in fiscal 1998 from 41.6% in
fiscal 1997. Such percentage increase is the result of change in product mix and
manufacturing overhead costs including increased engineering costs to support
customer-specific applications.

     Operating Expenses. Operating expenses for fiscal 1998 were $6.3 million,
an increase of $500,000, or 8.8%, from $5.8 million in fiscal 1997. Operating
expenses decreased as a percentage of total sales to 38.5% in fiscal 1998 from
41.5% in fiscal 1997. Selling, general and administrative expenses for fiscal
1998 were $4.4 million, an increase of $500,000, or 12.5%, from $3.9 million in
fiscal 1997. Selling, general and administrative expenses decreased as a
percentage of total sales to 27.0% in fiscal 1998 from 28.1% in fiscal 1997
because of lower relative sales and commission costs. Research and development
expenses for fiscal 1998 were $1.9 million, an increase of $19,000, or 1.0%,
from $1.9 million in fiscal 1997. Research and development expenses decreased as
a percentage of total sales to 11.5% in fiscal 1998 from 13.4% in fiscal 1997
because research and development expenses increased only slightly while sales
increased 17.3%.

     Interest and Other Income (Expense), Net. Interest and other income
(expense), net for fiscal 1998 was $249,000, an increase of $239,000 from
$10,000 in fiscal 1997. This income was earned on our cash deposits held in OYO
U.S.A.'s central cash management system. The increase is attributable to the
implementation of OYO U.S.A.'s policy in fiscal 1998 (effective October 1, 1997)
of allocating the earnings on cash deposits from investments and borrowings made
to other OYO U.S.A. subsidiaries to those subsidiaries that maintain positive
cash balances in the central cash management system.

     Income Taxes. TrueTime's effective income tax rate for the year ended
September 30, 1998 was 40.9% compared to 40.8% for fiscal 1997. Our effective
income tax rate differs from the statutory federal rate of 34% primarily as a
result of the effect of state income taxes.

LIQUIDITY AND SOURCES OF CAPITAL

     Historically, we have financed our operations through operating cash flow.
Cash provided by operating activities was $1.6 million in fiscal 1999 as
compared to $900,000 in fiscal 1998. The net increase of $700,000 is primarily
the result of an increase in net income of $600,000 during fiscal 1999, as
adjusted to include an increase in depreciation and amortization of $100,000
from investments made in machinery and equipment, an increase in the change in
operating assets in the amount of $1.5 million principally resulting from
accounts receivable and inventories related to increased sales, and an increase
in the change in operating liabilities of $1.5 million principally resulting
from trade accounts payable related to the increase in inventories and accrued
expenses related to an increase in employees. Cash provided by operating
activities was $900,000 in fiscal 1998 as compared to $100,000 in fiscal 1997.
The increase of $800,000 is the result of the increase in net income of $200,000
during fiscal 1998, as adjusted to include an increase in depreciation and
amortization of $100,000 from investments made in machinery and equipment, and a
reduction in the net increase in net operating assets of $500,000 related
primarily to a small increase in accounts receivable during fiscal 1998 as
compared to fiscal 1997 as a result of the timing of sales and related
collections.

     We currently participate in OYO U.S.A.'s central cash management system in
which the net cash provided or used by our operations is transferred to or from
OYO U.S.A. on a daily basis. We have a receivable from OYO U.S.A. for the
cumulative amount by which the cash provided by operating activities, including
current income taxes allocated from OYO U.S.A., has exceeded our working capital
and capital expenditure requirements. The change in this receivable is an
investing cash flow activity. The receivable was $433,000 at September 30, 1999
as compared to $2.7 million at September 30, 1998. The decrease resulted from
the collection of $3.5 million from OYO U.S.A. in September 1999 for the

                                       20
<PAGE>   25

preliminary and partial settlement of our receivable balance. The receivable was
$2.7 million at September 30, 1998 as compared to $2.5 million at September 30,
1997. The increase resulted from the excess of operating cash flows generated in
fiscal 1998 over capital expenditures. As soon as practical following the
closing of this offering, we will separate from OYO U.S.A.'s central cash
management system and the remaining receivable at that date will be collected in
cash. Beginning October 1, 1997, OYO U.S.A. implemented a policy of crediting
interest on the receivable balance, excluding the reduction in the receivable
balance for allocated current income taxes. Interest credited and added to the
receivable balance was $305,000 for fiscal 1999 and $249,000 for fiscal 1998.

     In October 1999, we transferred $3.5 million to OYO U.S.A. subject to the
terms of a Trust Agreement with OYO U.S.A. Under the terms of the Trust
Agreement, OYO U.S.A. acknowledges and agrees that it holds $3.5 million, plus
the investment income earned thereon, for our benefit and will manage the trust
assets as part of its other cash management activities. This action was taken to
maximize the return on our assets available for the investment until such time
that we have established our own short-term investment program. The Trust
Agreement can be terminated at our option after providing 30 days notice to OYO
U.S.A. We expect to terminate the trust as soon as is practical after the
closing of this offering, at which time the amounts held in trust along with the
investment earnings thereon will be returned to us.

     Other investing activities consist principally of capital expenditures in
the amount of $442,000 for fiscal 1999, $632,000 for fiscal 1998 and $245,000
for fiscal 1997 for investments in machinery and equipment. We are negotiating a
long-term lease agreement on a new larger manufacturing and office facility of
approximately 50,000 - 75,000 square feet, into which we intend to move in the
first quarter of calendar year 2000. We intend to use approximately $1.0 million
of our working capital to build out and equip the new manufacturing and office
facility. We also intend to retain an option to purchase the building. We expect
to incur $1.0 million in fiscal 2000 on other capital expenditures.

     We do not have any indebtedness since operating cash flow has satisfied our
working capital and capital expenditure requirements. Although we have no
current requirements for debt financing, in all likelihood, we will attempt to
establish a facility with a bank to provide funds in the future if needed.

     We sell on open account with terms that usually require payment within 30
days of invoice. Many customers pay later than the agreed-upon terms allow, but
generally not later than 30 days after the original due date. We had no
write-offs for bad debt in fiscal years 1997 and 1999, and $14,000 in fiscal
1998. We have included the effects of anticipated increased accounts receivable
in our plans for future working capital requirements.

     Cash and cash equivalents were $3.5 million at September 30, 1999 as
compared to less than $100,000 at September 30, 1998. The increase reflects a
$3.5 million collection from OYO U.S.A. in September 1999 related to the
preliminary and partial settlement of our receivable from OYO U.S.A. Cash
equivalents are invested on a short-term basis with a major bank. We expect that
the combination of cash and cash equivalents, cash flow from operations and the
proceeds of this offering should provide us with sufficient capital resources
and liquidity to fund our operations during fiscal 2000 and support our
expansion and acquisition strategy as described elsewhere in this prospectus.

     Inflation has not had a significant impact on our operations to date.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     We will be exposed to market risks related to changes in interest rates in
the future. Proceeds from this offering will be invested short term in financial
instruments, the value of which will be subject to interest rate risk and could
fall if interest rates rise. Additionally, while we have no plans for future
borrowings, any future borrowings will likely have a variable rate component
that will fluctuate as interest rates change. If market interest rates were to
increase immediately and uniformly by 10%, there would not be a material effect
on the results of operations or on our balance sheet because we currently have
no debt.

                                       21
<PAGE>   26

YEAR 2000 READINESS ISSUES

     At the transition between December 31, 1999 and January 1, 2000, certain
computers and information technology equipment may not continue to work
properly. In particular, this may occur when programs and data that use
six-digit dates such as 12/31/99 should convert to 01/01/00, but fail to do so
or fail to properly process the date data. Similar problems were suspected at
the GPS Week Number Roll-Over (WNRO) which occurred August 21, 1999 when the GPS
week counter rolled over from 1024 to 0000 as it was designed to do; on
September 9, 1999 which was a common program test date; and on February 29, 2000
which is an unusual leap day. Most century years such as 1800, 1900 and 2100 do
not have leap days. These groups of problems are known collectively as Y2K.

     GPS WNRO. No significant problems were found with the GPS WNRO. A small
number of customers who had older TrueTime products and had not checked their
equipment did later report their products failed to report the proper date and
have contacted TrueTime to have their products updated. There were no claims
against us and the costs of servicing the customers was not material.

     9/9/99 Test Date. No problems have been reported related to the 9/9/99 test
date.

     State of Readiness. We have completed extensive efforts related to
operations and products for Y2K.

     Products. Our Y2K product effort has included the purchase of a GPS
simulator, the staffing of dedicated test program, testing of new and old
products, notification on the Internet of the status of each of our products,
and the modification and upgrade of products as appropriate. In some cases, we
provide modifications and upgrades at no charge. In other cases, a modest charge
for the modifications and upgrades is made to the customer. We have been
conducting our Y2K product program since November 1997 and believe all
significant products have been tested and the results have been reported.
Modifications and upgrades to old products will continue into the fiscal year
2000.

     Product Costs. We have spent approximately $200,000 in each of fiscal years
1998 and 1999 on our Y2K product efforts. We estimate that we will spend
$200,000 in fiscal year 2000 on our Y2K product efforts. Such costs are
accounted for in the selling, general and administrative costs.

     Insurance. We have reviewed our guarantee and warranty provisions and
determined that our exposure is limited to the original purchase prices of
equipment bought by our customers. We have specifically declined to indemnify,
hold harmless or be responsible for consequential damages when requested by
customers. We have evaluated our liability insurance and determined that Y2K
liability is explicitly excluded from insurance coverage and cannot be
reasonably added to our insurance coverages.

     Operations. Our Y2K operations efforts have included supplier assessments,
internal information technology, or IT assessments and modifications and
upgrades, IT vendor assessments, and internal systems assessments.

     We have surveyed key suppliers and have received assurances that we will
continue to receive our uninterrupted supplies of goods and services.

     We have, or have had, evaluated our internal information systems, including
network hardware and software and user hardware and software. Numerous
components were found to be non-Y2K compliant. We have purchased and installed
upgrades, modifications and replacements. A small number of non-critical work
stations are planned for replacement. We expect the hardware to be purchased and
the installation to be complete no later than November 30, 1999.

     IT vendors such as our value added reseller that provides electronic data
interchange services, its Internet service provider and payroll processing
provider have been surveyed and assure us that we will continue to receive
uninterrupted services.

     Internal systems including heating, ventilation and air conditioning, alarm
system and process controls have been evaluated and found not to have Y2K
problems. The compliance of test equipment was completely evaluated during
October 1999.

                                       22
<PAGE>   27

     We maintain a disaster recovery program, including tape back-up on IT
systems and other measures, that is applicable to any Y2K problems or other
disaster. We believe the program is adequate to prevent unrecoverable losses
from any disaster.

     Operations Costs. We estimate we have spent about $100,000 in the fiscal
year 1998 and $200,000 in the fiscal year 1999 on our Y2K operations efforts. We
estimate that we will spend less than $100,000 in the fiscal year 2000 on our
Y2K operations efforts. The costs of our Y2K operations efforts are accounted
for in selling, general and administrative costs.

     International Risks. We have about 15% of our installed base in
international locations and receive approximately 5% of our materials directly
from international locations. From our evaluations, the risks in the
international locations are similar to those in domestic locations because our
customers in these areas have up-to-date equipment and we do not have many
international vendors.

     Risks. Should we not fully complete our efforts related to operations and
products, the results could include disruptions in business, lost revenue,
increased operating costs, loss of customers and other business interruptions,
any of which could have a material adverse effect on our business, financial
condition and results of operations.

                                       23
<PAGE>   28

                                    BUSINESS

TRUETIME

     TrueTime designs, develops, manufactures and markets precision time and
frequency products that are essential components used in telecommunications,
computer networking, e-commerce, aerospace and various other commercial markets.
Our products use a variety of external timing references, including most
importantly GPS together with advanced timing devices to provide high quality
frequencies and precise time. We offer a wide variety of products, which can be
divided into the following broad categories: (1) precise time and frequency
products, (2) computer plug-in cards, (3) computer network time servers, (4)
time code products and (5) time displays.

     Our products, incorporated as components in complex systems, allow
customers to

     - improve clarity and quality of voice, video and data in wireline,
       wireless and satellite communications,

     - authenticate the time of stock market and other e-commerce transactions,

     - monitor and control the frequency of electric utility power grids to
       prevent power black-outs and quickly locate power line faults,

     - transmit television signals at designated frequencies to meet regulatory
       requirements,

     - meet requirements for secure communications, particularly in national
       defense and security contexts, and

     - time high resolution data collected in military ranges and in space
       launches with a high degree of accuracy.

     During the past decade, we have strived to produce state-of-the-art precise
time and frequency technology. We have developed and implemented five
generations of precision time products based on GPS technology through the use
of our significant technology resources in the areas of GPS, frequency control,
real-time operating systems and computer networking. Our increased investments
in research and development have allowed us to develop a new platform -- a
combination of new hardware and software -- for many products, decrease time to
market for new products and improve product quality and robustness. This
platform also provides a means through which TrueTime can enter new markets.
Advanced technologies also offer opportunities to reduce manufacturing costs and
support expenses by increasing volumes of common products.

     TrueTime is recognized in the industries we serve for our commitment to
customer satisfaction, broad product offerings and advanced technical
capabilities. We are recognized by our community and employees for stable
employment and a corporate culture that provides leadership, opportunity and a
shared commitment to success.

     In the fiscal year ended September 30, 1999, we achieved sales of $20.6
million, an increase of 26.7% over the prior fiscal year, resulting in net
income of $2.3 million, an increase of 40.0% over the same period.

MARKET OVERVIEW

     Our time and frequency products are integral to the expanding
communications infrastructure composed of wireline, wireless (including
satellite) and computer network technologies. The increase in demand for
precision timing is due in part to the growth in communications and computer
network systems worldwide. Growth in data, voice and video transmissions on
these networks is anticipated to lead to an increased demand for substantial
bandwidth compared to traditional voice traffic. We believe that the convergence
of wireline, wireless and computer network systems and the pervasive growth of
the Internet and e-commerce will lead to increased demand for precision time and
frequency devices.

     Precision time and frequency devices normally require use of an external
timing reference to maintain required accuracy. Currently, the predominantly
used standard is the highly accurate time reference available from GPS operated
by the U.S. Department of Defense. The demand for precision time and

                                       24
<PAGE>   29

frequency referenced to GPS has grown with the increased use of digital wireless
communication and is now, in addition to more traditional uses in the aerospace,
utility and broadcast industries, being incorporated into wireless, computer and
high-speed wireline networks.

     Two marketing research firms that follow the GPS industry are Frost &
Sullivan and Allied Business Intelligence. These firms provide forecasts for
industry growth by segments, including forecasts in the growth in timing
products using GPS as a timing reference. Their forecasts for future growth of
the timing product segment are consistent, but not identical. According to
forecast data from a Frost & Sullivan report we obtained

     - the aggregate North American market for GPS related timing products is
       projected to grow from $209 million to $368 million during the five-year
       period from 2000 through 2004, reflecting a compound annual growth rate
       of approximately 15% during such period.

     According to forecast data from an Allied Business Intelligence report we
obtained covering the same five-year period

     - the aggregate U.S. market for GPS related timing products is projected to
       grow from $238 million to $383 million, reflecting a compound annual
       growth rate of approximately 13% during such period.

     According to Frost and Sullivan, the European GPS timing market is trailing
the North American market in terms of total revenue, with the 2000 revenue
forecast in European markets being $11.2 million. However, the compounded annual
growth rate for GPS timing products in Europe from 2000 through 2004 is forecast
to be 20%, as compared to 15% in North American markets. The strong growth
forecast for the GPS timing market reflects the strong growth of the
applications for which timing products are sold.

TECHNOLOGY OVERVIEW

     THE PRECISION CLOCK

     The basic clock consists of an oscillator and a counter. While early clocks
used pendulums as the oscillator, today, piezoelectric quartz crystals or atomic
atoms such as rubidium or cesium are used as the resonating reference. In either
instance, a counter tracks the number of oscillations and translates that into a
common time increment, usually a second. High quality quartz oscillators are the
most common oscillators found in precision time and frequency clocks.

     Once a precision clock has been built it is possible to maintain accurate
time and generate precise signals, also called frequencies. Accurate time is
used in time stamping applications such as telecommunications billing and
electronic transactions and can be transferred to other devices for purposes of
synchronization. Frequency generation benefits from an accurate clock because it
becomes possible to create repetitive signals with respect to a very precise
time interval, including high frequency sine waves or digital pulses, both of
which are used in many telecommunications applications.

     IMPROVING ON THE PRECISION CLOCK

     Quartz based clocks are subject to physical factors that effect the overall
clock accuracy and stability. The two primary contributors to clock error are
temperature changes and aging. The oscillation frequency of the quartz crystal
can speed up or slow down depending on variations in temperature. Similarly, the
oscillation frequency of a quartz crystal changes over time. Combined, these two
factors cause the clock to drift, resulting in incorrect time and a shift in the
output frequencies.

     The resonant frequency of the quartz crystal can be adjusted to correct for
physical factors contributing to the clock error. Much like a person
periodically adjusts a wristwatch to the correct time, an oscillator can be
periodically adjusted to the correct frequency. This technique is called
oscillator disciplining. One factor that distinguishes one precision clock
manufacturer from another is how well the

                                       25
<PAGE>   30

oscillator is disciplined to an external time reference. One of TrueTime's areas
of expertise is in superior oscillator disciplining technology to create
extremely accurate and stable clocks.

     An external time reference is typically another clock of higher accuracy
and precision than the local clock being disciplined. The time base used in all
precision clocks is known as Universal Time Coordinated, or UTC. UTC is
maintained in the United States by the U.S. Naval Observatory, or USNO, in
Washington, D.C. The National Institute of Standards and Technology, or NIST,
plays a major role in distributing that time for commercial use. Oscillator
disciplining focuses on the UTC time transfer mechanism from the reference to
the local clock and the accuracy of that time transfer.

     UTC time is made available for synchronization in several different ways
with varying degrees of accuracy. The primary means of synchronization to UTC
are via the following references:

        - GPS

        - Internet/network clocks

        - AM radio broadcasts

        - Dial-up phone connections

     Timing for GPS is maintained by the U.S. Air Force, using time directly
from the USNO. NIST is responsible for time distribution using the other
techniques. TrueTime manufactures clocks that use all of these references. The
timing accuracy provided by GPS, however, is so superior that it has become the
external timing reference of choice.

     GPS AS A TIME REFERENCE

     GPS is best known for its tremendous impact on markets that are focused on
geographical position. Aviation and marine navigation, as well as land surveying
and car navigation systems now enjoy positioning accuracy levels never seen in
the past. However, very precise time is integral in determining an accurate
position when using a satellite based navigation system.

     Each GPS satellite has on board several atomic clocks that are precisely
synchronized to UTC. Coded signals are broadcast by each of the 24 GPS
satellites with the exact time and the position of each satellite. GPS receivers
use an antenna to receive the signals and special semiconductor chip sets to
decode them to calculate the position of the antenna. By using a GPS receiver,
optimized for time and not position it is possible to get timing accuracy's of
plus or minus 1 millionth of a second to UTC. TrueTime's low end products
provide this level of accuracy. By applying sophisticated GPS tracking
algorithms developed by TrueTime to discipline clock oscillators, an accuracy of
40 billionths of a second to UTC is routinely achieved in our products.

     A significant advantage offered by GPS compared to any other time reference
is the worldwide availability of the signals. GPS satellites continuously orbit
the earth broadcasting the coded signals. Provided the GPS antenna on the
receiving device can receive the signals, precise synchronization to UTC is
possible anywhere on the planet. This facilitates an accurate and common time
base to synchronize systems across a country or around the world. Events on one
continent can be very closely correlated with events on others. Similarly,
widely distributed networks such as the Synchronized Optical Network, or SONET,
that carries most of the long haul voice traffic in the U.S., can be precisely
synchronized to improve efficiency and bandwidth.

     OUTPUTS OF THE PRECISION CLOCK

     As a clock becomes more and more precise, the applications shift from
providing the precise time to generating very high quality frequencies.
Applications for precision clocks generally fall into one of three categories:
precise time, frequency generation, and time transfer.

          Precise Time. Precise time is a measurement that tells the user what
the exact time is. A common application for precise time is time stamping of
electronic transactions or data. Electric power

                                       26
<PAGE>   31

utilities also use precise time to measure and maintain operating current and
locate transmission faults in the system. For scientific applications, precise
time is used to time tag events with very high resolution for comparison with
other events. Even directives such as the Emergency 911 initiative for locating
cellular based callers will require precision time stamping. Current
state-of-the-art time stamping is to the millionth of a second referenced to
UTC.

     Frequency Generation. The generation of signals such as high frequency sine
waves, or a once per second pulse, benefits from a precision clock. Externally
disciplined precision clocks can create near perfect wave forms and pulses and
can be precisely synchronized with a superior external reference, such as GPS.
The fastest growing application for GPS referenced precision clocks is the
generation of pulses and frequencies for telecommunications systems. For
example, many current wireless base stations use precision GPS references to
provide the signals used to create the carrier frequency and to coordinate
handoffs between cell sites. Frequency generation also includes high frequency
digital pulse generation. These signals are widely used to synchronize
communications networks and form the basis for signals that will carry data over
networks and satellite systems.

     Time Transfer. Time transfer is an integral part of synchronization. It is
not feasible to place a precision clock with every computer or instrument that
requires precise time. Time distribution then becomes a critical role of the
precision clock. The most cost effective ways to distribute time are via wires
such as computer serial cables, coaxial cables or ethernet networks.

     A popular time transfer technique in military and aerospace applications
involves time codes sent over coaxial cables. These codes have been standardized
and are known as Inter-Range Instrumentation Group, or IRIG, time codes. IRIG
codes are used to synchronize most of the military and government test ranges
and launch facilities across the U.S. They are also the primary means to
synchronize computers to one millionth of a second to each other.

     The fastest growing time transfer technique, and the one with the greatest
potential, uses ethernet networks or the Internet as the transfer medium. Using
a client server technique known as the Network Time Protocol, or NTP, a single
precision clock configured as a time server can synchronize tens of thousands of
client computers per hour. A packet exchange initiated by the client computer to
the time server can synchronize the client to the satisfactory level for such
purposes of one thousandth of a second to the time server.

TRUETIME'S SOLUTIONS

     TrueTime meets the growing timing and frequency needs of modern
communication and computer systems by using the following technologies:

          GPS TECHNOLOGY -- We strive to develop state-of-the-art products using
     current GPS timing references. GPS signals are the most accurate,
     widely-available and cost-effective source of timing references today. We
     are continually working on next-generation designs and applications to
     maintain and advance our GPS technologies.

          OSCILLATOR SELECTION AND CONTROL -- We generally use a quartz crystal
     oscillator as a fundamental component in our precision timing product.
     Using and controlling an extremely stable oscillator is critical to
     maintaining accurate time and frequencies, especially if synchronization
     reference sources are lost (such as the loss of satellite signals when a
     GPS antenna is accidentally damaged). We believe that we have strong
     relationships with our oscillator suppliers and a variety of technological
     advantages in the ability to test, select and control high-stability
     oscillators.

          REAL-TIME OPERATING SYSTEMS -- We incorporate real-time operating
     systems in our newest products. These operating systems are required to
     control precision timing devices and frequency sources and to process data
     in real time without introducing timing delays and synchronization
     problems. We believe this provides us with advantages in next-generation
     applications that will speed the introduction of new products.

                                       27
<PAGE>   32

          INTERNET INTERFACES -- We produce precision timing devices that can be
     controlled using a browser over the Internet or through a local area
     network. This permits the user to control the unit from anywhere in the
     world. We believe this is an essential step in the future of networked
     equipment. Additionally, we produce a series of NTP products that allow
     customers to synchronize computers and other equipment over the Internet.

OUR STRATEGY

     We have already established name-recognition in the time and frequency
industry. Our investments in new technology have given us the capability to
enter new segments of the timing market and allow us to reduce the time needed
to market new products. Now, our goals are to

      --  Introduce new products by

         - targeting the growing telecommunications, e-commerce, computer
           networking and digital wireless market segments,

         - increasing our research and development budget and capabilities, and

         - applying core technologies in new markets.

      --  Form strategic relationships by

         - developing alliances with companies that offer complementary products
           and technologies, and

         - exploring opportunities to acquire companies with technologies that
           will enhance our product lines, add new related products or add
           economies of scale to our existing operations.

      --  Continue to gain market share by

         - developing, manufacturing and marketing the highest quality precision
           time and frequency products,

         - applying new technology to current applications,

         - increasing international sales through increased marketing activities
           abroad, and

         - improving distribution channels.

TRUETIME'S PRODUCTS AND SERVICES

     We offer a wide variety of precision clock products upon which we have
built a reputation for quality and diversity. Our products can generally be
divided into the following broad categories:

          PRECISE TIME AND FREQUENCY PRODUCTS -- We manufacture precision time
     products that allow our customers to keep accurate time within
     40 billionths of a second. In many ways, our precise time products are
     similar to clocks and stopwatches -- our clocks tell us the time of day and
     allow us to measure the time interval between when an event starts and when
     it stops. The difference between conventional time measuring devices and
     our precise time products lies in the accuracy of the measurements. To
     place the accuracy of our clocks in perspective, a clock which accumulates
     a 40 billionths of a second time error over a 24 hour period will require
     more than 500,000 years to accumulate an error of one second.

          In the last three fiscal years, more than 75% of our revenues were
     from the sale of our timing products that use GPS as a timing reference for
     continuously disciplining our oscillators, the

                                       28
<PAGE>   33

     fundamental component that determines the accuracy of our time & frequency
     products. A schematic illustrating how a TrueTime GPS synchronized timing
     device operates is shown below.

