<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1996
REGISTRATION NO. 333 -
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TTR INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3577 11-3223672
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
2 HANAGAR STREET
KFAR SABA, ISRAEL 44425
011-972-9-766-2393
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)
------------------------
MR. MARC D. TOKAYER
CHAIRMAN OF THE BOARD
TTR INC.
2 HANAGAR STREET
KFAR SABA, ISRAEL 44425
011-972-9-766-2393
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
SAMUEL F. OTTENSOSER, ESQ. MITCHELL LAMPERT, ESQ.
BAER MARKS & UPHAM LLP LAMPERT & LAMPERT
805 THIRD AVENUE, NEW YORK, NY 10022 10 E. 40TH STREET, NEW YORK, NY 10016
TEL: (212) 702-5700 FAX: (212) 702-5941 TEL: (212) 889-7300 FAX: (212) 889-5732
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 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,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES OFFERING PRICE AGGREGATE
TO BE REGISTERED AMOUNT TO BE REGISTERED PER SHARE(1) OFFERING PRICE
<S> <C> <C> <C>
Common Stock, $.001 par value.................................... 1,466,250 shares(2) $ 6.00 $ 8,797,500
Redeemable Warrants.............................................. 690,000 warrants(2) $ 0.25 $ 172,500
Common Stock, $.001 par value.................................... 690,000 shares(3)(6) $ 7.20 $ 4,968,000
Representative's Warrants........................................ 120,000 warrants(4) $ .001 $ 120
Common Stock, $.001 par value.................................... 120,000 shares(6) $ 7.20 $ 1,080,000
Redeemable Warrants.............................................. 60,000 warrants $ .30 $ 18,000
Common Stock, $.001 par value.................................... 60,000 shares(5)(6) $ 7.20 $ 432,000
Common Stock, $.001 par value.................................... 1,327,021 shares(7) $ 6.00 $ 7,962,126
Redeemable Warrants.............................................. 1,000,000 warrants(8) $ 0.25 $ 250,000
Common Stock, $.001 par value.................................... 1,000,000 shares(6)(9) $ 7.20 $ 7,200,000
--------------
Total....................................................... $ 30,880,246
</TABLE>
<TABLE>
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES REGISTRATION
TO BE REGISTERED FEE
<S> <C>
Common Stock, $.001 par value.................................... $ 3,033.62
Redeemable Warrants.............................................. $ 59.48
Common Stock, $.001 par value.................................... $ 1,713.10
Representative's Warrants........................................ $ .04
Common Stock, $.001 par value.................................... $ 372.41
Redeemable Warrants.............................................. $ 6.21
Common Stock, $.001 par value.................................... $ 148.97
Common Stock, $.001 par value.................................... $ 2,745.56
Redeemable Warrants.............................................. $ 86.21
Common Stock, $.001 par value.................................... $ 2,482.76
----------
Total....................................................... $10,648.46
</TABLE>
(footnotes on next page)
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
(footnotes from front cover)
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933, as
amended.
(2) Includes 191,250 shares of Common Stock and 90,000 Redeemable Common Stock
Purchase Warrants subject to an over-allotment option granted to the
Underwriters.
(3) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants.
(4) Representative's Warrants to be issued to the Representative consist of
warrants to purchase 120,000 shares of Common Stock and warrants to purchase
60,000 Redeemable Common Stock Purchase Warrants.
(5) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants
included in the Representative's Warrants.
(6) Pursuant to Rule 416, this Registration Statement also covers an
indeterminable number of additional shares of Common Stock issuable as a
result of any future anti-dilution adjustments in accordance with the terms
of the Redeemable Common Stock Purchase Warrants.
(7) Consists of shares of Common Stock offered by the Selling Securityholders.
(8) Consists of Redeemable Common Stock Purchase Warrants being offered by the
Selling Securityholders.
(9) Consists of Common Stock issuable upon exercise of Redeemable Common Stock
Purchase Warrants being offered by the Selling Securityholders.
------------------------
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one
prospectus to be used in connection with an offering of 1,275,000 shares of
Common Stock, and 600,000 Redeemable Common Stock Purchase Warrants (the
'Offering Prospectus'), and another prospectus to be used in connection with the
sale of 1,417,021 shares of Common Stock, 1,000,000 Redeemable Common Stock
Purchase Warrants and 1,000,000 shares of Common Stock issuable upon the
exercise of such Warrants by certain selling securityholders (the 'Selling
Securityholders' Prospectus'). The Offering Prospectus and the Selling
Securityholders' Prospectus will be identical in all respects except for the
alternative pages for the Selling Securityholders' Prospectus included herein
which are labeled 'Alternate Page for Selling Securityholders' Prospectus.'
<PAGE>
<PAGE>
TTR INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NO.
CAPTION IN FORM SB-2 LOCATION IN PROSPECTUS
- ----------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus................................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors................. Prospectus Summary; Summary Financial Information;
and Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security-Holders............................. Selling Stockholders
8. Plan of Distribution................................. Selling Securityholders and Plan of Distribution
9. Legal Proceedings.................................... Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Stockholders
12. Description of Securities............................ Description of Securities
13. Interest of Named Experts and Counsel................ Legal Matters and Experts
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Management -- Indemnification
15. Organization Within Last Five Years.................. *
16. Description of Business.............................. Business
17. Management's Discussion and Analysis or Plan of
Operation.......................................... Plan of Operation
18. Description of Property.............................. Business -- Properties.
19. Certain Relationships and Related Transactions....... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................ Dividend Policy
21. Executive Compensation............................... Management -- Executive Compensation
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure................ *
</TABLE>
- ------------
* Not Applicable
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED SEPTEMBER , 1996
PROSPECTUS
TTR INC.
1,275,000 SHARES OF COMMON STOCK AND
REDEEMABLE WARRANTS TO PURCHASE 600,000 SHARES OF COMMON STOCK
Of the 1,275,000 shares of Common Stock, par value $.001 per share (the
'Common Stock'), offered hereby (the 'Offering'), 1,200,000 shares of Common
Stock are being sold by TTR Inc., a Delaware corporation (the 'Company'), and
75,000 shares of Common Stock are being sold by certain selling stockholders of
the Company (the 'Bridge Selling Stockholders') in each case through First
Metropolitan Securities, Inc., the representative of the Underwriters (the
'Representative'). The Bridge Selling Stockholders received such shares of
Common Stock in May 1996 in connection with the aggregate purchase of 10 units
for $500,000, each unit consisting of $50,000 principal amount 10% promissory
notes and 15,000 shares of Common Stock. The Company will not receive any of the
proceeds from the sale of the shares of Common Stock by the Bridge Selling
Stockholders. See 'Plan of Operation,' 'Description of Securities' and 'Selling
Stockholders.'
The Company is also hereby offering redeemable warrants to purchase 600,000
shares of Common Stock (the 'Warrants') through the Underwriters. The Common
Stock and the Warrants are sometimes referred to collectively as the
'Securities.' The Common Stock and the Warrants will trade separately
immediately upon the date of this Prospectus (the 'Effective Date').
Each Warrant entitles the holder to purchase one share of Common Stock for
$7.20 during the five-year period commencing six months after the date of this
Prospectus. The Company may call the Warrants for redemption, at a price of $.25
per Warrant, at any time commencing six months from the date of this Prospectus,
on not less than 30 days' prior written notice to the warrantholders, if the
closing bid price of the Common Stock for each of the 20 consecutive trading
days preceding the date on which the notice of redemption is given has been at
least 190% (currently $13.68, subject to adjustment) of the then effective
exercise price of the Warrants. See 'Description of Securities.'
(Cover continued on next page)
- ----------------------------------------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SUBSTANTIAL DILUTION. SEE 'DILUTION' AND 'RISK FACTORS' BEGINNING ON
PAGE 7.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND PROCEEDS TO BRIDGE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share........................................................ $6.00 $ .60 $5.40 $5.40
Per Warrant...................................................... $ .25 $ .03 $ .22 --
Total(3).................................................... $7,800,000 $780,000 $6,615,000 $405,000
</TABLE>
(1) Does not include a 3% nonaccountable expense allowance payable to the
Representative, of which $50,000 has been paid as at the date of this
Prospectus. The Company has also agreed to sell to the Representative
warrants (the 'Representative's Warrants') to purchase up to 120,000 shares
of Common Stock and/or 60,000 Warrants, to retain the Representative as a
financial consultant and to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the 'Securities Act'). See 'Underwriting.'
(2) Before deducting certain expenses payable by the Company, including the
nonaccountable expense allowance in the amount of $220,500 ($223,200 if the
Underwriters' overallotment option is exercised in full), estimated at
$845,500.
(3) The Company and certain stockholders have granted the several Underwriters
an option (the 'Over-allotment Option'), exercisable within 45 days from the
date of this Prospectus, to purchase in the aggregate up to an additional
191,250 shares of Common Stock and/or 90,000 Warrants on the same terms as
set forth above, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company, and Proceeds to Bridge Selling
Stockholders will be $8,970,000, $897,000, $7,182,000, and $405,000,
respectively. See 'Underwriting.'
------------------------
FIRST METROPOLITAN SECURITIES, INC.
The date of this Prospectus is , 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
<PAGE>
<PAGE>
(Cover continued from previous page)
Prior to this offering (the 'Offering'), no public market exists for the
Common Stock or Warrants. There can be no assurance that any such markets will
develop. After the Offering, the Company's current directors, executive officers
and principal stockholders will beneficially own approximately 23.5% of the
outstanding shares of Common Stock of the Company. Marc D. Tokayer, Chairman of
the Board, the Tokayer Family Trust, Baruch Sollish, Director and four other
stockholders with an aggregate of 1,137,430 shares of Common Stock (31.4% after
the Offering) intend to enter into a voting arrangement whereby they will agree
to vote their respective shares to elect directors and in support of positions
favored by a majority of the shares held among them. Accordingly, the Company's
present Management will in all likelihood continue to control the Company. The
Company has applied for the inclusion of the Common Stock and Warrants on the
Nasdaq SmallCap Market under the symbols ' ' and ' ,' respectively. A Nasdaq
listing does not imply that a liquid and active market will develop or be
sustained for the securities upon completion of the Offering. See 'Underwriting'
for a discussion of the factors considered in determining the exercise price
and/or the public offering price of the Warrants and the Common Stock. See 'Risk
Factors.'
Only the Common Stock and the Warrants are being sold as part of the
underwritten Offering. This Registration Statement also relates to the offer and
sale of an aggregate of 1,417,021 shares of Common Stock, 1,000,000 Warrants and
1,000,000 shares of Common Stock issuable upon the exercise of such Warrants
(collectively, the 'Selling Securityholders' Securities'). The Selling
Securityholders' Securities are being registered pursuant to registration rights
agreements entered into by the Company and the selling securityholders (the
'Selling Securityholders'). The Selling Securityholders have each agreed (except
for the Bridge Selling Stockholders who have agreed to lock-up their shares,
excluding 75,000 shares being underwritten hereunder, for a period of 18 months;
and except for certain Selling Securityholders with respect to up to 180,000
shares of Common Stock included in the Over-allotment Option) not to sell any of
the securities being registered in the Selling Securityholders' Offering for a
period of 24 months from the Effective Date without the prior written consent of
the Representative. The Representative will not consent to the release of such
lock-ups prior to the exercise or expiration of the Over-allotment Option. The
Company will not receive any of the proceeds from the sale of such securities.
See 'Selling Securityholders,' 'Selling Securityholders' Offering,' 'Selling
Stockholders,' 'Plan of Operation' and 'Underwriting.'
The Common Stock and Warrants being offered through the Underwriters
are being sold by the Company and the Bridge Selling Stockholders on a 'firm
commitment' basis subject to prior sale, when, as and if delivered to and
accepted by the several Underwriters named herein and subject to approval of
certain legal matters by counsel to the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify the
Offering and to reject any order in whole or in part. It is expected that
delivery of the certificates representing the securities offered hereby will be
made against payment therefor at the offices of the Representative in New York
City on or about , 1996.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND/OR WARRANTS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
The Company is not currently a reporting Company. Following the Offering,
the Company will be subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance there
with, will file reports, proxy and information statements and other information
with the Securities and Exchange Commission (the 'Commission'). The Company
intends to furnish to its stockholders annual reports containing audited
financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
------------------------
SoftGuard'tm', DiskGuard'tm', NetGuard'tm' and Remote Activation Center'tm'
are trademarks of the Company. Certain other trademarks of the Company and other
companies, including Microsoft Windows, Windows 95, Windows NT, MS-DOS, Apple
Macintosh and NEC, are used in this Prospectus.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements and notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Unless otherwise indicated, all share, per share and
financial information set forth herein assumes the exercise of 374,548 warrants
into 374,548 shares of Common Stock upon completion of this Offering and no
exercise of the Over-allotment Option, the Warrants or the Representative's
Warrants. See 'Description of Securities -- Prior Financings.'
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in 'Risk
Factors.'
THE COMPANY
TTR Inc. ('TTR' or the 'Company') is primarily engaged in the design and
development, and intends to commence marketing of, a family of proprietary
software security products that are designed to prevent the unauthorized
reproduction and use of computer software programs. TTR's proposed core product,
SoftGuard, is designed to be used by software developers for inclusion in their
software packages sold to end-users. The current version of SoftGuard, although
out of the development stage and ready for commercialization, has not yet been
released. Since its inception, the Company has been engaged primarily in product
design and testing, and has not had any sales revenue to date. The Company's
primary objective is to make SoftGuard the market standard for software
protection.
Annual losses incurred by software developers due to software piracy was
estimated by the Business Software Alliance to exceed $15 billion worldwide in
1994. SoftGuard is intended to provide comprehensive protection against
unauthorized software reproduction. Unlike most currently available software
security systems which are dependent on hardware peripherals, SoftGuard does not
entail the use of any dongles (keys) or similar devices. It is comprised of a
protection diskette, which provides anti-copying protection while the software
resides on a distribution diskette, CD-ROM or other distribution media, and a
software-based solution that protects against unauthorized reproduction once the
software is installed onto the end-user's system. The protection diskette is
used by the end-user only at the initial installation of the protected software
or upon an authorized transfer of protected software to another computer.
Without the protection diskette, the protected software will not properly
install. The Company plans on selling the SoftGuard protection diskette to
software developers who will include the protection diskette with their software
program that is ultimately sold to the legitimate end-user. When included with
such software, the developer's software program would be further protected by
the SoftGuard software licensed from the Company. The Company believes that
SoftGuard will provide an effective, versatile and relatively inexpensive
comprehensive software protection solution.
For software distributed electronically over the Internet, the Company is
developing a system that is intended to insure that the payment for the
downloaded software has been received and that the software's use will be
restricted to one site per payment. The Company's proposed Remote Activation
Center will utilize the core technology incorporated in SoftGuard to provide
both payment confirmation and conventional software protection. Although
currently in a program design and program development phase, the Company expects
the product to begin beta testing in November 1996 with a targeted release date
by the first quarter of 1997.
For software that does not require installation on an end-user's hard drive
and is run directly from a CD-ROM, such as educational or entertainment
software, the Company is developing a technology designed to protect against the
unauthorized reproduction of the CD-ROM. The decreasing costs of CD-Recorders,
which can be used to faithfully reproduce unauthorized copies of the CD-ROM, and
the increased availability of other mass reproduction machines, have contributed
to the increase in CD-ROM piracy. Conventional protection technologies are
believed by the Company to be generally impractical and cost ineffective. The
Company's solution involves modifications to the laser optics
3
<PAGE>
<PAGE>
system of the CD-ROM mastering machine. This technology would prevent the
faithful reproduction of the CD-ROM itself, without reference to the data
contained on it. The Company expects to commercially release its initial
DiskGuard CD-ROM product by the first quarter of 1997.
TTR believes that the principal competitive advantages featured in its
proposed products will include the following:
A software application protected by SoftGuard will only be able to
be installed onto the end-user's system in the presence of an authentic
protection diskette containing the appropriate identification code. Once
installed onto the end-user's system, the protected software will run only
on that unit.
SoftGuard can be programmed by the software developer to permit a
limited number of installations of authorized copies of the protected
software including limited time period trial offers.
SoftGuard's avoidance of any hardware peripherals such as dongles or
keys is expected to save the end-user the inconvenience associated with
such hardware use.
Per-unit production costs associated with SoftGuard protection
diskettes will be significantly lower compared to dongle or key based
solutions.
Once the SoftGuard protected software program is installed, the
product safety features will be self-executing and entirely 'transparent'
to the end-user who will not be aware of their operation.
A software program sold over the Internet that utilizes the Remote
Activation Center would be protected against unauthorized copying and use
in a similar fashion to conventional software protected by SoftGuard.
CD-ROMs utilizing the DiskGuard CD-ROM product in their
manufacturing would be non-reproducible.
The Company intends to market its SoftGuard line of products to software
developers. The Company's strategy is to distribute its products to software
developers through independent distributors or direct marketing through the
establishment of regional based subsidiaries or affiliates. The Company intends
to market its proposed CD-ROM product directly to CD-ROM replicators.
The Company's objective is to be a leading provider of software security
products with its SoftGuard product line. Some key elements of the Company's
strategy include (i) expansion of existing software security markets; (ii)
penetration of leading geographic marketing areas; (iii) continued product
expansion and enhancement; (iv) pursue strategic acquisitions; and (v)
strengthen competitive advantages.
TTR was organized as a holding company in Delaware on July 14, 1994. The
Company currently conducts its business through its wholly-owned subsidiary, TTR
Technologies Ltd. ('TTR Israel'), a private company formed under the laws of the
State of Israel on December 5, 1994. The Company's current product design,
marketing, research and development operations are conducted at TTR Israel's
premises in Kfar Saba, Israel. As used herein, the term 'Company' includes the
operations of TTR and TTR Israel, unless the context otherwise requires.
The Company's executive offices are located at 2 Hanagar Street, Kfar Saba,
ISRAEL 44425. Its telephone number is 011-972-9-766-2393.
4
<PAGE>
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered by the Company......... 1,200,000 shares of Common Stock and Warrants to purchase 600,000
shares of Common Stock. Each Warrant entitles the holder to
purchase one share of Common Stock for $7.20 during the five-year
period commencing six months after the date of this Prospectus. The
Company may call the Warrants for redemption, at a price of $.25
per Warrant, at any time commencing six months from the date of
this Prospectus on not less than 30 days' prior written notice to
the warrantholders, provided that the closing bid price of the
Common Stock for the 20 consecutive trading days preceding the date
on which the notice of redemption is given has been at least 190%
(currently $13.68, subject to adjustment) of the then effective
exercise price of the Warrants. See 'Description of Securities.'
Securities Offered by the Bridge Selling
Stockholders............................ 75,000 shares of Common Stock. See 'Selling Stockholders.'
Securities Offered Concurrently by the
Selling Securityholders................. 1,417,021 shares of Common Stock; Warrants to purchase 1,000,000
shares of Common Stock and 1,000,000 shares of Common Stock
issuable upon exercise of these Warrants. See 'Selling
Securityholders' Offering.'
Common Stock outstanding prior to the
Offering................................ 2,424,548(1)(2)
Common Stock to be outstanding after the
Offering................................ 3,624,548(1)(2)
Warrants outstanding prior to the
Offering................................ 1,000,000
Warrants to be outstanding after the
Offering................................ 1,600,000
Use of Proceeds........................... The Company intends to apply the net proceeds from the Offering for
marketing, research and product development, the repayment of
indebtedness, the purchase of capital equipment; and working
capital and general corporate purposes. See 'Use of Proceeds.'
Risk Factors and Dilution................. Prospective investors should carefully consider the matters set forth
under the captions 'Risk Factors' and 'Dilution.' An investment in
the securities offered hereby involves a high degree of risk and
immediate and substantial dilution.
Proposed Nasdaq Symbols(3)................ Common Stock:
Warrants: W
</TABLE>
- ------------
(1) Does not include 450,000 shares of Common Stock reserved for issuance upon
exercise of stock options granted or which may be granted under the
Company's Employee Stock Option Plan (the '1996 Plan').
(2) Excludes 1,000,000 shares of Common Stock which have been deposited into
escrow by the holders thereof. The Escrow Shares are subject to cancellation
and will be contributed to the capital of the Company if the Company does
not attain certain earnings levels or the market price of the Common Stock
does not achieve certain levels. If such earnings or market price levels are
met, the Company will record a substantial non-cash charge to earnings, for
financial reporting purposes, as compensation expense relating to the value
of the Escrow Shares released to Company officers and employees. See 'Risk
Factors -- Charge to Income in the Event of Release of Escrow Shares,'
'Capitalization' and 'Principal Stockholders.'
(3) The Company has applied for the inclusion of the Common Stock, and Warrants
on the Nasdaq SmallCap Market. A Nasdaq listing does not imply that a liquid
and active market will develop or be sustained for the securities upon
completion of the Offering.
5
<PAGE>
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the
Financial Statements included elsewhere in this Prospectus and should be read in
conjunction with such Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
FROM INCEPTION SIX MONTHS ENDED
(JULY 14, 1994) YEAR ENDED JUNE 30,
TO DECEMBER 31, DECEMBER 31, ---------------------------
1994 1995 1995 1996
--------------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
Income Statement Data:
Revenue...................................... $ -- $ -- $ -- $
Total expenses............................... 36,441 765,867 299,288 433,128
Operating loss............................... (36,441) (765,867 ) (299,288) (433,128)
Net loss..................................... (42,085) (896,663 ) (326,781) (494,681)
--------------- ------------ ------------- ----------
--------------- ------------ ------------- ----------
Net loss per share(1)........................ $ (0.02) $ (0.37 ) $ (0.15) $ (0.19)
--------------- ------------ ------------- ----------
--------------- ------------ ------------- ----------
Weighted average shares outstanding.......... 2,778,533 2,399,793 2,217,080 2,641,034
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-----------------------------
DECEMBER 31, PRO FORMA AS
1995 ACTUAL ADJUSTED(2)
--------------- ------------ -------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiencies)............................. $ (616,839) $(1,208,651 ) $ 4,604,979
Total assets............................................... 403,204 765,142 5,973,406
Total liabilities.......................................... 1,274,427 1,751,911 1,251,911
Total stockholders' equity (deficit)....................... (871,223) (986,769 ) 4,721,495
</TABLE>
- ------------
(1) Earnings per share are presented for 1995 and the six months ended June 30,
1996 on a pro forma basis to reflect the exercise of 374,548 warrants as if
it occurred on January 1, 1995. See 'Financial Statements.'
(2) Gives pro forma effect to (i) the exercise of 374,548 warrants and (ii) the
consummation of this Offering and the application of the estimated net
proceeds thereof. See 'Use of Proceeds' and 'Capitalization.'
6
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RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk and should not be purchased by persons who cannot afford the loss of their
entire investment. Prospective investors should carefully consider the following
risk factors, as well as all other information set forth elsewhere in this
Prospectus.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
projected in the forward-looking statements discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in this section, as well as in the sections entitled 'Plan of
Operation' and 'Business.'
Development Stage Company; History of Operating Losses; Accumulated
Deficit; Working Capital Deficiency; Stockholders' Deficit; Uncertainty of
Future Profitability. The Company is a development stage company with a limited
history of operations, and has an accumulated deficit from inception in July
1994 through June 30, 1996, of approximately $1,433,000. As a development stage
company, the Company has a limited relevant operating history upon which an
evaluation of the Company's prospects can be made. The Company's prospects must
therefore be evaluated in light of the problems, expenses, delays and
complications associated with a new business. At June 30, 1996, the Company had
a working capital deficiency of approximately $1,208,000 and a stockholders'
deficit of approximately $987,000. Losses have resulted principally from costs
incurred in research and development of the SoftGuard technologies and from
general and administrative costs. The current version of SoftGuard, although out
of the development stage and ready for commercialization, has not yet been
released. Accordingly, the Company has not realized any operating revenues to
date. The Company expects to continue to incur operating losses for the
foreseeable future until such time, if ever, as the Company is able to achieve
sufficient levels of revenues from operations. There can be no assurance that
the Company will ever generate revenues or achieve profitability. See 'Plan of
Operation.'
Explanatory Paragraph in Independent Auditors' Report. The Company's
independent auditors have included an explanatory paragraph in their report on
the Company's financial statement stating that certain factors raise substantial
doubt about the Company's ability to continue as a going concern. The Company's
continuation as a going-concern is dependent upon its ability to obtain
additional financing, including from this Offering, to generate sufficient cash
flow to meet its obligations on a timely basis. As a result of the start-up
nature of the Company's business, additional operating losses can be expected in
the foreseeable future. There can be no assurance that the Company can be
operated profitably in the future. See 'Plan of Operation' and Consolidated
Financial Statements.
Future Capital Needs; Uncertainty of Additional Financing. The Company's
cash requirements may vary materially from those now planned depending on
numerous factors, including the status of the Company's marketing efforts, the
Company's business development activities, the results of future research and
development and competition. Notwithstanding, the Company believes that the net
proceeds of this Offering, together with its projected cash flow from
operations, if any, will be sufficient to finance its working and other capital
requirements for a period of approximately 12 months from the date of this
Prospectus. Thereafter, or sooner if conditions make it necessary, the Company
may need to raise additional funds through public or private financings,
including equity financings which may be dilutive to stockholders. Any future
equity financings within the next 36 months would be subject to the approval of
the Representative. There can be no assurance that the Company will be able to
raise additional funds if its capital resources are exhausted, or that funds
will be available on terms attractive to the Company or at all. If adequate
funds are not available, the Company may be required to reduce materially its
proposed operations. See 'Use of Proceeds,' 'Underwriting' and 'Plan of
Operation.'
Dependence of Single Product Line and Limited Market. The Company proposes
to initially market one line of products to a limited market of customers
desiring to protect their software products. The Company estimates that
worldwide sales of software protection products was approximately $120,000,000
in 1995. The Company believes that future sales growth will be dependent
primarily upon and expansion of the software protection products market as well
as the Company's ability to market its products. There can be no assurance that
the Company will successfully market its products or that the market for
software security products will grow. See 'Business -- Sales and Marketing.'
7
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Uncertainty of End-User Acceptance of SoftGuard Products. The Company's
SoftGuard product line is intended to be sold to software developers for
inclusion in the applications programs marketed and sold by them. However, the
Company is ultimately dependent upon the end-user's acceptance of SoftGuard.
Many software development houses have elected to not include software protection
with their software programs because end-users have encountered operational
difficulties with, or have indicated an unwillingness to use, such software
protection. While the Company believes that SoftGuard is intended to address and
solve many of the operational difficulties encountered by end-users in using
many of the commercially available software protection products, there can be no
assurance that software developers will elect to include the Company's proposed
products in their software products or that if such products are included, the
products will be accepted by the general market. There can be no assurance that
the Company will be able to market its software protection successfully or that
future products, if any, will be accepted in the marketplace. See
'Business -- SoftGuard Software Protection' and ' -- Sales and Marketing.'
New Products and Rapid Technological Change. The market for the Company's
proposed products is characterized by rapidly changing technology, evolving
industry standards and new product introductions. The Company's future success
will depend in part on its ability to enhance its planned products and to
introduce new products and technologies to meet changing customer requirements.
The Company is currently devoting significant resources toward the development
of enhancements to its planned software protection line of products. There can
be no assurance that the Company will successfully complete the development of
these products in a timely fashion or that the Company's current or future
products will satisfy the needs of the software security market. There can also
be no assurance that security related products or technologies developed by
others will not adversely affect the Company's competitive position or render
its products or technologies non-competitive or obsolete. Moreover, the Company
is committed to devote a substantial portion of its revenues to research and
development efforts. There can be no assurance that these efforts will be
successful. See 'Use Of Proceeds' and 'Business -- Research and Development' and
' -- Competition.'
Proposed Expansion. The Company intends to use a significant portion of the
net proceeds of this Offering to expand its operations through the establishment
of its sales and marketing efforts, the expansion of its research and
development activities, or through possible acquisitions. The Company believes
that the net proceeds of the Offering will be sufficient to enable the Company
to carry out its planned growth, although there can be no assurance it will be
able to do so.
The Company may also seek to expand its operations through potential
acquisitions. The Company may use a portion of the net proceeds from this
Offering to acquire all or a portion of existing companies in businesses which
the Company believes are compatible with its business, including, but not
limited to, competitors of the Company. Any decision to make an acquisition will
be based upon a variety of factors, including, among others, the purchase price
and other financial terms of the transaction, the business prospects and the
extent to which any acquisition would enhance the Company's prospects. To the
extent that the Company may, depending upon the opportunities available to it,
finance an acquisition with a combination of cash and equity securities, any
such issuance of equity securities could result in dilution to the interests of
the Company's stockholders. However, any future equity financings within the
next 36 months would be subject to the approval of the Representative.
Additionally, to the extent that the Company, or the acquisition or merger
candidate itself, issues debt securities in connection with an acquisition, the
Company may be subject to risks associated with incurring indebtedness,
including the risks of interest rate fluctuations and insufficiency of cash flow
to pay principal and interest. The Company is not currently engaged in
identifying any potential acquisition and has no plans, agreements,
understandings or arrangements for any acquisitions. There can be no assurance
that the Company will be able to successfully consummate any acquisition or
successfully integrate into its business any acquired business or portion
thereof.
The management of the anticipated growth in expenditures will require
expansion of the Company's management and financial controls, and could place a
significant strain on the Company's resources. None of the Company's current
officers have had experience in managing a public company or a company having
expenditures as large as the anticipated expenditures of the Company. While the
Company intends to hire additional appropriate personnel, there can be no
assurance that these or
8
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<PAGE>
other measures implemented by the Company will effectively increase the
Company's capabilities to manage such growth or to do so in a timely and cost
effective manner. See 'Use of Proceeds' and 'Business.'
Limited Marketing Capability. The Company has limited marketing
capabilities and resources. Achieving market penetration will require
significant efforts by the Company to create awareness of and demand for the
Company's products. Accordingly, the Company's ability to build its customer
base will be dependent on its marketing efforts, including its ability to
establish an effective internal sales organization, or establish strategic
marketing arrangements with other companies. The Company currently has no plan,
agreement, understanding or arrangement with any distributors, and no assurance
can be given that any will be entered into. The failure by the Company
successfully to develop its marketing capabilities, both internally and through
distributors, would have a material adverse effect on the Company's business.
Further, there can be no assurance that the development of such marketing
capabilities will lead to sales of the Company's products. See 'Use of Proceeds'
and 'Business -- Sales and Marketing.'
International Sales. The Company intends to initially market its products
primarily in North America and Israel with subsequent efforts in Europe and the
Far East. The Company will be subject to the risks inherent in international
business activities, including unexpected changes in regulatory requirements and
the burdens of complying with a wide variety of laws and regulations. Moreover,
if for any reason exchange or price controls or other restrictions on the
conversion of foreign currencies were imposed, the Company's business could be
materially adversely affected.
Operations in Israel. The Company's offices and production facilities are
located in the State of Israel and are directly affected by the economic,
military and political conditions in that country. For information with respect
to certain factors concerning the State of Israel, including risks related to
the political and economic situation, see 'Business -- Conditions in Israel.'
Uncertain Ability to Protect Patent-Pending Technology. The Company's
ability to compete effectively depends on its success in protecting its
proprietary technology, both in the United States and abroad. The Company has
filed for patent protection in the United States, Israel, Germany, France, Great
Britain, the Netherlands and Japan for the process by which it imprints the
protection diskette used in the proposed SoftGuard line of products and in the
United States for the technology underlying the proposed DiskGuard CD-ROM based
protection (the 'Patent Rights'). No assurance can be given that any patents
will be issued from the United States or other patent offices for the Patent
Rights, that the Company will receive any patents in the future based on its
continued development in the technology, or that the Company's patent protection
within and/or outside of the United States will be sufficient to deter others,
legally or otherwise, from developing or marketing competitive products
utilizing the SoftGuard technologies.
The Company believes that the protection afforded by the Patent Rights is
material to its future revenues and earnings. There can be no assurance that the
Patent Rights will be found to be valid or that the Patent Rights will be
enforceable to prevent others from developing and marketing competitive products
or methods. A successful challenge to the validity of the Patent Rights would
have a material adverse effect on the Company, and could jeopardize its ability
to engage in its contemplated business activities. An infringement action on
behalf of the Company may require the diversion of substantial funds from the
Company's operations and may require management to expend efforts that might
otherwise be devoted to the Company's operations. Furthermore, there can be no
assurance that the Company will be successful in enforcing the Patent Rights.
There can be no assurance that patent infringement claims in the United
States, Israel or in other countries will not be asserted against the Company by
a competitor or others, or if asserted, that the Company will be successful in
defending against such claims. In the event one of the Company's proposed
products is adjudged to infringe patents of others with the likely consequence
of a damage award, the Company may be enjoined from using and selling such
product or be required to obtain a royalty-bearing license, if available on
acceptable terms. Alternatively, in the event a license is not offered, the
Company might be required, if possible, to redesign those aspects of the product
held to infringe so as to avoid infringement. Any redesign efforts undertaken by
the Company might be expensive, could delay the introduction or the
re-introduction of the Company's products into certain
9
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<PAGE>
markets, or may be so significant as to be impractical. See
'Business -- Patents, Trademarks and Proprietary Information' and 'Risk
Factors -- Competition.'
Trademark Registration. The Company intends to promote the 'SoftGuard,'
'NetGuard,' 'Remote Activation Center' and 'DiskGuard' trademarks in connection
with its marketing activities. The Company pursues the registration of its
trademarks in the United States and (based upon anticipated use)
internationally, and has applied for the registration of certain of its
trademarks, including 'SoftGuard,' and intends to apply for others. There can be
no assurance that prior registrations and/or uses of one or more of such marks
(or a confusingly similar mark) does not exist in one or more of such countries,
in which case the Company might thereby be precluded from registering and/or
using such mark in such country. See 'Business -- Patents, Trademarks and
Proprietary Information.'
Competition. The software protection industry is extremely competitive. The
Company's primary competitors include companies with substantially greater
financial, technological, marketing, personnel and research and development
resources than those of the Company. There can be no assurance that the Company
will be able to compete successfully in this market. In particular, Rainbow
Technologies Inc. and Aladdin Knowledge Systems Ltd., each have an established
installed product base in the limited market that exists for software security
products. Further, there can be no assurance that existing software companies
will not enter the market in the future. Although the Company believes that its
products are distinguishable from those of its competitors on the basis of their
technological features and functionality at an attractive price/performance
ratio, there can be no assurance that the Company will be able to penetrate any
of its competitors' portion of the market. Many of the Company's competitors
have existing relationships with major software development houses in the United
States, some of which are dominant software producers worldwide, and those
existing relationships may impede the Company's ability to sell to those
customers and expand its market share. Furthermore, there can be no assurance
that the Company will be able to continue developing products with innovative
features and functions, or that developments by others of similar or more
effective products will not render the Company's products or technologies
noncompetitive or obsolete. Since the Company's proposed products will be new to
the market and sold in competition with the products of companies with greater
financial and other resources, there can be no assurance that a market for the
Company's products will develop. See 'Business -- Competition.'
Protection of Proprietary Technology and Information. The Company will also
rely on trade secrets, know-how and continuing technological advancement to
maintain its proposed competitive position. Although the Company has entered
into confidentiality and invention agreements with its employees and
consultants, no assurance can be given that such agreements will be honored or
that the Company will be able to effectively protect its rights to its
unpatented trade secrets and know-how. Moreover, no assurance can be given that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets and know-how. See 'Business -- Patents, Trademarks and Proprietary
Information.'
Manufacture of Production Machinery. The Company utilizes a specially
designed laser based machine (the 'Diskette Marking Machine') in mass-producing
the protection diskette used in its proposed SoftGuard products. The Diskette
Marking Machine was built by an independent third-party and specially made to
the Company's order. The Company currently has one fully-operating Diskette
Marking Machine, which it believes can meet its foreseeable needs. Although the
Company does not have a written contract with the manufacturer of its Diskette
Marking Machine, the Company believes, based upon the experience of Management
and the Company's working relationship with such manufacturer, that it will be
able to have additional Diskette Marking Machines produced on an as needed
basis. There can be no assurance that the Company will be able to purchase or
will not experience delays in shipment of future Diskette Marking Machines or
that it will have a sufficient number of such machines to produce protection
diskettes at full capacity.
The Company believes that it could arrange for the assembly of these
machines with alternate sources if required to do so, but that any alternate
arrangement could result in temporary disruptions of its design and
manufacturing operations. Most of the sources and components used in the
manufacture and assembly of the Diskette Marking Machine are obtainable from
local sources, except for the laser device that specially marks each protection
diskette. Although the Company believes that there are
10
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adequate alternative sources for such devices, there can be no assurance that
the usage of an alternative source for the laser device will not render the
Diskette Marking Machine cost ineffective or that the Company will not
experience delays in its operations.
Dependence on Key Personnel. The success of the Company will be largely
dependent upon the personal efforts of Marc D. Tokayer, Dr. Baruch Sollish,
Ph.D. and Arik Shavit. The loss of the services of any of such persons could
have a material adverse effect on the Company's business and prospects. Although
the Company has entered into employment agreements with each of the
aforementioned individuals, there can be no assurance that the Company will be
able to retain their services. The Company is seeking to obtain prior to closing
of this Offering key-man life insurance on Mr. Tokayer and Dr. Sollish with
benefits of $1,000,000 payable to the Company in the event of each person's
death. The benefits receivable under these proposed policies might not be
sufficient to compensate the Company for the loss of Mr. Tokayer's or Dr.
Sollish's services should a suitable replacement not be employed. The Company is
also dependent to a substantial degree on its other technical and research
staff. Further, the success of the Company will also be dependent upon its
ability to hire and retain additional qualified management, marketing, and
financial personnel. The Company will compete with other companies with greater
financial and other resources for other such personnel. Although the Company has
not experienced to date any difficulty in attracting qualified personnel, there
can be no assurance that the Company will be able to retain its present
personnel or acquire additional qualified personnel as and when needed. See
'Management -- Employment and Consulting Agreements.'
Control by Management and Current Stockholders. Upon consummation of this
Offering, Management of the Company and current stockholders will own 2,349,548
shares of Common Stock, or approximately 64.8% (2,169,548, or 56.9%, if the
Over-allotment Option is exercised in full) of the then issued and outstanding
shares of Common Stock. Marc D. Tokayer, Chairman of the Board, the Tokayer
Family Trust, Baruch Sollish, Director and four other stockholders with an
aggregate of 1,137,430 shares of Common Stock (31.4% after the Offering) intend
to enter into a voting arrangement whereby they will agree to vote their
respective shares to elect directors and in support of positions favored by a
majority of the shares held among them. Accordingly, the Company's present
Management may be able to effectively control the Company, elect all of the
Company's directors, increase the authorized capital, dissolve, merge or sell
all of the assets of the Company, and generally direct the affairs of the
Company. See 'Principal Stockholders.'
Broad Discretion in Application of Proceeds. While the Company presently
intends to use the net proceeds of this Offering as set forth herein, Management
has broad discretion in the application of the net proceeds allocated to working
capital and general corporate purposes, including the proceeds, if any, which
will be applied to such uses if the Underwriters exercise their Over-allotment
Option. As a result of the foregoing, the success of the Company will be
substantially dependent upon the discretion and judgment of Management. See 'Use
of Proceeds.'
Immediate Substantial Dilution. The Company's present stockholders acquired
their shares of the Company's Common Stock at costs substantially below the
anticipated offering price of the Common Stock to be sold in this Offering.
Therefore, investors purchasing Common Stock in this Offering will incur an
immediate and substantial dilution in net tangible book value per share of
$4.99. Accordingly, investors will bear a disproportionate part of the financial
risk associated with the Company's business while effective control will remain
with existing stockholders. See 'Dilution.'
Charge to Earnings in the Event of Release of Escrow Shares. The Company
has outstanding 1,000,000 Escrow Shares which will be released from escrow if
the Company attains certain earnings levels over the next one to three years or
if the Common Stock trades at certain levels over the next three years. The
position of the Securities and Exchange Commission (the 'Commission') with
respect to such escrow arrangements provides that in the event any shares are
released from escrow to the stockholders of the Company who are officers,
directors, employees or consultants of the Company, a compensation expense will
be recorded for financial reporting purposes. Accordingly, the Company will, in
the event of the release of the Escrow Shares, recognize during the period in
which the earnings thresholds are met or such stock levels achieved, a
substantial noncash charge to earnings equal to the fair value of such shares on
the date of their release, which would have the effect of significantly
increasing the Company's loss or reducing or eliminating earnings, if any, at
such time. The recognition
11
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of such compensation expense may have a depressive effect on the market price of
the Company's securities. See 'Plan of Operation,' 'Principal Stockholders' and
'Description of Securities.' Notwithstanding the foregoing discussion, there can
be no assurance that the Escrow Shares will be released from escrow.
No Dividends. To date, the Company has not paid any cash dividends. After
the consummation of this Offering, the Company does not intend, for the
foreseeable future, to declare or pay any dividends and intends to retain
earnings, if any, for the future operation and expansion of the Company's
business. The declaration and payment of any cash dividends in the future will
be determined by the Board of Directors of the Company in light of conditions
and circumstances then existing, including the Company's earnings and its
financial conditions and requirements. See 'Dividends.'
Absence of Prior Public Market; Determination of Offering Price. Prior to
this Offering, there has been no public trading market for the Common Stock or
the Warrants, and there can be no assurance that an active public market for the
Common Stock or the Warrants will develop or continue following the Offering.
Although the Company has applied for approval for inclusion of the Common Stock
and the Warrants on the Nasdaq SmallCap Market, there can be no assurance that
an active trading market for the securities will develop, or if a trading market
does develop, that it will continue. However, until such time, if ever, that an
active trading market develops, investors will, in all likelihood, be unable
readily to liquidate their investment in the Company's securities following this
Offering.
The initial public offering price of the Common Stock and the Warrants has
been determined by negotiation between the Company and the Representative of the
Underwriters and may not necessarily bear any relationship to the Company's
assets, book value, revenues or other established criteria of value, and should
not be considered indicative of the price at which the Common Stock or the
Warrants will trade after completion of the Offering. There can be no assurance
that the market price of the Common Stock or the Warrants will not decline below
their initial public offering price. See 'Underwriting.'
Possible Volatility of Securities Prices. Trading volume and prices for the
Common Stock or the Warrants could be subject to wide fluctuations in response
to quarterly variations in operations, financial results, announcements with
respect to sales and earnings, technological innovations, new product
developments, the sale or attempted sale of a large amount of securities in the
public market, and other events or factors which cannot be foreseen or predicted
by the Company. In addition, various factors affecting the computer industry
generally may have a significant impact on the market price of the Common Stock
or the Warrants, as well as price and volume volatility affecting small and
emerging growth companies, in general, and not necessarily related to the
operating performance of such companies.
Shares Eligible for Future Sale. Future sales of shares of Common Stock by
existing stockholders pursuant to Rule 144 ('Rule 144') promulgated under the
Securities Act of 1933, as amended (the 'Securities Act'), or otherwise, could
have an adverse effect on the price of the shares of Common Stock. Upon
completion of this Offering, the Company will have 3,624,548 shares of Common
Stock outstanding (excluding 1,000,000 Escrow Shares). In addition, the Company
has reserved for issuance 217,473 shares upon exercise of warrants at $.01 per
share, 5,000 shares upon exercise of options granted under the 1996 Plan,
445,000 shares upon exercise of options to be granted under the 1996 Plan, and
1,780,000 shares for issuance upon exercise of the Warrants (1,870,000 shares if
the Underwriters' Over-allotment Option is exercised in full), including up to
180,000 shares for issuance upon exercise of the securities contained in the
Representative's Warrants.
The 1,275,000 shares of Common Stock offered hereby (1,466,250 if the
Underwriters' Over-allotment Option is exercised in full) and the 2,417,021
shares of Common Stock (including 180,000 shares subject to the Over-allotment
Option and 1,000,000 shares issuable upon exercise of 1,000,000 Warrants) being
offered by the Selling Securityholders (all of which shares are subject to
lock-up agreements described below) will be freely transferable without
restriction or further registration under the Securities Act except for any
shares purchased by an 'affiliate' of the Company within the meaning of Rule
144. The remaining 1,150,000 outstanding shares of Common Stock will be
'restricted securities,' as that term is defined in Rule 144, and may only be
sold pursuant to a registration statement under the Securities Act or an
applicable exemption from registration thereunder, including
12
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exemptions provided by Rule 144. Approximately 653,547 of such shares will be
eligible for resale under Rule 144 commencing 90 days following the completion
of this Offering; however, all of such shares are subject to the lock-up
agreements described hereafter. The remaining shares will become eligible for
resale under Rule 144 between July 1997 through February 1998. In addition, the
Company has granted to some securityholders certain registration rights. No
prediction can be made as to the effect that future sales of Common Stock, or
the availability of shares of Common Stock for future sales, will have on the
market price of the Common Stock and/or Warrants prevailing from time to time.
Sales of substantial amounts of Common Stock, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Common
Stock and/or Warrants and could impair the Company's ability to raise capital
through the future sale of its equity securities. The Company, its officers,
directors and stockholders beneficially owning 5% or more of the Common Stock,
all Selling Securityholders (except for the Bridge Selling Stockholders who have
agreed to lock-up their shares, excluding 75,000 shares being underwritten
hereunder, for a period of 18 months) and certain other stockholders (holding an
aggregate of approximately 2,184,548 shares, excluding up to 180,000 shares
included in the Over-allotment Option) have agreed, for a period of 24 months
from the date of this Prospectus, not to sell or otherwise dispose of any
securities of the Company, without the prior written consent of the
Representative. See 'Principal Stockholders,' 'Certain Transactions,' 'Shares
Eligible for Future Sale' and 'Underwriting.'
Effect of Outstanding Warrants and Options. The exercise of the Warrants,
the Representative's Warrants (and the Warrants included therein), other
warrants and stock options granted or to be granted may adversely affect
prevailing market prices for the Common Stock and/or Warrants and may dilute the
interests of existing stockholders. Moreover, the terms upon which the Company
will be able to obtain additional equity capital may be adversely affected since
the holders of such outstanding securities can be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain any needed
capital on terms more favorable to the Company than those provided in the
Warrants, the Representative's Warrants or the options. The Company has granted
certain demand and 'piggy-back' registration rights to the Representative with
respect to the securities issuable upon exercise of the Representative's
Warrants. See 'Description of Securities' and 'Underwriting.'
Current Prospectus and State Blue Sky Registration Required in Connection
with Exercise of Warrants. The Company will be able to issue Common Stock upon
exercise of Warrants only if there is a current prospectus under an effective
registration statement filed with the Commission relating to the Common Stock
issuable upon exercise of the Warrants, and only if such Common Stock is
qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdictions in which the various holders of Warrants
reside. The Company has undertaken and intends to file and keep current during
the period in which the Warrants are exercisable a prospectus which will permit
the purchase and sale of the Common Stock underlying the Warrants, but there can
be no assurance that it will be able to do so. Pursuant to Section 10(a)(3) of
the Securities Act, this Prospectus will no longer be deemed current nine months
from the date of this Prospectus. The Company intends to amend the Registration
Statement of which this Prospectus is a part, prior to when this Prospectus
becomes 'stale.' If the Company is unable to have a post-effective amendment
effective when this Prospectus becomes stale, the Company will disseminate
information to warrantholders and the public informing them that the Warrants
cannot be exercised.
In addition, although the Company intends to qualify the Common Stock
underlying the Warrants for sale in the states in which the Common Stock and
Warrants are offered, no assurance can be given that it will be able to do so.
The Warrants may be deprived of any value and the market for the Warrants may be
limited if there is not a current prospectus under an effective registration
statement covering the Common Stock issuable upon exercise of the Warrants or if
such Common Stock is not qualified or exempt from qualification in the
jurisdictions in which the holders of the Warrants reside. See 'Description of
Securities -- Warrants.'
Potential Adverse Effect of Redemption of Warrants. The Company may call
the Warrants for redemption at any time commencing six months from the date of
this Prospectus on not less than 30 days' prior written notice, at a price of
$.25 per Warrant, provided that the closing bid price of the Common Stock for
the twenty (20) consecutive trading days preceding the date on which the notice
of
13
<PAGE>
<PAGE>
redemption is given has been at least 190% (currently $13.68, subject to
adjustment) of the then effective exercise price of the Warrants. The
warrantholders may exercise their Warrants until the close of business on the
date fixed for redemption. Redemption of the Warrants could force the holders to
exercise the Warrants and pay the exercise price at a time when it may be
disadvantageous for the holders to do so; to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants, or to
accept the redemption price, which may be substantially less than the market
value of the Warrants at the time of redemption. See 'Description of
Securities -- Warrants.'
Antitakeover Provisions of Delaware Law. Certain provisions of Delaware law
may discourage third party attempts to acquire control of the Company. See
'Description of Securities.'
Service of Process and Enforcement of Judgments. Service of process upon
directors and officers of the Company, all of whom reside outside the United
States, may be difficult to obtain within the United States. Furthermore, since
substantially all of the Company's assets are located outside the United States,
any judgment obtained in the United States against the Company may not be
collectible within the United States.
The Company has been informed by its Israeli legal counsel that there is
doubt as to the enforceability of civil liabilities under the Securities Act and
the Securities Exchange Act of 1934, as amended, in original actions instituted
in Israel. However, subject to certain limitations, Israeli courts may enforce
United States final executory judgments for liquidated amounts in civil matters,
obtained after a trial before a court of competent jurisdiction (according to
the rules of private international law currently prevailing in Israel) which
enforce similar Israeli judgments, provided that (i) due service of process has
been effected, (ii) such judgments or the enforcement thereof are not contrary
to the law, public policy, security or sovereignty of the State of Israel, (iii)
such judgments were not obtained by fraud and do not conflict with any other
valid judgments in the same matter between the same parties and (iv) an action
between the same parties in the same matter is not pending in any Israeli court
at the time the lawsuit is instituted in the foreign court. All of the Company's
executive officers and Directors have irrevocably appointed Samuel F.
Ottensoser, Esq. of Baer Marks & Upham as their agent to receive service of
process in any action against them in any Federal or state court of the State of
New York.
Foreign judgments enforced by Israeli courts generally will be payable in
Israeli currency, and a specific permit of the Controller of Foreign Exchange
will be required to convert the Israeli currency into dollars and to transfer
such dollars out of Israel. Judgment creditors must bear the risk that they will
be unable to convert their award into foreign currency that can be transferred
out of Israel and the risk of unfavorable exchange rates.
Relationship of Representative to Trading. The Representative may act in a
market making capacity with respect to the purchase or sale of the Common Stock
and the Warrants in the over-the-counter market where each will trade. The
Representative also has the right to act as the Company's exclusive agent in
connection with any future solicitation of warrantholders to exercise their
Warrants. Unless granted an exemption by the Commission from Rule 10b-6 under
the Exchange Act, the Representative will be prohibited from engaging in any
market-making activities or solicited brokerage activities with regard to the
Company's securities during the periods prescribed by exemption (xi) to Rule
10b-6 before the solicitation of the exercise of any Warrant (and/or the
exercise of the Representative's Warrants and the Warrants contained therein)
until the later of the termination of such solicitation activity or the
termination by waiver or otherwise of any right the Representative may have to
receive a fee for the exercise of the Warrants following such solicitation. As a
result, the Representative and soliciting broker/dealers may be unable to
continue to make a market for the Company's securities during certain periods
while the Warrants are exercisable. Such a limitation, while in effect, could
impair the liquidity and market price of the Company's securities. The
Representative intends to make a market in the Company's securities following
the Offering, although it has no obligation to continue to do so for any
pre-determined period of time. See 'Underwriting.'
Penny Stock Regulation. Broker-dealer practices in connection with
transactions in 'penny stocks' are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current prices and
14
<PAGE>
<PAGE>
volume information with respect to transactions in such securities are provided
by the exchange or system). The penny stock rules require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document that provides information about
penny stocks and the risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
generally require that prior to a transaction in a penny stock the broker-dealer
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. If the Company's securities become subject to
the penny stock rules, investors in this Offering may find it more difficult to
sell their securities.
Possible Conflicts of Directors. In lieu of the Representative's right to
designate two non-voting advisors to the Company's Board of Directors at any
time within the five years commencing in fiscal 1996, the Representative has the
right during such five-year period, in its sole discretion, to designate two
persons for election as directors of the Company. If and when the Representative
designates such persons to serve as directors of the Company, those individuals
may be associated persons of the Representative who may have conflicting
obligations to the Company and the Representative when serving on the Board of
Directors. See 'Underwriting.'
Lack of Experience of the Representative. First Metropolitan Securities,
Inc. commenced operations in November 1995, and has not acted as an underwriter
of a public offering of securities. First Metropolitan's lack of experience may
have an adverse impact on the development of a trading market for the Company's
securities following this Offering. See 'Underwriting.'
15
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered
hereby (after deducting underwriting discounts and commissions and other
expenses of this Offering), are estimated to be approximately $5,769,500
($5,850,725 if the Over-allotment Option is exercised in full). The Company
expects to use the net proceeds in approximately the manner set forth in the
following table:
<TABLE>
<CAPTION>
APPROXIMATE
APPLICATION OF APPROXIMATE PERCENTAGE OF
PROCEEDS DOLLAR AMOUNT NET PROCEEDS
- ------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Marketing(1)............................................................ $ 1,307,500 22.6%
Additional Facilities(2)................................................ 500,000 8.9
Research and Product Development(3)..................................... 1,307,500 22.6
Repayment of Indebtedness(4)............................................ 1,800,000 31.1
Capital Equipment(5).................................................... 200,000 3.5
Working Capital and General Corporate Purposes(6)....................... 654,500 11.3
------------- ------
Total.............................................................. $ 5,769,500 100.0%
------------- ------
------------- ------
</TABLE>
- ------------
(1) This allocation includes approximately $700,000 of expenditures for print
media such as advertising and sales literature, and $200,000 for trade show
participation. The Company plans to hire one sales manager, at approximately
$65,000 per annum, two internal sales people, each at approximately $20,000
per annum (excluding sales commissions), and three customer service people,
each at approximately $20,000 per annum, following the completion of this
Offering. See 'Business -- Sales and Marketing.'
(2) The Company intends to use this allocation of net proceeds to open a sales
office in the United States over the next nine months at an estimated
initial cost of $500,000 depending on the amount of equipment, inventory and
personnel, exclusive of working capital needs. It is anticipated that the
office would be staffed with three to eight salespersons, who will be
responsible for managing and servicing the Company's business in the
respective areas, as well as developing new business. The Company estimates
the first year's salaries of these persons to be paid from this allocation
of proceeds of this Offering to be approximately $36,000 (exclusive of sales
commissions) per person per annum based on the qualifications and position
of each employee. See 'Business -- Sales and Marketing.'
(3) Anticipated expenditures include hardware and software development,
electronics engineering and prototype and tooling costs, and the hiring of
additional personnel. The Company intends to use this allocation of net
proceeds to expand its research and development department into three
groups: a research group, a development group and a quality assurance group.
The Company anticipates hiring between 15 and 18 additional employees to
staff these groups. The Company estimates the first year's salaries of these
persons to be paid from this allocation of proceeds of this Offering to be
approximately $19,000 to $38,000 per person per annum based on the
qualifications and position of each employee. See 'Business -- Research and
Development,' ' -- Production and Supplies' and 'Plan of Operation.'
(4) Represents the repayment of the outstanding Bridge Notes in the aggregate
principal amount of $500,000 plus estimated accrued interest thereon at the
rate of 10% per annum to the date of consummation of this Offering. The
Company used the net proceeds from the sale of such notes to pay for
research and product development, operating expenses, and various expenses
related to this Offering. Also represents the repayment of approximately
$1,041,000 from the 1995 Debt Financing plus estimated accrued interest
thereon at the rate of 10% per annum. See 'Description of
Securities -- Prior Financings,' 'Plan of Operation' and Note 8 of Notes to
Financial Statements.
(5) In connection with the Company's proposed expansion and the hiring of up to
20 additional employees, the Company intends to purchase for each new
employee a computer work station at an estimated cost of $7,500 per station.
In addition, the Company anticipates upgrading its local server
(footnotes continued on next page)
16
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<PAGE>
(footnotes continued from previous page)
network to accommodate the increased number of users at an approximate cost
of $60,000. See 'Plan of Operation.'
(6) Includes general and administrative expenses, including, but not limited to,
the payment of rent for the Company's offices and other office overhead,
executive salaries, and anticipated professional fees, as well as potential
acquisitions as described below.
------------------------
If the Underwriters exercise the Over-allotment Option in full, the Company
will realize additional net proceeds of approximately $81,225, which will be
added to the Company's working capital.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations, that the net proceeds of this Offering, together
with its projected cash flow from operations, if any, will be sufficient to
satisfy the Company's contemplated cash requirements for a minimum of 12 months
following the closing date of this Offering. In the event that the Company's
plans change or its assumptions change or prove to be inaccurate or if the net
proceeds of this Offering or the Company's projected cash flow prove to be
insufficient to fund operations (due to unanticipated expenses, manufacturing
problems, marketing difficulties or otherwise), the Company may find it
necessary or advisable to reallocate some of the proceeds within the
above-described categories, or to use portions of the net proceeds for other
purposes or may be required to seek additional financing or curtail its
operations. The Company has no current arrangements with respect to, or sources
of, additional financing and it is not anticipated that existing stockholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that any such additional financing will be available to the
Company on commercially reasonable terms, or at all. See 'Risk Factors -- Future
Capital Needs; Uncertainty of Additional Financing' and 'Plan of Operation.'
