UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report for the Fiscal year ended December 31, 1998
TTR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-22055 11-3223672
(State or Other Jurisdiction Commission File IRS Employer
of Incorporation) Number) Identification No.)
1841 Broadway, New York, NY, 10023
(Address of Principal Executive Offices)
212-333-3355
(Registrant's Telephone Number, including Area Code)
[Mark One]
|X| Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 1998
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Securities registered under Section 12(b) of the Exchange Act:
Title of each Class: Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act: None
Common Stock, par value $0.001
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
|_| Yes |X| No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|
Issuer's revenues for the Fiscal year ended December 31, 1998: $54,922
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2
The aggregate market value of the Registrant's Common Stock at August 9,
1999 held by persons deemed to be non-affiliates was approximately $14,330,370.
As of August 2, 1999, the Registrant had outstanding 5,646,971 shares of
$0.001 par value Common Stock.
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Item 1. Business
Introduction
We design, develop and market anti-piracy software technologies that
provide encryption and copy protection for software applications distributed on
CD-ROMs. Our proprietary product, DiscGuard, is designed to prevent unauthorized
CD-ROMS from operating as intended. Our copy protection technologies are
transparent to the legitimate end-user and do not require the user to install
hardware "keys" or "dongles" on the user's desk top or to obtain an "unlock
code" in order to run the protected application.
Since our inception in 1994, we have focused on
o developing our proprietary anti-privacy technologies; and
o in the last year, licensing a broad base of replicators,
representing a significant percentage of the world replication
market by disc volume, to use DiscGuard in their mastering
equipment, making DiscGuard readily available to software
publishers.
With our manufacturing and replication infrastructure in place to have
DiscGuard-protected software mass-produced on CD-ROMs by our network of licensed
replicators, since the first commercial release of DiscGuard in February 1998,
we have begun marketing DiscGuard to software publishers, directly and through
distributors. Approximately 24 software publishers market some or all of their
titles on DiscGuard-protected discs, representing approximately 400,000 CD-ROMs
and approximately 71 software titles.
Our goal is to establish DiscGuard as the leading product in our target
market segment of software-based CD-ROM copy protection for high-volume
multi-media consumer software, including games, entertainment and reference
software and other install-to-use applications.
Industry Background
Losses related to the unauthorized reproduction and use of software and
other electronic content present a continuing concern for software publishers.
Illegal copies of widely recognized software programs can be frequently
purchased in several parts of the world at retail prices that are a fraction of
those prevailing in the United States and Western Europe. The 1999 Global
Software Piracy Report (a May 1999 study conducted by International Planning and
Research Corp. for the Business Software Alliance and Software & Information
Industry Association) estimates that losses from the piracy of business software
exceeded $11.4 billion worldwide in 1997 and $11 billion in 1998. This amount
represents more than one of every three new business software applications. In
the United States alone, total losses from the piracy of business software
reached nearly $2.9 billion in 1998. Further, approximately 76% of business
software applications used in Eastern Europe, and approximately 36% of the
business software applications used in Western Europe, were illegally copied.
The
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Interactive Digital Software Association, the trade group representing
interactive entertainment software publishers, estimates that worldwide piracy
of entertainment software cost U.S. based computer and game publishers $3.2
billion in 1998.
The widespread use of CD-ROMs and other optical media exacerbates the
consequences of piracy since CD-ROMs are capable of storing significantly more
information than standard diskettes. Popular games, videos, educational
materials, business and other professional applications are routinely
distributed on CD-ROMs. According to Infotech Inc., a market research firm
specializing in the optical media industry, content distributed on CD-ROMs and
DVDs more than doubled between 1996 and 1998, and will exceed $75 billion by
2000. Such amounts represent estimated sales of approximately 1.6 billion units
in 1998, and 2.4 billion units in 2000. Until recently, CD-ROM based
applications have enjoyed some immunity from unauthorized reproduction due to
the relatively high cost of the copying hardware. However, the wide availability
and increasing affordability of CD recorders have greatly contributed to the
increase in CD-ROM piracy. With a CD recorder, even the casual user can copy an
unprotected application without significant impediment.
Attempts by third parties to circumvent copy protection technologies have
been and are expected to be a persistent problem, even in the face of the new
United States Digital Millennium Copyright Act, which was signed in October
1998. The Act outlaws copy protection circumvention devices and technologies
beginning in May 2000 and currently provides for both criminal and civil
penalties for companies or individuals who import, produce or distribute devices
designed to circumvent copy protection devices and technologies.
Since prior laws to combat software piracy have not served as an effective
deterrent, software publishers are seeking more effective methods to prevent the
replication of unauthorized copies of their proprietary products. Software
publishers presently use three primary strategies to protect content distributed
on CD-ROMs, as follows.
o Copy Protection. prevents the unauthorized reproduction of CD-ROMs.
Copy protection is a software solution designed to detect the
difference between a legitimate copy and an unauthorized copy of the
software application, and prevent the unauthorized copy from
operating. We compete in the copy protection segment of the
anti-piracy market.
o Restricted Usage. prevents the protected application from operating
on more than one unit at the same time, but does not deter
unauthorized reproduction. Included within this category are
solutions which utilize a hardware component known as a "key" or
"dongle." A dongle is a device that plugs into the computer and acts
as a key to unlock the protected software. Dongles are typically
provided directly to the software vendor and are frequently
customized for particular software applications. We believe that the
use of dongles presents significant operating difficulties and
inconveniences for legitimate end-users. Dongles are not
interchangeable among different applications, and require a separate
key for each application, resulting in a "daisy chain"
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of dongles protruding out of the back of the computer. Due to its
relatively high cost and inconvenience, the dongle is generally used
in the United States only in high-end markets for expensive
software, including scientific and computer-aided design software,
although it is used more frequently outside the United States,
particularly in Europe and Asia, for other applications. The use of
dongles and other hardware components can be especially burdensome
for high-volume, multi-media consumer software such as games,
entertainment and reference software, and other install-to-use
applications. Such software is not ordinarily installed onto a hard
drive, but accessed from time to time from the CD-ROM. As a result,
the dongle is needed each time the application is used.
o Audit Trail. protection does not prevent piracy or unauthorized
copying of CDs and DVDs. Audit trail merely furnishes information
identifying illegal use and perhaps the source of the illegal
reproduction. Examples of this are holograms and watermarks.
We believe that in 1998, only approximately 3.0 million of the 1.6 billion
discs sold included some form of copy protection, and that sales of all CD-ROM
copy-protection products was approximately $170 million. The CD-ROM copy
protection market is currently dominated by companies that offer the use of a
hardware device such as a key or dongle that plugs into the back of a computer
as an anti-piracy strategy. We believe that piracy is a critical issue in the
software and electronic content publishing industry and that, as a result,
software publishers, especially in the games and multi-media segment of the
software market, are increasingly demanding copy protection from replicators. We
believe that the global market for CD-ROM copy protection for the high-volume,
multi-media consumer software market, including games, designs and reference
software, and other install-to-use applications, is currently undeveloped.
Our Solution - DiscGuard
We believe that copy protection offers software publishers the most
effective solution to protect their products distributed on CD-ROMs and DVDs,
while offering convenience and cost effectiveness to the software publisher and
end-user. We believe that DiscGuard, our only commercially released product,
provides a technologically superior, cost-effective, convenient, software-based
anti-piracy solution for software distributed on CD-ROMs. DiscGuard
distinguishes between an authentic CD-ROM and an unauthorized copy and controls
the operation of the software on the DiscGuard protected CD-ROM. In particular,
DiscGuard embeds an indelible and non-reproducible digital identification code
or signature on CD-ROMs. Our technologies do not use keys or dongles or other
hardware on the consumer's desktop.
To protect a CD-ROM with DiscGuard, the software publisher first
integrates its application with DiscGuard's proprietary detecting software. At
the mastering facility, a DiscGuard-enhanced mastering machine adds a digital
signature to the glass master that is used to mass-produce CD-ROMs. The
remainder of the production process is the same as that for CD-ROMS that are not
DiscGuard protected. When DiscGuard detecting software identifies a CD-ROM as
authentic (i.e., containing a
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signature), it will allow the software application to operate as intended.
DiscGuard will prevent a copy that does not contain this signature from
operating as intended. DiscGuard is intended to prevent both consumer copying
and professional remastering and replication. DiscGuard does not prevent the
unauthorized multiple installation of hard-drive copies.
Our Strategy
Our goal is to become the market leader in CD-ROM copy protection. To
achieve this objective, the key elements of our strategy are to:
o Continue to have DiscGuard Integrated into the Mastering Equipment
of a Broad Base of Replicators of CD-ROMS. We intend to continue to
license DiscGuard to leading mastering facilities and replicators
and to support such mastering facilities and replicators.
o Leverage Replicator Relationships and Increase Market Penetration
among Software Publishers. We intend to license DiscGuard to an
increasing number of software publishers, through direct marketing
in the United States, Europe and the Middle East, through
distributors in Asia, and through referrals from our licensed
replicators. We may also seek a strategic alliance with an
international marketing partner or increase our use of distributors
in particular countries outside of Asia. We are targeting publishers
of high-volume, multi-media consumer software such as games,
entertainment and reference software, and other install-to-use
applications, because unauthorized disc replication is the most
common form of piracy of such applications.
o Introduce New Product Applications. We intend to expand our
technological base and extend DiscGuard protection to other segments
of the software publishing industry. In addition, we believe that
software developed for CD-ROM is beginning to migrate to DVDs, a
format with much greater storage capacity than CD-ROMs. We
anticipate that we will complete the development of a DiscGuard
protection product for DVD's by the time DVD recorders become widely
available, which we believe will occur over the next twelve to
twenty-four months.
o Pursue Royalty-Based Licensing Model. We are pursuing a
royalty-based licensing model that results in a high margin,
transaction-oriented business with recurring revenues. We typically
license our technology under unit-based pricing schedules. Royalties
and other fees are currently paid by software publishers and, to a
lesser extent, by commercial replicators. We intend whenever
feasible to continue to license our technologies to third parties
for unit or transaction-based royalties and fees.
o Protect Patent Position. We believe that our future success will
depend, in part, on the continued protection or our proprietary
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technologies. We have applied for patents to protect our copy
protection technologies and intend to pursue patent protection
aggressively.