                 THE ARCHITECTURE OF A PRECISION TIMING DEVICE

                                  [SCHEMATIC]

          Quartz-based clocks are subject to numerous physical factors that
     affect the overall clock accuracy and stability, including temperature
     changes and aging. We rely upon GPS as a reference for continuously
     disciplining our oscillators. GPS provides 24 hour worldwide coverage that
     is not affected by weather conditions. The coverage of the 24 satellites in
     six near-polar orbits together with numerous ground monitoring/verifying
     stations produces a readily available and highly accurate timing reference
     with state-of-the-art reliability and performance. However, GPS navigation
     receivers tend to deliver compromised results when used as a time and
     frequency receiver. To overcome this shortcoming in a standard GPS
     receiver, we have developed a product line which implements a suite of
     operations that extract optimal accuracy and stability from the clock
     measurements provided by the GPS core receiver. We believe our products
     provide superior oscillator discipline and enable us to offer the most
     accurate quartz oscillator timing products in the industry.

          COMPUTER PLUG-IN CARDS -- We manufacture a broad line of precision
     timing products in the form of plug-in cards for computers. These cards
     provide precise timing capabilities to computers equipped with very common
     bus components. Aside from providing accurate time measurement, these cards
     can provide a variety of time and frequency and other time outputs and
     functions, as well as time transfer for synchronization. Currently, plug-in
     cards connected by cables provide one of the easiest and most accurate ways
     to synchronize the clocks of two or more computers. We also offer
     state-of-the-art software development tools to speed the integration of
     these cards into software applications, which may save software developers
     significant time and money.

          COMPUTER NETWORK TIME SERVERS -- We manufacture two products for
     computer network time distribution. These products provide an extremely
     powerful and efficient manner in which to bring entire networks of
     computers into precise time synchronization. Designated computers run
     programs in the background that periodically correct the time of each local
     computer to that of the time server. As a result, we believe that network
     synchronization of thousands of computers to an accuracy of a second or
     less is achievable using these products. With the pervasive growth of the
     Internet and e-commerce and increasing electronic transactions, we believe
     that the demand for such synchronization products will continue to
     increase.

          TIME CODE PRODUCTS -- We offer a wide variety of time code generation,
     translation and synchronization products, including timing output options
     for our precise clocks. A time code is a data format for recording and
     processing time measurements. Time codes arose from the need to synchronize
     the instruments used to monitor the many aspects of a real time weapons
     test and to share the collected data with others monitoring the same test
     at different locations. Time codes provide the digital data format
     necessary for computers to transfer and correlate encoded time data among
     computers in a highly accurate manner.

          TIME DISPLAYS -- We manufacture a variety of time displays. These
     one-half-inch to four-inch light-emitting diode, or LED, displays often
     present a variety of information, including the time of

                                       29
<PAGE>   34

     day, frequency information regarding system electrical current or
     "countdown-to-launch" arrays. In many cases, the display is sold as an
     accessory to a precision clock to display the precise time in an instrument
     rack or control room.

TRUETIME'S CUSTOMERS

     Our customers are businesses and government agencies that have
sophisticated and demanding needs for timing with greater accuracy and
resolution than available from conventional time measuring devices. Our major
customer groups include:

          TELECOMMUNICATION COMPANIES -- Telecommunication companies are
     continually seeking to deliver greater bandwidth and connectivity to
     transmit data reliably at faster speeds. Wireline telephone companies that
     transmit audio, video and other data over wires encounter many problems if
     timing or synchronization is not precise. These problems include unreadable
     facsimiles and corrupted or lost data as well as frozen images on video
     conference screens. Similarly, wireless telephone carriers using cellular
     or satellite communication need precise time and synchronization to avoid
     static and blocked calls.

          COMPUTER NETWORKS -- Our customers include computer network designers
     and users because today's computer network technology is characterized by
     increasingly faster data transfer and throughput rates. Most major national
     and world-wide businesses operate large computer networks. The operation of
     computer networks is also becoming standard for many smaller businesses.
     Synchronization of timing in the network can increase the quality of data
     transmission and reduce the risk of system downtime.

          AEROSPACE INDUSTRY -- Among our long-standing customers are many
     different government agencies, including the U.S. Department of Defense,
     NASA and the State Department, as well as organizations operating test
     ranges for the Department of Defense. These customers make measurements of
     fast moving objects such as aircraft, weaponry projectiles, missiles and
     spacecraft. These customers also need highly accurate clocks to record
     critical, high resolution measurements and gather required data for events
     that are changing rapidly.

          E-COMMERCE -- The amount of data being transmitted over the Internet
     is expanding rapidly because of the growing number of users and the
     increasing range of data-intensive activities for which the Internet is
     used. Businesses increasingly enhance their reach to customers and
     suppliers with applications such as electronic commerce, supply chain
     management, global marketing and customer support via the Internet.
     Consumers use the Internet to communicate, collect and publish information,
     make retail purchases and access online entertainment. These network-based
     businesses and consumer activities require the transmission of increasingly
     large amounts of data quickly and reliably. As a result, broadband access
     is becoming increasingly important, and this creates a growing need for our
     precise time and frequency products.

          POWER UTILITIES -- Our power utility customers use precise time to
     maintain a precise frequency of 60 Hz for the electricity that literally
     runs our nation. Precise monitoring and control of the power line
     alternating current frequency helps to prevent power brown-outs and
     black-outs. Precise timing also aids in the location of power line faults.

          TELEVISION STATIONS -- Television stations need both accurate time and
     frequency references to keep their transmissions synchronized, their
     transmitters operating at the correct frequency and to switch between feeds
     cleanly. Our GPS timing products provide both time and frequency outputs
     for these purposes.

     Our customers are businesses and government agencies that have
sophisticated and demanding needs for timing with greater accuracy and
resolution than available from conventional time measuring devices. A
substantial portion of our sales is made to numerous, and usually repeat,
customers who purchase small quantities of multiple types of products and who
often have custom or semi-custom specifications. Representative of typical
customers are some of the best-known enterprises engaged in

                                       30
<PAGE>   35

     - telecommunications -- Lucent Technologies, PanAmSat Corporation and
       companies which were part of the old AT&T system,

     - computer networking -- Novell, Inc., Lucent Technologies and Cisco
       Systems, Inc.,

     - e-commerce -- NYSE, Nasdaq Stock Market, Chicago Mercantile Exchange,
       Chicago Board of Trade and Ameritrade Information Service,

     - power utilities -- PG&E Corporation and Bonneville Power Administration,

     - aerospace -- The Boeing Company, Northrup Grumman Corporation, FAA and
       Allied Signal Aerospace,

     - television -- CNN, Westwood One and WHDTV, the high-definition television
       model station, and

     - national defense -- separate purchasing arms of the Department of Defense
       and Hughes Network Systems, Lockheed Martin Corporation, Motorola, Inc.,
       Raytheon Systems Company, Litton Denro (a subsidiary of Litton
       Industries, Inc.) and NASA.

     In fiscal year 1999, we sold our products to more than 1,000 customers. Our
customers include companies that order a large number of very similar products,
as well as customers that order a small number of special order products. The
majority of our sales are made to numerous and usually repeat, customers who
purchase small quantities of multiple types of products and who often have
custom or semi-custom specifications. For larger orders, we often deliver
multiple types of products to multiple locations. The diversity of our customers
requires significant customer support, flexible manufacturing and a wide array
of product inventory. Our engineering and manufacturing operations and business
systems have been adapted for fast-turn, customer-specific product variations.
We believe that the size and diversity of our customer base reduces the business
risk inherent in dependence on a small number of large-volume customers.

     Among our largest customers during the last three fiscal years have been
separate purchasing arms of the U.S. military services and Hughes Network
Systems, Lockheed Martin Corporation, Motorola, Inc., Raytheon Systems Company,
Litton Denro and NASA. Generally, our largest customers tend to change or rotate
from year to year, although U.S. governmental units are consistently among our
largest customers. During fiscal years 1998 and 1999, purchases by the U.S. Army
comprised approximately 10% and 18%, respectively, of our sales. Similarly,
during fiscal years 1997 and 1998, purchases by Hughes Network Systems accounted
for 10% of our sales each year. Sales to the U.S. government, as a whole,
comprised 21%, 23% and 28% of our sales during fiscal years 1997, 1998 and 1999,
respectively.

SALES AND MARKETING

     In fiscal years 1997, 1998 and 1999, approximately 19%, 18% and 16%,
respectively, of our sales have been in international markets, but we are
attempting to increase our international marketing efforts. We market and sell
our products through three primary channels:

          SALES REPRESENTATIVES -- More than 80% of our orders come through our
     26 domestic and worldwide sales representative organizations. These
     representatives are independent firms, each assigned a geographical area
     for promoting and selling TrueTime products. Representatives covering our
     domestic sales areas receive commissions on the sales generated in their
     areas, but TrueTime actually confirms and invoices the sale to the
     customer. Our arrangements with our international representatives are
     different in that these representatives buy our products at a discount and
     then resell the products to their customers at prices dictated by their
     local market conditions.

          DIRECT CONTACT BY TRUETIME EMPLOYEES -- We have 25 employees in our
     Sales and Marketing Department, including our customer service personnel.
     Six of these employees are Regional Managers and are in direct contact with
     our customers. Most of the other employees work in customer service. We
     place special emphasis on making sure our products are performing within
     specifications and our customers are satisfied doing business with
     TrueTime.

          SALES AND MARKETING VIA INTERNET -- We have established an Internet
     website for extending the reach of our marketing and sales efforts.
     Although customers are not yet able to order our products over the
     Internet, our website provides added convenience for our customers who are
     increasingly
                                       31
<PAGE>   36

     using the Internet for choosing products which meet their needs. Because of
     the growing importance of our Internet link to customers, we are committed
     to the continual enhancement of our website and improvement of our
     procedures for responding to customer inquiries received through our
     website.

     Because we typically turn our orders on hand up to five or more times per
year, we do not regard so-called "backlog" as an indicator of our future
prospects.

TRUETIME'S COMPETITION

     The development, manufacture and sale of precise time and frequency
products is an intensely competitive industry. According to the previously noted
Frost & Sullivan report, there are more than 20 companies offering products in
the GPS timing field. These companies range from separate timing divisions in
very large companies, such as Hewlett-Packard and Motorola, to small stand alone
companies with revenues of less than $1 million annually. Our principal
competitors are Bancomm/Timing (a division of Datum, Inc.), Odetics Telecom (an
Odetics, Inc. division), Trak Systems, Inc. (a Tech-Sym Corporation subsidiary)
and Brandywine Communications, Inc. In addition, more than a dozen companies
produce products that are sold into the time and frequency markets as indirect
competition. These competitors consist primarily of component suppliers or
integrated system suppliers. As we continue to grow, we will likely encounter
these firms as more direct competitors. In general, most of our competitors have
more financial resources than we do, and may be capable of offering more
attractive packages for retaining and recruiting employees.

INTELLECTUAL PROPERTY

     Our success depends to a significant degree upon the preservation and
protection of our product and manufacturing process designs and other
proprietary technology. Historically, we have not filed patents to protect our
intellectual property, but have instead relied upon the confidential handling of
our designs, nondisclosure agreements with employees and trade secret law to
protect our product designs. Only recently have we decided to begin filing for
formal patents. Accordingly, our proprietary products are subject to examination
and possibly "reverse engineering" by our competitors. While we hope our
intellectual property is adequately protected by our confidential trade-secret
protection plans and programs, we cannot be sure that our competitors will be
prevented from gaining access to our proprietary and confidential technologies.
The use of our technology by others could eliminate any competitive advantages
we may have and cause us to lose sales. Moreover, the laws of other countries
where we market our products may afford even less protection for our
intellectual property.

     Some of our trade identifiers and product names have been trademarked,
including our name, "TrueTime."

     No single patent, trademark or group thereof is considered essential to the
success of TrueTime. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and costly,
even if we were to prevail. There are no proceedings currently pending relating
to our intellectual property.

REGULATORY MATTERS

     Our operations are subject to numerous local, state and federal laws and
regulations. While we do not foresee the need for significant expenditures to
ensure continued compliance with current environmental protection laws,
regulations in this area are subject to change, and we cannot be sure that
future laws and regulations will not have a material adverse effect on our
company. We use very few chemicals or other hazardous materials in our
operations and do not expect that significant costs will be incurred in
continuing to comply with existing environmental and other laws. We can offer no
assurance that future laws or regulations will not increase the costs of
compliance, and this could have a materially adverse effect on our company.

     Upon completion of this offering, we will no longer be a wholly owned
indirect subsidiary of OYO Japan. Therefore, TrueTime may enjoy some benefits by
no longer being considered a foreign-owned

                                       32
<PAGE>   37

corporation for certain regulatory purposes such as access to certain defense
contracts and government purchases of TrueTime products by system integrators.

MANUFACTURING OPERATIONS AND FACILITIES

     We currently manufacture and service our products at our single leased
facility of about 25,000 square feet in Santa Rosa, California. We are
negotiating a long-term lease agreement on a new larger manufacturing and office
facility of approximately 50,000 - 75,000 square feet, into which we intend to
move in the first quarter of calendar year 2000. Since the lease on our current
facilities does not expire until 2008, we plan to sublease upon moving our
facilities. In addition, we anticipate that the new lease agreement will provide
us with an option to purchase the new facility, which the Board may choose to
exercise in the future if it concludes that it is an economic use of our general
corporate funds. We plan to use approximately $1.0 million of our working
capital to build out and equip our new office and manufacturing facility.

     We use our production capacity to support top-level assembly and
modification and to conduct sophisticated tests of our products. We subcontract
base-level fabrication, low-level assembly and surface mount production to key
suppliers with expertise in these areas. All operations are performed under
TrueTime's ISO 9001 certification.

RESEARCH AND DEVELOPMENT

     In fiscal 1999, we spent $2.2 million developing network time servers,
network interface features and higher levels of integration and capabilities in
GPS and real time operating systems. In fiscal 1998, we spent $1.9 million
building the research and development organization and developing the core
technology platform for new products. In fiscal 1997, we spent $1.9 million
developing high end data rate clock and distribution system products, updating
our GPS products and increasing the options offered in GPS products.

SUPPLIERS

     We depend upon our suppliers for parts and services. Most of our parts and
services are obtainable from multiple sources, although some parts and services
are obtainable from only one source. Currently, Trimble Navigation, Inc.
provides virtually all of our supply of a key component for our GPS-based
products. While to date we have not had difficulty obtaining these parts and
services, if single-source products or services were to become unavailable, our
ability to provide products would be materially affected. We believe that
advances and investment in development technologies and modular designs will
allow us to respond quickly if part availability affects production, but there
can be no assurance as to that circumstance.

     Our current delivery times have been affected from time to time by
disruptions in the supply chain. Current deliveries range from (1) one to two
weeks for standard products kept in inventory, (2) two weeks to 45 days for
products that require configuration and (3) 60 to 90 days for custom products
that must be specially built to our customers' specifications.

     We sell on open account. Therefore, we use working capital to pay for the
wages of our employees and to carry inventories and accounts receivable pending
collections from our customers.

EMPLOYEES

     As of September 30, 1999, we employed 115 people on a full-time basis, all
of whom work at our facility in Santa Rosa, California. We have never
experienced a work stoppage and none of our employees is unionized. Over one
half of our employees have scientific and technical backgrounds.

LEGAL PROCEEDINGS

     From time to time, we may be a party to litigation and proceedings that may
be considered part of the ordinary course of our business. Since our
incorporation in 1991, we have not been a defendant in any lawsuit.

                                       33
<PAGE>   38

                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

     In connection with this offering, the Board of Directors of TrueTime will
be set at six positions. Our Certificate of Incorporation provides for the
classification of the Board into three classes of directors (Class I, Class II
and Class III), with the term of each class expiring at successive annual
stockholders' meetings. Beginning with the 2000 annual meeting of stockholders,
all nominees of the class standing for election will be elected for three-year
terms. The directors named below, other than Mr. Hall, will constitute the Board
of TrueTime at the time of the consummation of this offering.

<TABLE>
<CAPTION>
                                                                                         CLASS/YEAR
                                                                                      TERM AS DIRECTOR
NAME                                     AGE                 POSITION                   WILL EXPIRE
- ----                                     ---                 --------                 ----------------
<S>                                      <C>   <C>                                    <C>
Satoru Ohya(3).........................  67    Director                               Class III / 2002
Katsuhiko Kobayashi(1)(2)..............  54    Chairman of the Board and Director     Class III / 2002
Elizabeth A. Withers...................  40    President and Chief Executive Officer  Class II / 2001
                                               and Director
Haresh C. Patnaik......................  57    Senior Vice President and Chief
                                               Technical Officer
Donald H. Mitchell.....................  64    Vice President and Director of Sales
                                               and Marketing
Michael P. Von der Porten..............  43    Vice President and Chief Financial
                                               Officer
Ernest M. Hall, Jr.(4).................  74    Director (retiring prior to the
                                               closing of this offering)
Charles J. Abbe(1)(2)(3)...............  57    Director                                Class I / 2000
Charles H. Still(1)(2)(3)..............  57    Director                               Class II / 2001
A. Robert Towbin(1)(2)(3)..............  64    Director                                Class I / 2000
</TABLE>

- ---------------

(1) Member of the Compensation Committee of the Board of Directors.

(2) Member of the Audit Committee of the Board of Directors.

(3) To be elected as a director immediately prior to the closing of this
    offering.

(4) Mr. Hall will resign as a member of the Board of Directors immediately prior
    to the effectiveness of the registration statement relating to this
    offering.

     Satoru Ohya will be elected, and has consented to serve, as a director of
TrueTime immediately prior to the closing of this offering. He has been
President of OYO Japan since 1993. For over 40 years, Mr. Ohya has been an
employee, officer or director of OYO Japan and various of its subsidiaries.

     Katsuhiko Kobayashi joined OYO Japan in 1995 and has been a Managing
Director since March 1999. Since 1996 he has served as Treasurer of TrueTime's
predecessor and since 1999 as a director thereof. From 1973 to 1995 he was
employed by Sanwa Bank in its international banking area, where he last held the
position of general manager of the International Credit Administration
Department from 1993 to 1995. He is a director of OYO Geospace Corporation.

     Elizabeth A. Withers joined TrueTime in 1991. She has been a director and
President and Chief Executive Officer of TrueTime since September 1999. From
November 1998 until her appointment as President and Chief Executive Officer,
Ms. Withers served as Vice President of Operations. She has also held the
positions of Operations Manager and Materials Supervisor. Ms. Withers was
formerly Manufacturing Manager at Asea Brown Boveri, Production Manager at
Delphian Corporation and Field Engineering Supervisor at Fortune Systems. She
holds a B.S. degree in Organizational Behavior from the

                                       34
<PAGE>   39

University of San Francisco and the CPIM certification from the American
Production and Inventory Control Society (APICS).

     Haresh C. Patnaik has been Senior Vice President and Chief Technical
Officer of TrueTime since September 1999. From March 1998 until September 1999,
he served as Vice President of Research and Development. Mr. Patnaik joined
TrueTime in 1998 to build the Research and Development function and to assist
TrueTime with his broad management experience. From October 1991 until October
1997, Mr. Patnaik served as Vice President of Engineering at Tegal Corp.,
publicly-traded company in the semiconductor equipment manufacturing industry.
He has also served as the International Liaison and Program Director at Teradata
Corp., the Vice President of Engineering at Kennedy Co. and Director of
Engineering and Operations Program Manager at NCR Corporation. Mr. Patnaik holds
an M.S. degree in Electrical Engineering from Purdue University and a B.S.
degree in Electrical Engineering from IIT in Kharagpur, India. He has also
completed the Executive Management Program at UCLA Graduate School of Business.

     Donald H. Mitchell joined TrueTime in 1991 and has served as Vice President
and Director of Sales and Marketing since September 1999. He was Vice President
of Sales from July 1999 until September 1999 and Time and Frequency Director
from November 1991 until July 1999. Prior to joining TrueTime, Mr. Mitchell was
Sales and Marketing Manager at Austron, Inc./Frequency and Time Systems, Sales
and Marketing Manager at Datum, Inc. and Program Manager at Kentron
International. At Ling Temco Vought, Mr. Mitchell performed several roles,
including Program Manager responsible for the Hill Wendover Dugway Test Range at
Hill Air Force Base, Dugway Proving Grounds and Yuma Proving Grounds. He served
as Electronic Support Systems Manager at Khalalein Missile Test Range. Mr.
Mitchell has previous experience as Systems Manager for NASA in Kauai, Hawaii
and as Data Reduction Manager at the Navy Parachute Test Facility in El Centro,
California.

     Michael P. Von der Porten joined True Time in 1990 and has been Vice
President and Chief Financial Officer since September 1999. He served as Vice
President of Finance and Administration from November 1998 until September 1999.
He served as Controller and Manager of Administrative Services from June 1994
until November 1998. He served as Manager of Administrative Services from May
1991 until 1994. He has also held the position of Manufacturing Manager. Before
joining TrueTime, Mr. Von der Porten was the Director of Operations and
Secretary at Laser Scanning Products, Inc. and Materials Manager, Production
Manager and Program Manager at Microsource, Inc. Prior to that, he was
Headquarters Sales Manager and a Financial Analyst at Advanced Micro Devices.
Mr. Von der Porten holds an M.B.A. with concentrations in marketing and
production and operations management from the University of Chicago and a B.S.
in Engineering from Harvey Mudd College.

     Ernest M. Hall, Jr. has been a director since the formation of TrueTime and
its predecessors in 1991. From August 1994 until his retirement in September,
1999, Mr. Hall was the President of TrueTime. He will retire as a director of
TrueTime immediately prior to the effectiveness of the registration statement
relating to this offering. He has held various positions with the OYO group of
companies since 1980. He was President of OYO U.S.A. from 1985 until 1995, and
from 1997 to the present. From 1980 to 1985, Mr. Hall served as a consultant to
OYO U.S.A. He is a director of OYO Geospace Corporation. Following the offering,
Mr. Hall will continue to serve as President of OYO U.S.A. and will be an
advisor to our management and Board.

     Charles J. Abbe will be elected, and has consented to serve, as a director
of TrueTime immediately prior to the closing of this offering. Mr. Abbe has been
a director of Optical Coating Laboratory, Inc. (OCLI) since 1997, President
since November 1997 and Chief Executive Officer since April 1998. He served as
Vice President and General Manager of OCLI's Santa Rosa Division from April 1996
through October 1997 when he was appointed President, Chief Operating Officer
and director. Prior to joining OCLI, Mr. Abbe held various senior management
positions with Raychem Corporation from 1989 to 1996. From 1971 to 1989, he was
employed at McKinsey & Company, Inc.

     Charles H. Still will be elected, and has consented to serve, as a director
of TrueTime immediately prior to the closing of this offering and has been
Secretary of TrueTime since the formation of our
                                       35
<PAGE>   40

predecessor in September 1994. He has been a partner in the law firm of
Fulbright & Jaworski L.L.P. since 1975. He is a director of OYO Geospace
Corporation.

     A. Robert Towbin will be elected, and has consented to serve, as a director
of TrueTime immediately prior to the closing of this offering. Mr. Towbin has
been a Managing Director of C.E. Unterberg, Towbin since August 1995. He was
President and Chief Executive Officer of the Russian-American Enterprise Fund
from January 1994 to August 1995. From 1987 until 1993, he was a Managing
Director at Lehman Brothers Inc. He is a director of Bradley Real Estate Inc.,
Gerber Scientific, Inc., Globalstar Telecommunications Ltd., Globecomm Systems
Inc. and K&F Industries, Inc.

     From August 1994 until September 1999, TrueTime was managed by a team of
either four or five persons. Together, this group of managers was responsible
for the typical functions of executive officers and they reported to Ernest M.
Hall, Jr., who served as President. In preparation for this offering, Mr. Hall
resigned as President on September 15, 1999, and Ms. Withers was elected
President and Chief Executive Officer. Prior to being elected President, Ms.
Withers was Vice President and Operations Manager, and a member of the four
person management team serving TrueTime. Messrs. Patnaik, Mitchell and Von der
Porten were also members of that management team.

BOARD COMMITTEES

     Our Board has established an Audit Committee and a Compensation Committee.
The Audit Committee is charged with recommending to the Board of Directors the
appointment of our independent auditors, reviewing the compensation of such
auditors and reviewing with such auditors the plans for and the results and
scope of their auditing engagement. The Compensation Committee reviews the
performance and compensation of officers and makes recommendations to the Board
of Directors with respect thereto. It also administers our 1999 Employee Stock
Plan. See "-- Employee Stock Option Plan" and "-- Director Stock Plan."

DIRECTOR COMPENSATION

     Directors of TrueTime currently are not compensated for their services as
directors. All directors of the Company are reimbursed, however, for ordinary
and necessary expenses incurred in attending Board or committee meetings. We
intend to begin compensating non-employee directors and Board advisors for their
services at a rate of $12,000 per year (plus expenses) and an initial grant of
options to purchase 10,000 shares of common stock pursuant to the 1999
Non-Employee Director Stock Plan. In addition, we will annually grant additional
stock options to such directors and advisors for the purchase of shares of
common stock pursuant to the terms of that plan.

                                       36
<PAGE>   41

EXECUTIVE COMPENSATION

     The following table provides information about the current President and
Chief Executive Officer of TrueTime, the former President and Chief Executive
Officer of TrueTime and the three other executive officers of TrueTime who
received salary and bonus in the year ended September 30, 1999, that exceeded
$100,000, these persons being collectively referred to as "named executive
officers." The following compensation data includes bonuses awarded in fiscal
2000 for performance in fiscal 1999.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                  ANNUAL COMPENSATION
                                                             YEAR ENDED SEPTEMBER 30, 1999
                                                         --------------------------------------
                                                                                    ALL OTHER
NAME AND PRINCIPAL POSITION                               SALARY        BONUS      COMPENSATION
- ---------------------------                              --------      --------    ------------
<S>                                                      <C>           <C>         <C>
Elizabeth A. Withers
  President and Chief Executive Officer(1).............  $ 98,077(2)   $ 71,546       $4,617(3)
Ernest M. Hall, Jr.
  Former President(1)(4)...............................        --            --           --
Haresh C. Patnaik
  Senior Vice President and Chief Technical Officer....   135,193(2)     71,546        4,980(3)
Donald H. Mitchell
  Vice President and Director of Sales and Marketing...    83,429(2)    207,272(5)     6,473(3)
Michael P. Von der Porten
  Vice President and Chief Financial Officer...........   102,268(2)     71,546        4,764(3)
</TABLE>

- ---------------

(1) Mr. Hall retired from the office of President effective September 15, 1999.
    Ms. Withers was appointed to that office effective the same date. Following
    this offering, Mr. Hall will continue to serve as an advisor to TrueTime
    management and our Board.