The Company may use all or a portion of the $654,500, or 11.3%, of the net
proceeds from the Offering allocated to working capital, to acquire all or a
portion of existing companies in businesses which the Company believes are
compatible with its business including, but not limited to, competitors of the
Company. Any decision to make an acquisition will be based upon a variety of
factors, including, among others, the purchase price and other financial terms
of the transaction, the business prospects and competitive position of and the
nature of any formulations, designs or products and the extent to which any
acquisition would enhance the Company's prospects. To the extent that the
Company may, depending upon the opportunities available to it, finance an
acquisition with a combination of cash and equity securities, any such issuance
of equity securities could result in dilution to the interests of the Company's
stockholders. However, any future equity financings within the next 36 months
would be subject to the approval of the Representative. Additionally, to the
extent that the Company issues debt securities in connection with an
acquisition, the Company may be subject to risks associated with incurring
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest. The Company is not
currently engaged in identifying any potential acquisition and has no plans,
agreements, understandings or arrangements for any acquisitions. There can be no
assurance that the Company will be able to successfully consummate any
acquisition or successfully integrate into its business any acquired product or
business.
Pending utilization of the net proceeds of the Offering, the Company may
make temporary investments, in among other things, bank certificates of deposit,
interest-bearing investments, prime commercial paper, United States government
obligations, or money-market funds.
DIVIDEND POLICY
To date, the Company has not paid any cash dividends on its Common Stock.
The payment of future cash dividends, if any, is within the discretion of the
Board of Directors and will depend upon the Company's earnings, if any, capital
requirements and financial condition and other relevant factors. The Board does
not intend to declare any cash or other dividends in the foreseeable future,
rather it intends to retain future earnings, if any, to provide for the
operation and expansion of the Company's business. See 'Plan of Operation.'
17
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<PAGE>
DILUTION
At June 30, 1996, the negative net tangible book value of the Company was
$(1,127,254), or $(.27) per share of Common Stock based on 3,050,000 shares of
Common Stock issued and outstanding. After giving retroactive effect to the
exercise of 374,548 warrants into 374,548 shares of Common Stock upon the
consummation of this Offering and the receipt of an aggregate of $3,745.48 from
all of such exercises, the pro forma negative net tangible book value of the
Company was $(1,123,509) or $(.33) per share based on 3,424,548 shares issued
and outstanding. See 'Description of Securities -- Prior Financings.' After
giving effect to the sale of 1,200,000 shares of Common Stock and 600,000
Warrants offered by the Company hereby (less underwriting discounts and
estimated expenses of the Offering and the application of the estimated net
proceeds therefrom), the pro forma as adjusted net tangible book value of the
Company at June 30, 1996 would have been $4,686,376, or $1.01 per share, based
on 4,624,548 shares representing an immediate increase in net tangible book
value of $1.34 per share to existing stockholders and an immediate dilution of
$4.99 per share (83%) to the purchasers of Common Stock in the Offering.
The difference between the public offering price per share of Common Stock
and the net tangible book value per share of Common Stock after the Offering
constitutes the dilution per share of Common Stock to investors in the Offering.
Net tangible book value per share of Common Stock on any given date is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) on such date by the number of
outstanding shares of Common Stock.
The following table illustrates the dilution to the purchasers of Common
Stock in the Offering on a per-share basis:
<TABLE>
<S> <C> <C>
Offering price............................................................... $6.00
Pro forma net tangible book value before the Offering........................ $(.33)
-----
Increase attributable to new investors....................................... 1.34
-----
-----
Pro forma as adjusted net tangible book value after the Offering............. 1.01
-----
-----
Dilution to new investors.................................................... $4.99
-----
-----
</TABLE>
The following table summarizes as of June 30, 1996, the total consideration
paid and the average price per share of Common Stock paid by existing
stockholders and by purchasers of Common Stock in the Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ------------------------- PRICE PER
AMOUNT PERCENTAGE AMOUNT(1) PERCENTAGE SHARE
--------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders....................... 3,424,548(2) 74.1% $ 412,151 5.4% $ .12
---------
New Investors............................... 1,200,000 25.9 7,200,000 94.6 $6.00
--------- ---------- ---------- ---------- ---------
---------
Total.................................. 4,624,548 100.0% $7,612,151 100.0%
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>
- ------------
(1) Prior to deduction of costs of issuances.
(2) Includes 1,000,000 Escrow Shares. See 'Principal Stockholders -- Escrow
Shares.
18
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (including the 1,000,000 Escrow Shares), and as adjusted to reflect the
exercise of 374,548 warrants and the receipt of $3,745.48 therefrom, the
issuance and sale of the shares of Common Stock and the Warrants offered hereby
and the application of the estimated net proceeds therefrom. This table should
be read in conjunction with the consolidated financial statements and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- -----------
(UNAUDITED)
<S> <C> <C>
Total liabilities.......................................................... $ 1,751,911 $1,251,911
----------- -----------
Stockholders' equity (deficit)
Common Stock, $.001 par value; 20,000,000 shares authorized; 3,050,000
shares issued and outstanding; 4,624,548, pro forma as adjusted..... 3,050 4,625
Additional paid-in capital............................................ 405,356 6,177,026
Cumulative translation adjustment..................................... 38,254 38,254
Accumulated deficit................................................... (1,433,429) (1,498,410 )
----------- -----------
Total stockholders' equity (deficit)............................. (986,769) 4,721,495
----------- -----------
Total capitalization........................................ $ 765,142 5,973,406
----------- -----------
----------- -----------
</TABLE>
PLAN OF OPERATION
To date, the Company has had a limited operating history, is in
development-stage and has not realized any operating revenues. The current
version of SoftGuard, although out of the development stage and ready for
commercialization, has not yet been released. Since inception, the Company's
activities have been principally limited to organizational and initial
capitalization activities, designing and developing the technology underlying
its proposed software protection product lines and recruitment of executive
personnel. See 'Business.'
The current version of SoftGuard is intended to be compatible for use on
Windows 3.x and MS-DOS based systems. The Company is actively engaged in the
development of expanding its SoftGuard product line for multi-platform
versatility and compatibility with other operating systems and networks. The
Company anticipates introducing versions of SoftGuard for use with Windows 95
and the TTR Remote Activation Center for software being distributed through the
Internet (electronic distribution), by the first quarter of 1997, although no
assurance can be given. A version for Windows NT is in the system design stage,
and versions for NEC based operation systems and networks are being
investigated. The Company is also actively engaged in developing DiskGuard for
CD-ROM copy protection, and anticipates releasing the initial version by the
first quarter of 1997. The Company is exploring other compatible or
complementary product offerings. There can be no assurance that the Company will
successfully develop or ultimately commercialize any of these proposed products.
See 'Business.'
The Company anticipates undertaking marketing efforts in North America,
Israel, Europe and the Far East to increase awareness of the Company's products.
In this respect, the Company will be exploring the possibility of establishing
strategic relationships with appropriate significant software distributors.
Further, it is anticipated that TTR Israel's new Chief Executive Officer, who
assumed his duties in September 1996, will devote a significant portion of his
time in developing appropriate marketing strategies. In addition, the Company is
actively seeking an independent marketing professional with experience in
introducing new hi-tech products to market. The Company would utilize the
marketing professional's services to explore the possibilities of establishing
strategic relationships with well-known software developers and distributors.
See 'Management' and 'Business -- Sales and Marketing.'
The Company anticipates that the proceeds of this Offering will be
sufficient to satisfy the Company's contemplated cash requirements for the next
12 months following the consummation of the Offering, based upon the Company's
present plans and certain assumptions relating to general economic and industry
conditions, market factors, and the Company's future revenues and expenditures.
If any of
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<PAGE>
these factors change, the Company may be required to raise additional funds
during the next 12 months. The Company may, in any event, seek additional
financing following the completion of this Offering, even though the Company has
no present intention, agreement, understanding or commitment with respect to any
such financing.
As of June 30, 1996, the Company had an aggregate of approximately $31,300
in bank loans of which principal payments are due in various installments
through 1998. These loans bear interest at rates of prime plus 2.4%-3% per annum
and are secured by substantially all of the assets of TTR Israel. The Company
does not currently have any alternative sources of credit or capital financing.
At June 30, 1996, the Company had a working capital deficit of
approximately $1,208,000. Since inception, the Company has relied for all of its
funding on private sales of its debt and equity securities. See 'Description of
Securities -- Prior Financings' for a description of these sales.
The Company's product development is centralized out of TTR Israel's
facilities in Israel. The Company does not have any commitments or plans to
undertake significant capital expenditures in plant or equipment, other than the
purchase of approximately $140,000 of computer equipment. See 'Use of Proceeds.'
The Company requires the net proceeds of this Offering to continue its
product development efforts and to commence full-scale marketing of its version
of SoftGuard available for commercial release. To date, the Company has expended
approximately $423,000 on its research and development activities, and plans to
spend approximately $1,307,500 of the net proceeds of the Offering to continue
such activities. Over the next 12 months, the Company plans to spend
approximately $1,307,500 of the Offering proceeds on marketing related
activities. See 'Use of Proceeds' and 'Business -- Research and Development' and
' -- Sales and Marketing.'
To date, the Company has not generated any revenues from operations. For
the period from its inception to June 30, 1996, the Company has incurred net
losses aggregating approximately $1,433,000, reflecting principally research and
development expenses associated with SoftGuard and general and administrative
expenses. Accordingly, the Company's independent auditors included an
explanatory paragraph in their report dated July 1, 1996, indicating that there
is substantial doubt regarding the Company's ability to continue as a going
concern. The Company's continuation as a going-concern is dependent upon its
ability to obtain additional financing, including from this Offering, to
generate sufficient cash flow to meet its obligations on a timely basis. As a
development stage company, the Company has a limited relevant operating history
upon which an evaluation of the Company's prospects can be made. The Company's
prospects must therefore be evaluated in light of the problems, expenses, delays
and complications associated with a new business. As a result of the start-up
nature of the Company's business, additional operating losses can be expected in
the foreseeable future. There can be no assurance that the Company can be
operated profitably in the future. See 'Risk Factors -- Development Stage
Company; History of Operating Losses; Accumulated Deficit; Working Capital
Deficiency; Uncertainty of Future Profitability,' 'Risk Factors -- Explanatory
Paragraph in Independent Auditors' Report' and the Financial Statements.
The Company currently has ten employees, and depending on its level of
business activity, expect to hire additional employees in the next 12 months,
including marketing and sales, research and development, customer support,
production and administrative personnel, and has allocated approximately
$780,000 of the proceeds of this Offering for the recruitment and related
payroll expenses for approximately 20 additional employees over the next
12-month period. See 'Risk Factors -- Proposed Expansion' and 'Use of Proceeds.'
The Company expects that any release of the Escrow Shares to officers,
directors, employees and consultants of the Company will be deemed compensatory,
and accordingly, will result in a substantial non-cash charge to reportable
earnings equal to the fair market value of such shares on the date of release.
Such charge could substantially increase the Company's loss or reduce or
eliminate the Company's net income, if any, for financial reporting purposes for
the period(s) during which such shares are, or become probable of being,
released from escrow. Although the amount of compensation expense recognized by
the Company will not affect the Company's total stockholders' equity, it may
have a depressive effect on the market price of the Company's securities. See
'Risk Factors -- Charge to Earnings in the Event of Release of Escrow Shares.'
20
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<PAGE>
BUSINESS
The Company is primarily engaged in the design and development, and intends
to commence marketing of, a family of proprietary software security products
that are designed to prevent the unauthorized reproduction and use of computer
software programs. TTR's proposed core product, SoftGuard, is designed to be
used by software developers for inclusion in their software packages sold to
end-users. The current version of SoftGuard, although out of the development
stage and ready for commercialization, has not yet been released. Since its
inception, the Company has been engaged primarily in product design and testing,
and has not had any sales revenue to date. The Company's primary objective is to
make SoftGuard the market standard for software protection.
INDUSTRY BACKGROUND
Losses related to the unauthorized use of software present an increasing
concern for software developers and publishers. The Business Software Alliance
estimated that software-piracy related losses exceeded $15 billion worldwide in
1994. In the United States, total losses from software piracy exceeded $3
billion in 1994. Illegal copies of widely-recognized software programs can
frequently be purchased in certain parts of Eastern Europe and the Far East at
retail prices that are a fraction of those prevailing in the United States and
Europe.
Additionally, the increasing use of CD-ROMs poses new dangers. Unlike
standard distribution diskettes, CD-ROMs enable the processing, storing and
distribution of vast amounts of information. Increasingly, the data contained on
the CD-ROM is of a purely informative or entertainment nature and is not
intended to be installed permanently on the user's hard-drive. Until recently,
CD-ROM software has been relatively protected from unauthorized reproduction
owing to the relatively high-cost of CD-recording technology. With the advent of
low-cost CD Recorders and mass reproduction machines, software pirates are able
to duplicate the software applications contained on the CD-ROM with no
significant impediment. The unauthorized reproduction (and distribution) of
unprotected software applications residing on CD-ROMs can represent significant
potential revenue-losses.
Software protection is a relatively new market. Until the mid-1980's,
software developers and publishers traditionally relied on copyright and
intellectual property laws to police software piracy. However, as the frequency
and sophistication of software piracy increased, continued reliance on legal
sanctions frequently proved ineffective. Software developers began to seek ways
to aggressively and effectively halt the proliferation of unauthorized copies of
their software, thereby triggering the development of the software protection
market. Most of the security solutions which were commercially available
typically required that the software to be protected be stored in an 'encrypted'
mode so as to prevent its copying. In addition, a hardware component such as a
'dongle' (key), a physical device that plugs into a computer's parallel port,
was ordinarily utilized. The device must be present in order for the protected
software to execute (or 'decrypt'). Without the key or the plug, the protected
program wouldn't ordinarily execute. The dongle acts as 'identification code,'
enabling the protected software to execute. Dongles and keys are provided
directly to the software vendor and are frequently customized for particular
software applications. The technology underlying these solutions came to
represent the 'market standard' in terms of affording effective
software-protection.
Security solutions utilizing hardware components such as dongles present
significant operational difficulties and inconveniences for legitimate
end-users. By its very nature, the key is not 'transparent,' and needs to be
physically present on a parallel port each time that the protected application
is run. Frequently, keys are not interchangeable among different applications,
necessitating a different key for each application, giving rise to a 'daisy
chain' of plugs protruding out of the back of operating units. Furthermore,
dongles cannot currently be mass-produced. Each device must be custom made or
programmed, invariably resulting in relatively high production costs.
Accordingly, dongles are ordinarily used for higher priced applications
whose retail price typically exceeds $300. Software developers of many of the
commercially available popular software applications, such as well-known
word-processing and other business related programs, have elected to forego any
software anti-copying protection. Further, the relatively high-cost of the
dongles and other peripherals
21
<PAGE>
<PAGE>
render their use impractical for relatively lower priced CD-ROM applications,
such as games or other entertainment packages.
SoftGuard does not entail the use of any hardware peripherals such as
dongles, and requires the end-user to use a protection diskette only once at the
installation of the protected software onto the end-user's system. Thereafter,
the safety measures are transparent to the legitimate end-user, who need not be
aware of their operation. Furthermore, the utilization of SoftGuard does not
necessitate the software developer to implement design or code changes in the
software. Additionally, the Company expects to be able to mass-produce
SoftGuard, significantly decreasing the per-unit production costs. DiskGuard,
the proposed CD-ROM protection product, is intended to modify the laser optics
system of the CD-ROM mastering machine, rendering the CD-ROM non-reproducible
and thereby thwarting CD-ROM pirates' efforts to faithfully reproduce the
contents of the CD-ROM.
TTR believes that its proposed SoftGuard products will provide a versatile,
transparent, easy-to-use, effective and relatively inexpensive anti-copying
security solution that will not require the software developer to effect any
basic design changes to the protected software application program.
BUSINESS STRATEGY
The Company's primary objective is to make SoftGuard the 'market standard'
in software anti-copying protection. The Company intends to pursue a business
strategy that incorporates the following principal components:
Penetration of Software Security Markets. The Company intends to begin
marketing its proposed SoftGuard product to large well-known software
developers whose products enjoy wide geographic dispersion but who have
previously disregarded the software security market. By emphasizing
SoftGuard's reduced costs and end-user transparency, the Company hopes to
promote the penetration of the software security market beyond the current
$300 and above retail software market. In addition, new developments such
as the proposed DiskGuard CD-ROM product may enable the Company to expand
its potential customer base from software developers to CD-ROM replicators.
See 'Business -- Sales and Marketing.'
Penetration of Leading Geographic Marketing Areas. The Company intends
to launch its marketing and distribution efforts initially in North America
and Israel. The Company also expects to expand its marketing efforts to
subsequently include Europe and the Far East. The Company also intends to
develop a version of SoftGuard that is compatible with Japanese-standard
NEC based operating systems, which it expects to introduce by the second
quarter of 1997. See 'Business -- Sales and Marketing' and ' -- SoftGuard
Software Protection System.'
Continued Product Expansion and Enhancement. The Company is committed
to continuous product expansion and enhancement to stay competitive with
rapid technological advancement and other changes affecting the computer
industry. The Company is focusing its research and development activities
toward lowering the cost of its existing proposed products, the design and
development of new products, and the enhancement of existing proposed
products. For example, the Company intends on increasing the SoftGuard
product line by introducing new products for multi-platform versatility
with interoperability and compatibility with operating systems including
the Apple Macintosh, the Japanese-standard NEC computers, network
environments, Microsoft's Windows 95 and Windows NT, and the Internet. See
'Business -- SoftGuard Software Protection System' and ' -- Research and
Development' and 'Use of Proceeds.'
Pursue Strategic Acquisitions. In addition to growing internally, the
Company desires to grow through strategic acquisitions. The Company plans
to seek to acquire new products or complementary product lines for
integration into the Company's product offerings and its business. The
Company is not currently engaged in identifying any potential acquisitions
and currently has no plans, agreements, understandings or arrangements for
any acquisitions. See 'Risk Factors -- Proposed Expansion' and 'Use of
Proceeds.'
Strengthen Competitive Advantages. The Company believes that the key
to competition is to offer an effective security product which is more
convenient to use and more cost-effective than the competition. Research
and development efforts are being focused towards making SoftGuard even
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more user-friendly and cost-effective. In addition, the Company is
developing novel approaches to software security such as its DiskGuard for
CD-ROM based software, that are unavailable to its competition. See
'Business -- Research and Development'; ' -- SoftGuard Software Protection
System' and ' -- Competition.'
SOFTGUARD SOFTWARE PROTECTION SYSTEM
The proposed SoftGuard software protection products are intended to provide
comprehensive protection against unauthorized software copying. SoftGuard is to
be comprised of a specially designed protection diskette, which provides
anti-copying protection while the software resides on a distribution diskette,
CD-ROM or other distribution medium, as is the case when the software is
initially purchased by the end-user, and a software-based solution that protects
against unauthorized reproduction once the software is installed onto the
legitimate end-user's system. SoftGuard will not include any hardware
peripherals such as dongles.
The software applications to be protected will be encrypted by the software
developer using an encryption key derived from the protection diskette. The
protection diskette will be a standard commercially available diskette which is
physically altered by means of a novel and proprietary method to imprint an
identification code that is unique to the particular software house and the
specific application. The protected software will be purchased by the end-user
in the encrypted format, and such protected software will not execute or run as
intended unless it is installed in the presence of an authentic protection
diskette containing the appropriate identification code. Without the protection
diskette, the protected software will not properly install onto the end-user's
system and cannot be used. The protection diskette will be sold to the developer
and included in the applications package that is finally distributed to the
end-user. The protection diskette will be designed to be used only once by the
end-user at the time of the initial installation of the protected software.
It is intended that the developer's software program will further be
protected by the SoftGuard software licensed from the Company. As part of the
installation of the protected software onto the legitimate end-user's hard
drive, SoftGuard re-encrypts the protected software. The re-encryption effected
by SoftGuard is designed to adapt to certain unique characteristics of the
computer on which the protected software is being installed. When the authorized
or legitimate end-user tries to run the protected software (after installation
on the end-user's system), SoftGuard verifies the validity of the installed
software, decrypts the protected file and permits execution to take place.
Protected software subsequently installed or copied onto a different unit will
not work unless so authorized by the software developer, and thus will not
execute. The software developer will fix a pre-determined number of times that
the protected software can be installed (or reinstalled in the event of hard
disk failure) by the legitimate end-user. Any attempted installation beyond such
authorized number will not properly execute. Furthermore, SoftGuard will provide
the software developer with the option of limiting any installs of the protected
software for a pre-determined time-period. Thus, the end-user can try the
protected software for a limited time-period. This option will provide the
software developer with a powerful marketing tool, enabling it to expose the
benefits and applications of its software to the market without incurring the
risk of unauthorized mass-copying and distribution of the software.
The encryption key derived from the protection diskette is based on a
published algorithm. SoftGuard utilizes a unique technology to develop the
encryption keys. The encryption key is based in part upon the pattern created by
a series of marks on the diskette generated by physically altering the diskette
to remove magnetic material from its surface in pre-determined areas. The
resulting distinct pattern, or key, is used as a parameter in creating an
encryption key that can produce different encryption formats upon a
corresponding change in the key. In Management's view, this creates a highly
effective product since the unlikely event of the successful cracking of one
encryption key by an unauthorized user will not assist in the cracking of
another key.
Additionally, most commercially available anti-copying software-based
solutions utilize an 'envelope' method of encryption whereby the executable file
to be protected is encrypted in such a manner which requires a 'jump' to the
beginning of the protected file on the system's memory when such file is
executed. For someone running a debugger, such as a potential hacker, the
envelope method acts as a beacon indicating where, on a system's memory, the
protected file resides. Once the hacker
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knows where the protected file begins in the system's memory, he is able to take
a snapshot of the protected file in its unencrypted and unprotected format and
download it to a disk, thereby effectively 'cracking' the program. Unlike the
envelope method of encryption protection, SoftGuard will utilize a program that
monitors all program executions. Upon execution of a SoftGuard protected file,
the SoftGuard monitor will validate the protected file and remove the
encryption, thereby allowing successful execution. The SoftGuard method of
encryption requires no 'jump' to the beginning of the protected file on the
system's memory. Thus, the potential hacker is not informed as to where the
protected file begins in the system's memory. In Management's view, these
features present significant impediments to 'cracking.'
The Company intends on using a specially designed and highly accurate
laser-based duplicating machine to mass-produce the protection diskettes (the
'Diskette Marking Machine'). Mass-production of the protection diskettes will
significantly reduce the production costs of the protected software, affording
the software developer with a low-cost effective solution to unauthorized
software copying. Since the protection diskettes will only be able to be
produced by the Company's specially designed Diskette Marking Machine,
Management believes that it is highly unlikely for an unauthorized person to
make usable copies of protection diskettes.
SoftGuard is intended to be used to safeguard MS-DOS and Microsoft Windows
EXE executable files, as well as non-executable files including Windows DLL's
and runtime applications.
SOFTGUARD SOFTWARE PROTECTION PRODUCT LINE AND DEVELOPMENTS
The Company expects to initially market a version of SoftGuard that is
compatible for use on Windows 3.X and DOS based systems. The Company is planning
on expanding the proposed SoftGuard product line for multi-platform versatility
with interoperability and compatibility with other operating systems. There can
be no assurance given that the Company will successfully develop any new
products, or if developed, that they will be developed in a timely fashion
and/or result in sales. See 'Risk Factors -- New Products and Rapid
Technological Change.' The Company is currently developing or planning on
developing the following new features to the SoftGuard product line:
SoftGuard for Windows 95. The proposed SoftGuard for Windows 95 is
intended to support protected applications that are compatible with Windows
95. Upon finalization, SoftGuard for Windows 95 is expected to include all
of the features of the Windows 3.x version of SoftGuard. It is currently in
alpha testing. The program development is completed and the system is being
tested by the Company's quality assurance staff. It is currently
anticipated that it will be available for beta testing near the end of the
third quarter of 1996. When a program is in beta testing, it is being used
at actual customer sites. The Company receives feedback from the customers
and responds to problems as they arise. The length of the beta test depends
to a large extent on the results of the testing. The Company expects
SoftGuard for Windows 95 to be available for commercial release by the
first quarter of 1997.
SoftGuard for Windows NT. This version is intended to support
protected applications (both 16 and 32 bit) under Windows NT. It is
expected to include all of the features found in the Windows 3.x version of
SoftGuard. The program is currently in a system design phase, which occurs
after the functional specifications of the software system have been
determined, whereby the system files, databases, logical processes and
interfaces with other systems and with a user are designed. The Company
expects SoftGuard for Windows NT to be available for commercial release by
the third quarter of 1997.
SoftGuard for NEC and SoftGuard for Macintosh. The overwhelming
majority of the Japanese software market utilize NEC based operating
systems. In addition, many software developers design their software to run
on Macintosh operating systems in addition to DOS/Windows. TTR is in the
functional definition stage of adapting SoftGuard to operate on these
systems, whereby the functional specifications are being developed.
NetGuard. The proposed networks version of SoftGuard is being designed
to be used on any type of network server. The networks version is intended
to support tandem servers, RAID and disk stripping, as well as automatic
crash recovery. Additionally, it is being designed to enable any
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desired combination of fixed and floating licensing. The proposed product
is currently in a program design and program development stage. In program
design, the individual programs which comprise the processes of the system
are designed. In the program development stage, programmers use the program
design documents to write the programs which are then tested individually.
The Company expects the program to be ready for beta testing in the first
quarter of 1997, with a targeted commercial release by the third quarter of
1997.
TTR REMOTE ACTIVATION CENTER FOR INTERNET (ELECTRONIC) DISTRIBUTION
Companies desiring to distribute protected software electronically need to
insure that payment for the downloaded software is received and that such
software is restricted to use to one site per payment. Utilizing the core
technology incorporated in SoftGuard, the Company believes that it is addressing
these concerns with the Remote Activation Center for Internet (Electronic)
Distribution. The Remote Activation Center as proposed is based on a triangular
communication design, linking the end-user's system, the software distributor's
Internet server and the Company's Internet server. This will permit companies
that would like to sell protected software via electronic distribution such as
the Internet to protect their software utilizing similar procedures as in the
conventional version of SoftGuard. Once the end-user downloads and pays for the
protected (encrypted) software, the distributor's server would activate a
utility which automatically notifies the Company's Internet web server. All of
this would happen automatically and transparently to the end-user. It is
intended that when the end-user installs the protected software, the Company's
Internet server will be automatically contacted. Upon verification of payment,
the Company's server would pass a decryption key to unlock the protected
software. This part of the process is similar to the install process which takes
place in the current conventional version, with the Company's server acting like
the protection diskette. Unlike other remote activation schemes, the SoftGuard
electronic distribution product will not require the end-user to enter a
key-code in order to activate the downloaded software. Once the downloaded
software is installed onto the end-user's hard drive, it will be protected in
the same way as conventionally distributed SoftGuard treated software. Thus, the
Remote Activation Center is intended to insure payment by the end-user in
addition to providing conventional software protection. The Remote Activation
Center is currently in a program design and program development phase. The
Company expects the proposed system to begin beta testing in November 1996 with
a targeted commercial release date by the first quarter of 1997.
DISKGUARD FOR CD-ROM BASED SOFTWARE
Increasingly, popular game, video, educational materials (i.e.,
encyclopedias), business and other professional applications are distributed via
CD-ROM. A CD-ROM is able to store vast amounts of data, rendering it a more
efficient distribution vehicle than the standard diskette. Ordinarily, the user
does not install onto a hard-drive the data contained on the CD-ROM, but merely
accesses it from time to time for educative, entertainment or professional
purposes.
Until recently, CD-ROM based applications have enjoyed some immunity from
unauthorized reproduction due to the high cost of the copying hardware. However,
the decreasing costs of CD-Recorders, which can be used to faithfully reproduce
unauthorized copies of the CD-ROM, and the increased availability of other mass
reproduction machines, have contributed to the increase in CD-ROM piracy. By use
of a CD-Recorder, a software pirate is able to read the software application
program contained on the CD-ROM and to faithfully reproduce a copy of such
program on a parallel CD-ROM. Conventional encryption based technologies that
encrypt data contained on the CD-ROM are impractical if the user does not
ordinarily install the CD-ROM data onto a hard-drive. Also, dongles are
prohibitively expensive for the popular CD-ROM applications.
The Company is developing a proprietary technology that permits it to
programmatically distinguish between an authentic original CD-ROM designed by
the software developer and an unauthorized reproduction. Thus, a software pirate
who is attempting to copy a CD-ROM will be prevented from faithfully reproducing
the software program. The Company's proposed solution involves modifications to
the laser optics system of the CD-ROM mastering machine. This technology is
intended to prevent the faithful reproduction of the CD-ROM itself, without
reference to the data
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contained on it. The Company expects to commercially release its DiskGuard
CD-ROM product by the first quarter of 1997.
ADVANTAGES OF SOFTGUARD
From an end-user's viewpoint, copy protection is not necessarily the most
welcome feature in a software program. Many software development houses have
elected to not include software protection with their software programs because
end-users have encountered operational difficulties with, or have indicated an
unwillingness to use, such software protection. The Company believes that its
proposed SoftGuard products will address many of the operational difficulties
previously encountered by end-users. Significant features of SoftGuard available
to the end-user will include the following:
Avoids the Inconvenience Associated with Hardware Components or
Peripherals. Unlike most commercially available anti-copying solutions
utilizing hardware peripherals such as dongles, SoftGuard is proposed to be
a hardware-based solution in a software format that utilizes one diskette
that is typically used by the end-user only once at the time of
installation of the protected software onto the desired computer.
Thereafter, the solution is entirely software based. With SoftGuard, the
end-user avoids the inconvenience associated with hardware peripherals each
time the software is accessed. This renders SoftGuard versatile and
especially attractive for the growing number of laptop users.
Transparent Safety Features. Upon installation by the legitimate
end-user, the anti-copying features of SoftGuard are intended to integrate
onto the operating system and will not require any subsequent end-user
interaction. The software will be able to be accessed and used by the
legitimate end-user without any inconvenient procedures or steps on the
legitimate end-user's part. Accordingly, once the protected software
program is installed utilizing the protection diskette, the SoftGuard
safety features will be self-executing and transparent to the end-user.
Competitive Pricing. Unlike most commercially available solutions
utilizing dongles, where such peripherals need to be custom made, the
protection diskettes are expected to be mass-produced, resulting in a cost
savings to the software developer that can be passed onto the end-user.
Anti-virus protection. Computer viruses typically attach themselves to
executable files. Since SoftGuard protected executable files will be
maintained in an encrypted format, a by-product of SoftGuard protection is
that viruses will not be able to attach themselves to SoftGuard protected
files.
Authorized Transfers. Increasingly, end-users work outside of, or in
addition to, the traditional office setting. If the software developer
chooses, SoftGuard will be able to enable the legitimate end-user to
perform an authorized install of the protected application on both the
office-based unit and the additional portable or home-based unit, as
needed. Authorization can thus be transferred using a built in utility to
the unit where the end-user would like to work.
RESEARCH AND DEVELOPMENT
The computer industry in general is characterized by rapid product changes
resulting from new technological developments, performance improvements and
lower production costs. The Company's research and development activities to
date have focused on developing products responsive to perceived immediate
demands in the market. The Company believes that its future growth in the
software protection field, of which no assurance can be given, depends in large
part on its ability to be an innovator in the development and application of its
proprietary technology and know-how. The Company intends to work closely with
software developers to determine their requirements and to design enhancements
and new releases to meet their needs.
The Company has a staff of six full-time and two part-time research and
development personnel working on improvements and enhancements to current and
anticipated products as well as developing new products for the software
security industry. The Company has a policy of recruiting highly qualified
technical personnel and anticipates expanding its research and development
personnel in order to
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maintain its technological expertise. The Company intends to capitalize on the
highly-skilled pool of computer and engineering professionals in Israel in
pursuing its product research and development efforts.
Following the completion of this Offering, the Company intends to expand
its research and development department into three groups: a research group, a
development group and a quality assurance group. The Company anticipates hiring
between 15 and 18 additional employees to staff these groups. The development
team will be responsible for developing new products identified by the research
group and the maintenance and enhancement of current products. The quality
assurance group will be responsible for the quality of all products and customer
support. See 'Business -- Customer Support' and 'Plan of Operation.'
In August 1996, TTR Israel filed an application for grants with the Office
of the Chief Scientist of the Israeli Ministry of Trade ('OCS') in respect of
its products under development. Generally, grants from OCS constitute up to 50%
of certain research and development expenses on the development of products
intended for export. Under terms of the OCS's participation, a royalty of 3% of
the net sales of products developed from a project funded by OCS must generally
be paid, beginning with the commencement of sales of products developed with
grant funds and ending when 150% of the grant is repaid. The terms of the
Israeli government participation also require that the manufacture of products
developed with government grants be performed in Israel, unless a special
approval has been granted. Separate Government of Israel consent is required to
transfer to third parties technologies developed through projects in which the
OCS participates. The Company believes that these restrictions and obligations
will not have a material adverse effect on the operations of the Company since
the Company does not presently anticipate manufacturing its products outside of
Israel or transferring technology developed by it to third parties. Such
restrictions do not apply to exports from Israel of products developed with such
technologies. Additionally, government consent to use less offensive third party
manufacturing sites outside of Israel is not unreasonably withheld. TTR Israel
is seeking approximately $220,000 in grants, and anticipates a determination of
its application to be made before the end of 1996.
The Company's research and development efforts are currently focused on the
compatibility of its products with the most widely used software functioning on
different platforms. To date, the Company has expended approximately $453,000 on
its research and development activities including no expenses for the year ended
December 31, 1994 and approximately $276,000 for the year ended December 31,
1995. The Company expects the level of its research and development expense to
increase in the future. The Company has allocated approximately $1,307,500 of
the net proceeds for research and development activities. See 'Use of Proceeds.'
SALES AND MARKETING
The Company's objective is to make SoftGuard the market standard for
software anti-copying protection. The Company has allocated approximately
$1,307,500 of the net proceeds to be used to launch a marketing and distribution
effort initially in Israel and North America with subsequent efforts in Europe
and the Far East. See 'Use of Proceeds.'
The Company currently employs one salesman to identify beta sites locally
but anticipates expanding its sales and marketing personnel following the
completion of this Offering. See 'Use of Proceeds.' The Company intends to
center its marketing efforts around advertising and promotional campaigns
designed to enhance brand name recognition. See 'Business -- Patents, Trademarks
and Proprietary Information.'
Mr. Arik Shavit, the new Chief Executive Officer of TTR Israel, has
extensive experience in the hi-tech marketing field and it is anticipated that
Mr. Shavit will devote a significant amount of his business time to developing
and implementing appropriate marketing strategies designed to expand recognition
of the Company and its products. See 'Management.' Additionally, the Company is
entering into an agreement with an independent marketing professional with
experience in the introduction of new hi-tech products and concepts to the
market. Management believes that utilizing the services of a market professional
is instrumental in establishing strategic relationships with certain of the
larger and internationally recognized software developers and distributors.
However, no assurance can be given
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that such an agreement will result in strategic relationships with well-known
software developers and distributors.
The Company intends to establish a distribution network, although no
assurance can be given, that will attempt to penetrate the relevant markets. The
Company anticipates that its marketing strategy will include original equipment
manufacturer ('OEM') arrangements with software vendors and distributors and
direct sales over the Internet. The Company views the rapid penetration of the
North American, European and Far Eastern markets as a key strategic element in
the success of its business, and it intends to devote significant marketing
efforts in these areas.
The Company intends on selling the protection diskette to software
developers or to their packagers who will include the protection diskette with
their software program that is ultimately sold to the end-user. In addition, the
Company will license its protection software to the developer. The Company will
receive a licensing fee from the developer, which is expected to be determined
on a case-by-case basis, dependent, among others, upon the retail price and the
expected sales of the software.
The Company has established an Internet web site whereby it will promote
its proposed products electronically. The Company intends on using the site, at
http:/www.ttr.co.il, to permit software houses to be able to download
demonstration test versions of its proposed Remote Activation Center. See
'Business -- TTR Remote Activation Center for Internet (Electronic)
Distribution.' Following the demonstration, the software developer will be able
to contact the Company and obtain an authorization code if it wishes to purchase
the product. The Company anticipates that electronic distribution will assume an
increasingly larger role in the product distribution efforts of software
developers. The Company plans on charging a fee to the software developer each
time the Company's Internet server is contacted by the end-user as well as a
license for including the Company's software protection in the downloaded
software, similar to conventional SoftGuard.
The Company's proposed DiskGuard CD-ROM protection technology, premised on
distinguishing between authentic and replicated CD-ROMs, will involve changes to
the circuitry controlling the laser writing of CDs on CD presses and recorders.
There is no need, however, to open up CD presses physically to modify the
circuitry. These machines are designed to accept 'plug-ins.' The Company is
developing a black box (electronic circuit), although no assurance can be given,
which can be attached to a CD press. The Company intends to license use of these
black boxes to CD-ROM replicators. The replicator may then use the machines to
produce either conventional or non-reproducible CDs for those clients requesting
it. Clients of the replicators are expected to pay a premium for the
non-reproducible CDs, a portion of which would go to the Company.
PRODUCTION AND SUPPLIES
The Diskette Marking Machine, used to specially mark the protection
diskettes used in SoftGuard, is specially made to the Company's order.
Management estimates that each Diskette Marking Machine is capable of supporting
the annual production, at full capacity, of 750,000 protection diskettes. The
Company currently has one fully-operating Diskette Marking Machine, which it
believes can meet its needs for a minimum of 12 months following the completion
of this Offering. Although the Company does not have a written contract with the
manufacturer of its Diskette Marking Machine, the Company believes, based upon
the experience of Management and the Company's working relationship with such
manufacturer, that it will be able to have additional Diskette Marking Machines
produced on an as needed basis. All of the sources and components used in the
manufacture and assembly of the Diskette Marking Machine are obtainable from
local sources, except for the laser device that specially marks each protection
diskette. However, the Company believes that there are adequate alternative
sources for such devices.
The manufacture of the protection diskettes requires that standard
commercially available diskettes, specially formatted, be physically altered by
the Diskette Marking Machine to create the identification code from which the
encryption is derived. The Company obtains the specially formatted diskettes
from a local source, at an approximate cost to the Company of $.50 per formatted
diskette. The Company does not regard any one supplier as essential to its
operations, since equivalent replacements for the diskettes are either available
from one or more of the Company's other suppliers or are available from various
other sources at competitive prices.
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The Company anticipates that it will be able to fill orders for its
products within several hours to no longer than several weeks after receipt of a
firm purchase order. Consequently, the Company believes that backlog will be
kept at low levels as a result of the Company's ability to fill orders
relatively quickly. Due to the nature of its intended sales and marketing
efforts and the expected resulting close contact with the customer prior to the
receipt of a purchase order, the Company anticipates being able to plan its
production and component purchases in advance in order to enable it, although no
assurance can be given, to deliver its products quickly after receipt of an
order.
The Company intends to manufacture in-house the black boxes for its
proposed DiskGuard product. All of the sources and components used in the
manufacture and assembly of the black boxes are obtainable from local sources.
The Company currently does not have a written contract with any supplier of
these parts; however, the Company believes that there are adequate alternative
sources for each component.
CUSTOMER SUPPORT
The Company believes that highly efficient, responsive and prompt customer
service is essential for the Company's success in building and retaining
customer confidence.
Upon the commencement of commercialization of its proposed products, the
Company anticipates maintaining an appropriately sized staff of customer service
personnel, which will offer direct technical support. The Company anticipates
that it will geographically disperse its support staff as needed. On a routine
basis, the support staff will be expected to provide feed-back to the Company's
research and development and marketing staffs. The Company intends to use a
portion of the net proceeds of this Offering to increase its customer service
capabilities.
COMPETITION
The software protection industry is extremely competitive. The Company
faces tough competition from companies that are more established, benefit from
greater market recognition and have greater resources, financial and otherwise,
than the Company. The Company's primary competitors are Rainbow Technologies
Inc. and Aladdin Knowledge Systems Ltd., whom the Company believes to have the
largest installed product base in the limited market that exists for software
security products. Further, there can be no assurance that existing software
companies will not enter the market in the future. Most of the software
protection products distributed by each of these competitors utilize a hardware
device such as a dongle. Although the Company believes that its proposed
SoftGuard line of products will be favorably distinguishable from those of its
competitors, there can be no assurance that the Company will be able to
penetrate any of its competitor's portion of the market. See 'Risk
Factors -- Competition.'
The Company believes that its principal competitive advantages will be its
ability to offer a relatively inexpensive and effective software-protection
solution that does not utilize any hardware components (other than a protection
diskette) such as a dongle, plug, key or similar device that is compatible with
a wide variety of operating systems and platforms. The Company believes that its
proposed products will provide an additional competitive advantage in that they
are transparent to the end-user and do not interfere with the operation of the
computer or the protected application. Additionally, the Company's expected
ability to mass-produce the protection diskettes may provide it with an
additional competitive advantage in that it is anticipated to significantly
reduce the protected software's per-unit production costs. There can, however,
be no assurance that the Company will be able to continue developing products
with innovative features and functions, or that competitive pressures will not
result in price reductions that could materially adversely affect the Company.
See 'Risk Factors -- Competition.'
PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
The Company currently relies on a combination of trade secret, copyright
and trademark law, as well as non-disclosure agreements and invention-assignment
agreements, to establish and protect the technologies used in its proposed
products and other proprietary information. In addition, the Company
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has filed patent applications in the United States, Israel, Germany, France,
Great Britain, the Netherlands and Japan with respect to the technology
underlying the imprinting of the protection diskettes to be used in SoftGuard
and has filed a patent application in the United States for the technology
underlying the proposed DiskGuard CD-ROM based protection and intends on filing
additional applications in other countries. There can be no assurance that any
patents will be granted or that the Company's proprietary technology will remain
a secret or that others will not develop similar technology and use such
technology to compete with the Company.
The Company is of the view that its software products are proprietary and
are protected by copyright law, non-disclosure and secrecy agreements. The
Company also relies on proprietary know-how and employs various methods, such as
the proper labeling of confidential documents and non-disclosure agreements, to
protect its processes, concepts, ideas and documentation associated with its
proprietary products. However, such methods may not afford complete protection
and there can be no assurance that others will not independently develop such
processes, concepts, ideas and documentation.
The Company believes that product recognition is an important competitive
factor. Accordingly, the Company intends to promote the 'SoftGuard,' 'NetGuard,'
'Remote Activation Center' and 'DiskGuard' trademarks in connection with its
marketing activities. The Company pursues the registration of its trademarks in
the United States and (based upon anticipated use) internationally, and has
applied for the registration of certain of its trademarks, including
'SoftGuard.' The Company intends on making additional applications for
registration with respect to other marks. There can be no assurance that prior
registrations and/or uses of one or more of such marks (or a confusingly similar
mark) does not exist in one or more of such countries, in which case the Company
might thereby be precluded from registering and/or using such mark in such
country. The Company's use and registration rights with respect to any trademark
does not ensure that the Company has superior rights to others that may register
or use identical or similar marks on related goods and services. See 'Risk
Factors -- Trademark Registration.'
CONDITIONS IN ISRAEL
The following information is intended to advise prospective investors of
certain conditions in Israel that could affect the Company.
POLITICAL CONDITIONS
Since the establishment of the State of Israel in 1948, a state of
hostility existed, varying as to degree, among Israel and various Arab
countries. A peace agreement was signed between Israel and Egypt in 1979 and
limited relations have been established. A peace treaty with the Hashemite
Kingdom of Jordan was signed in 1995, ending the state of war along Israel's
longest border.
Since December 1987, civil unrest has existed in the territories which came
under Israel's control in 1967. In April 1994, negotiations between Israel and
the Palestine Liberation Organization resulted in the signing of an interim
agreement to grant Palestinian Arabs limited autonomy in certain of the
Territories administered by Israel. The interim agreement was followed by a
series of agreements and understandings expanding the areas subject to
autonomous administration. No prediction can be made as to whether a final
resolution of the area's problems will be achieved, as to the nature of any such
resolution or whether the civil unrest in the administered territories will
continue and to what extent the unrest will have an adverse impact on Israel's
economic development or on the operations of the Company in the future.
All adult male permanent residents of Israel under the age of 51 are,
unless exempt, obligated to perform up to 45 days of military reserve duty
annually. Additionally, all such residents are subject to being called to active
duty at any time under emergency circumstances. Many of the male employees of
the Company (including its President) are currently obligated to perform annual
reserve duty. While the Company and its personnel have operated effectively
under these requirements, no assessments can be made as to the full impact on
the Company's work force or business if conditions should change and no
30
<PAGE>
<PAGE>
prediction can be made as to the effect on the Company of any expansion or
reduction of these obligations.
Certain countries and companies participate in a boycott of Israeli
companies and others doing business in Israel or with Israel companies. The
Company, however, believes that the boycott will not have an material adverse
impact on the Company's business.
ECONOMIC CONDITIONS
Israel's economy has been subject to numerous de-stabilizing factors,
including a period of rampant inflation in the early to mid 1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. For these and associated reasons, the Israeli Government has
intervened in sectors of the Israeli economy, employing among other means,
fiscal and monetary policies, import duties, foreign currency restrictions and
control of wages, prices and exchange rates, and has frequently reversed or
modified its policies in all these areas. The New Israeli Shekel ('NIS') is
linked to a weighted basket of major currencies, of which the US Dollar
constitutes 50%. Periodically, the central Bank of Israel resets the target
exchange rate of the NIS in relation to the currency basket, and allows the
actual exchange rate to float within a range of 5% of the target rate.
Israel has recently experience a wave of immigration from the former Soviet
Union and its satellite countries. Almost 600,000 new immigrants have arrived
since 1989. The rate of recent immigration, however, has declined dramatically.
If immigration were to resume to its former levels, increased strains on
government services, economic development and resources could be expected.
Notwithstanding, it could be expected that such increased immigration would also
result in an increase in the highly-skilled labor pool.
TRADE AGREEMENTS
Israel is a member of the United Nations, the international Monetary Fund,
the International Bank for Reconstruction & Development and the International
Finance Corporation. Israel is a signatory to the General Agreement on Tariffs
and Trade, which provides for reciprocal lowering of trade barriers among its
members.
Israel became associated with the European Union by an agreement concluded
in 1975 which confers certain advantages with respect to Israeli exports to most
of the European countries and obliges Israel to lower its tariffs with respect
to imports from those countries over a number of years.
In 1985, Israel and the United States entered into an agreement to
establish a Free Trade Area, which is intended to ultimately eliminate all
tariff and certain non-tariff trade between the two countries. Under the
Agreement, most products received immediate duty free status in 1985, staged
reductions are taking place on others and reductions on tariffs relative to a
third category may be accelerated prior to 1995, by which all tariffs are to be
eliminated.
PROPERTIES
The Company, through TTR Israel, currently leases approximately 4,860
square feet for its executive offices, research and production facilities in
Kfar Saba, Israel at a monthly rental of approximately $4,025 pursuant to a
three-year lease expiring in May 1999, subject to two optional annual renewals
through May 2001.
EMPLOYEES
The Company presently has ten full-time employees, of whom six were
employed in research and development, one in sales, two in management and one in
administration. In addition, the Company employs an electrical engineer and a
quality assurance engineer as consultants on an as needed per project basis.
LEGAL PROCEEDINGS
The Company is not a party to any material litigation and is not aware of
any pending or threatened litigation that would have a material adverse effect
on the Company or its business.
31
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names, ages and positions of the executive officers and Directors of
the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
Marc D. Tokayer................. 39 Chairman of the Board, President and Treasurer; and President and
Director of TTR Israel
Baruch Sollish.................. 50 Director, Vice President -- Product Research and Development and
Secretary; and Director of Product Research and Development and
Director of TTR Israel
Arik Shavit..................... 46 Director and Vice President; and Chief Executive Officer and Director of
TTR Israel
</TABLE>
Marc D. Tokayer is the founder of the Company and has been Chairman of the
Board of Directors, President and Treasurer of the Company since its inception
in July 1994 and Chairman of the Board of Directors, President and Chief
Executive Officer of TTR Israel since its inception in December 1994. From
September 1992 until he joined the Company, Mr. Tokayer worked as an independent
consultant primarily in the areas of business applications. From October 1990
through August 1992, Mr. Tokayer was employed by Yael Ltd., a software company,
where he managed the development of the Central Inventory Control System.
Baruch Sollish, Ph.D. has been a Director of the Company and the Manager of
Product Research and Development for TTR Israel since December 1994. He was
elected the Vice President -- Product Research and Development and Secretary of
the Company in September 1996. Dr. Sollish created the core technology that
makes up the SoftGuard protection process. Prior to joining the Company, from
June 1987 through December 1994, Dr. Sollish founded and managed Peletronics
Ltd., an Israel software company, engaged primarily in the field of smart cards
and software design for personnel administration, municipal tax authorities and
billing procedures at bank clearance centers. Dr. Sollish holds six United
States Patents in the fields of Electro Optics, Ultrasound & Electronics and has
published and lectured extensively.
Arik Shavit has been a Director and Vice President of the Company and the
Chief Executive Officer of TTR Israel since September 1996. Prior thereto, Mr.
Shavit was a Manager of Business Development, Smart Card Services at IBM Israel
Ltd., where he has held this position since August 1994. From August 1990
through July 1994, Mr. Shavit founded and managed Silvaco (Israel) Ltd., an
Israeli subsidiary of SILVACO International, Inc., a California based software
company which develops state-of-the-art computer aided engineering (CAE)
Software Applications and provided development, marketing and support services.
Mr. Shavit also served as Corporate Vice-President and Director of the United
States company.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors currently receive
no cash compensation for serving on the Board of Directors. The Representative
has the right during the five-year period following the date of this Prospectus,
in its sole discretion, to designate two persons for the election as directors,
or alternatively to designate two individuals to serve as non-voting advisors to
the Company's Board of Directors. The Representative has no intention to select
either designee in the immediate future. Officers are elected annually by the
Board of Directors and serve at the discretion of the Board.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to the Company during Fiscal 1995 and 1994 by the
Company's President and Vice President -- Research and Development. No executive
officers received compensation in excess of $100,000 during such periods.
32
<PAGE>
<PAGE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------ PAYOUTS
------------------------------------------- RESTRICTED SECURITIES -------
OTHER ANNUAL STOCK UNDERLYING LTIP
NAME AND PRINCIPAL POSITION COMPENSATION AWARD(S) OPTIONS/ PAYOUTS
(1)(2)(3) YEAR SALARY ($) BONUS ($) ($) ($) SARS (#) ($)
(A) (B) (C) (D) (E) (F) (G) (H)
- ---------------------------------- ------- ------------ ----------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Marc D. Tokayer .................. 1995 $ 60,000 0 (1) 0 0 0
Chairman, President and CEO 1994 $ 60,000 0 (1) 0 0 0
Baruch Sollish ................... 1995 $ 60,000 0 (1) 0 0 0
Vice President - Research and 1994 n/a n/a n/a n/a n/a n/a
Development
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION
(1)(2)(3) ($)
(A) (I)
- ---------------------------------- ------------
<S> <<C>
Marc D. Tokayer .................. 0
Chairman, President and CEO 0
Baruch Sollish ................... 0
Vice President - Research and n/a
Development
</TABLE>
- ------------
(1) The above compensation figures do not include the cost to the Company of the
use of automobiles leased by the Company, the cost to the Company of
benefits, including premiums for life and health insurance and any other
personal benefits provided by the Company to such persons in connection with
the Company's business.
(2) See 'Employment Arrangements' for a description of Marc D. Tokayer's
employment agreement as President of TTR Israel and Baruch Sollish's
employment agreement as Director of Product Research & Development of TTR
Israel.
(3) Mr. Tokayer's compensation commenced effectively on October 15, 1994. Dr.
Sollish's compensation commenced effectively on January 1, 1995. Arik Shavit
assumed the position of Chief Executive Officer of TTR Israel in September
1996 pursuant to an employment agreement more fully described in 'Employment
Arrangements.'
------------------------
The Company did not grant any options in the last two fiscal years to any
of its executive officers. The Company does not have any long-term incentive
plans for compensating its executive officers.
EMPLOYMENT ARRANGEMENTS
TTR Israel has entered into an employment agreement with Marc Tokayer,
pursuant to which Mr. Tokayer is employed as the President and General Manager
for a term of three years commencing in August 1994. Pursuant to the employment
agreement, Mr. Tokayer will devote his full business time in consideration of a
monthly salary of $5,000, subject to adjustment. If Mr. Tokayer is terminated
without cause, as defined in the agreement, then he shall be entitled to
continue to receive his salary and benefits for an additional 12 months subject
to certain limitations.
TTR Israel has entered into an employment agreement with Baruch Sollish,
pursuant to which Dr. Sollish is employed as the Director of Product Research &
Development for a term of one year commencing in December 1995 and renewed for
an additional year. Pursuant to the employment agreement, Dr. Sollish will
devote his full business time in consideration of a monthly salary of $5,000
plus incentive compensation, payable quarterly, equal to one (1%) percent of the
initial $1,000,000 of gross receipts from the sale of certain products of the
Company (including SoftGuard), and two (2%) percent for gross receipts in excess
of such amount. If Dr. Sollish is terminated without cause, as defined in the
agreement, then such incentive compensation shall convert to royalty payments
under certain circumstances.
TTR Israel has entered into an employment agreement with Arik Shavit,
pursuant to which Mr. Shavit shall be employed as the Chief Executive Officer
for a term of three years commencing in September 1996. Pursuant to the
employment agreement, Mr. Shavit will devote his full business time in
consideration of a monthly salary of $8,334, subject to adjustment. Pursuant to
the employment agreement, Mr. Shavit will be issued warrants to purchase an
aggregate of 217,473 shares of Common Stock upon the date of this Prospectus,
subject to a four-year vesting schedule. See 'Certain Transactions.'
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<PAGE>
<PAGE>
EMPLOYEE BENEFIT PLANS
1996 STOCK OPTION PLAN
In June 1996, the Board of Directors adopted, subject to stockholder
approval, the Company's Incentive & Non-Qualified Stock Option Plan (the '1996
Plan'). The 1996 Plan provides for the grant to qualified employees (including
officers and directors) of the Company of options to purchase shares of Common
Stock. A total of 450,000 shares of Common Stock have been reserved for issuance
upon exercise of stock options granted under the 1996 Plan. The 1996 Plan is
administered by the Board of Directors or a committee of the Board of Directors
(the 'Compensation Committee') whose members are not entitled to receive options
under the Plan (excluding options granted exclusively for directors fees). The
Compensation Committee has complete discretion to select the optionee and to
establish the terms and conditions of each option, subject to the provisions of
the Plan. Options granted under the Plan may or may not be 'incentive stock
options' as defined in Section 422 of the Internal Revenue Code ('Incentive
Options') depending upon the terms established by the Compensation Committee at
the time of grant, but the exercise price of options granted may not be less
than 100% of the fair market value of the Common Stock as of the date of grant
(110% of the fair market value if the grant is an Incentive Option to an
employee who owns more than 10% of the outstanding Common Stock). Options may
not be exercised more than 10 years after the grant (five years if the grant is
an Incentive Option to any employee who owns more than 10% of the outstanding
Common Stock). Options granted under the Plan are not transferable and may be
exercised only by the respective grantees during their lifetimes or by their
heirs, executors or administrators in the event of death. Under the 1996 Plan,
shares subject to canceled or terminated options are reserved for subsequently
granted options. The number of options outstanding and the exercise price
thereof are subject to adjustment in the case of certain transactions such as
mergers, recapitalizations, stock splits or stock dividends.
As of the date of this Prospectus, the Company has granted to a former
director of the Company options exercisable for a period of four and one-half
years to purchase an aggregate of 5,000 shares of Common Stock, at an exercise
price of $6.00 per share.
INDEMNIFICATION
Pursuant to the Company's Certificate of Incorporation and By-laws,
officers and directors of the Company shall be indemnified by the Company to the
fullest extent allowed under Delaware law for claims brought against them in
their capacities as officers or directors. Indemnification is not allowed if the
officer or director does not act in good faith and in a manner reasonably
believed to be in the best interests of the Company, or if the officer or
director had no reasonable cause to believe his conduct was lawful. Accordingly,
indemnification may occur for liabilities arising under the Securities Act. The
Company and the Underwriters have agreed to indemnify each other (including
officers and directors) against certain liabilities, including liabilities under
the Securities Act. See 'Underwriting.' Insofar as indemnification for
liabilities arising under the Securities Act may be permitted for directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
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<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus and as
adjusted to reflect the sale of 1,200,000 shares of Common Stock offered by the
Company hereby, certain information, with respect to the beneficial ownership of
Common Stock by (i) each person known by the Company to be the owner of more
than 5% of the outstanding Common Stock, (ii) each director, (iii) each
executive officer named in the Summary Compensation Table and (iv) all directors
and executive officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES OWNED
AMOUNT AND
NATURE OF --------------------------
NAME AND ADDRESS BENEFICIAL BEFORE AFTER
OF BENEFICIAL OWNER(1) OWNERSHIP(2) OFFERING(3) OFFERING(4)
- ------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Marc D. Tokayer(5)....................................................... 753,547 31.1% 20.8%
Baruch Sollish........................................................... 100,000 4.1 2.8
Arik Shavit(6)........................................................... 0 0 0
Canova Finance Inc.(7)................................................... 639,375 22.7 15.9
Etilon Trading Ltd.(8)................................................... 639,375 22.7 15.9
Joe Ohayon(9)............................................................ 253,275 9.8 6.7
Chana Sasha Foundation Inc.(10).......................................... 167,975 6.7 4.5
All directors and executive officers as a group (3 persons)(5)(6)........ 853,547 35.2 23.5
</TABLE>
- ------------
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
TTR Inc., 2 Hanagar Street, Kfar Saba, ISRAEL 44425.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date hereof upon the exercise of warrants or options. Each
beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date hereof
have been exercised.