Expand and Maintain Customer Support. We intend to expand and
maintain our customer service capability as the number of our
licensed publishers grows. To date, we have been able to provide
satisfactory service and support to the relatively small number of
our licensed publishers.
Customers
Our efforts to date have largely been devoted to integrating DiscGuard
into the mastering equipment of a broad base of licensed replicators, in order
to provide our licensed publishers with a broad base of DiscGuard-licensed
replicators. This, in turn, required us to ensure that DiscGuard was licensed to
leading mastering equipment manufacturers in order to integrate DiscGuard into
the mastering interface system used by leading replicators. In February 1998 we
began marketing to software publishers.
Mastering Equipment Manufacturers
In order to produce DiscGuard-enhanced CD-ROMs, modifications to the laser
optics system of CD-ROM mastering equipment are required. In October 1997, we
signed an agreement with Doug Carson & Associates, Inc. to permit DCA to
integrate DiscGuard into its mastering interface system (or MIS) for sale to
replicators. The MIS is a key component of the mastering equipment used by
replicators to produce the glass masters which are, in turn, used to
mass-produce CD-ROMs and DVDs. Under this agreement, we granted DCA an
exclusive, non-transferable, royalty free world-wide license, originally through
December 31, 1998. Because DCA sold or upgraded a minimum number of units of the
version of its MIS that supports DiscGuard prior to December 31, 1998, the
exclusive license was extended until December 31, 1999. Under this agreement,
DCA must use its best efforts to sell DiscGuard-enhanced units. We believe that
DCA's MIS is installed in over 50% of the world's mastering equipment. We
believe that our relationship with DCA has facilitated the commercial adoption
of DiscGuard by making DiscGuard readily available to a broad base of
replicators. Although our relationship with DCA is important, we believe that,
if our exclusive license to DCA is not renewed or if our relationship with DCA
is otherwise terminated, we will be able to establish relationships on
acceptable terms with one or more other significant manufacturers of mastering
equipment. We also believe that DiscGuard is or could readily be made compatible
with the MIS of the other leading manufacturers, and that the MIS of the other
manufacturers is, in turn, compatible with the mastering equipment of our
existing DiscGuard-licensed replicators.
Mastering and Replicators
Our goal is to ensure that DiscGuard remains licensed to a significant
number of replicators so that software publishers will continue to have access
to DiscGuard
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from a conveniently located, regional replicator. We believe that the
replication industry is characterized by thin margins and intense competition,
and that DiscGuard provides added value to replicators by allowing them to offer
an anti-piracy option to their software publishing customers. DiscGuard is
currently available through several leading mastering and replication
facilities.
We authorize our licensed replicators to replicate DiscGuard-protected
CD-ROMs for software publishers who have obtained the right to use DiscGuard
directly from us or from an authorized distributor. Only a replicator that has
purchased the DiscGuard option for its mastering equipment can offer DiscGuard
protection to its customers. Licensed replicators of DiscGuard are required to
report sales volumes of DiscGuard protected CD-ROMs to us. We have licensed the
following replicators:
o Nimbus CD International, Inc., a leading British CD manufacturer and
replicator, installed DCA's DiscGuard-enhanced MIS in its mastering
equipment under a Development and OEM Licensing Agreement dated November
24, 1997 among DCA, Nimbus and us. Nimbus has a non-exclusive license to
produce DiscGuard protected CD-ROMs. The agreement has a five-year term
which is automatically renewable for successive one-year periods unless
either party gives notice of its desire not to renew the term. Under this
agreement, Nimbus is obligated to pay to us a percentage of the proceeds
of any premium it charges on any DiscGuard-protected CD-ROM that Nimbus
manufactures. Nimbus now offers DiscGuard protection to its software
publishing clients in North America and Europe.
o SKC Co. Ltd., the leading South Korean replicator, was granted a
three-year license in July 1998 (currently non-exclusive) to integrate
DiscGuard into SKC's mastering equipment and distribute
DiscGuard-protected CD-ROMs in South Korea. SKC is obligated to pay us a
per disc fee based on the number of DiscGuard-protected CD-ROMs it sells.
SKC also distributes and promotes DiscGuard to software publishers in
South Korea.
o Sonopress Gmbh, a leading German mastering and replication company and the
world's largest CD-ROM producer, entered into a sales and marketing
agreement with us in February 1999. Sonopress's eleven plants throughout
the world produce more than 2.5 million CDs daily. Sonopress has agreed to
promote DiscGuard to its clients in the software publishing and CD-ROM
replication industries. Sonopress can now master DiscGuard-protected
applications at two of its eleven plants and replicate DiscGuard-protected
applications at all eleven of its plants.
We also signed a Technology Evaluation Agreement with MPO Disque Compact,
a leading French mastering and replication company, and are currently
negotiating a license and marketing agreement with MPO.
We are currently pilot testing DiscGuard with additional replicators and
are actively marketing DiscGuard to other replicators, sometimes in conjunction
with sales representatives of DCA. We believe that the continued success of our
efforts to integrate DiscGuard in the mastering equipment of a broad base of
replicators will be
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a key factor in whether DiscGuard becomes the market standard for software
anti-piracy protection.
Software Publishers
As part of our marketing strategy, we attempt to demonstrate to software
publishers that, for a relatively modest investment per disc, DiscGuard can
offer anti-piracy protection and give them the opportunity to reduce the loss of
sales related to the unauthorized reproduction of their products. Since early
1998, we have signed license agreements with approximately 24 software
publishers pursuant to which we have licensed DiscGuard to protect some or all
of their software applications from unauthorized replication. Our licensed
publishers include Software Manufacturing Corporation Ltd., Hed-Artzi
Multi-media Ltd. (the largest Israeli software publisher), Codemasters Software
and Compedia Ltd. The agreements typically require the software publisher to pay
a license fee for each CD-ROM produced with DiscGuard. To date, DiscGuard
protects more than 400,000 CD-ROMs, representing more than 71 software titles.
We are currently in various stages of pilot testing DiscGuard with a
number of publishers. In pilot testing, the software publisher distributes a
relatively small number of discs of a CD-ROM software title to evaluate the
effectiveness of DiscGuard.
Marketing and Sales
We currently market to the North American market directly through our
offices in New York City and Campbell, California, and to the European and
Middle Eastern markets from our offices in Israel. We market to Asia through
distributors.
In June 1998, we entered into a non-exclusive two-year distribution
agreement with Eagle International Co., Ltd., under which Eagle will sell and
market DiscGuard to software publishers and replicators in Japan. The agreement
is automatically renewable for additional one-year periods unless terminated by
either party. Eagle pays a fee for each disc sold with DiscGuard and for
equipment sold based upon our suggested end-user list prices. In October 1998,
we signed a distribution agreement with the China Intercontinental Communication
Center, a government-authorized agency, to exclusively supply China's CD-ROM
manufacturers and software publishers with DiscGuard. The Software and
Information Industry Association estimates a $1.2 billion loss to China's
software industry from software piracy in 1998. We are exploring the possibility
of establishing relationships with additional software distributors.
To maintain our focus on product development and to avoid the expense of
establishing our own global sales and marketing staff, we do not anticipate
significantly expanding our currently limited internal sales and marketing
capability. Nevertheless, if we do not succeed in significantly increasing the
number of licensed publishers generated through our existing marketing efforts,
we may seek a strategic alliance with a partner with an international marketing
capability, or increase our use of distributors in particular countries outside
of Asia. We are not currently engaged in negotiations with any potential
strategic partner and there can be no assurance that we will be able to
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identify a suitable partner or that, if so, we will be able to sign an agreement
on acceptable terms.
Research And Development; New Products
The software industry in general is characterized by rapid product changes
resulting from new technological developments, performance improvements and
lower production costs. Our research and development activities have focused on
developing products responsive to perceived immediate market demands. We believe
that our future growth in the software anti-piracy industry will depend in large
part on our ability to develop and apply our proprietary technology and
know-how. We believe that the key to establishing DiscGuard as an effective
product for software-based CD-ROM copy protection lies in our ability to
continually enhance and upgrade DiscGuard so as to stay ahead of the efforts of
counterfeiters and hackers to circumvent our technology. To date, due a lack of
funding, our research and development efforts in this regard have been
responsive rather than pro-active. We believe, nevertheless, that DiscGuard
continues to provide effective CD-ROM copy protection, and that our technology
is intrinsically less susceptible to circumvention and counterfeiting than the
other software technologies used by our competitors in the consumer, multi-media
software copy protection market segment.
DiscGuard is currently available for the Microsoft Windows family of
operating systems (including Windows 98 and NT). We intend to expand DiscGuard's
capabilities to include other operating systems, and to protect DVDs. Although
no assurance can be given, we believe that we will complete the development of
DiscGuard protection for DVDs [by the time DVD recorders become widely
available]. The DVD format is expected by industry experts to be superior to
CD-ROM since the DVD format provides a very accurate playback of the original
digital format recording. Additionally, one DVD can contain the same amount of
data that seven to eight CDs currently contain. Industry experts believe that in
the future, one DVD will be able to hold the same amount of data currently
contained on 30 to 40 CDs.
Our Israeli subsidiary has received a grant of $210,000 from the Chief
Scientist of the State of Israel. We pay royalties to the Chief Scientist on
proceeds from the sale of products derived from the research and development
funded by the grant at the rate of 3% of the sales revenue for the first three
years of such sales, 4% for the following three years, and 5% thereafter, up to
a maximum of 100% of the grant. Our obligation to pay royalties to the Chief
Scientist is limited to the amount of the grant received and is linked to the
exchange rate of the dollar and the New Israeli Shekel. The Chief Scientist
places certain restrictions on companies that receive funding relating to the
transfer of know-how. We believe that these restrictions and obligations will
not have a material adverse effect on our operations since we do not presently
anticipate transferring ownership of the technology developed by us to third
parties. The restrictions do not apply to the exports from Israel of products
developed with such technologies.