(2) Beginning October 1, 1999, Ms. Withers' base annual salary is $160,000. Her
    compensation for fiscal 1999 related to her position as Vice President of
    Operations until September 15, 1999. In addition, effective October 1, 1999,
    Messrs. Patnaik's, Mitchell's and Von der Porten's base annual salaries were
    $155,000, $150,000 and $140,000, respectively.

(3) Represents contributions by TrueTime to a 401(k) savings plan and premiums
    paid on group-term life insurance.

(4) Mr. Hall did not receive compensation from TrueTime for his services as
    President. He was compensated by OYO U.S.A. for his services to OYO U.S.A.
    and its subsidiaries, including TrueTime, since his duties were primarily
    limited to overseeing the interests of OYO U.S.A. in TrueTime, and have not
    included active involvement in our daily activities.

(5) Includes commissions from sales and bonuses.

EMPLOYEE STOCK OPTION PLAN

     Our Board has established an incentive stock option and restricted stock
plan, the TrueTime, Inc. 1999 Employee Stock Plan (the Employee Plan), pursuant
to which options to purchase shares of common stock and awards of restricted
shares of common stock will be available for future grant to officers,
employees, consultants and advisors of TrueTime. The Employee Plan is designed
to provide selected employees, consultants and advisors, including officers,
with additional incentives to promote the success of our business and to enhance
our ability to attract and retain the services of qualified persons.

     The Employee Plan will be administered by the Compensation Committee of no
less than two persons appointed by the Board. Committee members may not be
employees of TrueTime and must not have been eligible to participate under the
Employee Plan for a period of at least one year prior to being appointed to the
Committee. Under the Employee Plan, options to purchase common stock and
restricted stock awards up to an aggregate of 1,500,000 shares of common stock
may be granted by the Committee. The exercise price of an option granted
pursuant to the Employee Plan may not be less than the fair market value of the
common stock on the date of grant and is determined by the Committee on the date
the option is granted. In the case of a grant of an option designated in the
Employee Plan as an "Incentive Option"

                                       37
<PAGE>   42

(which qualifies for special treatment under federal tax law) to an employee who
owns ten percent or more of the outstanding shares of common stock (a 10%
stockholder), the exercise price of each such option under the Employee Plan may
not be less than 110% of the fair market value of the common stock on the date
of the grant. No option may be granted under the Employee Plan for a period of
more than ten years. In the case of a 10% stockholder, no option designated as
an Incentive Option may be granted for a period of more than five years. Options
designated as Incentive Options under the Employee Plan may not be granted to
the extent the aggregate fair market value of the stock, valued as of the date
of the grant, with respect to which options first are exercisable by the option
holder in any calendar year, under the Employee Plan or any other incentive
stock option plan of TrueTime, exceeds $100,000. Under the Employee Plan, the
Compensation Committee may issue shares of restricted stock to employees for no
payment by the employee or for a payment below the fair market value on the date
of grant. The restricted stock is subject to certain restrictions described in
the Employee Plan, with no restrictions continuing for more than ten years from
the date of the award.

     To date the Board has not granted any options or restricted stock awards
under the Employee Plan. In connection with this offering, however, the Board
intends to grant options for shares of common stock to certain officers and,
employees, exercisable at the offering price.

     The following table provides information on stock options to be granted on
or about the closing date of this offering to our named executive officers.

<TABLE>
<CAPTION>
                                                                     PERCENT OF
                                                NUMBER OF SHARES    TOTAL OPTIONS
                                               UNDERLYING OPTIONS    GRANTED TO     EXERCISE   EXPIRATION
NAME                                                GRANTED           EMPLOYEES      PRICE        DATE
- ----                                           ------------------   -------------   --------   ----------
<S>                                            <C>                  <C>             <C>        <C>
Elizabeth A. Withers.........................       105,000              14%          (1)         (2)
Haresh C. Patnaik............................        90,000              12%          (1)         (2)
Donald H. Mitchell...........................        90,000              12%          (1)         (2)
Michael P. Von der Porten....................        90,000              12%          (1)         (2)
</TABLE>

- ---------------

(1) Exercise price will be equal to the initial public offering price.

(2) Options will expire ten years from date of grant.

     In the 1993 Omnibus Budget Reconciliation Act, Congress generally limited
to $1 million per year the tax deduction available to public companies for
certain compensation paid to designated executives. These executives include the
President and Chief Executive Officer and the next four highest compensated
officers of TrueTime. An exception is provided from this deduction limitation
for "performance-based" compensation if specified statutory requirements are
satisfied. The Plan is generally designed to satisfy these statutory
requirements for stock options. We anticipate being entitled to deduct an amount
equal to the ordinary income reportable by an optionee on exercise of
nonqualified options and the early disposition of shares of stock acquired by
exercise of incentive stock options. Restricted stock awards become vested based
on service to TrueTime, and generally will not be exempt from the $1 million
deduction cap. Because of special transition rules applicable to companies which
first become public in an initial public offering, we do not anticipate that
application of this deduction cap will have a material impact on awards issued
under this Plan.

     The Employee Plan may be amended by the Board without any requirement of
stockholder approval, except as required by Rule 16b-3 under the Securities
Exchange Act of 1934 (Rule 16b-3) and the incentive option rules of the Internal
Revenue Code of 1986.

DIRECTOR STOCK PLAN

     Our Board has also established the 1999 Non-Employee Director Stock Plan
(the Director Plan), pursuant to which options to purchase shares of common
stock will be available for future grant to non-employee directors and advisors
based on the fair market value thereof, as determined under the Director Plan,
at the date of grant. The Director Plan is designed to enhance our ability to
attract and retain the

                                       38
<PAGE>   43

services of qualified persons as directors and to provide such directors with a
direct proprietary interest in our success. The Director Plan will be
administered by the Board. Under the Director Plan, an aggregate of 150,000
shares of common stock will be available for grant of options to purchase common
stock and for issuance in partial payment of directors' annual fees. The
exercise price of an option granted pursuant to the Director Plan may not be
less than the fair market value of the common stock on the date of grant and is
determined by the Board on the date the option is granted. No option may be
granted under such Plan for a period of more than ten years. Shares issued to
directors in payment of part of their annual fees shall be issued based on the
fair market value thereof on the date of issuance.

     To date the Board has not granted options under the Director Plan and no
shares have been issued under such plan in respect of director fees. In
connection with this offering, however, the Board intends to grant options to
each non-employee director and Mr. Hall, as an advisor to our Board, to acquire
10,000 shares of common stock at an exercise price equal to the initial public
offering price of the common stock to be acquired in this offering as set forth
on the cover page of this prospectus. Thereafter, the Director Plan provides for
the grant of an option to acquire 10,000 to any newly elected member of the
Board of Directors and an annual grant of an option to acquire 3,000 shares of
common stock to those non-employee directors who are serving on the Board and
certain advisors to the Board following the annual meeting of the stockholders.
The Director Plan generally may be amended by the Board without any requirement
of stockholder approval except to the extent required by Rule 16b-3.

401(k) PLAN

     We have adopted a 401(k) Plan, effective as of the closing of this
offering, under which substantially all employees of TrueTime and its
subsidiaries who have completed at least six months of service will be eligible
to participate. The TrueTime 401(k) Plan permits eligible employees to
contribute up to 17% of their annual compensation up to a maximum dollar amount
established in accordance with Section 401(k) of the Internal Revenue Code of
1986. We may, in our discretion, make matching contributions of up to 50 percent
of the employees' deferrals of up to six percent of their compensation, or other
amounts as approved by the Board of Directors. During the fiscal year ended
September 30, 1999, our predecessor made matching contributions under a 401(k)
plan sponsored by OYO U.S.A. in an aggregate amount of approximately $19,000 for
Ms. Withers and Messrs. Patnaik, Mitchell and Von der Porten.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

     Our Certificate of Incorporation provides that the liability of the
directors for monetary damages shall be limited to the fullest extent
permissible under Delaware law.

     Our Bylaws indemnify our directors and officers to the fullest extent
possible under Delaware law. These indemnification provisions require us to
indemnify such persons against certain liabilities and expenses to which they
may become subject by reason of their service as a director or officer of
TrueTime or any of our affiliated enterprises. The provisions also set forth
certain procedures, including the advancement of expenses, that apply in the
event of a claim for indemnification. We intend to enter into indemnification
agreements with each of our officers and directors pursuant to which we will
indemnify each such person to the fullest extent permitted by law. We also
intend to obtain insurance to protect our officers and directors from liability.

EMPLOYMENT AGREEMENTS

     We plan to enter into an employment agreement with each of Ms. Withers and
Messrs. Patnaik, Von der Porten and Mitchell effective as of October 1, 1999,
subject to the consummation of this offering. These employment agreements will
set Ms. Withers' base annual salary at $160,000, Mr. Patnaik's base annual
salary at $155,000, Mr. Mitchell's base annual salary at $150,000 and Mr. Von
der Porten's base annual salary at $140,000, in each case subject to adjustment
by our Board. Each of these employees will also be entitled to participate in
our 401(k) Plan and any bonus plan we adopt and to receive certain employee
benefits and vacation.

                                       39
<PAGE>   44

     Each employment agreement will provide that Ms. Withers and Messrs.
Patnaik, Von der Porten and Mitchell receive the severance benefits described
below upon termination of his or her employment unless the termination (a)
results from the death, disability or retirement of such employee, (b) is by
TrueTime for Cause (as defined in the employment agreement) or (c) is by such
employee other than for Good Reason (as defined in the employment agreement).
Under these employment agreements, "Cause" is defined to mean the employee's
willful and continued failure to perform his or her duties after a demand for
such performance or the employee's willfully engaging in gross misconduct
materially and demonstrably injurious to TrueTime. Under these employment
agreements, "Good Reason" is defined to mean a demotion, a reduction in base
salary, a relocation of the employee's base location of employment, the
discontinuation of any employee benefit without comparable substitution, the
failure of any successor of TrueTime to assume the employment agreement or a
purported termination not in compliance with the employee agreement. The
severance benefits to which Ms. Withers or Messrs. Patnaik, Mitchell or Von der
Porten would be entitled include (i) his or her salary through the date of
termination, (ii) his or her base salary and pro-rated bonus for the fiscal year
of termination multiplied by one and one-half, (iii) any relocation and
indemnity payments to which he or she is entitled and any costs and legal fees
incurred in connection with any dispute over the employment agreement and (iv) a
gross-up for any applicable "excess parachute payment" tax imposed on the
employee by the Internal Revenue Code of 1986.

     Each employment agreement will have a two-year term and be automatically
renewable unless we timely elect not to renew. In these employment agreements,
each of Ms. Withers and Messrs. Patnaik, Mitchell and Von der Porten will agree
that he or she will not disclose or misappropriate any of our confidential
information. These employment agreements will also contain customary
non-competition provisions.

                                       40
<PAGE>   45

              RELATIONSHIP WITH OYO JAPAN AND RELATED TRANSACTIONS

     We are a wholly owned subsidiary of OYO U.S.A., which in turn is a wholly
owned subsidiary of OYO Japan. Mr. Kobayashi, the Chairman of our Board, is
Managing Director of OYO Japan. He also holds offices with other subsidiaries of
OYO U.S.A. Mr. Ohya, who is to become a director of the Company in conjunction
with the consummation of this offering, is President of OYO Japan. Mr. Still,
who is to become a director of the Company in conjunction with the consummation
of this offering, is the Secretary of OYO U.S.A., as well as of TrueTime, and
also serves in that position with respect to most of the subsidiaries of OYO
U.S.A. Messrs. Ohya, Kobayashi and Still are also directors of OYO Geospace
Corporation, a majority-owned subsidiary of OYO U.S.A.

     To effect a complete separation of the administrative operation of TrueTime
from OYO and its affiliates, we have entered into a transition services
agreement with OYO U.S.A. whereby each party has agreed to compensate the other
for use of personnel of the other party for up to one year following the
consummation of this offering. We anticipate that the transition services will
relate primarily to accounting, tax and employee benefit matters. Under that
agreement, no employee of either party will be required to provide more than 50
hours per month in service for the benefit of the other party. Our 401(k) Plan
has been administered with affiliated companies under OYO U.S.A.'s control. We
have paid our proportionate share of related costs (administration fees to third
parties). Upon the consummation of this offering, we will contract for all
services on our own behalf. We also intend to enter into a tax separation
agreement with OYO U.S.A. whereby (i) any tax liability, assessments,
adjustments or refunds relating to our income, gains, losses, deductions or
credits utilized or reflected or to be utilized or reflected in OYO U.S.A.'s
consolidated, combined, or unitary returns for the current year or for any
period which includes all or any portion of the taxable period ended as of the
closing date of this offering will be allocated between us and OYO U.S.A. and
(ii) any tax assessments, adjustments or refunds relating to our tax attributes
reflected or utilized in OYO U.S.A.'s consolidated, combined or unitary returns
as a result of an audit by a taxing authority will be allocated between us and
OYO U.S.A.

     We currently participate in the central cash management system of OYO
U.S.A. in which the net cash provided or used by our operations is transferred
to or from OYO U.S.A. on a daily basis. We have a receivable from OYO U.S.A. for
the cumulative amount by which the cash provided by operating activities,
including current income taxes allocated from OYO U.S.A., has exceeded our
working capital and capital expenditure requirements. The receivable was
approximately $433,000 at September 30, 1999 and reflects a collection of $3.5
million from OYO U.S.A. in September 1999 for the preliminary and partial
settlement of the receivable balance. As soon as practical following the closing
of this offering, we will separate from OYO U.S.A.'s central cash management
system and the remaining receivable at that date will be collected in cash.
Beginning October 1, 1997, OYO U.S.A. implemented a policy of crediting interest
on the receivable balance, excluding the reduction in the receivable balance for
allocated current income taxes. Interest credited and added to the receivable
balance was $305,000 for fiscal 1999. In October 1999, we transferred $3.5
million to OYO U.S.A. subject to the terms of a Trust Agreement with OYO U.S.A.
Under the terms of the Trust Agreement, OYO U.S.A. acknowledges and agrees that
it holds $3.5 million, plus the investment income earned thereon, for our
benefit and will manage the trust assets as part of its other cash management
activities. This action was taken to maximize the return on our assets available
for investment until such time that we have established our own short-term
investment program. The Trust Agreement can be terminated at our option after
providing 30 days notice to OYO U.S.A. We expect to terminate the trust as soon
as is practical after the closing of this offering, at which time the amounts
held in trust along with the investment earnings thereon will be returned to us.

     In connection with this offering, we have entered into a Registration
Rights Agreement pursuant to which we granted to OYO U.S.A. piggy-back and
demand registration rights for shares of our common stock owned by OYO U.S.A.
after the consummation of this offering. We are not obligated to effect a
registration if securities for which registration is demanded can be sold within
a single 90-day period pursuant to Rule 144 under the Securities Act of 1933. In
general, we will bear all registration expenses incurred in connection with
these registrations, but OYO U.S.A. will pay all underwriting discounts and

                                       41
<PAGE>   46

commissions applicable to the sale of securities sold by it. OYO U.S.A. has
entered into a lock-up agreement pursuant to which it has agreed not to offer or
sell shares of our common stock held by it for a period of one year from the
date of this prospectus without the prior written consent of C.E. Unterberg,
Towbin on behalf of the underwriters. OYO U.S.A. has advised us that it has no
plans at present to sell additional shares of our common stock following the
consummation of this offering, but it will not be restricted in doing so except
during the lock-up period pursuant to the lock-up agreement with the
underwriters.

                                       42
<PAGE>   47

                        SECURITY OWNERSHIP OF MANAGEMENT
                     AND PRINCIPAL AND SELLING STOCKHOLDER

     Of the shares of common stock being offered hereby, 1,500,000 are being
offered by OYO U.S.A., the selling stockholder. Prior to this offering, TrueTime
has been a wholly owned subsidiary of the selling stockholder, which held
4,000,000 shares. The selling stockholder is a wholly owned subsidiary of OYO
Japan. See "Relationship with OYO Japan and Related Transactions." Following
this offering, the selling stockholder will hold 2,500,000 shares of common
stock. TrueTime and the selling stockholder will proportionately share the
underwriting discount and the expenses of this offering.

     Prior to this offering, our members of management owned no shares of our
common stock. Contemporaneously with this offering, members of management will
be issued options to acquire shares of common stock, as set forth below,
pursuant to the Employee Plan. See "Management -- Employee Stock Plan." The
following table sets forth as of the closing of this offering the beneficial
ownership of shares of common stock, and as a percentage of outstanding common
stock, of each of our directors, each named executive officer, each beneficial
owner of more than 5% of our outstanding common stock and all our directors and
executive officers as a group. Each person named has sole voting and investment
power with respect to the shares indicated except as otherwise stated in the
notes to the table.

<TABLE>
<CAPTION>
                                                              BENEFICIAL OWNERSHIP AFTER OFFERING
                                                          -------------------------------------------
                                                                                PERCENTAGE
                                                                      -------------------------------
                                                                      IF UNDERWRITER   IF UNDERWRITER
                                                                      OVER-ALLOTMENT   OVER-ALLOTMENT
                                                                      OPTION IS NOT      OPTION IS
NAME OF BENEFICIAL OWNER                                   SHARES       EXERCISED        EXERCISED
- ------------------------                                  ---------   --------------   --------------
<S>                                                       <C>         <C>              <C>
OYO Corporation(1)......................................  2,500,000        45.5%            42.0%
OYO Corporation U.S.A.(2)...............................  2,500,000
Satoru Ohya(3)(7).......................................  2,510,000        45.6%            42.0%
Katsuhiko Kobayashi(4)(7)...............................     10,000          *                *
Elizabeth A. Withers....................................         --          --               --
Haresh C. Patnaik.......................................         --          --               --
Donald H. Mitchell......................................         --          --               --
Michael P. Von der Porten...............................         --          --               --
Ernest M. Hall, Jr.(5)..................................     10,000          *                *
Charles J. Abbe(6)(7)...................................     10,000          *                *
Charles H. Still(6)(7)..................................     10,000          *                *
A. Robert Towbin(6)(7)..................................     10,000          *                *
Executive officers and directors as a group (9
  people)(8)............................................  2,550,000        45.9%            42.5%
</TABLE>

- ---------------

 *  Less than one percent.

(1) The shares indicated as beneficially owned by OYO Corporation, a Japanese
    corporation, are held directly by its wholly owned subsidiary OYO
    Corporation U.S.A. The address of OYO Corporation is Ichigay Building 2-6,
    Kudan-kita 4-chome, Chiyoda-ku, Tokyo 102, Japan.

(2) The address of OYO Corporation U.S.A. is 7334 N. Gessner Road, Houston,
    Texas 77040.

(3) The shares indicated as beneficially owned by Mr. Ohya are owned directly by
    OYO U.S.A. and are included because Mr. Ohya is an affiliate of OYO Japan.
    Mr. Ohya disclaims beneficial ownership of the shares of common stock owned
    by OYO U.S.A. within the meaning of Rule 13d-3 under the Securities Exchange
    Act of 1934. Mr. Ohya owns 298,800 ordinary shares of OYO Japan, and his
    wife and children collectively own 19,741 shares of OYO Japan. Mr. Ohya
    disclaims beneficial ownership of the shares of OYO Japan owned by his
    children within the meaning of Rule 13d-3 under the Securities Exchange Act
    of 1934.

(4) Mr. Kobayashi owns 3,420 ordinary shares of OYO Corporation.

(5) Mr. Hall will resign as a member of the Board of Directors immediately prior
    to the effectiveness of the registration statement relating to this
    offering.
                                       43
<PAGE>   48

(6) To be elected as a director immediately prior to the closing of this
    offering.

(7) Represents options to purchase 10,000 shares to be granted in connection
    with this offering, which vest immediately.

(8) Does not include shares beneficially owned by Mr. Hall, who is retiring
    prior to the closing of this offering.

                                       44
<PAGE>   49

                          DESCRIPTION OF CAPITAL STOCK

     The following is a summary description of the material terms of our capital
stock. This summary is not intended to be complete. Since the terms of our
capital stock must comply with the provisions of our Certificate of
Incorporation and Bylaws, which are included as exhibits to the registration
statement of which this prospectus is a part, as well as the General Corporation
Law of the State of Delaware, you should read those two exhibit documents
carefully.

     We have the authority to issue up to 20,000,000 shares of common stock, par
value $.01 per share, and 1,000,000 shares of preferred stock, par value $.01
per share.

COMMON STOCK

     Subject to preferences that may be applicable to any preferred stock
outstanding at any time, if any, the holders of outstanding shares of common
stock are entitled to receive dividends out of assets legally available therefor
at such times and in such amounts as our Board from time to time may determine.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. Cumulative voting for the election
of directors is not authorized by our Certificate of Incorporation, which means
that the holders of a majority of the shares voted can elect all of the
directors then standing for election. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon our
liquidation, dissolution or winding-up the assets legally available for
distribution to stockholders would be distributable ratably among the holders of
our common stock after payment of liquidation preferences, if any, on any
outstanding preferred stock and payment of our creditors. Each outstanding share
of our common stock is, and all shares of our common stock to be outstanding
upon completion of this offering will be upon payment therefor, duly and validly
issued, fully paid and nonassessable.

PREFERRED STOCK

     Our Board is authorized, subject to any limitations under Delaware law that
may apply, to issue shares of preferred stock in one or more series. The Board
can fix the rights, preferences and privileges of the shares of each series and
any qualifications, limitations or restrictions thereon.

     Our Board may authorize the issuance of shares of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of our common stock. The issuance of shares of
preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of delaying,
deferring or preventing a change in control of TrueTime. We have no current plan
to issue any shares of preferred stock.

DELAWARE ANTI-TAKEOVER LAW

     We are subject to the provisions of Section 203 of the Delaware General
Corporation law regulating corporate takeovers. This statute prevents Delaware
corporations like us from engaging, under certain circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets, with any interested stockholder, or a stockholder who owns
15% or more of the corporation's outstanding voting stock, as well as affiliates
and associates of any such persons, for three years following the date that such
stockholder became an "interested stockholder" unless

     - the transaction in which such stockholder became an interested
       stockholder is approved by the Board of Directors prior to the date the
       interested stockholder attained such status;

     - upon consummation of the transaction that resulted in the stockholder's
       becoming an interested stockholder, the interested stockholder owned at
       least 85% of the voting stock of the corporation outstanding at the time
       the transactions commenced, excluding those shares owned by persons who
       are directors and also officers and, under certain circumstances, shares
       held in employee stock plans; or

                                       45
<PAGE>   50

     - the business combination is approved by the Board of Directors and
       authorized at an annual or special meeting of stockholders by the
       affirmative vote of at least two-thirds of the outstanding voting stock
       not owned by the interested stockholder.

     Under some circumstances, Section 203 makes it more difficult for a person
who would be an "interested stockholder" to effect various business combinations
with a corporation for a three-year period, although the stockholders may elect
to exclude a corporation from the restrictions imposed under Section 203. Our
Certificate of Incorporation does not exclude us from the restrictions imposed
under Section 203. It is anticipated that the provisions of Section 203 may
encourage companies interested in acquiring us to negotiate in advance with our
Board since the stockholder approval requirement would be avoided if a majority
of the directors then in office approves, prior to the date on which a
stockholder becomes an interested stockholder, either the business combination
or the transaction which results in the stockholder becoming an interested
stockholder.

CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

     The summary below describes provisions of our Certificate of Incorporation
and Bylaws. The provisions of our Certificate of Incorporation and Bylaws
discussed below may have the effect, either alone or in combination with the
provisions of Section 203 discussed above, of making more difficult or
discouraging a tender offer, proxy contest or other takeover attempt that is
opposed by our Board but that you might consider to be in your best interest.
Those provisions include

     - restrictions on the rights of stockholders to remove directors;

     - prohibitions against stockholders calling a special meeting of
       stockholders or acting by unanimous written consent in lieu of a meeting;
       and

     - requirements for advance notice of actions proposed by stockholders for
       consideration at meetings of the stockholders.

  CLASSIFIED BOARD OF DIRECTORS; REMOVAL; NUMBER OF DIRECTORS; FILLING VACANCIES

     Our Certificate of Incorporation and Bylaws provide that the Board shall be
divided into three classes of directors, designated Class I, Class II and Class
III, with the classes to be as nearly equal in number as possible. The term of
office of each class shall expire at the third annual meeting of stockholders
for the election of directors following the election of such class. See
"Management -- Directors and Officers" for identification of the directors in
each class. Each director is to hold office until his or her successor is duly
elected and qualified, or until his or her earlier resignation or removal.

     Our Certificate of Incorporation provides that the number of directors will
be fixed from time to time by a resolution adopted by the Board; provided that
the number so fixed shall not be more than nine nor less than three directors.
Our Certificate of Incorporation also provides that any vacancies will be filled
only by the affirmative vote of two-thirds of the remaining directors, even if
less than a quorum. Accordingly, absent an amendment to the Certificate of
Incorporation, our Board could prevent any stockholder from enlarging the Board
and filling the new directorships with such stockholder's own nominees.
Moreover, our Certificate of Incorporation and Bylaws provide that directors may
be removed only for cause and only upon the affirmative vote of holders of at
least a majority of our outstanding voting stock at a special meeting of
stockholders called expressly for that purpose.

     The classification of directors could have the effect of making it more
difficult for stockholders to change the composition of the Board. At least two
annual meetings of stockholders, instead of one, would generally be required to
effect a change in a majority of the Board. Such a delay may help ensure that
our directors, if confronted by a holder attempting to force a proxy contest, a
tender or exchange offer, or an extraordinary corporate transaction, would have
sufficient time to review the proposal as well as any available alternatives to
the proposal and to act in what they believe to be the best interest of the
stockholders. The classification provisions will apply to every election of
directors, however, regardless of

                                       46
<PAGE>   51

whether a change in the composition of the Board would be beneficial to us and
our stockholders and whether or not a majority of our stockholders believe that
such a change would be desirable.