(3) Based on 2,424,548 shares outstanding (excluding 1,000,000 Escrow Shares).
(4) Based on 3,624,548 shares outstanding (excluding 1,000,000 Escrow Shares),
including 1,200,000 shares of Common Stock offered by the Company hereby.
(5) Includes 384,274 shares held by the Tokayer Family Trust (the 'Trust'). The
Trust holds 90,000 shares which are subject to the Over-allotment Option.
See 'Underwriting.' The wife of Mr. Tokayer is the Trustee for the Trust,
and the income beneficiaries of the Trust are Mr. Tokayer's children. Mr.
Tokayer does not have or share any voting power or investment power with
respect to securities held by the Trust, and accordingly, disclaims
beneficial ownership of all such securities. After the Offering, the Trust
may be deemed to own 10.6% of the outstanding shares of Common Stock.
The amount of beneficial ownership for Mr. Tokayer excludes 269,274 Escrow
Shares in the name of Mr. Tokayer and 730,726 Escrow Shares in the name of
the Trust. Including the Escrow Shares would increase Mr. Tokayer's
percentage of outstanding shares owned before and after the Offering to
51.2% and 37.9%, respectively. See 'Principal Stockholders -- Escrow
Shares.'
See 'Principal Stockholders -- Voting Arrangements' for a description of a
voting arrangement to be entered into among Mr. Tokayer, Dr. Sollish and
five other stockholders with an aggregate of 1,137,430 shares of Common
Stock (31.4% after the Offering) whereby they will agree to vote their
respective shares to elect directors and in support of positions favored by
a majority of the shares held among them.
(footnotes continued on next page)
35
<PAGE>
<PAGE>
(footnotes continued from previous page)
(6) Excludes 217,473 shares issuable upon exercise of a like number of warrants
to be issued upon the date of this Prospectus, which will not be
immediately exercisable. See 'Management -- Employment Arrangement' and
'Certain Transactions.'
(7) Includes 387,500 shares issuable upon exercise of a like number of
Warrants. The address of Canova Finance Inc. is 3 New Burlington Street,
London WIX 1FE United Kingdom.
(8) Includes 387,500 shares issuable upon exercise of a like number of
Warrants. The address of Etilon Trading Limited is 4, Lower Hatch Street,
Dublin 2, Republic of Ireland.
(9) Includes 153,500 shares issuable upon exercise of a like number of
Warrants.
(10) Includes 71,500 shares issuable upon exercise of a like number of Warrants.
The address of Chana Sasha Foundation, Inc. is 1 State Street Plaza, New
York, NY 10004.
------------------------
By virtue of his ownership of Common Stock and position with the Company,
Marc D. Tokayer may be deemed a 'parent' and 'founder' of the Company as such
terms are defined under the Federal securities laws.
ESCROW SHARES
The 1,000,000 Escrow Shares are not assignable or transferable. The Escrow
Shares were deposited in escrow pursuant to an Escrow Agreement by and among the
Company, Mark D. Tokayer, the Trust and Aboudi & Brounstein Trustees Ltd. (the
'Escrow Agent') dated as of January 8, 1995 (the 'Escrow Agreement'). The Escrow
Shares will be released from escrow, on a pro rata basis, unless otherwise
agreed to by the Representative, if one or more of the following conditions are
met:
(a) 250,000 Escrow Shares shall be released if (i) the Company's net
income before provision for income taxes and exclusive of any extraordinary
earnings (all as audited by the Company's independent public accountants)
(the 'Minimum Pretax Income') amounts to at least $1,800,000 for the fiscal
year ending December 31, 1997; or (ii) the Bid Price (as defined in the
Escrow Agreement) of the Common Stock averages in excess of $15.00 per
share for 30 consecutive business days during the 12 month period
commencing on the date of this Prospectus;
(b) 300,000 Escrow Shares shall be released if (i) the Company's
Minimum Pretax Income amounts to at least $4,000,000 for the fiscal year
ending December 31, 1998; or (ii) the Bid Price (as defined in the Escrow
Agreement) of the Common Stock averages in excess of $20.00 per share for
30 consecutive business days during the 12 month period commencing 12
months from the date of this Prospectus;
(c) 450,000 Escrow Shares shall be released if (i) the Company's
Minimum Pretax Income amounts to at least $6,000,000 for the fiscal year
ending December 31, 1999; or (ii) the Bid Price (as defined in the Escrow
Agreement) of the Common Stock averages in excess of $25.00 per share for
30 consecutive business days during the 12 month period commencing 24
months from the date of this Prospectus;
(d) During the periods specified in (a), (b) or (c) above, the Company
is acquired by or merged into another entity in a transaction in which the
value of the per share consideration received by the stockholders of the
Company on the date of such transaction or at any time during the
applicable period set forth in (a), (b) or (c), respectively, equals or
exceeds the applicable levels set forth in (a), (b) or (c), respectively,
then such respective amount of Escrow Shares shall be released.
(e) Notwithstanding the conditions of release specified in (a), (b)
and (c) above, all remaining Escrow Shares not otherwise released or
cancelled and contributed to the capital of the Company shall be released
as of the date on which (i) the Underwriters and their customers own less
than 20% of the public float of the Common Stock or (ii) if none of the
Underwriters have made the high Bid Price on the Common Stock for 50
consecutive business days.
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<PAGE>
<PAGE>
The Minimum Pretax Income amounts set forth above shall (i) be calculated
exclusively of any extraordinary earnings including, but not limited to, any
charge to income resulting from release of the Escrow Shares and (ii) be
increased proportionately, with certain limitations, in the event additional
shares of Common Stock or securities convertible into, exchangeable for or
exercisable into Common Stock are issued after completion of this Offering. The
Bid Price amounts set forth above are subject to adjustment in the event of any
stock splits, reverse stock splits or other similar events.
Pursuant to the Escrow Agreement, any money, securities, rights or property
distributed in respect of the Escrow Shares, including any property distributed
as dividends or pursuant to any stock split, merger, recapitalization,
dissolution, or total or partial liquidation of the Company, shall be held in
escrow by the Escrow Agent until release of the Escrow Shares. During the time
the Escrow Shares are held in escrow, the Escrow Agent will vote the Escorw
Shares in the same manner as the majority of all other shares of the Company's
outstanding Common Stock is voted. If the applicable Minimum Pretax Income, the
Bid Price or alternative tests set forth above have not been met by March 31 of
the following fiscal year, then the Escrow Shares, as well as any dividends or
other distributions made with respect thereto, will be cancelled and contributed
to the capital of the Company. The Company expects that the release, if any, of
the Escrow Shares to officers, directors, employees and consultants of the
Company will be deemed compensatory and, accordingly, will result in a
substantial charge to reportable earnings, which would equal the fair market
value of such shares on the date of release. Such charge could substantially
increase the loss or reduce or eliminate the Company's net income for financial
reporting purposes for the period(s) during which such shares are, or become
probable of being, released from escrow. Although the amount of compensation
expense recognized by the Company will not affect the Company's total
stockholders' equity, it may have a negative effect on the market price of the
Company's securities. See 'Plan of Operation,' 'Risk Factors -- Charge to
Earnings in the Event of Release of Escrow Shares' and Note 11 of Notes to
Financial Statements.
The Minimum Pretax Income and Bid Price levels set forth above were
determined by negotiation between the Company and the Underwriters and should
not be construed to imply or predict any future earnings by the Company or any
increase in the market price of its securities.
VOTING ARRANGEMENTS
Marc D. Tokayer, Chairman of the Board, the Tokayer Family Trust, Baruch
Sollish, Director and four other stockholders with an aggregate of 1,137,430
shares of Common Stock (31.4% after the Offering), intend to enter into a voting
arrangement whereby they will agree to vote their respective shares to elect
directors and in support of positions favored by a majority of the shares held
among them. See 'Risk Factors -- Control by Management and Current
Stockholders.'
CERTAIN TRANSACTIONS
In July 1994, the Company sold 1,200,000 shares of its Common Stock to Marc
D. Tokayer, Chairman of the Board of Directors of the Company. Mr. Tokayer
subsequently contributed 561,453 shares to the Company which were immediately
cancelled by the Company and deposited 269,274 shares into escrow. The shares
were issued in consideration of services performed and Mr. Tokayer's shares of
Common Stock of TBR Systems Inc. ('TBR') (representing approximately 22% of the
then issued equity of TBR), in the aggregate valued at $1,200 ($.001 per share)
(ascribing no value to the shares of TBR). In August 1994, the Company sold
1,200,000 shares of its Common Stock to the Trust, which may be deemed an
affiliate of the Issuer, in consideration of $25,000. The Trust subsequently
transferred 85,000 shares to an unaffiliated third party in exchange for
services and deposited 730,726 shares into escrow. See 'Principal Stockholders.'
TTR Inc. retained Shane, Alexander, Unterburgher Securities, Inc. ('SAU')
to assist it in the establishment of a United States-based sales and
representative office at a fee of $7,900 per month and the issuance of warrants
for 185,000 shares of Common Stock for the period from November 1, 1994 through
December 31, 1995. SAU subsequently transferred the warrants to non-affiliated
third parties,
37
<PAGE>
<PAGE>
and the shares of Common Stock issuable upon exercise of such warrants are
included in the Selling Securityholders Offering. See 'Selling Securityholders'
Offering.'
In November 1994, the Company loaned SAU $256,000, which was repaid in its
entirety in 1995. The terms of the loan included an interest rate of 8% per
annum, with principal and interest payable by December 31, 1995.
In January 1995, TTR Israel acquired the technology underlying certain of
the features of SoftGuard from Rina Marketing R&D Ltd., an Israeli software
company ('Rina'). Until December 1994, Dr. Baruch Sollish, a director of the
Company, was affiliated with Rina. Dr. Sollish was responsible for developing
the technology purchased by the Company from Rina. In consideration of the
purchase of such technology, the Company paid to Rina at closing $50,000.
Following purchase of the technology, the Company developed, enhanced and added
to such technology to develop the SoftGuard line of products.
In January 1996, the Company sold 50,000 shares of its Common Stock to
Chana Sasha Foundation, Inc. ('CSF') for $100,000. In April 1996, the Company
completed a private placement of 650,000 shares of Common Stock and warrants to
purchase an additional 1,000,000 shares of Common Stock to Canova Finance Inc.
(251,875 shares and 387,500 warrants), Etilon Trading Ltd. (251,875 shares and
387,500 warrants), Joe Ohayon (99,775 shares and 153,500 warrants) and CSF
(46,475 shares and 71,500 warrants) for an aggregate purchase price of $200,000,
including $10,000 ascribed to the warrants. See 'Description of
Securities -- Prior Financings.'
In September 1996, the Company agreed to issue upon the date of this
Prospectus 217,473 warrants to Arik Shavit, a director of the Company, pursuant
to his employment agreement with TTR Israel as its Chief Executive Officer. The
warrants are exercisable at $.01 per share until September 2002 subject to a
four-year vesting schedule, whereby the first 72,491 warrants are not
exercisable until September 1997. See 'Management -- Employment Arrangements.'
For information concerning employment and consulting agreements with, and
compensation of, the Company's executive officers and directors, see
'Management -- Executive Compensation; Employment Arrangements; and Employee
Benefit Plans.' See 'Principal Stockholders -- Voting Arrangements' for a
description of a voting arrangement to be entered into among certain members of
Management and other stockholders.
The Company believes that the terms of each of the foregoing transactions
and those which will exist after the consummation of the Offering are no less
favorable to the Company than could have been obtained from non-affiliated third
parties, although no independent appraisals were obtained. In the future, all
transactions between the Company and its affiliates will also be on terms which
the Company believes will continue to be no less favorable to the Company than
the Company could obtain from non-affiliated parties.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, $.001
par value per share, of which 2,424,548 shares (assuming the pro forma exercise
of 374,548 warrants into 374,548 shares of Common Stock and excluding 1,000,000
Escrow Shares) are currently outstanding and held of record by approximately 60
holders. See 'Description of Securities -- Prior Financings' for a description
of the 374,548 warrants and 'Principal Stockholders -- Escrow Shares' for a
description of the Escrow Shares. Holders of shares of Common Stock are entitled
to one vote for each share held of record on all matters to be voted on by
stockholders. There are no preemptive, subscription, conversion or redemption
rights pertaining to the shares of Common Stock. Holders of shares of Common
Stock are entitled to receive dividends when, as and if declared by the Board of
Directors from funds legally available therefor and to share ratably in the
assets of the Company available upon liquidation, dissolution or winding up. The
holders of shares of Common Stock do not have cumulative voting rights for the
election of directors and, accordingly, the holders of more than 50% of the
shares of Common Stock are able to elect all directors. After the completion of
this Offering, the officers and directors of
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the Company will be entitled to vote 23.5% of the shares of Common Stock. Marc
D. Tokayer, Chairman of the Board, the Trust, Baruch Sollish, Director and four
other stockholders with an aggregate of 1,137,430 shares of Common Stock (31.4%
after the Offering) intend to enter into a voting arrangement whereby they will
agree to vote their respective shares to elect directors and in support of
positions favored by a majority of the shares held among them. Accordingly, in
all likelihood they will be able to elect all of the Company's directors. All of
the outstanding shares of Common Stock are, and the Common Stock offered hereby,
upon issuance and when paid for, will be duly authorized, validly issued, fully
paid and non-assessable.
WARRANTS
Each Warrant entitles the registered holder thereof to purchase one share
of Common Stock for $7.20, subject to adjustment in certain circumstances,
during the period commencing six months from the date of this Prospectus and
ending five years from the date of this Prospectus.
The Company may call the Warrants for redemption with the consent of the
Underwriters, subject to the requirement of a current prospectus covering the
Common Stock issuable upon exercise of such Warrants under an effective
registration statement filed with the Commission, in whole or in part, at a
price of $.25 per Warrant, at any time commencing six months after the date of
this Prospectus, upon not less than 30 days' prior written notice to the
warrantholders, if the closing bid price of the Common Stock has been at least
$13.68 for 20 consecutive trading days preceding the date on which the notice of
redemption is given. The warrantholders shall have the right to exercise the
Warrants until the close of business on the date fixed for redemption.
The Warrants will be issued in registered form pursuant to the terms of the
Warrant Agreement. Reference is made to the Warrant Agreement (which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part) for a complete description of the terms and conditions applicable to the
Warrants (the description herein contained being qualified in its entirety by
reference to the Warrant Agreement).
The exercise prices, number of shares of Common Stock issuable on exercise
of the Warrants and the redemption prices are subject to adjustment in certain
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of the Company. However, the Warrants
are not subject to adjustment for issuances of shares of Common Stock at prices
below their exercise price.
The Warrants may be exercised upon surrender of the Warrant certificate
('Warrant Certificate') on or prior to the expiration date at the offices of the
warrant agent, with the exercise form on the reverse side of the Warrant
Certificate completed and executed as indicated, accompanied by full payment of
the exercise price for the number of Warrants being exercised. The
warrantholders do not have the rights or privileges of holders of Common Stock
prior to exercise of the Warrants.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the Common Stock issuable upon exercise of such
Warrants under an effective registration statement filed with the Commission and
such shares have been qualified for sale or are exempt from qualification under
the securities laws of the state of residence of the holder of such Warrants.
In addition, subject to the rules of the NASD, the Company has agreed to
engage the Underwriter as warrant solicitation agent, in connection with which
it would be entitled to a 4% fee upon exercise of the Warrants. In accordance
with NASD Notice to Members 81-38, no fee shall be paid: (i) upon the exercise
where the market price of the underlying Common Stock is lower than the exercise
price; (ii) for the exercise of Warrants held in any discretionary account;
(iii) upon the exercise of Warrants where disclosure of compensation
arrangements has not been made and documents provided to customers both as part
of the original Offering and at the time of exercise; (iv) upon the exercise of
Warrants in unsolicited transactions; or (v) unless the soliciting NASD member
is designated in writing. Notwithstanding the foregoing, no fees will be paid to
the Underwriter or any other NASD members upon exercise of the Warrants within
the first twelve months after the date of this Prospectus. The certificates
representing the Warrants provide a space where a holder must affirmatively
identify the NASD member who solicited the exercise of such Warrant. Pursuant to
the Warrant Agreement, the
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Warrant Agent is responsible for determining when the fee is owed. The Company
has agreed not to engage any other firm as a warrant solicitation agent.
No fractional shares will be issued upon exercise of the Warrants. However,
if a warrantholder exercises all Warrants then owned of record by him, the
Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable, an amount in cash based on the
market value of the Common Stock on the last trading day prior to the exercise
date.
PRIOR FINANCINGS
From November 1994 through July 1995, the Company consummated a private
placement to 26 accredited investors of two-year 10% promissory notes
aggregating approximately $1,041,000 (the '1995 Debt Financing'). In November
1996, $392,500 of such principal becomes due and payable. In connection with the
Debt Financing, the Company issued warrants (the 'Debt Financing Warrants') to
the noteholders to purchase up to a total of 174,548 shares of Common Stock for
$.01 per share. The 174,548 shares of Common Stock issuable upon exercise of the
Debt Financing Warrants are included in the Selling Securityholders Offering.
The 1995 Debt Financing will be repaid from the proceeds of this Offering as the
promissory notes become due and payable, or sooner at the discretion of the
Company. See 'Use of Proceeds.' The proceeds from the 1995 Debt Financing were
used for the initial activities of the Company, including recruitment of
personnel, acquisition of equipment and office premises, and for general
corporate purposes. Also in connection with the 1995 Debt Financing, the Company
paid commissions and non-accountable expense allowances in the aggregate amount
of approximately $146,000 to SAU. See 'Selling Securityholders Offering' and
'Principal Stockholders.'
In April 1996, the Company completed a private placement of 650,000 shares
of Common Stock and warrants to purchase an additional 1,000,000 shares of
Common Stock to four sophisticated investors for an aggregate purchase price of
$200,000 (the 'Equity Financing'). The securities issued in connection with the
Equity Financing are included in the Selling Securityholders Offering. The
proceeds from the Equity Financing were used for product development and for
general corporate purposes. See 'Selling Securityholders Offering.'
In June 1996, the Company issued in a private placement to 6 accredited
investors one-year 10% promissory notes in the aggregate amount of $500,000 (the
'Bridge Financing'). By its terms, the Bridge Financing must be repaid from the
proceeds of this Offering. See 'Use of Proceeds.' The net proceeds to the
Company of the Bridge Financing were approximately $423,000 after deducting
related placement expenses. The proceeds were used for product development and
working capital purposes. In connection with the Bridge Financing, the Company
issued an aggregate of 150,000 shares of Common Stock, of which 75,000 shares
are being underwritten hereunder. The remaining securities issued in connection
with the Bridge Financing are included in the Selling Securityholders Offering.
Also in connection with the Bridge Financing, the Company paid commissions and
non-accountable expense allowances in the aggregate amount of approximately
$55,000 to the Representative. See 'Selling Securityholders Offering.'
LIMITATIONS UPON TRANSACTIONS WITH 'INTERESTED STOCKHOLDERS'
Section 203 of the Delaware General Corporation Law prohibits a publicly
held Delaware corporation from engaging in a 'business combination' with an
'interested stockholder' for a period of three years after the date of the
transaction in which the person became an interested stockholder unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (iii) on or after such date the business combination is
approved by the board of directors and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. A 'business combination' includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An 'interested
stockholder' is a person who, together with affiliates and associates, owns (or
within three years, did own), 15% or more of the corporation's voting stock. The
restrictions of Section 203 do not apply, among other things, if a
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corporation, by action of its stockholders, adopts an amendment to its
certificate of incorporation or by-laws expressly electing not to be governed by
Section 203, provided that, in addition to any other vote required by law, such
amendment to the certificate of incorporation or by-laws must be approved by the
affirmative vote of a majority of the shares entitled to vote. Moreover, an
amendment so adopted is not effective until twelve months after its adoption and
does not apply to any business combination between the corporation and any
person who became an interested stockholder of such corporation on or prior to
such adoption. The Company's Certificate of Incorporation and By-laws do not
currently contain any provisions electing not to be governed by Section 203 of
the Delaware General Corporation Law. The provisions of Section 203 of the
Delaware General Corporation Law may have a depressive effect on the market
price of the Common Stock because they could impede any merger, consolidating
takeover or other business combination involving the Company or discourage a
potential acquireror from making a tender offer or otherwise attempting to
obtain control of the Company.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The transfer agent and registrar for the Common Stock and the warrant agent
for the Warrants is North American Transfer Co., 147 W. Merrick Road, Freeport,
New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 3,624,548 shares of
Common Stock outstanding. Of the Common Stock to be issued and outstanding after
the Offering, an aggregate of 2,474,548 shares of Common Stock, consisting of
the 1,275,000 shares of Common Stock sold in the Offering and the 1,417,021
shares of Common Stock (all of which shares will be subject to a lock-up
agreement as described below) being offered by the Selling Securityholders will
be freely tradeable without restriction or further registration under the
Securities Act, except for any shares purchased by an 'affiliate' of the Company
within the meaning of Rule 144 under the Securities Act ('Rule 144'). The
remaining 1,150,000 shares of Common Stock are 'restricted securities,' as that
term is defined under Rule 144, and may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemption provided by Rule 144. Approximately 653,547
of such shares will be eligible for sale under Rule 144 commencing 90 days after
the consummation of the Offering; however, all of such shares will be subject to
the following lock-up agreement. The Company's officers, directors, stockholders
each beneficially owning 5% or more of the Common Stock, all Selling
Securityholders (except for the Bridge Selling Stockholders who have agreed to
lock-up their shares, excluding 75,000 shares being underwritten hereunder, for
a period of 18 months) and certain other stockholders (covering an aggregate of
approximately 2,094,548 shares, excluding 180,000 shares included in the
Over-allotment Option) have agreed, for a period of 24 months from the date of
this Prospectus, not to sell or otherwise dispose of any securities of the
Company, without the prior written consent of the Representative.
In general, under Rule 144, as currently in effect, a person, including an
'affiliate' of the Company as defined under the Securities Act, (or persons
whose shares are aggregated), who for at least two years has beneficially owned
restricted securities acquired directly or indirectly from the Company or an
affiliate of the Company in a private transaction, is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the total number of outstanding shares of the same class or the average
weekly trading volume during the four calendar weeks preceding the day notice is
given to the Securities and Exchange Commission with respect to such sale. A
person (or persons whose shares are aggregated) who is not an affiliate and has
not been an affiliate of the Company at any time during the three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least three years is entitled to sell such shares pursuant to
subparagraph (k) of Rule 144 without regard to the volume limitations described
above.
Prior to this Offering, there has been no public trading market for the
Common Stock, and there can be no assurance that a regular trading market will
develop after the Offering, or that if developed it will be sustained. In
addition, no prediction can be made as to the effect, if any, that market sales
of Common Stock or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of shares of Common Stock may be
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sold in the public market may adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.
Rule 701 under the Securities Act provides that, beginning 90 days after
the date of this Prospectus, shares of Common Stock acquired on the exercise of
outstanding options may be resold by persons other than affiliates subject only
to the manner of sale provisions of Rule 144, and by affiliates subject to all
provisions of Rule 144 except its two-year minimum holding period. The Company
intends to file a registration statement under the Securities Act (on Form S-8
or any successor form) to register the shares of Common Stock issued and
reserved for issuance in compensatory arrangements and under its stock plan.
Registration would permit the resale of such shares by non-affiliates in the
public market without restriction under the Securities Act.
REGISTRATION RIGHTS
The holders of 800,000 shares of Common Stock, 374,548 shares of Common
Stock of the Company issuable upon exercise of warrants at an exercise price
$.01 per share, 1,000,000 Warrants and 1,000,000 shares of Common Stock issuable
upon exercise of such Warrants have been granted certain incidental and/or
demand registration rights. These securities were purchased in private
transactions with the Company in November 1994 through July 1995, April 1996 and
June 1996. The piggyback registration rights do not apply to registrations
relating to initial public offerings, mergers, acquisitions or pursuant to Form
S-8 (or any successor form). Notwithstanding, all of such shares of Common Stock
and Warrants are included in the Selling Securityholders' Offering (except to
the extent that 75,000 shares are being underwritten in this Offering and up to
180,000 shares are included in the Over-allotment Option).
UNDERWRITING
Subject to the terms of the Underwriting Agreement, the Underwriters,
severally and not jointly, have agreed to purchase from the Company, 1,200,000
shares of Common Stock and 600,000 Warrants, and 75,000 shares of Common Stock
from the Bridge Selling Stockholders, as follows:
<TABLE>
<CAPTION>
NAME SHARES WARRANTS
- ---------------------------------------------------------------------- --------- --------
<S> <C> <C>
First Metropolitan Securities, Inc. ..................................
--------- --------
Total....................................................... 1,275,000 600,000
--------- --------
--------- --------
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent. The Underwriters are
committed to purchase all of the securities offered hereby on a 'firm
commitment' basis, if any are purchased.
The Underwriters have advised the Company that they propose to initially
offer the Common Stock and the Warrants to the public at the prices set forth on
the cover page of this Prospectus and to certain dealers at such prices less
concessions not in excess of $ per share of Common Stock. The two
market-makers required for a Nasdaq SmallCap Market listing will not be chosen,
but rather it is anticipated by the Company that market-makers will register
voluntarily.
Neither the Company nor any of its officers, directors, affiliates and
associates will recommend, encourage or advise investors to open brokerage
accounts with any broker-dealer that is obtained to make a market in the
Company's Securities. Furthermore, no promoter or anyone acting at the direction
of the Company's officers, directors, affiliates, associates or promoters will
engage in such activities.
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The Company, the Trust, which may be deemed an affiliate of the Company,
and the collective securityholders from the 1995 Debt Financing, have granted to
the Underwriters an option, exercisable during the 45 calendar day period after
the closing of the Offering, to purchase from the Company at the initial public
offering price less underwriting discounts and the non-accountable expense
allowance, up to an aggregate of 191,250 shares of Common Stock (on a pro rata
basis) for the sole purpose to cover over-allotments, if any. The Company has
also granted such option to the Underwriters with respect to up to an aggregate
of 90,000 Warrants.
The Company has agreed that it will not issue any other securities (except
with respect to the shares of Common Stock issuable upon the exercise of
outstanding options or warrants, pursuant to the 1996 Plan, the Warrants or the
Representative's Warrants) for three years from the Effective Date without the
prior written consent of the Representative. The Company and the Bridge Selling
Stockholders have agreed to pay to the Representative a non-accountable expense
allowance of 3% of the gross proceeds of this Offering, of which $50,000 has
been paid as of the date of this Prospectus. Further, the Company has agreed to
reimburse the Representative for certain accountable expenses relating to this
Offering.
The Representative has informed the Company that it does not expect sales
to discretionary accounts to exceed percent of the total number of the shares
of Common Stock offered hereby.
The Representative acted as Placement Agent for the Bridge Financing in
June 1996 for which it received a Placement Agent fee and a non-accountable
expense allowance of approximately $55,000.
Each of the Company's stockholders who beneficially own more than five (5%)
percent of the Company's outstanding Common Stock, or warrants or options to
purchase Common Stock or other securities convertible into Common Stock, the
Selling Securityholders (except for the Bridge Selling Stockholders who have
agreed to lock-up their shares, excluding 75,000 shares being underwritten
hereunder, for a period of 18 months) and certain other stockholders, and each
officer and director of the Company or relative of such officer or director have
agreed not to sell or otherwise dispose of any of their Common Stock (covering
an aggregate of approximately 2,094,548 shares, excluding 180,000 shares
included in the Over-allotment Option) or other securities of the Company owned
directly or indirectly by him or beneficially by him on the date of this
Prospectus for a period of 24 months from the date of this Prospectus without
the prior written consent of the Representative, which consent may be granted
prior to the expiration of the lock-up period, but not prior to the exercise or
expiration of the Over-allotment Option. Notwithstanding these lock-up
agreements, such persons may make private transfers, provided that the
transferees agree to be bound by the same restrictions. An appropriate legend
will be marked on the face of certificates representing all such securities.
The Company has agreed, if required by the Representative at any time
within the five years commencing in fiscal 1996, to designate two individuals to
serve as non-voting advisors to the Company's Board of Directors. The
Representative's designees will receive the same compensation, if any, for such
service as other non-officer directors. In lieu of the Representative's right to
designate the non-voting advisors, the Representative shall have the right
during such five-year period, in its sole discretion, to designate two persons
for election as directors of the Company. The Representative has advised the
Company that it has no intention to select its designees as non-voting advisors
or directors in the immediate future. If and when the Representative designates
such persons to serve as directors of the Company, those individuals may be
associated persons of the Representative who may have conflicting obligations to
the Company and the Representative when serving on the Board of Directors. The
Company will utilize its best efforts to obtain the election of such persons,
each of whom shall be entitled to receive the same compensation, expense
reimbursements and other benefits as any other director. See 'Risk
Factors -- Possible Conflicts of Directors.'
The Company has also agreed to retain the Representative, pursuant to a
consulting agreement (the 'Consulting Agreement'), as the Company's management
and financial consultants for the two-year period commencing at or prior to the
closing of this Offering, for an annual rate of $75,000 payable in advance on
the Closing of this Offering. Pursuant to the Consulting Agreement, the
Representative will render certain financial advisory and investment banking
services to the Company, including advice as to the Company's financial public
relations, internal operations, corporate finance matters, and other related
matters. As part of the Consulting Agreement, the Company has agreed, for a
period of three
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years following the Effective Date, to pay the Representative a cash finder's
fee of (i) five percent of the first $1,000,000; (ii) four percent of the second
$1,000,000; (iii) three percent of the third $1,000,000; and (iv) two percent of
any consideration over $4,000,000 upon the completion of any transaction in
which the Representative was responsible for introducing a merger or acquisition
candidate to the Company.
In addition, the Representative has a right of first refusal to perform
services for the Company with respect to certain future transactions for a
period of four years after the Effective Date.
In connection with this Offering, the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
120,000 shares of Common Stock and 60,000 Warrants at 120% of the offering price
(the 'Representative's Warrants'). The shares of Common Stock and the Warrants
issuable upon exercise of the Representative's Warrants will be identical to the
securities offered hereby. The Representative's Warrants contain anti-dilution
provisions providing for adjustment of the exercise price upon the occurrence of
certain events.
The Representative's Warrants will be nontransferable for a period of one
year from the date of this Prospectus except to officers of the Representative,
other underwriters, selected dealers, or their respective officers or partners.
The holders of the Representative's Warrants will have no voting, dividend or
other rights of stockholders of the Company until such time as the
Representative's Warrants are exercised.
At the request of a majority of the holders of the Representative's
Warrants and/or underlying securities during the five-year period commencing one
year after the date of this Prospectus, the Company has agreed to file, at its
expense and on one occasion, and to use its best efforts to cause to become
effective, a new registration statement or prospectus required to permit the
public sale of the securities underlying the Representative's Warrants. In
addition, if at any time during the six-year period commencing one year after
the date of this Prospectus, the Company registers any of its securities or
exempts such securities from registration under the provisions of Regulation A
or any equivalent thereto, the holders of the Representative's Warrants will
have the right, subject to certain conditions, to include in such registration
statement at the Company's expense, all or any part of the securities underlying
the Representative's Warrants.
A new registration statement will be required to be filed and declared
effective before distribution to the public of the securities underlying the
Representative's Warrants. The Company will be responsible for the cost of
preparing such a registration statement.
During the term of the Representative's Warrants, the holders of the
Representative's Warrants are given the opportunity to profit from a rise in the
market price of the Common Stock and the Warrants. To the extent that the
Representative's Warrants are exercised, dilution of the interests of the
Company's stockholders will occur. The Representative and its transferees may be
deemed to be 'underwriters' under the Securities Act with respect to the sale of
the Common Stock and the Warrants to be received upon exercise of the
Representative's Warrants, and any profit realized upon such sale may be deemed
to be additional underwriting compensation. Further, the terms upon which the
Company will be able to obtain additional equity capital may be adversely
affected since the holder of the Representative's Warrants can be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than those
provided in the Representative's Warrants.
Commencing six months after the date of this Prospectus, the Company has
agreed to pay the Representative as warrant solicitation agent, a 4% fee upon
exercise of the Warrants subject to the rules of the NASD. See 'Description of
Securities.'
Although it has no legal obligations to do so, the Representative has
indicated that it intends to become a market maker and otherwise effect
transactions in the Company's securities. The Representative also has the right
to act as the Company's exclusive agent in connection with any future
solicitation of warrantholders to exercise their Warrants. Unless granted an
exemption by the Commission from Rule 10b-6 under the Exchange Act, the
Representative will be prohibited from engaging in any market-making activities
or solicited brokerage activities with regard to the Company's securities during
the periods prescribed by exemption (xi) to Rule 10b-6 before the solicitation
of the exercise of any Warrant (and/or the exercise of a significant amount of
the Representative's Warrants
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and the Warrants contained therein) until the later of the termination of such
solicitation activity or the termination by waiver or otherwise of any right the
Representative may have to receive a fee for the exercise of the Warrants
following such solicitation.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriters against certain liabilities in connection with
the Registration Statement of which this Prospectus forms a part, including
liabilities under the Securities Act. To the extent this section may purport to
provide exculpation from possible liabilities arising under the Federal
securities laws, it is the opinion of the Commission that such indemnification
is against public policy and is therefore unenforceable.
The foregoing is a summary of the principal terms of the Underwriting
Agreement, the Representative's Warrants and the Consulting Agreement and does
not purport to be complete. Reference is made to the copies of the Underwriting
Agreement, the Representative's Warrants Agreement and the Consulting Agreement
which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
First Metropolitan Securities, Inc. commenced operations in November 1995,
and has not acted as an underwriter of a public offering of securities. First
Metropolitan's lack of experience may have an adverse impact on the development
of a trading market for the Company's securities following this Offering. See
'Risk Factors -- Lack of Experience of the Representative.'
Prior to this Offering, no public market exists for the Common Stock and
the Warrants offered hereby. Consequently, the public offering price of the
Common Stock and the Warrants and the exercise prices and other terms of the
Warrants have been determined by the Company, and the Representative and are not
necessarily related to the Company's asset value, earnings, book value or other
such criteria of value. Factors considered in determining the public offering
price of the Common Stock and the Warrants and the exercise price of the
Warrants include primarily the prospects for the industry in which the Company
operates, the Company's Management, the general condition of the securities
markets and the demand for securities in similar industries.
SELLING SECURITYHOLDERS' OFFERING
Concurrently with this Offering, 1,199,598 shares of Common Stock and
1,000,000 Warrants have been registered under the Securities Act for resale.
Furthermore, the Registration Statement of which the Selling Securityholders'
Prospectus is a part also relates to an aggregate of 1,000,000 shares of Common
Stock issuable upon the exercise of 1,000,000 Warrants being registered on
behalf of the holders of all of such securities (the 'Selling Securityholders').
Accordingly, the Selling Securityholders may exercise the Warrants and sell the
underlying Common Stock. The Selling Securityholders have agreed (except for the
Bridge Selling Stockholders who have agreed to lock-up their shares, excluding
75,000 shares being underwritten hereunder, for a period of 18 months; and
except for certain Selling Securityholders with respect to up to 180,000 shares
of Common Stock included in the Over-allotment Option) not to sell such
securities for a period of 24 months after the date of this Prospectus without
the prior written consent of the Representative, which consent may be granted
prior to the expiration of the lock-up period but not prior to the exercise or
expiration of the Underwriters' over-allotment option.
The Company will not receive any proceeds from the sales of the Selling
Securityholders' securities by the Selling Securityholders. Sales of the Selling
Securityholders' securities, or even the potential of such sales, would likely
have an adverse effect on the market price of the Company's securities.
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<PAGE>
SELLING STOCKHOLDERS
The Bridge Selling Stockholders are offering an aggregate of 75,000 shares
of Common Stock in the underwritten Offering. None of the Bridge Selling
Stockholders have ever held any position or office with the Company or had any
other material relationship with the Company. The Company will not receive any
proceeds from the sale of the Bridge Selling Stockholders' shares of Common
Stock by the Bridge Selling Stockholders. The following table sets forth certain
information with respect to the Bridge Selling Stockholders.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP PERCENTAGE
OF COMMON PERCENTAGE OF OF COMMON OF COMMON
STOCK COMMON STOCK AMOUNT OF STOCK STOCK OWNED
PRIOR TO OWNED BEFORE SHARES BEING AFTER AFTER
NAME OF SELLING STOCKHOLDER OFFERING(1) OFFERING(2) REGISTERED OFFERING OFFERING(3)
- --------------------------------------------- --------- ------------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
Richard H. Schneider(4)...................... 22,500 * 11,250 11,250 *
Gary Pope(4)................................. 37,500 1.5% 18,750 18,750 *
Walter Scott(4).............................. 37,500 1.5 18,750 18,750 *
Leonard Lewis................................ 15,000 * 7,500 7,500 *
Joseph P. Colwin(4).......................... 15,000 * 7,500 7,500 *
Donald K. Currie(4).......................... 22,500 * 11,250 11,250 *
</TABLE>
- ------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Each beneficial owner's percentage ownership is determined by assuming that
options or warrants that are held by such person (but not those held by any
other person) and which are exercisable within 60 days from the date hereof
have been exercised.
(2) Based on 2,424,548 shares of Common Stock outstanding (excluding 1,000,000
Escrow Shares) before the Offering.
(3) Based on 3,624,548 shares of Common Stock outstanding (excluding 1,000,000
Escrow Shares) after the Offering, including 1,200,000 shares of Common
Stock offered by the Company hereby.
(4) This selling stockholder is a limited partner of the Representative.
LEGAL MATTERS
The legality of the securities offered by this Prospectus will be passed
upon for the Company by Baer Marks Upham LLP, New York, New York. In addition,
certain other matters in connection with this Offering with respect to Israeli
law will be passed upon for the Company by Aboudi & Brounstein, Tel Aviv,
Israel. Certain legal matters will be passed upon for the Underwriter by Lampert
and Lampert, New York, New York.
EXPERTS
The consolidated financial statements of TTR Inc. for the period from July
14, 1994 (date of inception) to December 31, 1994 and the year ended December
31, 1995 included in this Prospectus have been included in reliance upon the
report of Schneider Ehrlich & Wengrover LLP, independent certified public
accountants, given upon the authority of said firm as experts in accounting and
auditing. The financial statements of TTR Technologies Ltd. for the period from
December 5, 1994 (date of inception) to December 31, 1994 and the year ended
December 31, 1995 included in this Prospectus in the consolidated financial
statements of TTR Inc. have been included in reliance upon the report of BDO
Almagor & Co., independent certified public accountants, given upon the
authority of said firm as experts in accounting and auditing.
46
<PAGE>
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form SB-2 including all amendments
thereto (the 'Registration Statement') under the Securities Act with respect to
the Securities offered by this Prospectus. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulation of the Commission.
For further information with respect to the Company and the Offering, reference
is made to the Registration Statement, including the exhibits filed therewith.
The Registration Statement may be inspected and copies may be obtained from the
Public Reference Section at the Commission's principal office, located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611, and the Northeast Regional Office, Seven World Trade Center,
Suite 1300, New York, New York 10048, upon payment of the fees prescribed by the
Commission. The Registration Statement has been filed electronically with the
Commission. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, at http://www.sec.gov. Statements contained
in this Prospectus as to the contents of any contract or other document are not
necessarily complete and where the contract or other document has been filed as
an exhibit to the Registration Statement, each such statement is qualified in
all respects by such reference to the applicable document filed with the
Commission.
47
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
Indpendent Auditors' Reports.......................................................................... F-2
Report of Independent Public Accountants.............................................................. F-3
Consolidated Balance Sheet............................................................................ F-4
Consolidated Statement of Operations.................................................................. F-5
Consolidated Statement of Stockholders' Deficit....................................................... F-6
Consolidated Statement of Cash Flows.................................................................. F-7 - F-8
Notes to Consolidated Financial Statements............................................................ F-9 - F-17
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
TTR INC.
Immanuel, Israel
We have audited the accompanying consolidated balance sheet of TTR Inc. and
its Subsidiary (A Development Stage Company) as of December 31, 1995, and the
related consolidated statements of operations, cash flows, and stockholders'
deficit for the year ended December 31, 1995 and for the period from July 14,
1994 (Date of Inception) to December 31, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of TTR
Technologies, Ltd. a wholly owned subsidiary, which statements reflect total
assets of $218,392 as of December 31, 1995, and net losses of $571,924 and
$2,193 for the years ended December 31, 1995 and the period from December 5,
1994 to December 31, 1994, respectively. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to the amounts included for TTR Technologies Ltd. is based solely on the
reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TTR Inc. and its Subsidiary as of
December 31, 1995 and the results of their operations and their cash flows for
the year ended December 31, 1995 and for the period from July 14, 1994 (Date of
Inception) to December 31, 1994 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements
and as discussed in Note 3 to the financial statements, the Company has incurred
recurring losses since its inception in 1994, and has an accumulated deficit at
December 31, 1995 of $938,748. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
SCHNEIDER, EHRLICH & WENGROVER LLP
Woodbury, New York
July 1, 1996
F-2
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
T.T.R. TECHNOLOGIES LTD.
(A Development Stage Company)
We have audited the accompanying balance sheet of T.T.R. Technologies Ltd.
(a development stage company) ('the Company') as of December 31, 1995 and the
related statements of operations, changes in shareholders' deficiency and cash
flows for the year ended December 31, 1995 and for the period December 5, 1994
(date of inception) to December 31, 1994. 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 audit in accordance with generally accepted auditing
standards, including those prescribed by the Israeli Auditor's Regulations
(Auditor's Mode of Performance), 1973. Such auditing standards are substantially
identical to generally accepted auditing standards in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance that the financial statements are free of material misstatement. An
audit includes examining on a test basis, evidence supporting the amounts and
disclosure in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the management of
the Company, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the above financial statements present fairly in all
material respects, the financial position of the Company (a development stage
company) as of December 31, 1995 and the results of its operations, changes in
shareholders' deficiency, and cash flows for the year ended December 31, 1995
and for the period December 5, 1994 (date of inception) to December 31, 1994 in
conformity with accounting principles generally accepted in Israel and in the
United States. As applicable to these financial statements, such accounting
principles are substantially identical.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency and shareholders' deficiency that raise
substantial doubt about its ability to continue as a going concern. The
Company's plans are also referred to in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The financial statements have been translated into dollars for the purpose
of their inclusion in the financial statements of TTR Inc.
BDO ALMAGOR & CO.
Certified Public Accountants
Ramat-Gan, Israel
July 1, 1996
F-3
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, -----------
1995
------------ (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash........................................................................... $ 87,866 $ 384,874
Accounts receivable............................................................ 1,680 583
Other current assets........................................................... 15,939 21,384
------------ -----------
Total current assets...................................................... 105,485 406,841
Property and equipment -- net....................................................... 175,619 173,924
Deferred financing costs, net of accumulated amortization of $76,175 and $116,353,
for 1995 and 1996................................................................. 77,256 100,100
Deferred stock offering costs....................................................... -- 40,385
Due from officer.................................................................... 26,000 26,000
Other assets........................................................................ 18,844 17,892
------------ -----------
Total assets.............................................................. $ 403,204 $ 765,142
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Current liabilities
Current portion of long-term debt.............................................. $ 528,130 $ 1,362,944
Accounts payable............................................................... 34,958 9,722
Accrued expenses............................................................... 63,213 93,243
Interest payable............................................................... 96,023 149,583
------------ -----------
Total current liabilities................................................. 722,324 1,615,492
Long-term debt, less current portion................................................ 552,103 136,419
------------ -----------
Total liabilities......................................................... 1,274,427 1,751,911
------------ -----------
Committments and contingencies -- See Notes
Stockholders' deficit
Common stock, $.001 par value;
20,000,000 shares authorized,
2,200,000 and 3,050,000 issued and outstanding including 1,000,000 shares
placed in escrow.............................................................. 2,200 3,050
Additional paid-in capital.......................................................... 42,673 405,356
Cumulative translation adjustments.................................................. 22,652 38,254
Deficit accumulated during the development stage.................................... (938,748) (1,433,429)
------------ -----------
Total stockholders' deficit............................................... (871,223) (986,769)
------------ -----------
Total liabilities and stockholders' deficit............................... $ 403,204 $ 765,142
------------ -----------
------------ -----------
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FROM FROM FROM
INCEPTION INCEPTION INCEPTION
(JULY 14, (JULY 14, SIX MONTHS ENDED (JULY 14,
1994) TO YEAR ENDED 1994) TO JUNE 30, 1994) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ JUNE 30,
1994 1995 1995 1995 1996 1996
------------ ------------ ------------ ---------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue............................. $ -- $ -- $ -- $ -- $ -- $ --
Expenses
Research and development........ 276,248 276,248 92,731 176,320 452,568
Sales and marketing............. 15,800 248,158 263,958 87,644 61,099 325,057
General and admininstrative..... 20,641 241,461 262,102 118,913 195,709 457,811
------------ ------------ ------------ ---------- ---------- -----------
Total expenses.............. 36,441 765,867 802,308 299,288 433,128 1,235,436
------------ ------------ ------------ ---------- ---------- -----------
Operating loss...................... (36,441) (765,867) (802,308) (299,288) (433,128) (1,235,436)
Other (income) expense
Loss on investment.............. 17,000 17,000 17,000
Interest income................. (500) (12,324) (12,824) (8,896) (12,824)
Interest expense................ 6,144 126,120 132,264 36,389 61,553 193,817
------------ ------------ ------------ ---------- ---------- -----------
Total other (income)
expenses.................. 5,644 130,796 136,440 27,493 61,553 197,993
------------ ------------ ------------ ---------- ---------- -----------
Net loss............................ $ (42,085) $ (896,663) $ (938,748) $ (326,781) $ (494,681) $(1,433,429)
------------ ------------ ------------ ---------- ---------- -----------
------------ ------------ ------------ ---------- ---------- -----------
Net loss per share.................. $ (0.02) $ (0.37) $ (0.39) $ (0.15) $ (0.19) $ (0.54)
------------ ------------ ------------ ---------- ---------- -----------
------------ ------------ ------------ ---------- ---------- -----------
Weighted average number of shares
outstanding....................... 2,778,533 2,399,793 2,399,793 2,217,080 2,641,034 2,641,034
------------ ------------ ------------ ---------- ---------- -----------
------------ ------------ ------------ ---------- ---------- -----------
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
DEFICIT
FOREIGN ACCUMULATED
ADDITIONAL CURRENCY DURING
COMMON STOCK PAID-IN TRANSLATION DEVELOPMENT
SHARES AMOUNT CAPITAL ADJUSTMENT STAGE TOTAL
------------ ------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at July 14, 1994
(date of inception).................... -- $ -- $ -- $-- $ -- $ --
Issuances of common stock, par value
$.001
Services rendered at $.001 per
share.............................. 1,200,000 1,200 1,200
Cash at $.0208 per share............. 1,200,000 1,200 23,800 25,000
Net loss................................. (42,085 ) (42,085)
------------ ------- ---------- ----------- ----------- ---------
Balances at December 31, 1994............ 2,400,000 2,400 23,800 -- (42,085 ) (15,885)
Common stock contributed................. (561,453) (561 ) 561
Issuances of common stock, par value
$.001
Services rendered at $.05 per
share.............................. 361,453 361 17,712 18,073
Issuance of common stock purchase
warrants
Services rendered at $.04 per
warrant............................ 600 600
Foreign currency translation
adjustment............................. 22,652 22,652
Net loss................................. (896,663 ) (896,663)
------------ ------- ---------- ----------- ----------- ---------
Balances at December 31, 1995............ 2,200,000 2,200 42,673 22,652 (938,748 ) (871,223)
Issuances of common stock, par value
$.001
Cash at $.307 per share.............. 650,000 650 199,350 200,000
Cash at $.50 per share (net of stock
offering costs of $11,467)......... 150,000 150 63,383 63,533
Cash at $2.00 per share.............. 50,000 50 99,950 100,000
Foreign currency translation
adjustment............................. 15,602 15,602
Net loss................................. (494,681 ) (494,681)
------------ ------- ---------- ----------- ----------- ---------
Balances at June 30, 1996 (unaudited).... 3,050,000 $3,050 $405,356 $38,254 $(1,433,429) $(986,769)
------------ ------- ---------- ----------- ----------- ---------
------------ ------- ---------- ----------- ----------- ---------
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM FROM
INCEPTION INCEPTION
(JULY 14, (JULY 14,
1994) TO YEAR ENDED 1994) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss....................................................... $ (42,085) $ (896,663) $ (938,748)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization............................. 5,470 95,298 100,768
Translation adjustment.................................... -- (561) (561)
Stock and warrants issued for services.................... -- 18,673 18,673
Increase (decrease) in cash attributable to changes in
assets and liabilities
Accounts receivable.................................. (203) (1,422) (1,625)
Escrow............................................... (14,572) 14,572 --
Other current assets................................. -- (13,492) (13,492)
Accounts payable..................................... 161 40,183 40,344
Accrued expenses..................................... 1,070 74,638 75,708
Interest payable..................................... 4,808 91,215 96,023
------------ ------------ ------------
Net cash used by operating activities..................... (45,351) (577,559) (622,910)
------------ ------------ ------------
Cash flows from investing activities
Loans receivable............................................... (125,500) 125,500 --
Purchases of property and equipment............................ (1,402) (193,655) (195,057)
Increase in organization costs................................. (7,680) -- (7,680)
------------ ------------ ------------
Net cash used by investing activities..................... (134,582) (68,155) (202,737)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from issuance of common stock......................... 26,200 -- 26,200
Loans to officer............................................... (20,000) (6,000) (26,000)
Deferred financing costs....................................... (75,319) (78,112) (153,431)
Proceeds from long-term debt................................... 483,277 605,764 1,089,041
Payments on long-term debt..................................... -- (21,613) (21,613)
------------ ------------ ------------
Net cash provided by financing activities................. 414,158 500,039 914,197
------------ ------------ ------------
Effect of exchange rates on cash.................................... (334) (350) (684)
------------ ------------ ------------
Increase (decrease) in cash......................................... 233,891 (146,025) 87,866
Cash at beginning of period......................................... -- 233,891 --
------------ ------------ ------------
Cash at end of period............................................... $ 233,891 $ 87,866 $ 87,866
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest.................................................. $ 207 $ 2,461 $ 2,668
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM
INCEPTION
SIX MONTHS ENDED (JULY 14,
JUNE 30, 1994) TO
------------------------------ JUNE 30,
1995 1996 1996
----------------- --------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss............................................................ $ (326,781) $(494,681) $(1,433,429)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization.................................. 31,357 59,470 160,238
Amortization of discount on long-term debt..................... -- 1,960 1,960
Translation adjustment......................................... 396 957 396
Stock and warrants issued for services......................... 18,673 -- 18,673
Increase (decrease) in cash attributable to changes in assets
and liabilities
Accounts receivable....................................... (501) 1,243 (382)
Escrow.................................................... 14,572 -- --
Other current assets...................................... (29,165) 1,546 (11,946)
Accounts payable.......................................... 33,996 (21,869) 18,475
Accrued expenses.......................................... 66,641 33,598 109,306
Interest payable.......................................... 38,964 53,560 149,583
----------------- --------- -----------
Net cash used by operating activities.......................... (151,848) (364,216) (987,126)
----------------- --------- -----------
Cash flows from investing activities
Loans receivable.................................................... (104,395) -- --
Purchases of property and equipment................................. (133,700) (14,871) (209,928)
Increase in organization costs...................................... (7,680)
----------------- --------- -----------
Net cash used by investing activities.......................... (238,095) (14,871) (217,608)
----------------- --------- -----------
Cash flows from financing activities
Proceeds from issuance of common stock.............................. -- 363,533 389,733
Loans to officer.................................................... -- -- (26,000)
Deferred financing costs............................................ (61,276) (64,980) (218,411)
Deferred stock offering costs....................................... (40,385) (40,385)
Proceeds from long-term debt........................................ 469,103 425,000 1,514,041
Payments on long-term debt.......................................... (2,760) (6,380) (27,993)
----------------- --------- -----------
Net cash provided by financing activities...................... 405,067 676,788 1,590,985
----------------- --------- -----------
Effect of exchange rates on cash......................................... 845 (693) (1,377)
----------------- --------- -----------
Increase in cash......................................................... 15,969 297,008 384,874
Cash at beginning of period.............................................. 233,891 87,866 --
----------------- --------- -----------
Cash at end of period.................................................... $ 249,860 $ 384,874 $ 384,874
----------------- --------- -----------
----------------- --------- -----------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest............................................................ $ 249 $ -- $ 2,668
----------------- --------- -----------
----------------- --------- -----------
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 1 -- DESCRIPTION OF BUSINESS
TTR Inc. (the 'Company') was incorporated on July 14, 1994 under the laws
of the State of Delaware. TTR Technologies Ltd., was formed under the laws of
the State of Israel on December 5, 1994 as a wholly owned research and
development subsidiary of the Company.
The Company is engaged in the development and enhancement of computer
software products which it intends to market.
The Company is considered to be in the development stage and has earned no
revenues to date. Business activities to date have focused on product and
marketing research, product development, and raising capital.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, TTR Technologies Ltd. All significant
intercompany accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported revenues
and expenses. Actual results could vary from the estimates that were used.
REVENUE RECOGNITION
The Company anticipates that revenues from software will be recognized upon
delivery to the customer, provided that the Company's obligations, if any, are
insignificant and collectability is probable. Revenues from maintenance and
engineering services will be recognized over the term of the respective
contracts.
FOREIGN CURRENCY TRANSLATIONS
The financial statements of the Company's Israeli subsidiary have been
translated into U.S. dollars in accordance with Statement No. 52 of the
Financial Accounting Standards Board (FASB). Assets and liabilities have been
translated at year-end (period-end) exchange rates and statement of operations
have been translated at average rates prevailing during the year. The
translation adjustments have been recorded as a separate component of
stockholders' deficit (cumulative translation adjustment).
NET LOSS PER SHARE
Net loss per share of common stock is computed based on the weighted
average number of common stock and common stock equivalent shares outstanding
during the period. Pursuant to SEC rules, common stock and warrants issued for
consideration below the proposed public offering price within the last twelve
months have been included in the calculation of common stock equivalents, using
the treasury stock method, as if they had been outstanding for all periods
presented. Shares held in escrow are not treated as outstanding during any
period (Note 11).
F-9
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNT POLICIES -- (CONTINUED)
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Fixed assets are depreciated on
a straight-line basis over their estimated useful lives as follows:
<TABLE>
<S> <C>
Office furniture and equipment.............................. 5 - 7 years
Computer equipment.......................................... 5 years
Vehicles.................................................... 6.5 years
</TABLE>
RESEARCH AND DEVELOPMENT COSTS
Research and development expenditures are charged to operations as
incurred. Software development costs are required to be capitalized when a
product's technological feasibility has been established by completion of a
working model of the product and ending when a product is available for general
release to customers. To date, completion of a working model of the Company's
products and general release have substantially coincided. As a result, the
Company has not capitalized any software development costs since such costs have
not been significant.
INCOME TAXES
The Company accounts for its income taxes using the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109, 'Accounting
for Income Taxes' (SFAS No. 109), which requires the establishment of a deferred
tax asset or liability for the recognition of future deductible or taxable
amounts and operating loss carryforwards. Deferred tax expense or benefit is
recognized as a result of the changes in the assets and liabilities during the
year. Valuation allowances are established when necessary, to reduce deferred
tax assets to amounts expected to be realized.
INTERIM FINANCIAL STATEMENTS
In the opinion of management of the Company, the unaudited financial
statements as of June 30, 1996, and for the six months ended June 30, 1995 and
1996, have been prepared on the same basis as the audited financial statements
and include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the results of the interim periods.
NOTE 3 -- GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has a limited
operating history, has sustained losses since its inception and the accumulated
deficit at December 31, 1995 and at June 30, 1996 (unaudited) are $938,748 and
$1,433,429, respectively. The Company faces a number of risks, including
uncertainties regarding demand and market acceptance of the Company's products,
dependence on a single product line, the effects of technological change,
competition and the development of new products. Additionally, there are other
risk factors such as the nature of the Company's distribution channels, ability
to manage growth, loss of key personnel and the effects of planned expansion of
operations on the future results of the Company.
F-10
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 3 -- GOING CONCERN -- (CONTINUED)
The Company anticipates that it will continue to incur significant
operating costs and losses in connection with the development of its products
and increased marketing efforts and is subject to other risks affecting the
business of the Company, as discussed above. The Company is not generating any
revenues from its operations to fund its activities and is therefore dependent
on additional financing from external sources. In addition, in November 1996,
the company will be required to commence repayment of its long-term debt (see
Note 8). The ability of the Company to continue as a going concern is dependent
upon the success of the Company's product and its access to sufficient funding
to enable it to continue operations. The Company is investigating various
possibilities for long-term financing including a proposed initial public
offering. There is no assurance that such financing will be available to the
Company and the inability to obtain such financing would have a material adverse
effect on the Company.
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Office equipment................................................. $ 22,646 $ 24,626
Computer equipment............................................... 112,941 127,095
Vehicles......................................................... 59,470 58,207
------------ -----------
195,057 209,928
Less: Accumulated depreciation................................... 19,438 36,004
------------ -----------
$175,619 $ 173,924
------------ -----------
------------ -----------
</TABLE>
Depreciation expense was $57, $13,560, $4,007 and $12,701 for the periods
ended December 31, 1994, December 31, 1995, June 30, 1995 and June 30, 1996,
respectively.