From the date of inception through March 31, 1999, we have expended
approximately $2.9 million on research and development activities, including
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approximately $1.0 million for the year ended December 31, 1998, and
approximately $316,000 for the three months ended March 31, 1999. We expect to
maintain our research and development expense at approximately the current level
for the foreseeable future.
We are a member of the Software and Information Industry Association and
of the Israeli Export Institute.
Competition
The CD-ROM copy protection industry is extremely competitive. Our primary
competitors include companies with substantially greater financial,
technological, marketing, personnel and research and development resources than
ours. There can be no assurance that we will be able to compete successfully in
this market. In particular, certain companies, such as C-Dilla Limited, Sony
DADC Austria AG, MLS LaserLock International Inc. and Link Data Security, claim
to provide comprehensive optical media-based anti-piracy protection. Two of
these competitors have relationships with DCA to make their products available.
The copy protection products of C-Dilla, for example, are based on a technology
which attempts to prevent unauthorized copying by encoding a disc with
unreadable "bad sectors." This alternate copy-protection technology may prove to
be more successful than DiscGuard, which embeds a digital signature in
authorized discs and is designed to prevent discs which lack the signature from
operating as intended. In addition, Rainbow Technologies Inc. and Aladdin
Knowledge Systems Ltd. each have an established installed product base in the
market for hardware key-based software copy protection products and could expand
into our target market of copy protection products for consumer software
contained on optical media such as CD-ROMs. There can be no assurance that other
software companies will not enter the market in the future. Many of our
competitors have existing relationships with major software developers in the
United States, some of which are dominant software producers worldwide, and
those existing relationships may impede our ability to sell our products to
those customers and expand our market share. For example, C-Dilla has been
acquired by Macrovision Corporation, a leader in the market for video security
technology and products. There can be no assurance that we will be able to
continue developing products with innovative features and functions, or that
development by others of similar or more effective products will not render our
products or technologies noncompetitive or obsolete.
Proprietary Rights
We currently rely on a combination of trade secret, copyright and
trademark law, as well as non-disclosure agreements and invention-assignment
agreements, to protect the technologies used in our products and other
proprietary information. In addition, we have filed patent applications in the
United States and Israel and under the Patent Cooperation Treaty with respect to
the technology underlying DiscGuard. There can be no assurance that any patent
will be issued or that our proprietary technology will remain a secret or that
others will not develop similar technology and use such technology to compete
with us.
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We believe that our software products are proprietary and are protected by
copyright law, non-disclosure and secrecy agreements. We also rely on
proprietary know-how and employ various methods, such as proper labeling of
confidential documents and non-disclosure agreements, to protect our processes,
concepts, ideas and documents associated with 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.
Employees
We have 11 full-time employees, including seven in Israel and four in the
U.S., including two in New York and two in California. None of our employees is
covered by a collective bargaining agreement or is represented by a labor union.
We have not experienced any organized work stoppages and considers our relations
with our employees to be good.
Our future performance is highly dependent upon the continued service of
members of our senior management and of Dr. Baruch Sollish, our Vice-President-
Research and Development, in particular. We believe that our future success will
also depend upon our continuing ability to identify, attract, train and retain
other highly skilled managerial, technical, sales and marketing personnel.
Hiring for such personnel is competitive, and there can be no assurance that we
will be able to retain our key employees or attract, assimilate or retain the
qualified personnel necessary for the development of its business.
Conditions in Israel
CONDITIONS IN ISRAEL
The following information discusses certain conditions in Israel that
could affect the Company's Israeli subsidiary, TTR Technologies, Ltd. All
figures and percentages are approximate. A portion of the information with
respect to Israel presented hereunder has been taken from Annual Reports of the
Bank of Israel and publications of the Israeli Central Bureau of Statistics.
Political Conditions
Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors and a state of
hostility, varying from time to time in intensity and degree, has led to
security and economic problems for Israel. However, a peace agreement between
Israel and Egypt was signed in 1979, a peace agreement between Israel and Jordan
was signed in 1994 and, since 1993, several agreements between Israel and the
Palestine Liberation Organization ("PLO")--Palestinian Authority representatives
have been signed. In addition, Israel and several other Arab states have
announced their intention to establish trade and other relations and are
discussing certain projects. As of the date hereof, Israel has not entered into
any peace agreement with Syria or Lebanon. Recently there has been stagnation in
the peace process in the Middle East. There can be no assurance as to whether or
how the "peace process" will develop or what effect
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it may have upon us. Beginning in 1948, nearly all Arab countries formally
adhered to a boycott of Israel and Israeli companies and, since the early 1950's
of non-Israeli companies doing business in Israel or with such companies.
Despite measures to counteract the boycott, including anti-boycott legislation
in the United States, the boycott has had an indeterminate negative effect upon
trade with and foreign investment in Israel. We do not believe that the boycott
has had a material adverse effect on the Company, but there can be no assurance
that restrictive laws, policies or practices directed toward Israel or Israeli
businesses will not have an adverse impact on the operation or expansion of its
business.
Generally, all male adult citizens and permanent residents of Israel under
the age of 54 are, unless exempt, obligated to perform certain military duty
annually. Additionally, all such residents are subject to being called to active
duty at any time under emergency circumstances. Some of the employees of the our
Israeli subsidiary currently are obligated to perform annual reserve duty. While
our Israeli subsidiary has operated effectively under these and similar
requirements in the past, no assessment can be made of the full impact of such
requirements on us in the future, particularly if emergency circumstances occur.
Economic Conditions
Israel's economy has been subject to numerous destabilizing factors,
including a period of rampant inflation in the early to mid-1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts,
security incidents and for at least the five years preceding 1997, expansion.
The Israeli government has, for these and other reasons, intervened in the
economy by utilizing, among other means, fiscal and monetary policies, import
duties, foreign currency restrictions and control of wages, prices and exchange
rates. The Israeli government periodically changes its policies in all these
areas.
The economic recession which began in 1997 continued during 1998, with a
further decline in the rate of GDP growth and an increase in unemployment,
despite a significant decrease in the balance of payments deficit and in the
growth rate of the public sector deficit. These developments reflect the
continued slow growth of domestic demand, the global economic slowdown,
instability in international financial markets and continued tight fiscal and
monetary policies aimed at maintaining economic stability and achieving budget
deficit and inflation targets determined by the government. Other factors
contributing to the continued economic slowdown were security and political
uncertainty, and changes in the labor market, such as increases in the minimum
wage and public sector employment.
Despite improvements during 1998, Israel maintains a significant balance
of payments deficit, primarily as a result of its defense burden, the absorption
of immigrants, especially from the former Soviet Union, the provision of a
minimum standard of living for lower income segments of the community and the
maintenance of a minimum level of net foreign reserves. In order to finance this
deficit, Israel must sustain an adequate inflow of capital from abroad. The
major sources of the country's capital imports include U.S. military and
economic aid, personal remittances from
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abroad, sales of Israeli government bonds (primarily in the United States) and
loans from foreign governments, international institutions and the private
sector.
Assistance From The United States
The State of Israel receives significant amounts of economic and military
assistance from the United States, averaging approximately $3 billion annually
over the last several years. In addition, in 1992, the United States approved
the issuance of up to $10 billion in loan guarantees during United States fiscal
years 1993-1998 to help Israel absorb a large influx of new immigrants,
primarily from the republics of the former Soviet Union. Under the loan
guarantee program, Israel may issue up to $2 billion in principal amount of
guaranteed loans each year, subject to reduction in certain circumstances. There
is no assurance that foreign aid from the United States will continue at or near
amounts received in the past. If the grants for economic and military assistance
or the United States loan guarantees are eliminated or reduced significantly,
the Israeli economy could suffer material adverse consequences.
Trade Agreements
Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction and Development and the International
Finance Corporation. Israel is also a signatory to the General Agreement on
Tariffs and Trade, which provides for reciprocal lowering of trade barriers
among its members. In addition, Israel has been granted preferences under the
Generalized System of Preferences from the United States, Australia, Canada and
Japan. These preferences allow Israel to export the products covered by such
programs either duty-free or at reduced tariffs.
Israel and the European Union concluded a Free Trade Agreement in July,
1975 which confers certain advantages with respect to Israeli exports to most
European countries and obligates Israel to lower its tariffs with respect to
imports from these countries over a number of years.
In 1985, Israel and the United States entered into an agreement to
establish a Free Trade Area, under which most products received immediate
duty-free status, and by 1995 all other tariffs and certain non-tariff barriers
on most trade between the two countries were ultimately eliminated.
On January 1, 1993, an agreement between Israel and EFTA, which at present
includes Norway, Switzerland, Iceland and Liechtenstein, established a
free-trade zone between Israel and the EFTA nations.
In recent years, Israel has established commercial and trade relations
with a number of other nations, including Russia, China and nations in Eastern
Europe, with which Israel had not previously had such relations.
Employees
The Company's Israel subsidiary is subject to various Israeli labor laws
and collective bargaining agreements between Histadrut and the federation of
industrial
<PAGE>
15
employers. Such laws and agreements cover a wide range of areas, including
hiring practices, wages, promotions, employment conditions (such as working
hours, overtime payment, vacations, sick leave and severance pay), benefits
programs (such as pension plans and education funds) and special issues, such as
equal pay for equal work, equal opportunity in employment and employment of
women. The collective bargaining agreements also cover the relations between
management and the employees' representatives, including Histadrut's involvement
in certain aspects of hiring and dismissing employees and procedures for
settling labor disputes. Our Israel subsidiary continues to operate under the
terms of Israel's national collective bargaining agreement, portions of which
expired in 1994. Israeli employers and employees are required to pay
predetermined sums to the National Insurance Institute, an organization similar
to the United States Social Security Administration. These contributions entitle
the employees to receive a range of medical services and other benefits. Certain
employees of the Company's Israeli subsidiary are covered by individual
employment agreements.
Item 2. Description of Properties
We lease a 4,860 square foot facility used in our research and development
and administrative activities in Kfar Saba, Israel. The lease provides for a
monthly rent of approximately $4,045 and an expiration date of May 31, 1999,
subject to two optional annual renewals through May 2001. We have improved these
facilities to meet the requirements of our research and development activities.