     The classification provisions could also have the effect to discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of us, even though such an attempt might be
beneficial to us and our stockholders. The classification of the Board could
thus increase the likelihood that incumbent directors will retain their
positions. In addition, because the classification provisions may discourage
accumulations of large blocks of our stock by purchasers whose objective is to
take control of us and remove a majority of the Board, the classification of the
Board could tend to reduce the likelihood of increases in the market price of
our common stock that might result from accumulations of large blocks.
Accordingly, you could be deprived of opportunities to sell your shares of our
common stock at a higher market price than might otherwise be the case.

  NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

     Our Certificate of Incorporation provides that stockholder action can be
taken only at an annual or special meeting of stockholders and stockholder
action may not be taken by written consent in lieu of a meeting. Special
meetings of stockholders can be called only by our Board by a resolution adopted
by two-thirds of the members of the Board, or by the Chairman of the Board or
the Chief Executive Officer. Moreover, the business permitted to be conducted at
any special meeting of stockholders is limited to the business brought before
the meeting under the notice of meeting given by us.

     The provisions of our Certificate of Incorporation prohibiting stockholder
action by written consent and permitting special meetings to be called only by
the Chairman of the Board or the Chief Executive Officer, or at the request of
two thirds of the members of the Board, may have the effect of delaying
consideration of a stockholder proposal until the next annual meeting. The
provisions would also prevent the holders of a majority of our voting stock from
unilaterally using the written consent procedure to take stockholder action.
Moreover, a stockholder could not force stockholder consideration of a proposal
over the opposition of the Chairman or President or two thirds of the members of
the Board by calling a special meeting of stockholders prior to the time such
parties believe such consideration to be appropriate.

  ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER
  PROPOSALS

     Our Bylaws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or bring other business
before an annual meeting of stockholders.

     The stockholder notice procedure provides that only persons who are
nominated by, or at the direction of, the Board, or by a stockholder who has
given timely notice containing specified information to our Secretary prior to
the meeting at which directors are to be elected, will be eligible for election
as our directors. The stockholder notice procedure also provides that at an
annual meeting only such business may be conducted as has been brought before
the meeting by, or at the direction of, the Board of Directors or by a
stockholder who has given timely written notice containing specified information
to our Secretary of such stockholder's intention to bring such business before
such meeting. Under the stockholder notice procedure, for notice of stockholder
nominations or proposals to be made at an annual meeting to be timely, such
notice must be received by us not less than 90 days nor more than 180 days in
advance of such meeting. However, in the event that less than 100 days notice or
prior public disclosure of the date of the meeting of stockholders is given or
made to the stockholders, to be timely, notice of a nomination or proposal
delivered by the stockholder must be received by our Secretary not later than
the close of business on the tenth day following the day on which notice of the
date of the meeting of stockholders was mailed or such public disclosure was
made to the stockholders. If the Board or, alternatively, the presiding officer
at a meeting, in the case of a stockholder proposal, or the chairman of the
meeting, in the case of a stockholder nomination to the Board, determines at or
prior to the meeting that business was not brought before the meeting, or a
person was not nominated, in accordance with the stockholder notice procedure,
such business will not be conducted at such meeting, or such person will not be
eligible for election as a director, as the case may be.

                                       47
<PAGE>   52

     By requiring advance notice of nominations by stockholders, the stockholder
notice procedure will afford our Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent considered necessary
or desirable by the Board, to inform stockholders about such qualifications. By
requiring advance notice of other proposed business, the stockholder notice
procedure will also provide a more orderly procedure for conducting annual
meetings of stockholders and, to the extent considered necessary or desirable by
the Board, will provide the Board with an opportunity to inform stockholders,
prior to such meetings, of any business proposed to be conducted at such
meetings, together with any recommendations as to the Board's position regarding
action to be taken regarding such business, so that stockholders can better
decide whether to attend such a meeting or to grant a proxy regarding the
disposition of any such business.

     Although our Bylaws do not give the Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to us and our stockholders.

  AMENDMENTS

     Our Certificate of Incorporation provides that we reserve the right to
amend, alter, change or repeal any provision contained in our Certificate of
Incorporation, and all rights conferred to stockholders are granted subject to
such reservation. The affirmative vote of holders of not less than two-thirds of
our voting stock, voting together as a single class, is required to alter,
amend, adopt any provision inconsistent with or repeal specified provisions of
our certificate of incorporation, including certain provisions discussed in this
section. In addition, our Certificate of Incorporation provides that
stockholders may only adopt, amend or repeal our Bylaws by the affirmative vote
of holders of not less than a majority of our voting stock, voting together as a
single class. Our Bylaws may also be amended by our Board.

RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY

     Our Certificate of Incorporation authorizes the board of directors to
create and issue rights, warrants and options entitling the holders of them to
purchase from us shares of any class or classes of our capital stock or other
securities or property on such terms and conditions as the board of directors
may deem advisable.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

     Our Certificate of Incorporation limits the liability of directors to the
fullest extent permitted by Delaware law. In addition, our Certificate of
Incorporation and Bylaws provide that we will indemnify our directors and
officers to the fullest extent permitted by Delaware law. We have also entered
into separate indemnification agreements with our directors and officers that
provide them indemnification protection to the maximum extent permitted by law
in the event our Certificate of Incorporation is subsequently amended or we are
taken over and also to provide for certain procedural matters for our directors
that safeguard or enhance their indemnity rights. The form of the indemnity
agreements is included as an exhibit to the registration statement of which this
prospectus is a part and you should read that document carefully, together with
our Certificate of Incorporation and By-laws, which are also included as
exhibits, if you want further information as to our indemnity arrangements
relating to directors and officers.

     Our Certificate of Incorporation and Bylaws provide that we will indemnify
officers and directors against losses that they may incur in investigations and
legal proceedings resulting from their services to us, which may include
services in connection with takeover defense measures. Such provisions may have
the effect of preventing changes in our management.

                                       48
<PAGE>   53

LISTING

     We are applying to have the shares we are offering approved for quotation
on the Nasdaq National Market under the symbol "TRUE."

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for our common stock is American
Securities Transfer and Trust, Inc. and they can be reached at 1825 Lawrence
Street, Denver, Colorado 80202, (303) 298-5370.

                                       49
<PAGE>   54

                        SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.

     After this offering, 5,500,000 shares of our common stock will be
outstanding (5,950,000 shares if the underwriters exercise their over-allotment
option from us in full), and there are 810,000 estimated shares of common stock
issuable upon the exercise of authorized and outstanding options under our stock
plans (see "Management"), and 200,000 shares issuable under warrants issued to
the underwriters in connection with this offering (see "Underwriting"). Of these
shares, the 3,000,000 shares (3,450,000 shares if the underwriters exercise
their over-allotment options in full) sold in this offering will be freely
tradable without restrictions under the Securities Act, except for any shares
purchased by any of our affiliates, defined as any person that, directly or
indirectly, controls, or is controlled by, or is under common control with,
TrueTime. The remaining 2,500,000 shares (not including shares issuable under
options, warrants or pursuant to restricted stock awards as to which special
restrictions apply) are restricted securities, defined as

     - securities acquired directly or indirectly from us, or from an affiliate
       of ours, or in a transaction or chain of transactions not involving any
       public offering; and

     - securities acquired from us that are subject to the resale limitations
       under the Securities Act.

Restricted securities generally may not be sold unless they are registered under
the Securities Act or are sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144 under the Securities Act.

     Our officers and directors and the selling stockholder have entered into
lock-up agreements pursuant to which they have agreed not to offer or sell any
shares of common stock for a period of one year after the date of this
prospectus without the prior written consent of C.E. Unterberg, Towbin, which
may, at any time and without notice, waive any of the terms of these lock-up
agreements. These shares will not be eligible for sale in the public market
without registration under the Securities Act unless such sales meet the
conditions and restrictions of Rule 144 as described below.

     In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (1)
1% of the then-outstanding shares of common stock and (2) the average weekly
trading volume of the common stock during the four calendar weeks immediately
preceding the date on which the notice of such sale on Form 144 is filed with
the SEC. Sales under Rule 144 are also subject to certain provisions relating to
notice and manner of sale and the availability of current public information
about the Company. In addition, a person (or persons whose shares are
aggregated) who has not been an affiliate of the Company at any time during the
90 days immediately preceding a sale of our common stock, and who has
beneficially owned the shares for at least two years, would be entitled to sell
shares owned thereby under Rule 144(k) without regard to the volume limitation
and other conditions described above. The foregoing summary of Rule 144 is not
intended to be a complete description.

     As soon as practicable following the consummation of this offering, we
intend to file a registration statement under the Securities Act to register the
shares of our common stock available for issuance under our stock plans. Shares
issued under these plans and warrants generally will be available for sale in
the open market when options or warrants or exercised or restricted stock awards
vest, subject to the expiration of the one-year lock-up period.

                                       50
<PAGE>   55

     We have granted C.E. Unterberg, Towbin demand registration and piggyback
registration rights covering the 200,000 shares of our common stock they may
acquire upon exercise of the warrants held by them. We intend to grant OYO
U.S.A. piggyback and demand registration rights covering the 2,500,000 shares of
common stock it will own after this offering.

                                       51
<PAGE>   56

                                  UNDERWRITING

     Subject to the terms and conditions set forth in an underwriting agreement
among us and the underwriters, each of the underwriters named below, for whom
C.E. Unterberg, Towbin is acting as representative, has agreed to purchase from
us the number of shares of common stock set forth below:

<TABLE>
<CAPTION>
                                                                NUMBER
UNDERWRITER                                                    OF SHARES
- -----------                                                    ---------
<S>                                                            <C>
C.E. Unterberg, Towbin......................................
                                                               ---------
          Total.............................................   3,000,000
                                                               =========
</TABLE>

     The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions. The nature of the underwriters'
obligations is that they are committed to purchase and pay for all of the above
shares of common stock if any are purchased.

PUBLIC OFFERING PRICE AND DEALERS CONCESSION

     The underwriters propose initially to offer the shares of common stock
offered by this prospectus to the public at the public offering price per share
set forth on the cover page of this prospectus and to certain dealers at that
price less a concession not in excess of $     per share. The underwriters may
allow, and these dealers may re-allow, a discount not in excess of $     per
share on sales to certain other dealers. After commencement of this offering,
the offering price, discount price and re-allowance may be changed by the
underwriters. No such change will alter the amount of proceeds to be received by
us as set forth on the cover page of this prospectus.

OVER-ALLOTMENT OPTION

     We have granted the underwriters an option, which may be exercised within
30 days after the date of this prospectus, to purchase up to 450,000 additional
shares of common stock to cover over-allotments, if any, at the initial public
offering price, less the underwriting discount set forth on the cover page of
this prospectus. If the underwriters exercise their over-allotment option to
purchase any of these additional 450,000 shares of common stock, these
additional shares will be sold by the underwriters on the same terms as those on
which the shares offered by this prospectus are being sold. We will be
obligated, pursuant to the over-allotment option, to sell shares to the
underwriters if the underwriters exercise their over-allotment option. The
underwriters may exercise their over-allotment option only to cover over-
allotments made in connection with the sale of the shares of common stock
offered by this prospectus.

UNDERWRITING COMPENSATION

     The following table summarizes the compensation to be paid to the
underwriters by us and the selling shareholder in connection with this offering:

<TABLE>
<CAPTION>
                                                                          TOTAL
                                                             -------------------------------
                                                      PER       WITHOUT            WITH
                                                     SHARE   OVER-ALLOTMENT   OVER-ALLOTMENT
                                                     -----   --------------   --------------
<S>                                                  <C>     <C>              <C>
Underwriting discounts paid by us..................    $           $                $
Underwriting discounts paid by the selling
  stockholder......................................
          Total....................................    $           $                $
</TABLE>

INDEMNIFICATION OF UNDERWRITERS

     We have agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in connection with these
liabilities.

                                       52
<PAGE>   57

C.E. UNTERBERG, TOWBIN WARRANT

     As additional underwriting compensation, we will issue C.E. Unterberg,
Towbin, for its own account, a warrant covering an aggregate of up to 200,000
shares of common stock exercisable at the price per share equal to 110% of the
initial public offering price. C.E. Unterberg, Towbin may exercise this warrant
as to all or any lesser number of the underlying shares of common stock
commencing on the first anniversary of the date of this offering until the fifth
anniversary of the date of this offering. The terms of this warrant require us
to register the common stock for which this warrant is exercisable within one
year from the date of the prospectus.

     This warrant is not transferable by the warrant holder other than to
officers and partners of C.E. Unterberg, Towbin or to one of the other
underwriters or its officers or partners. The exercise price of this warrant and
the number of shares of common stock for which this warrant is exercisable are
subject to adjustment to protect the warrant holder against dilution in certain
events.

LOCK-UP AGREEMENTS

     We, the selling stockholder and all of our directors and officers have
agreed to a "lock-up" arrangement under which we and they may not offer, sell,
contract to sell, pledge or otherwise dispose of, or file a registration
statement with the SEC in respect of, or establish or increase a put position
within the meaning of Section 16 of the Exchange Act with respect to any shares
of capital stock of TrueTime or any securities convertible into or exercisable
or exchangeable for such capital stock, or publicly announce an intention to
effect any such transaction, in each case without the prior written consent of
C.E. Unterberg, Towbin for a period of one year after the date of this
prospectus, subject to certain exceptions.

STABILIZATION AND OTHER TRANSACTIONS

     In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the common stock. These transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M under the Exchange Act,
pursuant to which the underwriters may bid for, or purchase, common stock for
the purpose of stabilizing the market price. The underwriters also may create a
short position by selling more common stock in connection with this offering
than they are committed to purchase from us, and in such case may purchase
common stock in the open market following completion of this offering to cover
all or a portion of such short position. In addition, the underwriters may
impose "penalty bids" whereby they may reclaim from a dealer participating in
this offering, the selling concession with respect to the common stock that it
distributed in this offering, but which was subsequently purchased for the
accounts of the underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
common stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in the paragraph is required, and, if
they are undertaken, they may be discontinued at any time.

DISCRETIONARY ACCOUNTS

     The underwriters have informed us that they do not intend to confirm sales
to any account over which they exercise discretionary authority.

DETERMINATION OF OFFERING PRICE

     Prior to this offering, there has been no market for our common stock.
Accordingly, the initial public offering price for the common stock was
determined by negotiation between us and the underwriters. Among the factors
considered in determining the initial public offering price were our results of
operations, our current financial condition, our future prospects, the state of
the markets for our services, the experience of our management, the economics of
the precision timing industry in general, the general condition of the equity
securities market and the demand for similar securities of companies considered
comparable to us.

                                       53
<PAGE>   58

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for us by Fulbright & Jaworski L.L.P., Houston, Texas. Charles H. Still, a
partner in such firm, will become a member of our Board of Directors immediately
prior to the consummation of this offering and will be granted options to
purchase 10,000 shares of common stock under the 1999 Director Stock Option Plan
at the offering price. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Akin, Gump, Strauss, Hauer & Feld,
L.L.P.

                                    EXPERTS

     The financial statements as of September 30, 1998 and 1999, and for each of
the three years in the period ended September 30, 1999, included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

                   WHERE YOU CAN FIND ADDITIONAL INFORMATION

     We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of our
common stock being sold in this offering. This prospectus does not contain all
of the information set forth in the registration statement and the exhibits
filed with the registration statement. For further information with respect to
TrueTime and our common stock, we refer you to the registration statement and
the exhibits filed with the registration statement. Statements contained in this
prospectus regarding the contents of any contract or any other document filed as
an exhibit are not necessarily complete, and, in each instance, we refer you to
the copy of such contract or other document filed as an exhibit to the
registration statement and each such statement is qualified in all respects by
the contract or other document in question. A copy of the registration statement
and the exhibits and schedules filed with the registration statement may be
inspected without charge at the public reference facilities maintained by the
SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60611 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the registration statement may be obtained from these offices upon the payment
of the fees charged by the SEC. You may obtain information on the operation of
the SEC's public reference facilities by calling 1-800-SEC-0330. The SEC also
maintains a World Wide Web site that contains registration statements, reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. The address of the site is
http://www.sec.gov. We maintain a website at www.truetime.com.

                                       54
<PAGE>   59

                                 TRUETIME, INC.

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Accountants...........................   F-1
Balance Sheets as of September 30, 1998 and 1999............   F-2
Statements of Operations for the Years Ended September 30,
  1997, 1998 and 1999.......................................   F-3
Statements of Changes in Stockholder's Equity for the Years
  Ended September 30, 1997, 1998 and 1999...................   F-4
Statements of Cash Flows for the Years Ended September 30,
  1997, 1998 and 1999.......................................   F-5
Notes to Financial Statements...............................   F-6
</TABLE>

                                       F-i
<PAGE>   60

                       REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
TrueTime, Inc.:

     In our opinion, the accompanying balance sheets and the related statements
of operations, changes in stockholder's equity and cash flows present fairly, in
all material respects, the financial position of TrueTime, Inc. (a wholly owned
subsidiary of OYO Corporation U.S.A.) at September 30, 1998 and 1999, and the
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with accounting principles generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

Houston, Texas
November 2, 1999

                                       F-1
<PAGE>   61

                                 TRUETIME, INC.

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                 AS OF SEPTEMBER 30,
                                                              -------------------------
                                                                 1998          1999
                                                              -----------   -----------
<S>                                                           <C>           <C>
Current assets:
  Cash and cash equivalents.................................  $    38,348   $ 3,538,851
  Receivables:
     Trade accounts, net of allowance of $10,000 at each
      date..................................................    2,945,038     4,270,985
     Affiliates.............................................        3,171        42,760
  Receivable from Parent....................................    2,741,589       432,608
  Inventories...............................................    4,217,828     5,064,779
  Prepaid expenses and other current assets.................      148,655        23,753
  Deferred income tax.......................................      220,151       172,791
                                                              -----------   -----------
          Total current assets..............................   10,314,780    13,546,527
Property and equipment, net.................................    1,003,205     1,128,275
Goodwill, net of accumulated amortization of $188,906 and
  $214,682..................................................      842,327       816,552
                                                              -----------   -----------
          Total assets......................................  $12,160,312   $15,491,354
                                                              ===========   ===========

                         LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
  Trade accounts payable....................................  $   436,547   $   767,337
  Accrued expenses..........................................    1,237,362     1,971,066
                                                              -----------   -----------
          Total current liabilities.........................    1,673,909     2,738,403
Commitments and contingencies
Stockholder's equity:
  Preferred stock, $.01 par value, 1,000,000 shares
     authorized, no shares issued and outstanding...........           --            --
  Common stock, $.01 par value, 20,000,000 shares
     authorized, 4,000,000 shares issued and outstanding....       40,000        40,000
  Additional paid-in capital................................    4,689,838     4,689,838
  Retained earnings.........................................    5,756,565     8,023,113
                                                              -----------   -----------
          Total stockholder's equity........................   10,486,403    12,752,951
                                                              -----------   -----------
          Total liabilities and stockholder's equity........  $12,160,312   $15,491,354
                                                              ===========   ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       F-2
<PAGE>   62

                                 TRUETIME, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               YEAR ENDED SEPTEMBER 30,
                                                        ---------------------------------------
                                                           1997          1998          1999
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Sales.................................................  $13,893,904   $16,296,604   $20,645,240
Cost of sales.........................................    5,783,298     7,536,409     9,076,137
                                                        -----------   -----------   -----------
Gross profit..........................................    8,110,606     8,760,195    11,569,103
Operating expenses:
  Selling, general and administrative.................    3,906,323     4,395,159     5,905,203
  Research and development............................    1,854,596     1,873,365     2,155,597
                                                        -----------   -----------   -----------
          Total operating expenses....................    5,760,919     6,268,524     8,060,800
                                                        -----------   -----------   -----------
Income from operations................................    2,349,687     2,491,671     3,508,303
                                                        -----------   -----------   -----------
Interest and other income (expense):
  Interest income.....................................           --       259,824       300,109
  Other, net..........................................        9,972       (10,916)        4,982
                                                        -----------   -----------   -----------
          Total interest and other income, net........        9,972       248,908       305,091
                                                        -----------   -----------   -----------
Income before provision for income taxes..............    2,359,659     2,740,579     3,813,394
Provision for income taxes............................      963,410     1,121,608     1,546,846
                                                        -----------   -----------   -----------
Net income............................................  $ 1,396,249   $ 1,618,971   $ 2,266,548
                                                        ===========   ===========   ===========
Weighted average shares outstanding as adjusted for
  reincorporation:
  Basic and diluted...................................    4,000,000     4,000,000     4,000,000
                                                        ===========   ===========   ===========
Earnings per share:
  Basic and diluted...................................  $      0.35   $      0.40   $      0.57
                                                        ===========   ===========   ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       F-3
<PAGE>   63

                                 TRUETIME, INC.

                 STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
             FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999

<TABLE>
<CAPTION>
                                        COMMON STOCK       ADDITIONAL
                                     -------------------    PAID-IN      RETAINED
                                      SHARES     AMOUNT     CAPITAL      EARNINGS       TOTAL
                                     ---------   -------   ----------   ----------   -----------
<S>                                  <C>         <C>       <C>          <C>          <C>
Stockholder's equity, October 1,
1996...............................  4,000,000   $40,000   $4,689,838   $2,741,345   $ 7,471,183
Net income.........................         --        --           --    1,396,249     1,396,249
                                     ---------   -------   ----------   ----------   -----------
Stockholder's equity, September 30,
  1997.............................  4,000,000    40,000    4,689,838    4,137,594     8,867,432
Net income.........................         --        --           --    1,618,971     1,618,971
                                     ---------   -------   ----------   ----------   -----------
Stockholder's equity, September 30,
  1998.............................  4,000,000    40,000    4,689,838    5,756,565    10,486,403
Net income.........................         --        --           --    2,266,548     2,266,548
                                     ---------   -------   ----------   ----------   -----------
Stockholder's equity, September 30,
  1999.............................  4,000,000   $40,000   $4,689,838   $8,023,113   $12,752,951
                                     =========   =======   ==========   ==========   ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       F-4
<PAGE>   64

                                 TRUETIME, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                YEAR ENDED SEPTEMBER 30,
                                                          -------------------------------------
                                                             1997          1998         1999
                                                          -----------   ----------   ----------
<S>                                                       <C>           <C>          <C>
Cash flows from operating activities:
  Net income............................................  $ 1,396,249   $1,618,971   $2,266,548
  Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Deferred income taxes..............................       47,382       47,531       47,360
     Depreciation and amortization......................      200,123      265,874      342,888
     Effects of changes in operating assets and
       liabilities:
       Receivables......................................   (1,327,617)     127,736   (1,365,536)
       Inventories......................................     (777,342)    (675,414)    (846,951)
       Prepaid expenses and other current assets........        5,917      (35,391)     124,902
       Trade accounts payable...........................      275,335     (516,230)     330,790
       Accrued expenses.................................      275,953       39,426      733,704
                                                          -----------   ----------   ----------
          Net cash provided by (used in) operating
            activities..................................       96,000      872,503    1,633,705
                                                          -----------   ----------   ----------
Cash flows from investing activities:
  Decrease (increase) in receivable from Parent.........      148,824     (201,936)   2,308,981
  Capital expenditures..................................     (244,824)    (632,219)    (442,183)
                                                          -----------   ----------   ----------
          Net cash provided by (used in) investing
            activities..................................      (96,000)    (834,155)   1,866,798
                                                          -----------   ----------   ----------
Increase in cash and cash equivalents...................           --       38,348    3,500,503
Cash and cash equivalents, beginning of period..........           --           --       38,348
                                                          -----------   ----------   ----------
Cash and cash equivalents, end of period................  $        --   $   38,348   $3,538,851
                                                          ===========   ==========   ==========
Supplemental cash flow information:
  Noncash settlement of cumulative allocated current
     income taxes by offset against receivable from
     Parent.............................................  $        --   $       --   $4,229,878
                                                          ===========   ==========   ==========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       F-5
<PAGE>   65

                                 TRUETIME, INC.

                         NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     TrueTime, Inc. (the "Company") is a wholly owned subsidiary of OYO
Corporation U.S.A. (the "Parent"). The Parent is a wholly owned subsidiary of
OYO Corporation, a Japanese corporation. The Company designs, develops and
manufactures precision time products that are essential components in modern
communications and computer systems. The Company's products are used in its
telecommunications, computer networking and aerospace industries as well as in
various other commercial markets. The Company's products use a variety of
external timing references, including most importantly the Global Positioning
System, together with state-of-the-art clocks to provide high quality signals
(frequencies) and precision time.

     The significant accounting policies followed by the Company are summarized
below:

  USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  REVENUE RECOGNITION

     Revenue is primarily derived from the sale of precision time and frequency
instruments. Revenue is recognized when products are shipped and title has
passed to the customer.

  RESEARCH AND DEVELOPMENT COSTS

     Research and development costs are expensed as incurred.

  ALLOCATION OF OPERATING EXPENSES FROM THE PARENT

     The Company and the Parent have separate management, operating facilities
and administrative functions and do not conduct shared research and development
activities. The Parent arranges for specific shared services for its
subsidiaries and charges each subsidiary for an allocation of the related costs.
Such shared services relate primarily to accounting, tax and employee benefit
matters.

  CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid debt securities purchased with an
original or remaining maturity at the time of purchase of three months or less
to be cash equivalents. Subsequent to September 30, 1999, cash and cash
equivalents include amounts held in trust with the Parent as more fully
described in Note 8.

  CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents and trade
accounts receivable.

     The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. Management believes the financial strength
of the financial institutions minimizes the credit risk related to such
deposits.

     The Company sells products to customers throughout the United States and
various foreign countries. The Company's normal credit terms for trade
receivables are 30 days. In certain situations, credit terms may be extended to
60 days. The Company performs ongoing credit evaluations of its customers and

                                       F-6
<PAGE>   66
                                 TRUETIME, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

generally does not require collateral. Allowances are maintained for estimated
credit losses. The Company's provision for bad debts was none, $13,700 and none
for the years ended September 30, 1997, 1998 and 1999, respectively. The
Company's write off of bad debts against the allowance for doubtful accounts was
none, $13,700 and none for the years ended September 30, 1997, 1998 and 1999,
respectively.