NOTE 5 -- DUE FROM OFFICER
This amount represents non-interest bearing advances to an officer of the
Company.
NOTE 6 -- OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Loan receivable, employee........................................ $ 13,468 $13,284
Organization costs, net of accumulated amortization.............. 5,376 4,608
------------ -----------
Total....................................................... $ 18,844 $17,892
------------ -----------
------------ -----------
</TABLE>
The loan receivable represents non-interest bearing advances to an employee
of the Company. The loan is to be repaid over a four year period commencing in
1996.
Organization costs are being amortized over a five year period using the
straight-line method.
F-11
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 7 -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Accrued payroll and payroll taxes................................ $ 20,128 $43,959
Other............................................................ 43,085 49,284
------------ -----------
$ 63,213 $93,243
------------ -----------
------------ -----------
</TABLE>
NOTE 8 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
(1) Bank loans................................................. $ 39,153 $ 31,323
(2) Promissory notes........................................... 1,041,080 1,041,080
(3) Promissory notes (net of unamortized
discount of $73,040)..................................... -- 426,960
------------ -----------
1,080,233 1,499,363
Current portion............................................ 528,130 1,362,944
------------ -----------
Non-current portion........................................ $ 552,103 $ 136,419
------------ -----------
------------ -----------
</TABLE>
- ------------
(1) These loans are denominated in NIS, bear interest at the rate of prime plus
2.4%-3% per annum and are secured by substantially all the assets of the
Company's subsidiary. Principal payments are due in various installments
through 1998.
(2) The Company issued two-year promissory notes aggregating $1,041,080 in a
private placement. The notes bear interest at the rate of 10% per annum
payable at the maturity date. In connection with this offering the Company
issued warrants to the noteholders to purchase up to a total of 174,548
shares of the Company's common stock for $.01 per share. The warrants are
exercisable from the date on which a registration statement with respect to
an initial public offering (IPO) becomes effective until the IPO closes. In
addition the Company utilized the services of Shane, Alexander, Unterburgher
Securities, Inc. (SAU) as a placement agent. SAU received a commission of
10% of the gross proceeds and an additional 4% of such proceeds as a
non-accountable expense allowance. These fees, totaling approximately
$146,000, have been capitalized as deferred financing costs and are being
amortized over a two-year period using the straight-line method.
Amortization was $4,645, $71,530, $30,976 and $40,178 for the periods ended
December 31, 1994, 1995, June 1995 and June 1996.
(3) In June 1996, the Company realized net proceeds of $423,552 from a private
placement of 10 units of its securities at a purchase price of $50,000 per
unit. Each unit consisted of $50,000 Principal Amount 10% promissory notes
and 15,000 shares of its common stock. The Company has allocated $7,500 per
unit to the Common Stock sold in the private placement, and the balance to
promissory note principal. The difference between the face value of the
notes ($50,000) and the amount allocated to note principal represents a
discount which is being amortized over the term of the note based upon the
interest method. The principal and accrued interest become due and payable
at the earlier of one year or the date the Company receives proceeds from
any form of public or private equity financing or debt financing exceeding
$350,000.
F-12
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 8 -- LONG-TERM DEBT -- (CONTINUED)
In connection with this offering a placement agent received a commission of
10% of the gross proceeds and an additional 3% of such proceeds as a
non-accountable expense allowance. Certain of the investors in the private
placement have an ownership interest in the placement agent.
The aggregate maturities of long-term debt for the next three years ending
December 31, are as follows: 1996 -- $528,130; 1997 -- $969,738 and
1998 -- $9,325.
NOTE 9 -- LOSS ON INVESTMENT
In August 1994, the Company's president contributed to the Company his 22%
interest in the common stock of TBR, Inc. (TBR), a Florida corporation. TBR's
only asset is a software product developed by its shareholders. TBR has no other
assets or liabilities and has had no significant business operations to date.
During fiscal 1995, the Company purchased an additional 4.8% of TBR common stock
for $17,000, which funds were used in a marketing effort for TBR's software
product. As of December 31, 1995, the Company elected to write off its
investment in TBR in full.
NOTE 10 -- INCOME TAXES
At December 31, 1995, the Company had available $364,000 of net operating
loss carryforwards for U.S. federal income tax purposes which expire in the
years 2009 through 2010 and $325,000 of foreign net operating loss carryforwards
with no expiration date. Due to the uncertainty of their realization, no income
tax benefit has been recorded by the Company for these net operating loss
carryforwards as valuation allowances have been established for any such
benefits. The use of the U.S. federal net operating loss carryforwards is
subject to limitations under section 382 of the Internal Revenue code pertaining
to changes in stock ownership.
Significant components of the Company's deferred tax assets and liabilities
for U.S. federal and Israel income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................ $225,000 $ 341,400
Research and developments costs............................. 65,000 89,200
Accrued vacation and severance.............................. 13,000 29,400
------------ -----------
Total deferred tax assets.............................. 303,000 460,000
Valuation allowance.................................... 303,000 460,000
------------ -----------
Net deferred tax assets..................................... $ -- $ --
------------ -----------
------------ -----------
</TABLE>
Pre-tax losses from foreign (Israeli) operations were $2,193, $571,924,
$183,176 and $368,478 for the periods ended December 31, 1994, 1995, June 1995
and June 1996, respectively.
NOTE 11 -- STOCKHOLDERS' DEFICIT
CONTRIBUTED SHARES
In January 1995, the Company's President contributed a total of 561,453
shares of common stock held by him. The Company subsequently cancelled these
shares.
F-13
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 11 -- STOCKHOLDERS' DEFICIT -- (CONTINUED)
WARRANTS
On May 15, 1995, the Company issued warrants as compensation to a
consultant to purchase up to a total of 15,000 shares of the Company's common
stock for $.01 per share. The warrants are exercisable until January 15, 2001.
PRIVATE PLACEMENT
In April 1996, the Company completed a private placement of 650,000 shares
of its Common Stock and warrants for an additional 1,000,000 shares, for an
aggregate purchase price of $200,000. The warrants are exercisable after an
initial public offering of the Company's Common stock at an exercise price equal
to the exercise price of any warrants issued at the IPO.
ESCROW SHARES
An aggregate of 1,000,000 shares of the Company's common stock, owned by
its President have been designated as escrow shares. The escrow shares are not
assignable nor transferable until certain as yet undetermined earnings or market
price criteria have been met.
As restriction on such shares are removed, they will be accounted for as
reissued for services rendered and the fair value of such shares will be charged
to operations as compensation expense. The charge will not affect the Company's
equity, nor will it be deductible for income tax purposes.
NOTE 12 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective December 31, 1995, the Company adopted SFAS 107, which requires
disclosing fair value to the extent practicable for financial instruments which
are recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed therein are not necessarily representative of
the amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement. The following table
summarizes financial instruments by individual balance sheet accounts as of
December 31, 1995.
<TABLE>
<CAPTION>
CARRYING
AMOUNT FAIR VALUE
---------- ----------
<S> <C> <C>
Debt maturing within one year..................................... $ 528,130 $ 528,130
Long-term debt.................................................... 552,103 552,103
---------- ----------
Totals....................................................... $1,080,233 $1,080,233
---------- ----------
---------- ----------
</TABLE>
For debt classified as current, it was assumed that the carrying amount
approximated fair value for these instruments because of their short maturities.
The fair value of long-term debt is based on current rates at which the Company
could borrow fund with similar remaining maturities. The carrying amount of
long-term debt approximates fair value.
NOTE 13 -- RELATED PARTY TRANSACTIONS
In November 1994, the Company entered into a fourteen month agreement with
SAU to assist in the establishment of a U.S. based sales office and to provide
marketing consulting services to the Company. Pursuant to the contract SAU
received a fee of $7,900 per month and was issued Warrants to purchase up to
185,000 shares of the Company's Common Stock under the same terms as the
F-14
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 13 -- RELATED PARTY TRANSACTIONS -- (CONTINUED)
promissory note holders. SAU subsequently assigned its rights to the Warrants to
certain of the promissory note holders.
The Company loaned a total of $256,000 to SAU under a short term loan
agreement. The loan was repaid in 1995 with interest at the rate of 8% per
annum.
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
CONSULTING AND EMPLOYMENT AGREEMENT
a) In August 1994, the Company's subsidiary entered into an employment
agreement with one of its officers. The agreement has a three-year term which
provides for annual compensation of $60,000, subject to adjustment. The
agreement may terminate with 60 days prior notice and if the termination is
without cause then the general manager will be entitled to continue to receive
his salary for an addtional twelve months. At the end of the initial three-year
term the agreement automatically renews for one-year periods.
b) In December 1995, the Company's subsidiary entered into an employment
agreement with its director of product research and development. The agreement
has a one-year term, renewable for additional one-year terms and provides for
annual base compensation of $60,000 plus incentive compensation, payable
quarterly, equal to 1% of the initial $1,000,000 of gross receipts from certain
products of the Company and 2% for gross receipts in excess thereof. In the
event the agreement is terminated or not renewed without cause, and if a
properly registered patent, as defined, is in effect, the Company's subsidiary
will be required to pay royalties in the amount of the incentive compensation
for the duration of the patent.
c) The Company has entered into a three-year marketing consulting agreement
which is due to expire in October 1998. Under the agreement, the consultant
receives a monthly fee of $4,800 per month.
OPERATING LEASES
On June 1, 1996, the Company entered into an operating lease agreement for
office space. Future minimum rentals on this lease as of December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------------------------------------------------------------------
<S> <C>
1996................................................................ $ 22,218
1997................................................................ 48,624
1998................................................................ 48,624
1999................................................................ 24,312
--------
$143,778
--------
--------
</TABLE>
F-15
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 15 -- SUBSEQUENT EVENTS -- (UNAUDITED)
STOCK OPTION PLAN
In July 1996, the Board of Directors adopted the Company's Incentive and
Non-qualified Stock Option Plan (the 'Plan') and has reserved up to 450,000
shares of Common Stock for issuance thereunder. The Plan provides for the
granting of options to officers, directors, employees and advisors of the
Company. The exercise of incentive stock options ('ISOs') issued to employees
who are less than 10% stockholders shall not be less than the fair market value
of the underlying shares on the date of grant or not less than 100% of the fair
market value of the shares in the case of an employee who is a 10% stockholder.
The exercise price of restricted stock options shall not be less than the par
value of the shares to which the option relates. Options are not exercisable for
a period of one year from the date of grant. Thereafter, options may be
exercised as determined by the Board of Directors, with maximum terms of ten and
five years, respectively, for ISOs issued to employees who are less than 10%
stockholders and employees who are 10% stockholders. In addition, under the
plan, no individual will be given the opportunity to exercise ISO's valued in
excess of $100,000, in any calendar year, unless and to the extent the options
have first become exercisable in the preceding year. The Plan will terminate in
2006.
In July 1996, the Company issued 5,000 options under the plan to a former
director. The options are excercisable at $6.00 per share until January 15,
2001.
EMPLOYMENT AGREEMENT
In July 1996, the Company's subsidiary entered into a three-year employment
agreement with its new President and general manager to commence no later than
September 8, 1996. The agreement provides for annual compensation of
approximately $100,000, subject to adjustment and is renewable for additional
one-year periods at the end of the initial term. Within the initial term, the
employee may terminate the agreement with 60 days prior notice and with 90 days
notice thereafter. In addition the Company has agreed to grant, on the date on
which the Company's IPO Registration Statement is declared effective, warrants
to purchase up to 217,473 shares of Common Stock at an exercise price of $.01
per share. The Company estimates that it will record deferred compensation
expense amounting to $1,305,000, or $6.00 per share, and will amortize this
amount over the period that services are to be provided. The options will vest
over a four year period commencing with the date of grant.
PROPOSED PUBLIC OFFERING
On September 3, 1996, the Company's board of directors approved the filing
of a registration statement by TTR, Inc. with the Securities and Exchange
Commission covering the proposed sale of its common stock to the public.
NOTE 16 -- RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, SFAS No. 121, 'Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of' was issued which establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain intangibles to be disposed of. SFAS
No. 121 requires that long-lived assets and certain intangibles to be held and
leased by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. SFAS No. 121 must be implemented by the Company no later than the
year ended December 31, 1996. The adoption of SFAS No. 121 is not expected to
have material impact on the Company's financial position or operating results.
F-16
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
[INFORMATION AS OF AND FOR THE PERIODS ENDED JUNE 30, 1995 AND 1996 ARE
UNAUDITED]
NOTE 16 -- RECENTLY ISSUED ACCOUNTING STANDARDS -- (CONTINUED)
In October 1995, SFAS No. 123, 'Accounting for Stock-Based Compensation'
was issued which establishes financial accounting and reporting standards for
stock-based employee compensation plans. SFAS No. 123 defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, SFAS No. 123 permits the Company to
continue to measure compensation costs for its stock option plans using the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, 'Accounting for Stock Issued to Employees'. If the Company
elects to remain with its current accounting, in 1996 the Company must make pro
forma disclosures of 1995 and 1996 net income (loss) and earnings (loss) per
share as if the fair value based method of accounting had been applied. The
Company has not yet determined the valuation method it will employ or the effect
on operating results of implementing SFAS No. 123. In addition, SFAS No. 123
requires that transactions whereby the Company issues its equity instruments to
acquire goods or services from non-employees entered into after December 15,
1995 must be accounted for based on the fair value.
F-17
<PAGE>
<PAGE>
_____________________________ _____________________________
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY, BY ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS
OF BY ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................................... 3
Summary Financial Information.............................................................................................. 6
Risk Factors............................................................................................................... 7
Use of Proceeds............................................................................................................ 16
Dividend Policy............................................................................................................ 17
Dilution................................................................................................................... 18
Capitalization............................................................................................................. 19
Plan of Operation.......................................................................................................... 19
Business................................................................................................................... 21
Management................................................................................................................. 32
Principal Stockholders..................................................................................................... 35
Certain Transactions....................................................................................................... 37
Description of Securities.................................................................................................. 38
Shares Eligible for Future Sale............................................................................................ 41
Underwriting............................................................................................................... 42
Selling Securityholders' Offering.......................................................................................... 45
Selling Stockholders....................................................................................................... 46
Legal Matters.............................................................................................................. 46
Experts.................................................................................................................... 46
Available Information...................................................................................................... 47
Index to Financial Statements.............................................................................................. F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,275,000 SHARES OF
COMMON STOCK
AND 600,000 WARRANTS
TTR INC.
--------------------------
PROSPECTUS
--------------------------
FIRST METROPOLITAN
SECURITIES, INC.
, 1996
_____________________________ _____________________________
<PAGE>
<PAGE>
[Alternative Page for Selling Securityholders' Prospectus]
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED SEPTEMBER , 1996
PROSPECTUS
TTR INC.
2,417,021 SHARES OF COMMON STOCK
REDEEMABLE WARRANTS TO PURCHASE 1,000,000 SHARES OF COMMON STOCK
- ----------------------------------------------------------
This Prospectus relates to 2,417,021 shares of Common Stock (the 'Selling
Securityholders' Shares'), $.001 par value (the 'Common Stock'), of TTR Inc.
(the 'Company'), which are being offered for sale by certain selling
securityholders, including members of Management (the 'Selling
Securityholders'), including 1,417,021 shares of Common Stock and redeemable
Warrants to purchase 1,000,000 shares of Common Stock (the 'Selling
Securityholders' Warrants') and an aggregate of 1,000,000 shares of Common Stock
issuable upon exercise of the Selling Securityholders' Warrants. Each Selling
Securityholders' Warrant entitles the holder to purchase one share of Common
Stock for $7.20 during the five-year period commencing six months after the date
of this Prospectus. The Selling Securityholders' Shares and the Selling
Securityholders' Warrants are sometimes collectively referred to herein as the
'Selling Securityholders' Securities.' See 'Selling Securityholders and Plan of
Distribution.'
The Company will not receive any of the proceeds from the sales of the
Selling Securityholders' Securities by the Selling Securityholders. The Selling
Securityholders' Securities may be offered from time to time by the Selling
Securityholders, their transferees, pledgees and/or their donees, through
ordinary brokerage transactions in the over-the-counter market, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or at
negotiated prices. The Selling Securityholders (except for the Bridge Selling
Stockholders who have agreed to lock-up their shares, excluding 75,000 shares
being underwritten hereunder, for a period of 18 months; and except for certain
Selling Securityholders with respect to up to 90,000 shares of Common Stock
included in the Over-allotment Option) have each agreed not to sell any of the
securities being registered hereunder for a period of 24 months from the date of
the Prospectus without the prior written consent of the Representative.
The Selling Securityholders, their pledgees and/or their donees, may be
deemed to be 'underwriters' as defined in the Securities Act of 1933, as amended
(the 'Securities Act'). If any broker-dealers are used by the Selling
Securityholders, their pledgees and/or their donees, any commission paid to
broker-dealers and, if broker-dealers purchase any Selling Securityholders'
Securities as principals, any profits received by such broker-dealers on the
resale of the Selling Securityholders' Securities, may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Securityholders, their pledgees and/or their
donees, may be deemed to be underwriting commissions. All costs, expenses and
fees in connection with the registration of the Selling Securityholders'
Securities will be borne by the Company except for any commission paid to
broker-dealers.
The Selling Securityholders' Securities offered by this Prospectus may be
sold from time to time by the Selling Securityholders, their pledgees and/or
their donees. No underwriting arrangements have been entered into by the Selling
Securityholders. The distribution of the Selling Securityholders' Securities by
the Selling Securityholders, their pledgees and/or their donees, may be effected
in one or more transactions that may take place on the over-the country market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more dealers for resale of such shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Securityholders, their pledgees and/or their donees, in connection with sales of
the Selling Securityholders' Securities.
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering of 1,275,000
shares of Common Stock and redeemable Warrants to purchase 600,000 shares of
Common Stock (without giving effect to the Underwriters' Over-allotment Option
granted to the Underwriters to purchase up to an additional 191,250 shares of
Common Stock and 90,000 Warrants), was declared effective by the Securities and
Exchange Commission. In connection with such underwritten offering, the Company
granted the Representative a warrant to purchase 120,000 shares of Common Stock
and 60,000 Warrants (the 'Representative's Warrants').
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE 'RISK
FACTORS' BEGINNING ON PAGE 7.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE OFFERING
<TABLE>
<S> <C>
Securities Registered(1).................. 2,417,021 shares of Common Stock. See 'Description of Securities' and 'Selling
Securityholders and Plan of Distribution.'
1,000,000 Warrants. See 'Description of Securities.'
Risk Factors.............................. This offering involves a high degree of risk and immediate substantial dilution.
See 'Risk Factors' and 'Dilution.'
</TABLE>
------------
(1) Includes 1,000,000 shares of Common Stock issuable upon the exercise of the
Selling Securityholders' Warrants being registered herein.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
<PAGE>
<PAGE>
[Alternative Page for Selling Securityholders' Prospectus]
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
The Company has issued an aggregate of 2,417,021 shares of Common Stock,
including 1,417,021 shares of Common Stock, and 1,000,000 Selling
Securityholders' Warrants and 1,000,000 shares of Common Stock issuable upon
exercise of the Selling Securityholders' Warrants. See 'Principal Stockholders.'
The Selling Securityholders have advised the Company that sales of the Selling
Securityholders' Securities may be effected from time-to-time by themselves,
their pledgees and/or their donees, in transactions (which may including block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Selling Securityholders' Securities, or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Securityholders, their pledgees and/or their donees, may effect such
transactions by selling the Selling Securityholders' Securities directly to
purchasers or through broker-dealers that may act as agents or principals. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders and/or the purchasers of Selling
Securityholders' Securities for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Securityholders, their pledgees and/or their donees, and any
broker-dealers that act in connection with the sale of the Selling
Securityholders' Securities as principals may be deemed to be 'underwriters'
within the meaning of Section 2(11) of the Securities Act and any commissions
received by them and any profit on the resale of the Selling Securityholders'
Securities as principals might be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Securityholders' Securities
being registered on behalf of the Selling Securityholders are restricted
securities while held by the Selling Securityholders and the resale of such
securities by the Selling Securityholders is subject to the prospectus delivery
and other requirements of the Act. The Selling Securityholders, their pledgees
and/or their donees, may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the Selling
Securityholders' Securities against certain liabilities, including liabilities
arising under the Securities Act. The Company will not receive any proceeds from
the sale of the Selling Securityholders' Securities by the Selling
Securityholders. Sales of the Selling Securityholders' Securities by the Selling
Securityholders, or even the potential of such sales, would likely have an
adverse effect on the market price of the Company's securities.
At the time a particular offer of any securities is made by or on behalf of
the Selling Securityholders, to the extent required, a prospectus supplement
will be distributed which will set forth the number of securities being offered
and the terms of the offering, including the names or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for shares
purchased from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, and the proposed selling
price to the public.
Under the Securities Exchange Act of 1934, as amended (the 'Exchange Act'),
and the regulations thereto, any person engaged in distribution of Company
securities offered by this Prospectus may not simultaneously engage in
market-making activities with respect to Company securities during the
applicable 'cooling off' period prior to the commencement of such distribution.
In addition, and without limiting the foregoing, the Selling Securityholders
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation, Rules 10b-6 and 10b-7, in
connection with transactions in the securities, which provisions may limit the
timing of purchases and sales of Company securities by the Selling
Securityholders.
The following table set forth certain information with respect to persons
for whom the Company is registering the Selling Securityholders' Securities for
resale to the public. The Company will not receive any of the proceeds from the
sale of the Selling Securityholders' Securities. Beneficial ownership of the
Selling Securityholders' Securities by such Selling Securityholders after the
Offering will depend on the number of Selling Securityholders' Securities sold
by each Selling Securityholders. The securities held by the Selling
Securityholders are restricted securities while held by such Selling
Securityholders and the resale of such securities by the Selling Securityholders
is subject to prospectus delivery and other requirements of the Act. The Selling
Securityholders' Securities offered by the Selling Securityholders are not being
underwritten by the Underwriter.
Alt-2
<PAGE>
<PAGE>
[Alternative Page for Selling Securityholders' Prospectus]
(table continued on next page)
<TABLE>
<CAPTION>
BENEFICIAL
BENEFICIAL OWNERSHIP
OWNERSHIP PRIOR PERCENTAGE AMOUNT OF AFTER SELLING
TO SELLING OF SHARES/ SECURITYHOLDERS'
SECURITYHOLDERS' COMMON STOCK WARRANTS OFFERING IF ALL
OFFERING OWNED BEFORE BEING SHARES/WARRANTS
SELLING SECURITYHOLDER(1) SHARES(2) OFFERING(3) REGISTERED ARE SOLD
- --------------------------------------------- ---------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
Arnold Ackerman.............................. 78,000 3.2% 78,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Adelaide Corl Trust.......................... 4,000 * 4,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Marvin Barish................................ 8,000 * 8,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Grafton Cooper............................... 3,680 * 3,680 Shs. 0 Shs.
0 Wts. 0 Wts.
Richard Denton............................... 12,498 * 12,498 Shs. 0 Shs.
0 Wts. 0 Wts.
Alice Fischlewitz............................ 24,000 * 24,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Bertha Fischlewitz........................... 24,000 * 24,000 Shs. 0 Shs.
0 Wts. 0 Wts.
The Garrison Third Family Limited
Partnership................................ 5,920 * 5,920 Shs. 0 Shs.
0 Wts. 0 Wts.
John Hess.................................... 951 * 951 Shs. 0 Shs.
0 Wts. 0 Wts.
Chana and Yecheskal Kaminsky................. 4,000 * 4,000 Shs. 0 Shs.
0 Wts. 0 Wts.
John McDonnell............................... 3,760 * 3,760 Shs. 0 Shs.
0 Wts. 0 Wts.
Modern Technology Corp....................... 4,000 * 4,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Larry Morris................................. 8,320 * 8,320 Shs. 0 Shs.
0 Wts. 0 Wts.
Yosef Muskin................................. 2,000 * 2,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Dana Resnick................................. 4,000 * 4,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Solomon Ross................................. 4,000 * 4,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Ivan Roth.................................... 1,680 * 1,680 Shs. 0 Shs.
0 Wts. 0 Wts.
Morris Rubin................................. 4,000 * 4,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Dorris Saltz................................. 2,000 * 2,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Louis Sammut................................. 4,000 * 4,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Sandra Satt.................................. 8,000 * 8,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Walter Scott................................. 51,500(3) * 32,750 Shs. 0 Shs.
0 Wts. 0 Wts.
Arthur Sterenbuck............................ 8,000 * 8,000 Shs. 0 Shs.
0 Wts. 0 Wts.
George Taylor................................ 12,743 * 12,743 Shs. 0 Shs.
0 Wts. 0 Wts.
John Winter.................................. 3,033 * 3,033 Shs. 0 Shs.
0 Wts. 0 Wts.
Ulrich and Dagmar Wissman.................... 10,000 * 10,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Alcium Bennet................................ 12,000 * 12,000 Shs. 0 Shs.
0 Wts. 0 Wts.
(table continued on next page)
</TABLE>
Alt-3
<PAGE>
<PAGE>
[Alternative Page for Selling Securityholders' Prospectus]
<TABLE>
<CAPTION>
BENEFICIAL
BENEFICIAL OWNERSHIP
OWNERSHIP PRIOR PERCENTAGE AMOUNT OF AFTER SELLING
TO SELLING OF SHARES/ SECURITYHOLDERS'
SECURITYHOLDERS' COMMON STOCK WARRANTS OFFERING IF ALL
OFFERING OWNED BEFORE BEING SHARES/WARRANTS
SELLING SECURITYHOLDER(1) SHARES(2) OFFERING(3) REGISTERED ARE SOLD
- --------------------------------------------- ---------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C>
Richard Larry................................ 6,000 * 6,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Lawrence Radbell............................. 9,000 * 9,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Richard Ross................................. 6,000 * 6,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Yossi Simpson................................ 6,000 * 6,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Jerome Toder................................. 6,000 * 6,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Wayne Sacker................................. 24,000 * 24,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Charna Radbell............................... 3,000 * 3,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Nicole Radbell............................... 3,000 * 3,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Stuart Elfland............................... 9,000 * 9,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Jack Hirschfield............................. 3,000 * 3,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Nicole Kubin................................. 6,000 * 6,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Jericho Investments Ltd...................... 15,000 * 15,000 Shs. 0 Shs.
0 Wts. 0 Wts.
Canova Finance Inc........................... 639,375(4) 22.7% 251,875 Shs. 0 Shs.
387,500 Wts. 0 Wts.
Etilon Trading Ltd........................... 639,375(5) 22.7% 251,875 Shs. 0 Shs.
387,500 Wts. 0 Wts.
Joe Ohayon................................... 253,275(6) 9.8% 99,775 Shs. 0 Shs.
153,500 Wts. 0 Wts.
Chana Sasha Foundation, Inc.................. 167,975(7) 6.7% 46,475 Shs. 50,000 Shs.
71,500 Wts. 0 Wts.
1.4%(14)
Richard H. Schneider......................... 22,500(8) * 11,250 Shs. 0 Shs.
0 Wts. 0 Wts.
Gary Pope.................................... 37,500(9) 1.5% 18,750 Shs. 0 Shs.
0 Wts. 0 Wts.
Leonard Lewis................................ 15,000(10) * 7,500 Shs. 0 Shs.
0 Wts. 0 Wts.
Joseph P. Colwin............................. 15,000(11) * 7,500 Shs. 0 Shs.
0 Wts. 0 Wts.
Donald K. Currie............................. 22,500(12) * 11,250 Shs. 0 Shs.
0 Wts. 0 Wts.
Tokayer Family Trust......................... 384,274(13) 15.8% 100,000 Shs. 284,274 Shs.
0 Wts. 0 Wts.
Arik Shavit.................................. 217,473(15) 8.2% 217,473 Shs. 0 Shs.
0 Wts. 0 Wts.
Total:............................. 2,558,822 74.7% 1,417,021 Shs. 334,274 Shs.
---------------- ------------ -------------- ---------------
---------------- ------------ -------------- ---------------
1,000,000 Wts. 0 Wts.
-------------- ---------------
-------------- ---------------
9.2%
---------------
---------------
(footnotes on next page)
</TABLE>
Alt-4
<PAGE>
<PAGE>
[Alternative Page for Selling Securityholders' Prospectus]
* Less than 1% of the issued and outstanding shares of Common Stock.
(1) Except as otherwise indicated, no Selling Securityholder is an officer,
director or affiliate of the Company.
(2) Based on 2,424,548 shares issued and outstanding (excluding 1,000,000
Escrow Shares). Each beneficial owner's percentage ownership is determined
by assuming that options or warrants that are held by such person (but not
those held by any other person) and which are exercisable within 60 days
from the date hereof have been exercised.
(3) Includes 18,750 shares included in the underwritten offering.
(4) Includes 387,500 shares issuable upon the exercise of a like number of
Warrants.
(5) Includes 387,500 shares issuable upon the exercise of a like number of
Warrants.
(6) Includes 153,500 shares issuable upon the exercise of a like number of
Warrants.
(7) Includes 71,500 shares issuable upon the exercise of a like number of
Warrants.
(8) Includes 11,250 shares included in the underwritten offering.
(9) Includes 18,750 shares included in the underwritten offering.
(10) Includes 7,500 shares included in the underwritten offering.
(11) Includes 7,500 shares included in the underwritten offering.
(12) Includes 11,250 shares included in the underwritten offering.
(13) The wife of Marc D. Tokayer, the Company's Chairman, is the Trustee for the
Tokayer Family Trust (the 'Trust'), and the income beneficiaries of the
Trust are Mr. Tokayer's children. Accordingly, the Trust may be deemed an
affiliate of the Company. The amount of beneficial ownership includes
90,000 shares held by the Trust which are subject to the Over-allotment
Option, but excludes 730,726 Escrow Shares.
(14) Based on 3,624,548 shares issued and outstanding (excluding 1,000,000
Escrow Shares) after the Offering.
(15) A director and Vice President of the Company. Includes 217,473 shares
issuable upon the exercise of warrants issuable upon the date of this
Prospectus. The warrants are subject to a four-year vesting schedule,
whereby the first 72,491 warrants are not exercisable until September 1997.
Alt-5
<PAGE>
<PAGE>
[ALTERNATIVE PAGE FOR SELLING SECURITYHOLDERS' PROSPECTUS]
_____________________________ _____________________________
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY, BY ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF BY
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................................................................................................ 3
Summary Financial Information............................................................................................. 6
Risk Factors.............................................................................................................. 7
Use of Proceeds........................................................................................................... 16
Dividend Policy........................................................................................................... 17
Dilution.................................................................................................................. 18
Capitalization............................................................................................................ 19
Plan of Operation......................................................................................................... 19
Business.................................................................................................................. 21
Management................................................................................................................ 32
Principal Stockholders.................................................................................................... 35
Certain Transactions...................................................................................................... 37
Description of Securities................................................................................................. 38
Shares Eligible for Future Sale........................................................................................... 41
Underwriting.............................................................................................................. 42
Legal Matters............................................................................................................. 46
Experts................................................................................................................... 46
Available Information..................................................................................................... 47
Selling Securityholders and Plan of Distribution.......................................................................... Alt-2
Index to Financial Statements............................................................................................. F-1
</TABLE>
------------------------
2,417,021 SHARES OF
COMMON STOCK
1,000,000 WARRANTS
TTR INC.
--------------------------
PROSPECTUS
--------------------------
, 1996
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law, the Issuer has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act of
1933, as amended (the 'Securities Act'). The Issuer's Bylaws provide that the
Issuer will indemnify its directors, executive officers, other officers,
employees and agents to the fullest extent permitted by Delaware law.
The Issuer's Certificate of Incorporation provides for the elimination of
liability for monetary damages for breach of the directors' fiduciary duty of
care to the Issuer and its stockholders. These provisions do not eliminate the
directors' duty of care and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Issuer, for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for any transaction from which the director derived an
improper personal benefit, and for payment of dividends or approval of stock
repurchases or redemptions that are unlawful under Delaware law. The provision
does not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
Reference is made to Section 8 of the Underwriting Agreement (Exhibit 1.1
to this Registration Statement) which provides for indemnification by the
Underwriters and their controlling persons, on the one hand, and of the Issuer
and its controlling persons on the other hand, against certain civil
liabilities, including liabilities under the Securities Act.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Issuer in connection with
the issuance and distribution of the securities being registered hereunder. All
of the amounts shown are estimates (except for the SEC and the NASD registration
fees).
<TABLE>
<S> <C>
SEC filing fee........................................................................... $ 10,648.46
NASD, Inc. filing fee.................................................................... 3,588.02
NASDAQ listing fee....................................................................... 20,000.00
Transfer agent's fee..................................................................... 5,000.00
Printing and engraving expenses.......................................................... 125,000.00
Legal fees and expenses.................................................................. 250,000.00
Blue sky filing fees and expenses (including counsel fees)............................... 57,500.00
Accounting fees and expenses............................................................. 100,000.00
Miscellaneous expenses................................................................... 53,263.52
-----------
Total.......................................................................... $625,000.00
-----------
-----------
</TABLE>
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES
1. (a) In July 1994, the Company sold 1,200,000 shares of its Common Stock
to Marc D. Tokayer, Chairman of the Board of Directors of the Issuer. Mr.
Tokayer subsequently contributed 561,453 shares to the Company which were
immediately cancelled by the Company and deposited 269,274 shares into escrow to
be released from escrow if the Company attains certain future earnings levels or
if the Common Stock trades at certain levels.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of services performed and Mr.
Tokayer's shares of Common Stock of TBR Systems Inc. (representing approximately
22% of the then issued equity) in the aggregate valued at $1,200 ($.001 per
share) (ascribing no value to the shares of TBR Systems Inc.).
II-1
<PAGE>
<PAGE>
(d) The Company believes that the shares of Common Stock were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
2. (a) In August 1994, the Company sold 1,200,000 shares of its Common
Stock to the Tokayer Family Trust (the 'Trust'), which may be deemed an
affiliate of the Issuer. The Trust subsequently transferred 85,000 shares to an
unaffiliated third party in exchange for services and deposited 730,726 shares
into escrow to be released from escrow if the Company attains certain future
earnings levels or if the Common Stock trades at certain levels.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of $25,000 ($.0208 per share).
(d) The Company believes that the shares of Common Stock were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
3. (a) From November 1994 through July 1995, the Company consummated a
private placement (the '1995 Debt Financing') to 26 accredited investors of
units (the 'Units') consisting of $25,000 principal amount 10% promissory notes
(the 'Notes') and 4,000 warrants exercisable at $.01 per share (the 'Debt
Financing Warrants') . In connection with the Debt Financing, the Company sold
41.6425 Units and issued warrants to the noteholders to purchase up to a total
of 174,548 shares of Common Stock for $.01 per share.
(b) The Company paid commissions (10%) and non-accountable expense
allowances (4%) in the aggregate amount of approximately $146,000 to Shane,
Alexander, Unterburgher Securities, Inc. ('SAU').
(c) The total offering price was $1,041,080.40 (ascribing no value to the
Debt Financing Warrants), and the total underwriting discount was $104,108.
(d) The Company believes that the Units, Notes and Debt Financing Warrants
were issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Sections 4(2) and 4(6) of the Securities
Act of 1933, as amended, and Regulation D promulgated thereunder.
4. (a) In November 1994, the Company issued 185,000 Debt Financing Warrants
to SAU. SAU subsequently transferred all of the warrants to 17 unaffiliated
individuals.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of consulting services
performed.
(d) The Company believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended.
5. (a) In June 1995, the Company issued an aggregate of 361,453 shares of
Common Stock to six consultants, including 100,000 shares to Dr. Baruch Sollish,
a director of the Company.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of consulting services
performed valued at $18,073 ($.05 per share).
(d) The Company believes that the shares of Common Stock were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
6. (a) In May 1995, the Company issued 15,000 Debt Financing Warrants to
Jericho Investments Ltd.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of financial consulting
services performed.
II-2
<PAGE>
<PAGE>
(d) The Company believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended.
7. (a) In January 1996, the Company sold 50,000 shares of Common Stock to
the Chana Sasha Foundation.
(b) There were no underwriters with respect to the above transaction.
(c) The shares were issued in consideration of $100,000 ($2.00 per share).
(d) The Company believes that the shares of Common Stock were issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
8. (a) In April 1996, the Company completed a private placement of 650,000
shares of Common Stock and warrants to purchase an additional 1,000,000 shares
of Common Stock (the 'Warrants') to four sophisticated investors (the 'Equity
Financing').
(b) There were no underwriters with respect to the above transaction.
(c) The aggregate purchase price of the securities sold in the Equity
Financing was $200,000, including $10,000 ascribed to the Warrants.
(d) The Company believes that the shares of Common Stock and Warrants were
issued in a transaction not involving a public offering in reliance upon an
exemption from registration provided by Section 4(6) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder.
9. (a) In June 1996, the Company issued in a private placement to 6
accredited investors one-year 10% promissory notes (the 'Bridge Financing'). In
connection with the Bridge Financing, the Company issued to such investors an
aggregate of 150,000 shares of Common Stock.
(b) The Company paid commissions and non-accountable expense allowances in
the aggregate amount of approximately $55,000 to First Metropolitan Securities,
Inc.
(c) The total offering price was $500,000 (ascribing $75,000 to the shares
of Common Stock), and the total underwriting discount was $50,000.
(d) The Company believes that the promissory notes and the shares of Common
Stock were issued in a transaction not involving a public offering in reliance
upon an exemption from registration provided by Section 4(6) of the Securities
Act of 1933, as amended, and Regulation D promulgated thereunder.
10. (a) In July 1996, the Company issued 5,000 options to Sheldon Rich, a
former director of the Company. The options are exercisable at $6.00 per share
until January 15, 2001.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of services performed
pursuant to the Company's 1996 Stock Option Plan.
(d) The Company believes that the options were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended.
11. (a) In September 1996, the Company agreed to issue 217,473 warrants
upon the date of this Prospectus to Arik Shavit, a director of the Company. The
warrants are exercisable at $.01 per share until September 2002 and are subject
to a four-year vesting schedule.
(b) There were no underwriters with respect to the above transaction.
(c) The warrants were issued in consideration of services to be performed
prior to vesting.
(d) The Company believes that the warrants were issued in a transaction not
involving a public offering in reliance upon an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended.
II-3
<PAGE>
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Company, as amended.
3.2 -- By-Laws of the Company, as amended.
3.3 -- Memorandum of Association of TTR Israel.
3.4 -- Articles of Association of TTR Israel.
4.1 -- Form of Representative's Warrants.
*4.2 -- Form of Public Warrant Agreement.
*4.3 -- Specimen Common Stock Certificate.
*4.4 -- Specimen Warrant Certificate.
*4.5 -- Escrow Agreement.
4.6 -- Form of Registration Rights between the Company and certain securityholders.
5.1 -- Securities Opinion of Baer Marks & Upham LLP.
*9.1 -- Voting Trust Agreement.
*10.1 -- Financial Consulting Agreement between the Representative and the Company.
10.2 -- The Company's 1996 Stock Option Plan.
10.3 -- Employment Agreement between TTR Israel and Marc D. Tokayer.
10.4 -- Employment Agreement between TTR Israel and Baruch Sollish.
10.5 -- Employment Agreement between TTR Israel and Arik Shavit, as amended.
10.6 -- Unprotected Tenancy Agreement between TTR Israel and Pharmastate Ltd. dated June 10, 1996.
10.7 -- Consulting Agreement dated November 1, 1994 between the Company and Shane Alexander Unterburgher
Securities Inc.
10.8 -- Consulting Agreement dated October 1, 1995 between the Company and Holborn Systems Ltd.
*10.9 -- Consulting Agreement between the Company and Lee Kaplan.
10.10 -- Purchase Agreement and Assignment dated January 5, 1995 between TTR Israel and Rina Marketing R&D Ltd.
21.1 -- Subsidiaries of the Company.
23.1 -- The consent of Baer Marks & Upham LLP is included in Part II of this Registration Statement.
23.2 -- The consent of Aboudi & Brounstein is included in Part II of this Registration Statement.
23.3 -- The consent of Schneider, Ehrlich & Wengrover LLP, certified public accountants, is included in Part II
of this Registration Statement.
23.4 -- The consent of BDO Almagor & Co., certified public accountants, is included in Part II of this
Registration Statement.
24.1 -- Powers of Attorney (included on the signature page of this Registration Statement).
27 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment to this Registration Statement.
ITEM 28. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the 'Act');
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
II-4
<PAGE>
<PAGE>
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(5) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the small business issuer of expenses incurred or paid by a
Director, officer or controlling person of the small business issuer 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 small business issuer 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 Act and
will be governed by the final adjudication of such issue.
(6) For determining any liability under the Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or
(4) or 497(h) under the Act as part of this registration statement as of
the time the Commission declared it effective.
(7) For determining any liability under the Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-5
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the State of Israel, on the 10th day of September 1996.
TTR INC.
By: /s/ MARC D. TOKAYER
...................................
MARC D. TOKAYER
CHAIRMAN
POWER OF ATTORNEY
Each person whose signature appears below, hereby constitutes and appoints
Marc D. Tokayer his true and lawful attorney-in-fact and agent, with power of
substitution and resubstitution, for him and in his 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 file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying all that said attorney-in-fact and agent
or his substitute or substitutes, or any of them, may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------- ---------------------------------------------- -------------------
<C> <S> <C>
/s/ MARC D. TOKAYER Chairman of the Board, President (Principal September 10, 1996
........................................ Executive Officer) and Treasurer (Principal
MARC D. TOKAYER Financial Officer)
/s/ ARIK SHAVIT Director and Vice President September 10, 1996
........................................
ARIK SHAVIT
/s/ BARUCH SOLLISH Director and Vice President - Product Research September 10, 1996
........................................ and Development and Secretary
BARUCH SOLLISH
</TABLE>
II-6
<PAGE>
<PAGE>
CONSENT OF COUNSEL
The consent of Baer Marks & Upham LLP is contained in its opinion which was
filed as Exhibit 5.1 to this Registration Statement.
II-7
<PAGE>
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the reference to our firm under the caption 'Legal
Matters' in the Prospectus contained in this Registration Statement.
ABOUDI & BROUNSTEIN
Tel Aviv, Israel
September 9, 1996
II-8
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption 'Experts' and to
the use of our report dated July 1, 1996, in the Registration Statement on Form
SB-2 and related Prospectus of TTR Inc.
SCHNEIDER EHRLICH & WENGROVER LLP
Woodbury, New York
September 11, 1996
II-9
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<PAGE>
CONSENT OF INDEPENDENT AUDITORS
As independent auditors of T.T.R. Technologies Ltd., we hereby consent to
the inclusion of our report dated July 1, 1996 and to the reference to our firm
under the heading 'Experts' in the Registration Statement on Form SB-2 and
related prospectus of TTR Inc.
BDO ALMAGOR & CO.
Ramat-Gan, Israel
September 9, 1996
II-10
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- --------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 -- Form of Underwriting Agreement. ................................................................
3.1 -- Certificate of Incorporation of the Company, as amended. .......................................
3.2 -- By-Laws of the Company, as amended. ............................................................
3.3 -- Memorandum of Association of TTR Israel. .......................................................
3.4 -- Articles of Association of TTR Israel. .........................................................
4.1 -- Form of Representative's Warrants. .............................................................
4.6 -- Form of Registration Rights between the Company and certain securityholders.....................
5.1 -- Securities Opinion of Baer Marks & Upham LLP. ..................................................
10.2 -- The Company's 1996 Stock Option Plan. ..........................................................
10.3 -- Employment Agreement between TTR Israel and Marc D. Tokayer. ...................................
10.4 -- Employment Agreement between TTR Israel and Baruch Sollish. ....................................
10.5 -- Employment Agreement between TTR Israel and Arik Shavit, as amended. ...........................
10.6 -- Unprotected Tenancy Agreement between TTR Israel and Pharmastate Ltd. dated June 10, 1996. .....
10.7 -- Consulting Agreement dated November 1, 1994 between the Company and Shane Alexander Unterburgher
Securities Inc. ..............................................................................
10.8 -- Consulting Agreement dated October 1, 1995 between the Company and Holborn Systems Ltd. ........
10.10 -- Purchase Agreement and Assignment dated January 5, 1995 between TTR Israel and Rina Marketing
R&D Ltd. .....................................................................................
21.1 -- Subsidiaries of the Company. ...................................................................
23.1 -- The consent of Baer Marks & Upham LLP is included in Part II of this Registration Statement. ...
23.2 -- The consent of Aboudi & Brounstein is included in Part II of this Registration Statement. ......
23.3 -- The consent of Schneider, Ehrlich & Wengrover LLP, certified public accountants, is included in
Part II of this Registration Statement. ......................................................
23.4 -- The consent of BDO Almagor & Co., certified public accountants, is included in Part II of this
Registration Statement. ......................................................................
24.1 -- Powers of Attorney (included on the signature page of this Registration Statement). ............
27 -- Financial Data Schedule.........................................................................
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as 'tm'
The section symbol shall be expressed as 'ss'
<PAGE>
<PAGE>
DRAFT
[Proposed Form of Underwriting
Agreement -- Subject to
Additional Internal Review]
TTR INC.
1,275,000 shares of Common Stock, $.001 par value
per share and 600,000 Redeemable
Common Stock Purchase Warrant
UNDERWRITING AGREEMENT
, 1996
First Metropolitan Securities, Inc.
17 State Street
New York, New York 10004
Ladies and Gentlemen:
TTR Inc., a Delaware corporation (the "Company"), and the holders of
shares of Common Stock (as hereinafter defined) as listed in Schedule I hereto
(the "Sellers"), each confirms its agreement with First Metropolitan Securities,
Inc. (the "Underwriter"), with respect to the proposed sale by the Company and
the purchase by the Underwriter, of the respective numbers of shares of the
Company's common stock, par value $.001 per share ("Common Stock") and
redeemable Common Stock purchase warrant (the "Redeemable Warrants"), each of
which entitles the holder thereof to purchase one share of Common Stock at an
exercise price of $7.20 per share, pursuant to a warrant agreement between the
Company and North American Transfer Co., as the warrant agent (the "Warrant
Agreement"), and with respect to the grant by the Company and the Sellers, to
the Underwriter of the option described in Section 3(b) hereof to purchase all
or any part of 191,250 (1,250 by the Company and 180,000 by certain selling
securityholders as listed in Schedule II annexed hereto) shares of Common Stock
and 90,000 Redeemable Warrants by the Company, for the purpose of covering
over-allotments, if any. The aforesaid 1,275,000 shares (the "Shares") of Common
Stock and an aggregate of 600,000 Redeemable Warrants, sold by the Company and
the Sellers (in the denominations listed in Schedule I hereto, are collectively
referred to herein as the "Firm Securities") and all or any part
<PAGE>
<PAGE>
of the Units subject to the option described in Section 3(b) hereof (the "Option
Securities") are hereinafter collectively referred to as the "Securities." The
Company also proposes to issue and sell to the Underwriter warrants (the
"Underwriter's Warrants") pursuant to the Underwriter's Warrant Agreement (the
"Underwriter's Warrant Agreement") for the purchase of an aggregate of and
additional 127,500 shares of Common Stock and 60,000 Redeemable Warrants. The
shares of Common Stock issuable upon exercise of the Underwriter's Warrants and
the Redeemable Warrants underlying the Underwriter's Warrants are hereinafter
sometimes referred to as the "Warrant Shares." The Shares, the Redeemable
Warrants, the Underwriter's Warrants, and the Warrant Shares are more fully
described in the Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Underwriter as of the date
hereof, and as of the Closing Date and the Option Closing Date (as defined in
Subsection 3(c) hereof, if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333- ), including any related preliminary
prospectus ("Preliminary Prospectus"), for the registration of the Securities
under the Securities Act of 1933, as amended (the "Act"), which registration
statement and amendment or amendments have been prepared by the Company in
conformity with the requirements of the Act, and the rules and regulations (the
"Regulations") of the Commission under the Act. The Company will promptly file a
further amendment to said registration statement in the form heretofore
delivered to the Underwriter and will not, before the registration statement
becomes effective (the "Effective Date"), file any other amendment thereto
unless the Underwriter shall have consented thereto after having been furnished
with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein (including, but not limited to those documents or
information incorporated by reference therein under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement" and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the Regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Rules and Regulations" mean the rules and regulations adopted by the Commission
under either the Act or the Exchange Act, as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed in
all material respects with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus the Registration Statement
or Prospectus at the time of filing
2
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<PAGE>
thereof contained an untrue statement of a material fact or omitted to stale a
material fact required to be stated therein and necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in such Preliminary Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing Date
(as defined in Subsection 3(c) hereof, if any, and during such longer period as
the Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
compliance with the Act and the Rules and Regulations, and will in all material
respects conform to the requirements of the Act and the Rules and Regulations;
neither the Registration Statement or the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
conformity with information supplied to the Company in writing by or on behalf
of any Underwriter expressly for use in the Registration Statement or Prospectus
or any amendment thereof or supplement thereto.
(d) The Company and its subsidiaries are validly existing as
corporations in good standing under the laws of their states of incorporation or
jurisdictions, foreign or domestic, as applicable. The Company and its
subsidiaries are duly qualified and licensed and in good standing as a foreign
corporations in each jurisdiction in which their ownership or leasing of
properties or the character of its operations require such qualification or
licensing. The Company and its subsidiaries have all requisite power and
authority (corporate and other), and have obtained any and all necessary
applications, approvals, orders, licenses, certificates, franchises and permits
of and from all governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over environmental or similar
matters), to own or lease their properties and conduct their business as
described in the Prospectus; the Company and its subsidiaries have been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; neither the Company nor its subsidiaries
have received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operation of the Company or its subsidiaries. The disclosures in the
Registration Statement concerning the effects of federal, state, local, and
foreign laws, rules and regulations on the Company's and its subsidiaries
businesses as currently conducted and as contemplated are correct in all
respects and do not omit to state a material fact necessary
3
<PAGE>
<PAGE>
to make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization", and will
have the adjusted capitalization set forth therein on the Closing Date based
upon the assumptions set forth therein, and the Company and its subsidiaries are
not a party to or bound by any instrument, agreement or other arrangement
providing for the Company and its subsidiaries to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement and as
described in the Prospectus. The Shares, the Underwriters Warrants, and the
Warrant Shares and all other securities issued or issuable by the Company or its
subsidiaries, conform or, when issued and paid for will conform in all respects
to all statements with respect thereto contained in the Registration Statement
and the Prospectus. All issued and outstanding securities of the Company and its
subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or its subsidiaries, or
similar contractual rights granted by the Company or its subsidiaries. The
Shares, Underwriter's Warrants and Redeemable Warrants to be issued and sold by
the Company hereunder and the Warrant Shares issuable upon exercise of the
Underwriter's Warrants and Redeemable Warrants and payment therefor; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company, or similar contractual rights granted by the
Company have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid and
non-assessable and will conform in all respects to the description thereof
contained in the Prospectus; all corporate action required to be taken for the
authorization, issue and sale of the Securities, the Underwriter's Warrants, and
the Warrant Shares has been duly and validly taken; and the certificates
representing the Securities, the Underwriter's Warrants, and the Warrant Shares
will be in due and proper form. Upon the issuance and delivery pursuant to the
terms hereof of the Securities to be sold by the Company hereunder, the
Underwriter will acquire good and marketable title to such Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever.
(f) The financial statements of the Company and its
subsidiaries, together with the related notes and schedules thereto, included in
the Registration Statement, the Preliminary Prospectus and the Prospectus fairly
present the financial position and the results of operations of the Company and
its subsidiaries at the respective dates and for the respective periods to which
they apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved. There has been no material
adverse change or development involving a prospective change in the condition,
financial or otherwise, or in the earnings, business affairs, position,
prospects, value, operation, properties, business, or results of operation of
the Company and its subsidiaries, whether or not arising in the ordinary course
of business, since the dates of the financial statements included in the
Registration Statement and the Prospectus
4
<PAGE>
<PAGE>
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company and its subsidiaries, conforms in all respects to the
descriptions thereof contained in the Registration Statement and in the
Prospectus.
(g) The Company and its subsidiaries (i) has paid all federal,
state, local, and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and taxes payable under Chapters 21 through 24 of
the Internal Revenue Code of 1986 (the "Code"), (ii) have furnished all
information returns required to furnish pursuant to the Code, and have
established adequate reserves for such taxes which are not due and payable, and
(iii) do not have any tax deficiency or claims outstanding, proposed or assessed
against them.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriter in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriter of the
Securities from the Company or (iii) the consummation by the Company of any of
its obligations under this Agreement.
(i) The Company maintains insurance of the types and in the
amounts which they reasonably believe to be adequate for their businesses, all
of which insurance is in full force and effect.
(j) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company which (i) questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to
enter into this Agreement, the Underwriter's Warrant Agreement and the
Consulting Agreement (as defined in Section 7(n) hereof) and to consummate the
transactions provided for in such agreements; and this Agreement, the
Underwriter's Warrant Agreement and the Consulting Agreement have each been duly
and properly authorized, executed and delivered by the Company. Each of this
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement,
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or delivery of
this Agreement, the
5
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<PAGE>
Underwriter's Warrant Agreement and the Consulting Agreement, its performance
hereunder and thereunder, its consummation of the transactions contemplated
herein and therein, or the conduct of its business as described in the
Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of, (i) the
articles of incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or instrument
to which the Company is a party or by which any of them is or may be bound or to
which any of their properties or assets (tangible or intangible) is or may be
subject to any indebtedness, or (iii) any statute, judgment, decree, order, rule
or regulation applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
their respective activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with the Underwriter's purchase and distribution of the
Securities to be sold by the Company hereunder.
(m) All executed agreements or copies of executed agreements
filed as exhibits to the Registration Statement to which the Company or its
subsidiary are a party or by which any of them may be bound or to which any of
their respective assets, properties or businesses may be subject have been duly
and validly authorized, executed and delivered by the Company and/or its
subsidiary, and constitute the legal, valid and binding agreements of the
Company and/or its subsidiary, as the case may be, enforceable against each of
them in accordance with their respective terms. The descriptions in the
Registration Statement of contracts and other documents are accurate and fairly
present the information required to be shown with respect thereto by Form SB-2
and there are no contracts or other documents which are required by the Act to
be described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
Exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any
6
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other distribution on or in respect of its capital stock. The Company has one
subsidiary, TTR Technologies, Ltd., of which it owns 100% of the outstanding
shares of common stock.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets (tangible or intangible)
of the Company is subject or affected.
(p) The Company and its subsidiary generally enjoys
satisfactory employer-employee relationships with their employees and both are
in compliance in all material respects with all federal, state, local, and
foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours. There are no pending
investigations involving the Company or any subsidiary, by the U.S. Department
of Labor, or any other governmental or foreign agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or any
subsidiary, pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company, or any predecessor entity, and none has ever occurred.
No representation question exists respecting the employees of the Company or its
subsidiary, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company or any subsidiary. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company or of its subsidiary. No labor dispute with
the employees of the Company exists, or, to the best knowledge of the Company,
is imminent; and the Company is not aware (having made no independent
investigation for purposes of this statement) of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, manufacturers or
contractors which might be expected to result in any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(q) Since its inception, the Company has not incurred any
material liability arising under or as a result of the application of the
provisions of the Act.
(r) Neither the Company does not maintain, sponsor or
contribute to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan" or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37) respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans").
The Company does not maintains or contributes, now or at any time previously, to
a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Code, which could
subject the Company to any
7
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tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code Section 401(a), stating that such ERISA Plan and the attendant trust are
qualified thereunder. The Company has not ever completely or partially withdrawn
from a "multiemployer plan."
(s) The Company is not (nor the manner in which it conducts
its business or proposes to conduct its business) in violation of any domestic
or foreign laws ordinances or governmental rules or regulations to which it is
subject.
(t) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
within eighteen (18) months of the date hereof or to require the Company to file
a registration statement under the Act during such eighteen (18) month period.
(u) None of the Company, nor any of its respective employees,
directors, stockholders or affiliates (within the meaning of the Rules and
Regulations) has taken or will take, directly or indirectly, any action designed
to or which has constituted or which might reasonably be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Securities or otherwise.
(v) None of the patents, patent applications, trademarks,
service marks, trade names, copyrights, know-how, technology or other intangible
asset and licenses and rights to the foregoing presently owned or held by the
Company or any subsidiary, are in dispute so far as known by the Company or are
in any conflict with the right of any other person or entity. To the best of the
Company's knowledge, the Company and its subsidiary (i) own or have the right to
use, free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever, all patents, trademarks, service marks, trade names and copyrights,
technology and licenses and rights with respect to the foregoing, used in the
conduct of its business as now conducted or proposed to be conducted without
infringing upon or otherwise acting adversely to the right or claimed right of
any person, corporation or other entity under or with respect to any of the
foregoing, and (ii) except as set forth in the Prospectus, is not obligated or
under any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
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(w) The Company and its subsidiary own and have the
unrestricted right to use all trade secrets know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "intellectual
properly") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the Company
or its subsidiary, free and clear of and without violating any right, lien, or
claim of others, including without limitation, former employers of its
employees; provided, however, that the possibility exists that other persons or
entities, completely independently of the Company, as the case may be, or their
respective employees or agents, could have developed trade secrets or items of
technical information similar or identical to those of the Company or its
subsidiary. The Company and its subsidiary are not aware of any such development
of similar or identical trade secrets or technical information by others.
(x) The Company and its subsidiary have taken reasonable
security measures to protect the secrecy, confidentiality and value of all the
intellectual property.