We lease executive offices in New York City, comprised of 650 square feet leased
at a monthly rental of $1,660 with a scheduled expiration date of June 30, 2002.
We lease offices in Campbell, California which are used for sales and marketing.
This lease is for 663 square feet at a monthly rental of $1,591 with an
expiration date of January 31, 2000. We believe that these facilities are
sufficient to meet the current and anticipated future requirements. We believe
that we will be able either to renew our present leases or obtain suitable
replacement facilities. In the opinion of management, our leased facilities in
the U.S. are adequately covered by insurance. Our facilities in Israel are not
insured.
Item 3. Legal Proceedings
In June 1999 the Company received notice from Biscount Overseas Ltd., a
selling stockholder, threatening to commence litigation for damages suffered as
a result of the Company's failure to register shares of its common stock
purchased by Biscount. Biscount alleges that we owes it $400,000, the full
amount of its investment, plus approximately $60,000 in interest to date. The
parties are attempting to settle this matter.
Several suits have been filed and threats of litigation have been made
against the Company and its Israeli subsidiary by various vendors and former
employees for unpaid invoices and other amounts in an aggregate amount of
approximately $147,000.
Item 4. Submission of Matters to a Vote of Security Holders
<PAGE>
16
The Company held its Annual Meeting of Shareholders on December 28, 1998 and
the shareholders voted as to the following: (a) election of Marc D. Tokayer and
Dr. Baruch Sollish as directors to serve for a term of one (i) year or until a
successor is duly elected; (ii) approval of the name change of Company to "TTR
Technologies, Inc."; (iii) approval of an amendment to the Company's Articles of
Incorporation to authorize the issuance of Preferred Stock; (iv)approval of new
Bylaws; (v) approval of an increase in the number of common shares reserved for
issuance under the Company 1996 Stock Option Plan to 750,000 common shares and
to amend such stock plan to permit the acceleration of vesting for certain
options granted thereunder; (vi) approval of the adoption of the 1998
Non-Executive Directors Stock Option Plan and the reservation of 25,000 common
shares for issuance thereunder; (vii) approval of the ratification of BDO
Almagor & Co. as auditors for the year ending December 31, 1998.
No other matters were submitted to a vote of shareholders during the year
ended December 31, 1998.
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the OTC Electronic Bulletin Board
under the symbol 'TTRE'. The following table sets forth the range of high and
low bid prices for the Common Stock as reported on the OTC Electronic Bulletin
Board by the National Association of Securities Dealers, Inc., Automated
Quotations System for the periods indicated.
Common Stock
Quarter Ended High Low
(1998)
March 31 $6 $4
June 30 $5 1/2 $2 5/8
September 30 $3 1/4 $7/8
December 31 $3 1/6 $11/16
(1997)
March 31 $16 23/32 $9 1/4
June 30 $15 7/8 $11
September 30 $13 3/4 $11
December 31 $11 15/16 $5 5/8
<PAGE>
17
The foregoing represent inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
As of July 30, 1999 there were approximately 147 holders of record of our
common stock, excluding stockholders whose stock is held either in nominee name
or street name brokerage accounts. Based on information obtained from our
transfer agent, as of such date, there were approximately 859 stockholders of
our common stock whose stock is held in either nominee name or street name
brokerage accounts.
The Company has paid no dividends on its Common Stock and does not expect
to pay cash dividends in the foreseeable future. It is the present policy of the
Board of Directors to retain all earnings to provide funds for the growth of the
Company. The declaration and payment of dividends in the future will be
determined by the Board of Directors based upon the Company's earnings,
financial condition, capital requirements and such other factors as the Board of
Directors may deem relevant. The Company is not under any contractual
restriction as to its present or future ability to pay dividends
Item 6. Management's Discussion and Analysis and Plan of Operations
The following discussion should be read in conjunction with our
consolidated financial statements and the notes thereto included elsewhere in
this prospectus.
General
Overview
We design, develop and market anti-piracy software technologies that
provide encryption and copy protection for software applications distributed on
CD-ROMs. Our proprietary product, DiscGuard, is designed to prevent unauthorized
CD-ROMS from operating as intended. Our copy protection technologies are
transparent to the legitimate end-user and do not require the user to install
hardware "keys" or "dongles" on the user's desk top or to obtain an "unlock
code" in order to run the protected application.
Since our inception in 1994, we have focused on
o developing our proprietary anti-privacy technologies; and
o in the last year, licensing a broad base of replicators,
representing a significant percentage of the world replication
market by disc volume, to use DiscGuard in their mastering
equipment, making DiscGuard readily available to software
publishers.
With our network of licensed replicators in place to have
DiscGuard-protected software mass-produced on CD-ROMs, since the first
commercial release of DiscGuard in February 1998, we have begun marketing
DiscGuard to software publishers, directly and through distributors.
Approximately 24 software publishers market some or all of their
<PAGE>
18
titles on DiscGuard-protected discs, representing approximately 400,000 CD-ROMs
and approximately 71 software titles.
Our goal is to establish DiscGuard as the leading product in our target
market segment of software-based CD-ROM copy protection for high-volume
multi-media consumer software, including games, entertainment and reference
software and other install-to-use applications.
In 1997, we completed an initial public offering to raise working capital.
We have had difficulty in the past twelve months in raising financing needed to
fund our operations and have, therefore, significantly curtailed our activities.
In the summer of 1998, we abandoned a proposed public offering of our common
stock after filing a registration statement therefor, due to a correction in the
stock market.
We have $1.5 million in aggregate principal amount of indebtedness
currently due and payable together with interest thereon. The holders of an
aggregate of $562,500 in principal amount of such indebtedness have agreed to
extend the maturity thereof until various dates from April through July 2000. We
are attempting to obtain similar extensions from the holders of the balance of
such indebtedness. There can be no assurance that any extensions will be granted
with regard to all or any part of such balance. We will need to obtain
additional financing or otherwise reallocate our available funds in order to
repay any amount of such indebtedness as to which no extension is granted.
If we receive extensions with respect to the entire balance of such
indebtedness, we anticipate that our cash on hand, together with the proceeds
(before deducting approximately $112,000 in fees and commissions) from the sale
of an additional $1.0 million in principal amount of our 10% Convertible
Debentures due April 30, 2001 not later than five days after the effective date
of a registration statement relating to the common shares issued upon (and in
connection with) the conversion of the Debentures (of which $400,000 has been
pre-funded) will allow us to maintain operations through November 1999.
Thereafter, from December 1999 through December 2000, we will need additional
financing of at least $4.6 million of investment capital, funding by strategic
partner(s) or operating revenues to continue operating, pay suppliers and other
creditors and retire an aggregate of $1.9 million in outstanding principal
amount of indebtedness other than the Debentures. We do not have any commitments
for any additional financing other than the sale of the additional $1.0 million
in principal amount of Debentures (of which $400,000 has been pre-funded).
We have not had any significant revenues to date. As of March 31, 1999, we
had an accumulated deficit of approximately $12.9 million. Our expenses have
related primarly to expenditures on research and development, marketing,
recruiting and retention of personnel, costs of raising capital and operating
expenses. The report of the independent auditors on our financial statements for
the year ended December 31, 1998 includes an explanatory paragraph relating to
the uncertainty of our ability to continue as a going concern, which may make it
more difficult for us to raise additional capital.
Subject to our raising sufficient financing in the future, we intend to
increase our research and development efforts. We believe that the software
developed for CD-
<PAGE>
19
ROMs has begun to migrate to DVDs, a medium with greater storage capacity. We
hope to complete the development of DiscGuard protection for DVDs by the time
DVD drives become widely available and software is distributed on DVDs.
We intend to ensure that DiscGuard remains integrated into the mastering
equipment of a broad base of replicators (i.e., mass producers of CD-ROMs),
affording software publishers convenient access to DiscGuard-licensed
replicators. We will continue our marketing efforts by directly distributing our
product in the United States, Europe and the Middle East, utilizing distributors
in Asia and acting on referrals from our replicators. If we do not succeed in
significantly increasing the number of licensed publishers generated by our
existing marketing efforts, we may also seek a strategic alliance with an
international marketing partner or increase our use of distributors in
particular countries outside of Asia. On June 1, 1999, we hired a Chief
Operating Officer to oversee our marketing efforts.
Revenue Sources
Our main source of revenue is from royalties payable by software
publishers under non-exclusive license agreements with such software publishers.
Typically, our license agreements relate to some or all of a publisher's
software titles on CD-ROMs. These license agreements have unit-based pricing
schedules, based on the number of CD-ROMs produced by a replicator. We recognize
revenue when CD-ROM discs are produced for our licensed software publishers by
our licensed replicators. We also receive a limited amount of revenue from our
licensed replicators.
Stock Based Compensation
Compensation expense arising from stock grants, and options and warrants
issued at exercise prices below the quoted market price as of the date of grant
is recognized over the period that services are rendered. As more fully
described below in "Results of Operations," we have recorded expense in
connection with stock based compensation during the years ended December 31,
1997 and 1998, as well as deferred compensation expense for the value of the
grants that were not yet earned as of such dates. We currently expect to
amortize $399,420 million in 1999 and $6,422 in 2000 as deferred compensation
expense in respect of options outstanding at December 31, 1998.
Results of Operations
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997.
We reported revenues for the first time in 1998 totaling $54,922. All of
the revenues were derived from license fees received from licensees of
DiscGuard.
Research and development costs for the year ended December 31, 1998 were
$1,032,253 as compared to $967,155 for 1997. Research and development costs in
1998 were expended in developing improved versions of DiscGuard following its
commercial introduction in February 1998.
<PAGE>
20
Sales and marketing expenses for the year ended December 31, 1998 were
$1,837,931 as compared to $1,421,496 for 1997. This increase reflects our
intensified marketing activities when DiscGuard became commercially available in
the first quarter of 1998.
General and administration expenses for the year ended December 31, 1998
were $2,380,976 as compared to $1,477,085 for 1997. The increase in general and
administrative spending was primarily due to increased staffing, public
relations and professional fees relating to a proposed secondary public offering
of common stock in July 1998.
Operating expenses include $1,305,000 and $1,173,000 of stock-based
compensation for the years ended December 31, 1998 and 1997, respectively.