  INVENTORIES

     Inventories are stated at the lower of cost (as determined by a method that
approximates the first-in, first-out method) or market.

  PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation expense is provided
by the straight-line method over an estimated useful life of 5 years for all
property and equipment except leasehold improvements, which are depreciated over
the shorter of the economic life or the term of the lease.

     Expenditures for renewals and betterments are capitalized. Repairs and
maintenance are charged to expense as incurred. The cost and accumulated
depreciation of assets sold or otherwise disposed of are removed from the
accounts and any gain or loss thereon is reflected in operations.

  GOODWILL

     The Parent acquired the Company in 1991. Goodwill represents the Parent's
purchase price of the Company in excess of the fair values of the Company's
assets and liabilities at the purchase date. Goodwill is amortized to expense
using the straight-line method over an estimated useful life of 40 years.

     Goodwill and other long-lived assets are reviewed for impairment whenever
an event or change in circumstances indicates that the carrying amount of the
assets may not be recoverable. The impairment review includes comparison of
future cash flows expected to be generated by the Company's operations with the
carrying value of goodwill and other long-lived assets. If the carrying value of
such assets exceeds the expected undiscounted future cash flows, an impairment
loss is recognized to the extent the carrying amount of the assets exceeds their
fair values.

  PRODUCT WARRANTIES

     The Company sells products under one-year warranties. The estimated future
cost under existing warranties is accrued.

  INCOME TAXES

     The Company joins in the consolidated U.S. income tax return of the Parent,
which includes all U.S. subsidiaries of the Parent, and in the consolidated
California state income tax return, which includes all subsidiaries that are
included in the consolidated U.S. income tax return. Federal and state income
taxes are provided by the Company as if it filed separate income tax returns.

     The Company follows the liability method of accounting for income taxes
whereby deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws. The Company provides a
valuation allowance, if necessary, to reduce deferred tax assets to their
estimated realizable value.

                                       F-7
<PAGE>   67
                                 TRUETIME, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. INVENTORIES:

     Inventories consisted of the following:

<TABLE>
<CAPTION>
                                                                AS OF SEPTEMBER 30,
                                                              -----------------------
                                                                 1998         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
Finished goods..............................................  $1,030,747   $  948,393
Work in process.............................................     769,541    1,375,575
Raw materials...............................................   2,417,540    2,740,811
                                                              ----------   ----------
                                                              $4,217,828   $5,064,779
                                                              ==========   ==========
</TABLE>

3. PROPERTY AND EQUIPMENT:

     Property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                AS OF SEPTEMBER 30,
                                                              ------------------------
                                                                 1998         1999
                                                              ----------   -----------
<S>                                                           <C>          <C>
Machinery and equipment.....................................  $1,451,660   $ 1,712,419
Furniture and fixtures......................................     341,963       342,716
Transportation equipment....................................       2,142        26,767
Leasehold improvements......................................     132,716       141,728
                                                              ----------   -----------
                                                               1,928,481     2,223,630
Accumulated depreciation....................................    (925,276)   (1,095,355)
                                                              ----------   -----------
                                                              $1,003,205   $ 1,128,275
                                                              ==========   ===========
</TABLE>

4. ACCRUED EXPENSES:

     Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
                                                                AS OF SEPTEMBER 30,
                                                              -----------------------
                                                                 1998         1999
                                                              ----------   ----------
<S>                                                           <C>          <C>
Employee bonuses............................................  $  530,331   $  873,157
Payroll and other compensation..............................     437,941      725,063
Compensated absences........................................     230,213      246,984
Product warranty............................................      12,000       12,000
Legal and professional fees.................................      25,867       26,102
Other accrued expenses......................................       1,010       87,760
                                                              ----------   ----------
                                                              $1,237,362   $1,971,066
                                                              ==========   ==========
</TABLE>

                                       F-8
<PAGE>   68
                                 TRUETIME, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES:

     The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                         YEAR ENDED SEPTEMBER 30,
                                                    ----------------------------------
                                                      1997        1998         1999
                                                    --------   ----------   ----------
<S>                                                 <C>        <C>          <C>
Current:
  Federal.........................................  $775,564   $  909,378   $1,269,555
  State...........................................   140,464      164,699      229,931
                                                    --------   ----------   ----------
                                                     916,028    1,074,077    1,499,486
                                                    --------   ----------   ----------
Deferred:
  Federal.........................................    40,061       40,201       40,051
  State...........................................     7,321        7,330        7,309
                                                    --------   ----------   ----------
                                                      47,382       47,531       47,360
                                                    --------   ----------   ----------
                                                    $963,410   $1,121,608   $1,546,846
                                                    ========   ==========   ==========
</TABLE>

     The differences between the effective tax rate reflected in the total
provision for income taxes and the statutory federal tax rate of 34% were as
follows:

<TABLE>
<CAPTION>
                                                         YEAR ENDED SEPTEMBER 30,
                                                    ----------------------------------
                                                      1997        1998         1999
                                                    --------   ----------   ----------
<S>                                                 <C>        <C>          <C>
Provision for income taxes at the statutory
rate..............................................  $802,284   $  931,797   $1,296,554
State income taxes, net of federal income tax
  benefit.........................................   147,785      172,029      237,240
Goodwill amortization.............................     8,764        8,764        8,764
Other.............................................     4,577        9,018        4,288
                                                    --------   ----------   ----------
Provision for income taxes........................  $963,410   $1,121,608   $1,546,846
                                                    ========   ==========   ==========
Effective income tax rate.........................      40.8%        40.9%        40.6%
                                                    ========   ==========   ==========
</TABLE>

     Deferred income taxes under the liability method reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred income tax
liabilities and assets were as follows:

<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30,
                                                              -------------------
                                                                1998       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred income tax assets:
  Allowance for doubtful accounts...........................  $  4,000   $  4,000
  Accrued product warranty..................................     5,000      5,000
  Inventories...............................................    34,390     43,311
  Accrued compensated absences..............................    92,900     99,635
  Other.....................................................    85,748     32,560
                                                              --------   --------
                                                               222,038    184,506
Deferred income tax liability:
  Property and equipment....................................    (1,887)   (11,715)
                                                              --------   --------
          Net deferred income tax asset.....................  $220,151   $172,791
                                                              ========   ========
</TABLE>

     Under the liability method, a valuation allowance is provided when it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. Based on the Company's historical

                                       F-9
<PAGE>   69
                                 TRUETIME, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

taxable income record and taxable income available in carryback years,
management believes that the Company will realize the deferred tax assets.

6. STOCKHOLDER'S EQUITY:

     Effective November 1, 1999, the Company was reincorporated from California
to Delaware under the name TrueTime, Inc. (also referred to as the "Company").
The reincorporation was accomplished by the issuance of 4,000,000 shares of $.01
par value common stock in a newly formed Delaware corporation to the Parent and
the tax-free merger of the California corporation into the Delaware corporation.
After the reincorporation, the Company has 20,000,000 authorized shares of $.01
par value common stock, of which 4,000,000 issued and outstanding common shares
are owned by the Parent. The accompanying financial statements reflect the
capital structure of the Company after the reincorporation and the assets,
liabilities, total stockholder's equity and results of operations of the
previous California corporation for all dates and periods presented. Earnings
per share information has been computed giving effect to the common shares
outstanding after the reincorporation for all periods presented.

     Effective with the reincorporation, the Company has 1,000,000 authorized
shares of $0.01 par value preferred stock. No preferred shares have been issued.

     In conjunction with a planned initial public offering, the Company has
filed a registration statement with the Securities and Exchange Commission to
offer 3,000,000 common shares, including 1,500,000 common shares owned by
Parent. The Company has agreed to grant options to the underwriters for the
purchase of up to 450,000 additional common shares to cover over-allotments, if
any. In addition, the Company has agreed to issue warrants to the underwriters
for the purchase of up to 200,000 common shares at an exercise price equal to
110% of the offering price.

     The board of directors have established the TrueTime, Inc. 1999 Employee
Stock Plan and the 1999 Non-Employee Director Plan and have reserved an
aggregate of 1,500,000 common shares and 150,000 common shares, respectively,
for issuance thereunder. No stock awards have been granted under either plan.

7. RETIREMENT PLAN:

     The Company's employees are participants in a 401(k) plan (the "Plan")
provided by the Parent, which covers substantially all eligible employees in the
United States. The Plan is a qualified salary reduction plan in which all
eligible participants may elect to have a percentage of their compensation
contributed to the Plan, subject to annual limitations. The Company's share of
discretionary contributions was approximately $92,000, $112,000 and $136,000 for
the years ended September 30, 1997, 1998 and 1999, respectively.

8. RELATED PARTY TRANSACTIONS:

     Sales to the Parent and other affiliated companies were approximately
$97,000, $40,000 and $52,000 during the years ended September 30, 1997, 1998 and
1999, respectively.

     The Company participates in the central cash management system of the
Parent in which the net cash provided or used by operations is transferred to or
from the Parent on a daily basis. Since the implementation of the central cash
management system, the Company's cash flow provided from operating activities
have exceeded capital expenditure and, as a result, the Company has maintained a
receivable from the Parent for the excess that is held in the cash management
system. Beginning October 1, 1997, the Parent implemented a policy of crediting
interest on the receivable balance. Interest credited and added to the
receivable balance was $259,824 and $300,109 for the years ended September 30,
1998 and 1999, respectively. For financial reporting purposes, the receivable
from the Parent represents the
                                      F-10
<PAGE>   70
                                 TRUETIME, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

cumulative amount of cash contributed to the central cash management system,
plus the interest credited thereon, net of the cumulative amount of current
federal income taxes that have been allocated from the Parent.

     On September 30, 1999, the Company and the Parent conducted a partial and
preliminary settlement of the receivable from Parent. On that date, the Parent
formally settled the cumulative amount of allocated current federal income taxes
of $4,229,878 by offsetting such amount against the receivable from the Parent
for the cumulative amount of cash contributed to the central cash management
system. In addition, the Parent paid the Company $3,500,000 in cash as a partial
settlement of the resulting net receivable balance. At September 30, 1999, after
considering this transaction, the remaining receivable from Parent was $432,608.
In October 1999, the Company transferred $3,500,000 in cash to the Parent
subject to the terms of a Trust Agreement with the Parent. Under the terms of
the Trust Agreement, the Parent acknowledges and agrees that it holds
$3,500,000, plus the investment income earned thereon, for the Company's benefit
and manages the trust assets as part of the Parent's other cash management
activities. This action was taken to maximize the return on the Company's assets
available for investment until such time that the Company has established its
own short-term investment program. The Trust Agreement can be terminated at the
Company's option after providing 30 days notice. Upon termination of the trust,
the Parent is obligated to return the trust assets to the Company.

9. COMMITMENTS:

  OPERATING LEASES

     The Company leases certain office space and manufacturing facilities under
noncancelable operating leases. For fiscal years ending after September 30,
1999, the approximate future minimum rental commitments under noncancelable
operating leases were as follows:

<TABLE>
<CAPTION>
               YEAR ENDING SEPTEMBER 30,
               -------------------------
<S>                                                        <C>
2000....................................................   $  185,000
2001....................................................      185,000
2002....................................................      185,000
2003....................................................      185,000
2004....................................................      186,000
Thereafter..............................................      783,000
                                                           ----------
                                                           $1,709,000
                                                           ==========
</TABLE>

     Rent expense for the years ended September 30, 1997, 1998 and 1999, was
approximately $178,000, $191,000 and $353,000, respectively.

10. SEGMENT INFORMATION:

     The Company manages its business on a total product-line basis and has one
reportable segment. The product-line and related accounting policies are
described in Note 1.

                                      F-11
<PAGE>   71
                                 TRUETIME, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     Revenues related to continuing operations in the United States and foreign
countries are presented below:

<TABLE>
<CAPTION>
                                                       YEAR ENDED SEPTEMBER 30,
                                                ---------------------------------------
                                                   1997          1998          1999
                                                -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Revenues from unaffiliated customers:
  United States...............................  $11,337,000   $13,445,000   $17,276,000
  Foreign:
     Europe...................................    1,524,000     1,387,000     1,869,000
     Other....................................      936,000     1,425,000     1,448,000
</TABLE>

     All of the Company's long-lived assets related to continuing operations are
located in the United States.

     Various branches and agencies of the U.S. Government utilize the Company's
products in varying applications. Total products sales to the U.S. Government
comprised 21%, 23% and 28% of revenues during the years ended September 30,
1997, 1998 and 1999, respectively. Sales to one branch of the U.S. Government
comprised 18% of the Company's revenues for the year ended September 30, 1999.
In addition, sales to a private-sector customer comprised 10% of revenues for
each of the two years in the period ended September 30, 1998.

                                      F-12
<PAGE>   72

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                3,000,000 SHARES

                                [TRUETIME LOGO]

                                  COMMON STOCK

                            ------------------------

                                   PROSPECTUS
                            ------------------------

                         [C.E. UNTERBERG, TOWBIN LOGO]

                                            , 1999

     UNTIL           , 2000, 25 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   73

                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions and other underwriter compensation,
payable by TrueTime in connection with the sale of common stock being
registered. All amounts are estimates except the SEC registration fee, the NASD
filing fees and the Nasdaq National Market listing fee.

<TABLE>
<CAPTION>
                                                            AMOUNT TO
                                                             BE PAID
                                                            ---------
<S>                                                         <C>
SEC Registration fee.....................................    $6,714
NASD filing fee..........................................     2,915
Nasdaq National Market initial listing fee...............      *
Printing and engraving...................................      *
Legal fees and expenses..................................      *
Accounting fees and expenses.............................      *
Directors and Officers Liability Insurance...............      *
Blue sky fees and expenses...............................      *
Transfer agent fees......................................      *
Miscellaneous............................................      *
                                                             ------
          Total..........................................    $ *
                                                             ======
</TABLE>

- ---------------

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the Delaware Corporation Law permits a corporation to
include in its charter documents and in agreements between the corporation and
its directors and officers provisions as to the scope of indemnification.

     Article 7 of TrueTime's Certificate of Incorporation, to be filed in
connection with this offering, provides for indemnification of officers and
directors to the fullest extent permissible under Delaware law.

     Section 52 of TrueTime's By-laws provides for the indemnification of
officers and directors acting on behalf of TrueTime if any such person so
indemnified acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of TrueTime, and, with respect to any criminal
action or proceeding, any such person had no reason to believe his or her
conduct was unlawful.

     TrueTime has entered into indemnification agreements with its officers and
directors, in addition to indemnification provided for in TrueTime's By-laws,
and intends to enter into indemnification agreements with any new officers and
directors in the future.

     Delaware law permits TrueTime to purchase and maintain insurance on behalf
of any director, officer, employee or agent of TrueTime against any liability
asserted against or incurred by any of them in such capacity or arising out of
the status thereof as such whether or not TrueTime would have the power to
indemnify such director, officer, employee or agent against such liability under
the applicable provisions of Delaware law, the Certificate of Incorporation or
the By-laws.

     The general effect of the foregoing provisions is to reduce the
circumstances in which an officer or director may be required to bear the
economic burdens of the liabilities and expenses arising from his or her service
as such.

                                      II-1
<PAGE>   74

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

     TrueTime, Inc. was incorporated in Delaware on October 13, 1999, for the
purpose of effecting this offering. On November 1, 1999, its predecessor
TrueTime, Inc., a California corporation, was merged into TrueTime, Inc., a
Delaware corporation, to accomplish a reincorporation in Delaware. In connection
with such merger the single outstanding share of common stock of TrueTime, Inc.
(a California corporation) was converted into 4,000,000 newly issued shares of
common stock, $.01 par value, of TrueTime, Inc. (a Delaware corporation),
constituting all the outstanding shares thereof. The issuance of such shares
upon the reincorporation of TrueTime, Inc. in Delaware was exempt from the
registration provisions of the Securities Act of 1933 under Section 4(2)
thereof. Such issuance was a transaction not involving any public offering of
securities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

  (a) EXHIBITS

<TABLE>
<CAPTION>
      EXHIBIT NO.                                DESCRIPTION
      -----------                                -----------
<C>                      <S>
          1.1*           -- Form of Underwriting Agreement.
          1.2*           -- Form of Warrant Agreement and Warrant (to be issued to
                            the C.E. Unterberg, Towbin).
          3.1            -- Certificate of Incorporation of the Registrant.
          3.2            -- By-laws of the Registrant.
          4.1*           -- Specimen Certificate of the Registrant's common stock.
          4.2            -- See Exhibit 3.1 for provisions of the Registrant's
                            Certificate of Incorporation defining the rights of the
                            holders of common stock.
          4.3            -- See Exhibit 3.2 for provisions of the Registrant's
                            By-laws defining the rights of holders of common stock.
          5.1*           -- Opinion of Fulbright & Jaworski L.L.P., counsel to the
                            Registrant.
         10.1*           -- Form of Indemnification Agreement entered into between
                            the Registrant and its officers and directors.
         10.2*           -- TrueTime, Inc. 1999 Employee Stock Plan.
         10.3*           -- TrueTime, Inc. 1999 Directors Stock Plan.
         10.4*           -- Employment Agreement between the Registrant and Elizabeth
                            Withers.
         10.5*           -- Employment Agreement between the Registrant and Haresh
                            Patnaik.
         10.6*           -- Employment Agreement between the Registrant and Michael
                            Von der Porten.
         10.7*           -- Employment Agreement between the Registrant and Donald
                            Mitchell.
         10.8*           -- Tax Separation Agreement between the Registrant and OYO
                            Corporation U.S.A.
         10.9*           -- Transition Services Agreement between the Registrant and
                            OYO Corporation U.S.A.
         10.10           -- Trust Agreement between the Registrant and OYO
                            Corporation U.S.A. for the benefit of the Registrant.
         10.11*          -- Registration Rights Agreement between the Registrant and
                            OYO Corporation U.S.A.
         10.12           -- Standard Industrial Lease between Manor Development Co.
                            and the Registrant.
         21.1            -- List of Subsidiaries of the Registrant -- None.
         23.1            -- Consent of PricewaterhouseCoopers LLP, public
                            accountants.
         23.2*           -- Consent of Fulbright & Jaworski L.L.P., counsel to the
                            Registrant. Reference is made to Exhibit 5.1.
</TABLE>

                                      II-2
<PAGE>   75

<TABLE>
<CAPTION>
      EXHIBIT NO.                                DESCRIPTION
      -----------                                -----------
<C>                      <S>
         23.3            -- Consent of named director (Satoru Ohya).
         23.4            -- Consent of named director (Charles J. Abbe).
         23.5            -- Consent of named director (Charles H. Still).
         23.6            -- Consent of named director (A. Robert Towbin).
         24.1            -- Power of Attorney. Reference is made to page II-4.
         27.1            -- Financial Data Schedule.
</TABLE>

- ---------------

* To be supplied by amendment.

  (b) FINANCIAL STATEMENT SCHEDULES

     All financial statement schedules are omitted as the required information
is inapplicable or the information is presented in the Financial Statements or
the related Notes.

ITEM 17. UNDERTAKINGS

     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

     The undersigned registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     registration statement as of the time it was declared effective.

          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-3
<PAGE>   76

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa Rosa,
State of California, on this third day of November, 1999.

                                            TRUETIME, INC.

                                            By   /s/ ELIZABETH A. WITHERS
                                             -----------------------------------
                                                    Elizabeth A. Withers
                                               President and Chief Executive
                                                          Officer
                                               (Principal Executive Officer)

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Ernest M. Hall, Jr., and Elizabeth A.
Withers, and each of them, as his or her true and lawful attorney-in-fact and
agent with full power of substitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective on filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
                      SIGNATURE                                   TITLE                    DATE
                      ---------                                   -----                    ----
<S>                                                    <C>                           <C>
               /s/ KATSUHIKO KOBAYASHI                                               November 3, 1999
- -----------------------------------------------------     Chairman of the Board
                 Katsuhiko Kobayashi

              /s/ ELIZABETH A. WITHERS                  President, Chief Executive   November 3, 1999
- -----------------------------------------------------      Officer and Director
                Elizabeth A. Withers                       (Principal Executive
                                                                 Officer)

            /s/ MICHAEL P. VON DER PORTEN                Vice President and Chief    November 3, 1999
- -----------------------------------------------------  Financial Officer (Principal
              Michael P. Von der Porten                  Financial and Accounting
                                                                 Officer)

               /s/ ERNEST M. HALL, JR.                                               November 3, 1999
- -----------------------------------------------------            Director
                 Ernest M. Hall, Jr.
</TABLE>

                                      II-4
<PAGE>   77

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
      EXHIBIT NO.                                DESCRIPTION
      -----------                                -----------
<C>                      <S>
          1.1*           -- Form of Underwriting Agreement.
          1.2*           -- Form of Warrant Agreement and Warrant (to be issued to
                            the C.E. Unterberg, Towbin).
          3.1            -- Certificate of Incorporation of the Registrant.
          3.2            -- By-laws of the Registrant.
          4.1*           -- Specimen Certificate of the Registrant's common stock.
          4.2            -- See Exhibit 3.1 for provisions of the Registrant's
                            Certificate of Incorporation defining the rights of the
                            holders of common stock.
          4.3            -- See Exhibit 3.2 for provisions of the Registrant's
                            By-laws defining the rights of holders of common stock.
          5.1*           -- Opinion of Fulbright & Jaworski L.L.P., counsel to the
                            Registrant.
         10.1*           -- Form of Indemnification Agreement entered into between
                            the Registrant and its officers and directors.
         10.2*           -- TrueTime, Inc. 1999 Employee Stock Plan.
         10.3*           -- TrueTime, Inc. 1999 Directors Stock Plan.
         10.4*           -- Employment Agreement between the Registrant and Elizabeth
                            Withers.
         10.5*           -- Employment Agreement between the Registrant and Haresh
                            Patnaik.
         10.6*           -- Employment Agreement between the Registrant and Michael
                            Von der Porten.
         10.7*           -- Employment Agreement between the Registrant and Donald
                            Mitchell.
         10.8*           -- Tax Separation Agreement between the Registrant and OYO
                            Corporation U.S.A.
         10.9*           -- Transition Services Agreement between the Registrant and
                            OYO Corporation U.S.A.
         10.10           -- Trust Agreement between the Registrant and OYO
                            Corporation U.S.A. for the benefit of the Registrant.
         10.11*          -- Registration Rights Agreement between the Registrant and
                            OYO Corporation U.S.A.
         10.12           -- Standard Industrial Lease between Manor Development Co.
                            and the Registrant.
         21.1            -- List of Subsidiaries of the Registrant -- None.
         23.1            -- Consent of PricewaterhouseCoopers LLP, public
                            accountants.
         23.2*           -- Consent of Fulbright & Jaworski L.L.P., counsel to the
                            Registrant. Reference is made to Exhibit 5.1.
         23.3            -- Consent of named director (Satoru Ohya).
         23.4            -- Consent of named director (Charles J. Abbe).
         23.5            -- Consent of named director (Charles H. Still).
         23.6            -- Consent of named director (A. Robert Towbin).
         24.1            -- Power of Attorney. Reference is made to page II-4.
         27.1            -- Financial Data Schedule.
</TABLE>

- ---------------

* To be supplied by amendment.

<PAGE>   1


                                                                     EXHIBIT 3.1

                                 TRUETIME, INC.

                          CERTIFICATE OF INCORPORATION



                                    ARTICLE 1

     The name of the Corporation is TrueTime, Inc.

                                    ARTICLE 2

     The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at that address is The Corporation Trust
Company.

                                    ARTICLE 3

     The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.

                                    ARTICLE 4

     The total number of shares of stock of all classes which the Corporation
has authority to issue is 21,000,000 shares, of which 20,000,000 shares shall be
common stock, with a par value of $.01 per share ("Common Stock"), and 1,000,000
shares shall be preferred stock, with a par value of $.01 per share ("Preferred
Stock").

     The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the shares of each class of stock
are as follows:

                                 PREFERRED STOCK

     Preferred Stock may be issued from time to time by the Board of Directors
as shares of one or more series. Subject to the provisions hereof and the
limitations prescribed by law, the Board of Directors is hereby vested with the
authority and is expressly authorized, prior to issuance, by adopting
resolutions providing for the issuance of, or providing for a change in the
number of, shares of any particular series and, if and to the extent from time
to time required by law, by filing a certificate pursuant to the General
Corporation Law of the State of Delaware (or other law hereafter in effect
relating to the same or substantially similar subject matter), to establish or
change the number of shares to be included in each such series and to fix the
designation and powers, preferences and rights and the qualifications and
limitations or restrictions thereof relating to the shares of each such series,
all to the maximum extent permitted by the General Corporation Law of



<PAGE>   2


the State of Delaware as in effect on the date hereof or as hereafter amended.
The vested authority of the Board of Directors with respect to each series shall
include, but not be limited to, the determination of the following:

          (a) the distinctive serial designation of such series and the number
     of shares constituting such series (provided that the aggregate number of
     shares constituting all series of Preferred Stock shall not exceed
     1,000,000);

          (b) The annual dividend rate, if any, on shares of such series and the
     preferences, if any, over any other series (or of any other series over
     such series) with respect to dividends, and whether dividends shall be
     cumulative and, if so, from which date or dates;

          (c) whether the shares of such series shall be redeemable and, if so,
     the terms and conditions of such redemption, including the date or dates
     upon and after which such shares shall be redeemable, and the amount per
     share payable in case of redemption, which amount may vary under different
     conditions and at different redemption dates;

          (d) the obligation, if any, of the Corporation to purchase or redeem
     shares of such series pursuant to a sinking fund or purchase fund and, if
     so, the terms of such obligation;

          (e) whether shares of such series shall be convertible into, or
     exchangeable for, shares of stock of any other class or classes, any stock
     of any series of the same class or any other class or classes or any
     evidences of indebtedness and, if so, the terms and conditions of such
     conversion or exchange, including the price or prices or the rate or rates
     of conversion or exchange and the terms of adjustment, if any;

          (f) whether the shares of such series shall have voting rights in
     addition to the voting rights provided by law, and, if so, the terms of
     such voting rights, including, without limitation, whether such shares
     shall have the right to vote with the Common Stock on issues on an equal,
     greater or lesser basis;

          (g) the rights, including any preferences over Common Stock or any
     other series (or of any other series over such series), of the shares of
     such series in the event of a voluntary or involuntary liquidation,
     dissolution, winding up or distribution of assets of the Corporation;

          (h) whether the shares of such series shall be entitled to the benefit
     of conditions and restrictions upon (i) the creation of indebtedness of the
     Corporation or any subsidiary, (ii) the issuance of any additional stock
     (including additional shares of such series or of any other series) or
     (iii) the payment of dividends or the making of other distributions on the
     purchase, redemption or other acquisition by the Corporation or any
     subsidiary of any outstanding stock of the Corporation; and

                                        2

<PAGE>   3


          (i) any other relative, rights, powers, preferences, qualifications,
     limitations or restrictions thereof, including, but not limited to, any
     that may be determined in connection with the adoption of any stockholder
     rights plan after the date hereof, relating to any such series.