(y) The Company and its subsidiary have good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus, to be owned or leased by it free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects, or other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due and payable.
(z) Schneider Ehrlich & Weingrover LLP, independent certified
public accounts, whose report is filed with the Commission as a part of the
Registration Statement, are independent certified public accountants as required
by the Act and the Rules and Regulations.
(aa) On or before the Effective Date of the Registration
Statement, the Company shall cause to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors and stockholders, or any person or entity deemed to be an affiliate of
the Company pursuant to the Rules and Regulations has agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber any of their shares of
Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein for a period of not
less than 24 months following such Effective Date without the prior written
consent of the Underwriter, except with regards to the stockholders listed in
Schedule III, the term for each stockholder listed shall be adjusted as provided
therein. The Company will cause the Transfer Agent, as defined below, to mark an
appropriate legend on the face of stock certificates representing all of such
shares of Common Stock and other securities owned by such holders.
(bb) There are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Securities
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hereunder or any other arrangements, agreements, understandings, payments or
issuance with respect to the Company or any of its officers, directors,
employees or affiliates that may affect the Underwriter's compensation, as
determined by the National Association of Securities Dealers Inc. ("NASD").
(cc) The Securities have been approved for quotation on the
SmallCap Market of the Nasdaq Stock Market, subject to official notice of
issuance.
(dd) None of the Company, nor any of its respective officers,
employees agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (a) might subject any of Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company,
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. Each of the Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or the Company, has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficiary interest in any contract or
agreement to which the Company is a party or by which any of them may be bound
or affected. Except as set forth in the Prospectus under "Certain Relationships
and Related Transactions," there are no existing material agreements,
arrangements, understandings or transactions, or proposed material agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, or Principal Stockholder of the Company, or any affiliate
or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriter's counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(gg) The Company has not entered into any employment
agreements, except as described in the Prospectus.
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2. Representations and Warranties of the Sellers. The Sellers represent
and warrant to, and agree with, the Underwriter as of the date hereof, and as of
the Option Closing Date, if any, as follows:
(a) Such Sellers have and will have on the Closing Date, good,
valid and marketable title to the Shares to be sold by the Sellers to the
Underwriter, free and clear of any liens, charges. claims, encumbrances,
pledges, security interests, restrictions, equities, stockholders' agreements,
voting trusts, community property rights or defects in title whatsoever: the
Sellers have full right, power and authority to sell, transfer and deliver the
Securities to be sold by the Sellers under this Agreement; and upon delivery of
such Securities and payment of the purchase price therefor as contemplated in
this Agreement, the Underwriter will receive good and marketable title to the
Securities purchased by it from the Sellers, free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, restriction, equity,
stockholders' agreement, voting trust, community property right or defect in
title whatsoever; and other than as described in the Registration Statement and
the Prospectus or created hereby, there are no outstanding options, warrants,
rights, or other agreements or arrangements requiring the Sellers at any time to
transfer any Common Stock or securities to be sold hereunder by the Sellers.
(b) The performance of this Agreement and the consummation of
the transactions herein contemplated, will not conflict with or result in a
breach of, or default under, any will, indenture, mortgage, deed of trust,
voting trust agreement, stockholders' agreement, note, loan or credit agreement,
or other agreement or instrument to which any of the Sellers is a party or by
which he is or may be bound or to which any of his property is or may be
subject, or any indebtedness statute, judgment, decree, order, rule or
regulation applicable to any of the Sellers of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body, domestic, or
foreign, having jurisdiction over the Sellers or any of his activities or
properties; this Agreement has been duly executed and delivered by the Sellers,
and (to the extent this Agreement is a binding agreement of the Underwriter)
constitutes the valid and binding agreement of the Sellers enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application, relating to or affecting enforcement of creditor's rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law.
(c) The Sellers have reviewed and are familiar with the
Registration Statement as originally filed with the Commission and all
amendments and supplements thereto, if any, filed with the Commission prior to
the date hereof, and with the Preliminary Prospectus and the Prospectus, as
supplemented, if applicable, to the date hereof, and has no knowledge of any
material fact, condition or information not disclosed in the Registration
Statement and Prospectus, as so supplemented, if applicable, which has adversely
affected or could adversely affect the condition, financial or otherwise. or the
earnings, business affairs, position, prospects, value, operation, properties,
business or results of operation of the Company; to the best knowledge and
information of the Sellers, such Registration Statement and Prospectus, as so
supplemented, if applicable, does not contain any untrue statement of a material
fact or omit to
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state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading and
all information furnished by or on behalf of the Sellers for use in the
Registration Statement, the Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto is, and, at the Closing Date, will be true and
complete in all material respects; and the Sellers are not prompted to sell the
Securities to be sold by the Sellers under this Agreement by any information
concerning the Company which is not set forth in the Prospectus, as so
supplemented, if applicable.
(d) Nothing has come to the attention of the Sellers to cause
them to believe that the Company's representations and warranties contained in
this Agreement are not accurate.
(e) There is not pending or threatened against the Sellers any
action, suit or proceeding (or circumstances that may give rise to the same)
which (i) questions the validity of this Agreement or of any action taken or to
be taken by the Sellers pursuant to or in connection with this Agreement or (ii)
which is required to be disclosed in the Registration Statement and the
Prospectus which is not so disclosed and such proceedings which are summarized
in the Registration Statement and the Prospectus, if any, are accurately
summarized in all material respects.
(f) No stamp duty or similar tax is payable by or on behalf of
the Underwriter in connection with (i) the sale of the Securities to be sold by
the Sellers, (ii) the purchase by the Underwriter of the Securities, and (iii)
the consummation by the Sellers of any of their obligations under this
Agreement.
(g) Except for the Securities being sold hereunder, the
Sellers do not have any registration rights or other similar rights with respect
to any securities of the Company; and the Sellers do not have any right of first
refusal or other similar right to purchase any securities of the Company upon
the issuance or sale thereof by the Company or upon the sale thereof by any
other stockholder of the Company.
(h) The Sellers have not since the filing of the initial
Registration Statement (i) sold, bid for, purchased, attempted to induce any
person to purchase, or paid anyone any compensation for soliciting purchases of,
Common Stock, or (ii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any securities of the Company (except for the
sale of the Securities to the Underwriter under this Agreement and except as
otherwise permitted by law).
(i) The Sellers have not taken, and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the distribution of
the Securities.
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(j) The Sellers will review the Prospectus and will comply
with all agreements and satisfy all conditions on his part to be complied with
or satisfied pursuant to this Agreement at or prior to the Closing Date.
(k) Any certificate signed by or on behalf of any Sellers and
delivered to the Underwriter or to counsel for the Underwriter shall be deemed a
representation and warranty by the Sellers to the Underwriter as to the matters
covered thereby.
(l) The Sellers have reviewed the Registration Statement as it
pertains to each of them and confirm that the information and statements as they
relate to them, and in particular the statements and information contained on
the cover page, and under the section "Selling Security Holders is true and
correct and neither omits to state a material fact necessary to be stated under
the circumstances or misstates a material fact stated therein.
(m) In connection with the Registration Statement and the
offer and sale by the Seller of any Securities pursuant thereto, the Sellers
acknowledge that each of them has been advised of Rules 10b-6 (the "Rules")
under the General Rules and Regulations under the General Rules and Regulations
under the Securities and Exchange Act of 1934 (the "Exchange Act"). Each of the
Sellers has reviewed the Act, the Rules and the Releases and have been advised
to seek the independent advice of their own counsel.
3. Purchase, Sale and Delivery of the Securities and
Underwriter's Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriter and the Underwriter
agrees to purchase from the Company the Firm Securities at the price per Unit as
set forth in subsection (c) below.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company and the Selling Securityholders
listed in schedule II hereby grants an option to the Underwriter to purchase up
to an additional 191,250 shares of Common Stock and 90,000 Redeemable Warrants
at the price per Share and Redeemable Warrant set forth in subsection (c) below.
The option granted hereby will expire 45 days after the date of this Agreement,
and may be exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Firm Securities upon notice by the Underwriter to the
Company setting forth the number of Option Securities as to which the
Underwriter is then exercising the option and the time and date of payment and
delivery for such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Underwriter, but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to Closing Date, as hereinafter defined, unless otherwise agreed
to between the Underwriter and the Company. In the event such option is
exercised the Underwriter shall purchase the total number of Option Securities
then being purchased. Nothing herein contained shall obligate the Underwriter to
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purchase any over-allotments. No Option Securities shall be delivered unless the
Firm Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Underwriter at 17 State Street, New York, New York 10004, or at such other place
as shall be agreed upon by the Underwriter and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on ___________, 1996 or
at such other time and date as shall be agreed upon by the Underwriter and the
Company but not less than three (3) nor more than thirty (30) business days
after the Effective Date of the Registration Statement (such time and date of
payment and delivery being hereafter called "Closing Date"). In addition, in the
event that any or all of the Option Securities are purchased by the Underwriter,
payment of the purchase price for, and delivery of certificates for such Option
Securities shall be made at the above mentioned office of the Underwriter or at
such other place as shall be agreed upon by the Underwriter and the Company on
each Option Closing Date as specified in the notice from the Underwriter to the
Company. Delivery of the certificates for the Firm Securities and the Option
Securities, if any, shall be made to the Underwriter against payment of the
purchase price for the Firm Securities and the Option Securities, if any, to the
order of the Company or the Sellers as the case may be, by New York Clearing
House funds, certificates for the shares of Common Stock and Redeemable Warrants
underlying the Firm Securities and the Option Securities, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and shall
be in such denominations and registered in such names as the Underwriter may
request in writing at least two (2) business days prior to Closing Date or the
relevant Option Closing Date, as the case may be. The certificates for the
shares of Common Stock and Redeemable Warrants underlying the Firm Securities
and the Option Securities, if any, shall be made available to the Underwriter at
such office or such other place as the Underwriter may designate for inspection,
checking and packaging no later than 9:30 a.m. on the last business day prior to
Closing Date or the relevant Option Closing Date, as the case may be.
The purchase price per Unit to be paid by the Underwriter to
the Company and the Sellers, for the Securities purchased hereunder will be the
same for each Share and Redeemable Warrant will be $5.40 and $.22, respectively.
Neither the Company nor the Sellers shall not be obligated to sell any
Securities hereunder unless all Firm Securities to be sold by the Company are
purchased hereunder. The Company agrees to issue and sell 1,200,000 Shares and
600,000 Redeemable Warrants and the Sellers agree to sell an aggregate of 75,000
Shares to the Underwriter.
(d) On Closing Date, the Company shall issue and sell to the
Underwriter Underwriter's Warrants at a purchase price of $10.00, which warrants
shall entitle the holders thereof to purchase an aggregate of 127,500 Shares and
60,000 Warrants. The Underwriter's Warrants shall be exercisable for a period of
four (4) years commencing one (1) year from the Effective Date of the
Registration Statement at an initial exercise price equal to one hundred twenty
percent (120%) of the initial public offering price of the Securities. The
Underwriter's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as
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Exhibit to the Registration Statement. Payment for the Underwriter's Warrants
shall be made on the Closing Date.
4. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Underwriter deems advisable, the Underwriter
shall make a public offering of the Securities (other than to residents of or in
any jurisdiction in which qualification of the Securities is required and has
not become effective) at the price and upon the other terms set forth in the
Prospectus. The Underwriter may from time to time increase or decrease the
public offering price after distribution of the Securities has been completed to
such extent as the Underwriter, in its sole discretion deems advisable.
5. Covenants of the Company and the Sellers. The Company and Sellers
each covenants and agrees with the Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
Effective Date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act before termination of the offering of the Securities by
the Underwriter of which the Underwriter shall not previously have been advised
and furnished with a copy, or to which the Underwriter shall have objected or
which is not in compliance with the Act, the Exchange Act or the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose, (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose, (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the
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Underwriter pursuant to Rule 424(b)(4)) not later than the Commission's close of
business on the earlier of (i) the second business day following the execution
and delivery of this Agreement and (ii) the fifth business day after the
Effective Date of the Registration Statement.
(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriter in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Underwriter with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the Underwriter
or Lampert & Lampert ("Underwriter's Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Underwriter may reasonably designate, and
shall make such applications, file such documents and furnish such information
as may be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriter agrees that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or reports at such
times as are or may reasonably be required by the laws of such jurisdiction to
continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriter's Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Underwriter promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be reasonably satisfactory to
Underwriter's Counsel, and the Company will furnish to the Underwriter a
reasonable number of copies of such amendment or supplement.
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(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriter, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the Effective Date of
the Registration Statement.
(h) During a period of five years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports (if requester by the Underwriter) of earnings, and
will deliver to the Underwriter:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and certified by the
Company' s principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations, stockholders'
equity, and cash flows of the Company for such fiscal year, accompanied by a
copy of the certificate thereon of independent public accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(v) every press release and every material news item
or article of interest to the financial community in respect of the Company or
their affairs which is intended for release by the Company; and
(vi) any additional information of a public nature
concerning the Company, and any future subsidiaries or their respective
businesses which the Underwriter may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
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(i) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Underwriter or on the
Underwriter's order, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the Effective Date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may reasonably
request.
(k) Except for the offering contemplated by this Agreement,
for a period of 24 months from the Effective Date of the Registration Statement
none of the Company, its officers or directors, or holders of the Company's
securities, except as listed in Schedule III, including options, warrants and
other like rights, prior to the Effective Date, or any person or entity deemed
to be an affiliate of the Company pursuant to the Rules and Regulations, will,
directly or indirectly, issue, offer to sell, sell, grant an option for the sale
of, assign, transfer, pledge, hypothecate or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior written consent of
the Underwriter (the "Lock-up"). On or before the Effective Date of the
Registration Statement, the Company shall cause to be duly executed legally
binding and enforceable agreements pursuant to which each of persons enumerated
in the preceding sentence who are subject to the Lock-up, has agreed to be bound
by the Lock-up. During the 36 month period commencing with the Effective Date of
the Registration Statement, the Company shall issue no shares of capital stock,
except shares issuable upon the exercise of options or warrants referred to in
the Registration Statement, inclusive of up to an aggregate of 450,000 shares
pursuant to options which may be granted under the Company's 1996 Stock Option
Plan and the 1,000,000 shares held in escrow on behalf of management, or in
connection with any acquisition from, or business combination with, an
unaffiliated entity or securities convertible into or exchangeable for shares of
Common Stock or, except in conformity and compliance with the terms of this
Agreement, grant any options or warrants.
(l) None of the Company, nor any of its respective officers or
directors, nor affiliates of any of them (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or which
might in the future reasonably be expected to cause or result in, stabilization
or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be used
directly or indirectly to acquire any securities issued by the Company.
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(n) The Company shall timely file all such reports, forms or
other documents as may be required (including but not limited to a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Section 7(j) hereof.
(p) The Company shall cause the Securities to be quoted on the
SmallCap Market of the Nasdaq Stock Market.
(q) For a period of three (3) years from the Closing Date, the
Company shall furnish to the Underwriter at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock; (ii) a list of
holders of Common Stock upon the Underwriter's reasonable requests; and (iii) a
weekly listing of the securities positions of participants in the Depository
Trust Company.
(r) For a period of three (3) years the Company shall notify
the Underwriter of each meeting of the Board, which meetings shall be held at
least quarterly. An individual selected by the Underwriter shall be permitted to
attend all meetings of the Board and to receive all notices and other
correspondence and communications sent by the Company to members of the Board.
The Company shall reimburse the Underwriter's designee for his or her
out-of-pocket expenses reasonably incurred in connection with his or her
attendance of the Board meetings.
(s) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the Warrant Shares, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other appropriate
form) for the registration under the Act of the Warrant Shares.
(t) For a period of five (5) years from the date hereof, use
its best efforts to maintain its listing of its Common Stock on the Nasdaq Stock
Market.
(u) Grant to the Underwriter preferential right on the terms
and Subject to the conditions set forth in this paragraph, for a period of four
years from the Effective Date of the Registration Statement, to purchase for its
account, or to sell for the account of the Company or its present or future
affiliates or subsidiaries, any securities of the Company or any of its
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present or future affiliates or subsidiaries, not including securities issuable
under the Company's stock option plan or other employee benefit plans, with
respect to which the Company or any of its present or future affiliates or
subsidiaries may seek a public or private sale of such securities. The Company,
will consult, and will cause such present or future affiliates or subsidiaries
to consult with the Underwriter with regard to any such offering or placement
and will offer, or cause any of its present or future affiliates or subsidiaries
to offer, to the Underwriter the opportunity, on terms not more favorable to the
Company or such present or future affiliate or subsidiary than they can secure
elsewhere, to purchase or sell any such securities. If the Underwriter fails to
accept in writing such proposal made by the Company or any of its present or
future affiliates or subsidiaries within ten (10) business days after receipt of
a notice containing such notice, then the Underwriter shall have no further
claim or right with respect to the proposal contained in such notice. If,
thereafter, such proposal is materially modified, the Company shall again
consult, and cause each present or future affiliate or subsidiary to consult,
with the Underwriter in connection with such modification and shall in all
respects have the same obligations and adopt the same procedures with respect to
such proposal as are provided hereinabove with respect to the original proposal.
(v) On or before the Effective Date of the Registration
Statement, retain or make arrangements to retain a financial public relations
firm reasonably satisfactory to the Underwriter which shall be continuously
engaged from such engagement date to a date twenty-four months from Closing
Date.
(w) As soon as practicable, but in no event more than 30
business days from the Effective Date of the Registration Statement, (i) file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Company's securities and (ii) take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
Moody's OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(x) The Company shall furnish to the Underwriter, within
ninety (90) days following the Option Closing Date, three (3) bound volumes of
all papers and documents utilized in the offering.
(y) Following the Effective Date of the Registration
Statement, the Company shall, at its sole cost and expense, prepare and file
such blue sky trading applications with such jurisdictions as the Underwriter
may reasonably request after consultation with the Company.
(z) The Company shall not amend or alter any term of any
written employment agreement, if any, between the Company and any executive
officer or director, during the term thereof, in a manner more favorable to such
employee or director, without the express written consent of the Underwriter.
(aa) The Sellers consent to the use of the Prospectus and any
amendment or supplement thereto by the Underwriter and all dealers to whom the
Securities may be sold, both
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in connection with the offering or sale of the Securities and for such period of
time thereafter as the Prospectus, as amended or supplemented, is required by
law to be delivered in connection therewith.
(bb) Sellers confirm that none of the Securities included in
the Registration Statement to be offered or sold by the Sellers will be offered
or sold by any of them for the purpose of covering "Short Sales" as that term is
used and defined in the Act and Rules.
(cc) Sellers confirm and represent and warrant that during the
period that they may be offering or selling any of their Securities included in
the Registration Statement, neither of them will directly or indirectly,
individually or through any "affiliated purchasers" as defined in Rule
10b-6(c)(g) engage in any transaction which would or tend to be in violation of
the anti-manipulation and investor protection purposes of the Act or Rules.
(dd) Sellers understand, and confirm that each of them will
not, during the time that they are engaged in the distribution of their
respective Securities, bid for or purchase, or induce others to bid for or
purchase any securities of the Company or any of the Company's Common Stock or
Common Stock Purchase Warrants until their participation in the distribution of
the securities covered by the Registration Statement has been completed or such
securities are withdrawn from registration. Sellers acknowledge that the
foregoing is to deter and prevent the artificial conditioning of the market to
facilitate a distribution as defined in Exchange Act Release 34-l9565 and Rule
l0b-6(a)(3)(xi) and (xii); in accordance with the policies of the Securities and
Exchange Commission in interpreting the Act and Rules and as set forth in the
Releases.
(ee) In connection with the Company's request of the
Commission to declare the Registration Statement effective, each of the Sellers
confirms that he has ceased, or will cease, all purchasing activity for the
Company's securities for 9 business days prior to the proposed effective date.
(ff) Sellers agree to maintain all book, records,
confirmations, canceled checks or other documents (collectively the
"Information") relating to the sale of their Securities pursuant to the
Registration Statement and to promptly (no later than 48 hours after written,
telegraphic or telefax request) supply the information to the Company. Sellers
acknowledge that any information supplied to the Company may in turn be
furnished by the Company to the Securities and Exchange Commission pursuant to
Rule 418(a)(4).
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Option Closing Date (to the extent not paid at Closing Date) all
expenses and fees (other than fees of counsel to the Underwriter, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation, (i) the fees and
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expenses of accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing, filing,
delivery and mailing (including the payment of postage with respect thereto) of
the Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriter in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of the Securities including any transfer or other taxes payable
thereon, (iv) the qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, and disbursements and fees of counsel in
connection therewith, (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with the "road show", information
meetings and presentations, bound volumes and prospectus memorabilia, (vi) costs
and expenses in connection with due diligence investigations, including but not
limited to the fees of any independent counsel or consultant retained, (vii)
fees and expenses of the transfer agent, (viii) applications for assignments of
a rating of the Securities by qualified rating agencies, (ix) the fees payable
to the NASD, and (x) the fees and expenses incurred in connection with the
listing of the Securities on the Nasdaq Stock Market and any other exchange.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 7, Section 11(b) or Section 12, the
Company shall reimburse and indemnify the Underwriter for all of their
out-of-pocket expenses including the fees and disbursements of counsel for the
Underwriter.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 6, it will pay to
the Underwriter a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm
Securities, $50,000 of which has been paid to date to the Underwriter. The
Company will pay the remainder on the Closing Date by certified or bank
cashier's check or, at the election of the Underwriter, by deduction from the
proceeds of the offering contemplated herein. In the event the Underwriter
elects to exercise the over-allotment option described in Section 3(b) hereof,
the Company further agrees to pay to the Underwriter on the Option Closing Date
(by certified or bank cashier's check or, at the Underwriter's election, by
deduction from the proceeds of the offering) a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received by the Company from
the sale of the Option Securities.
7. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company and the Sellers herein as of the
Closing Date and each Option Closing Date, if any, as if they had been made on
and as of the Closing Date or each Option Closing Date, as the case may be; the
accuracy on and as of the Closing Date or Option Closing Date, if any, of
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the statements of officers of the Company made pursuant to the provisions
hereof; and the performance by each of the Company on and as of the Closing Date
and each Option Closing Date, if any, of each of its or his covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriter, and, at
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriter's Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriter of such timely filing, or
a post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's opinion, is material or omits to
state a fact which, in the Underwriter's opinion, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, is material, or omits to state a
fact which, in the Underwriter's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall
have received the favorable opinion of Baer Marks Upham LLP, counsel to the
Company, addressed to the Underwriter and in form and substance reasonably
satisfactory to the Underwriter's Counsel, to the effect that:
(i) the Company and its subsidiaries (A) have been
duly organized and are validly existing as corporations in good standing under
the laws of their jurisdictions, (B) are duly qualified and licensed and in good
standing as foreign corporations in each jurisdiction in which their ownership
or leasing of any properties or the character of their operations requires such
qualification or licensing, except where the failure to so qualify would not
have a material adverse effect on the Company and/or its subsidiary, and (C)
have all requisite power and authority (corporate and other), and have obtained
any and all necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or
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regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease their
properties and conduct their business as described in the Prospectus; to the
best of such counsel's knowledge, the Company and its subsidiary have been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; and to the best of such counsel's
knowledge, neither the Company nor its subsidiaries have received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singularly or in the aggregate, is the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, of the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operation of any
of the Company or its subsidiary.
The disclosures in the Registration Statement concerning the effects of
federal, state, local, and foreign laws, rules and regulations on each of the
Company's businesses as currently conducted and as contemplated are correct in
all respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(ii) except as described in the Prospectus, to the
best of such counsel's knowledge, the Company owns, directly or indirectly no
Subsidiaries;
(iii) except as described in the Prospectus, to the
best knowledge of such counsel, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity;
(iv) the Company has a duly authorized, issued and
outstanding 10,000,000 shares of Common Stock, $.01 par value, of which
2,424,548 (assuming the exercise of 37,4548 warrants into 374,548 shares of
common stock and exclusive of the 1,000,000 shares issued and held in escrow for
the benefit of management shares are issued and outstanding, and no shares of
preferred stock, as set forth in the Prospectus, and any amendment or supplement
thereto, under "Capitalization", and the Company is not a party to or bound by
any instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for this
Agreement and as described in the Prospectus. The Securities, the Underwriter's
Warrants, the Warrant Shares and all other securities issued or issuable by the
Company conform in all respects to all statements with respect thereto contained
in the Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto and are not subject to personal liability by reason of
being such holders, and none of such securities were issued in violation of the
preemptive rights of any insiders of any security of the Company, if any. The
Securities, the Underwriter's Warrants and the Warrant Shares to be sold by the
Company hereunder are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance
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with the terms thereof, are validly issued, fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and sale of
the Securities has been duly and validly taken; and the certificates
representing the Securities and securities underlying the Securities and the
Underwriter's Warrants are in due and proper form. The Redeemable Warrants and
the Underwriter's Warrants constitute valid and binding obligations of the
Company, to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby. Upon the
issuance and delivery pursuant to the Agreement of the Securities to be sold by
the Company, the Underwriter will acquire good and marketable title to such
securities free and clear of any pledge, lien, charge, claim, encumbrance,
pledge, security interest or other restriction of any kind whatsoever.
(v) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 430A, and no stop order suspending the
effectiveness of the Registration Statement has been issued and to the best of
such counsel's knowledge, no proceedings for that purpose have been instituted
or are pending or threatened or contemplated under the Act;
(vi) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and statistical
data included therein, as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of the Act and the Rules and
Regulations. Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Registration Statement, the
Prospectus, and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus, on the basis of the foregoing, no facts have come to
the attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto, at the time such Registration
Statement or amendment became effective or the Preliminary Prospectus or
Prospectus or amendment or supplement thereto as of the date of such opinion
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and schedules and other financial and
statistical data included in the Preliminary Prospectus, the Registration
Statement or Prospectus).
(vii) to the best of such counsel's knowledge, (A)
there are no contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
(or required to be filed under the Exchange Act if upon such filing they would
be incorporated, in whole or in part, by reference therein) and the Prospectus
and filed as exhibits
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thereto, and the exhibits which have been filed are correct copies of the
documents of which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is a party or by
which it is bound, including any document to which the Company is a party or by
which it is bound, incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate and fairly represent the
information required to be shown by Form SB-2; (C) there is not pending or
threatened against the Company any action suit, proceeding, inquiry,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of the Company
which (x) is required to be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), (y) questions the validity
of the capital stock of the Company or this Agreement or of any action taken or
to be taken by the Company pursuant to or in connection with this Agreement, or
(z) might materially and adversely affect the condition, financial or otherwise,
or the earnings, business affairs, position, prospects, value, operation,
properties, business or results of operation of the Company; (D) no statute or
regulation or legal or governmental proceeding required to be described in the
Prospectus is not described as required; and (E) there is no action, suit or
proceeding pending, or threatened, against or affecting, the Company before any
court or arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) in which there is a reasonable possibility of an
adverse decision which may result in a material adverse change in the assets,
business, operations, financial condition or prospects of the Company, which
could materially, adversely affect the present or prospective ability of the
Company to perform its obligations under this Agreement or which in any manner
draws into question the validity or enforceability of this Agreement;
(viii) The Company has full legal right, power and
authority to enter into each of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement, and the Consulting Agreement, and to
consummate the transactions provided for therein; and each of this Agreement,
the Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement has been duly authorized, executed and delivered by the Company. This
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement,
assuming due authorization, execution and delivery by each other party thereto
and further assuming that they are valid and binding agreements of the
Underwriter, so as the case may be, constitutes legal, valid and binding
agreements of the Company enforceable as against the Company in accordance with
their terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable law),
and none of the Company's execution or delivery of this Agreement, the
Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its business as
described in the Registration Statement, the Prospectus, and any
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amendments or supplements thereto, to the best knowledge of such counsel,
conflicts with or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (A) the articles of
incorporation or by-laws of the Company, (B) any indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which any of them is or may be bound or to which any of their properties
or assets (tangible or intangible) is or may be subject, or any indebtedness, or
(C) any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its respective activities or properties.
(ix) no consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or other body,
domestic or foreign, (other than such as may be required under Blue Sky laws, as
to which no opinion need be rendered) is required in connection with the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, the performance of the Agreement, the Underwriter's Warrant, the
Warrant Agreement and the Consulting Agreement, and the transactions
contemplated thereby;
(x) To the best of such counsel's knowledge, the
properties and business of the Company and its subsidiary conform to the
description thereof contained in the Registration Statement and the Prospectus;
and the Company and its subsidiary have good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus to be owned or leased by it, in each case free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due and payable;
(xi) To the best of such counsel's knowledge, neither
the Company nor its subsidiary is in breach of, or in default under, any term or
provision of any indenture, mortgage, installment sale agreement, deed of trust,
lease, voting trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company or its
subsidiary is a party or by which the Company may be bound or to which any of
the property or assets (tangible or intangible) of the Company or its subsidiary
is subject or affected, except such as would not have a material adverse effect
on the Company or its subsidiary; and neither the Company nor its subsidiary is
in violation of any term or provision of their Articles of Incorporation or
By-Laws or in violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation;
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(xii) the statements in the Prospectus under
"BUSINESS," "MANAGEMENT," "PRINCIPAL SECURITY HOLDERS," "CERTAIN TRANSACTIONS,"
"DESCRIPTION OF SECURITIES" and "SHARES ELIGIBLE FOR FUTURE SALE" have been
reviewed by such counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or legal conclusions,
are correct in all material respects;
(xiii) the Securities have been accepted for
quotation on the SmallCap Market of the Nasdaq Stock Market;
(xiv) except as and to the extent set forth in the
Prospectus, the Company and its subsidiary, own or possess, free and clear of
all liens or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct their businesses (including, without limitation
any such licenses or rights described in the Prospectus as being owned or
possessed by the Company), and there is no claim or action by any person
pertaining to, or proceeding, pending, or threatened, which challenges the
exclusive rights of the Company and/or its subsidiary with respect to any
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications and licenses used in the conduct of the Company's and/or its
subsidiary's businesses (including without limitations any such licenses or
rights described in the Prospectus as being owned or possessed by the Company);
the Company's and its subsidiary's current products, services and processes do
not and will not infringe on the patents currently held by third parties;
(xv) to the best knowledge of such counsel, except as
and to the extent set forth in the Prospectus, neither the Company nor its
subsidiary are under any obligation to pay to any third-party royalties or fees
of any kind whatsoever with respect to any technology or intellectual properties
developed, employed or used;
(xvi) to the best of such counsel's knowledge, the
persons listed under the caption "PRINCIPAL STOCKHOLDERS" in the Prospectus are
the respective "beneficial owners" (as such phrase is defined in regulation
13d-3 under the Exchange Act) of the securities set forth opposite their
respective names thereunder as and to the extent set forth therein;
(xvii) to the best of such counsel's knowledge,
except as described in the Prospectus, no person, corporation, trust,
partnership, association or other entity has the right to include and/or
register any securities of the Company in the Registration Statement, require
the Company to file any registration statement or, if filed, to include any
security in such registration statement for eighteen months from the date
hereof;
(xviii) to the best of such counsel's knowledge and
except as described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder or
financial consulting arrangement or any other arrangements, agreements
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understandings, payments or issuances that may affect the Underwriter's
compensation, as determined by the NASD;
(xix) to the best of such counsel's knowledge, except
as set forth in the Prospectus under "Certain Transactions," there are no
existing material agreements, arrangements, understandings or transactions, or
proposed material agreements, arrangements, understandings or transactions
between or among the Company, its subsidiary and any officer, director, or
Principal Stockholder of the Company or its subsidiary, or any affiliate or
associate of any such person or entity;
(xx) to the best of such counsel's knowledge, the
minute books of the Company has been made available to Underwriter's Counsel and
contain a complete summary of all meetings and actions of the respective
directors and stockholders of the Company since the time of their respective
incorporations and reflect all transactions referred to in such minutes
accurately in all respects.
(xxi) the organization of the Company has been duly
and validly consummated in accordance and in compliance with applicable law and
does not violate the charter or by-laws or give rise to any claim or entitlement
by or to any stockholder.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriter's
Counsel) of other counsel reasonably acceptable to Underwriter's Counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent they
deem proper, on certificates and written statements of responsible officers of
the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Underwriter's Counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
At each Option Closing Date, if any, the Underwriter shall have
received the favorable opinion of Baer Marks & Upham, LLP, counsel to the
Company, dated the Option Closing Date, addressed to the Underwriter and in form
and substance satisfactory to Underwriter's Counsel confirming as of Option
Closing Date the statements made by Baer Marks & Upham, LLP in their opinion
delivered on the Closing Date.
(d) Intentionally omitted.
(e) On or prior to each of the Closing Date and the Option
Closing Date, Underwriter's Counsel shall have been furnished such documents
certificates and opinions as
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they may reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in subsection (b) of this Section 7, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representation, warranties or conditions herein contained.
(f) On or prior to each of the Closing Date and the Option
Closing Date, Underwriter's Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
(g) Prior to each of Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company does not, shall be in
default under any provision of any instrument relating to any outstanding
indebtedness; (iv) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (v) no action, suit or proceeding, at law or in equity, shall have
been pending or to its knowledge threatened against the Company, or affecting
any of their respective properties or businesses before or by any court or
federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income of
the Company, except as set forth in the Registration Statement and Prospectus;
and (vi) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Underwriter shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or the Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are
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pending or, to the best of each of such person's knowledge, are contemplated or
threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and neither the Preliminary Prospectus or any supplement thereto included any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company shall not have incurred up to and including the Closing Date or the
Option Closing Date, as the case may be, other than in the ordinary course of
its business, any material liabilities or obligations, direct or contingent; the
Company shall not have paid or declared any dividends or other distributions on
its capital stock; the Company shall not have entered into any transactions not
in the ordinary course of business; there shall not have been any change in the
capital stock or long-term debt or any increase in the short-term borrowings
(other than any increase in the short-term borrowings in the ordinary course of
business) of the Company; the Company does not have sustained any material loss
or damage to its property or assets, whether or not insured; there shall not be
any litigation which is pending or threatened against the Company which is
required to be set forth in an amended or supplemented Prospectus which has not
been set forth; and there shall not have occurred any event required to be set
forth in an amended or supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (g) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriter will have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement
(j) At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriter and Underwriter's Counsel, from Schneider Ehrlich &
Weingrover LLP, independent certified public accounts:
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
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(ii) stating that it is their opinion, the financial
statements and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder and
that the Underwriter may rely upon the opinion of Schneider Ehrlich & Weingrover
LLP, independent certified public accounts with respect to the financial
statements and-supporting schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
financial statements and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and Regulations
or are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement, or
(B) at a specified date not more than five (5) days prior to the Effective Date
of the Registration Statement, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts shown
in the Company's balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if there
was any change or decrease, setting forth the amount of such change or decrease,
and (C) during the period from __________, 199_ to a specified date not more
than five (5) days prior to the Effective Date of the Registration Statement,
there was any decrease in net revenues, net earnings or increase in net earnings
per common share of the Company, in each case as compared with the corresponding
period beginning _________, 199_ other than as set forth in or contemplated by
the Registration Statement, or, if there was any such decrease, setting forth
the amount of such decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the amount of liabilities
of the Company (including a breakdown of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not
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constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(vi) stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company's management any "weakness", as defined in Statement of Auditing
Standard No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit, " in the Company' s internal controls; and
(vii) Intentionally omitted.
(viii) statements as to such other matters incident
to the transaction contemplated hereby as the Underwriter may reasonably
request.
(k) On the Closing Date, and each Option Closing Date, if any,
the Underwriter shall have received from Schneider Ehrlich & Weingrover LLP,
independent certified public accounts a letter, dated as of the Closing Date,
and each Option Closing Date, if any, to the effect that they reaffirm that
statements made in the letter furnished pursuant to Subsection (j) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to Closing Date and each Option Closing Date, if any, and,
if the Company has elected to rely on Rule 430A of the Rules and Regulations, to
the further effect that they have carried out procedures as specified in clause
(v) of subsection (i) of this Section with respect to certain amounts,
percentages and financial information as specified by the Underwriter and deemed
to be a part of the Registration Statement pursuant to Rule 430A(b) and have
found such amounts, percentages and financial information to be in agreement
with the records specified in such clause (v).
(l) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Underwriter for the several
Underwriter's accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of Section
5 hereof shall have been issued on either the Closing Date or the Option Closing
Date, if any, and no proceedings for that purpose shall have been instituted or
to its knowledge or that of the Company shall be contemplated.
(n) On or before the Closing Date the Company shall have (i)
executed and delivered to the Underwriter the consulting agreement,
substantially in the form filed as an Exhibit to the Registration Statement (the
"Consulting Agreement") and (ii) paid to the Underwriter $150,000 representing
the two year retainer fee pursuant to the Consulting Agreement.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled,
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the Underwriter may terminate this Agreement or, if the Underwriter so elects,
it may waive any such conditions which have not been fulfilled or extend the
time for their fulfillment.
7. Indemnification.
(a) The Company and the Sellers, jointly and severally, agree
to indemnify and hold harmless the Underwriter, and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which such Underwriter or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained (i) in any Preliminary Prospectus, (except that the
indemnification contained in this paragraph with respect to any preliminary
prospectus shall not inure to the benefit of the Underwriter or to the benefit
of any person controlling the Underwriter) on account of any loss, claim,
damage, liability or expense arising from the sale of the Shares by the
Underwriter to any person if a copy of the Prospectus, as amended or
supplemented, shall not have been delivered or sent to such person within the
time required by the Act, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus, as amended and supplemented, and
such correction would have eliminated the loss, claim, damage, liability or
expense), the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
Common Stock of the Company issued or issuable upon exercise of the
Underwriter's Warrants; or (iii) in any application or other document or written
communication (in this Section 9 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Common Stock under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
NASDAQ or any other securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which any of the Company or the Sellers may have at common law or
otherwise.
(b) The Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration
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Statement, and each other person, if any, who controls the Company within the
meaning of the Act to the same extent as the foregoing indemnity from the
Company and the Sellers to the Underwriters but only with respect to statements
or omissions, if any, made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to any Underwriter by such
Underwriter expressly for use in such Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto or in any
such application, provided that such written information or omissions only
pertain to disclosures in the Preliminary Prospectus, the Registration Statement
or Prospectus directly relating to the transactions effected by the Underwriters
in connection with this Offering; provided, further, that the liability of each
Underwriter to the Company shall be limited to the product of the Underwriter's
discount or commission and the number of Shares sold by such Underwriter
hereunder. Each of the Company and the Sellers acknowledge that the statements
with respect to the public offering of the Securities set forth under the
heading "Underwriting" and the stabilization legend in the Prospectus and the
statement as to the anticipated date of delivery of the certificates
representing the Shares have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 8, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with one counsel
reasonably satisfactory to such indemnified party. Notwithstanding the foregoing
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnifying party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In
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no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this Section 8 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent; provided
however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 8, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 8 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Shares or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company
and the Sellers are contributing parties and the Underwriters are the
indemnified party the relative benefits received by the Company and Sellers on
the one hand, and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Shares
(before deducting expenses) bear to the total underwriting discounts received by
the Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Sellers or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d), the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Shares purchased by the
Underwriters hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who has
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signed the Registration Statement, and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to this
subparagraph (d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect to which a claim for contribution may be made against another
party or parties under this subparagraph (d), notify such party or parties from
whom contribution may be sought, but the omission so to notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have hereunder or otherwise than under
this subparagraph (d), or to the extent that such party or parties were not
adversely affected by such omission. The contribution agreement set forth above
shall be in addition to any liabilities which any indemnifying party may have at
common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company or of the Sellers submitted
pursuant hereto, shall be deemed to be representations. warranties and
agreements at the Closing Date and the Option Closing Date, as the case may be,
and such representations, warranties and agreements of the Company and the
Sellers and the indemnity agreements contained in Section 8 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, the Sellers or any controlling
person, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriter.
9. Effective Date.
(a) This Agreement shall become effective at 10:00
a.m., New York City time. on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, in its discretion, shall release the Securities
for the sale to the public, provided, however that the provisions of Sections 6,
8 and 11 of this Agreement shall at all times be effective. For purposes of this
Section 10, the Securities to be purchased hereunder shall be deemed to have
been so released upon the earlier of dispatch by the Underwriter of telegrams to
securities dealers releasing such shares for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (d) of this Section 11, the
Underwriter shall have the right to terminate this Agreement, (i) if any
calamitous domestic or international event or act or occurrence has materially
disrupted, or in the Underwriter's opinion will in the immediate future
materially disrupt general securities markets in the United States; or (ii) if
trading on the New York Stock Exchange, the American Stock Exchange, or in the
over-the-counter market shall have been suspended or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market by the NASD or by order
of the Commission or any other government authority having
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jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or (vi) if the Company shall nave sustained a loss
material or substantial to the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which whether or
not such loss shall have been insured, will, in the Underwriter's opinion, make
it inadvisable to proceed with the delivery of the Securities; or (vii) if there
shall have been such material adverse change in the conditions or prospects of
the Company, or such material adverse general market conditions as in the
Underwriter's judgment would make it inadvisable to proceed with the offering,
sale and/or delivery of the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 10 and 11 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 6 and Section 8 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Default by the Company or One or more of the Sellers or Selling
Stockholder. If the Company or either of the Sellers or Selling Stockholders,
shall fail at the Closing Date or any Option Closing Date, as applicable, to
sell and deliver the number of Securities which it is obligated to sell
hereunder on such date, then this Agreement shall terminate (or, if such default
shall occur with respect to any Option Securities to be purchased on an Option
Closing Date, the Underwriter may at the Underwriter's option, by notice from
the Underwriter to the Company, terminate the Underwriter's several obligations
to purchase Securities from the Company on such date) without any liability on
the part of any non-defaulting party other than pursuant to Section 6 and
Section 8 hereof. No action taken pursuant to this Section shall relieve the
Company or any Seller from liability, if any, in respect of such default.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at First Metropolitan Securities, Inc., 17 State Street, New York,
New York 10004, Attention: Syndicate Department, with a copy to Lampert &
Lampert, 10 East 40th Street, New York, New York 10007, Attention: Mitchell
Lampert, Esq. Notices to the Company shall be directed to the Company at 16/8
Hatam Sofer Street, Immanuel, 44845, Israel, Attention: Marc D. Tokayer, with a
copy to Baer Marks & Upham, LLP at 805 Third Avenue, New York, New York
10022-7513, attention: Sam Ottensosar, Esq. Notices to the Sellers shall be
directed to the Sellers c/o the Company at 16/8 Hatam Sofer Street, Immanuel,
44845, Israel, Attention: Marc D. Tokayer.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 9 hereof, and the Sellers and
their respective successors, legal representatives and assigns, and their
respective heirs and legal representatives and no other person shall have or
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be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
TTR INC.
By: /s/ Marc D. Tokayer
-------------------------
Marc D. Tokayer
President
Confirmed and accepted as of the date first above written.
FIRST METROPOLITAN SECURITIES, INC.
By: _____________________________
Name:
Title:
TTR INC., as representative for
the Sellers and Selling
Stockholders
By: ______________________________
Marc D. Tokayer
President
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PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "TTR INC.", FILED IN THIS OFFICE ON THE FOURTEENTH DAY OF JULY,
A.D. 1994, AT 4:30 O'CLOCK P.M.
[SEAL]
EDWARD J. FREEL
-----------------------------------------
Edward J. Freel, Secretary of State
2418657 8100 AUTHENTICATION: 7204797
944147449 DATE: 08-08-94
<PAGE>
<PAGE>
CERTIFICATE OF INCORPORATION OF
TTR, INC.
I, Marc D. Tokayer, being of the age of eighteen years or over, for purposes of
forming a corporation pursuant to the General Corporation Law of the State of
Delaware, do hereby certify:
1. The name of the corporation is TTR Inc.
2. The address of the corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, County of New Castle, Delaware, 19801. The
name of the corporation's registered agent at such address is The Corporation
Trust Company.
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
Delaware.
4. The aggregate number of shares of stock which the corporation shall have the
authority to issue is 100,000 shares of Common Stock, each with a par value of
$.01.
5. The name and mailing address of the incorporator is Marc D. Tokayer, P.O. Box
295, Immanuel 44845, Israel.
6. To the fullest extent that the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended, permits elimination or
limitation of the liability of directors, a director of the corporation shall
not be personally liable to the corporation or any of its shareholders for any
breach of duty in his capacity as a director. Any repeal or modification of the
foregoing sentence by the shareholders of the corporation shall not adversely
affect any right or protection of a director of the corporation existing at the
time of such repeal or modification.
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7. The directors and officers of the corporation shall be entitled to such
rights of indemnification and advancement of expenses, including attorneys'
fees, in the defense of any action or threatened action in which a director or
officer is or may be a party as the Board of Directors may by resolution
prescribe.
IN WITNESS WHEREOF, I have made and signed this certificate this 14th day of
July, 1994, and I affirm the statements contained herein are true.
MARK D. TOKAYER
-----------------------------------------
Mark D. Tokayer
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PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "TTR INC.", FILED IN THIS OFFICE ON THE EIGHTEENTH DAY OF AUGUST,
A.D. 1994, AT 12 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
EDWARD J. FREEL
-----------------------------------------
Edward J. Freel, Secretary of State
2418657 8100 AUTHENTICATION: 7216051
944154884 DATE: 08-18-94
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TTR INC.
(Pursuant to Section 242)
The undersigned, being the president of TTR Inc., does hereby certify the
following:
1. The name of the Corporation is TTR Inc.
2. The Certificate of Incorporation was filed by the Secretary of State
of Delaware on July 14, 1994.
3. Paragraph 4 of the Certificate of Incorporation is hereby amended to
read as follows:
"The aggregate number of shares of stock which the corporation shall have
the authority to issue is 20,000,000 shares of Common Stock, each with a
par value of $.001."
IN WITNESS WHEREOF, this certificate of Amendment has been signed this
17th day of August 1994.
MARK D. TOKAYER
-----------------------------------------
Mark D. Tokayer, President
<PAGE>
<PAGE>
BY-LAWS OF TTR INC.
ARTICLE I
OFFICES
The registered office of the corporation shall be at such place as the directors
shall from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETING OF SHAREHOLDERS
2.1 Time & place of Meetings. All meetings of the shareholders shall be held at
such times and such places as the Board of Directors of the Corporation shall
determine.
2.2 Annual Meetings. Annual meetings of the shareholders shall be held each year
at such time and place during the month selected by the Board of Directors at
which they shall elect a Board of Directors as may properly be brought before
the meeting.
2.3 Notice of Annual Meeting. Written or printed notice of the annual meeting
stating the place, date and hour of the meeting shall be delivered not less than
ten (10) nor more than fifty (50) days before the date of the meeting, either
personally or by mail or by the direction of the president, the secretary, or
the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting.
2.4 Special Meetings. Special meetings of the shareholders may be held at such
time and place as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president, the Board of
Directors or the holders of not less than a majority of all of the shares
entitled to vote at the meeting.
2.5 Notice of Special Meetings; Business Transacted. Written or printed notice
of a special meeting stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be delivered not less
than ten (10) nor more than fifty (50) days before the date of the meeting,
either personally or by mail, by, or at the direction of, the president, the
Board of Directors, or, if the meeting is called by a majority of all of the
shares
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2
entitled to vote at the special meeting, the secretary, to each shareholder of
record entitled to vote at such meeting. The business transacted at any special
meeting of the shareholders shall be limited to the purposes stated in the
notice.
2.6 Quorum Of Shareholders. The holders of a majority of the shares of the stock
issued and outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have the power to adjourn the meeting from
time to time, without notice other than announcement of the meeting, until such
a quorum shall be present or represented. At such adjourned meeting at which
such a quorum shall be present or represented any business may be transacted
which might have been transacted at the meeting as originally notified.
2.7 Majority Vote. If a quorum is present, the affirmative vote of the majority
of the shares of stock represented at the meeting shall be the act of the
shareholders, unless the vote of a greater or a lesser number of stock is
required by law or by the certificate of incorporation.
2.8 Method of Voting. Each outstanding share of vote shall be entitled to one
vote on each matter submitted to a vote at the meeting of the shareholders. A
person may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy. Each proxy shall be revocable unless expressly provided therein to be
irrevocable or unless otherwise made irrevocable by law. Any vote may be taken
by a show of hands unless someone entitled to vote shall object, in which case
written ballots shall be used.
2.9 Record Date; Closing Transfer Book. The Board of Directors may fix in
advance a record date for determining shareholders entitled to notice of to vote
at a meeting of the shareholders, the record date to be not less than ten (10)
nor more than fifty (50) days prior to the meeting; or the Board of Directors
may close the stock transfer books for such purpose for a period of not less
than ten (10) nor more than fifty (50) days prior to such meeting. In the
absence of any action by the Board of Directors, the date upon which the notice
of the meeting is mailed shall be the record date.
2.10 Action Without a Meeting. Any action required by statute to be taken at a
meeting of the shareholders or any action which may be taken at a meeting of the
shareholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
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3
matter thereof, and such consent shall have the same force and effect as a
unanimous vote of the shareholders. Any such signed consent, or a copy thereof,
shall be placed in the minute book of the corporation.
ARTICLE III
DIRECTORS
3.1 Management of the Corporation. The business and affairs of the Corporation
shall be managed by its Board of Directors, who may exercise all such powers of
the Corporation and do all such lawful acts and things as are not, by statute or
by the Certificate of Incorporation or by these By-Laws, directed to be
exercised or done by the shareholders.
3.2 Number and Qualification. The number of directors shall be three (3), which
number may decreased or increased by a vote of the majority of the outstanding
shares. The directors, other than the first Board of Directors, shall be elected
at the annual meeting of the shareholders, and each director shall serve until
the next succeeding annual meeting or until his successor shall have been
elected and qualified. The first board of directors shall hold office!until the
first meeting of the shareholders.
3.3 Removal. Any director may be removed, with or without cause, at any time by
the vote of the shareholders at a special meeting called for that purpose. Any
director may be removed for cause by the action of the directors at a special
meeting called for that purpose.
3.4 Resignation. Any director may resign at any time by giving written notice to
the President or the Secretary. The resignation of a director shall take effect
at the time specified therein, or, if the time when it shall become effective
shall not be specified therein, then it shall take effect immediately upon its
receipt by the President or the Secretary. Unless otherwise specified therein,
the acceptance of such resignation shall not be necessary for its effectiveness.
3.5 Vacancies. If any vacancies occur in the Board of Directors by the death,
resignation, retirement, disqualification or removal from office of the
director, or otherwise than as a result in the increase in the number of
directors, a majority of the directors then in office, though less than a
quorum, may chose a successor or successors may be chosen at a special meeting
of the shareholders called for that purpose to be filled by reason of an
increase in the number of directors shall be filled by election at an annual
meeting of the shareholders called for that purpose.
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4
3.6 Place of Meetings. The directors of the corporation may hold their meetings,
both regular and special, at such times and in such places as they shall
designate.
3.7 Annual Meetings. The first meeting of the newly elected Board of Directors
shall be held without further notice immediately following the annual meeting of
the shareholders and at the same place, unless by a majority vote of the
directors then elected and serving, such time and place shall be changed.
3.8 Regular Meetings. Regular meetings of the Board of Directors may be held
upon such notice or without notice, and at such time and place as shall from
time to time be determined by the Board of Directors.
3.9 Special Meetings. Special meetings of the Board of Directors may be called
by the President on twenty four (24) hours' notice to each director either
personally or by mail, telephone, telecopier or telegram. Special meetings shall
be called by the President or the Secretary in like manner and on like notice on
the written request of two (2) directors.
3.10 Quorum; Majority Vote. At all meetings of the Board of Directors, the
presence of a majority of the directors fixed by these By-Laws shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the act of a majority of the directors present at any meeting at which there
shall be a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute, the Certificate of Incorporation or
these By-Laws. If a quorum shall not be present at any meeting of the directors,
the directors present thereat may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a quorum shall be
present. At any such adjourned meeting any business may be transacted which
might have been transacted at the meeting as originally notified.
3.11 Compensation. The Board of Directors siall have the authority to determine
from time to time the amount of compensation, if any, which shall be paid to its
members for their services as directors and as members of standing or special
committees of the Board. The Board shall also have the power in its discretion
to provide for and to pay to directors rendering services to the corporation not
ordinarily rendered by directors as such, special compensation appropriate to
the value of such services as determined by the Board from time to time. Nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.
3.12 Procedure. At any meeting of the Board, the President shall act as chairman
of the meeting and preside thereat. the Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
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<PAGE>
5
3.13 Committees of the Board. The Board of Directors may, by resolution adopted
by the affirmative vote of a majority of the entire Board, designate one or more
directors (with such alternates, if any, as they may deem desirable) to
constitute one or more committees for any purpose, and each of which, to the
extent provided in the resolution, shall have the authority of the Board, except
as otherwise required by law.
3.14 Action Without a Meeting. Any action required or permitted to be taken at a
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if a consent in writing, setting forth the action to be taken, is
signed by all of the members of the Board of Directors or such committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote at a meeting, and may be stated as such in any document or instrument filed
with the Secretary of State. The signed consent, or signed copy, shall be placed
in the minute book of the Corporation.
ARTICLE IV
NOTICE
4.1 Manner of Giving Notice. Whenever under the provisions of statute, the
Certificate of Incorporation or these By-Laws, notice is required to be given to
any director or shareholder, and no provisions are made as to how such notice
shall be given, it shall not be construed to mean personal notice, but any such
notice as may be given in writing, by mail, postage prepaid, addressed to such
director or shareholder at the address appearing on the books of the
Corporation. Any notice required or permitted to be given at the time when the
same is deposited in the mail as aforesaid. Notice to directors may also be
given by telecopier.
4.2 Waiver of Notice. Whenever any notice is required to be given to any
director or shareholder of the Corporation under the provisions of statute, the
Certificate of Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Attendance at a meeting shall constitute a waiver of notice of such
meeting, except where a person attends for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
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6
ARTICLE V
OFFICERS
5.1 Officers. The officers of the Corporation shall be elected by the Board of
Directors and shall include a president, vice president, treasurer and
secretary. The Board of Directors shall also elect such other officers and
assistant officers and agents as it shall from time to time deem necessary and
who shall exercise such powers and perform such duties as shall be set forth in
these By-Laws or determined from time to time by the Board of Directors or the
President. Other than the President, no other officer, assistant officer or
agent need be a member of the Board. The Board may delegate to the President the
power to appoint or remove any such officers, assistant officers or agents.
5.2 Two or More Offices. Any two (2) or more offices may be held by the same
person, except that the President and the Secretary shall not be the same
person.
5.3 Compensation. The compensation of all officers of the Corporation shall be
fixed from time to time by the Board, and none of such officers shall be
prevented from a receiving a salary by reason of the fact that he is also a
director of the Corporation. The Board of Directors may from time to time
delegate to the President the authority to fix the compensation of all of the
other officers of the Corporation.
5.4 Term of Office; Removal; Filling of Vacancies. Unless otherwise specified by
the Board of Directors at the time of the election or in an employment agreement
approved by the Board, each officer's term shall end at the first meeting of
directors after the next annual meeting of the shareholders. Each elected
officer of the Corporation shall hold office until his successor is chosen and
qualified in his stead or until his earlier death, resignation or removal from
office. Each officer or agent shall hold office at the pleasure of the Board of
Directors without the necessity of periodic re appointment. Any officer or agent
elected or appointed by the Board may be removed at any time by the Board of
Directors whenever the best interests of the Corporation shall be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. If the office of any officer shall become vacant
for any reason, the vacancy may be filled in by the Board.
5.5 Resignation. Any officer may resign at any time by giving written notice of
such resignation to the Board of Directors, the President or the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein or, if no time is specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
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7
5.6 President. The President shall be the ranking and chief executive officer of
the Corporation. The President shall have general supervision of the affairs of
the Corporation and general control of all its business.
5.7 Vice Presidents . Each Vice President shall generally assist the President
and shall have such powers and perform such duties and services as shall from
time to time be prescribed or delegated to him by the President or the Board of
Directors.
5.8 Secretary. The Secretary shall provide notice of all meetings of the
shareholders and special meetings of the Board of Directors and shall keep and
attest true records of all proceedings at all meetings of the shareholders and
the Board of Directors. The Secretary shall keep and account for all books,
documents, papers and records of the Corporation except those for which some
other officer or agent shall be properly accountable and shall also perform such
other duties as shall form time to time be assigned to him by the President.
5.9 Assistant Secretaries. Each assistant secretary shall generally assist the
Secretary and shall have such powers and perform such duties and services as
shall from time to time be prescribed or delegated to him by the Secretary of
the President.
5.10 Treasurer. The Treasurer shall be the chief financial officer of the
Corporation. He shall have active control of and be responsible for matters
pertaining to the finances of the Corporation. The Treasurer shall have the care
and custody of all of the monies, funds and securities of the Corporation; shall
deposit or cause to be deposited all such funds in and with such depositories as
the Board of Directors shall form time to time direct or as shall be selected in
accordance with the procedures established by the Board; shall advise upon all
terms of credit granted by the Corporation; and shall be responsible for the
collection of all of its accounts and shall cause to be kept full and accurate
records of all receipts and disbursements. He shall have the power to endorse
for deposit or collection or otherwise, all checks, drafts, notes, bills of
exchange or other commercial papers payable to the Corporation and to give
proper receipts or discharges for all payments to the Corporation. The Treasurer
shall also perform such duties as may from time to time be assigned to him by
the President.
5.11 Assistant Treasurers. Each assistant treasurer shall generally assist the
Treasurer and shall have such powers and perform such duties and services as
shall from to time to time be prescribed or delegated to him by the President.