Interest expense for the year ended December 31, 1998 increased to
$410,715 as compared to $113,445 during 1997 due to the increase in debt
financing activity in the year. Included in interest expense is non-cash
amortization of note discount in the amount of $272,009 for the year ended
December 31, 1998. Note discounts were imputed to reflect the equity component
of the related financings.
Interest income was $3,413 for the year ended December 31, 1998 as
compared to $42,069 for 1997. The decrease was a result of higher average cash
holdings during 1997.
For the year ended December 31, 1998 we had a loss of $5,578,540 as
compared to $4,119,612 for 1997. This increase was a result of the increased
operating and interest expenses for the year.
Liquidity and Capital Resources
At December 31, 1999, we had cash of approximately $74,500, representing a
decrease of approximately $376,000 over December 31, 1997. During the year ended
December 31, 1998 we used net cash for operations of $2,235,231 as compared to
$2,735,369 in 1997.
We have curtailed expenses in many areas, including reductions in
personnel. We believe that ongoing investment in research and development
activities and marketing, especially to software publishers, will be critical to
our ability to generate revenue and operate profitably. We anticipate that we
will continue to expend significant funds in research and development activities
and marketing.
In May 1999, we issued $1.0 in aggregate principal amount of our 10%
Convertible Debentures due April 30, 2001. The Debentures were issued pursuant
to an agreement which provides that, subject to certain conditions, the
Debenture holders will purchase an additional $1.0 million in aggregate
principal amount of 10% Debentures not later than five days after the effective
date of a registration statement relating to the common shares issued upon (and
in connection with) the conversion of the Debentures (of which $0.4 million was
pre-funded in July 1999).
<PAGE>
21
We have approximately $1.5 million in aggregate principal amount of
indebtedness currently due and payable together with interest thereon. The
holders of an aggregate of $562,500 in principal amount of such indebtedness
have agreed to extend the maturity thereof until various dates from April
through July 2000. We are attempting to obtain similar extensions from the
holders of the balance of such indebtedness. There can be no assurance that any
extensions will be granted with regard to all or any part of such balance. We
will need to obtain additional financing or otherwise reallocate our available
funds in order to repay any amount of such indebtedness as to which no extension
is granted.
If we receive extensions with respect to the entire balance of such
indebtedness, we anticipate that cash on hand, as well as the $1.0 million
(before deducting approximately $112,000 in fees and commissions) due to be
invested upon purchase of the additional Debentures (of which $400,000 has been
pre-funded), will allow us to bring several supplier and vendors current and to
maintain operations through November 1999. Thereafter, from December 1999
through December 2000, we will need additional financing of at least $4.6
million of investment capital, funding by strategic partner(s) or operating
revenues to continue operating, pay suppliers and other creditors and retire an
aggregate of $1.9 million in outstanding principal amount of indebtedness other
than the Debentures. We are currently reviewing possible private sales of equity
or debt with equity features and arrangements with strategic partners. We have
no commitments for any such financing and there can be no assurance that we will
obtain additional capital when needed or that any such additional capital will
not have a dilutive effect on current stockholders.
Year 2000 Issues
Background
Many currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates
because these systems may have been developed using two digits rather than four
to determine the applicable year. For example, computer systems that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This error could result in system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced to comply with such "Year
2000" requirements.
State of Readiness
Our business is dependent on the operation of numerous systems that could
potentially be affected by Year 2000 related problems. Those systems include,
among others:
o hardware and software systems that we use internally in the management of
our business;
<PAGE>
22
o software products that we have developed;
o the internal systems of our customers and suppliers; and
o non-information technology systems and services that we use in the
management of our business, such as telephone systems and building
systems.
Based on an analysis of the systems potentially affected by conducting
business in the twenty-first century, we are applying a phased approach to
making such systems, and accordingly our operations, Year 2000 ready. Beyond
awareness of the issues and scope of systems involved, the phases of activities
in progress include:
o an assessment of specific underlying computer systems, programs
and/or hardware;
o rededication or replacement of Year 2000 non-compliant technology;
o validation and testing of technologically Year 2000 ready solutions;
and
o implementation of the Year 2000 ready systems.
<PAGE>
23
The table below provides the status and timing of these phased activities:
Affected Systems Status
- ---------------- ------
Software Assessment completed; conducting ongoing
products that we validation and testing
license or sell (see details below)
Hardware and software Assessment completed;
systems that we use certain components replaced;
conducting validation and testing
Internal systems of our Assessment not yet completed
customers and suppliers
Non-information technology No assessment made
systems and certain services
that we use in the management
of our business, internal and
external, such as telephone
systems and building systems
Product Status
DiscGuard is not date or time sensitive. We have tested and verified
DiscGuard as Year 2000 ready. Year 2000 readiness does not include the
performance or functionality of third party products, including hardware or
software with which DiscGuard interfaces.
Costs to Address Year 2000 Readiness
We have expensed as incurred all costs directly related to Year 2000
readiness, even in cases where non-compliant information technology systems have
been replaced. To date, these costs have been insignificant. The replacement
cost of non-information technology systems would have been incurred, regardless
of the Year 2000 issue.
We do not believe that future expenditures to upgrade internal systems and
applications will have a material adverse effect on our business, financial
condition and results of operations. In addition, while the potential costs of
redeployment of personnel and any delays in implementing other projects is not
known, the costs are anticipated to be immaterial.
Risks of Year 2000 Issues
We believe that DiscGuard is Year 2000 ready; however, success of our Year
2000 readiness efforts may depend on the success of our customers in dealing
with their Year 2000 issues. We license DiscGuard to customers in several
different industries--i.e., to manufacturers of mastering equipment, replicators
and software
<PAGE>
24
publishers--each of which are experiencing different issues with Year 2000
readiness. Customer difficulties with Year 2000 issues could interfere with the
use of DiscGuard, which might require us to devote additional resources to
resolve the underlying problems. If the problem is found to lie in DiscGuard,
our business, financial condition and results of operations could be materially
adversely affected.
Furthermore, the purchasing patterns of these customers or potential
customers may be affected by Year 2000 issues as companies expend significant
resources to become Year 2000 ready. The costs of becoming Year 2000 ready for
current or potential customers may result in reduced funds available to purchase
and implement our products. In addition, we rely on various entities that are
common to many businesses, such as public utilities. If these entities were to
experience Year 2000 failures, our ability to conduct business would be
disrupted.
Although we believe that our Year 2000 readiness efforts are designed to
appropriately identify and address those Year 2000 issues that are within our
control, there can be no assurance that our efforts will be fully effective or
that the Year 2000 issues will not have a material adverse effect on our
business, financial condition or results of operations. The novelty and
complexity of the issues presented and our dependence on the preparedness of
third parties are among the factors that could cause our efforts to be less than
fully effective. Moreover, Year 2000 issues present many risks that are beyond
our control, such as the potential effects of Year 2000 issues on the economy in
general and on our business partners and customers in particular.
Contingency Plans
We have conducted an assessment of certain of our Year 2000 exposure areas
in order to determine what steps beyond those identified by our internal review
were advisable and no additional work was recommended. We do not presently have
a contingency plan for handling Year 2000 issues that are not detected and
corrected prior to their occurrence. Any failure by us to address any unforeseen
Year 2000 issue could adversely affect our business, financial condition and
results of operations. Any such occurrence could adversely affect our business.
Item 7. Financial Statements
The information called for by this Item 7 is included following the "Index to
Financial Statements" contained in this Annual Report on Form 10KSB.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
As of July 30, 1999, the directors, officers and key employees of TTR are as
follows:
<PAGE>
25
Name Age Position
Marc D. Tokayer 42 Chairman of the Board, Chief Executive
Officer, President and Treasurer; and
President and Director of our Israeli
subsidiary
Emanuel Kronitz 40 Chief Operating Officer
Baruch Sollish 52 Director, Vice President-Research
and Development, Secretary; Chief
Technology Officer of our Israeli
subsidiary
All officers serve until the next annual meeting of directors and until
their successors are elected and qualified.
Marc. D. Tokayer, has been Chairman of the Board of Directors, President,
and Treasurer of TTR since he founded TTR in July 1994 and has been Chief
Executive Officer of TTR since he resumed the position in January 1999. He has
served as President and Chairman of the Board of Directors of TTR's Israeli
subsidiary since its inception in December 1994.
Emanuel Kronitz, has been the Chief Operating Officer of TTR since June
1, 1999. From January through May 1999 he served as CEO of Smart Vending
Solutions Inc., a Delaware corporation, which developed a novel vending machine
based on free access technology. From November 1997 through January 1999, he was
president of Orgad Creations Ltd., an Israeli company engaged in the
electroforming of gold jewelry. From January 1996 through November 1997, he was
a Senior Investment Manager at Leumi & Co, Investment Bankers Ltd., an Israeli
investment bank, where he was in charge of investment portfolio of approximately
30 high-tech and industrial companies. Between January 1994 and December 1995,
he was a Vice President of Business Development at the Elul Group, an Israeli
high tech marketing and investment company, where he was primarily responsible
for identifying and negotiating new business ventures. He received an LLB (law
degree) from Bar Ilan University, Tel Aviv in 1983 and an MBA from York
University in Toronto in 1988.
Baruch Sollish, Ph.D, has been a Director of TTR since December 1994 and
has served as Vice President--Research and Development and Secretary of TTR
since September 1996. 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 and electronics and has published and lectured extensively. Dr.
Sollish received a Ph.D. in Electrical Engineering from Columbia University in
1973.
<PAGE>
26
There are no family relationships between any of the above executive
officers, and there is no arrangement or understanding between any of the above
executive officers and any other person pursuant to which he was selected as an
officer.
Our Board of Directors is currently comprised of two Directors. All
directors hold office until the next annual meeting of stockholders and the
election and qualification of their successors. Directors receive no cash
compensation for serving on the Board of Directors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board.
The Board of Directors has created a Stock Option Committee to administer
our 1996 Stock Option Plan. This Committee is currently composed of Marc
Tokayer.