     Except where otherwise set forth in the resolution or resolutions adopted
by the Board of Directors providing for the issuance of any series of Preferred
Stock, the number of shares comprising such series may be increased or decreased
(but not below the number of shares then outstanding) from time to time by like
action of the Board of Directors. The shares of Preferred Stock of any one
series shall be identical with the other shares in such series in all respects
except as to the dates from and after which dividends thereon shall cumulate, if
cumulative.

     Shares of any series of Preferred Stock that have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or which, if convertible or exchangeable, have been converted into,
or exchanged for, shares of stock of any other class or classes or any evidences
of indebtedness shall have the status of authorized and unissued shares of
Preferred Stock and may be reissued as a part of the series of which they were
originally a part or may be reclassified and reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors or as part of any other series of Preferred Stock, all subject to the
conditions or restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of any
series of Preferred Stock and to any filing required by law.

     The number of authorized shares of Preferred Stock may be increased or
decreased by the affirmative vote of the holders of a majority of the stock of
the Corporation entitled to vote without the separate vote of holders of
Preferred Stock as a class.

                                  COMMON STOCK

     Subject to all of the rights of the Preferred Stock, and except as may be
expressly provided with respect to the Preferred Stock herein, by law or by the
Board of Directors pursuant to this Article 4:

          (a) dividends may be declared and paid or set apart for payment upon
     Common Stock out of any assets or funds of the Corporation legally
     available for the payment of dividends and may be payable in cash, stock or
     otherwise;

          (b) the holders of Common Stock shall have the exclusive right to vote
     for the election of directors (other than in the case of newly created
     directorships and vacancies, which shall be filled solely by the remaining
     directors as set forth in Article 6 hereof) and on all other matters
     requiring stockholder action, each share being entitled to one vote; and

          (c) upon the voluntary or involuntary liquidation, dissolution or
     winding up of the Corporation, the net assets of the Corporation shall be
     distributed pro rata

                                        3

<PAGE>   4


     to the holders of Common Stock in accordance with their respective rights
     and interests.

                DENIAL OF PREEMPTIVE RIGHTS AND CUMULATIVE VOTING

     No holder of any stock of the Corporation shall be entitled as such, as a
matter of right, to subscribe for or purchase any part of any new or additional
issue of stock of any class whatsoever of the Corporation, or of securities
convertible into stock of any class whatsoever, whether now or hereafter
authorized, or whether issued for cash or other consideration or by way of
dividend.

     No holder of any stock of the Corporation shall have the right of
cumulative voting at any election of directors or upon any other matter.

                                    ARTICLE 5

     The name of the incorporator is Charles H. Still, whose mailing address is
1301 McKinney, Suite 5100, Houston, Texas 77010-3095.

                                    ARTICLE 6

     The Corporation is to have perpetual existence.

                                    ARTICLE 7

     All power of the Corporation shall be vested in and exercised by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law, including the power of the Board of Directors to create and
issue rights, warrants and options entitling the holders of them to purchase
from the Corporation shares of any class or classes of the Corporation's capital
stock or other securities or property upon such terms and conditions as the
Board of Directors may deem advisable.

     For the management of the business and for the conduct of the affairs of
the Corporation, and in further creation, definition, limitation and regulation
of the power of the Corporation and of its directors and stockholders, it is
further provided:

     Section 1. Elections of Directors. Elections of Directors need not be by
written ballot unless the Bylaws of the Corporation shall so provide.

     Section 2. Number, Election and Terms of Directors. Except as otherwise
fixed pursuant to the provisions of Article 4 hereof relating to the rights of
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation to elect additional directors under
specified circumstances, the number of directors of the Corporation shall be
fixed from time to time by or pursuant to the Bylaws; provided that such number
shall not be less than

                                        4

<PAGE>   5


three nor more than nine. The directors, other than those who may be elected by
the holders of any class or series of stock having preference over the Common
Stock as to dividends or upon liquidation, shall be classified, with respect to
the time for which they severally hold office, into three classes, each as
nearly equal in number as possible, as shall be provided in the manner specified
in the Bylaws, one class (Class I) to hold office initially for a term expiring
at the first annual meeting of stockholders of the Corporation following the
filing of this Certificate of Incorporation, another class (Class II) to hold
office initially for a term expiring at the second annual meeting of
stockholders of the Corporation following the filing of this Certificate of
Incorporation, and another class (Class III) to hold office initially for a term
expiring at the third annual meeting of stockholders of the Corporation
following the filing of this Certificate of Incorporation, with the members of
each class to hold office until their successors are elected and qualified or
until their earlier resignation or removal. At each annual meeting of the
stockholders of the Corporation, the successors to the class of directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders to be held in the third year following the
year of their election.

     Section 3. Stockholder Nomination of Director Candidates. Advance notice of
nominations for the election of Directors, other than by the Board of Directors
or a Committee thereof, shall be given in the manner provided in the Bylaws.

     Section 4. Newly Created Directorships and Vacancies. Except as otherwise
fixed pursuant to the provisions of Article 4 hereof relating to the rights of
the holders of any class or series of stock having a preference over Common
Stock as to dividends or upon liquidation to elect directors under specified
circumstances, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled
solely by the affirmative vote of at least two-thirds (rounded up to the nearest
whole number) of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified or until their earlier resignation or removal. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.

     Section 5. Removal of Directors. Subject to the rights of any class or
series of stock having preference over Common Stock as to dividends or upon
liquidation to elect directors under specified circumstances, any director may
be removed from office only for cause. Except as may otherwise be provided by
law, cause for removal shall be construed to exist only if during a director's
term as a director of the Corporation: (a) the director whose removal is
proposed has been convicted of a felony by a court of competent jurisdiction and
such conviction is no longer subject to direct appeal; (b) such director has
been adjudicated by a court of competent jurisdiction to be liable for gross
negligence, recklessness or misconduct in the performance of his or her duty to
the Corporation in a manner of substantial importance to the Corporation and
such adjudication is no longer subject to direct appeal; or (c) such director
has been adjudicated by a court of competent jurisdiction to be mentally
incompetent, which mental incompetency directly affects his or her ability as a
director of the Corporation, and such adjudication is no longer subject to
direct appeal.

                                        5

<PAGE>   6


     Section 6. Stockholder Action. Any action required or permitted to be taken
by the stockholders of the Corporation must be effected at a duly called annual
or special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to the
rights of holders of any class or series of stock having a preference over
Common Stock as to dividends or upon liquidation, special meetings of
stockholders of the Corporation may be called only by the Chairman of the Board,
the Chief Executive Officer or the Board of Directors pursuant to a resolution
approved by members consisting of two-thirds of the entire Board of Directors
then in office.

     Section 7. Bylaw Amendments. The Board of Directors shall have the power to
make, alter, amend and repeal the Bylaws. Any Bylaws made by the Board of
Directors under the powers conferred hereby may be altered, amended or repealed
by the directors or by the stockholders; provided, however, that the Bylaws
shall not be altered, amended or repealed and no provision inconsistent
therewith shall be adopted (i) by stockholder action without the affirmative
vote of the holders of at least two-thirds of the voting power of all the shares
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class or (ii) by director action without the
affirmative vote of at least two-thirds (rounded up to the nearest whole number)
of the directors then in office.

     Section 8. Liability of Directors.

          A. No director of the Corporation shall be liable to the Corporation
     or any of its stockholders for monetary damages for breach of fiduciary
     duty as a director; provided that this Article 7 shall not eliminate or
     limit the liability of a director of the Corporation: (i) for any breach of
     the director's duty of loyalty to the Corporation or its stockholders, (ii)
     for acts or omissions not in good faith or that involve intentional
     misconduct or a knowing violation of law, (iii) under Section 174 of the
     General Corporation Law of the State of Delaware, or (iv) for any
     transaction from which the director derived an improper personal benefit.

          B. If the General Corporation Law of the State of Delaware hereafter
     is amended to authorize the further elimination or limitation of the
     liability of directors of the Corporation, then the liability of a director
     of the Corporation shall be limited to the fullest extent permitted by the
     General Corporation Law of the State of Delaware, as so amended, and such
     limitation of liability shall be in addition to, and not in lieu of, the
     limitation on the liability of a director of the Corporation provided by
     the provisions of this Section 8 of this Article 7.

          C. Any repeal or modification of this Section 8 of this Article 7
     shall be prospective only and shall not adversely affect any right or
     protection of a director of the Corporation existing at the time of such
     repeal or modification.

          D. Director liability shall be limited to the fullest extent permitted
     by the General Corporation Law of the State of Delaware. The Corporation
     shall indemnify its directors to the fullest extent permitted by the
     General Corporation Law of the State of Delaware.

                                        6

<PAGE>   7


     Section 9. Amendment, Repeal, etc. Notwithstanding anything contained in
this Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least two-thirds of the voting power of all shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with, or repeal, this Article 7 or any provision hereof.

                                    ARTICLE 8

     The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute and this Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.

     THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this Certificate, hereby declaring and certifying that this
is my act and deed and the facts herein stated are true. Accordingly, I have
hereunto set my hand this 11th day of October, 1999.




                                              /s/ Charles H. Still
                                       ------------------------------------
                                                Charles H. Still

<PAGE>   1
                                                                     EXHIBIT 3.2


                                     BYLAWS

                                       OF

                                 TRUETIME, INC.
                            (a Delaware Corporation)

                         ADOPTED AS OF OCTOBER 13, 1999


                                     OFFICES

         1. The Corporation shall at all times maintain a registered office in
the State of Delaware.

         2. The Corporation may also have offices at such other places within or
outside of the State of Delaware as the Board of Directors shall from time to
time appoint or the business of the Corporation require.


                                  CAPITAL STOCK

         3. The Board of Directors may authorize the issuance of the capital
stock of the Corporation at such times, for such consideration, and on such
terms and conditions as the Board may deem advisable, subject to any
restrictions and provisions of law, the Certificate of Incorporation, as amended
and restated from time to time (the "Certificate of Incorporation"), of the
Corporation or any other provisions of these Bylaws.

         4. The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of the Corporation by, the chairman or vice-chairman of the board of
directors, or the president or vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. The certificates shall otherwise be in
such form as may be determined by the Board of Directors, shall be issued in
numerical order, shall be entered in the books of the Corporation as they are
issued and shall exhibit the holder's name and number of shares.




                                        1

<PAGE>   2




         5. The shares of the capital stock of the Corporation are transferable
only on the books of the Corporation upon surrender, in the case of certificated
shares, of the certificates therefor properly endorsed for transfer, or
otherwise properly assigned, and upon the presentation of such evidences of
ownership of the shares and validity of the assignment as the Corporation may
require.

         6. The Corporation shall be entitled to treat the person in whose name
any share of stock is registered as the owner thereof for purposes of dividends
and other distributions in the course of business or in the course of
recapitalization, consolidation, merger, reorganization, liquidation, or
otherwise, and for the purpose of votes, approvals and consents by stockholders,
and for the purpose of notices to stockholders, and for all other purposes
whatsoever, and shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person, whether or not the
Corporation shall have notice thereof, save as expressly required by the laws of
the State of Delaware.

         7. The Board of Directors may appoint one or more transfer agents and
registrars, and may require certificates for shares to bear the signature of
such transfer agent(s) and registrar(s).

         8. Upon the presentation to the Corporation of a proper affidavit
attesting the loss, destruction or mutilation of any certificate for shares of
stock of the Corporation, the Board of Directors may direct the issuance of a
new certificate or uncertificated shares in lieu of and to replace the
certificate so alleged to be lost, destroyed or mutilated. The Board of
Directors may require as a condition precedent to the issuance of a new
certificate or uncertificated shares any or all of the following: (a) additional
evidence of the loss, destruction or mutilation claimed; (b) advertisement of
the loss in such manner as the Board of Directors may direct or approve; (c) a
bond or agreement of indemnity, in such form and amount and with such surety (or
without surety) as the Board of Directors may direct or approve; and (d) the
order or approval of a court.


                    STOCKHOLDERS AND MEETINGS OF STOCKHOLDERS

         9. All meetings of stockholders shall be held at such place within or
outside of the State of Delaware as shall be fixed by the Board of Directors and
stated in the notice of meeting.

         10. The Annual Meeting of Stockholders of the Corporation shall be held
on such date and at such time as is fixed by the Board of Directors and stated
in the notice of meeting. Directors shall be elected in accordance with the
provisions of the Certificate of Incorporation of the Corporation and these
Bylaws and such other business shall be transacted as may properly come before
the meeting.

         11. The Annual Meeting of Stockholders may be adjourned by the
presiding officer of the meeting for any reason (including, if the presiding
officer determines that it would be in the best interests of the Corporation to
extend the period of time for the solicitation of proxies) from time to time and
place to place until the presiding officer shall determine that the business to
be conducted at the meeting is completed, which determination shall be
conclusive.

         12. At an Annual Meeting of the Stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an Annual


                                        2

<PAGE>   3




Meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
stockholder of the Corporation. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 90 days nor more
than 180 days prior to the date of the annual meeting; provided, however, that
in the event that less than 100 days notice or prior public disclosure of the
date of the meeting of stockholders is given or made to the stockholders, to be
timely, notice delivered by the stockholder must be received by the Secretary
not later than the close of business on the tenth day following the day on which
notice of the date of the meeting of stockholders was mailed or such public
disclosure was made to the stockholders. A stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting (a) a brief description of the business desired to be brought
before the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such proposal, (c) the class
and number of shares of the Corporation that are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
In addition, if the stockholder's ownership of shares of the Corporation, as set
forth in the notice, is solely beneficial, documentary evidence of such
ownership must accompany the notice. Notwithstanding anything in these Bylaws to
the contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 12. The presiding
officer of an annual meeting shall, if the facts warrant, determine and declare
to the meeting that any business that was not properly brought before the
meeting is out of order and shall not be transacted at the meeting.

         13. A special meeting of stockholders may only be called by the
Chairman of the Board, the Chief Executive Officer or the Board of Directors
pursuant to a resolution adopted by two-thirds of the directors then in office.
The notice of every special meeting of stockholders shall state the purpose for
which it is called. At any special meeting of stockholders, only such business
shall be conducted as shall be provided for in the resolution or resolutions
calling the special meeting or, where no such resolution or resolutions have
been adopted, only such business shall be conducted as shall be provided in the
notice to stockholders of the special meeting. Any special meeting of
stockholders may be adjourned by the presiding officer of the meeting for any
reason (including, if the presiding officer determines that it would be in the
best interests of the Corporation to extend the period of time for the
solicitation of proxies) from time to time and from place to place until the
presiding officer shall determine that the business to be conducted at the
meeting is completed, which determination shall be conclusive.

         14. Written notice of each meeting of stockholders shall be mailed to
each stockholder of record at his last address as it appears on the books of the
Corporation at least ten days prior to the date of the meeting.

         15. The Board of Directors shall have the power to close the stock
transfer books of the Corporation for a period not more than sixty nor less than
ten days preceding the date of any meeting of stockholders, or the date for
payment of any dividend, or the date for the allotment of rights, or the date
when any reclassification or change or conversion or exchange of capital stock
shall go into effect; provided, however, that in lieu of closing the stock
transfer books as aforesaid, the Board of



                                        3

<PAGE>   4




Directors may fix in advance a date not more than sixty nor less than ten days
preceding the date of any meeting of stockholders, or the date for any payment
of dividends, or the date for allotment of rights, or the date when any
reclassification or change or conversion or exchange of capital stock shall go
into effect, as a record date for the determination of the stockholders entitled
to vote at any such meeting or entitled to receive payment of any such dividend
or to any such allotment of rights, or to exercise the rights in respect of any
such reclassification, change, conversion or exchange of capital stock, and in
such cases only such stockholders as shall be stockholders of record on the date
so fixed shall be entitled to vote at such meeting, or to receive payment of
such dividend, or to receive such allotment of rights, or to exercise such
rights or to participate in the effect of any such transaction, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid. This Bylaw shall in no way affect
the rights of a stockholder and his transferee or transferor as between
themselves.

         16. The holders of a majority of the outstanding shares of stock of the
Corporation having voting power with respect to a subject matter (excluding
shares held by the Corporation for its own account) present or represented by
proxy shall constitute a quorum at the meeting of stockholders for the
transaction of business with respect to such subject matter; provided, however,
that if the subject matter is one as to which a higher vote is required (as
contemplated by Section 17 hereof), then the holders of that number of shares
equal to at least that higher number of outstanding shares of stock of the
Corporation having voting power with respect to such subject matter (excluding
shares held by the Corporation for its own account) present or represented by
proxy shall constitute a quorum at the meeting of stockholders solely for the
transaction of business with respect to such subject matter. In the absence of a
quorum with respect to a particular subject matter, the presiding officer of the
meeting shall have power to adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a quorum is present with
respect to that subject matter. If the adjournment is for more than 30 days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At such adjourned meeting, any business may be
transacted that might have been transacted at the meeting as originally
notified.

         17. When a quorum is present or represented at any meeting of
stockholders, the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall be the act of the stockholders in all matters, unless
the matter is one upon which, by express provision of the corporation laws of
the State of Delaware, of the Certificate of Incorporation or of these Bylaws, a
different vote is required, in which case such express provision shall govern
and control the decision of that matter. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
and entitled to vote on the election of directors.

         18. Every stockholder having the right to vote shall be entitled to
vote in person, or by proxy appointed by an instrument in writing subscribed by
such stockholder (which for purposes of this paragraph may include a signature
and form of proxy pursuant to a facsimile or telegraphic form of proxy or any
other instruments acceptable to the Judge of Election), bearing a date not more
than three years prior to voting, unless such instrument provides for a longer
period, and filed with the Secretary of the Corporation before, or at the time
of, the meeting. If such instrument shall designate two or more persons to act
as proxies, unless such instrument shall provide to the contrary, a majority of
such persons present at any meeting at which their powers thereunder are to be
exercised


                                        4

<PAGE>   5




shall have and may exercise all the powers of voting thereby conferred, or if
only one be present, then such powers may be exercised by that one; or, if an
even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of the
same portion of the shares as he is of the proxies representing such shares.

         19. Unless otherwise provided by the Certificate of Incorporation or by
the corporation laws of the State of Delaware, each stockholder of the
Corporation shall, at every meeting of stockholders, be entitled to one vote in
person or by proxy for each share of capital stock of the Corporation registered
in his name.

         20. Any other corporation owning voting shares in this Corporation may
vote the same by its President or by proxy appointed by him, unless some other
person shall be appointed to vote such shares by resolution of the Board of
Directors of such stockholder corporation. A partnership holding shares of this
Corporation may vote such shares by any general partner or by proxy appointed by
any general partner.

         21. Shares standing in the name of a deceased person may be voted by
the executor or administrator of such deceased person, either in person or by
proxy. Shares standing in the name of a guardian, conservator or trustee may be
voted by such fiduciary, either in person or by proxy, but no such fiduciary
shall be entitled to vote shares held in such fiduciary capacity without a
transfer of such shares into the name of such fiduciary. Shares standing in the
name of a receiver may be voted by such receiver. A stockholder whose shares are
pledged shall be entitled to vote such shares, unless in the transfer by the
pledgor on the books of the Corporation, he has expressly empowered the pledgee
to vote thereon, in which case only the pledgee, or his proxy, may represent the
stock and vote thereon.

         22. The order of business and all other matters of procedure at every
meeting of the stockholders may be determined by the presiding officer of the
meeting, who shall be the Chairman of the Board, or in his absence the Chief
Executive Officer, or in the absence of both of them such other officer of the
Corporation as designated by the Board. The presiding officer of the meeting
shall have all the powers and authority vested in a presiding officer by law or
practice without restriction, including, without limitation, the authority, in
order to conduct an orderly meeting, to impose reasonable limits on the amount
of time at the meeting taken up in remarks by any one stockholder and to declare
any business not properly brought before the meeting to be out of order.

         23. The Board shall appoint one or more Judges of Election to serve at
every meeting of the stockholders.

                       DIRECTORS AND MEETINGS OF DIRECTORS

         24. The business of the Corporation shall be managed by a Board of
Directors (herein the "Board of Directors" or the "Board") who shall exercise
all the powers of the Corporation not reserved to or conferred on the
stockholders by statute, the Certificate of Incorporation or the Bylaws of the
Corporation.




                                       5
<PAGE>   6

         25. Except as otherwise fixed pursuant to the provisions of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional directors under specified circumstances,
the number of directors shall be as fixed from time to time by resolution of the
Board adopted by the affirmative vote of at least two-thirds of the directors
then in office, provided the number shall not be less than the minimum nor more
than the maximum number permitted by the Certificate of Incorporation, provided
further that if no such minimum or maximum number is stated in the Certificate
of Incorporation the number shall not be less than three nor more than nine. The
directors, other than those who may be elected by the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, shall be divided into three classes as nearly equal in number
as possible, with the term of office of one class expiring each year. The term
of office of each director shall expire at the third Annual Meeting after
election of the class to which he belongs. During the intervals between Annual
Meetings of Stockholders, any vacancy occurring in the Board of Directors caused
by resignation, removal, death or other incapacity, and any newly-created
directorships resulting from an increase in the number of directors, shall be
filled by a two-thirds vote of the directors then in office, whether or not a
quorum. Each director chosen to fill a vacancy shall hold office for the
unexpired term in respect of which such vacancy occurs. Each director chosen to
fill a newly-created directorship shall hold office until the next election of
the class for which such director shall have been chosen.

         26. Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or a committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of directors generally. However, any
stockholder entitled to vote in the election of directors generally may nominate
one or more persons for election as directors at a meeting only if written
notice of such stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not later than 90 days nor more
than 180 days prior to the date of the annual meeting; provided, however, that
in the event that less than 100 days notice or prior public disclosure of the
date of the meeting of stockholders is given or made to the stockholders, to be
timely, notice delivered by the stockholder must be received by the Secretary
not later than the close of business on the tenth day following the day on which
notice of the date of the meeting of stockholders was mailed or such public
disclosure was made to the stockholders. Notwithstanding the foregoing if an
existing director is not standing for reelection to a directorship that is the
subject of an election at such meeting, then a stockholder may make a nomination
with respect to such directorship at anytime not later than the close of
business on the tenth day following the date on which a written statement
setting forth the fact that such directorship is to be elected and the name of
the nominee proposed by the Board of Directors is first mailed to stockholders.
Each notice of a nomination from a stockholder shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the Securities Exchange Act of
1934 and the rules






                                       6
<PAGE>   7


and regulations thereunder (or any subsequent provisions replacing such Act,
rules or regulations); and (e) the consent of each nominee to serve as a
director of the Corporation if so elected. The presiding officer of the meeting
may refuse to acknowledge the nomination of any person not made in compliance
with the foregoing procedure.

         27. Any director may be removed from office as a director at any time,
but only for cause (as set forth in the Certificate of Incorporation), by the
affirmative vote of stockholders of record holding a majority of the outstanding
shares of stock of the Corporation entitled to vote in elections of directors at
a meeting of the stockholders called for that purpose.

         28. Regular meetings of the Board of Directors shall be held at such
times and at such place or places as the directors shall, from time to time,
determine at a prior meeting. Special meetings of the Board may be called by the
Chairman of the Board or President of the Corporation and shall be called by
either of said officers upon the written request of any two directors. Special
meetings shall be held at the office of the Corporation or at such place as is
stated in the notice of the meeting. No notice shall be required for regular
meetings of the Board. Notices of special meetings shall be given by mail at
least five days before the meeting or by telephone, telecopy or telegram at
least 24 hours before the meeting. Notices may be waived. Notices need not
include any statement of the purpose of the meeting.

         29. When all of the directors shall be present at any meeting, however
called or notified, they may act upon any business that might lawfully be
transacted at regular meetings of the Board, or at special meetings duly called,
and action taken at such meetings shall be as valid and binding as if legally
called and notified. Members of the Board of Directors may participate in a
meeting of the Board by means of conference telephone or similar communications
equipment to the full extent and with the same effect as authorized and
permitted by Delaware law.

         30. One-third of the total number of the members of the Board of
Directors (but in no event less than three directors) shall constitute a quorum
for the transaction of business, and the acts of a majority of the directors
present at any meeting at which there is a quorum present shall be the acts of
the Board; provided, however, that the directors may act in such other manner,
with or without a meeting, as may be permitted by the laws of the State of
Delaware and provided further, that if all of the directors shall consent in
writing to any action taken by the Corporation, such action shall be as valid as
though it had been authorized at a meeting of the Board.

         31. Directors shall receive such compensation and reimbursement for
expenses for attendance at meetings of the Board or of committees thereof and
such other compensation as shall be fixed by a majority of the entire Board.