5.12 Additional Powers and Duties. In addition to the foregoing especially
enumerated duties, services and powers, the several officers of the Corporation
shall perform such other duties and services and exercise such further powers as
may be provided by statute, the Certificate of Incorporation or these By-
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8
Laws or as the Board of Directors may from time to time determine or as may be
assigned to them by any competent superior officer.
ARTICLE VI
PROTECTIVE PROVISIONS
Without first obtaining the approval of a majority of the shares then issued and
outstanding and entitled to vote at a shareholders' meeting, the Corporation may
not do any of the following:
(i) amend the Articles of Association of the Company, including changes
to authorized capital,
(ii) sell, convey, license, transfer or otherwise dispose of or encumber
or grant rights to a substantial part of its property or business or merge into
or consolidate with any other company (other than a wholly owned subsidiary
company),
(iii) enter into a new line of business , or
(iv) replace the President of the Company.
The following provisions shall remain in effect until such time as any of the
Company's equity securities are offered to the public.
ARTICLE VII
STOCK AND TRANSFER OF STOCK
7.1 Share Certificates. Certificates in such form as may be determined by the
Board of Directors and as shall conform to the requirements of statute, the
Certificate of Incorporation and these By-Laws shall be delivered representing
all shares of any class of stock of the Corporation to which shareholders shall
be entitled. Such certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued. Each certificate
shall be signed by the President or the Secretary and may be sealed with the
seal of the Corporation or a facsimile thereof. If any certificate shall be
countersigned by a transfer agent or registered by a registrar, either of which
is other than the Corporation or an employee of the Corporation, the signature
of any such officer may be a facsimile. In case any officer, transfer agent or
registrar who shall have signed or whose facsimile signature shall have been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate shall be issued, it may be issued by the
Corporation with the same effect as if he were an!officer, transfer agent or
registrar at the date of the issue.
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9
7.2 Issuance. Subject to the provisions of statute, the Certificate of
Incorporation or these By-Laws, shares may be issued for such consideration and
to such persons as the Board of Directors may determine from time to time.
7.3 Lost, Stolen or Destroyed Certificates. The Board of Directors, the
President or such other officer or officers of the Corporation as the Board may
from time to time designate, in his or its discretion, may direct a new
certificate or certificates representing shares to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors, the president or any such
other officer, in its or his sole discretion and as a condition precedent to the
issuance thereof, may require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it or he shall require and/or give the Corporation a bond in
such form, in such sum, and with such surety or sureties as it or he may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate or certificates alleged to have been lost, stolen or
destroyed.
7.4 Transfers of Shares. Shares of the stock of the Corporation shall be
transferable only on the books of the Corporation by the holder thereof in
person or by his duly authorized attorney or agent. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate or
certificates representing shares, duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, with all required
stock transfer tax stamps affixed thereto and canceled or accompanied by
sufficient funds to pay such taxes, it shall be the duty of the Corporation to
issue a new certificate or certificates to the person entitled thereto, cancel
the old certificate or certificates and record the transaction upon its books.
7.5 Registered Shareholders. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock of the Corporation as the
holder in fact there of and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE VIII
MISCELLANEOUS
8.1 Dividends. Dividends upon the outstanding shares of stock of the
Corporation, subject to the provisions of the statute and of the Certificate of
Incorporation, may be declared by the Board of Directors at any annual, regular
or special meeting and may be paid in cash, in property or in shares of stock of
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10
the Corporation or in any combination thereof. The Board of Directors may fix in
advance a record date for the purpose of determining shareholders entitled to
receive payment of any dividend, the record date to be not less than ten (10)
nor more than fifty (50) days prior to the payment date of such dividend, or the
Board of Directors may close the stock transfer books for such purpose for a
period of not less than ten (10) nor more than fifty (50) days prior to the
payment date of such dividend. In the absence of any action by the Board of
Directors, the date upon which the Board shall adopt the resolution declaring
the dividend shall be the record date.
8.2 Reserves. There may be created from time to time by resolution of the Board
of Directors, out of the earned surplus of the Corporation, such reserve or
reserves as the Board of Directors from time to time in its discretion, shall
deem proper to provide for contingencies, or to equalize dividends, or to repair
or maintain any property of the Corporation or for such other purpose as the
Board of Directors shall deem beneficial to the Corporation. The Board may
modify or abolish any such reserve in the manner in which it was created.
8.3 Signatures for Contracts, Negotiable Instruments. All bills, notes, checks
or other instruments for the payment of money and all contracts shall be signed
or countersigned by such officer, officers, agent or agents and in such manner
as are permitted by these By-Laws or as, from time to time, may be prescribed by
resolution (whether general or special) of the Board of Directors.
8.4 Fiscal Year. The fiscal year of the Corporation shall be from January 1
through December 31.
8.5 Books and Records. The Corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of its shareholders
and Board of Directors and shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of its shareholders, giving the names and addresses of all shareholders and the
number and class of the shares of stock of the Corporation held by them.
8.6 Indemnification. The indemnification of directors, officers, employees and
agents of the Corporation shall be subject to the following provisions:
(i) The Corporation shall indemnify any person made, or threatened to be
made, a party to any action or proceeding, whether civil, criminal,
administrative or investigative, brought or threatened to be brought against
him, by reason of the fact that he, his testator or intestate, is or was a
director or officer of the Corporation, or served any other corporation or
partnership, joint venture, trust, employee benefit plan or other enterprise in
any capacity, at the request of the Corporation while he was such a director or
officer, against
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11
expenses (including legal fees), judgments, fines and amounts paid in
settlement, to the fullest extent permitted and in the manner prescribed by law.
(ii) Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding shall be paid by the Corporation in advance
of the final disposition of such action as permitted by law.
(iii) The foregoing provisions of this Article shall be deemed to be
contract between the Corporation and each director or officer of the Corporation
who serves in such capacity at any time while this Article and the relevant
provisions of the Delaware General Corporation Law are in effect, and any repeal
or modification of this article or such provisions of the Delaware General
Corporation Law shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing as it relates to any
action or proceeding theretofore or thereafter brought or threatened, based in
whole or in part upon any such state of facts; provided, however, that the
rights of indemnification and advancement of expenses provided in this Article
shall not be deemed exclusive of any other rights to which any director or
officer of the Corporation may now or hereafter become entitled apart from this
Article.
(iv) The Board of Directors in its discretion shall have the power on
behalf of the Corporation to provide indemnification and advancement of expenses
to the extent and in the manner it may deem appropriate, for any person made, or
threatened to be made, a party to any action or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he, his
testator or intestate, is or was an employee or agent of the Corporation or
served the Corporation in any other capacity or served any other corporation or
any partnership, joint venture, trust employee benefit plan or other enterprise
in any capacity at the request of the Corporation.
(v) The provisions of this section shall be applicable to all actions,
suits or proceedings commenced after its adoption, whether such rise out of acts
or omissions which occurred prior to or subsequent to such adoption and shall
continue as to a person who has ceased to be a director or officer or to render
services for or at the request of the Corporation and shall inure to the benefit
of the heirs, executors and administrators of such a person.
(vi) The Corporation may purchase and maintain insurance to provide for
payment of the indemnification required or permitted y these By-Laws and the
Delaware Corporation Law.
8.7 Surety Bonds. Such officers and agents of the Corporation as the President
or as the Board of Directors may direct, from time to time, shall be bonded for
the faithful performance of their duties and for the restoration to the
Corporation, in case of their death, resignation, retirement, disqualification
or removal from office, of all books, papers, vouchers, money and other property
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12
of whatever kind in their possession or under their control belonging to the
Corporation, in such amounts and by such surety companies as the President or
the Board of Directors may determine. The premiums on such bonds shall be paid
by the Corporation, and the bonds so furnished shall be in the custody of the
Secretary.
8.8 Interested Directors, Officers and Shareholders.
(i) Validity. Any contract or other transaction between the Corporation
and any of its directors, officers or shareholders (or any corporation or firm
in which any of them are directly or indirectly interested) shall be valid for
all purposes notwithstanding the presence of such director, officer or
shareholder at the meeting authorizing such contract or transaction, or his
participation or vote in such meeting or authorization.
(ii) Disclosure or Approval. The foregoing shall, however, apply only if
the material facts of the relationship or the interest of each such director,
officer or shareholder is known or disclosed:
(A) to the Board of Directors and it nevertheless authorizes or ratifies
the contract or transaction by a majority of the directors present, each
such interested director to be counted in determining whether a quorum
is present but not in calculating the majority necessary to carry the
vote; or
(B) to the Shareholders and they nevertheless authorize or ratify the
contract or transaction by majority of the shares present, each such
interested person to be counted for quorum and voting purposes.
(iii) Non-exclusive. This provision shall not be construed to invalidate
any contract or transaction which would be valid in the absence of this
provision.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be adopted
at any meeting of the Shareholders at which a quorum is present by the
affirmative vote of a majority of the shares outstanding and entitled to vote at
such meeting.
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<PAGE>
ORDINANCE.1
THE COMPANIES ORDINANCE (1983)
MEMORANDUM OF ASSOCIATION
OF
T.T.R. TECHNOLOGIES LTD
[Name of Company in Hebrew Letters]
1. The name of the Company in English is: T.T.R. TECHNOLOGIES LTD. The name of
the company in Hebrew is [NAME OF COMPANY IN HEBREW LETTERS]
2. The purposes for which the Company is established are:
(a) To market and develop any products and services as shall be determined by
the Company from time to time.
(b) To engage in and conduct any business as shall be determined by the Company
from time to time.
3. The liability of the members is limited.
4. The share capital of the Company is 25,200 New Israeli Shekels divided into
25,200 ordinary Shares of one New Israeli Shekel each.
We, the undersigned, want to incorporate as a Company, in pursuance of this
Memorandum of Association, and we respectively agree to take the number of
shares in the capital of the Company set opposite our respective names.
<TABLE>
<CAPTION>
Name and Number of shares
Addresses of I.D. and taken by each
subscribers Description Signature Subscriber
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
T.T.R. Inc. Delaware Mark Tokayer 99
16/8 Hatam Sofer Company
Immanuel, Israel
Marc Tokayer I.D. 15787492 Mark Tokayer 1
16/8 Hatam Sofer
Immanuel, Israel
</TABLE>
DATED this 4th day of December ___, 1994
WITNESS to the above signatures: David Aboudi
---------------------
[David Aboudi, Advocate - in Hewbrew Letters]
DAVID ABOUDI, Advocate
<PAGE>
<PAGE>
THE COMPANIES ORDINANCE (1983)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
T.T.R. TECHNOLOGIES LTD.
[name of company in Hebrew letters]
The regulations contained in the Second Schedule to the Companies
Ordinance (New Version) (the "Regulations") shall apply to T.T.R. TECHNOLOGIES
LTD. (the "Company") subject to the modifications hereinafter expressed.
(a) The Articles of Association of the Company shall be numbered in the same
manner as the Regulations, except with respect to Regulations not adopted, and
the word "deleted" shall appear next to the number of such deleted provision.
(b) After Clause I of the Regulations, the following clause shall be inserted:
1(a) The Company is a private limited Company and accordingly:
(i) The number of members of the Company at any time shall not
exceed 50 (not including persons who are in the employment to the Company, and
persons who, having been formerly in the employment of the Company were while in
that employment and have continued after the termination of that employment to
be members of the Company). However for the purposes of this provision, where
two or more persons hold one or more shares in the Company jointly they shall be
treated as a single member;
(ii) No invitation shall be issued to the public to subscribe for
any shares or debenture stocks of the Company;
(iii) The right to transfer shares of the company shall be
restricted in accordance with the provisions of these Articles;and
(iv) Any transfer of shares in the Company shall require the
authorization of the Board of Directors.
(c) clause 5 of the Regulations shall be deleted.
<PAGE>
<PAGE>
2
(d) Clause 19 (1) of the Regulations shall be amended by deleting the words 'not
paid up in full.'
(e) Clauses 34-39, 48(b) and 51 of the Regulations shall be deleted.
(f) After Clause 67 at the Regulations, the following clause shall be inserted:
67(a) A resolution in writing signed by all members of the
Company then entitled to attend and vote at General Meetings or to which all
such members have given their written consent (by letter, telegram, telex,
telefax or otherwise) shall be deemed to have been unanimously adopted by a
General Meeting duly convened and held.
67(b) Where all the directors present at or participating in the
meeting have consented thereto, any director may participate in a meeting of the
board by means of conference telephone, electronic or other communication
facilities as permit all persons participating in the meeting to communicate
with each other simultaneously and instantaneously and a director participating
in such a meeting by such means is deemed to be present at the meeting.
(g) Clauses 68-70 of the Regulations shall be deleted and after clause 70 the
following clause shall be inserted:
70(a) The number of the members of the Board of Directors, their
duties and the manner of their appointment and termination will be determined
from time to time by a general meeting of the Company.
(h) Clauses 73,79, 80(5) and 8l-89 of the Regulations shall be deleted.
(i) Clause 91 of the Regulations shall be deleted and after it the following
clause shall be inserted:
91(a) The Board of Directors can set the size of the quorum
required to conduct the business affairs of the Company and can define the
signatory rights of the Company. Until resolved to the contrary the quorum for a
meeting of the Board of Directors shall be one.
(j) After clause 95 of the Regulations.the following clauses shall be inserted:
95(a) A resolution in writing signed by all the members of the
Board of Directors or such resolution that all the members of the Board of
Directors have given their written consent ( by letter, telegram, telex, telefax
or otherwise ) shall be valid for every purpose as a resolution adopted at a
Board of Directors meeting that was duly convened and held.
95 (b)(i) The Company may enter into a contract for the insurance
of part or all of its officers' liability in respect of any of the following:
<PAGE>
<PAGE>
3
(1) violations of his obligation toward the Company or toward
any other to act with circumspection;
(2) violations of his obligation of loyalty toward it, provided
the officer acted in good faith and had reasonable cause to
assume that his act would not injure the Company;
(3) financial obligations imposed on him in favor of a third
party, in respect of an act performed by virtue of his
position as officer of the Company.
(ii) The Company may indemnify any of its officers for the
following matters:
(1) a financial obligation imposed on the officer in favor of a
third party by a court judgment, including a compromise
judgment or an arbitrator's decision approved by a court,
for an act performed by virtue of his position as officer of
the Company; and
(2) reasonable legal expenses, including attorney's fees,
expended by or charged to an officer or adjudged against him
by a court in an action lodged against him by the Company or
on its behalf by another person, or in a criminal charge in
which he was found innocent, all for an act performed by
virtue of his position as officer of the Company.
(k) Clause 100 of the Regulations shall be deleted.
Addresses & Descriptions of
Name Subscribers Signatures
- --------- -- -------------------------------------------------------------------
T.T.R. Inc. Delaware Company Marc Tokayer
16/8 Hatam Sofer
Immanuel, Israel
Marc Tokayer I.D. 15787492 Marc Tokayer
16/8 Hatam Sofer
Immanuel, Israel
Dated this 11th day of December __,1994
Witness to the above signatures David Aboudi
----------------------
[David Aboudi, Advocate - in Hebrew letters]
David Aboudi, Advocate
<PAGE>
<PAGE>
CERTIFICATE OF NAME CHANGE
TO CHANGE HEBREW NAME
[name of company in Hebrew letters]
T.T.R. TECHNOLOGIES LTD
[name of company in Hebrew letters]
T.T.R. TECHNOLOGIES LTD
1995 10
[hebrew numbers] [hebrew numbers] [hebrew numbers]
51-205917-1
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
TTR, INC.
AND
FIRST METROPOLITAN SECURITIES, INC.
___________
UNDERWRITER'S
WARRANT AGREEMENT
DATED AS OF ______________, 1996
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
UNDERWRITER'S WARRANT AGREEMENT dated as of ____________, 1996 among TTR,
Inc., a New York corporation (the "Company") and First Metropolitan Securities,
Inc., a Delaware corporation (hereinafter referred to variously as the "Holder"
or the "Underwriter").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue to the Underwriter warrants to
purchase up to an aggregate of 127,500 shares of common stock, par value $.001
per share, of the Company ("Common Stock") and 60,000 Redeemable Common Stock
Purchase Warrant (the "Warrants" or "Redeemable Warrants"), each Warrant
exercisable for one share of Common Stock at $7.20, collectively referred to as
the "Underwriter's Warrants"; and
WHEREAS, the Underwriter has agreed pursuant to the underwriting agreement
(the "Underwriting Agreement") dated as of the date hereof between the
Underwriter and the Company and certain selling securityholders, to underwrite
the Company's proposed public offering of 1,275,000 shares of Common Stock
(1,200,000 shares by the Company and 75,000 shares by certain selling
securityholders) and 600,000 Redeemable Warrants, at a public offering price of
between $5.00 and $6.00 per share and $.25, respectively (the "Public
Offering"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriter in consideration for, and as part
of the compensation in connection with the Public Offering;
<PAGE>
<PAGE>
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of an aggregate of ten dollars ($10.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Grant. The Holder is hereby granted the right to purchase, at any time
from ___________, 1997 until 5:30 P.M., New York time, on _______________, 2002,
up to an aggregate 127,500 shares of Common Stock and 60,000 Warrants at an
initial exercise price (subject to adjustment as provided in Section 8 hereof)
of $_.__ (120% of the initial public offering price) and $.30, respectively,
subject to the terms and conditions of this Agreement. Except as set forth
herein, the Common Stock and Warrants issuable upon exercise of the
Underwriter's Warrants are in all respects identical to the shares of Common
Stock and Warrants being purchased by the Underwriter for resale to the public
pursuant to the terms and provisions of the Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant. The Warrants initially are exercisable at an
aggregate initial exercise price (subject to adjustment as
2
<PAGE>
<PAGE>
provided in Section 8 hereof) as set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender at the Company's
principal offices in New York (presently located at 16/8 Hatam Sofer Street,
Immanuel, Israel, 44845), of a Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of the Purchase Price
(as hereinafter defined) for the shares of Common Stock and/or Warrants, the
registered holder of a Warrant Certificate ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the shares of Common Stock
and Warrants so purchased. The purchase rights represented by each Underwriter's
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock). In the
case of the purchase of less than all the shares and Warrants purchasable under
any Warrant Certificate, the Company shall cancel the Warrant Certificate upon
the surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the securities purchasable thereunder.
4. Issuance of Certificates. Upon the exercise of the Underwriter's
Warrants, the issuance of certificates for the Common Stock and Warrants or
other securities, properties or rights underlying such Underwriter's Warrants,
shall be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof,
3
<PAGE>
<PAGE>
and such certificates shall (subject to the provisions of Sections 5 and 7
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the
Underwriter and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
The Underwriter's Warrant Certificates and the certificates representing
the Common Stock and Warrants issuable upon exercise of the Underwriter's
Warrants shall be executed on behalf of the Company by the manual or facsimile
signature of the then present Chairman or Vice Chairman of the Board of
Directors or President or Vice President of the Company under its corporate seal
reproduced thereon, attested to by the manual or facsimile signature of the then
present Secretary or Assistant Secretary of the Company. Underwriter's Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of the Underwriter's Warrants. The Holder of a
Underwriter's Warrant Certificate, by its acceptance thereof, covenants and
agrees that the Underwriter's Warrants are being acquired as an investment and
not with a view to the
4
<PAGE>
<PAGE>
distribution thereof; and that the Underwriter's Warrants may not be sold,
transferred, assigned, hypothecated or otherwise disposed of, in whole or in
part, for a period of one (1) year from the date of the Public Offering, except
to officers or partners of the Underwriter or members of the selling group
and/or their officers and partners.
6. Exercise Price.
ss.6.1 Initial and Adjusted Exercise Price. Except as otherwise provided in
Section 8 hereof, the initial exercise price of each of the shares of Common
Stock and Redeemable Warrants underlying the Underwriter's Warrants shall be
$____ (120% of the initial public offering prices) and $.30, respectively. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 8 hereof.
ss.6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
ss.7.1 Registration Under the Securities Act of 1933. The Underwriter's
Warrants, the shares of Common Stock and Warrants issuable upon exercise of the
Underwriter's Warrants have been registered pursuant to a registration statement
on form SB-2 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act").
5
<PAGE>
<PAGE>
ss.7.2 Piggyback Registration. If, at any time commencing after
____________, 1997, through and including ____________, 2003 (84 months from the
Effective Date), the Company proposes to register any of its securities under
the Act (other than in connection with a merger or pursuant to Form S-8) it will
give written notice by registered mail, at least thirty (30) days prior to the
filing of each such registration statement, to the Underwriter and to all other
Holders of the Underwriter's Warrants and/or the Common Stock and Warrants
underlying same of its intention to do so. If any of the Underwriter or other
Holders of the Underwriter's Warrants and/or Common Stock and Warrants
underlying same notify the Company within twenty (20) days after receipt of any
such notice of its or their desire to include any such securities in such
proposed registration statement, the Company shall afford each of the
Underwriter and such Holders of the Underwriter's Warrants and/or Common Stock
and Warrants underlying same the opportunity to have any such Common Stock and
Warrants underlying same registered under such registration statement.
Notwithstanding the provisions of this Section 7.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
ss.7.3 Demand Registration.
6
<PAGE>
<PAGE>
(a) At any time commencing after ______________, 1997 (12 months from the
Effective Date) through and including ______________, 2001 (60 months from the
Effective Date), the Holders of the Underwriter's Warrants and/or Common Stock
and Warrants underlying same representing a "Majority" (as hereinafter defined)
of such securities (assuming the exercise of all of the Underwriter's Warrants)
shall have the right (which right is in addition to the registration rights
under Section 7.2 hereof), exercisable by written notice to the Company, to have
the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Underwriter and Holders, in order to comply with the provisions of the Act, so
as to permit a public offering and sale of their respective Common Stock and
Warrants underlying same for nine (9) consecutive months by such Holders and any
other Holders of the Underwriter's Warrants and/or Common Stock and Warrants
underlying same who notify the Company within ten (10) days after receiving
notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Underwriter's Warrants and the Common Stock and
Warrants underlying same within ten (10) days from the date of the receipt of
any such registration request.
7
<PAGE>
<PAGE>
(c) In addition to the registration rights under Section 7.2 and subsection
(a) of this Section 7.3, at any time commencing after ______________, 1997 (12
months from the Effective Date) through and including ______________, 2001 (60
months from the Effective Date), any Holder or Holders of a Majority of
Underwriter's Warrants and/or shares of Common Stock and Warrants underlying
same shall have the right, exercisable by written request to the Company, to
have the Company prepare and file, on one occasion, with the Commission a
registration statement so as to permit a public offering and sale for nine (9)
consecutive months by any such Holder or Holders, provided, however, that the
provisions of Section 7.4(b) hereof shall not apply to any such registration
request and registration and all costs incident thereto shall be at the expense
of the Holder or Holders making such request.
(d) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the shares of Common
Stock, Warrants and shares of Common Stock underlying the Underwriter's Warrants
within the time period specified in Section 7.4(a) hereof pursuant to the
written notice specified in Section 7.3(a) of a Majority of the Holders of the
Underwriter's Warrants and/or shares of Common Stock and Warrants underlying
same, the Company agrees that upon the written notice of election of a Majority
of the Holders of the Underwriter's Warrants and/or Common Stock and Warrants
underlying same it shall repurchase (i) any and all Common Stock and Warrants
underlying the
8
<PAGE>
<PAGE>
Underwriter's Warrants at the higher of the Market Price per share of Common
Stock on (x) the date of the notice sent pursuant to Section 7.3(a) or (y) the
expiration of the period specified in Section 7.4(a) and (ii) any and all
Warrants at such Market Price less the exercise prices of such Warrant. Such
repurchase shall be in immediately available funds and shall close within two
(2) days after the later of (i) the expiration of the period specified in
Section 7.4(a) or (ii) the delivery of the written notice of election specified
in this Section 7.3(d).
ss.7.4 Covenants of the Company With Respect to Registration. In connection
with any registration under Section 7.2 or 7.3 hereof, the Company covenants and
agrees as follows:
(a) The Company shall use its best efforts to file a registration statement
within thirty (30) days of receipt of any demand therefor, shall use its best
efforts to have any registration statement declared effective at the earliest
possible time, and shall furnish each Holder desiring to sell Common Stock
and/or Warrants underlying the Underwriter's Warrants, such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s) counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Sections 7.2 and 7.3(a) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, and blue sky fees and expenses.
The
9
<PAGE>
<PAGE>
Holder(s) will pay all costs, fees and expenses in connection with any
registration statement filed pursuant to Section 7.3(c). If the Company shall
fail to comply with the provisions of Section 7.4(a), the Company shall, in
addition to any other equitable or other relief available to the Holder(s), be
liable for any or all incidental, special and consequential damages and damages
due to loss of profit sustained by the Holder(s) requesting registration of
their Warrant Shares.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Common Stock and Warrants underlying the
Underwriter's Warrants included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
requested by the Holder(s), provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Common Stock and
Warrants underlying same to be sold pursuant to any registration statement and
each person, if any, who controls such Holders within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Act, the Exchange Act or
10
<PAGE>
<PAGE>
otherwise, arising from such registration statement but only to the same extent
and with the same effect as the provisions pursuant to which the Company has
agreed to indemnify the Underwriter contained in Section 7 of the Underwriting
Agreement.
(e) The Holder(s) of the Common Stock and Warrants underlying the
Underwriter's Warrants to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act,
the Exchange Act or otherwise, arising from information furnished by or on
behalf of such Holders, or their successors or assigns, for specific inclusion
in such registration statement to the same extent and with the same effect as
the provisions contained in Section 7 of the Underwriting Agreement pursuant to
which the Underwriter has agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as requiring the
Holder(s) to exercise their Underwriter's Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other than
the Common Stock and Warrants underlying the
11
<PAGE>
<PAGE>
Underwriter's Warrants to be included in any registration statement filed
pursuant to Section 7.3 hereof, or permit any other registration statement to be
or remain effective during the effectiveness of a registration statement filed
pursuant to Section 7.3 hereof, without the prior written consent of the Holders
of the Underwriter's Warrants and Common Stock and Warrants underlying same
representing a Majority of such securities.
(h) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in
12
<PAGE>
<PAGE>
accountants' letters delivered to underwriters in underwritten public offerings
of securities.
(i) The Company shall as soon as practicable after the effective date of
the registration statement, and in any event within 15 months thereafter, have
made "generally available to its security holders" (within the meaning of Rule
158 under the Act) an earnings statement (which need not be audited) complying
with Section 11(a) of the Act and covering a period of at least 12 consecutive
months beginning after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below, and the
managing underwriters, copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
13
<PAGE>
<PAGE>
(k) The Company shall enter into an underwriting agreement with the
managing underwriters selected for such underwriting by Holders holding a
Majority of the Common Stock and Warrants underlying same requested to be
included in such underwriting. Such agreement shall be satisfactory in form and
substance to the Company, each Holder and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type used by the
managing underwriter.
The Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Common Stock and Warrants underlying same and may, at
their option, require that any or all the representations, warranties and
covenants of the Company to or for the benefit of such underwriters shall also
be made to and for the benefit of such Holders. Such Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Holders, their
intended methods of distribution, and except for matters related to disclosures
with respect to such Holders, contained or required to be contained, in such
registration statement under the Act and the rules and regulations thereunder.
(1) For purposes of this Agreement, the term "Majority" in reference to the
Holders of Underwriter's Warrants, shall mean in excess of fifty percent (50%)
of the then outstanding Underwriter's Warrants assuming full exercise thereof,
and shares of Common Stock underlying the Warrants, underlying the Underwriter's
Warrants that
14
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<PAGE>
(i) are not held by the Company, an affiliate, officer, creditor, employee or
agent thereof or any of their respective affiliates, members of their families,
persons acting as nominees or in conjunction therewith or (ii) have not been
resold to the public pursuant to Rule 144 under the Act or a registration
statement filed with the Commission under the Act.
8. Adjustments to Exercise Price and Number of Securities.
ss.8.1 Intentionally Omitted.
ss.8.2 Intentionally Omitted.
ss.8.3 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
ss.8.4 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
shares of Common Stock underlying the Underwriter's Warrants shall be adjusted
to the nearest full amount by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock underlying same issuable upon exercise of the Underwriter's Warrants
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
ss.8.5 Definition of Common Stock. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Certificate of
15
<PAGE>
<PAGE>
Incorporation of the Company as amended as of the date hereof, or (ii) any other
class of stock resulting from successive changes or reclassifications of such
Common Stock, consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that the Company
shall after the date hereof issue a class of Common Stock with greater or
superior voting rights than the shares of Common Stock outstanding as of the
date hereof, the Holder, at its option, may receive upon exercise of any Warrant
either shares of Common Stock or a like number of such securities with greater
or superior voting rights.
ss.8.6 Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to each Holder
a supplemental warrant agreement providing that each Holder shall have the right
thereafter (until the expiration of such Warrant) to receive, upon exercise of
such Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such Warrant might have been
exercised immediately prior to such consolidation or merger. Such supplemental
warrant agreement shall provide for adjustments which shall be identical to the
adjustments provided in Section 8.
16
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<PAGE>
The above provision of this subsection shall similarly apply to successive
consolidations or mergers.
ss.8.7 No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made:
(a) Upon the issuance or sale of the Underwriter's Warrants or
the shares of Common Stock issuable upon the exercise of (i) the
Underwriter's Warrants, (ii) the Warrants underlying the Underwriter's
Warrants, (iii) the options and warrants outstanding on the date hereof
and described in the prospectus relating to the Public Offering or (iv)
up to an aggregate of 450,000 shares issuable upon the exercise of
options granted under the Company's 1996 Stock Option Plan; or
(b) If the amount of such adjustment shall be less than two
cents ($.02) per share, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least two cents ($.02) per share.
ss.8.9 Dividends and Other Distributions. In the event that the
Company shall at any time prior to the exercise of all Underwriter's Warrants
declare a dividend (other than a dividend consisting solely of shares of Common
Stock) or otherwise distribute to its stockholders any assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other
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thing of value, the Holders of the unexercised Underwriter's Warrants shall
thereafter be entitled, in addition to the shares of Common Stock or other
securities and property receivable upon the exercise thereof, to receive, upon
the exercise of such Underwriter's Warrants, the same property, assets, rights,
evidences of indebtedness, securities or any other thing of value that they
would have been entitled to receive at the time of such dividend or distribution
as if the Underwriter's Warrants had been exercised immediately prior to the
record date for such dividend or distribution. At the time of any such dividend
or distribution, the Company shall make appropriate reserves to ensure the
timely performance of the provisions of this subsection 8.9.
ss.8.10 Adjustment of the Redeemable Warrants.
Notwithstanding this Section 8, any adjustment of the exercise price and/or
the number of shares of Common Stock purchasable upon the exercise of the
Redeemable Warrants underlying the Underwriter's Warrants shall be determined
solely by the anti- dilution and other adjustment provisions provided for by the
terms of a certain Warrant Agreement date ___________, 1996 between the Company
and North American Transfer Co. (the "Warrant Agreement") provided however, that
the term "Warrant Price" as used in said Warrant Agreement shall be deemed to be
$_____ when applied to the Common Stock issued pursuant to the Warrants
hereunder, and not by the provisions of this Section 8, and notice thereof shall
be given as provided in said Warrant Agreement to the holders of the Warrants.
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9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of shares of Common Stock and Warrants
underlying same in such denominations as shall be designated by the Holder
thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Underwriter's
Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock upon the
exercise of the Underwriter's Warrants or Warrants underlying same, nor shall it
be required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of shares of Common Stock
or other securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized
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shares of Common Stock, solely for the purpose of issuance upon the exercise of
the Underwriter's Warrants and Warrants underlying same, such number of shares
of Common Stock or other securities, properties or rights as shall be issuable
upon the exercise thereof. The Company covenants and agrees that, upon exercise
of the Underwriter's Warrants and Warrants underlying same and payment of the
exercise prices therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. As
long as the Underwriter's Warrants shall be outstanding, the Company shall use
its best efforts to cause all shares of Common Stock issuable upon the exercise
of the Underwriter's Warrants and Warrants underlying same to be listed (subject
to official notice of issuance) on all securities exchanges on which the Common
Stock issued to the public in connection herewith may then be listed and/or
quoted on NASDAQ.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as a stockholder in respect of any meetings of stockholders
for the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Underwriter's Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to
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receive a dividend or distribution payable otherwise than in cash, or a
cash dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock
of the Company, or any option, right or warrant to subscribe therefor;
or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property assets and business as an
entirety shall be proposed; then, in any one or more of such events the
Company shall give written notice of such event at least fifteen (15)
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to
such dividend, distribution, convertible or exchangeable securities or
subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or
payment of any such dividend, or the issuance
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of any convertible or exchangeable securities, or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding
up or sale
13. Notices.
All notices requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly made when delivered, or
mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of the Underwriter's Warrants, to
the address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice
to the Holders.
14. Supplements and Amendments. The Company and the Underwriter may from
time to time supplement or amend this Agreement without the approval of any
holders of Warrant Certificates (other than the Underwriter) in order to cure
any ambiguity, to correct or supplement any provision contained herein which may
be defective or inconsistent with any provisions herein or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Underwriter may deem necessary or desirable and which the Company and
the Underwriter deem shall not adversely affect the interests of the Holders of
Warrant Certificates.
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15. Successors. All the covenants and provisions of this Agreement shall
be binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
16. Termination. This Agreement shall terminate at the close of business
on ___________, 2003. Notwithstanding the foregoing, the indemnification
provisions of Section 7 shall survive such termination until the close of
business on ____________, 2006.
17. Governing Law: Submission to Jurisdiction. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of such State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Underwriter and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriter and the Holders hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Underwriter and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified
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mail, return receipt requested, postage prepaid, addressed to it at the address
set forth in Section 3 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
18. Entire Agreement: Modification. This Agreement (including the
Underwriting Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and may not be modified or amended except by a writing
duly signed by the party against whom enforcement of the modification or
amendment is sought.
19. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits or this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than
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the Company and the Underwriter and any other registered Holder(s) of the
Warrant Certificates or Common Stock and Warrants underlying same any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and the Underwriter and any
other Holder(s) of the Warrant Certificates or Warrant Shares.
22. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] TTR, Inc.
By
------------------------------------
Marc Tokayer
President
Attest:
- -----------------------------------
Secretary
FIRST METROPOLITAN SECURITIES, INC.
By
-------------------------------------
Name:
Title:
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR
RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE UNDERWRITER'S WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO
HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME , 2001
No. W- __________ Underwriter's Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ___________, or registered
assigns, is the registered holder of ___________ Underwriter's Warrants to
purchase initially, at any time from ___________, 1996 [one year from the
effective date of the Registration Statement] until 5:30 p.m. New York time
on , 2000 [four years from the effective date of the Underwriting Agreement]
("Expiration Date"), up to 127,500 fully-paid and non-assessable share of
common stock, par value $.001 per share ("Common Stock") and 60,000 redeemable
Common Stock purchase warrant ("Warrants") of TTR, Inc., a New York corporation
(the "Company"), at the initial exercise prices, subject to adjustment in
certain events (the "Exercise Prices"), of $_______ and $.30, respectively,
upon surrender of this Warrant Certificate and payment of the Exercise Price
at an office or agency of the Company, but subject to the conditions set forth
herein and in the Underwriter's warrant agreement dated as of ___________, 1996
between the Company and First Metropolitan Securities, Inc. (the
"Underwriter's Warrant Agreement"). Payment of the Exercise Prices
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shall be made by certified or official bank check in New York Clearing House
funds payable to the order of the Company.
No Underwriter's Warrant may be exercised after 5:30 p.m., New York
time, on the Expiration Date, at which time all Underwriter's Warrants evidenced
hereby, unless exercised prior thereto, hereby shall thereafter be void.
The Underwriter's Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of shares of Common Stock and Warrants pursuant
to the Underwriter's Warrant Agreement, which agreement is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the
Underwriter's Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Underwriter's
Warrants; provided, however, that the failure of the Company to issue such new
Warrant Certificates shall not in any way change, alter or otherwise impair, the
rights of the holder as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Underwriter's Warrants shall be issued to the transferee(s) in exchange for
this Warrant Certificate, subject to the limitations provided herein and in the
Underwriter's Warrant Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Underwriter's Warrants
evidenced by this Certificate, the Company shall forthwith issue to the holder
hereof a new Warrant Certificate representing such numbered unexercised
Underwriter's Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
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All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of __________________, 1996
TTR, Inc.
[SEAL] By
---------------------------------
Name:
Title: President
Attest:
- --------------------------------
Secretary
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[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______________ shares of
Common Stock and _____________ Warrants, underlying the Underwriter's Warrants,
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of TTR, Inc. in the
amount of $_________, all in accordance with the terms hereof. The undersigned
requests that a certificates for such securities be registered in the name of
_______________ whose address is _______________________________ and that such
Certificate be delivered to _________________ whose address is ______________.
Dated:
Signature ___________________
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
_____________________________
Insert Social Security or
Other Identifying Number of
Holder)
<PAGE>
<PAGE>
4. Registration Rights
4.1 Defined Terms. For the purposes of this Section 4 of this Agreement
(Registration Rights), the following terms shall have the meanings ascribed to
them as set forth below:
(a) "Registrable Securities" shall mean the shares of Common Stock of
the Company (i) issuable to the Subscriber upon the exercise of the Warrant
purchased by the Subscriber pursuant to the Memorandum or (ii) issued as a
dividend or other distribution with respect to or in exchange of the foregoing.
(b) "Subscriber" shall include each Subscriber and any permitted
transferee of such subscriber.
(c) "SEC" shall mean the Securities Exchange Commission.
4.2 Piggy-back Registration Rights. (a) Subject to the terms of this
Agreement, in the event the Company decides to register any of its Common Stock
under the Act, the Company shall in each case give written notice of such
proposed filing to each Subscriber at least thirty (30) days before the
anticipated filing date, and such notice shall offer to such Subscriber the
opportunity to include in such registration statement such number of shares of
Registrable Securities as it may request.
(b) The Company shall, or, if such registration statement is being filed
in connection with an underwritten public offering, shall cause the managing
underwriter to, offer such shares on the same terms and conditions as the Common
Stock of the Company included therein. Notwithstanding the foregoing, if any
such managing underwriter shall give the Company notice in writing that, in its
opinion, the distribution of the shares of Common Stock requested by the
Subscriber to be included in the registration concurrently with the Common Stock
being registered by the Company would adversely affect the distribution of such
Common Stock by the Company, the Company shall provide the Subscribers with a
copy of such written notice and shall not be obligated to register any shares of
Common Stock proposed for registration by the Subscriber; provided, however,
that if the managing underwriter recommends exclusion of less than all of the
Common Stock sought to be registered by any person other than the Company, such
exclusion with respect to shares proposed for regisuration by the Subscribers
shall be made on a pro rata basis with all other shareholders of the Company who
requested to include shares in such registration.
4.3 Obligations of the Company. Whenever the Company is required to
register Common Stock it agrees that it shall also do the following:
(a) prepare for filing with the Securities and Exchange
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Commission such amendments and supplements to said registration statement and
the prospectus used in connection therewith as may be necessary to keep said
registration statement effective and to comply with the provisions of the
Securities Act with respect to the sale of securities covered by said
registration statement for the period necessary (but in no event more than 180
days) to complete the proposed public offering;
(b) furnish to each Subscriber of Registrable Securities so registered
such copies of the preliminary and final prospectus and such other documents as
said Subscriber may reasonably request to facilitate the public offering of his
or its Common Stock;
(c) use its best efforts to register or qualify the securities covered
by said registration statement under the securities or "blue-sky" laws of such
jurisdictions as any Subscriber of Registrable Securities so registered may
reasonably request; provided, however, that the Company shall not be obligated
to qualify to do business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to service of process in suits
other than those arising out of the offer or sale of the securities covered by
the registration statement in any jurisdiction where it is not then so subject;
(d) notify each Subscriber of Registrable Securities so registered, at
any time when a prospectus relating thereto is required to be delivered under
the Act, of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading, and, at the request of any such Subscriber, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Common Stock, such prospectus will not contain any untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(e) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(f) provide a transfer agent and registrar for all such Common Stock
not later than the effective date of such registration statement;
(g) enter into such customary agreements (including underwriting
agreements on customary terms) and take all such other actions as the
Subscribers of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of
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<PAGE>
such Registrable Securities (including, without limitation, effecting a stock
split or a combination of shares);
(h) permit each holder of Registrable Securities so registered or his
or its counsel or other representatives to inspect and copy such corporate
documents and records as may reasonably be requested by them;
(i) furnish to each holder of Registrable Securities so registered a
copy of all documents filed and all correspondence from or to the Securities and
Exchange Commission in connection with any such offering; and
(j) pay all expenses in connection with such registration and offering,
except for any underwriting discounts or selling commissions which shall be
borne by the holders of Registrable Securities included in such registration,
pro rata, and any fees and disbursements of counsel for any such holder which
shall be borne by such holder.
4.4 Indemnification. (a) Incident to any registration statement,
including any preliminary prospectus, prospectus, or any amendments or
supplements thereto, filed pursuant hereto (a "Registration Statement") or any
application for exemption or other statement made hereunder in connection with
the sale of Common Stock, the Company will indemnify each Subscriber of
Registrable Securities so registered or sold, each underwriter, and each
officer, director or controlling person of any of them against all claims,
losses, damages and liabilities, including legal and other expenses incurred in
investigating or defending against the same, arising out of any untrue statement
of a material fact contained therein, or by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arising out of any violation by the Company of the
Act, any state securities or "blue-sky" laws or any rule or regulation
thereunder in connection with such registration or sale, except insofar as the
same may have been caused by an untrue statement or omission based upon, and in
conformity with, information furnished in writing to the Company by such
Subscriber expressly for use therein. Promptly, and in any event within twenty
(20) days, after receipt by any such Subscriber or any underwriter or any
officer, director or controlling person of any of them of notice of the
assertion or commencement of any action in respect of which indemnity may be
sought against the Company, such Subscriber, underwriter, officer, director or
controlling person, as the case may be, will notify the Company in writing of
the assertion or commencement thereof, and, subject to the provisions
hereinafter stated, the Company shall assume the defense of such action
(including the employment of counsel, who shall be counsel reasonably
satisfactory to such Subscriber or such underwriter or officer, director or
controlling person, as the case may be, and
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<PAGE>
the payment of all fees and expenses) insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against the
Company. Such Subscriber or any underwriter or any such officer, director or
controlling person shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, provided that the Company
shall have the right to control any such litigation, but the fees and expenses
of such separate counsel shall not be at the expense of the Company unless the
employment of such counsel has been specifically authorized by the Company. The
Company shall not be liable to indemnify any person for any settlement of any
such action effected without the Company's consent.
(b) With respect to any untrue statement of a material fact contained in
a Registration Statement or an application for exemption referred to herein, or
any omission to state therein a material fact necessary to make the statements
therein not misleading, which were made in reliance upon, and in conformity
with, information furnished in writing to the Company by any Subscriber for use
in any such Registration Statement or application for exemption, such Subscriber
will indemnify the Company, the underwriters, its directors and officers, the
other Subscriber of Common Stock and each person controlling any of them against
all claims, losses, damages and liabilities, including legal and other expenses
incurred in investigating or defending the same, to which any of them may become
subject. Promptly, and in any event within twenty (20) days, after receipt of
notice of the assertion of commencement of any action in respect of which
indemnity may be sought against such Subscriber, the Company will notify such
Subscriber in writing of the assertion or commencement thereof, and such
Subscriber, subject to the provisions hereinafter stated, shall assume the
defense of such action (including the employment of counsel, who shall be
counsel reasonably satisfactory to the Company, and the payment of all fees and
expenses) insofar as such action shall relate to the alleged liability in
respect of which indemnity may be sought against such Subscriber. The Company
and each such director, officer or controlling person shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, provided that such Subscriber shall have the right to control any such
litigation, but the fees and expenses of such separate counsel shall not be at
the expense of such Subscriber unless employment of such counsel has been
specifically authorized by such Subscriber. Such Subscriber shall not be liable
to indemnify any person for any settlement of any such action effected without
such Subscriber's consent.
4.5 Cooperation. At any time the Company is requested to include
Registrable Securities in a registration pursuant to any of the foregoing
provisions hereof, the Subscriber thereof shall promptly provide to the Company
such information relating to such
<PAGE>
<PAGE>
Subscriber or its Registrable Securities as the Company shall reasonably request
for use in or in the preparation of such registration statement.
<PAGE>
<PAGE>
[LETTERHEAD OF BAER MARKS & UPHAM LLP]
September 12, 1996
TTR Inc.
2 Hanagar Street
Kfar Saba, 44425, Israel
RE: Registration Statement on Form SB-2
Gentlemen:
We have acted as counsel to TTR Inc., a Delaware corporation (the
"Company"), in connection with (a) the proposed public offering by the Company
and certain stockholders of up to 1,466,250 shares of Common Stock, $.001 par
value (the "Common Stock") and redeemable warrants to purchase 690,000 shares
of Common Stock (the "Warrants"), including up to 191,250 shares of Common Stock
and 90,000 Warrants solely to cover over-allotments; (b) the proposed public
offering by certain selling securityholders of the Company of up to 1,417,021
shares of Common Stock and 1,000,000 Warrants; and (c) the issuance by the
Company to First Metropolitan Securities, Inc. (the "Representative") of
warrants (the "Representative's Warrants") to purchase up to 120,000 shares of
Common Stock and 60,000 Warrants, pursuant to a registration statement on Form
SB- 2 (the "Registration Statement"), originally filed by the Company with the
Securities and Exchange Commission on September 12, 1996, pursuant to the
Securities Act of 1933, as amended.
The shares of Common Stock issuable pursuant to the above proposed
public offerings are hereinafter referred to as the "Offered Shares." The shares
of Common Stock issuable upon exercise of the Warrants are hereinafter referred
to as the "Warrant Shares." The shares of Common Stock issuable upon exercise of
the Representative's Warrants and the Warrants included therein are hereinafter
referred to as the "Representative's Warrant Shares." The Offered Shares, the
Warrants, the Warrant Shares, the Representative's Warrants and the
Representative's Warrant Shares are hereinafter referred to as the "Securities."
In connection with the foregoing, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Certificate of
Incorporation of the Company, as amended, the By-laws of the Company, as
amended, the form of Underwriting Agreement, and
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TTR Inc.
September 12, 1996
Page 2
the form of Representative's Warrant filed as exhibits to the Registration
Statement, your records of corporate proceedings, and such other documents as we
have deemed necessary or appropriate as a basis for the opinions set forth
below. In such examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the accuracy and
completeness of all documents submitted to us as copies and the authenticity of
the originals of such latter documents. As to any facts material to such
opinions which we did not independently establish or verify, we have relied upon
statements or representations of officers and other representatives of the
Company, public officials or others.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly organized and is validly existing and in
good standing under the laws of the State of Delaware.
2. The sale and issuance of the Securities have been duly authorized by
the Board of Directors of the Company, and the Offered Shares, and the Warrant
Shares and the Representative's Warrant Shares when issued and paid for, as
contemplated by the Registration Statement and as provided for in the Warrants
and the Representative's Warrants, as the case may be, will be validly issued,
fully paid and non-assessable, and no personal liability will attach to the
ownership thereof.
We hereby consent to the reference to our name in the Registration
Statement under the caption "Legal Matters" and further consent to the inclusion
of this opinion as Exhibit 5.1 to the Registration Statement. In giving such
consent, we do not thereby concede that we are in the category of persons whose
consent is required under Section 7 of the Securities Act, or the rules and
regulations thereunder, or that we are 'experts' within the meaning of the
Securities Act or such rules and regulations.
Very truly yours,
BAER MARKS & UPHAM LLP
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TTR INC.
INCENTIVE & NON-QUALIFIED STOCK OPTION PLAN
1. Purpose: The Stock Option Plan (hereinafter the "Plan") is intended to
provide a method whereby employees (including officers and directors) of TTR
Inc. (the "Company") and its subsidiaries who are making and are expected to
continue making substantial contributions to the successful management and
growth of the Company and its subsidiaries may be offered an opportunity to
acquire Common Stock, par value $0.001 per share (the "Common Stock"), of the
Company, in order to increase their proprietary interests in the Company and
their incentive to remain in and advance in the employ of the Company and its
subsidiaries, and to attract and retain personnel of experience and ability by
granting such persons an opportunity to acquire a proprietary interest in the
Company. Accordingly, the Comqany may, from time to time, grant to such persons
as may be selected in the manner hereinafter provided, incentive stock options,
as defined in Section 422A of the Internal Revenue Code of 1986 (the "Code")
("Incentive Stock Options"), and restricted stock options ("Restricted Stock
Options") to purchase shares of Common Stock of the Company on the terms and
conditions hereinafter established. The Incentive Stock Options and Restricted
Stock Options sometimes are referred to herein individually as an "Option" and
collectively as the "Options".
2. Administration: The Plan shall be administered by a Stock Option Committee
(the "Committee") appointed by the Board of Directors of the Company, which
Committee membership may consist of one member. Committee members are to be
members of the Board of Directors of the Company and are eligible to participate
in the Plan. Subject to the terms and conditions of the Plan and relevant
commitments of the Company, the Committee shall have full discretion, from time
to time, to select the individuals or persons to whom Options shall be granted,
to determine the number of shares to covered by each Option, the time at which
the Option shall be granted, the terms and conditions of Option Agreements (as
hereinafter defined), and except as hereinafter provided, the option exercise
price and the terms during which the Option may be exercised. The Committee may
exercise its authority hereunder by meeting or by unanimous written consent.
The Board of Directors may at any time appoint or remove members of the
Committee and may fill vacancies, however caused, in the Committee. The
Committee shall select one of its members as Chairman, and shall hold its
meetings at such time and place as it shall deem advisable. A majority of its
members shall constitute a quorum. All actions of the Committee shall be taken
by a majority of its members and may be taken by written consent in lieu of a
meeting. The Committee shall make such rules and regulations for the conduct of
its business as it shall deem advisable.
3. Interpretation & Amendment: The interpretation, construction or determination
of any provision of the Plan by the Committee shall be final and conclusive. No
member of the Board of Directors or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan.
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4. Participants: Options may be granted under the Plan to key employees of the
Company and its subsidiaries (including employees who are also directors or
officers of the Company or its subsidiaries and non-employee directors). Solely
for the purpose of granting Restricted Stock Options under the Plan, the term
"employees" shall also include officers and directors of and consultants to the
Company or any subsidiary. The status of the Option as either Incentive Stock
Option or Restricted Stock Option shall be set forth in the Option Agreements.
The term "subsidiary" shall mean "subsidiary corporation" as defined in Section
425 of the Code. No Incentive Stock Option shall be granted to an employee who,
at the time of the grant of the Incentive Stock Option, owns stock possessing
more than 10% of the total combined voting power of all classes of capital stock
of the Company or any subsidiary of the Company; provided, however, that an
Incentive Stock Option may be granted to such employee if, at the time that such
Incentive Stock Option is granted, the option exercise price is at least 110
percent (110%) of the fair market value of the Common Stock subject to the
Incentive Stock Option, and such Incentive Stock Option is by its terms not
exercisable after the expiration of five (5) years from the date such Incentive
Stock Option is granted.
5. Common Stock: The number of shares of Common Stock which may be issued and
sold pursuant uo the Options granted under the Plan from time to time shall not
exceed in the aggregate 450,000 shares of Common Stock of the Company, which
shares may be issued and sold pursuant to Incentive Stock Options or Restricted
Stock Options, as the Committee, in its sole discretion, may determine. Should
any Options expire or terminate for any reason without having been exercised in
full, the unsold shares covered thereby shall be added to the shares otherwise
available for Options hereunder.
6. Terms and Conditions of Options: Options granted pursuant to the Plan shall
be in such form and on such terms as the Committee shall, from time to time,
approve, but subject, nevertheless, to the following terms and conditions:
(i) The Options shall state the total number of shares of Common Stock
to which it relates and no fractional shares of Common Stock shall be issued.
(ii) The exercise price per share of Common Stock issuable upon exercise
of an Incentive Stock Option shall be not less than one hundred percent (100%)
of the fair market value of the Common Stock covered by such Option at the date
such option is granted, or, in the case of an employee who at the time the
Incentive Stock Option is granted owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of capital stock of the
Company or any subsidiary of the Company, the option exercise price shall be not
less than one hundred and ten percent (110%) of the fair market value of the
Common Stock covered by such Option.
(iii) The option exercise price per share of Common Stock issuable upon
the exercise of a Restricted Stock Option shall be determined by the Committee
but shall be not less than the par value of the Common Stock.
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(iv) Notwithstanding any other provision of the Plan, the term of an
Incentive Stock Option and the term of a Restricted Stock Option shall be for a
period of not more than ten (10) years from the date the Plan is adopted by the
Board of Directors.
(v) An Option must be granted within ten years of the earlier of the
date the Plan is adopted or the date this Plan is approved by the Company's
stockholders.
(vi) No individual shall be given the opportunity, under the Plan, to
exercise Incentive Stock Options for the purchase of Common Shares valued (at
the time of grant of the Incentive Stock Options) in excess of $100,000, in any
calendar year, unless and to the extent that said Options shall have first
become exercisable in the preceding year. No Incentive Stock Option shall be
granted hereunder in such a manner as would cause the foregoing restrictions to
be violated.
7. Restrictions on Exercise; Termination of Employment; Death: No option shall
be exercisable in whole or in part prior to 12 months from the date it was
granted. Subject to the rights of cumulation provided in the last sentence of
this subdivision, each Option shall be exercisable as to not more than one
fourth of the total number of shares covered thereby during each 12 month period
commencing 12 months from the date of the granting of the Option until the
shares covered by the Option shall have been purchased. The Board of Directors
may, however, provide for the exercise of Option after the initial 12 month
period, either as to an increased percentage of shares per year or as to all
remaining shares, if the option holder shall, with the approval of the Company,
retire. No Option shall be exercisable after the expiration of 10 years from the
date it was granted. During the lifetime of the option holder, the Option shall
be exercisable only by the option holder and shall not be assignable or
transferable by the option holder and no other person shall acquire any rights
therein. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, in any subsequent period but not later than 10
years from the date the Option is granted.
In the event that an option holder shall cease to be employed by the Company or
its subsidiaries for any reason other than his death and shall no longer be in
the employ of any of them, subject to the condition that no Option shall be
exercisable after the expiration of 10 years from the date it is granted, such
option holder shall have the right to exercise the Option at any time within 3
months after such cessation to the extent his rights to exercise such Option had
accrued pursuant to the provisions of the Plan and had not previously been
exercised at the date of such termination. If the option holder shall die while
in the employ of the Company or a subsidiary or within a period of three months
after the termination of all employment with the Company and its subsidiaries
and shall have not fully exercised the Option, an Option may be exercised,
subject to the condition that no Option shall be exercisable after the
expiration of ten years from the date it was granted, to the extent that such
option holder's right to exercise such Option had accrued pursuant to this Plan
at the time of his death and had not previously been exercised, at any time
within 6 months after the option holder's death, by the executors or
administrators of the option holder or by any person or persons who shall have
acquired the Option directly from the option holder by bequest or inheritance.
No Option shall be transferable by the option holder otherwise than by will or
the laws of descent and distribution.
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8. Notice of Election Under Section 83 (b): With respect to the exercise of a
Restricted Stock Option, each employee making an election under Section 83 (b)
of the Code and the Regulations and Rulings promulgated thereunder will provide
a copy thereof to the Company within 30 days of the filing of such election with
the Internal Revenue Service. Any insider acquiring Options after the Company
becomes subject to Rule 16b-3 who elects the election under Section 83 (b) of
the Code and Regulations promulgated thereunder, shall notify the Company within
30 days of the filing of such election.
9. Stock Splits, Mergers, Etc.: In the case of any stock split, stock dividend
or similar transaction applicable to all of the outstanding shares of the
Company equally which increases or decreases the number of outstanding shares of
Common Stock pari passu, appropriate adjustment shall be made by the Board of
Directors, whose determination shall be final, to the number of Shares of Common
Stock which may be purchased under the Plan, as well as to the number of Common
Stock which may be purchased under the Option so as to maintain the relative
share interests offered thereby and to the Option exercise price per share of
Common Stock. In the case of a merger, sale of assets or similar transaction
which results in a replacement of the Company's Common Stock with stock of
another corporation, the Company will be required to replace any outstanding
Options granted under the Plan with comparable options to purchase the stock of
such other corporation. The Company may provide for immediate maturity of all
outstanding Options prior to the effectiveness of such merger, sale of assets or
similar transaction, with all Options not being exercised within the time period
specified by the Board of Directors being terminated.
10. Exercise of Options: An option holder electing to exercise an Option shall
give written notice to the Company of such election and the number of shares of
Common Stock that he has elected to acquire. An option holder of a Restricted
Stock Option shall have no rights of a stockholder with respect to shares of
Common Stock covered by an Option until after the date of issuance of a stock
certificate to him upon partial or complete exercise of his Option. A holder of
an Incentive Stock Option shall have the rights of a stockholder with respect to
shares of Common Stock upon exercise of the Option.
11. Written Option Agreement: Agreements granting Options under the Plan
("Option Agreements") shall be in writing, duly executed and delivered by or on
behalf of the Company and the option holder, shall contain such terms and
conditions as the committee deems advisable, and shall specify its application
as to a Restricted Stock Option or an Incentive Stock Option. If there is any
conflict between the terms and conditions of any Option Agreement and the Plan,
the terms and conditions of the Plan shall control.