Section 16 Filings
The Company believes that (i) each of Marc D. Tokayer and Baruch Sollish
failed to timely file a Form 3 in connection with their appointment as executive
officers and directors, (ii) the Tokayer Family Trust failed to file a Form 3 to
report its their shareholdings in the Company, (iii) each of Marc D. Tokayer,
Baruch Sollish and the Tokayer Family Trust have failed to file a Form 4 to
reflect the voting agreement among them, (iv) Marc Tokayer and the Tokayer
Family Trust have failed to file Form 4s relating to their waiver with respect
to and the Company's cancellation of 750,000 shares of common stock placed in
escrow, (iv) Messrs. Shavit and Barsh each failed to file a Form 3 to report
their respective appointment as executive officers and, in the case of Mr.
Shavit, as a director, and a Form 4 to report the grant of options to purchase
shares of common stock of the Company. The exchange of such options for stock
and, in the case of Mr. Shavit, a Form 4 relating to the termination of his
employment.
Item 10. Executive Compensation
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to, or earned by, the Chief Executive
Officer of TTR and to all other executive officers (the "Named Executive
Officers") serving as such at the end of 1998 whose compensation exceeded
$100,000 for fiscal 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ------------------------ --------------------
Restricted Securities
Name and Other Annual Stock Underlying LTIP
Principal Position Year Salary Bonus Compensation Awards Options Payouts All Other
- ------------------ ---- ------ ----- ------------ ------ ------- ------- ---------
Compensation
- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marc D. Tokayer 1998 $64,430 $12,019 $14,423(1)
Chairman, 1997 73,850 7,647 26,307(1) 0 0 0 0
President & CEO 1996 66,686 12,876 19,278(1) 0 0 0
Baruch Sollish 1998 $91,678 $42,015 $13,927 0 0 0
Vice-President- 1997 99,931 50,000(2) 24,875(1) 0 0 0
Research & 1996 69,517 0 14,037(1) 0 0 0
Development
Steven L. Barsh 1998 93,334(4) 0 0 0 250,000(5) 0
Former Chief 1997 0 0 0 0 0
Executive Officer(3) 1996 0 0 0 0 0 0
</TABLE>
<PAGE>
27
(1) Includes contributions to insurance premiums, car allowance and car
expenses.
(2) Comprises a one-time payment made in consideration of Dr. Sollish's waiver
of incentive bonus payments due to him under his employment agreement.
(3) Mr. Barsh's employment commenced in July 1998 and terminated as of
February 12, 1999. See "Certain Relationships and Related Transactions."
(4) Reflects a reduction in annual salary from $210,000 to $70,000 in October
1998. See "Certain Relationships and Related Transactions."
(5) Reflects the exchange on October 20, 1998 of 250,000 options granted under
the 1996 Stock Option Plan at an exercise price of $2 15/16 per share for
250,000 non-plan options with an exercise price of $15/16 per share. In
July 1999 such options were exchanged for 150,000 shares of our common
stock. See "Certain Relationships and Related Transactions."
<PAGE>
28
Options Granted In Last Fiscal Year
The following table sets forth certain information concerning options
granted to the Named Executive Officers during 1998:
Number of % of Total
Shares Options
Underlying Granted to Exercise or Market
Options Employees Base Price Price on Expiration
Name Granted in 1998 ($/Share) Grant Date Date
- ---- ---------- ---------- ----------- ---------- ----------
Steven Barsh 250,000(1) 86% $.0.93(1) $0.93(1)(2) 2007
(1) Reflects the exchange on October 20, 1998 of 250,000 options granted under
the 1996 Stock Option Plan at an exercise price of $2 15/16 per share for
250,000 non-plan options with an exercise price of $15/16 per share. In
July 1999 such options were exchanged for 150,000 shares of our common
stock. See "Certain Relationships and Related Transactions."
(2) Based on the closing price of the common stock ($0.93) on October 20,
1998, as reported on the OTC Electronic Bulletin Board.
Aggregate Options Exercised In Last Fiscal year
And Fiscal Year End Option Values
The following table sets forth information with respect to option
exercises during the year ended December 31, 1998 and the number and value of
options outstanding at December 31, 1998 held by the Named Executive Officers:
<TABLE>
<CAPTION>
Number of Shares
Underlying
Unexercised
Shares Options at
Acquired December 31, 1998 Value of Unexercised
on Value Exercisable ("E") In-the-Money Options at
Name Exercise Realized Unexercisable ("U") December 31, 1998(1)
- ---- -------- -------- ------------------- --------------------
<S> <C> <C> <C> <C> <C>
Steven Barsh 0 0 250,000(E) /0(U) $48,750
</TABLE>
(1) Based upon the difference between the exercise price of such options
($0.93) and the closing price of the common stock ($1.125) on December 31,
1998, as reported on the OTC Electronic Bulletin Board.
Stock Option Plans
1996 Stock Option Plan. Our current policy is that all full time key
employees be considered annually for the possible grant of stock options,
depending upon employee performance. The criteria for the awards are experience,
uniqueness of contribution to TTR and level of performance shown during the
year. Stock options
<PAGE>
29
are intended to improve loyalty to TTR and help make each employee aware of the
importance of our business success.
We have adopted our 1996 Incentive and Non-Qualified Stock Option Plan.
The 1996 Stock Option Plan provides for the grant to qualified employees
(including officers and directors) of options to purchase shares of Common
Stock. A total of 750,000 shares of Common Stock have been reserved for issuance
upon exercise of stock options granted under the 1996 Stock Plan.
The 1996 Stock Plan is administered by a Stock Option Committee of the
Board of Directors. The Committee consists of Mr. Tokayer. Members of the
Committee are not eligible for awards. The Committee has discretion to select
the optionee and to establish the terms and conditions of each option, subject
to the provisions of the 1996 Stock Plan. Options granted under the 1996 Stock
Plan may be non-qualified stock options or Incentive Stock Options (an option
which qualifies under Section 422 of the Internal Revenue Code) but in any case
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). The
Committee may, in its discretion (i) accelerate the date or dates on which all
or any particular option or options granted under the 1996 Stock Plan may be
exercised, or (ii) extend the dates during which all, or any particular, option
or options granted under the 1996 Stock Plan may be exercised, provided, that no
such extension shall be permitted if it would cause the 1996 Option Plan to fail
to comply with Section 422 of the Code or with Rule 16b-3 of the Securities and
Exchange Act of 1934. Except as otherwise determined by the Committee at the
date of the grant of the option, and subject to the provisions of the 1996 Stock
Plan, an optionee may exercise an option at any time within one year (or within
such lesser period as may be specified in the applicable option agreement)
following termination of the optionee's employment or other relationship with
TTR if such termination was due to the death or Disability (as defined) of the
optionee but in no event later than the expiration date of the Option. Except as
otherwise determined by the Board of Directors or the Committee at the date of
the grant of an Option, if the termination of the optionee's employment or other
relationship is for any other reason the Option shall expire immediately upon
such termination. Options granted under the 1996 Stock 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 Stock 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 June 30, 1999, 423,700 options to purchase shares of common stock
were outstanding under the 1996 Stock Plan.
Non-Executive Directors Stock Option Plan. We adopted our 1998
Non-Executive Director Stock Option Plan in July 1998 to provide an incentive
for
<PAGE>
30
attracting and retaining on our Board the service of qualified individuals who
are not otherwise employed by us or any subsidiary.
The Directors Plan is administered by the Board of Directors. We have
reserved 25,000 shares of Common Stock under the Directors Plan for issuance
upon the exercise of stock options. Options are exercisable upon the date of
grant and expire five years from the date of grant. Upon termination of any
director, the options expire within two months of such termination. The exercise
price of the option will be the fair market value of the Common Stock on the
date of the grant of the option. The number of options and prices at which they
are exercisable are subject to adjustment in the case of certain transactions
such as mergers, recapitalizations, stock splits or stock dividends. No options
may be granted under the Directors Plan after July 2008. As of June 30, 1999 no
options were outstanding under the Directors Plan.
Employment Agreements
Our Israeli subsidiary entered into an employment agreement in August 1994
with Marc Tokayer, pursuant to which Mr. Tokayer is employed as its General
Manager for a term which is automatically renewable from year to year unless
either party gives notice of termination at least 90 days prior to the current
expiration date. Mr. Tokayer receives an annual salary of $74,232, subject to
increase and the grant of a performance bonus in the Board's discretion. If Mr.
Tokayer is terminated other than for engaging in willful misconduct or acts of
bad faith or conviction of a felony, he will be entitled to continue to receive
his salary and benefits for an additional 12 months, subject to certain
limitations. Mr. Tokayer's agreement contains customary confidentiality and
noncompete provisions that prohibit him from competing with us or soliciting its
employees for one year following the termination of his employment.
We signed an employment agreement with Emanuel Kronitz as of June 1, 1999,
pursuant to which Mr. Kronitz is employed as our Chief Operating Officer. The
agreement is for a term of one year and is automatically renewable for
additional one year terms, unless terminated in accordance with the agreement.
The agreement is terminable by either party upon 90 days prior notice. Mr.
Kronitz is paid a monthly salary of $5,000 plus benefits and was granted options
under the 1996 Option Plan to purchase 235,000 shares of our common stock, at an
exercise price of $0.01 per share, which options vest in equal monthly
installments over three years. Mr. Kronitz's agreement contains customary
confidentiality and noncompete provisions that prohibit him from competing with
us or soliciting our employees for one year following the termination of his
employment.
Our Israeli subsidiary entered into an employment agreement with Dr.
Baruch Sollish in December 1994, pursuant to which Dr. Sollish is employed as
Director of Product Research and Development of TTR Israel. The agreement is
renewable from year-to-year, subject to termination by either party on not less
than 60 days notice prior to the end of any calendar year. Dr. Sollish receives
an annual base salary of $91,678 subject to increase and the grant of a
performance bonus in the Board's discretion. In March 1997, in consideration of
Dr. Sollish's waiver of certain incentive bonus payments due payable to him
under the agreement based on revenues from certain products, Dr. Sollish
received a one-time bonus payment of $50,000. Dr.
<PAGE>
31
Sollish's agreement contains customary confidentiality and non-compete
provisions that prohibit him from competing with us for one year, or soliciting
its employees for one year, following the termination of his employment.