                             COMMITTEES OF DIRECTORS

         32. The Board of Directors shall establish an Audit Committee and a
Compensation Committee, and may establish an Executive Committee, a Nominating
Committee and such other committees as may be established by resolution of a
majority of the whole Board. Each of such committees shall consist of one or
more members of the Board. Members of committees of the Board of Directors shall
be elected annually by vote of a majority of the Board. The Chief Executive







                                       7
<PAGE>   8


Officer shall be an ex-officio nonvoting member of each committee (except the
Audit and Compensation Committees) of which he is not elected as an official
voting member. With respect to any committee (including the Audit and
Compensation Committees) of which the Chief Executive Officer is not an official
voting member, the Chief Executive Officer shall be given notice of all
committee meetings at the same time notice is given to committee members, and
the Chief Executive Officer shall be afforded the opportunity to speak at the
committee meeting. Presence of a majority of the committee members (not counting
any ex-officio nonvoting members) shall constitute a quorum. Committees may act
by majority vote of the voting members present at a meeting. Each of such
committees shall have and may exercise such of the powers of the Board of
Directors in the management of the business and affairs of the Corporation as
may be provided in these Bylaws or by resolution of the Board of Directors. Each
of such committees may authorize the seal of the Corporation to be affixed to
any document or instrument. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
or disqualified member at any meeting of such committee. Meetings of committees
may be called by any member of a committee by written, telegraphic or telephonic
notice to all members of the committee and the Chief Executive Officer and shall
be held at such time and place as shall be stated in the notice of meeting. Any
member of a committee may participate in any meeting by means of conference
telephone or similar communications equipment. In the absence or
disqualification of a member of any committee the member or members thereof
present at any meeting and not disqualified from voting, whether or not
constituting a quorum may, if deemed advisable, unanimously appoint another
member of the Board to act at the meeting in the place of the disqualified or
absent member. Each committee may fix such other rules and procedures governing
conduct of meetings as it shall deem appropriate.

         33. The Executive Committee of the Board of Directors, if one is
established, shall consist of not less than three directors. The Executive
Committee shall have and exercise the authority of the Board of Directors
between meetings of the Board, subject to such limitations and restrictions
required by Delaware law or as the Board may impose in a resolution duly adopted
by the Board.

         34. The Audit Committee shall consist of not less than two members of
the Board of Directors, none of whom shall be employees of the Corporation. The
Audit Committee shall be responsible for recommending to the entire Board
engagement and discharge of independent auditors of the financial statements of
the Corporation, shall review the professional service provided by independent
auditors, shall review the independence of independent auditors, shall review
with the auditors the plan and results of the auditing engagement, shall
consider the range of audit and non-audit fees, shall review the adequacy of the
Corporation's system of internal accounting controls, shall review the results
of procedures for internal auditing and shall consult with the internal auditor
of the Corporation with respect to all aspects of the Corporation's internal
auditing program. In addition, the Audit Committee shall direct and supervise
special investigations as deemed necessary by the Audit Committee.

         35. The Compensation Committee shall consist of not less than two
members of the Board of Directors, none of whom shall be employees of the
Corporation. The Compensation Committee shall recommend to the Board the
compensation to be paid to officers and key employees of the Corporation and the
compensation of members of the Board of Directors. Except as otherwise provided
in any specific plan adopted by the Board, the Compensation Committee shall be










                                       8
<PAGE>   9


responsible for administration of executive incentive compensation plans, stock
option plans and other forms of direct or indirect compensation of officers and
key employees, and each member of the Compensation Committee shall have the
power and authority to execute and bind the Company to such documents,
agreements and instruments related to such plans and compensation as are
approved by the Compensation Committee. In the alternative, the Compensation
Committee may authorize any officer of the Company to execute such documents,
agreements and instruments on behalf of the Company. In addition, the
Compensation Committee shall review levels of pension benefits and insurance
programs for officers and key employees.

         36. The Nominating Committee, if one is established, shall recommend to
the Board nominees for election as directors. The Nominating Committee shall
consider performance of incumbent directors and shall recommend to the Board
whether an incumbent director whose term expires shall be nominated for
reelection.

         37. Any action required or permitted to be taken at any meeting of any
committee of the Board of Directors may be taken without a meeting if a consent
in writing, setting forth the action so taken, is signed by all of the members
of such committee.

                                    OFFICERS

         38. The Board of Directors shall elect a President and a Secretary, and
may elect a Chairman of the Board, a Treasurer, one or more vice presidents,
including an Executive Vice President and Chief Financial Officer, a General
Counsel, a Controller, one or more assistant secretaries and assistant
treasurers, and such other officers as the Board of Directors shall deem
appropriate. The Chairman of the Board shall be a director of the Corporation.
Other officers need not be directors.

         39. Officers of the Corporation shall hold office until their
successors are chosen and qualified or until their earlier resignation or
removal. Any officer, agent or employee may be removed at any time, with or
without cause, by the Board but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed. Election or appointment of
an officer or agent shall not of itself create contract rights. Vacancy
occurring in any office or position at any time may be filled by the Board. All
officers, agents and employees of the Corporation shall respectively have such
authority and perform such duties in the conduct and management of the
Corporation as may be delegated by the Board of Directors or by these Bylaws.

         40. Officers shall receive such compensation as may from time to time
be determined by the Board of Directors. Agents and employees shall receive such
compensation as may from time to time be determined by the Chief Executive
Officer.

         41. The Chairman of the Board, if one is elected, may preside, or may
direct that the President so preside, at all meetings of the stockholders and at
all meetings of the directors. In the absence of the Chairman of the Board, or
if no Chairman of the Board is elected, the President shall so preside. If the
Board of Directors shall elect a person to be the Chairman of the Board and
shall designate such person the Chief Executive Officer of the Corporation, the
Chairman of the Board








                                       9
<PAGE>   10


shall supervise and direct the operations of the business of the Corporation in
accordance with the policies determined by the Board of Directors.

         42. Unless the Board of Directors shall have elected a Chairman of the
Board of Directors and designated such person the Chief Executive Officer of the
Corporation, the President shall be the Chief Executive Officer of the
Corporation, supervising and directing the operations of the business of the
Corporation in accordance with the policies determined by the Board of
Directors. If the Board of Directors shall have elected a person as Chairman of
the Board and designated such person as a Chief Executive Officer of the
Corporation, the President shall be the Chief Operating Officer of the
Corporation and shall be responsible for the general supervision and control of
the business and the affairs of the Corporation subject to the directions of the
Chairman of the Board and the Board of Directors. If the Board of Directors
shall have elected a person Chairman of the Board and shall designate such
person the Chief Executive Officer of the Corporation, the President, in the
absence or incapacity of such Chairman of the Board, shall perform the duties of
that office.

         43. A Vice President, if one is elected, in the absence or incapacity
of the President, shall perform the duties of the President. If there be more
than one Vice President, the Board of Directors shall designate the Vice
President who is to perform the duties of the President in the event of his
absence or incapacity. Each Vice President shall have such other duties and
authority as shall be assigned by the Chief Executive Officer or may be
delegated by the Board of Directors. The Executive Vice President and Chief
Financial Officer, if one is elected, shall be responsible for and direct,
either directly or indirectly through any Treasurer, Controller or Director of
Data Processing of the Corporation, all treasury, accounting, cost and
budgeting, and data collection functions. He will report directly to the
President with a report and policy relationship to the Chairman of the Board and
the Board of Directors.

         44. The Secretary shall attend all meetings of the Board of Directors
and all meetings of stockholders and shall record all votes and minutes from all
proceedings in a book to be kept for that purpose. He shall keep in safe custody
the seal of the Corporation and affix the same to any instrument requiring it,
and when so affixed, it shall be attested by his signature or by the signature
of the Treasurer or an Assistant Secretary; provided, however, that the affixing
of the seal of the Corporation to any document or instrument specifically shall
not be required in order for such document or instrument to be binding on or the
official act of the Corporation, and the signature of any authorized officer,
without the seal of the Corporation, shall be sufficient for such purposes. The
Secretary shall perform such other duties and have such other authorities as are
delegated to him by the Board of Directors.

         45. The Treasurer, if one is elected, shall be responsible for the care
and custody of all funds and other financial assets, taxes, corporate debt,
order entry and sales invoicing including credit memos, credit and collection of
accounts receivable, cash receipts, and the banking and insurance functions of
the Corporation. He shall report directly to and perform such other duties as
shall be assigned by the Executive Vice President and Chief Financial Officer,
if one is elected, or otherwise the President.

         46. The Controller, if one is elected, shall be responsible for the
installation and supervision of all general accounting records of the
Corporation, preparation of financial statements and the annual and operating
budgets and profit plans, continuous audit of accounts and records of






                                       10
<PAGE>   11


the Corporation, preparation and interpretation of statistical records and
reports, taking and costing of all physical inventories and administering the
inventory levels, supervision of accounts payable and cash disbursements
function and hourly and salary payrolls. He shall report directly to and perform
such other functions as shall be assigned him by the Executive Vice President
and Chief Financial Officer, if one is elected, or otherwise the President.

         47. The Board of Directors of the Corporation may require any officer,
agent or employee to give bond for the faithful discharge of his duty and for
the protection of the Corporation, in such sum and with such surety as the Board
deems advisable.

                      BANKING, CHECKS AND OTHER INSTRUMENTS

         48. The Board of Directors shall by resolution designate the bank or
banks in which the funds of the Corporation shall be deposited, and such funds
shall be deposited in the name of the Corporation and shall be subject to checks
drawn as authorized by resolution of the Board of Directors.

         49. The Board of Directors may in any instance designate the officers
and agents who shall have authority to execute any contract, conveyance, or
other instrument on behalf of the Corporation; or may ratify or confirm any
execution. When the execution of any instrument has been authorized without
specification of the executing officer or agents, the Chairman of the Board, if
designated as the Chief Executive Officer of the Corporation, President or any
Vice President, and the Secretary or Assistant Secretary or Treasurer or
Assistant Treasurer may execute the same in the name and on behalf of the
Corporation and may affix the corporate seal thereto; provided, however, that
the affixing of the seal of the Corporation to any document or instrument
specifically shall not be required in order for such document or instrument to
be binding on or the official act of the Corporation, and the signature of any
authorized officer, without the seal of the Corporation, shall be sufficient for
such purposes.

                                   FISCAL YEAR

         50. The fiscal year of the Corporation shall begin on the first day of
October and end on the thirtieth day of September.

                                BOOKS AND RECORDS

         51. The proper officers and agents of the Corporation shall keep and
maintain such books, records and accounts of the Corporation's business and
affairs and such stock ledgers and lists of stockholders as the Board of
Directors shall deem advisable and as shall be required by the laws of the State
of Delaware or other states or jurisdictions empowered to impose such
requirements.




                                       11
<PAGE>   12

                                 INDEMNIFICATION

         52. Each director or officer of the Corporation or a subsidiary of the
Corporation who was or is made a party or is threatened to be made a party to or
is involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or a subsidiary of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be amended
(the "DGCL"), (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment),
against all expenses, (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators. The right to indemnification
conferred in this Section shall be a contract right and shall include the right
to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
DGCL requires, the payment of such expenses incurred by a director or officer in
his or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under the applicable
provisions of the DGCL. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation or
a subsidiary of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.

         53. The indemnification and advancement of expenses provided in
paragraph 52 of these Bylaws shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any agreement, vote of stockholders, vote of disinterested
directors, insurance arrangement or otherwise, both as to action in his or her
official capacity and as to action in another capacity.

                                   AMENDMENTS

         54. Except as otherwise provided in the Certificate of Incorporation,
these Bylaws may be altered, amended or repealed and new Bylaws may be adopted
at any regular meeting of the stockholders or Board of Directors; or at any
special meeting of the stockholders or Board of Directors; provided that notice
of such proposed making, alteration or repeal be included in the notice of such
special meeting. The Board of Directors may take such action by the vote of
two-thirds of those Directors present and voting at a meeting where a quorum is
present. Subject to applicable provisions of the Certificate of Incorporation,
the stockholders may make new Bylaws,









                                       12
<PAGE>   13


or adopt, alter, amend, or repeal Bylaws adopted by either the stockholders or
the Board of Directors by the affirmative vote of the holders of not less than
two-thirds (66 2/3%) of the voting power of all of the then outstanding shares
of capital stock of the Corporation then entitled to vote generally in the
election of directors.



                                       13



<PAGE>   1


                                                                   EXHIBIT 10.10

THE STATE OF TEXAS         ss.
                           ss.
COUNTY  OF   HARRIS        ss.


     THIS TRUST AGREEMENT is made and entered effective as of the 1st day of
October, 1999, between TRUETIME, INC., a California corporation, with principal
offices in Santa Rosa, California, as Grantor (the "Grantor"), and OYO
CORPORATION U.S.A., a Texas corporation, with principal offices in Houston,
Texas, as Trustee (the "Trustee").

                              W I T N E S S E T H:

     The Grantor is desirous of creating a trust for the purposes and upon the
terms and provisions hereinafter set forth. Accordingly, the Grantor has
herewith transferred to the Trustee, and the Trustee does, by the execution of
these presents, acknowledge receipt from the Grantor of the sum of Three Million
Five Hundred Thousand and No 1/100 Dollars ($3,500,000) in cash. This property,
together with any other property which may hereafter be conveyed to the Trustee
subject to the trust hereby created, shall be held, administered and distributed
by the Trustee, upon the trust and for the purposes and uses herein set forth.

     1. The Trustee hereby acknowledges, agrees, covenants and declares that it
holds all of the property it acquires from Grantor and all benefits and
advantages to be derived therefrom, in trust for and on behalf of the Grantor,
as and from the date first acquired by the Trustee.

     2. The Trustee shall hold, manage, sell, exchange, invest and reinvest the
trust property, collect all income and, after deducting such expenses as are
properly payable, shall accumulate and distribute the income and principal as
the Grantor may direct. All trust income not otherwise appointed by the Grantor
shall be accumulated and invested.

     3. The Grantor may at any time or from time to time remove the Trustee of
the trust, with or without cause, and may appoint a successor Trustee or may
terminate the trust.

     4. The Trustee shall receive no compensation for serving under this trust
instrument. The Trustee shall be reimbursed for the reasonable costs and
expenses incurred in connection with such Trustee's duties.

     5. No Trustee acting hereunder shall be required to give bond or other
security in any jurisdiction.

     6. The Grantor may by acknowledged instrument alter, amend, revoke or
terminate this trust instrument on thirty days' notice to the Trustee (unless
waived). If the trust is terminated, the Trustee shall deliver the trust
property to the Grantor or as the Grantor shall direct.

     7. The Trustee shall have all of the powers conferred upon trustees by the
Texas Trust Code, and by any future amendments to the Texas Trust Code or any
corresponding statute, except for any instance in which the Texas Trust Code or
such other statutory provisions may conflict with the express provisions of this
trust instrument, in which case the provisions of this trust instrument shall
control.

     8. The Grantor shall have the right, from time to time, to grant, transfer
or convey to the Trustee such additional property as the Grantor shall desire to
become a part of the trust and, subject

                                       -1-

<PAGE>   2


to acceptance by the Trustee, such additional property shall thereafter be held,
administered and distributed by the Trustee in accordance with the provisions of
this trust instrument.

     9. A separate accounting shall be kept by the Trustee of the property given
to it subject to this trust instrument, but the Trustee may invest the trust
property in joint investments or joint interests in investments with other
assets managed by the Trustee, and this trust shall be credited with an
undivided interest in all joint investments in the proportion which is assigned
to it or in the proportion which its contribution to such investments bears to
the whole.

     10. ALL QUESTIONS PERTAINING TO THIS TRUST INSTRUMENT'S VALIDITY,
CONSTRUCTION AND ADMINISTRATION SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS.

     IN WITNESS WHEREOF, the Grantor and the Trustee have hereunto set their
hands as of the date first above written.



                               TRUETIME, INC., Grantor


                               By: /s/ Michael P. Von der Porten
                                   ---------------------------------------------
                               Name: Michael P. Von der Porten
                               Title: Vice President and Chief Financial Officer


                               OYO CORPORATION U.S.A., Trustee


                               By  /s/ Ernest M. Hall, Jr.
                                   ---------------------------------------------
                               Name: Ernest M. Hall, Jr.
                               Title: President

<PAGE>   1
                                                                   EXHIBIT 10.12

                         STANDARD INDUSTRIAL LEASE--NET

                   AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION


1.       PARTIES. This Lease, dated, for reference purposes only, May 7, 1992,
is made by and between MANOR DEVELOPMENT CO., A California Corporation (herein
called "Lessor") and TRUETIME, INC., a California corporation (herein called
"Lessee").

2.       PREMISES. Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
that certain real property situated in the County of Sonoma, State of
California, commonly known as _______________________________and described as
Lot #4 and a portion of Lot #5 as shown on the map of OAK MANOR UNIT II,
Subdivision,. Santa Rosa, as shown on attached plat marked Exhibit A including
the building to be built according to Paragraph #52 hereof. Said real property
including the land and all improvements therein, is herein called "the
Premises".

3.       TERM.

         3.1 TERM. The term of this Lease shall be for fifteen (15) years
commencing on as provided in paragraph 48 and ending fifteen years thereafter
unless sooner terminated pursuant to any provision hereof.

         3.2 DELAY IN POSSESSION. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Lessee hereunder
or extend the term hereof, but in such case, Lessee shall not obligated to pay
rent until possession of the Premises is tendered to Lessee; provided, however,
that if Lessor shall not have delivered possession of the Premises within sixty
(60) days from said commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease, in
which event the parties shall be discharged from all obligations hereunder;
provided further, however, that if such written notice of Lessee is not received
is not received by Lessor within said ten (10) day period, Lessee's right to
cancel this Lease hereunder shall terminate and be of no further force or
effect.

         3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay rent
for such period at the initial monthly rates set forth below.

4.       RENT. Lessee shall pay to Lessor as rent for the Premises, monthly
payments of $13,981.50, in advance, on the 1st day of each month of the term
hereof, Lessee shall pay Lessor upon the execution hereof $13,981.50 as rent for
the 1st month. Rent for any period during the term hereof which is for less than
one month shall be a pro rata portion of the monthly installment. Rent shall







<PAGE>   2


be payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may designate
in writing.

5.       SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof $13,981.50 as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount hereinabove
stated and Lessee's failure to do so shall be a material breach of this Lease.
Lessor shall not be required to keep said deposit separate from its general
accounts. If Lessee performs all of Lessee's obligations hereunder, said
deposit, or so much thereof as has not theretofore been applied by Lessor, shall
be returned, without payment of interest or other increment for its use, to
Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunder) at the expiration of the term hereof, and after Lessee has
vacated the Premises. No trust relationship is created herein between Lessor and
Lessee with respect to said Security Deposit.

6.       USE.

         6.1 USE. The Premises shall be used and occupied only for light
manufacturing as approved by the City of Santa Rosa or any other use which is
reasonably comparable and for no other purpose.

         6.2 COMPLIANCE WITH LAW.

             (a) Lessor warrants to Lessee that the Premises, in its state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will use the Premises, does not violate any covenants or
restrictions of record, or any applicable building code, regulation or ordinance
in effect on such Lease term commencement date. In the event it is determined
that this warranty has been violated, then it shall be the obligation of the
Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation. In the event Lessee does not give to Lessor
written notice of the violation of this warranty within six months from the date
that the Lease term commences, the correction of same shall be the obligation of
the Lessee at Lessee's sole cost. The warranty contained in this paragraph
6.2(a) shall be of no force or effect if, prior to the date of this Lease,
Lessee was the owner or occupant of the Premises, and, in such event, Lessee
shall correct any such violation at Lessee's sole cost.


                                      -2-
<PAGE>   3




             (b) Except as provided in paragraph 6.2(a), Lessee shall, at
Lessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements in effect during the term or any part of the term hereof,
regulating the use by Lessee of the Premises. Lessee shall not use nor permit
the use of the Premises in any manner that will tend to create waste or a
nuisance or, if there shall be more than one tenant in the building containing
the Premises, shall tend to disturb such other tenants.

         6.3 CONDITION OF PREMISES.

             (a) Lessor shall deliver the Premises to Lessee clean and free of
debris on Lease commencement date (unless Lessee is already in possession) and
Lessor further warrants to Lessee that the plumbing, lighting, air conditioning,
heating and loading doors in the Premises shall be in good operating condition
on the Lease commencement date. In the event that it is determined that this
warranty has been violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with specificity the nature
of the violation, to promptly, at Lessor's sole cost, rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained in this paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was the owner or occupant of the Premises.

             (b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises in their condition existing as of the Lease commencement
date or the date that Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal, county and state laws,
ordinances and regulations governing and regulating the use of the Premises, and
any covenants or restrictions of record, and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that neither Lessor nor Lessor's agent has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Lessee's business.

7.       MAINTENANCE, REPAIRS AND ALTERATIONS.

         7.1 LESSEE'S OBLIGATIONS. Lessee shall keep in good order, condition
and repair the Premises and every part thereof, structural and non-structural
(whether or not such portion of the Premises requiring repair, or the means of
repairing the same are reasonably or readily accessible to Lessee, and whether
or not the need for such repair occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises) including, without
limiting the generality of the foregoing, all plumbing, heating, air
conditioning (Lessee shall procure and maintain, at Lessee's expense, an air
conditioning system maintenance contract) ventilating, electrical, lighting
facilities and equipment within the Premises, fixtures, walls (interior and
exterior), foundations, ceilings, roofs (interior and exterior), floors,
windows, doors, plate glass and skylights located within the Premises, and all
landscaping, driveways, parking lots, fences and signs located on the Premises
and sidewalks and parkways adjacent to the Premises. The roof shall be
maintained by Lessor.



                                      -3-
<PAGE>   4





         7.2 SURRENDER. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as when received, ordinary wear and tear excepted, clean and free of debris.
Lessee shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall leave the
air lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing and fencing on the premises in good
operating condition.

         7.3 LESSOR'S RIGHTS. If Lessee fails to perform Lessee's obligations
under this Paragraph 7, or under any other paragraph of this Lease, Lessor may
at its option (but shall not be required to) enter upon the Premises after ten
(10) days' prior written notice to Lessee (except in the case of an emergency,
in which case no notice shall be required), perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the cost
thereof together with interest thereon at the maximum rate then allowable by law
shall become due and payable as additional rental to Lessor together with
Lessee's next rental installment.

         7.4 LESSOR'S OBLIGATIONS. Except for the obligations of Lessor under
Paragraph 6.2(a) and 6.3(a) (relating to Lessor's warranty), Paragraph 9
(relating to destruction of the Premises) and under Paragraph 14 (relating to
condemnation of the Premises, it is intended by the parties hereto that Lessor
have no obligation, in any manner whatsoever, to repair and maintain the
Premises nor the building located thereon nor the equipment therein, whether
structural or nonstructural, all of which obligations are intended to be that of
the Lessee under Paragraph 7.1 hereof, Lessee expressly waives the benefit of
any statute nor or hereinafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the premises in good order, condition and repair. The
roof shall be maintained by Lessor.

         7.5 ALTERATIONS AND ADDITIONS.

             (a) Lessee shall not, without Lessor's prior written consent make
any alterations, improvements, additions, or Utility Installations in, on or
about the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease. In any event, whether or not in
excess of $2,500 in cumulative cost, Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the building(s) on the
Premises without Lessor's prior written consent. As used in this Paragraph 7.5
the term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing, and fencing. Lessor may require that Lessee
remove any or all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises to their
prior condition. Lessor may require Lessee to provide Lessor, at Lessee's sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability and for mechanic's and materialmen's liens and to insure
completion of the work. Should Lessee make








                                      -4-
<PAGE>   5


any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, Lessor may require that Lessee remove any or all of
the same.

             (b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in written
form, with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work and the compliance by Lessee of all
conditions of said permit in a prompt and expeditious manner.

             (c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall, in
good faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense defend itself and Lessor against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises, upon the condition
that if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.

             (d) Unless Lessor requires their removal, as set forth in Paragraph
7.5(a), all alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee);
which may be made on the Premises, shall become the property of Lessor and
remain upon and be surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this Paragraph 7.5(d), Lessee's machinery and
equipment, other than that which is affixed to the Premises so that it cannot be
removed without material damage to the Premises, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of Paragraph 7.2.

8.       INSURANCE INDEMNITY.

         8.1 INSURING PARTY. As used in the Paragraph 8, the term "insuring
party" shall mean the party who has the obligation to obtain the Property
Insurance required hereunder. The insuring party shall be designated in
Paragraph 46 hereof. In the event Lessor is the insuring party, Lessor shall
also maintain the liability insurance described in paragraph 8.2 hereof, in
addition to, and not in lieu of, the insurance required to be maintained by
Lessee under said paragraph 8.2, but Lessor shall not be required to name Lessee
as an additional insured on such policy. Whether the insuring party is the
Lessor or the Lessee, Lessee shall, as additional rent for the Premises, pay the
cost of all insurance

                                      -5-
<PAGE>   6




required hereunder, except for that portion of the cost attributable to Lessor's
liability insurance coverage in excess of $1,000,000 per occurrence. If Lessor
is the insuring party Lessee shall, within ten (10) days following demand by
Lessor, reimburse Lessor for the cost of the insurance so obtained.

         8.2 LIABILITY INSURANCE. Lessee shall, at Lessee's expense obtain and
keep in force during the term of this Lease a policy of Combined Single Limit,
Bodily Injury and Property Damage insurance insuring Lessor and Lessee against
any liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than $500,000 per occurrence. The
Lessee shall insure performance by Lessee of the indemnity provisions of this
Paragraph 8. The limits of said insurance shall not, however, limit the
liability of Lessee hereunder.

         8.3 PROPERTY INSURANCE.

             (a) The insuring party shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage to
the Premises, in the amount of the full replacement value thereof, as the same
may exist from time to time, which replacement value is now $1,000,000.00, but
in no event less than the total amount required by lenders having liens on the
Premises, against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, flood (in the event same is
required by a lender having a lien on the Premises), and special extended perils
("all risk" as such term is used in the insurance industry). Said insurance
shall provide for payment of loss thereunder to Lessor or to the holders of
mortgages or deeds of trust on the Premises. The insuring party shall, in
addition, obtain and keep in force during the term of this Lease a policy of
rental value insurance covering a period of one year, with loss payable to
Lessor, which insurance shall also cover all real estate taxes and insurance
costs for said period. A stipulated value or agreed amount endorsement deleting
the coinsurance provision of the policy shall be procured with said insurance If
the insuring party shall fail to procure and maintain said insurance the other
party may, but shall not be required to, procure and maintain the same, but at
the expense of Lessee. If such insurance coverage has a deductible clause, the
deductible amount shall not exceed $1,000 per occurrence, and Lessee shall be
liable for such deductible amount.