12. Payment: The Option Exercise Price shall be payable upon the exercise of the
Option in cash, by certified check or by tender of the shares of Common Stock
or, at the discretion of the Board of Directors, by paying cash, at the minimum,
the par value of the shares of Common Stock being acquired and executing a
promissory for the balance of the Option exercise Price, provided that said note
shall bear interest in the case of Incentive Stock Options, at a rate which is
no less than the lowest applicable U.S. federal rate required to be charged to
preclude the re characterization of any
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amount of stated principal interest for U.S. federal tax purposes. In the case
of Restricted Stock Options, the rate of interest will be determined by the
Committee. If the shares of Common Stock are tendered as payment of the option
exercise price, the value of such shares shall be their fair market value as of
the date of exercise.
13. Restrictions on Issuing Shares: The exercise of each Option shall be subject
to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory body
is necessary or desirable as a condition of, or in connection with, such
exercise in the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the company. The
Company shall use its best efforts to effect or secure the necessary
withholding, listing, registration, qualification, consent or approval so as to
effect the exercise of each option and issue and deliver the shares purchased
thereunder.
14. Term of the Plan: The Plan shall terminate ten (10) years after the Plan is
adopted by the Board of Directors, and no Option shall be granted pursuant to
the Plan after that date.
15. Application of the Funds: The proceeds received by the Company from the sale
of the Common Stock pursuant to the exercise of the Options granted under the
Plan shall be used for general corporate purposes.
16. Continuation of Employment: Neither the Plan nor any Option Agreement shall
impose any obligation on the Company or any subsidiary of the Company to
continue the employment of an option holder, and nothing in the Plan or in any
Option Agreement shall confer upon any option holder any right to continue in
the employ of the Company or the subsidiary of the Company or conflict with the
right of either to terminate such employment at any time.
17. Effectiveness of the Plan: The Plan shall become effective on the date of
its adoption by the Board of Directors, but subject, nevertheless, to (i)
approval, within 12 months thereof, by the stockholders representing at least a
majority of the voting stock of the Company or by such greater percentage as may
from time to time be required under the laws of he State of Delaware, and (ii)
such approvals as may be required by any other public authorities. Options under
this Plan may be granted but not exercised until it is approved by the Company's
shareholders. In the event the Plan is not approved, the Plan shall terminate
and all Options granted shall be void and have no force or effect.
<PAGE>
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MARC TOKAYER
AGREEMENT entered into as of August __, 1994 between MARC TOKAYER
("Employee") and T.T.R. TECHNOLOGIES LTD. (hereafter referred to as the
"Company" or "TTR").
W I T N E S S E T H
WHEREAS, the Company is in the business of developing and marketing
computer software products; and
WHEREAS, TTR Technologies Limited desires to employ Employee as General
Manager responsible for it's operations:
NOW THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment
With effect from the effective date (as defined in section 3), TTR
Technologies Limited employs Employee as General Manager and Employee accepts
employment with the Company upon the terms and conditions set forth herein.
2. Duties
2.1 The Employee shall be responsible for all operations of the Company.
2.2 Employee shall devote his full business time and attention to the
Business of the Company and shall perform his duties diligently and promptly for
the benefit of the Company.
2.3 Employee shall report regularly to the Board of Directors of the
Company or as otherwise requested by the Board.
3. Term
3.1 Employee's employment under this Agreement shall commence on October
15, 1994 (the "Effective Date") and shall end on the earlier of: (i) the death
or
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disability (as defined herein) of the Employee or termination of Employee's
employment with cause (as defined herein); or (ii) three (3) years from the date
of this Agreement. After the expiration of such initial term (other than for
reasons set forth in clauses (i)), this Agreement shall automatically be renewed
for additional one (1) year periods on the same terms and conditions set forth
herein (unless mutually agreed otherwise), unless either party elects not to
renew the term of this Agreement by giving written notice to the other at least
ninety (90) days before the expiration date.
3.2 For the purpose of this paragraph 3, "disability" shall mean any
physical or mental illness or injury as a result of which Employee remains
absent from work for a period of two (2) successive months, or an aggregate of
two (2) months in any twelve (12) month period. Disability shall occur at the
end of any such period.
3.3 For the purpose of this paragraph 3, "cause" shall exist if Employee
(i) breaches any of the material terms or conditions of this Agreement; (ii)
substantially fails to perform the Employee's areas of responsibility set forth
herein, (iii) engages in willful misconduct or acts in bad faith with respect to
the Company, in connection with and related to the employment hereunder, (iv) is
convicted of a felony, (v) fails to comply with the instructions of the
Company's Board of Directors in a manner materially detrimental to the Company,
provided, that with respect to clauses (i), (ii) and (v), if Employee has cured
any such condition (that is reasonably susceptible to cure) within 30 days of
the advance notice (as defined herein) then "cause" shall be deemed to not
exist. For purposes of this Paragraph 3, "advance notice" shall constitute a
written notice delivered to Employee that sets forth with particularity the
facts and circumstances relied upon by the Company as the basis for cause.
3.4 Upon the termination of the Employee for any reason whatsoever,
other then as set out in s.3.3(iii and iv), the Employee shall be paid, in
addition to any other amounts due and owing under this Agreement or law, a
severence payment equal to twelve (12) months Gross Salary (as defined below)
based on Employee's most recent monthly Gross Salary. Such payment shall be net
of any deductions, including those for income taxes or insurance of any kind.
TTR shall be obligated to pay to the appropriate authority any taxes and
insurance owing by Employee as a result of receipt of such payment.
4. Compensation
4.1 During the term hereof, and subject to the performance of the
services required to be performed hereunder by Employee, the Company shall pay
to the Employee for all services rendered hereunder, a gross salary, payable not
less often than once per month and in accordance with the Company's normal and
reasonable payroll practices, a monthly gross amount of U.S. $5000 (the "Gross
Salary").
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The Company shall make all national insurance (Bituach Leumi) payments required
under law in respect of Employee's employment hereunder.
4.2 Translations to Israeli currency shall be calculated on the basis of
the representative rate of exchange published by a daily newspaper in Israel on
the date of payment. The linkage of the Employee's compensation to the US dollar
shall be credited toward any Tosefet Yoker and all other similar wage increases
required to be paid under Israeli Law.
4.3 The Employee shall receive the Gross Salary payable in respect of
periods of the Employee's military reserve duty. The Company shall be entitled
to receive and retain any amounts payable by the National Insurance Institute or
any other agency in respect of such periods.
4.4 The Board shall undertake an evaluation of the Employee's
performance from time to time and may increase the monthly Gross Salary or grant
a performance bonus if it should determine in its absolute discretion that such
increase or bonus is justifiable and appropriate.
4.5 The Company and the Employee will obtain and maintain Manager's
Insurance (Bituach Menahalim) for the exclusive benefit of the Employee in the
customary form. Each of the Company and the Employee shall contribute toward the
premiums payable in respect of such insurance those amounts which would be
recognized under applicable law, but in no event shall such contributed amounts
be more than thirteen and one third percent (13 1/3%) of each monthly Gross
Salary payment for the Company and five percent (5%) of such amount for the
Employee. It is hereby agreed that should the Employee be or become entitled to
severance pay under applicable law, his benefits under said insurance shall be
in lieu thereof and in full and final substitution therefor.
4.6 Employee is entitled to participate in any form of stock option
benefit plan to be established by the Company's majority shareholder and parent
company, TTR Inc., a Delaware company.
4.7 Employee is authorized to incur reasonable expenses for promoting
the Business of the company including expenses for entertainment, travel,
lodging, and similar items. TTR will reimburse Employee promptly for all such
expenses upon presentation by the Employee, of an itemized amount of
expenditures.
4.8 Company shall provide Employee with use of an automobile and Company
shall pay for registration, gas, maintenance and insurance.
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5. Vacation
Employee shall be entitled to 20 working days of paid vacation during
each year that this Agreement is in effect, to be taken at times as agreed upon
by the parties. In addition, Employee shall be entitled to paid vacation for
each of the middle days (Hol Ha'moed) of the Jewish Festivals of Passover
(Pesach) and Succot for the duration of, and during any renewal period, that
this Agreement is in effect.
6. Secrecy and Nondisclosure
Employee shall treat as secret and confidential all of the processes,
methods, formulas, procedures, techniques, software, designs, data, and other
information which are not of public knowledge or record pertaining to the
Company's and any affiliate's business (existing, potential, and future),
including without limitation, all business information relating to customers and
supplies and products of which Employee becomes aware during and as a result of
employment with the Company, and Employee shall not disclose, use, publish, or
in any other manner reveal, directly or indirectly, at any time during and after
the term of this Agreement, any such information detailed herein. The obligation
hereunder shall survive the termination or expiration of this Agreement.
7. Non-Competition
7.1 During the term of this Agreement (and any renewal thereof) and for
a term of one (1) year after Employee ceases to be employed by the Company,
Employee will not, directly or indirectly, for his own account or as an
employee, officer, director, partner, joint venturer, shareholder, investor,
consultant or otherwise (except as an investor in a corporation whose stock is
publicly traded and in which Employee holds less than 5% of the outstanding
shares) interest himself or engage, directly or indirectly, in the design,
development, production, sale or distribution of any product or component that
directly or indirectly competes with a product or component (i) then being
designed, produced, sold or distributed by the Company or any of its affiliates
(ii) or to which the Company or any of its affiliates shall have proprietary
rights.
7.2 Employee agrees that during a period of one (1) year from the
termination of this Agreement or any extensions thereof, he shall not directly
or indirectly employ any individual employed by the Company at the time that
Employee's employment with the Company is terminated.
7.3 Employee acknowledges that the restricted period of time and
geographical location specified under this paragraph 7 are reasonable, in view
of the
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nature of the business in which the Company is engaged and Employee's knowledge
of the Company's business and products. If such period of time or geographical
location should be determined to be unreasonable in any judicial proceeding,
then the period of time and area of restriction shall be reduced so that this
Agreement may be enforced in such area and during such period of time as shall
be determined to be reasonable by such judicial proceeding.
8. Development Rights
The Employee agrees and declares that all proprietary information
including but not limited to trade secrets, know-how, patents and other rights
in connection therewith developed by or with the contribution of Employee's
efforts during his employment with the Company shall be the sole property of the
Company.
9. Employee Representations
The Employee represents and warrants to the Company that the execution
and delivery of this Agreement and the fulfillment of the terms hereof (i) will
not constitute a breach of any agreement or other instrument to which he is
party, (ii) does not require the consent of any person, and (iii) shall not
utilize during the term of his employment any proprietary information of any
third party, including prior employers of the Employee.
10. Benefit
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, including any subsidiary or affiliated
entity.
11. Entire Agreement
This Agreement constitutes the entire understanding and agreement
between the parties, and supersedes any and all prior discussions and agreements
and correspondence, and may not be amended or modified in any respect except by
a subsequent writing executed by both parties.
12. Notices
All notices and other communications to any party shall be given or made
in writing and telecopied, faxed, mailed or delivered by hand at the address set
out in the caption of this Agreement or to such address as either party may
specify from time to time. Such notice or other communication shall be
effective, (i) if given by telecopier or fax, when such copy is transmitted to
the number specified herein and the
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appropriate answer back is received or (ii) if given by any other means, when
delivered at the address specified.
14. Applicable Law
This Agreement, its validity, construction and effect shall be governed
by and construed under the laws of the State of Israel, without giving effect to
principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly signed by
the date stated above.
T.T.R. TECHNOLOGIES LTD.
By: MARC TOKAYER
---------------------
MARC TOKAYER
- ---------------------
MARC TOKAYER
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<PAGE>
EMPLOYMENT AGREEMENT
with
BARUCH SOLLISH
AGREEMENT entered into as of December 1, 1994 between BARUCH SOLLISH
residing at Bet Yisrael 43, Emanuel, Israel ("Employee") and T.T.R. TECHNOLOGIES
LTD., an Israeli company-in-formation with temporary offices at 16/8 Hatam Sofer
Street, Emanuel, Israel (the "Company").
W I T N E S S E T H
WHEREAS, the Company is in the business of developing and marketing
computer software products; and
WHEREAS, the Company desires to employ Employee initially as Director of
Product Research & Development at the Company.
NOW THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment
With effect from the effective date (as defined in section 3), the
Company employs Employee and Employee accepts employment with the Company upon
the terms and conditions set forth herein.
2. Duties
2.1 The Company hereby engages Employee to serve as its Director of
Product Research & Development. In such capacity, the Employee shall be
responsible for all product research & development activities of the Company,
and shall see that all orders of the President and resolutions of the Board of
Directors in this respect are carried into effect.
2.2 Employee shall devote his full business time and attention to the
Business of the Company and shall perform his duties diligently and promptly for
the benefit of the Company during usual business hours on five business days per
week (and outside those hours when reasonably necessary) and faithfully and
diligently perform such duties as may be assigned to or vested in him by the
president or the
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<PAGE>
Board of Directors. Employee shall pre-clear with the President of the Company
all product research & development plans and activities. The Employee shall not,
without the prior written consent of the Board of Directors, undertake or accept
any other paid or unpaid employment or occupation or engage in or be associated
with any other commercial or business duties or pursuits, except as otherwise
permitted hereunder.
2.3 Employee shall report regularly and as requested to the President of
the Company or as otherwise requested by the Board of Directors.
3. Term
3.1 Employee's employment under this Agreement shall commence on January
1, 1995 (the "Effective Date") and shall end on the earlier of : (i) the death
or disability (as defined herein ) of the Employee or termination of Employee's
employment with cause (as defined herein); (ii) termination by either party
without cause upon sixty (60) days advance written notice or (iii) one (1) year
from the date of this Agreement. After the expiration of such initial term
(other than for reasons set forth in clauses (i) and (ii), this Agreement shall
automatically be renewed for additional one (1) year periods on the same terms
and conditions set forth herein (unless mutually agreed otherwise), unless
either party elects not to renew the term of this Agreement by giving written
notice to the other at least sixty (60) days before the expiration date.
3.2 For the purpose of this paragraph 3, "disability" shall mean any
physical or mental illness or injury as a result of which Employee remains
absent from work for a period of two (2) successive months, or an aggregate of
two (2) months in any twelve (12) month period. Disability shall occur at the
end of any such period.
3.3 For the purpose of this paragraph 3, "cause" shall exist if Employee
(i) breaches any of the material terms or conditions of this Agreement; (ii)
substantially fails to perform the Employee's areas of responsibility set forth
herein, (iii) engages in willful misconduct or acts in bad faith with respect to
the Company, in connection with and related to the employment hereunder, (iv) is
convicted of a felony, (v) fails to comply with the instructions of the
Company's Board of Directors in a manner materially detrimental to the Company,
provided, that with respect to clauses (i), (ii) and (v), if Employee has cured
any such condition (that is reasonably susceptible to cure) within 30 days of
the advance notice (as defined herein) then "cause" shall be deemed to not
exist. For purposes of this Paragraph 3, "advance notice" shall constitute a
written notice delivered to Employee that sets forth with particularity the
facts and circumstances relied upon by the Company as the basis for cause.
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3.4 Either the Company or Employee may terminate this Agreement without
cause upon not less than sixty (60) days prior written notice to the other.
3.5 During the period following notice of termination by either party
for whatever reason, the Employee shall cooperate with the Company and use his
best efforts to assist the integration into the Company the person or persons
who will assume the Employee's responsibilities.
4. Compensation
4.1 During the term hereof, and subject to the performance of the
services required to be performed hereunder by Employee, the Company shall pay
to the Employee for all services rendered hereunder, a gross salary, payable not
less often than once per month and in accordance with the Company's normal and
reasonable payroll practices, a monthly gross amount of U.S. $5000 (the "Gross
Salary"). Except as otherwise provided herein, the Gross Salary amount payable
hereunder is all inclusive and shall include all benefits and payments which
Employee may otherwise be entitled to, including, without limitation, sickness
benefits, travel expenses, pension payments and payment for additional hours
worked. The Company shall make all national insurance (Bituach Leumi) payments
required under law in respect of Employee's employment hereunder.
4.2 Translations to Israeli currency shall be calculated on the basis of
the representative rate of exchange published by a daily newspaper in Israel on
the date of payment. The linkage of the Employee's compensation to the US dollar
shall be credited toward any Tosefet Yoker and all other similar wage increases
required to be paid under Israeli Law.
4.3 The Employee shall receive the Gross Salary payable in respect of
periods of the Employee's military reserve duty. The Company shall be entitled
to receive and retain any amounts payable by the National Insurance Institute or
any other agency in respect of such periods.
4.4 The Board shall undertake an evaluation of the Employee's
performance from time to time and may increase the monthly Gross Salary or grant
a performance bonus if it should determine in its absolute discretion that such
increase or bonus is justifiable and appropriate. It is understood and agreed
that Employee's compensation hereunder will not be increased for at least the
first year that this Agreement is in effect.
4.5 The Company and the Employee will obtain and maintain Manager's
Insurance (Bituach Menahalim) for the exclusive benefit of the Employee in the
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customary form. Each of the Company and the Employee shall contribute toward the
premiums payable in respect of such insurance those amounts which would be
recognized under applicable law, but in no event shall such contributed amounts
be more than thirteen and one third percent (13 1/3%) of each monthly Gross
Salary payment for the Company and five percent (5%) of such amount for the
Employee. It is hereby agreed that should the Employee be or become entitled to
severance pay under applicable law, his benefits under said insurance shall be
in lieu thereof and in full and final substitution therefor.
4.6 In addition to the Gross Salary, the Company shall pay to Employee
incentive compensation (hereinafter the "Incentive Compensation") for the term
and any renewal period as provided below:
(i) The Incentive Compensation shall be equal to one percent (1%) of the
Gross Receipts from the sale of Covered Products of the Company up to one
million U.S. Dollars ($1,000,000) and two percent (2%) of the Gross Receipts
from the sale of Covered Products in excess of such amount.
(ii) The Incentive Compensation shall be computed on a calendar
quarterly basis for the respective periods ending March 31, June 30, September
30 and December 31 of each year. Within thirty (30) days of the end of each
quarter, the Company shall provide the Employee with a written statement
("Quarterly Gross Receipts Report") setting forth essential information
concerning the sales of Covered Products by the Company.
(iii) Employee shall be entitled to receive the Incentive Compensation
on a quarterly basis. In the event the Employee is terminated without cause
under Section 3.4, he shall be entitled to the Incentive Compensation based on
the actual Gross Receipts from the sale of Covered Products for that quarter
through the date of termination. If the Employee is terminated for cause under
Section 3.1, he shall not be entitled to receive Incentive Compensation under
this Section.
(iv) The Company shall remit payment to the Employee in respect of the
Incentive Compensation earned for the preceding calendar quarter at the same
time as the Quarterly Gross Receipts Report is submitted to the Employee. If no
Incentive Compensation for the Quarter has been earned, or if the Employee shall
be ineligible therefor hereunder, it shall be so reported. The Company shall be
entitled to deduct or withhold from the Incentive Compensation payments all
taxes and charges which the Company may be required to deduct or withhold
therefrom under applicable law.
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(v) For purposes of this Agreement, the term "Gross Receipts" shall mean
the gross revenues actually received by the Company or its affiliates from the
sale or distribution of Covered Products anywhere in the world.
(vi) For purposes of this Agreement, the term "Covered Products" shall
mean only those products sold by the Company and its affiliates which were (i)
actually designed or developed and completed by the department or division at
the Company headed by the Employee pursuant to the terms of this Agreement or
(ii) designed and developed by the Employee prior to the effectiveness of this
Agreement and to which the Company shall have acquired full proprietary rights.
4.7 In the event that this Agreement is terminated for whatever reason
or expires, then the Company shall pay to Employee royalties in an amount
corresponding to the Incentive Compensation set forth in Section 4.6(i) above
("Royalties") in respect of the Covered Products, provided, that, (i) a properly
registered patent in respect of such Covered Product is in effect in Israel or
in the United States, and then the Royalty payment shall be made for the
duration of such patent, provided, further, that, if a properly completed and
executed patent application has been filed and is pending with the Israel Patent
Office or the United Patent Office, then the Company shall remit the Royalty
Payments as provided below in escrow for the benefit of the client until such
time, if ever, that such patent is in fact obtained by or on behalf of the
Company or any of its affiliates. Should such patent application be denied, then
all amounts in escrow shall thereupon revert to the Company and the Company is
hereby authorized to then remit to its account the escrowed amounts.
4.7.1. The Royalty shall be computed on a calendar quarterly basis for
the respective periods ending March 31, June 30, September 30 and December 31 of
each year. Within thirty (30) days of the end of each quarter, the Company shall
provide the Employee with a written statement ("Royalty Report") setting forth
essential information concerning the sales of Covered Products by the Company
for purposes of making the Royalty payment. The Company shall remit payment to
the Employee in respect of the Royalty earned for the preceding calendar quarter
at the same time as the Royalty Report is submitted to the Employee. If no
Royalty for the Quarter has been earned, or if the Employee shall be ineligible
therefor hereunder, it shall be so reported. The Company shall be entitled to
deduct or withhold from the Royalty payments all taxes and charges which the
Company may be required to deduct or withhold therefrom under applicable law.
4.8 In the event that within the first year after the Effective Date
either (i) Employee's employment hereunder is terminated by the Company for
cause or (ii) Employee terminates this Agreement under Section 3.4, then, within
ten (10) days of such termination, Employee shall pay to the Company U.S.$5,000
in Israeli
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Shekalim at the representative rate of exchange published by an Israeli
newspaper on the date of payment. Payment of this amount by Employee to the
Company shall not affect any right or remedy otherwise available to the Company
under this Agreement or under law.
4.9 Employee is entitled to participate in any form of stock option
benefit plan to be established by the Company's majority shareholder and parent
company, TTR Inc., a Delaware company. In the event that this Agreement is
terminated for whatever reason or expires during the first two (2) years of
Employee's employment hereunder, then all stock options or grants awarded to
Employee which have not vested on the date of termination shall revert to the
Company.
5. Vacation
Employee shall be entitled to 10 working days of paid vacation during
each year that this Agreement is in effect, to be taken at times as agreed upon
by the parties. In addition, Employee shall be entitled to paid vacation for
each of the middle days (Hol Ha'moed) of the Jewish Festivals of Passover
(Pesach) and Succot for the duration of, and during any renewal period, that
this Agreement is in effect.
6. Secrecy and Nondisclosure
Employee shall treat as secret and confidential all of the processes,
methods, formulas, procedures, techniques, software, designs, data, and other
information which are not of public knowledge or record pertaining to the
Company's and any affiliate's business (existing, potential, and future),
including without limitation, all business information relating to customers and
supplies and products of which Employee becomes aware during and as a result of
employment with the Company, and Employee shall not disclose , use, publish, or
in any other manner reveal, directly or indirectly, at any time during and after
the term of this Agreement, any such information detailed herein. The obligation
hereunder shall survive the termination or expiration of this Agreement.
7. Non-Competition
7.1 During the term of this Agreement (and any renewal thereof) and for
a term of one (1) year after Employee ceases to be employed by the Company,
Employee will not, directly or indirectly, for his own account or as an
employee, officer, director, partner, joint venturer, shareholder, investor,
consultant or otherwise (except as an investor in a corporation whose stock is
publicly traded and in which Employee holds less than 5% of the outstanding
shares) interest himself or engage, directly or indirectly, in the design,
development, production, sale or distribution of
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any product or component that directly or indirectly competes with a product or
component (i) then being designed, produced, sold or distributed by the Company
or any of its affiliates (ii) or to which the Company or any of its affiliates
shall have proprietary rights. The limitations set forth in the preceding
sentence shall not apply to Employee's servicing of any consulting clients that
are serviced by Employee or Peletronics Ltd. on the date set forth above,
provided, that, all billings and payments that Employee receives on behalf of
services so provided shall be promptly remitted to the Company, and Employee
agrees to take all actions and sign any instrument reasonably requested by the
Company in order to effect the foregoing.
7.2 Employee agrees that during a period of one (1) year from the
termination of this Agreement or any extensions thereof, he shall not directly
or indirectly employ any individual employed by the Company at the time that
Employee's employment with the Company is terminated.
7.3 Employee acknowledges that the restricted period of time and
geographical location specified under this paragraph 7 are reasonable, in view
of the nature of the business in which the Company is engaged and Employee's
knowledge of the Company's business and products. If such period of time or
geographical location should be determined to be unreasonable in any judicial
proceeding, then the period of time and area of restriction shall be reduced so
that this Agreement may be enforced in such area and during such period of time
as shall be determined to be reasonable by such judicial proceeding.
8. Development Rights
The Employee agrees and declares that all proprietary information
including but not limited to trade secrets, know-how, patents and other rights
in connection therewith developed by or with the contribution of Employee's
efforts during his employment with the Company shall be the sole property of the
Company.
9. Employee Representations
The Employee represents and warrants to the Company that the execution
and delivery of this Agreement and the fulfillment of the terms hereof (i) will
not constitute a breach of any agreement or other instrument to which he is
party, (ii) does not require the consent of any person, and (iii) shall not
utilize during the term of his employment any proprietary information of any
third party, including prior employers of the Employee.
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10. Cost-Sharing
In the event that legal suit ("Action") is commenced against the Company and
Employee on a cause of action relating to the commencement by Employee of his
employment with the Company under this Agreement, the Company, at it sole cost,
shall assume the legal defense and other associated costs and expenses of such
Action on behalf of itself and Employee, provided, that, the Company shall, in
its sole discretion, be entitled to establish the legal strategy to be adopted
in such Action on behalf of Employee, including, without limitation settling any
and all claims relating to the Action. Employee shall cooperate with the Company
and its legal counsel as requested by the Company and such counsel in defending
against the Action, and Employee hereby authorizes Company to take any
action that the Company shall, in its sole discretion, determine to be
appropriate in respect of the Action, including settling any and all claims
relating to the Action. Non-compliance by Employee with the terms of this
Section 10 shall release the Company from its obligation to defend the Action on
behalf of Employee.
11. Benefit
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, including any subsidiary or affiliated
entity.
12. Entire Agreement
This Agreement constitutes the entire understanding and agreement
between the parties, and supersedes any and all prior discussions and agreements
and correspondence, and may not be amended or modified in any respect except by
a subsequent writing executed by both parties.
13. Notices
All notices and other communications to any party shall be given or made
in writing and telecopied, faxed, mailed or delivered by hand at the address set
out in the caption of this Agreement or to such address as either party may
hereafter specify. Such notice or other communication shall be effective, (i) if
given by telecopier or fax, when such copy is transmitted to the number
specified herein and the appropriate answer back is received or (ii) if given by
any other means, when delivered at the address specified herein.
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14. Applicable Law
This Agreement, its validity, construction and effect shall be governed
by and construed under the laws of the State of Israel, without giving effect to
principles of conflict of laws thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly signed by
the date stated above.
T.T.R. TECHNOLOGIES LTD.
(a company-in-formation)
By: MARC D. TOKAYER
------------------------
Marc D. Tokayer, one of the
incorporators of the Company
BARUCH SOLLISH
---------------
BARUCH SOLLISH
<PAGE>
<PAGE>
AGREEMENT
with
ARIK SHAVIT
THIS AGREEMENT is entered into as of July 5, 1996, between Arik Shavit
I.D. No. 0-30352462 (the "Employee") and TTR Technologies Ltd., (the "Company"
or "TTR") a company formed under the laws of the State of Israel.
W I T N E S S E T H
WHEREAS, the Company is wishes to employ the Employee in accordance with
the terms and conditions of this Agreement, and the Employee wishes to be so
employed.
NOW THEREFORE the parties hereto agree as follows:
1. Employment
With effect from the effective date (as defined in section 3), the
Company employs Employee and Employee accepts employment with the Company upon
the terms and conditions set forth herein.
2. Duties
2.1 TTR hereby engages Employee to serve as its President and General
Manager and shall perform such duties, undertake such responsibilities and
exercise such authority as shall be delegated to him by the Board o Directors of
the Company. The Employee's authority will be subject only to the authority of
the CEO and the Board of Directors of the Company.
2.2 The Employee's services under this Agreement will be performed
primarily at the Company's Israel office. The Parties acknowledge and agree
however that the nature of the Employee's duties hereunder will also require
substantial international travel.
2.3 Employee shall report regularly to the Board of Directors of the
Company or as otherwise reasonably requested by the Board.
2.4 Employee shall be nominated by the Company to be on the Board of
Directors of the Company and Company shall use its best efforts to have Employee
appointed to the Board of Directors of TTR Inc.
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3. Term
3.1 Employee's employment under this Agreement shall commence not later
than September 8, 1996 (the "Effective Date") and shall end on the earlier of:
(i) the death or disability (as defined herein) of the Employee, (ii)
termination of Employee's employment with cause (as defined herein); (iii)
Employee resignation upon sixty (60) days notice during the first year of the
Effective Date and thereafter upon ninety (90) days notice (iv) three (3) years
from the date of this Agreement. After the expiration of such initial term
(other than for reasons set forth in clauses (i), (ii) and (iii)), this
Agreement shall automatically be renewed for additional one (1) year periods on
the same terms and conditions set forth herein ( unless mutually agreed
otherwise).
The Company is entitled in its sole and absolute discretion to make payment in
lieu of the notice period specified under Clause (iii) and to require Employee
to cease his involvement with the Company.
3.2 For the purpose of this paragraph 3, "disability" shall mean any
physical or mental illness or injury as a result of which Employee remains
absent from work for a period of two (2) successive months, or an aggregate of
two (2) months in any twelve (12) month period. Disability shall occur at the
end of any such period.
3.3 For the purpose of this paragraph 3, "cause" shall exist if Employee
(i) breaches any of the material terms or conditions of this Agreement; (ii)
substantially fails to perform the Employee's areas of responsibility set forth
herein, (iii) engages in willful misconduct or acts in bad faith with respect to
the Company, in connection with and related to the employment hereunder, (iv) is
convicted of a felony, (v) fails to comply with the instructions of the
Company's Board of Directors in a manner materially detrimental to the Company,
provided that with respect to clauses (i), (ii) and (v), if Employee has cured
any such condition (that is reasonably susceptible to cure) within 30 days of
the advance notice (as defined herein) then "cause" shall be deemed to not
exist. For purposes of this Paragraph 3, "advance notice" shall constitute a
written notice delivered to Employee that sets forth with particularity the
facts and circumstances relied upon by the Company as the basis for cause.
3.4 During the period following notice of termination by either party
for whatever reason, the Employee shall cooperate with the Company and use his
best efforts to assist the integration into the Company the person or persons
who will assume the Employee's responsibilities.
3.5 The Employee shall be entitled to resign forthwith without incurring
any damages if TTR Inc. does not receive a Letter of Intent from First
Metropolitan Securities Inc. within sixty (60) days from the date of this
Agreement.
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4. Compensation
4.1 During the term hereof, and subject to the performance of the
services required to be performed hereunder by Employee, the Company shall pay
to the Employee for all services rendered hereunder, a starting salary, payable
not less often than once per month and in accordance with the Company's normal
and reasonable payroll practices, a monthly gross amount equal to not less than
U.S. $8,334 in Israeli currency calculated on the basis of the higher of the
representative rate of exchange published by a daily newspaper in Israel on the
Effective Date and $1:3.27NIS (the "Gross Starting Salary"). Thereafter the
monthly Gross Starting Salary will be adjusted monthly according to changes in
the Israeli CPI as published by the CSB on the fifteenth (15) of each month
4.2 The Employee shall receive the Gross Salary payable in respect of
periods of the Employee's military reserve duty. The Company shall be entitled
to receive and retain any amounts payable by the National Insurance Institute or
any other agency in respect of such periods.
4.4 The Board shall undertake an evaluation of the Employee's
performance from time to time but not less often than once per year including a
review upon six (6) months from Effective Date, and may increase the monthly
Gross Salary or grant a performance bonus if it should determine in its absolute
discretion that such increase or bonus is justifiable and appropriate.
4.5 The Employee shall devote his full time to the affairs of the
Company as required without any right or entitlement to additional or overtime
compensation except as expressly provided herein.
4.6 Employee shall be issued shares of the common stock of the Company's
parent company TTR Inc. from TTR Inc.'s employee stock option plan ("ESOP") in
the amount equal to 6% of the equity of TTR Inc. at the time of its IPO as
follows:
a) 2% shall be issued to a Trustee on the effective date of the IPO for
the benefit of the Employee and such shares shall be transferred to the Employee
twelve months from Effective Date.
b) 1.33% shall be issued to Employee at twenty four months, at thirty
six months and at forty eight months from Effective Date
If this Agreement is terminated for cause or if Employee resigns within twelve
months from Effective Date, Employee shall not be issued any shares and those
shares held by the Trustee for the benefit of the Employee shall revert back to
the ESOP. Thereafter, if Employee is terminated or if he resigns, Employee shall
receive the pro rata percent of stock equal the number of full months worked at
Company during such year.
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4.8 Company shall provide Employee with use of an automobile and Company
shall pay for registration, gas, maintenance and insurance; and shall provide
the Employee with a cell phone and pay for its maintenance and use.
4.9 The Company and the Employee will obtain and maintain Manager's
Insurance (Bituach Menahalim) and Disability Insurance for the exclusive benefit
of the Employee in the customary form. Each of the Company and the Employee
shall contribute toward the premiums payable in respect of such insurance those
amounts which would be recognized under applicable law, but in no event shall
such contributed amounts be more than thirteen and one third percent (13 1/3%)
for Manager's Insurance and 2.5% for Disability Insurance of each monthly gross
salary payment for the Company and five percent (5%) of such amount for the
Employee. It is hereby agreed that should the Employee be or become entitled to
severance pay under applicable law, his benefits under said insurance, to the
extent available, shall be in lieu thereof and in full and final substitution
therefor. If the Employee resigns after one (1) year from the Effective Date,
the Company shall transfer the Company's portion of payments (and accumulations
thereon) of the Bituach Menahalim to the Employee.
4.10 The Company and the Employee shall maintain an advancement fund
(keren Heshtamlut) for exclusive benefit of the Employee. The Company shall
contribute to such fund an amount equal to 7-1/2% of each monthly Gross Salary
payment and the employee shall contribute to such fund an amount equal to 2-1/2%
of each monthly Gross Salary payment. The Employee hereby instructs the Company
to transfer to such advancement fund the amount of the Employee's and the
Company's contribution from each monthly Gross Salary payment.
4.11 The Employee is entitled to leave for sick days and D'mei Havarah
as provided by law.
5. Expenses
Subject to the Company's expense policy as shall be in effect from time
to time, Employee is authorized to incur reasonable and proper expenses for
promoting the business of TTR including expenses for entertainment, travel,
lodging, and similar items. TTR will reimburse Employee promptly for all such
expenses upon presentation by Employee, of receipts or other appropriate
evidence of expenses.
6. Vacation
6.1 The Employee shall be entitled to paid vacation during Hol Hamoed of
Passover and Sukkot and an additional 12 working days during the first year of
this Agreement to be taken at times as agreed upon by the parties. For each
additional year Employee is working for Company as the President and General
Manager he shall be entitled to an additional one (1) day vacation up to a
maximum of seventeen (17) working days of paid vacation per year, to be taken at
times as agreed upon by the parties.
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6.2 Purim and Tisha B'Av are considered regular working days. However,
Employee can elect to take them as vacation days. If taken as vacation days they
shall be counted as part of the 12 days mentioned in section 6.2.
6.3 The day before Passover, Shavuot, Rosh Hashana, Yom Kippur and
Sukkot are half working days. Employee can elect to take these days as half
vacation days. These vacation days if taken are counted as part of the 12 days
mentioned in section 6.1.
6.4 All public fast days are considered regular work days.
6.5 Employee is entitled to paid leave, in the event of death in the
family, G-d forbid, for the amount of time dictated by Jewish Law.
7. Secrecy and Nondisclosure
Without derogating from any of the terms of any other Confidential
Disclosure and Non-Competition Agreement between the Parties, the Employee shall
treat as secret and confidential all of the processes, methods, formulas,
procedures, techniques, software, designs, know-how, data, and other information
which are not of public knowledge or record pertaining to TTR's business
(existing, potential, and future), including without limitation. all business
information relating to customers and supplies and products of which the
employee becomes aware during and as a result of employment with TTR, and
Employee shall not disclose, use, publish, or in any other manner reveal,
directly or indirectly, at any time during and after the term of this Agreement,
any such information detailed herein.
8. Non-Competition & Poaching
8.1 Without derogating from any of the terms of any other Confidential
Disclosure & Non-Competition Agreement between the Parties, during the term of
this Agreement and for a term of one (1) year after Employee ceases to be
employed by the Company, Employee will not, directly or indirectly, for his own
account or as an employee, officer, director, partner, joint venturer,
shareholder, investor, consultant or otherwise (except as an investor in a
corporation whose stock is publicly traded and in which Employee holds less than
5% of the outstanding shares) engage in or contribute his knowledge to any work
or activity that involves a product, process, service or development which
directly competes with the business of the Company, now or hereafter existing.
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8.2 Employee acknowledges that the restricted period of time and
geographical location specified under this Section 8 are reasonable, in view of
the nature of the business in which the Company is engaged and Employee's
knowledge of the Company's business and products. If such period of time or
geographical location should be determined to be unreasonable in any judicial
proceeding, then the period of time and area of restriction shall be reduced so
that this Agreement may be enforced in such area and during such period of time
as shall be determined to be reasonable by such judicial proceeding.
8.3 The Employee shall not at any time during the period from the
termination of this Agreement or any extension hereof, to the expiry of six (6)
months, employ or attempt to employ or solicit or endeavor to entice away from
or discourage from being employed by the Company any person who is, or shall at
any time until the termination of this Agreement or any extension hereof, one of
the employees of the Company.
9. Development Rights
The Employee agrees and declares that all proprietary information
including but not limited to trade secrets, know-how, patents and other rights
in connection therewith developed by or with the contribution of Employee's
efforts during his employment with TTR shall be the sole property of TTR. Upon
the Company's request (whenever made), Employee shall execute and assign to the
Company all the rights in the proprietary information.
10. Employee Representations
The Employee represents and warrants to TTR that the execution and
delivery of this Agreement and the fulfillment of the terms hereof (i) will not
constitute a breach of any agreement or other instrument to which he is party,
(ii) does not require the consent of any person, and (iii) shall not utilize
during the term of his employment any proprietary information of any third
party, including prior employers of the Employee.
11. Benefit & Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company, its parent Company, successors and assigns, including any subsidiary.
The rights and obligations of the Employee under this Agreement may not be
assigned by him.
12. Entire Agreement
This Agreement constitutes the entire understanding and agreement
between the parties, and supersedes any and all prior discussions and agreements
and correspondence, and may not be amended or modified in any respect except by
a subsequent writing executed by both parties.
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13. Notices
All notices or other communications required or desired to be sent to either
Party shall be in writing and shall be sent by hand or by Registered or
Certified mail, postage prepaid, return receipt requested, or sent by telegram
or facsimile to the address set forth in the Preamble to this Agreement or to
such other address as the recipient may designate by notice in accordance with
the provisions of this Clause.
.
Any such notice shall have been deemed to have been delivered if served by hand
when delivered, if by Registered or Certified Mail 48 hours after posting if
within the same country or 14 days if posted from another country, and by telex
or facsimile transmission when dispatched and receipt confirmed by recipient
party.
14. Severability:
Any term or provision of this Agreement which is found by a court,
tribunal or arbitration panel to be invalid or unenforceable shall be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the other terms
or provisions of this Agreement. In the event that any term or provision of this
Agreement is found to be unenforceable or ineffective, then the reviewing court,
tribunal or arbitration panel may modify such term or provision to the extent
necessary to render it enforceable and the parties agree to be bound by and
perform this Agreement as modified.
15. Applicable Law
This Agreement shall be governed by and construed in accordance with the laws of
the State of Israel. All disputes, differences or questions arising out of or
relating to this Agreement, or pertaining to its validity, interpretation,
breach or violation shall be decided exclusively by the appropriate court
sitting in Tel Aviv-Jaffa.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly signed by
the date stated above.
T.T.R. Technologies Ltd.
MARC TOKAYER ARIK SHAVIT
- ------------------------- ------------------------
Marc Tokayer Arik Shavit
<PAGE>
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
AMENDMENT, dated as of September 8, 1996 to EMPLOYMENT AGREEMENT, dated as
of July 5, 1996 (the "Shavit Employment Agreement"), between TTR Technologies
Ltd., an Israeli company ("TTR Israel") and Arik Shavit ("Employee")
W I T N E S S E T H
WHEREAS, the TTR Israel and the Employee desire to amend the Employment
Agreement as provided for herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendments
1.1 Section 2.1 of the Employment Agreement is amended so that all references to
"President" and "General Manager" shall heretofore be and refer to "chief
executive officer" and all references to "CEO" shall heretofore be and refer to
the "President".
1.2 Section 4.6 of the Employment Agreement is hereby amended as follows:
"Employee shall be issued options ("Employee Options") to purchase
that number of shares of the Common Stock, par value $0.001 (the "Common
Stock") of TTR Inc. ("TTR Inc."), at an exercise price per share of $0.01,
equal to 6% of the Common Stock of TTR Inc. outstanding after the
consummation of an initial public offering of TTR Inc. (the "IPO"),
(without giving effect to the number of Common Stock issuable to Employee
hereunder), subject to the vesting schedule set forth below, as follows:
(i) 33.34% of the Employee Options shall be issued to Aboudi &
Brounstein Trustees Ltd., as trustees for the Employee ("Trustee") on
the date on which the Registration Statement filed by TTR Inc. under
the Securities Act of 1933, as amended, in connection with the IPO is
declared effective ("IPO Effective Date"), which shares shall be
transferred from the Trustee to the Employee on the first anniversary
of the Effective Date of this Agreement; and
(ii) the remaining Employee Options shall be issued to Employee on the
IPO Effective Date and shall vest in Employee in equal installments on
the second, third and fourth anniversary, respectively, of the
Effective Date of this Agreement.
In the Event that this Agreement is terminated for cause or if
Employee resigns on or prior to the first anniversary of the Effective Date
of this Agreement, none of the Employee Options issued to Trustee or to
Employee shall vest in the Employee and all Employee Options issued
hereunder shall revert to the Company. In the event that this Agreement is
terminated or if Employee resigns after the first anniversary of the
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<PAGE>
2
Effective Date of this Agreement, only that amount of the Employee Options
that is pro-rata to the number of full months which Employee was employed
hereunder shall vest in the Employee."
2. Miscellaneous
2.1 Except as hereby amended, the Employment Agreement shall remain in full
force and effect, and any references to the "Employment Agreement" between the
Company and Arik Shavit shall be deemed to refer to the Shavit Employment
Agreement as amended hereunder.
2.2 This Amendment constitutes the entire understanding and agreement between
the parties on the subject matter hereof, and supersedes any and prior
discussions thereto.
TTR TECHNOLOGIES LTD.
By: MARK TOKAYER
---------------------------
Title:
ARIK SHAVIT
-------------------------------
ARIK SHAVIT
<PAGE>
<PAGE>
Certificate of Translator
I, the undersigned, hereby certify that I am a legal translator and that the
attached document is a translation from Hebrew to English of an unprotected
tenancy Agreement made and signed in Tel-Aviv on the 10th day of June, 1996
between Pharmastate Ltd. as lessor, and T.T.R. Technologies Ltd., as lessee.
Dated this 9th day of September, 1996 in Tel Aviv, Israel.
/s/ ELANA KROPARO
.....................................
Elana Kroparo
<PAGE>
<PAGE>
TRANSLATION FROM THE HEBREW
UNPROTECTED TENANCY AGREEMENT
Made and signed in Tel-Aviv on the 10th day of June, 1996
Between: Pharmastate Ltd. Private Company Registration No. 51-212758-0
3 Bazel St., Kiryat Arye, Petach Tikva (hereinafter: "the
Lessor")
of the first part
And: T.T.R. Technologies Ltd. Private Company Registration No.
51-205917-1 16/8 Hatam Sofer Emanuel (hereinafter: "Lessee")
of the other part
Whereas the Lessor is the owner of a gallery covering an area of approx.
407 sq.m. in the third floor at the southern part of an
industrial building in 2 Hungar St. Kfar Sava, known as Plot 9356
in Parcel 62, Block 7606 (hereinafter: "the Leasehold"); and
Whereas the Lessor wishes to lease the Leasehold by means of unprotected
tenancy pursuant to the Tenant's Protection Law (Combined
Version) 5732-1972, and the Lessor is willing to lease the
Leasehold to the Lessee pursuant to the provisions of this
Agreement;
Now, Therefore, It Is Agreed, Stipulated and Declared Between the Parties As
Follows:
1. The Preamble herein constitutes an inseparable part hereof.
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Lease
2. a. The Lessor hereby leases to the Lessee and the Lessee hereby
leases the Leasehold from the Lessor, by means of unprotected
tenancy (hereinafter: "the Tenancy"), subject to the provisions
hereinafter provided in this Agreement.
The Leasehold also includes five parking spaces to be used by the
Lessee subject to the Lessor's instructions.
b. The Parties hereby declare that the Leasehold is a vacant asset
and that the tenancy transaction entered into hereunder is
unprotected pursuant to the Tenant's Protection Law (Combined
Version) 5732-1972 and the regulations thereof and/or any other
law which will come in its stead.
c. The Lessee hereby declares that it does not pay to the Lessor any
key money or any other amount other than rental, directly or
indirectly, and that the Leasehold was not leased by means of key
money.
d. The parties hereby agree that no present or future laws and/or
regulations and/or decrees and/or directives vesting in the
Lessee rights which are not granted pursuant herein, or limiting
the Lessor's right to demand the vacating of the Leasehold and/or
to make any use in its rights pursuant to this Agreement shall
apply to the tenancy transaction hereunder.
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Term of Tenancy
3. a. The Tenancy is for a term of three years commencing on June 1st,
1996 and ending on May 31st, 1999 (hereinafter: "Term of
Tenancy").
b. The Lessee is hereby given an option to lease the Leasehold for
an additional period of one year, commencing on June 1st, 1999,
and ending on May 31st, 2000 (hereinafter: "Extended Term of
Tenancy").
Furthermore, the Lessee is hereby given further option to lease
the Leasehold for a period of another year commencing on June
1st, 2000 and ending on May 31st, 2001 ("Additional Term of
Tenancy").
In the event that the Lessee does not advise at least 90 days in
advance prior to the termination of the Term of Tenancy, or the
termination of the Extended Term of Tenancy, as the case may be,
of its intention to terminate the Tenancy Agreement, the Tenancy
Agreement shall automatically renew for the Extended Term of
Tenancy or the Additional Term of Tenancy, as the case may be,
where all the provisions of this Agreement shall apply, mutatis
mutandis. It is hereby agreed that a condition precedent for the
renewal of this Agreement for the Extended Term of Tenancy or for
the Additional Term of Tenancy, as the case may be, is the
deposit of a bank guarantee, under the terms set forth in Section
12 hereinafter, for the Extended Term of Tenancy, or the
Additional Term of Tenancy, as the case may be, in the equivalent
sum in NIS to three months rent, at their value in accordance
with the rate of rental to be determined for the Extended Term of
Tenancy pursuant to sub-section 5.b. hereinafter, not later than
the date of commencement of the
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Extended Term of Tenancy or the commencement of the Additional
Term of Tenancy, as the case may be.
c. Upon the termination of this Agreement the Lessee shall vacate
the Leasehold and hand over same to the possession of Lessor,
being vacant of any chattel and person, clean, tidy, in a good
and orderly condition, excluding reasonable wear.
It is hereby clarified that any renovation made by the Lessee in
the Leasehold or any addition admitted by the Lessee therein
which is permanently attached thereto, excluding an
air-conditioning system, whether pursuant to Lessor's approval to
perform same as set forth herein or otherwise, shall belong to
the Lessor upon the termination of the Term of Tenancy, and the
Lessee shall not be entitled to demand from Lessor any payment
and/or compensation in respect thereof.
d. It is hereby clarified that upon the duly termination of this
Agreement the Lessee shall return the possession in the Leasehold
to the Lessor on the date set forth therefor herein and in the
event that Lessee fails to do so, the Lessee hereby irrevocably
agrees that the Lessor shall instruct the authorized entities to
discontinue the electricity and/or water and/or telephone
services to the Leasehold, or, alternatively, the Lessee hereby
declares that it agrees that the Lessor shall take possession in
the Leasehold and, if needed, shall break, at the Lessee's
expense, the lock thereof and replace same, and shall store, at
the Lessee's expense, and at its responsibility, all its
chattels. The foregoing remedies shall be in addition, and not in
place, of any other relief pursuant to any law.
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e. Early vacation of the Leasehold by the Lessee prior to the
termination of the Term of Tenancy or the Extended Term of
Tenancy, as the case may be, shall be subject to the written
approval of the Lessor. In the absence of such written approval
the Lessee shall be obligated to pay the Rental and shall be
subject to the other provisions herein until the termination of
the Term of Tenancy or the Extended Term of Tenancy, as the case
may be.
Purpose of Tenancy
4. The purpose of the Tenancy is solely for the usage of the Leasehold as
offices, for research, manufacture and marketing, in the filed of
Hi-Tech.
Rental
5. a. The Lessee shall pay during the Term of Tenancy rental in the
amount in NIS equivalent to $8 per each square meter per each
month of rent (hereinafter: "Rental"), with the addition of VAT
at law, and in addition the Lessee shall pay maintenance fees in
the amount of $0.75 per square meter, with the addition of VAT at
law, as set forth in Section 10 hereinbelow. The Rental and
maintenance fees shall be calculated and paid in respect of the
area of the Leasehold which covers 407 sq.m. with the addition of
53 sq.m. for the right to use the parts of the building which are
common to all the tenants, and in total, for 460 sq.m.
The Rental and maintenance fees shall be calculated in NIS, in
accordance with the representative exchange rate of the US Dollar
on the actual date of payment.
For the sake of clarity, the foregoing shall be paid whether the
Lessee uses the Leasehold or otherwise.
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b. The Rental shall be re-determined upon the completion of three
years of tenancy, from the date of singing this Agreement. The
Rental to be so re-determined shall be the higher amount of: a)
the updated Rental at that time with the addition of 10% thereon;
or, b) the Rental to be determined by an agreed appraiser to be
agreed by the parties and in the absence of such agreement, by an
appraiser to be appointed by the Chairman of the District Board
of the Israeli Bar Association. The appraiser shall assess the
Rental in view of the condition of the Leasehold on the date of
signing hereof, disregarding the changes admitted to the
Leasehold by the Lessee.
c. The Rental, with the addition of VAT at law, shall be paid in
accordance with the following breakdown:
(a) On June 1st, 1996 Rental in the amount of $10,069 shall be
paid with the addition of VAT for the period commencing on
June 1st, 1996 and ending on September 30th, 1996.
(b) As of October 1st, 1996 until the termination of the Term of
Tenancy or the Extended Term of Tenancy, or the Additional
Term of Tenancy, as the case may be, the Rental shall be
paid on the 1st of the month, for every three months of rent
in advance (hereinafter: "Dates of Payment").
In the event that any of the Dates of Payment does not occur on a
business day, such payment shall be postponed to the first
business day following such Date of Payment and shall be
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-7-
effected in accordance with the representative rate of exchange
of the US Dollar to be published on such date. It is hereby
clarified that the possession in the Leasehold shall be handed
over to the Lessee solely following the settlement of the first
payment.
d. The place of payment shall be either at the Lessor's premises by
means of handing over of a check to the order of the Lessor or by
means of transfer of the payment directly to the Lessor's bank
account, in accordance with the following particulars: Bank
________ Branch________, Account No. ________.
Usage of the Leasehold
6. a. The Lessee hereby declares and warrants that it has examined the
Leasehold and found same to be in good order and suitable for the
purpose of the Tenancy, and it hereby waives any allegation
and/or claim in respect thereof, other than latent defects.
b. The Lessee hereby declares that it has inspected the legal status
of the Leasehold, including in respect of the licenses for the
operation of a business in the Leasehold, and that it assumes the
issue of licensing, at its responsibility, including all costs
and expenses involved therewith.
The Lessee undertakes to bear all costs and expenses resulting
from the failure to obtain a license from the competent
authorities and any cost and expense which are involved with or
which are the result of the operation of the business in the
Leasehold, and it undertakes to indemnify the Lessee for any
damage, claim or expanses suffered by it as a result of or in
respect of the licensing of the business and/or the existence
and/or operation of the business in the Leasehold.
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In the event that the Lessee is forced to vacate the Leasehold
prior to the termination of the Term of Tenancy or the Term of
Extended Tenancy, as the case may be, as a result of a judicial
order or directives by the planning and building authorities
relating to the purpose of the use in the Leasehold (including
the filing of a bill of indictment) this Agreement shall
terminate on the date of actual vacation by Lessee, and the
Lessee shall have no claim of any nature whatsoever toward the
Lessor in respect of such early vacation. All other provisions
herein (excluding the date of termination of Tenancy) shall
remain in full force.
c. The Lessee shall be entitled, in collaboration with the Lessor,
to fix, at the Lessee's expense, signposts at the front of the
Leasehold, subject to obtaining of license therefor from the
competent authorities. All payments in respect of license and/or
fees and/or fines and/or any payments of whatsoever nature,
resulting from such signposts, shall apply to the Lessee.
d. During the entire term of its possession in the Leasehold, solely
the Lessee shall be liable for any occurrence and/or damage
suffered by it and/or its employees and/or any person on its
behalf and/or any third party and/or their property within the
area of the Leasehold and/or within the area of the building
where the Leasehold is located, which was caused due to the
actions and/or omissions of the Lessee and/or any person on its
behalf and/or following its permission, and the Lessor shall be
under no liability in connection therewith. The Lessee undertakes
to indemnify and/or compensate the Lessor in any event where it
is obligated by a court to pay any amount whatsoever due to any
occurrence and/or damage caused as aforesaid, and, inter alia,
the Lessee undertakes to bear the Lessor's legal expenses in
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<PAGE>
-9-
connection therewith and any other expense incurred by the
Lessor. It is hereby agreed that the Lessee shall pay such
amounts to the Lessor within seven days of Lessor's first demand.
It is hereby agreed that where the Lessor receives notice
demanding to pay any amount whatsoever in connection herewith, it
shall promptly advise the Lessee thereof and shall enable the
Lessee to defend on its behalf and cooperate with the Lessor in
any matter relating to the handling of the legal case arising
therefrom. In the event that the Lessee does not take action or
handles such case within 10 days, the Lessor shall be entitled to
do so notwithstanding the foregoing, and same shall not be viewed
as waiver of its rights pursuant to this Agreement.
e. Without derogating from the provisions of sub-section 6.d. above,
the Lessee hereby undertakes to maintain throughout the entire
Term of Tenancy valid insurance in the amount of NIS 500,000
which will be presented for the approval of the Lessor until the
date of signing hereof, to cover all risks and damages which may
be caused to any third party whatsoever, as a result of the
actions and/or omissions on the part of the Lessee's and/or any
person on its behalf and/or any person authorized by it, as well
as property insurance.
The Lessor and the Lessee shall be listed as beneficiaries in a
third party insurance and the policy shall include a provision
whereby the insurer shall not be entitled to submit a restitution
claim against the Lessor.
A copy of the foregoing insurance policies shall be handed over
to the Lessor until the date of signing hereof.
The Lessor hereby undertakes to maintain a building insurance
which also includes the Leasehold.
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f. The Lessee hereby undertakes to keep the Leasehold in a good and
orderly condition and to repair, at its expense, all damages
and/or breakdowns caused or created in the Leasehold, immediately
upon the creation or causing of such damages or breakdowns. The
foregoing shall not apply to wear and damages caused during and
as a result of ordinary and reasonable usage of the Leasehold,
not due to negligence and/or mala fide on the part of the Lessee
and/or any person on its behalf.
In the event that the Lessee does not repair such breakdown
within 14 days of the occurrence thereof or in the event of
damage and/or breakdown of a nature which necessitates immediate
repair promptly, the Lessor shall be entitled, without derogating
from any other relief pursuant to this Agreement and pursuant to
law to carry out such repair by itself, and the expenses of such
repair shall apply to the Lessee upon the Lessor's first written
demand, and against a tax invoice or receipt for the expenses of
such repair.
g. The Lessee hereby undertakes to keep clean the Leasehold and the
pavement at the front of the Leasehold, the stairwell, the yard,
the garden, and all other common places to it and the other
tenants of the building.
h. The Lessee hereby undertakes to strictly fulfill the provisions
of the law applying to the operation of business, and without
derogating from the generality of the foregoing, the Lessee
hereby undertakes to strictly fulfill the provisions of all
municipal laws applying to businesses.
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i. The Lessee undertakes to operate its business in a manner which
will not disturb other tenants where the Leasehold is located to
transact their business in an orderly manner.
j. The Lessor shall approve in writing, in advance, the location of
loading and unloading spaces for the Leasehold.
k. The Lessor hereby undertakes to promptly repair any defect or
breakdown applicable to it pursuant to the provisions of this
Agreement, which interferes with the operation and/or the orderly
usage of the Lessee in the Leasehold. In the event that the
Lessor fails to do so within 14 days from the date of receipt of
written notice from the Lessee to that effect, where Lessor does
not contest its obligation to bear such payment, the Lessee shall
be entitled to repair such damage at its expense and demand the
cost thereof from the Lessor.
The Lessor shall try to carry out the said visits and/or repairs
with as little disturbance as possible to the operation of the
Lessee. Repairs performed by the Lessor in the Leasehold as such
may be necessary pursuant to this Agreement shall be carried out
by it without damage to the property of the Lessee.
Right to enter
7. The Lessee hereby undertakes to allow the Lessor to enter the Leasehold
during reasonable hours, following prior coordination, in order to
inspect the condition of the Leasehold or to perform repairs in the
Leasehold, or in order to show the Leasehold to other persons, or to
inspect or verify the fulfillment of the provisions of the Tenancy
pursuant to this Agreement.