Report on Repricing of Options
In connection with the termination of Steven Barsh as our Chief Executive
Officer, the Board of Directors approved the exchange of 250,000 options granted
to Mr. Barsh under the 1996 Stock Option Plan at an exercise price of $2 15/16
per share, the fair market value of the common stock on the date of the original
grant, for 250,000 immediately exercisable, non-plan options with an exercise
price of $15/16 per share, the fair market value of the common stock on October
20, 1998, the effective date of the exchange. In approving the exchange and the
repricing of the non-plan options granted in exchange for the plan options
surrendered, the Board based the repricing on a comparison of the fair market
value of the common stock on the date of the original grant to its fair market
value on the date of the exchange and on the desirability of effecting a
settlement with Mr. Barsh. See "Certain Relationships and Related Transactions."
<PAGE>
32
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of July 30, 1999,
concerning the ownership of the Common Stock by (a) each person who, to the best
of the Company's knowledge, beneficially owned on that date more than 5% of the
outstanding Common Stock (b) each of the Company's directors (c) all current
directors, officers and significant employees of the Company as a group. Except
as otherwise indicated, the stockholders listed in the table have the sole
voting and investment power with respect to the shares indicated.
Name and Address of Shares of Common Stock
Beneficial Owner Beneficially Owned (1) Percent of Class (2)
Wall & Broad Equities, Inc. 1,300,000 (3) 18.71
Blumfield Investment Inc. 837,209 (4)(5) 12.91
Wayne Invest &
Trade Inc. 837,209 (4)(5) 12.91
Burstein & Lindsay
Securities Corp. 837,209 (4)(5) 12.91
Madison Trading 837,209 (4)(5) 12.91
Marc D. Tokayer 618,547 (6) 10.95
L&H Foundation 418,605 (7)(5) 6.9
Econor Investment
Corporation 418,605 (7)(5) 6.9
K & D Equities, Inc. 400,000 (3) 6.61
Jarvis Developments
Limited 287,426 5.09
Baruch Sollish 150,000 (8) 2.66
Emanuel Kronitz 32,639 (9) *
All directors and officers as
a group (3 persons) 801,186 (10) 12.49%
<PAGE>
33
* Indicated less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes voting
or investment power with respect to securities. In accordance with SEC
rules, shares which may be acquired upon exercise of stock options which
are currently exercisable or which become exercisable within 60 days after
the date of the information in the table are deemed to be beneficially
owned by the optionee. Except as indicated by footnote, and subject to
community property laws where applicable, to our knowledge, the persons or
entities named in the table above are believed to have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) For purposes of calculating the percentage of outstanding shares held by
each person named below, any shares which such person has the right to
acquire whether within 60 days after the date of the information in the
table or later are deemed to be outstanding, but not for the purpose of
calculating the percentage ownership of any other person.
(3) Represents shares issuable upon exercise of warrants or options.
(4) Represents (i) shares issuable upon conversion of $400,000 in aggregate
principal amount 10% Convertible Debentures due April 30, 2001, based on
an assumed conversion price of $0.86, together with interest thereon
accrued through the maturity date thereof and (ii) 279,070 shares issuable
upon the exercise osf Warrants issuable upon conversion of the Debentures
at such assumed conversion price.
(5) In accordance with the terms of the Debentures, the assumed conversion
price reflects the average of the closing trading prices of the common
stock on the three days during the 30 day period preceding May 19, 1999,
the initial closing date of sales of the Debentures, on which the closing
price of the common stock was lowest. The actual conversion price will be
based on a formula stated in the Debentures and may be higher or lower
than the assumed price. As required by SEC regulations, the number of
shares shown as beneficially owned includes shares which could be
purchased within 60 days. However, the terms of the Debentures and
Warrants of this shareholder specify that the shareholder can not convert
the Debentures or exercise its Warrants to the extent that such conversion
or exercise would result in the shareholder and its affiliates
beneficially owning more than 9.99% of our then outstanding common stock.
Thus, although some of the shares listed in the table might not be subject
to purchase by the shareholder during that 60 day period, they are
nevertheless included in this table. The actual number of shares of common
stock issuable upon the conversion of the Debentures and exercise of the
Warrants is subject to adjustment and could be materially less or more
than the number estimated in the table. This variation is due to factors
that cannot be predicated by us at this time. The most signifacant of
these factors is the future market price of the common stock.
(6) Includes 324,274 shares held by The Tokayer Family Trust. Mr. Tokayer's
wife is the trustee and Mr. Tokayer's children are the income
beneficiaries of the Trust. Mr. Tokayer disclaims beneficial ownership of
all such shares. Mr. Tokayer disclaims beneficial interest in 15,000
shares issuable upon exercise of options held by Gershon Tokayer, Mr.
Tokayer's brother.
(7) Represents (i) shares issuable upon conversion of $200,000 in aggregate
principal amount 10% Convertible Debentures due April 30, 2001, based on
an assumed conversion price of $0.86, together with interest thereon
accrued through the maturity date thereof and (ii) 139,535 shares issuable
upon the exercise of Warrants issuable upon conversion of the Debentures
at such assumed conversion price.
(8) Includes 50,000 shares issuable upon exercise of options.
(9) Represents shares issuable upon exercise of warrants.
(10) See Note 6 and 8 above.
Item 12. Certain Relationships and Related Transactions
In June 1998 Mr. Tokayer and The Tokayer Family Trust waived their rights
to 750,000 shares of Common Stock which had been placed in escrow and were
subject to release upon our achieving certain revenue or stock price levels.
Such shares have been returned to treasury and cancelled.
<PAGE>
34
In February 1999, the Company issued to Dr. Sollish 50,000 vested options.
In June 1999, the Company granted 235,000 options under the 1996 Option
Plan to Emanuel Kronitz, its Chief Operating Officer. Subject to Mr. Kronitz's
continued employment with the Company, these options vest in 36 equal monthly
installments and have a nominal exercise price.
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, entered into a voting arrangement dated August 10, 1996,
whereby they agreed to vote their respective shares to elect directors and in
support of positions favored by a majority of the shares held among them. This
arrangement was terminated in July 1999.
The Company signed an employment agreement in July 1998 with Mr. Steven L.
Barsh pursuant to which Mr. Barsh was employed as Chief Executive Officer
through January 1999. Under the agreement, Mr. Barsh received an annual salary
of $210,000 and pursuant to the 1996 Stock Option Plan, we issued to him 250,000
stock options which were to vest equally over a five-year period, and have an
exercise price of $2-15/16 per share. In October 1998, Mr. Barsh agreed to
accept $70,000 per annum and to defer payment of the balance owed until such
time as we raised $3,000,000. In connection with the salary adjustment, Mr.
Barsh returned the options issued to him, and we issued to Mr. Barsh, on October
20, 1998, non-plan options for 250,000 shares of Common Stock, with an exercise
price of $15/16 per share. Mr. Barsh resigned effective February 12, 1999. The
employment agreement provided that we would owe Mr. Barsh salary and benefits
for six months following his resignation. We also owed Mr. Barsh approximately
$40,000 in unreimbursed expenses and $60,000 in unpaid salary earned prior to
his resignation. In consideration of the waiver by Mr. Barsh of the amounts owed
to him and in settlement of a dispute as to the number of stock options to which
he was entitled, in July 1999 we issued to Mr. Barsh 150,000 shares of common
stock and Mr. Barsh waived his rights and released his claims to the 250,000
options previously issued to him, which options have been cancelled.
The Company's Israeli subsidiary signed a three-year employment agreement
in July 1996 with Arik Shavit, pursuant to which Mr. Shavit was employed as
President and General Manager. Pursuant to the agreement, Mr. Shavit received an
annual salary of $110,628, subject to adjustment, and was issued options to
purchase an aggregate of 217,473 shares of Common Stock. The options are
exercisable for a price of $.01 per share until September 2006, subject to a
vesting schedule pursuant to which 72,491 and 48,328 options vested in September
1997 and 1998, respectively, and 48,327 options vest in each of September 1999
and September 2000. Effective December 1, 1998, Mr. Shavit resigned from all
positions he held with us and our Israeli subsidiary. In connection with his
resignation, we, signed an agreement pursuant to which Mr. Shavit is to continue
to receive the salary and benefits received
<PAGE>
35
at the time of his resignation through September 1999. Additionally, warrants
for 48,326 shares which would have otherwise vested in September 2000 were
terminated. To date, Mr. Shavit has exercised options for 128,872 shares. Mr.
Shavit and we released each other from any claims arising prior to his
termination, except that Mr. Shavit's obligations respecting confidentiality,
non-competition and non-solicitation remain in effect for one year following his
termination. In consideration of Mr. Shavit's waiver of certain amounts owed to
him under the separation agreement, we agreed to vest his remaining 40,273
options and to register the shares issuable upon the exercise thereof.
ITEM 13. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENTS
3.1 Certificate of Incorporation of TTR, as amended.(3)
3.2 By-Laws of TTR, as amended.(3)
4.1 Specimen Common Stock Certificate. (1)
4.2.2 Form of 10% Promissory Note dated variously as of April through August
1998 between Registrant and each of certain investors, in an aggregate
principal amount of $1,462,500. (3)
4.2.3 Form of Promissory Note dated as of December, 1998 between Registrant
and each of certain investors, in an aggregate principal amount of
$150,000. (3)
Certain instruments which define the rights of holders of long-term debt of the
Registrant and its consolidated subsidiary have not been filed as Exhibits to
this Registration Statement since the total amount of securities authorized
under any such instrument does not exceed 10% of the total assets of the Company
and its subsidiary on a consolidated basis, as of June 30, 1999.