             (b) If the Premises are part of a larger building, or if the
Premises are part of a group of buildings owned by Lessor which are adjacent to
the Premises, then Lessee shall pay for any increases in the property insurance
of such other building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.

                  (c) If the Lessor is the insuring party the Lessor will not
insure Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the






                                      -6-
<PAGE>   7

Premises under paragraph 7, hereof. But if Lessee is the insuring party the
Lessee shall insure its fixtures, equipment and tenant improvements.

         8.4 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide". The insuring
party shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8. No such policy shall be
cancellable or subject to reduction of coverage or other modification except
after thirty (30) days' prior written notice to Lessor. If Lessee is the
insuring party Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor
or may order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand. Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in Paragraph
8.3. If Lessee does or permits to be done anything which shall increase the cost
of the insurance policies referred to in Paragraph 8.3, then Lessee shall
forthwith upon Lessor's demand reimburse Lessor for any additional premiums
attributable to any act or omission or operation of Lessee causing such increase
in the cost of insurance. If Lessor is the insuring party, and if the insurance
policies maintained hereunder cover other improvements in addition to the
Premises. Lessor shall deliver to Lessee a written statement setting forth the
amount of any such insurance cost increase and showing in reasonable detail the
manner in which it has been computed.

         8.5 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
under paragraph 8.3, which perils occur in, on or about the Premises, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.


         8.6 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from and
against any claims arising from Lessee's use of the Premises, or from the
conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action or proceeding be brought against Lessor by
reason of any such claim. Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material
party of the consideration to Lessor, hereby assumes all risk of damage to
property or injury to persons, in, upon or about the Premises arising from any
cause and Lessee hereby waives all claims in respect thereof against Lessor.



                                      -7-
<PAGE>   8

         8.7 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or the
Premises, nor shall lessor be liable for injury to the person of Lessee.
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant; if any, of the building in which the Premises are
located.

9.       DAMAGE OR DESTRUCTION.

         9.1 DEFINITIONS.

             (a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
50% of the then replacement cost of the Premises. "Premises Building Partial
Damage" shall herein mean damage or destruction to the building of which the
Premises are a part to the extent that the cost of repair is less than 50% of
the then replacement cost of such building as a whole.

             (b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or more
of the then replacement cost of the Premises. "Premises Building Total
Distribution" shall herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of repair is 50% or more of
the then replacement cost of such building as a whole.

             (c) "Insured Loss" shall herein mean damage or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8.

         9.2 PARTIAL DAMAGE - INSURED LOSS. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6. if at any time during the term of this Lease there
is damage which is an Insured Loss and which falls into the classification of
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements unless the same have become a part of the Premises pursuant
to Paragraph 7.5 hereof as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the above, if the Lessee is
the insuring party, and if the insurance proceeds received by Lessor are not
sufficient to effect such repair, Lessor shall give notice to Lessee of the
amount required in addition to the insurance proceeds to effect such repair.
Lessee shall contribute the required amount to Lessor within ten days after
Lessee has received notice from Lessor of the






                                       -8-
<PAGE>   9

shortage in the insurance. When Lessee shall contribute such amount to Lessor,
Lessor shall make such repairs as soon as reasonably possible and this Lessee
shall continue in full force and effect. Lessee shall in no event have any right
to reimbursement for any such amounts so contributed.

         9.3 PARTIAL DAMAGE - UNINSURED LOSS. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, if at any time during the term of this Lease there
is damage which is not an insured Loss and which falls within the classification
of Premises Partial Damage or Premises Building Partial Damage, unless caused by
a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), Lessor may at Lessor's option either (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after the date of the occurrence of such
damage of Lessor's intention to cancel and terminate this Lease, as of the date
of the occurrence of such damage. In the event Lessor elects to give such notice
of Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expenses, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible, if Lessee does not give such notice within such
10-day period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.

         9.4 TOTAL DESTRUCTION. If at any time during the term of this Lease
there is damage, whether or not an Insured Loss, (including destruction required
by any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.

         9.5 DAMAGE NEAR END OF TERM.

             (a) If at any time during the last six months of the terms of this
Lease there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.

             (b) Notwithstanding paragraph 9.5(a), in the event that Lessee has
an option to extend or renew this Lease, and the time within which said option
may be exercised has not yet expired. Lessee shall exercise such option, if it
is to be exercised at all, no later than 20 days after the occurrence of an
Insured Loss falling within the classification of Premises Partial Damage during
the last six months of the term of this Lease. If Lessee duly exercises such
option during said 20 days period, Lessor shall, at Lessor's expenses, repair
such damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option during said 20 day
period, then Lessor may at Lessor's option terminate and cancel this Lease as of
the expiration of said 20 day period by giving written notice to Lessee of
Lessor's election to do so








                                       -9-
<PAGE>   10

within 10 days after the expiration of said 20 day period, notwithstanding any
term or provision in the grant of option to the contrary.

         9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.

             (a) In the event of damage described in paragraphs 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the provisions of
this Paragraph 9, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired. Except for abatement
of rent, if any, Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair or restoration.

             (b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair or
restoration within 90 days after such obligations shall occur, Lessee may at
Lessee's option cancel and terminate this Lease by giving Lessor written notice
of Lessee's election to do so at any time prior to the commencement of such
repair or restoration. In such event this Lease shall terminate as of the date
of such notice.

         9.7 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.

         9.8 WAIVER. Lessor and Lessee waiver the provisions of any statutes
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.

10.      REAL PROPERTY TAXES.


         10.1 PAYMENT OF TAXES. Lessee shall pay the real property tax, as
defined in paragraph 10.2, applicable to the Premises during the term of this
Lease. All such payments shall be made at least ten (10) days prior to the
delinquency date of such payment. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes paid by
Lessee shall cover any period of time prior to or after the expiration of the
term hereof, Lessee's share of such taxes shall be equitably prorated to cover
only the period of time within the tax fiscal year during which this Lease shall
be in effect, and Lessor shall reimburse Lessee to the extent required. If
Lessee shall fail to pay any such taxes, Lessor shall have the right to pay the
same, in which case Lessee shall repay such amount to Lessor with Lessee's next
rent installment together with interest at 10% per annum.

         10.2 DEFINITION OF "REAL PROPERTY TAX". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than








                                      -10-
<PAGE>   11

inheritance, personal income or estate taxes) imposed on the Premises by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Premises or in the real property of which
the Premises are a part, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the Premises. The term
"real property tax" shall also include any tax, fee, levy, assessment or charge
(i) in substitution of, partially or totally, any tax, fee, levy, assessment or
charge hereinabove included within the definition of "real property tax," or
(ii) the nature of which was hereinbefore included within the definition of
"real property tax," or (iii) which is imposed for a service or right not
charged prior to June 1, 1978, or, if previously charged, has been increased
since June 1, 1978, or (iv) which is imposed as a definition of real property
tax by reason of such transfer, or (v) which is imposed by reason of this
transaction, any modification or changes hereto, or any transfers hereof.

         10.3 JOINT ASSESSMENT. If the Premises are not separately assessed.
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.

         10.4 PERSONAL PROPERTY TAXES.

             (a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible Lessee shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.

             (b) If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee within 10 days after receipt of a written statement setting forth the
taxes applicable to Lessee's property.

11.      UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises.

12.      ASSIGNMENT AND SUBLETTING.

         12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a





                                      -11-
<PAGE>   12

timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.

         12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph 12.1
hereof. Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises provided that said assignee assumes in full, the
obligations of Lessee under this Lease any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.

         12.3 NO RELEASE OF LESSEE. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligator, or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision hereof. Consent to one assignment of subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Lessee or any successor of Lessee. In the performance of any of
the terms hereof. Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee. Lessor may consent to
subsequent assignments or subletting of this Lease or amendments or
modifications to this Lease with assignees of Lessee, without notifying Lessee,
or any successor of Lessee, and without obtaining its or their consent thereto
and such action shall not relieve Lessee of liability under the Lease.

         12.4 ATTORNEY'S FEES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor for any act Lessee proposes to do then
Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.

13.      DEFAULTS; REMEDIES.

         13.1 DEFAULTS. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Lessee:

             (a) The vacating or abandonment of the Premises by Lessee.

             (b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three days after written notice thereof
from Lessor to Lessee. In the event that Lessor served Lessee with a Notice to
Pay Rent or Quit pursuant to applicable Unlawful Retainer statutes such Notice
to Pay Rent or Quit shall also constitute the notice required by this
subparagraph.




                                      -12-
<PAGE>   13

              (c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee, other than described in paragraph (b) above, where such failure shall
continue for a period of 30 days after written notice thereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, than lessee shall not be
deemed to be in default if Lessee commenced such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion.

              (d) (i)The making by Lessee of any general arrangement or
assignment for the benefit of creditors; (ii) Lessee becomes a "debtor" as
defined in 11 U.S.C. ss.101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within 60 days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.
Provided, however, in the event that any provision of this paragraph 13.1(d) is
contrary to any applicable law, such provision shall be of no force or effect.

              (e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any successor
in interest of Lessee or any guarantor of Lessee's obligation hereunder, any of
them, was materially false.

         13.2 REMEDIES. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach:

              (a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event,
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, by not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's fees,
and any real estate commission actually paid; the worth at the time of aware by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by the Lessor pursuant to Paragraph
15 applicable to the unexpired term of this Lease.

              (b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the Premises
in such event Lessor shall be entitled to enforce all of Lessor's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due hereunder.




                                      -13-
<PAGE>   14

              (c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.

         13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently prosecutes the same to completion.

         13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder. In the event
that a late charge is payable hereunder, whether or not collected for three (3)
consecutive installments of rent, then rent shall automatically become due and
payable quarterly in advance, rather than monthly notwithstanding paragraph 4 or
any other provision of this Lease to the contrary.

         13.5 IMPOUNDS. In the event that a late charge is payable hereunder,
whether or not collected for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the






                                      -14-
<PAGE>   15


provisions of this paragraph may, at the option of Lessor, be applied to the
payment of any monetary default of Lessee in lieu of being applied to the
payment of real property tax.

14.      CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than 10% of the floor area
of the building on the Premises, or more than 25% of the land area of the
Premises which is not occupied by any building, is taken by condemnation, Lessee
may, at Lessee's option to be exercised in writing only within ten (10) days
after Lessor shall have given to Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent shall be
reduced in the proportion that the floor area of the building taken bears to the
total floor area of the building situated on the Premises. No reduction of rent
shall occur if the only area taken is that which does not have a building
located thereof. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under the threat of the
exercise of such power shall be the property of Lessor, whether such aware shall
be made as compensation for diminution in value of the leaseholder or for the
taking of the fee, or as severance damages; provided, however, that Lessor shall
be entitled to any aware for loss or damage to Lessee's trade fixtures and
removable personal property. In the event that this Lease is not terminated by
reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount in
excess of such severance damages required to complete such repair.

15.      BROKER'S FEE.

              (a) Upon execution of this Lease by both parties, Lessor shall pay
to None Licensed real estate broker(s), a fee as set forth in a separate
agreement between Lessor and said broker(s), or in the event there is no
separate agreement between Lessee and said broker(s), the sum of $-0-, for
brokerage services rendered by said broker(s) to Lessor in this transaction.

              (b) Lessor further agrees that if lessee exercises any Option as
defined in paragraph 39.1 of this Lease, which is granted to Lessee under any
rights to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or if Lessee remains in possession of the
Premises after the expiration of the term of this Lease pertaining to the
Premises and/or any adjacent property in which Lessor has an interest, then as
to any of said transactions Lessor shall pay said broker(s) a fee in accordance
with the schedule of said broker(s) in effect at the time of execution of this
Lease.




                                      -15-
<PAGE>   16

              (c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association, or other entity having
an ownership interest in said real property or any part thereof, when such fee
is due hereunder. Any transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Said broker shall be a
third party beneficiary of the provisions of this Paragraph 15.

16.      ESTOPPEL CERTIFICATE.

              (a) Lessee shall at any time upon not less than ten (10) days'
prior written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (1) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the
rent and other charges are paid in advance, if any, and (ii) acknowledging that
there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor
hereunder or specifying such defaults if any are claimed. Any such statement may
be conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises.

              (b) At Lessor's option, Lessee's failure to delivery such
statement within such time shall be a material breach of Lease or shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance or such failure may be considered by
Lessor as a default by Lessee under this Lease.

              (c) If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.

17.      LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners at the time in question of the fee title or a lessee's
interest in a ground lease of the Premises, and except as expressly provided in
Paragraph 15, in the event of any transfer of such title or interest. Lessor
herein named (and in case of any subsequent transfers then the grantor) shall be
relieved from and after the date of such transfer of all liability as respects
Lessor's obligations thereafter to be performed, provided that any funds in the
hands of Lessor or the then grantor at the time of such transfer, in which
Lessee has an interest, shall be delivered to the grantee. The obligations
contained in this Lease to be performed by Lessor shall, subject as aforesaid,
be binding on Lessor's successors and assigns, only during their respective
periods of ownership.




                                      -16-
<PAGE>   17

18.      SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

19.      INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the rate 10%
per annum from the date due. Payment of such interest shall not excuse or cure
any default by Lessee under this Lease, provided, however, that interest shall
not be payable on late charges incurred by Lessee nor on any amounts upon which
late charges are paid by Lessee.

20.      TIME OF ESSENCE. Time is of the essence.

21.      ADDITIONAL RENT. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.

22.      INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease. Lessee
hereby acknowledges that neither the real estate broker listed in Paragraph 15
hereof nor any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.

23.      NOTICES. Any notice required or permitted to be given hereunder shall
be in writing and may be given by personal delivery or by certified mail, and if
given personally or by mail, shall be deemed sufficiently given if addressed to
Lessee or to Lessor at the address noted below the signature of the respective
parties, as the case may be. Either party may by notice to the other specify a
different address for notice purposes except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties as
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee.

24.      WAIVERS. No waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.




                                      -17-
<PAGE>   18

25.      RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.

26.      HOLDING OVER. If Lessee, with Lessor's consent, remains in possession
of the Premises or any party thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions of
this Lease pertaining to the obligations of Lessee, but all options and rights
of first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.

27.      CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28.      COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.

29.      BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment of subletting by Lessee and subject to the provisions of
Paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.

30.      SUBORDINATION.

              (a) This Lease, at Lessor's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation or security
now or hereafter placed upon the real property of which the Premises are a part
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements, and extensions thereof.
Notwithstanding such subordination, Lessee's rights to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.

              (b) Lessee agrees to execute any documents required to effectuate
an attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).




                                      -18-
<PAGE>   19

31.      ATTORNEY'S FEES. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the court.
The provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.

32.      LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.

33.      AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

34.      SIGNS. Lessee shall not place any sign upon the Premises without
Lessor's prior written consent except that Lessee shall have the right, without
the prior permission of Lessor to place ordinary and usual for rent or sublet
signs thereon.

35.      MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.

36.      CONSENTS. Except for paragraph 33 whereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent shall
not be unreasonably withheld.

37.      GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.

38.      QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.




                                      -19-
<PAGE>   20

39.      OPTIONS.

         39.1 DEFINITION. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the Premises or the right or option to purchase other property of
Lessor, or the right of first refusal to purchase other property of Lessor, or
the right of first offer to purchase other property of Lessor.

                          [INSERT PLOT - EXHIBIT A ??]

         39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease are
personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to any Leasers Affiliates as
defined in paragraph 12.2 of this Lease. The Options herein granted to Lessee
are not assignable separate and apart from this Lease.

         39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extend or renew this Lease a later option cannot be exercised unless
the prior option to extend or renew this Lease has been so exercised.

         39.4 EFFECT OF DEFAULT ON OPTIONS.

              (a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the default
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) continuing until
the obligation is paid, or (iii) at any time after an event of default described
in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without any necessity of Lessor to
give notice of such default to Lessee), or (iv) in the event that Lessor has
given to Lessee three or more notices of default under paragraph 13.1(b), where
a late charge has become payable under paragraph 13.4 for each of such defaults,
or paragraph 13.1(c), whether or not the defaults are cured, during the 12 month
period prior to the time that Lessee intends to exercise the subject Option.

              (b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).

              (c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after






                                      -20-
<PAGE>   21


such exercise and during the terms of this Lease, (i) Lessee fails to pay to
Lessor a monetary obligation of Lessee for a period of 30 days after such
obligation becomes due (without any necessity of Lessor to give notice thereof
to Lessee), or (ii) Lessee fails to commence to cure a default specified in
paragraph 13.1(c) within 30 days after the date that lessor gives notice to
Lessee of such default and/or Lessee fails thereafter to diligently prosecute
said cure to completion, or (iii) Lessee commits a default described in
paragraph 13.1(a), 13.1(d) or 13.1(e) (without any necessity of Lessor to give
notice of such default to Lessee), or (iv) Lessor gives to Lessee three or more
notices of default under paragraph 13.1(b), where a late charge becomes payable
under paragraph 13.4 for each such default, or paragraph 13.1(c), whether or not
the defaults are cured.

40.      MULTIPLE TENANT BUILDING. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care, and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee.

41.      SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties.

42.      EASEMENTS. Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of the Parcel Maps and restrictions, so
long as such easements, rights, dedications, Maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessees shall
sign any of the aforementioned documents upon request of Lessor and failure to
do so shall constitute a material breach of this Lease.

43.      PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.

44.      AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to lessor evidence of such authority satisfactory to Lessor.





                                      -21-
<PAGE>   22

45.      CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.

46.      INSURING PARTY. The insuring party under this lease shall be the True
Time, Inc., Lessee.

47.      ADDENDUM. Attached hereto is an addendum or addenda containing
paragraphs 48 through 52 which constitutes a part of this Lease.








LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

         IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
         YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
         MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
         ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
         LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
         RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
         THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
         LEASE.



                                      -22-
<PAGE>   23



The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.


Executed at      Santa Rosa, California          MANOR DEVELOPMENT CO.
           ------------------------------------
on                    May 7, 1992                By   /s/ Boyd R. Lang
  ---------------------------------------------    ----------------------------
                                                   Boyd R. Lang, President

Address           3100 Dutton Ave. #222          By   /s/ Boyd R. Lang, Jr.
       ----------------------------------------    ----------------------------
                  Santa Rosa, CA 95407             Boyd R. Lang, Jr., Secretary
       ----------------------------------------      "LESSOR" (Corporate seal)


Executed at  Santa Rosa, California              TRUE TIME, INC.
           ------------------------------------
on           3243 Santa Rosa Avenue              By   /s/ John L. Van Groos
  ---------------------------------------------    -----------------------------
                                                   John L. Van Groos - President

Address      Santa Rosa, CA 95407                By
       ----------------------------------------    -----------------------------
                                                     "LESSEE" (Corporate seal)

                                      -23-
<PAGE>   24



48.      TERM - The term of this lease shall commence thirty (30) days after the
date of the City of Santa Rosa signs off for the completion and occupancy of the
building to be constructed according to Paragraph #52 hereof, covering the work
being performed by Lessor.

         Provided that Lessee is not in default in the performance of this
lease, Lessee shall have the option to renew the lease for two (2) additional 5
year terms, at the expiration of the initial lease term. All terms of the lease
shall apply during the renewal terms except; 1) this option to renew clause. 2)
the monthly rent then being paid, adjusted to C.P.I. as provided herein. The
option shall be exercised by written notice to Lessor not less then 6 months
prior to the expiration of the initial or prior to the expiration of the first
option period if notice is not given in the manner provided herein within the
time specified, this option shall expire.

49.      PLANS - Lessor and Lessee AS OF THIS DATE have approved preliminary
plans for a building to be constructed according to Paragraph #52 here of.
Within 60 days of the execution of this lease, Lessor shall have prepared a set
of architectural plans according to the preliminary plans. Upon approval of the
architectural plans by both Lessor and Lessee, Lessor shall cause final working
drawings to be drawn and submitted to the City of Santa Rosa and other
governmental agencies for approvals, and issuance of a building permit. Lessor
shall make available upon request by Lessee copies of all drawings, permits and
applications related to this project. Lessor shall use all reasonable dispatch
to obtain there approvals.

         In the event the architectural plans are in keeping with the
preliminary plans and Lessee does not approve said plans and pay the Additional
Security Deposit, this lease shall become null and void.

         The fees charged by the Architect for the architectural drawings shall
be deducted from the funds paid by Lessee to Lessor with the execution of this
lease and the balance, if any, shall be returned to Lessee.

50.      FINANCING - In the event that prior to the approval of the
architectural plans by Lessor and Lessee, Lessor is unable to obtain
satisfactory construction and permanent loan commitment to construct said
building and improvements this lease shall become null and void and the full
amount paid by Lessee to Lessor shall be repaid to Lessee, and there shall be no
further obligations between the parties.

51.      ADDITIONAL SECURITY DEPOSIT - Reference to the provisions of paragraph
5 hereof. Upon the approval of said Architectural plans refereed to in PARAGRAPH
#49, and proof of construction financing. Lessee shall pay Lessor the sum of
$41,944.50 to increase the security deposit. Providing the lease is not in
default at the end of the first year of the term hereof, a portion of the
security deposit in the amount of $27,963.00 shall be refunded to Lessee.

52.      CONSTRUCTION - Upon the issuance of a building permit from the City of
Santa Rosa and the placement of financing, Lessor shall commence construction of
the building and site






                                      -24-
<PAGE>   25


improvements according to the plans approved by the City of Santa Rosa and other
Governmental agencies. lessor shall use all reasonable dispatch to have the
building completed and ready for occupancy by Lessee. Occupancy will be
available to Lessee by 9-30-94 or this Lease shall become null and void and the
full amounts paid by Lessee to Lessor shall be repaid to Lessee. Lessor shall
cooperate with Lessee to allow Lessee to do their tenant improvement work in the
building during construction.


                                      -25-

<PAGE>   1
                                                                    EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS



We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated November 2, 1999, relating to the financial statements of TrueTime,
Inc. which appear in such Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.





PricewaterhouseCoopers LLP

Houston, Texas
November 3, 1999

<PAGE>   1


                                                                    EXHIBIT 23.3

                                     CONSENT

     In connection with the initial public offering (the "Offering") of common
stock of TrueTime, Inc., a Delaware corporation (the "Company"), and the filing
of a Registration Statement on Form S-1 with the Securities and Exchange
Commission (the "Registration Statement"), the undersigned consents to be named
in the Registration Statement as a person who will be elected as a director
immediately prior to the closing of the Offering. The undersigned further
consents to serve as a director of the Company, if elected, and to the filing of
this consent as an exhibit to the Registration Statement.

Dated: November 1, 1999.


                                       /s/ Satoru Ohya
                                       -----------------------------------------
                                       Satoru Ohya




<PAGE>   1


                                                                    EXHIBIT 23.4

                                     CONSENT

     In connection with the initial public offering (the "Offering") of common
stock of TrueTime, Inc., a Delaware corporation (the "Company"), and the filing
of a Registration Statement on Form S-1 with the Securities and Exchange
Commission (the "Registration Statement"), the undersigned consents to be named
in the Registration Statement as a person who will be elected as a director
immediately prior to the closing of the Offering. The undersigned further
consents to serve as a director of the Company, if elected, and to the filing of
this consent as an exhibit to the Registration Statement.

Dated: 1 November, 1999.


                                       /s/ Charles J. Abbe
                                       -----------------------------------------
                                       Charles J. Abbe

<PAGE>   1


                                                                    EXHIBIT 23.5

                                     CONSENT

     In connection with the initial public offering (the "Offering") of common
stock of TrueTime, Inc., a Delaware corporation (the "Company"), and the filing
of a Registration Statement on Form S-1 with the Securities and Exchange
Commission (the "Registration Statement"), the undersigned consents to be named
in the Registration Statement as a person who will be elected as a director
immediately prior to the closing of the Offering. The undersigned further
consents to serve as a director of the Company, if elected, and to the filing of
this consent as an exhibit to the Registration Statement.

Dated: November 1, 1999.


                                       /s/ Charles H. Still
                                       -----------------------------------------
                                       Charles H. Still




<PAGE>   1


                                                                    EXHIBIT 23.6

                                     CONSENT

     In connection with the initial public offering (the "Offering") of common
stock of TrueTime, Inc., a Delaware corporation (the "Company"), and the filing
of a Registration Statement on Form S-1 with the Securities and Exchange
Commission (the "Registration Statement"), the undersigned consents to be named
in the Registration Statement as a person who will be elected as a director
immediately prior to the closing of the Offering. The undersigned further
consents to serve as a director of the Company, if elected, and to the filing of
this consent as an exhibit to the Registration Statement.

Dated: November 2, 1999.


                                       /s/ A. Robert Towbin
                                       -----------------------------------------
                                       A. Robert Towbin




<TABLE> <S> <C>

<ARTICLE> 5

<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          SEP-30-1999
<PERIOD-START>                             OCT-01-1998
<PERIOD-END>                               SEP-30-1999
<CASH>                                       3,538,851
<SECURITIES>                                         0
<RECEIVABLES>                                4,270,985
<ALLOWANCES>                                    10,000
<INVENTORY>                                  5,064,779
<CURRENT-ASSETS>                            13,546,527
<PP&E>                                       2,223,630
<DEPRECIATION>                               1,095,355
<TOTAL-ASSETS>                              15,491,354
<CURRENT-LIABILITIES>                        2,738,403
<BONDS>                                              0
                                0
                                          0
<COMMON>                                        40,000
<OTHER-SE>                                           0
<TOTAL-LIABILITY-AND-EQUITY>                15,491,354
<SALES>                                     20,645,240
<TOTAL-REVENUES>                            20,645,240
<CGS>                                        9,076,137
<TOTAL-COSTS>                                8,060,800
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                              3,813,394
<INCOME-TAX>                                 1,546,846
<INCOME-CONTINUING>                          3,813,394
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                 3,813,394
<EPS-BASIC>                                        .57
<EPS-DILUTED>                                      .57


</TABLE>


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