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The Lessor shall try to carry out the said visits and/or repairs with as
little disturbance as possible to the operation of the Lessee. The
Lessor shall try to perform repairs in the Leasehold as such may be
necessary pursuant to this Agreement without damage to the Leasehold.
Non-Transferability of rights and usage
8. a. The Lessee hereby expressly undertakes, not to transfer this
Agreement or any right arising therefrom to another person/s, not
to transfer the Leasehold or any part thereof and/or not to lease
the Leasehold or any part thereof by means of sub-tenancy or
otherwise and/or not to permit the usage therein or in any part
thereof to other person/s, in any manner whatsoever, and/or not
to share with any person the maintenance of the Leasehold and/or
the usage thereof and/or any benefit therefrom, whether for
consideration or otherwise, other than pursuant to the Lessor's
prior written approval. The Lessor shall not unreasonably
withhold such approval for the execution of the foregoing actions
to a corporation wherein the Lessee is the owner of at least 51%
of the shares or a corporation to come in place of the Lessee due
to merger or consolidation with the Lessee.
b. The Lessee shall be entitled to transfer its rights hereunder, in
all or in part, to another person and/or entity, without the
Lessor's approval, provided that the Agreement between the Lessor
and the Lessees remains in full force.
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Prohibition of Changes in the Leasehold
9. a. The Lessee shall be entitled to perform internal changes in the
Leasehold in accordance with the drawing which is attached hereto
and forms an inseparable part hereof, and solely in accordance
therewith.
b. The Lessee hereby undertakes, not to make and not to permit any
changes whatsoever in the Leasehold including renovation thereof
and changes in the front of the Leasehold, other than the agreed
changes between the parties as set forth in sub-section a. above,
without the Lessor's prior written approval to that effect.
Painting of the Leasehold, internal division thereof by means of
light plaster partitions and internal changes which do not
involve permanent fixtures or removal of permanent fixtures shall
not be viewed as renovation for this purpose. It is hereby
clarified that any request for renovation on behalf of the Lessee
shall be accompanied by a drawing, at the Lessee's expense, of
such requested renovation.
Any repair, improvement, building and change shall be deemed
immediately upon execution thereof as the Lessor's property and
the Lessee shall have no right to remove and/or tear out same
upon the termination of the Term of Tenancy, save for chattels
which are not permanent fixtures and which the removal thereof
shall cause no damage whatsoever to the Leasehold.
Taxes and payments
10. a. The Lessee shall bear, solely for the entire Term of Tenancy, all
payments resulting from the maintenance and usage of the
Leasehold, including payments in respect of municipal taxes,
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business taxes, water, gas, electricity, payments in respect of
license fees, signposts taxes, etc. the Lessee hereby undertakes
to advise the Municipality of this Tenancy Agreement within 7
days of the date of signing hereof and to present a confirmation
to the Lessor within same period of the receipt of such notice by
the Municipality. For the sake of clarity, the Lessee hereby
undertakes to bear all the said taxes also in respect of the
additional area of 53 sq.m. as aforesaid in sub-section 5.a.
above.
b. The Lessee shall bear the payment in the amount of $0.75 with the
addition of VAT at law per each net square meter for its pro rata
share in the payment of maintenance to the House Committee.
Maintenance of the Leasehold includes reasonable gardening,
cleaning and general maintenance of the common areas and the
elevator.
c. The Lessee shall be responsible for the timely payment of all
bills and payments in respect of the Leasehold, and it shall be
obligated to pay the addition of any interest, linkage
differences or late charges in respect of untimely payment. In
the event that the Lessor has to bear such payments, the Lessee
shall pay to the Lessor in addition to any sum so borne by the
Lessor, linkage differences to the Consumer's Price Index and
linked interest at a rate of 10% per year.
d. The Lessee hereby declares and undertakes that all current
payments in respect of the Leasehold until the date of
commencement of the Term of Tenancy shall be borne by Lessee.
e. For the removal of any doubts, it is hereby clarified, that there
is no telephone line in the Leasehold. The Lessee shall be
entitled to
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order and install, solely at its expense, telephone lines in the
Leasehold which will remain in its possession.
f. The Lessor shall be responsible to pay all the payments and taxes
in respect of the areas outside the Leasehold which are currently
used by all other lessees in the building where the Leasehold is
located and are not included in the Leasehold area to a third
party.
Delay in vacatine of Leasehold
11. In the event that the Lessee has to vacate the Leasehold pursuant to the
provisions of this Agreement and has not done so, it shall pay to the
Lessor predetermined Rental in NIS equivalent to US$ 200, in accordance
with the exchange rate of the US Dollar, per each day of delay in
vacating the Leasehold, until actual vacating, without derogating from
any other remedy or relief of the Lessor pursuant to this Agreement
and/or pursuant to the provisions of any law. For the sake of clarity,
the foregoing shall apply in addition of the Lessor's right to take
possession in the Leasehold.
Securities
12. a. As security to the payment of the Rental and/or payment of the
increased rental in case of delay in vacating the Leasehold, as
set forth in Section 11 above and/or for the execution of any
other payment which pursuant to this Agreement is applicable to
the Lessee, the Lessee shall deposit with the Lessor, upon the
signing hereof, an unconditional bank guarantee, unlimited by
time, in the amount of NIS 50,000, linked to the Consumer's Price
Index, as of the last known index on the date of signing hereof,
until the actual date of payment (hereinafter: "the Guarantee").
The
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Lessor shall be entitled to demand the exercise of the Guarantee
following a written warning to that effect to the Lessee where
the Lessor finds out that the Lessee has failed to pay the Rental
timely and/or in full and/or where the Lessor finds out that the
Lessee is in delay in vacating the Leasehold and as a result
thereof the Lessor has the right to the increased rental as set
forth in Section 11 above and wherever the Lessor finds out that
the Lessee has not fulfilled its undertaking to bear any payment
whatsoever pursuant to this Agreement.
The Guarantee shall be deposited in trust with Adv. Ran Shalish
who shall be entitled to release same to the Lessor following
seven days from the receipt of a warning by the Lessor to the
Lessee of the intention to exercise the Guarantee.
b. Upon termination of this Agreement, termination of the Term of
Tenancy or the termination of each of the Additional Terms of
Tenancy, as the case may be, and after the Lessor is satisfied
that the Lessee has fulfilled all its undertakings pursuant to
this Agreement, the Lessor shall promptly return the Guarantee,
at the Lessee's demand.
c. It is hereby clarified that the purpose of the Guarantee and/or
the collection thereof is to add, and not to derogate from, any
remedy and relief of the Lessor pursuant to the provisions of
this Agreement and to any law.
Breach and Vacating
13. a. The provisions of Sections 4 - in respect of the Lessee's
undertaking to adhere to the purpose of the Tenancy; 5 - in
respect of the Lessee's undertaking to fully and timely pay the
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Rental; 6 - in respect of the Lessee's undertaking to insure the
Leasehold and the Lessor's undertaking to insure the building,
and the parties' undertaking to bear liability for damages and/or
in respect of the Lessee's responsibility to refrain from any
disturbance to the tenants of the building; 8 - in respect of
non-transferability of rights; 9 - in respect of prohibition of
changes in the Leasehold; and lO - in respect of the Lessee's
undertaking to bear the expenses in connection with the Leasehold
and the Lessee's undertaking to see to the maintenance of the
common area; all jointly and each severally, are material
provisions herein and the breach of anyone thereof by any party
hereto shall constitute a fundamental breach, vesting in the
other party the right to terminate this Agreement and to the
prompt vacating of the Leasehold, following a warning to remedy
such breach within 7 days from the lessor's or Lessee's demand,
as the case may be.
b. Any payment applying to the Lessor pursuant to this Agreement,
which has not been timely paid, excluding the payments set forth
in Section 10, shall be linked to the Consumer's Price Index as
of the date of creation thereof until the date of actual payment,
and shall bear linked interest at the rate of 10% per year.
c. In any other event of breach of this Agreement by Lessee, the
Lessor shall be entitled to terminate this Agreement and demand
the vacating of the Leasehold, where such breach has not been
remedied within 30 days as of the date of the Lessor's demand to
such effect, and in such event the Lessee shall vacate the
Leasehold within seven days as of the date when the Lessor's
demand has been delivered.
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d. In the event of fundamental breach herein followed by duly
termination of this Agreement, the party in breach shall be
obligated to pay to the other party predetermined and agreed
compensation of US$ 4,000 within seven days of the date of notice
of such termination, without derogating from any other relief or
right pursuant to this Agreement or law to which such party is
entitled.
e. The foregoing shall not derogate from any relief or right to
which the parties are entitled pursuant to the provisions of this
Agreement and/or pursuant to the provisions of any law.
Miscellaneous
14. a. No waiver, discount or extension on the part of the Lessor shall
be valid, unless made in writing with the signature of the
Lessor. Any delay on the part of Lessor to use its rights
pursuant to this Agreement, shall not be deemed as waiver
thereof, and the Lessor shall be entitled to use its rights
without limitation.
b. The Lessee hereby absolutely and irrevocably waives any
offsetting right, if any, from the Rental amounts and from any
other amounts to be paid by Lessee pursuant to this Agreement.
c. The Lessee hereby declares that it was explained to it that it
may consult an attorney prior to its signing hereof and that it
is aware and agrees that in this transaction Adv. Shalish shall
represent solely the Lessor.
d. Upon the signing hereof the Lessee shall present to the Lessor a
minutes of a meeting of the Lessee's Board of Directors, in which
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it was resolved to enter into this Agreement and determined who
is authorized on behalf of the Lessee to sign all documents
relating to this Tenancy.
Modifications to the Agreement
15. Any modification to this Agreement shall be made in writing only, and no
claim in respect of oral or implied change shall be heard.
Jurisdiction
16. Any dispute between the Lessor and the Lessee shall only be heard in the
competent court in Tel-Aviv, Israel.
Addresses and Notices
17. The parties' addresses for the purpose of this Agreement are as first
mentioned in the Preamble hereof.
Any notice delivered by one party to the other, in accordance with the
above addresses, shall be deemed to have been received within 72 hours
from dispatch thereof by registered mail with a confumation of delivery.
In Witness Whereof The Parties Have Signed:
- ------------------------------ ------------------------------
Lessor Lessee
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CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into this 1st day of November 1994
by and between TTR Inc., a Delaware corporation (hereafter "TTR" or the
"Company") and Shane Alexander Unterburgher Securities Inc. a New York
corporation ( hereafter the "Consultant")
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing various
computer technologies;
WHEREAS, the Company desires to engage the services of Consultant in the
fields of financial planning and marketing ( the "Services");
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement The Company hereby engages Consultant and the Consultant agrees to
act as a consultant to the Company in relation to the Services.
2. Duties
2.1 Consultant agrees to provide advice and services to the Company regarding
the Services as determined form time to time by the Company. Consultant shall
devote such time and effort to the consulting services hereunder as is necessary
and proper for the fulfillment of Consultant's obligations hereunder.
2.2 Consultant shall report regularly to the President of the Company with
respect to Consultant's activities hereunder.
3. Compensation
3.1 For services rendered hereunder, Consultant shall be entitled as a
consulting fee to (i) $7900.00 per month, payable in equal installments at the
end of each one month period or as otherwise agreed upon by parties and (ii)
warrants to purchase 185,000 shares of Common Stock, par value $0.0010, of the
Company on the terms and conditions contained in the Warrant attached hereto as
Schedule I.
3.2 The Company shall reimburse Consultant for all actual costs and expenses
incurred by Consultant in rendering the consulting services hereunder in
accordance with its general corporate policy in this matter.
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2
3.3 Payment of consulting fees and reimbursable costs and expenses shall be made
only against delivery by Consultant to the Company of requisite tax receipts or
other appropriate documentation thereof.
4. Term & Termination
4.1 This Agreement shall commence on November 1, 1994 and shall terminate on
December 31, 1995 unless the parties mutually agree otherwise.
5. Proprietary Information; Non-Competition
5.1 The term "Information" means any and all confidential and proprietary
information including but not limited to any and all specifications, formulae,
prototypes, software design plans, computer programs, and any and all records,
data, methods, techniques, processes and projections, plans, marketing
information, materials, financial statements, memoranda, analyses, notes, and
other data and information (in whatever form), as well as improvements and
know-how related thereto, relating to the Company or its products. Information
shall not include information that (a) was already known to or independently
developed by the Consultant prior to its disclosure as demonstrated by
reasonable and tangible evidence satisfactory to the Company; (b) shall have
appeared in any printed publication or patent or shall have become part of the
public knowledge except as a result of breach of this Agreement by the
Consultant or similar agreements by other Company consultants or employees (c)
shall have been received by the Consultant from another person or entity having
no obligation to the Company or (d) is approved in writing by the Company for
release by the Consultant.
5.2 The Consultant agrees to hold in trust and confidence all Information
disclosed to it and further agrees not to exploit or disclose the Information to
any other person or entity or use the Information directly or indirectly for any
purpose other than for its work with the Company.
5.3 The Consultant agrees to disclose the Information only to persons necessary
in connection with its work with the Company and who have undertaken the same
confidentiality obligations set forth herein in favor of the Company. The
Consultant agrees to assume full responsibility for the confidentiality of the
Information disclosed to it and to prevent its unauthorized disclosure, and
shall take appropriate measures to ensure that such persons acting on his behalf
are bound by a like covenant of secrecy.
5.4 The Consultant acknowledges and agrees that the Information furnished
hereunder is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
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3
6.
6.1 Consultant will not, directly or indirectly, for its own account or as an
employee, officer, director, consultant, joint venturer, shareholder, investor,
or otherwise ( except of as an investor in a corporation whose stock is publicly
traded and in which the Consultant holds less than 5% of the outstanding shares)
interest itself or engage, directly or indirectly, in the design, development,
production, sale or distribution of any product or component that directly or
indirectly competes with a product or component (i) then being designed,
produced, sold or distributed by the Company or any of its affiliates (ii) or to
which the Company or any of its affiliates shall then have proprietary rights.
6.2 Consultant's undertakings herein under paragraph 6 shall be binding upon its
affiliates, subsidiaries or successors, heirs or assigns, and shall continue
until the later of (i) the expiration of one year from the date of execution of
this Agreement or (ii) the expiration of one year from the date the Consultant
last (A) acted as a consultant of the Company or any of its affiliates,
subsidiaries or successors or (B) represented itself as an agent or
representative of the Company or any of its affiliates, subsidiaries or
successors unless permission is specifically granted in writing by the Company
to make use or release any such information.
6.3 Consultant acknowledges that the restricted period of time and the
geographical location specified under this paragraph 6 are reasonable, in view
of the nature of the business in which the Company is engaged and Employee's
knowledge of the Company's business and products. If such a period of time or
geographical location should be determined to be unreasonable in any judicial
proceeding, then the period of time and area of restriction shall be reduced so
that this Agreement may be enforced in such an area and during such a period of
time as shall be determined to be reasonable by such judicial proceeding.
7. Consultant represents and warrants that his receipt of Information hereunder
or use thereof for the purposes of this Agreement shall not violate any
undertaking or obligation of the Consultant to any third party or entitle any
third party to access or right in the Information.
8. Ownership
8.1 'Project Materials' - shall mean any and all works of authorship and
materials developed by the Consultant, its employees, agents in relation to
Services (whether individually, collectively or jointly with the Company and on
whatever media) including, without limitation, any and all reports, studies,
data, diagrams, charts, specifications, pre contractual and contractual
documents and all drafts thereof and working papers relating thereto, but
excluding consultants ordinary correspondence.
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4
8.2 The Project Materials and the intellectual property rights therein or
relating thereto shall be and remain the exclusive property of the Company and
shall vest in the Company at the time they are first created.
8.3 In the event and to the extent that any of the Project Materials or the
intellectual property rights therein or relating thereto are deemed for any
reason not to vest in the Company pursuant to this Section 8 then, upon request
by the Company, the Consultant shall forthwith assign or otherwise transfer the
same to the Company free of any encumbrance or compensation to the Consultant.
8.4 At the request and the expense of the Company, the Consultant shall do all
such things and sign all documents or instruments reasonably necessary in the
opinion of the Company to enable the Company to obtain, defend and enforce its
rights in the Project Materials.
8.5 Upon the request by the Company, and in any event upon expiration or
termination of this Agreement, the Consultant shall promptly deliver to the
Company all copies of the Project Materials then in Consultants custody, control
or possession.
8.6 The provisions of this section shall survive the expiration or termination
of this agreement.
9. Warranty
Consultant represents and warrants that on the date hereof it free to be engaged
by the Company upon the terms contained in this Agreement and that there are no
agreements or arrangements restricting full performance of Consultant's duties
hereunder.
10. Force Majeure
10.1 No liability shall result to any Party due to a delay in performance caused
by circumstances beyond the reasonable control of the Party affected, including,
but not limited to acts of God, flood, war, terrorism, embargo, accident, and
governmental laws, or request, or any ruling of a court or tribunal;
10.2 Each Party affected by an event of force majeure shall (a) promptly notify
the other Party hereto of the expected duration thereof, and its anticipated
effect on the Party effected in terms of the performance required hereunder; and
(b) make reasonable efforts to remedy any such event of force majeure.
Performance that is delayed by any event of force majeure shall be extended for
such time as the event shall continue.
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5
11. General Provisions
11.1 This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
11.2 No failure, delay or forbearance by a party in exercising any power
or right hereunder shall in any way restrict or diminish such party's rights
and powers under this Agreement, or operate as a waiver of any breach or
non-performance by either party of any of the terms or conditions hereof.
11.3 If any term or provision of this Agreement shall be declared invalid,
illegal or unenforceable, then such term or provision shall be enforceable to
the extent that a court shall deem it reasonable to enforce such term or
provision and if such term or provision shall be unenforceable, such term or
provision shall be severed and all remaining terms and provisions shall be
unaffected and shall continue in full force and effect.
11.4 The terms and conditions of this Agreement supersede those of all previous
agreements and arrangements, either written or oral between the Company and
Consultant relating to the subject thereof.
11.5 Consultant acknowledges and agrees that he is an independent contractor, is
not the agent of the Company and has no authority in such capacity to bind or
commit the Company by or to any contract or otherwise. Consultant is not,
expressly or by implication, an employee of the Company for any purpose
whatsoever.
11.6 This Agreement is personal to Consultant and Consultant shall not assign or
delegate his rights or duties to a third party, whether by contract, will or
operation of law, without the Company's prior written consent.
11.7 Each notice and/or demand given by one party pursuant to this Agreement
shall be given in writing and shall be sent by registered mail to the other
party at its designated address and such notice and/or demand shall be deemed
given at the expiration of seven (7) days from the date of mailing by registered
mail or immediately if delivered by hand. Delivery by facsimile and other
electronic communication shall be sufficient and be deemed to have occurred upon
electronic confirmation of receipt.
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6
11.8 This Agreement shall be interpreted, construed and governed in accordance
with the law of the State of Israel.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
TTR Inc. Shane Alexander Unterburgher Securities
BY MARC D. TOKAYER By: [SIGNATURE]
------------------------- -------------------------------
<PAGE>
<PAGE>
SCHEDULE I
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE
REPRESENTATIONS AND AGREEMENTS MADE TO THE RECORD HOLDER HEREOF SET FORTH IN
THIS WARRANT.
COMMON STOCK PURCHASE WARRANT
in favor of
DATE
WARRANT NO.
Shares of Common
Stock of TTR Inc.
FOR VALUE RECEIVED, TTR INC., a Delaware company (the "Company"), hereby
grants to (the "Holder"), the right to purchase, subject to the
terms and conditions hereof, fully paid and
non-assessable shares of Common Stock of the Company, par value $0.001, (the
"Shares"). The purchase price for each Share purchased pursuant to this Warrant
shall be equal to $0.01, subject to the terms hereof. Hereinafter, (i) such
Shares, together with any other equity security which may be issued by the
Company in substitution therefor, are referred to as the "Shares"; (ii) the
shares purchasable hereunder are referred to as the "Warrant Shares"; (iii) and
the price payable hereunder for each of the Warrant Shares, as adjusted in the
manner set forth hereinafter, is referred to as the "Per Share Warrant Price";
and (iv) this warrant and all warrants hereafter issued in exchange or
substitution for this Warrant are referred to as the "Warrants". The Per Share
Warrant Price and the number of Warrant Shares are subject to adjustment as
hereinafter provided.
1. Warrant Period; Exercise of Warrant
1.1 This Warrant may be exercised in whole only once at any time commencing 9:00
a.m New York City time, on the date on which a registration statement with
respect to an initial public offering of the
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2
Company's securities under the Securities Act of 1933, as amended (the "IPO")
becomes effective and continuing up to 9:00 a.m. on the date on which the IPO
closes (the "Warrant Period") by the surrender of this Warrant (with a duly
executed exercise form in the form attached at the end hereof as Exhibit A) at
the principal office of the Company, together with the proper payment of the Per
Share Warrant Price times the number of Warrant Shares. The Per Share Warrant
Price due on exercise shall be due only at the closing of the IPO. If the IPO is
not closed within ninety (90) days of the date of the exercise, the exercise
shall be null and void and the Warrant shall remain in full force and effect.
1.2 Upon surrender of this warrant and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered to Warrant holder,
a certificate or certificates for the number of Warrant Shares being purchased,
and such certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of the such Shares as of the close of business on the date of the surrender of
the Warrant and payment of the Per Share Warrant Price.
1.3 Any stamp tax attributable to the issuance of the Shares shall be borne
solely by Holder.
2. Representations and Warranties
2.1 The Holder (i) represents warrants, covenants and agrees that the Warrant
and the underlying Warrant Shares are being acquired by the Holder for the
Holder's own account, for investment purposes only, and not with a view to or
for sale in connection with any distribution thereof or with any present
intention of selling or distributing all or any part of the Warrant or the
underlying Warrant Shares thereof; (ii) understands (x) that if it should
thereafter decide to dispose of such Warrant or Warrant Shares (which it does
not contemplate at such time) it may do so only in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), (y) this Warrant and
the Warrant Shares are not registered under the Securities Act nor does the
Company have any obligation to register this Warrant and the Warrant Shares
(except as provided in paragraph 3 below) and (z) that it is unlikely that Rule
144 adopted by the Securities and Exchange Commission will be applicable to
permit sales of this Warrant and the Warrant Shares in reliance thereon; and
(iii) acknowledges that, as of the date hereof, it has been given a full
opportunity to ask questions of and to receive answers from the Company
concerning this Warrant and the Warrant Shares and the business of the Company
and to obtain such information as it desired in order to evaluate the
acquisition of this Warrant and the Warrant Shares, and all questions have been
answered to its full satisfaction.
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3
3. Registration Rights
The Holder shall have the registration rights for the Shares issuable
upon exercise of this Warrant as set forth in the Subscription Agreement issued
in connection with the Company's Private Placement Memorandum, dated October 7,
1994.
4. Reservation of Shares.
The Company has reserved, and shall at all times so long as any Warrant
remains outstanding, keep reserved, out of its authorized and unissued capital
stock, such number of shares of Common Stock, par value $0.001, as shall be
subject to purchase under the Warrant.
5. Limited Transfer
5.1 The Company may treat the registered holder of record as the holder for all
purposes.
5.2 In no event shall the Company be obligated to effect any transfer of
Warrants or Warrant Shares unless a registration statement is in effect with
respect thereto under applicable state and Federal securities laws or unless the
Company shall have received an opinion in substance reasonably satisfactory to
it from counsel that such registration is not required. Unless registered, the
Warrant Shares issued upon exercise of the Warrant shall be subject to a stop
transfer order and the certificate or certificates evidencing such Warrant
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT.
ACCORDINGLY, SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER SUCH ACT, OR AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT."
6. Loss, etc. of Warrant
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder a new Warrant of like date, tenor and denomination.
7. Notices
Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified, registered or
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4
express mail, postage prepaid. Any such notice shall be deemed given when
delivered personally or, if mailed, three days after the date of deposit, to
each party at its address designated in writing by it to the other party.
9. Governing Law
This Agreement shall be construed in accordance with and governed by the laws of
the State of New York, without giving effect to the conflict of laws provisions.
IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase Warrant to
be executed as of the date first written above.
TTR INC.
By:
---------------------------
Marc. D. Tokayer
Title: President
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5
ELECTION TO PURCHASE
TTR Inc.
[address]
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for and to purchase thereunder the
full amount of shares represented thereby, and requests that certificates
representing such shares be issued in the name of:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
please print name, address and other pertinent information)
Sincerely,
<PAGE>
<PAGE>
CONSULTING AGREEMENT
CONSULTING AGREEMENT made as of the 1st day of October, 1995 by and
among TTR Inc., (hereafter "TTR" or the "Company") and Holborn Systems Ltd (
hereafter the "Consultant") .
W I T N E S S E T H
WHEREAS, the Company is in the business of marketing and developing
computer software;
WHEREAS, the Company desires to engage the services of Consultant as a
consultant for financial affairs and strategic planning (hereafter the
"Services"); and
WHEREAS, Consultant represents that it has the requisite skills to
render the Services set forth herein;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement The Company hereby engages Consultant and the Consultant agrees to
provide the Services to the Company as determined from time to time by the Board
of Directors of the Company, on the terms and conditions set forth herein.
2. Duties
2.1 Consultant agrees to provide advice and services to the Company regarding
the Company's financial operations and the stategic planning of its affairs as
determined form time to time by the Company's Board of Directors. Consultant
shall devote such time and effort to the Services as is necessary and proper for
the fulfillment of Consultant's obligations hereunder.
2.2 Consultant shall report regularly to the President of the Company with
respect to Consultant's activities hereunder.
3. Compensation
3.1 For services rendered hereunder, Consultant shall be entitled as a
consulting fee to $4,800 per month, payable on the last day of every month or as
agreed by the parties from time to time.
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2
3.2 The Company shall reimburse Consultant for all actual costs and expenses
incurred by Consultant in rendering the consulting services hereunder in
accordance with its general corporate policy in this matter.
3.3 Payment of consulting fees and reimbursable costs and expenses shall be made
only against delivery by Consultant to the Company of requisite tax receipts or
other appropriate documentation thereof.
4. Term & Termination
4.1 This Agreeemnt shall commence on the date first noted above and continue for
a period of three (3) years thereafter.
4.2 This Agreement shall terminate without any further action on the part of
either party for justifiable cause, as defined below.
4.2.1 The term "justifiable cause" shall mean (i) a serious breach of
trust including but not limited to theft, embezzlement, self-dealing, prohibited
disclosure to unauthorized persons or entities of a confidential or proprietary
information of or relating to the Company and engaging by Consultant in any
prohibited business competitive to the business of the Company and its
subsidiaries or affiliated entities; or (ii) any willful failure to perform or
failure to perform competently any of Consultant's functions or duties hereunder
or other cause justifying termination or dismissal under applicable law
4.3 Either party shall be entitled to terminate this Agreement upon breach of a
material term thereof by either party upon receipt by the breaching party of
written notice thereof from the other party, specifying in reasonable detail the
basis of the breach, provided, that, if the breaching party had cured the breach
within 15 days of receipt of notice from the other, then the Agreement shall
continue in full force and effect.
4.4 Upon the termination, cancellation or expiration of this Agreement, neither
party shall be responsible or liable to the other for consequential or
incidental damages of any kind.
5. Non-competition
5.1 Consultant agrees and undertakes that for so long as this Agreement is in
effect and for a one (1) year period following the termination or expiration of
this Agreement with the Company it shall not engage in for whatever reason,
directly or indirectly, as owner, partner, joint venturer, stockholder,
employee, broker, agent, principal, trustee, corporate officer, director,
licenser, become financially interested in, be employed by or have any
connection with, any business or venture that is engaged in any activities
involving either (i) products competitive to actual products then designed or
produced by the Company or
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3
any of its subsidiaries or affiliates (ii) information, processes, technology
or equipment that is substantially similar to information, processes, technology
or equipment in which the Company or any of its subsidiaries or affiliates then
has a proprietary interest, in any geographic area where, during the time of
engagement, such business of the Company or any of its subsidiaries or
affiliates is being or had been conducted; provided, however, that Consultant
may own any securities of any corporation which is engaged in any such business
and is publicly owned and traded but in an amount not to exceed at any one time
five percent of any class of stock or securities of such company, so long as he
has no active role in the publicly owned or traded company as director,
employee, consultant or otherwise.
5.2 If any one or more terms contained in this paragraph 5 shall for any reason
be held to be excessively broad with regard to time, geographic scope or
activity, the term shall be construed in a manner to enable it to be enforced to
the extent compatible with applicable law.
6. Proprietary Information
6.1 Consultant acknowledges and agrees that the Company possesses and will
continue to possess information and technology that has been created discovered
or developed, or has otherwise become known to the Company in the field of copy
protection, including without limitation, information and technology which has
been assigned or otherwise conveyed to the Company, which information or
technology has commercial value in the business in which the Company is engaged.
Such information, whether documentary, oral or computer generated, shall be
deemed to be and is referred to as "proprietary information", which, by way of
illustration but not limitation, shall include trade secrets, processes,
formulae, data and knowhow, improvements, inventions, techniques, products
(actual or planned), marketing plans, strategies, forecasts and customer lists.
6.2 Proprietary information shall be deemed to include any and all proprietary
information disclosed by or on behalf of the Company, irrespective of form but
excluding information that (i) shall have become a part of the public knowledge
except as a result of the breach of this Agreement by Consultant; (ii) shall
have been received by Consultant form a third party having no obligation to the
Company; (iii) reflects general skills and experience gained during Consultant's
engagement by the Company; or (iv) reflects data and information generally known
within the industries or trades in which the Company competes.
6.3 Consultant agrees that all proprietary information, patents and other rights
in connection therewith shall be the sole property of the Company and its
assigns. At all times, both during the engagement by the Company and after its
termination, Consultant will keep in confidence and trust all proprietary
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4
information, and Consultant will not use or disclose any proprietary information
or anything relating to it without the written consent of the Company except as
may be necessary in the ordinary course or performing Consultant's duties as
Consultant to the Company.
7. Warranty
Consultant represents and warrants that on the date hereof it free to be engaged
by the Company upon the terms contained in this Agreement and that there are no
agreements or arrangements restricting full performance of Consultant's duties
hereunder.
8. Force Majeure
8.1 No liability shall result to any Party due to a delay in performance caused
by circumstances beyond the reasonable control of the Party affected, including,
but not limited to acts of God, flood, war, terrorism, embargo, accident, and
governmental laws, or request, or any ruling of a court or tribunal;
8.2 Each Party affected by an event of force majeure shall (a) promptly notify
the other Party hereto of the expected duration thereof, and its anticipated
effect on the Party effected in terms of the performance required hereunder; and
(b) make reasonable efforts to remedy any such event of force majeure.
Performance that is delayed by any event of force majeure shall be extended for
such time as the event shall continue.
9. General Provisions
9.1 This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof, and shall not be amended, modified or
varied by any oral agreement or representation or otherwise other than by a
written instrument executed by both parties or their duly authorized
representatives.
9.2 No failure, delay or forbearance by a party in exercising any power or right
hereunder shall in any way restrict or diminish such party's rights and powers
under this Agreement, or operate as a waiver of any breach or non-performance by
either party of any of the terms or conditions hereof.
9.3 If any term or provision of this Agreement shall be declared invalid,
illegal or unenforceable, then such term or provision shall be enforceable to
the extent that a court shall deem it reasonable to enforce such term or
provision and if such term or provision shall be unenforceable, such term or
provision shall be severed and all remaining terms and provisions shall be
unaffected and shall continue in full force and effect.
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5
9.4 The terms and conditions of this Agreement supersede those of all previous
agreements and arrangements, either written or oral between the Company and
Consultant relating to the subject thereof.
9.5 Consultant acknowledges and agrees that he is an independent contractor, is
not the agent of the Company and has no authority in such capacity to bind or
commit the Company by or to any contract or otherwise. Consultant is not,
expressly or by implication, an employee of the Company for any purpose
whatsoever.
9.6 This Agreement is personal to Consultant and Consultant shall not assign or
delegate his rights or duties to a third party, whether by contract, will or
operation of law, without the Company's prior written consent.
9.7 Each notice and/or demand given by one party pursuant to this Agreement
shall be given in writing and shall be sent by registered mail to the other
party at its designated address and such notice and/or demand shall be deemed
given at the expiration of twenty-one (21) days from the date of mailing by
registered mail or immediately if delivered by hand. Delivery by facsimile and
other electronic communication shall be sufficient and be deemed to have
occurred upon electronic confirmation of receipt.
9.8 This Agreement shall be interpreted, construed and governed in accordance
with the law of the State of New York.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date
first above written.
T.T.R. Inc. Holborn Systems Limited
M. Tokayer John W.T. Green
- -------------- -----------------
By: M. Tokayer By: John W.T. Green
President Director
<PAGE>
<PAGE>
PURCHASE AGREEMENT AND ASSIGNMENT, made this 5th day of January, 1995,
by and among TTR TECHNOLOGIES LTD., an Israeli company with temporary offices at
16/8 Hatam Sofer Street, Emanuel 44545, Israel (the "Purchaser") and RINA
MARKETING R&D LTD., an Israeli company with offices at 3 Hahilazon Street, Ramat
Gan 52522, Israel ("Seller").
W I T N E S S E T H
WHEREAS, Seller is the sole owner of the rights, title and interests in
and to the Purchased Property (as defined below);
WHEREAS, the Purchaser desires to purchase, and the Seller desires to
sell and assign to the Purchaser, subject to the terms and conditions contained
herein, all of Seller's right, title and interest in and to Purchased Property
(as defined below);
WHEREAS, the Purchaser and the Seller desire to set forth their
agreement relating to the sale and assignment to Purchaser of all of Seller's
rights, title and interest to the Purchased Property.
NOW, THEREFORE, in consideration of the terms and conditions hereafter set
forth, the parties hereto mutually agree as follows:
1. Definitions & Interpretation
1.1 Definitions. As used herein, the following terms shall, unless the context
otherwise requires, have the following meanings ascribed to them
"Closing Date" shall mean January 5, 1995 or any subsequent date mutually agreed
to by the parties.
"Contracts" shall mean all agreements or undertakings listed on Schedule "E"
hereto with any existing or former customer, prospect, employee, contractor,
agent or supplier relating in any way to the Software, the Documentation or the
Intangible Property. If the assignment or transfer by the Seller of any Contract
referred to above pursuant to this Agreement shall require the consent of any
other party, and if the making of an agreement to assign would constitute a
breach thereof or impair the rights of the Seller thereunder, then this
Agreement shall not be construed as an agreement to make an assignment, but the
Seller nonetheless shall be obligated to take reasonable steps to obtain for the
Purchaser the benefits of such Contracts and the Purchaser shall be obligated to
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perform all obligations of Seller under such contracts (even though the Seller
may remain liable to the other party or parties to such contracts or
agreements).
"Customer List" shall mean the list of customers of the Seller annexed hereto as
Schedule "B" to whom copies of the Software or any of the other Purchased
Property shall have been sold or assigned or who obtained a license to use the
Software or any of the other Purchased Property.
"Documentation" shall mean all user manuals, brochures, instructional guides and
other materials describing any aspect of the Software or designed to facilitate
the use or modification or enhancement of the Software.
"Equipment" shall mean the equipment or apparatus by which a computer diskette
is signed or altered for the purpose of protecting the diskette from
unauthorized copying.
"Intangible Property" shall mean all trade names and other identifying names
other than the trade name "Pass", all trademarks, service marks and other
identifying names and marks associated with the Software, whether registered or
unregistered, and including all goods relating to any of the foregoing, and all
applications for any of the foregoing, all patents, copyright, copyright
registrations and patent applications therefor, together with all divisions,
renewals and continuations of any of the foregoing, and all know-how, unpatented
inventions, trade secrets and other intangible and intellectual property
embodied in or pertaining to the Software and the Documentation.
"Marketing Information" shall mean all customer and marketing materials and
information relating to the Software, including without limitation, customer
lists, prospect lists, marketing plans, forecasts and assumptions, price lists
and lists of suppliers and contractors.
"Permits" shall mean all licenses, permits, authorizations, and other approvals
from any governmental or regulatory body or authority, or from any private party
pertaining to the Software or Documentation.
"Purchased Property" shall mean collectively, the Software, Contracts, Customer
List, Documentation, Equipment, Intangible Property, Marketing Information,
Permits, Contract and Technology, including, without limitation, name and
goodwill associated with the foregoing.
"Software" shall mean certain computer software applications programs known as
"Pass" as more particularly described and identified in Schedule "A" attached
hereto, together with all supplements, enhancements and modifications
(regardless of the state of development), as of the Closing Date, including
without limitation, source codes, object codes, technical documentation and
similar information necessary for the utilization and development thereof.
<PAGE>
<PAGE>
"Technology" shall mean all things authored, discovered, developed, made,
perfected, improved, designed, engineered, acquired, produced, conceived or
first reduced to practice by Seller, any party commissioned by the Seller, or
any of the Seller's employees or agents that are (i) embodied in, derived from
or relate to the Software or (ii) intended to provide for the alteration of
computer diskettes for the purpose of protection from unauthorized copying, in
any stages of development, including, without limitation, modification,
enhancements, designs, concepts, techniques, methods, ideas, flow charts, coding
sheets, programmer's notes and all other information relating to the Software,
whether or not such information is patentable or otherwise subject to
registration or protection under any applicable intellectual property law and
whether or not such information is actually protectable as a trade secret under
applicable law; provided, however, that, the term "Technology" shall not
include, or be deemed to refer to, the technology, method or process by which
the Software accomplishes real-time encryption and decryption of information or
material.
1.2 Interpretation. The recitals set forth above are incorporated into the body
of this Agreement and constitute an inseparable part thereof.
2. Sale, Assignment and Purchase of Right, Title and Interests in Purchased
Property
2.1 Subject to the terms and conditions set forth herein, and on reliance on the
representations and warranties of the Seller, on the Closing Date the Seller
shall sell, assign, grant, convey, bargain and deliver all of the Seller's
right, title and interests in and to the Purchased Property, free and clear of
all liens, charges, encumbrances and defects of any kind whatsoever, and the
Purchaser shall purchase all of the Seller's such right, title and interest in
and to the Purchased Property (the "Sale and Assignment").
2.1.1 The Purchaser shall have until the Closing Date to investigate the title
to the Software or any of the other Purchased Property and shall on or before
the Closing Date give its objections, if any, to the Seller or its counsel.
Nothing contained in the foregoing shall in any way affect the representation
and warranties of the Seller or the Selling Shareholders contained herein nor
affect or be deemed to affect any conditions set forth herein.
2.2 The Sale and Assignment shall be effected on the Closing Date by bills of
sale, endorsements, assignments and such other instruments of transfer and
conveyance as shall be deemed necessary or desirable to counsel for the
Purchaser.
2.3. The Seller shall, at any time and from time to time after the Closing Date,
upon the request of the Purchaser and at the expense of the Seller, execute,
acknowledge and deliver, and will cause to be done, executed,
<PAGE>
<PAGE>
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be reasonably required for better assigning,
transferring, granting, conveying, assuring and confirming to the Purchaser, or
to its successors and assigns, the right, title and interests in any or all of
the Purchased Property.
3. Purchase Price; Payment Terms
3.1 The Purchase Price for the Sale and Assignment shall be Fifty Thousand
United States Dollars ($50,000), exclusive of value added taxes which may be
assessed in respect thereof (the "Purchase Price"). The Purchaser shall pay, in
New Israeli Shekels at the Bank of Israel Representative US. Dollar Exchange
Rate then in effect, the full amount of the Purchase Price on the Closing Date.
3.1.1 At the option of the Purchaser, payment may be made by way of a bank draft
or wire transfer to the Seller's account. If payment is made by way of a bank
draft, such payment shall be at such bank's sell rate for the U.S. Dollar on the
Closing date.
3.2 The value added tax that may be assessed on the Sale and Assignment shall be
borne by the Purchaser. On the Closing Date, the Purchaser shall tender to the
Seller, the Purchaser's check, payable to the order of the Seller and post dated
to the date on which such value added tax is to be paid, in the amount of the
assessed value added tax, against delivery of Seller's tax receipt.
3.3 Any transfer fee or charge actually payable in connection with the payment
of the Purchase Price shall be borne by the Purchaser.
4. Closing
The Closing of the Sale and Assignment shall take place at the offices of Aboudi
& Brounstein, 6 Chen Blvd., Tel Aviv, or any other place mutually agreed to by
the parties, at 11:00 A.M. on the Closing Date.
5. Representations and Warranties of the Seller
The Seller represents and warrants to the Purchaser as of the Closing Date as
follows:
5.1 Organization. Seller is a corporation duly organized, validly existing and
in good Standing under the laws of the State of Israel.
5.2 Authority. Seller has full corporate authority to operate its business as
conducted and to execute and perform in accordance with this Agreement, and this
Agreement constitutes a valid and binding obligation of the Seller and is
enforceable in accordance with its terms. Each document of transfer
<PAGE>
<PAGE>
contemplated by this Agreement when executed and delivered by the Seller in
accordance with the provisions hereof, shall be valid and legally binding in
accordance with its terms. This Agreement, the Sale and Assignment and all
transactions contemplated hereby have been duly authorized by all requisite
action by the Seller.
5.3 Conflicting Agreements; No Liens. Neither the execution nor the delivery of
this Agreement nor the fulfillment nor the compliance with its terms and
conditions hereof will constitute a breach by the Seller of its articles or
memorandum of association or result in a breach of the terms, conditions or
provisions of, constitute a default under or result in a violation of any
agreement, contract, instrument, order, judgment or decree to which Seller is a
party or by which it is bound, or result in a violation by Seller of any
existing law or statute or any material rule or regulation or of any order,
decree, writ or injunction of any court or governmental agency or result in the
creation or imposition of any lien, charge, restriction, security interest or
encumbrance of any nature whatsoever on the Purchased Property.
5.4 Consents. No consent or other approval of any governmental entity or other
person is necessary in connection with the execution of this Agreement or the
consummation by the Seller of the Sale and Assignment or any other transaction
contemplated hereby.
5.5 Title to Purchased Property. Seller owns, or on the Closing Date shall own,
all of the right, title and interests in and to all of the Purchased Property
free and clear of all liens, charges, encumbrances or title defects of any
nature whatsoever, including, without limitation, patent or intellectual rights
or other proprietary rights infringement.
5.6 Litigation. There are no actions, suits, proceedings or investigations
pending, or, to the knowledge of the Seller, threatened against or involving
Seller or bought by Seller and affecting any of the Purchased Property. Seller
is not operating its business under or subject to, any order writ, injunction or
decree of any court or government agency.
5.7 Patents, Trademarks and Copyrights; Infringement. The Seller does not own
any patents, trademarks, patent rights, or copyrights, nor has the Seller
applied for any patent, trademark or copyright registrations, in respect of the
Software or any other Purchased Property. The Seller has not received any notice
or claim of infringement of any patent, invention, rights, trademarks, trade
names or copyrights of others with reference to the processes, methods, formulae
or procedures used by Seller in the design, development, marketing or sale of
the Software or any of the other Purchased Property, and such processes,
methods, formulae or procedures do not infringe on any patent, copyright,
trademark or other proprietary rights of a third party.
<PAGE>
<PAGE>
5.8 Customers. The Customer List attached hereto as Schedule "B" is complete and
accurate and there are no other customers, persons, individuals or entities
(other than those listed on Schedule B) to whom any version or copy of the
Software, or any other Purchased Property has been transferred, sold, licensed
or assigned. Other than the customers listed on Schedule "B", the Seller has not
granted to any other person, individual or entity a license in respect of the
Software or any other Purchased Property.
5.9 Customer Orders and Commitments. Schedule "C" annexed hereto lists all
unfilled customer orders and commitments, written or oral, of the Seller
pertaining to the Software and any other Purchased Property and on hand as of
the date first written above.
5.10 Trade Names. Attached as Schedule "D" hereto is a complete and accurate
list of all trade names used by the Seller in connection with the Software or
any other Purchased Property, and other than the trade names listed therein, the
Seller has not used any other trade name with respect to any of the Purchased
Property.
5.11 Material Contracts and Agreements. Other than for the contracts and
agreements listed on Schedule "E" hereto, there are no material contracts,
agreements or other commitments, written or oral, to which the Seller or either
of the Selling Shareholders is a party, or by which either is bound, which may
relate to the Purchased Property.
5.12 Untrue Statements or Material Omissions. No representation or warranty by
the Seller, and no statement contained in any certificate or other instrument
furnished or to be furnished by to the Purchaser pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact which is necessary in order to make the statements contained
therein not misleading.
6. Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Seller as of the Closing Date as
follows:
6.1 Organization. The Purchaser is a corporation duly organized, validly
existing and in good Standing under the laws of the State of Israel.
6.2 Authority. Purchaser has full corporate authority to execute and perform in
accordance with this Agreement, and this Agreement constitutes a valid and
binding obligation of the Purchaser and is enforceable in accordance with its
terms. Each instrument contemplated by this Agreement when executed and
<PAGE>
<PAGE>
delivered by the Purchaser in accordance with the provisions hereof, shall be
valid and legally binding in accordance with its terms. This Agreement, the Sale
and Assignment and all transactions contemplated hereby have been duly
authorized by all requisite action by the Purchaser.
6.3 Conflicting Agreements; No Liens. Neither the execution nor the delivery of
this Agreement nor the fulfillment nor the compliance with its terms and
conditions hereof will constitute a breach by the Purchaser of its articles or
memorandum of association or result in a breach of the terms, conditions or
provisions of, constitute a default under or result in a violation of any
agreement, contract, instrument, order, judgment or decree to which the
Purchaser is a party or by which it is bound, or result in a violation by the
Purchaser of any existing law or statute or any material rule or regulation or
of any order, decree, writ or injunction of any court or governmental agency.
6.4 Consents. No consent or other approval of any governmental entity or other
person is necessary in connection with the execution of this Agreement or the
consummation by the Purchaser of the Sale and Assignment or any other
transaction contemplated hereby.
7. Covenants and Undertakings of Seller
7.1 Interference. The Seller shall not interfere, disrupt or attempt to disrupt
the relationship, contractual or otherwise, between the Purchaser and any
customer of the Seller, which was such on or prior to the Closing Date.
7.2 Investigation. From and after the date hereof through the Closing Date, the
Seller will afford the officers and representatives of the Purchaser a full
opportunity to make such investigation as it shall desire with respect to the
Purchased Property.
7.3 Names. From and after the Closing Date, Seller shall cease to use any of
trade names or word listed on Schedule "D" hereto or any variations thereof or
any other trademarks, trade names or copyrights.
7.4 Notice to Existing Customers. Immediately after the execution of this
Agreement, the Seller shall notify in writing each of the persons listed on the
Customer List annexed hereto on Schedule "B" that the Seller has transferred to
the Purchaser all of the Seller's right, title and interests in and to the
Software and the other Purchased Property, and shall request of each such
customer to direct or refer any matter pertaining to the Software or the
Purchased Property to the Purchaser.
7.5 Reference of Future Inquires. From and after the Closing Date, the Seller
shall refer to the Purchaser any and all inquires from any person relating or
pertaining to the Software or any other of the Purchased Property, and shall
<PAGE>
<PAGE>
promptly inform the Seller of each such inquiry.
7.6 Non-competition. From and after the Closing Date and for a period of two (2)
years thereafter, neither the Seller nor Amnon Shoshtari, nor any business in
which either of them owns directly or indirectly more than 5% of the equity
interest thereof, shall engage, directly or indirectly, as a proprietor,
partner, employee, agent, consultant or stockholder (except as permitted
hereunder) or in any other capacity whatsoever, in the design or development or
marketing or distribution of any product or component which competes with the
Purchased Property.
8. Conditions Precedent of Purchaser
The obligations of Purchaser under this Agreement are subject to the conditions
that on or prior to the Closing Date the following conditions shall have been
satisfied in full, it being understood and agreed that if any of the foregoing
conditions shall not have been fulfilled by the Closing Date, the Purchaser may
terminate without penalty or liability this Agreement by written notice to the
Seller:
8.1 Accuracy of Representations and Warranties on Closing Date. The
representations, warranties, covenants and undertakings of the Seller contained
in this Agreement or in any certificate or document delivered pursuant to the
provisions hereof or in connection with the transactions contemplated hereby
shall be true on and as of the Closing Date as though such representations,
warranties, covenants and undertakings were made at and as of such date, except
as otherwise contemplated herein.
8.2 Seller's Compliance with Agreement. The Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the closing of this Agreement.
8.3 Resolutions. The Seller shall have delivered to the Purchaser copies of the
resolutions of the Board of Directors and the members of the Seller authorizing
the transactions contemplated herein, together with a certificate from the
Seller's counsel certifying the above resolutions, all in the form attached
hereto as Exhibit A.
8.4 Release of First International Bank Lien. The Seller shall have furnished to
the Purchaser, in form and substance acceptable to counsel to the Purchaser, a
duly executed release by The First International Bank Ltd. ("FIB") releasing any
lien, encumbrance, charge or security interest in favor of FIB in any of the
Purchased Property and consenting to the Sale and Assignment and the other
transactions contemplated hereunder.
<PAGE>
<PAGE>
8.5 Intellectual Property Rights Infringement. The investigation undertaken by
the Purchaser with respect to the Purchased Property shall not have disclosed
any infringement by any of the Purchase Property (or any component thereof) of
the intellectual or other proprietary rights, including without limitation,
patent, copyrights or trademark infringement of any third party.
8.6 Injunction. On the Closing Date, there shall be no effective injunction,
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as herein provided.
8.7 Approval of Proceedings. All actions, proceedings, instruments and documents
required to carry out this Agreement, or incidental thereto, and all other
related legal matters shall have been approved by Aboudi & Brounstein, counsel
for the Purchaser.
9. Conditions Precedent of the Seller
The obligations of the Seller under this Agreement are subject to the conditions
that on or prior to the Closing Date the following conditions shall have been
satisfied in full, it being understood and agreed that if any of the foregoing
conditions shall not have been fulfilled by the Closing Date, the Seller may
terminate without penalty or liability this Agreement by written notice to the
Purchaser:
9.1 Accuracy of Representations and Warranties on Closing Date. The
representations and warranties of the Purchaser contained in this Agreement or
in any certificate or document delivered pursuant to the provisions hereof or in
connection with the transactions contemplated hereby shall be true on and as of
the Closing Date as though such representations and warranties were made at and
as of such date, except as otherwise contemplated herein.
9.2 Purchaser's Compliance with Agreement The Purchaser shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the closing of this Agreement.
9.3 Resolutions. The Purchaser shall have delivered to the Seller copies of the
resolutions of the Board of Directors and/or the members of the Purchaser
authorizing the transactions contemplated herein, together with a certificate
from the Purchaser's president or chief operating officer, certifying that the
Purchaser shall have taken all action required under law and its memorandum or
articles of association authorizing the transactions contemplated in this
Agreement.
9.4 Injunction. On the Closing Date, there shall be no effective injunction,
<PAGE>
<PAGE>
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as herein provided.
10. Indemnification
10.1 Each of the Seller and Amnon Shoshtari (collectively, the "Indemnifying
Parties") shall, jointly and severally, indemnify and hold harmless the
Purchaser from and against and in respect of any and all liabilities, losses,
damages, claims, costs and expenses, including, without limitation, attorney's
fees and litigation costs, arising out of or due to:
(i) a breach of any representation, warranty, covenant, undertaking or
agreement of the Seller contained in this Agreement or in any statement or
certificate furnished to Purchaser pursuant hereto or in connection with the
Sale and Assignment or any other transaction contemplated hereby;
(ii) any claim by a creditor (trade or otherwise) of the Seller with
respect to the Purchased Property respecting any liabilities of the Seller with
respect thereto, including, without limitation, claims by tax authorities or any
governmental agency;
(iii) any intellectual property rights infringement claim as to the
Software or any Purchased Property, including without limitation, patent,
copyright, registered design or trademark or any other claim of proprietary
rights infringement as to any of the Purchased Property.
10.2 The Purchaser shall promptly notify in writing the Indemnifying Parties of
the commencement of any claim or of any action or proceeding to which the
foregoing provisions relating to the Indemnifying Parties' obligations and
undertaking shall apply. The Purchaser may, in its sole and absolute discretion,
defend against or settle any such claim or litigation in the manner and on the
terms deemed appropriate by the Purchaser, provided, that, prior to settling any
such claim, action or proceeding or litigation, the Purchaser shall consult with
the Seller but shall be entitled to act in its sole and absolute discretion
barring agreement with the Seller. The Indemnifying Parties shall promptly
reimburse the Purchaser for the amount of all expenses, legal or otherwise,
incurred by the Purchaser in connection with the defense against or settlement
of such claim. If no settlement of the claim is reached, the Indemnifying
Parties shall promptly reimburse the Purchaser for the amount of any judgment
rendered with respect to such claim or in such litigation, and of all expenses,
legal or otherwise, incurred by the Purchaser in the defense against such claim.
10.2.1 The Seller may be entitled to participate, at its own expense, in
the defense of any such claim, provided, that, the (i) Seller notifies in
writing the Purchaser of its desire to so participate and (ii) the Purchaser
directs and
<PAGE>
<PAGE>
controls the defense of such claim and the Seller otherwise cooperates with the
Purchaser in the strategy to be adopted in the defense or settlement of such
claim or litigation and does not adopt a strategy opposed to that adopted by the
Purchaser
11. Miscellaneous
11.1 Entire Agreement. This Agreement constitutes the entire understanding and
agreement between the parties, and supersedes any and all prior discussions and
agreements and correspondence, and may not be amended or modified in any respect
except by a subsequent writing executed by both parties.
11.2 Successors & Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties.
11.3 Governing Law; Arbitration. All disputes, controversies, differences or
questions arising out of or relating to this Agreement, or to the validity,
interpretation, breach, violation or term thereof, will be finally and solely
determined and settled by a Bet Din to be mutually agreed upon or appointed by
the parties
The signing of this Agreement constitutes a Deed of Arbitration pursuant to the
Israel Arbitration Law 5721-1968.
11.4 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.5 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing this
Agreement.
11.6 Notices. Unless otherwise provided, any notice required or permitted
hereunder shall be given in writing and shall be deemed effectively given upon
personal delivery to the other party to be notified or fourteen (14) business
days after deposit in the mail by prepaid registered mail and addressed to the
party to be notified at the address set forth in this Section as follows:
For the Purchaser:
TTR Technologies Ltd.
16/8 Hatam Sofer Street
<PAGE>
<PAGE>
Emanuel, 44545
For the Seller:
Rina Marketing R & D Ltd.
3 Hahilazon Street
Ramat Gan, 52522
or at such other address as such party may designate by written notice to the
other parties.
11.7 Amendments & Waivers. Any term of this Agreement may be amended and the
observance of any term may be waived only with the written consent of the party
to be charged.
11.8 Nature & Survival of the Representations. All statements contained in any
certificate or other instrument delivered by or on behalf of a party pursuant to
this Agreement or in connection with the transactions contemplated hereby shall
be deemed representations and warranties by such party. All representations and
warranties and agreements made by the parties hereto in this Agreement or
pursuant hereto shall survive the Closing Date hereunder.
11.9 Acknowledgment Regarding Legal Representation. Each of the parties hereto
acknowledges and confirms that it has had a full and complete opportunity to
obtain independent legal advice in connection with the advisability of entering
into this Agreement.
11.10 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provisions shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
<PAGE>
<PAGE>
provisions were so excluded and shall be enforceable in accordance with its
terms.
IN WITNESS WHEREOF, the undersigned have set forth their signature as of the
date first written above.
TTR TECHNOLOGIES
LTD.
By: [SIGNATURE]
-----------------
[Signature in Hebrew Letters]
Title:
RINA MARKETING R&D
LTD.
By: [SIGNATURE]
------------------
[Signature in Hebrew Letters]
[51-164966-7 Hebrew Letters]
The undersigned undertakes to fully comply with and perform his obligations and
undertakings contained in this Agreement, including without limitation, those
obligations and undertakings contained in Sections 7.6 (No-competition) and 10
(Indemnification) hereunder.
January 5, 1995 AMNON SHOSHTARI
- ------------------- -----------------------
Date AMNON SHOSHTARI
I.D. No. 057795656
<PAGE>
<PAGE>
Subsidiaries of TTR Inc.
<TABLE>
<CAPTION>
Name Jurisdiction of Organization Other Business Names
- ---- ---------------------------- --------------------
<S> <C> <C>
T.T.R. Technologies Ltd. Israel n/a
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements accompanying the filing of Form SB-2
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> Dec-31-1995 Dec-31-1996
<PERIOD-START> Jan-1-1995 Jan-1-1996
<PERIOD-END> Dec-31-1995 Jun-30-1996
<CASH> 87,866 384,874
<SECURITIES> 0 0
<RECEIVABLES> 1,680 583
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 105,485 406,841
<PP&E> 195,057 209,928
<DEPRECIATION> 19,438 36,004
<TOTAL-ASSETS> 403,204 765,142
<CURRENT-LIABILITIES> 722,324 1,615,492
<BONDS> 1,080,233 1,499,363
<COMMON> 2,200 3,050
0 0
0 0
<OTHER-SE> (873,423) (989,819)
<TOTAL-LIABILITY-AND-EQUITY> 403,204 765,142
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 765,867 433,128
<LOSS-PROVISION> 17,000 0
<INTEREST-EXPENSE> 126,120 61,553
<INCOME-PRETAX> (896,663) (494,681)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (896,663) (494,681)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (896,663) (494,681)
<EPS-PRIMARY> (0.37) (0.19)
<EPS-DILUTED> 0 0
<PAGE>