4.4.2 Warrant Agreement dated as of December 23,1997 between Registrant and
Biscount Overseas Ltd.(2)
4.4.3 Warrant Agreement dated as of February 26, 1998 between Registrant and
Biscount Overseas Ltd. (2)
4.4.4 Warrant dated January 15, 1998 between Registrant and Mu & Kang
Consultants.(3)
4.4.7 Form of Warrant dated as of December 1998 between Registrant and
certain private investors.(3)
4.4.8 Form of Warrant variously dated April through August 1998 between
Registrant and certain private investors. (3)
4.4.9 Warrant dated June 11, 1998 between Registrant and Plans Inc.
9.1 Voting Trust Agreement.(1)
10.1 Financial Consulting Agreement with Josephthal & Co., Inc. (3)
10.2 1996 Incentive and Non-Qualified Stock Option Plan, as amended.(3)
10.3 Non-Executive Directors Stock Option Plan. (3)
10.4 Employment Agreement between TTR Technologies Ltd. and Marc D.
Tokayer.(1)
10.5 Employment Agreement between TTR Technologies Ltd. and Baruch
Sollish.(1)
<PAGE>
36
10.6 Employment Agreement between TTR Technologies Ltd. and Arik Shavit, as
amended.(1)
10.7 Employment Agreement between TTR Technologies Inc. and Steven L.
Barsh. (3)
10.8 Unprotected Tenancy Agreement between TTR Technologies Ltd and
Pharmastate Ltd. dated June 10, 1996.(1)
10.9 Consulting Agreement dated November 1, 1994 between TTR and Shane
Alexander Unterburgher Securities Inc.(1)
10.10 Consulting Agreement dated October 1, 1995 between TTR and Holborn
Systems Ltd.(1)
10.11 Loan and Security Agreement dated September 30, 1996 between TTR and
732498 Ontario Ltd.(1)
10.12 Form of Note Extension Agreement.(1)
10.13 Form of Promissory Note (1).
10.14 Settlement Agreement dated May 6, 1997 between TTR and Henry
Israel.(2)
10.15 Agreement dated January 19, 1998 between TTR and Henry Israel.(2)
10.16 Development and OEM Licensing Agreement dated October 31, 1997 between
TTR and Doug Carson & Associates Inc.(2)
10.17 Development and OEM Licensing Agreement dated October 31, 1997 between
TTR, Doug Carson & Associates Inc. and Nimbus CD International,
Inc.(2)
10.18 Management Agreement dated October 1, 1997 between TTR and Ultimus
Ltd.(2)
10.19 Stock Purchase Agreement dated December 20, 1997 between TTR and
Biscount Overseas Ltd.(2)
10.20 Consulting Agreement between TTR and Pioneer Management
Corporation.(1)
10.21 Purchase Agreement and Assignment dated January 5, 1995 between TTR
Israel and Rina Marketing R&D Ltd.(1)
10.22 Form of Subscription Agreement dated as of December 1998 between TTR
and certain investors. (3)
10.25 Form of Subscription Agreement dated variously as of April through
August 1998 between TTR and certain investors.(3)
10.28 Consulting Agreement between Registrant and Jarvis Developments Ltd.
dated November 20, 1998 and amendment thereto dated January 28,
1999.(3)
10.29 Consulting Agreement between Registrant and Biscount Overseas Ltd.
dated October 1, 1998.(3)
10.30 Consulting Agreement between Registrant and Mordecai Lerer dated
January 28, 1999.(3)
10.31 Settlement Agreement between Registrant and Ephod Israel Group dated
January 28, 1999.(3)
10.32 Consulting Agreement between Registrant and CYGNI S.A. dated January
28, 1999.(3)
10.33 Marketing Agreement between Registrant and Machtec Ltd.(3)
10.34 Stock Purchase Agreement between Registrant and Dalimore Consulting
Ltd. dated December 10, 1998(3)
<PAGE>
37
10.35 Stock Purchase Agreement between Registrant and Abraham Stephansky
dated February 1, 1999.(3)
10.36 Stock Purchase Agreement between Registrant and Parnell Ltd. dated
April 1, 1999.(3)
10.37 Consulting Agreement between Registrant and Limelkin Ltd. dated June
1, 1998.(3)
10.38 Consulting Agreement between Registrant and Trax Investments Ltd.
dated June 11, 1998.(3)
10.39 Consulting Agreement between Registrant and Plans Inc. dated June 11,
1998.(3)
10.40 Lease between Registrant and Peppertree Properties, Inc. dated January
23, 1999.
27.1 Financial Data Schedule.(3)
- -----------------
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
SB-2, dated February 10, 1997, No. 333-11829, and incorporated herein by
reference.
(2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-KSB filed
for the Year ended December 31, 1997 and incorporated herein by reference.
(3) Filed Herewith
<PAGE>
38
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned , thereunto duly authorized.
TTR TECHNOLOGIES, INC.
By: /s/MARC D. TOKAYER
------------------------------------
MARC D. TOKAYER,
Date: August __ 1999
CHAIRMAN OF THE BOARD AND PRESIDENT
(PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER
AND OFFICER DULY AUTHORIZED TO SIGN ON
BEHALF OF REGISTRANT
<PAGE>
T.T.R. Technologies, Inc.
(A Development Stage Company)
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-1
Consolidated Financial Statements
Balance Sheets as of December 31, 1998 and 1997 F-2
Statements of Operations for the years ended December 31, 1998 and
1997 and the period from July 14, 1994 (inception) to
December 31, 1998 F-3
Statements of Comprehensive Loss for the years ended December 31, 1998
and 1997 and the period from July 14, 1994 (inception) to
December 31, 1998 F-4
Statement of Stockholders' Equity (Deficit) for the period from
July 14, 1994 (inception) to December 31, 1998 F-5
Statements of Cash Flows for the years ended December 31, 1998 and 1997
and the period from July 14, 1994 (inception) to December 31, 1998 F-6
Notes to the Consolidated Financial Statements F-7 - F-21
</TABLE>
<PAGE>
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
TTR Technologies, Inc.
We have audited the accompanying consolidated balance sheets of TTR Technologies
Inc. (formerly TTR Inc.) (the "Company") (a development stage company) as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, comprehensive loss, stockholders' equity (deficit), and cash flows
for each of the two years in the period ended December 31, 1998. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as the evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of TTR
Technologies Inc. (a development stage company) as of December 31, 1998 and
1997, and the consolidated results of its operations and its cash flows for each
of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
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 stockholders' deficit 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.
Brightman Almagor & Co.
Certified Public Accountants (Israel)
A member of Deloitte Touche Tohmatsu
Ramat Gan, Israel
June 30, 1999
<PAGE>
F-2
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1997
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 74,445 $ 450,040
Accounts receivable 7,793 --
Stock subscription receivable -- 100,000
Other current assets 21,250 131,538
------------ ------------
Total current assets 103,488 681,578
Property and equipment - net 311,493 416,045
Due from officer -- 16,000
Deferred financing costs, net 70,712 --
Other assets 4,852 75,004
------------ ------------
Total assets $ 490,545 $ 1,188,627
------------ ------------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
LIABILITIES
Current liabilities
Current portion of long-term debt $ 873,153 $ 5,564
Short-term borrowings, net of
discount of $173,030 264,335 --
Accounts payable 744,103 87,363
Accrued expenses 1,056,345 139,972
------------ ------------
Total current liabilities 2,937,936 232,899
Long-term debt, less current portion 594,011 14,804
Accrued severance pay 56,765 31,195
------------ ------------
Total liabilities 3,588,712 278,898
Common stock issued with guaranteed
selling price - $.001 par value;
15,000 shares issued and outstanding -- 232,500
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value;
20,000,000 shares authorized;
4,176,326 and 4,271,548 issued
and outstanding, including -0- and
1,000,000 shares placed in escrow,
respectively 4,177 4,272
Common stock subscribed, $.001 par
value; 16,000 shares at
December 31, 1997 -- 100,000
Additional paid-in capital 9,170,585 8,117,275
Other accumulated comprehensive income 79,415 38,029
Deficit accumulated during the
development stage (11,758,111) (6,179,571)
Less: deferred compensation (594,233) (1,402,776)
------------ ------------
Total stockholders' equity (deficit) (3,098,167) 677,229
------------ ------------
Total liabilities and stockholders'
equity (deficit) $ 490,545 $ 1,188,627
============ ============
See Notes to Financial Statements.
<PAGE>
F-3
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
From
Inception
Year (July 14,
Ended 1994) to
December 31, December 31,
1998 1997 1998
---- ---- ----
Revenue $ 54,922 $ -- $ 54,922
Expenses
Research and development 1,032,253 967,155 2,619,961
Sales and marketing 1,837,931 1,421,496 3,693,225
General and administrative 2,380,976 1,477,085 4,502,797
------------ ------------ ------------
Total expenses 5,251,160 3,865,736 10,815,983
------------ ------------ ------------
Operating loss (5,196,238) (3,865,736) (10,761,061)
Other (income) expense
Legal settlement -- 232,500 232,500
Loss on investment -- -- 17,000
Other income (25,000) (50,000) (75,000)
Interest income (3,413) (42,069) (58,306)
Interest expense 410,715 113,445 880,856
------------ ------------ ------------
Total other (income) expenses 382,302 253,876 997,050
------------ ------------ ------------
Net loss $ (5,578,540) $ (4,119,612) $(11,758,111)
============ ============ ============
Per share data:
Basic and diluted $ (1.54) $ (1.35)
============ ============
Weighted average number
of common shares used in
basic and diluted loss
per share 3,615,908 3,054,519
============ ============
See Notes to Financial Statements.
<PAGE>
F-4
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
From
Inception
Year (July 14,
Ended 1994) to
December 31, December 31,
1998 1997 1998
---- ---- ----
Net loss $ (5,578,540) $ (4,119,612) $(11,758,111)
Other comprehensive
income (loss)
Foreign currency translation
adjustments 41,386 (19,667) 79,415
------------ ------------ ------------
Comprehensive loss $ (5,537,154) $ (4,139,279) $(11,678,696)
============ ============ ============
See Notes to Financial Statements.
<PAGE>
F-5
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Additional
Common Stock Subscribed Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balances at July 14, 1994
(date of inception) -- $ -- -- $ -- $ --
Common stock issued for
Services rendered 1,200,000 1,200
Cash 1,200,000 1,200 23,800
Net loss
----------- ----------- ------------- ------------- -----------
Balances at December 31, 1994 2,400,000 2,400 -- -- 23,800
Common stock contributed (561,453) (561) 561
Common stock issued for
Services rendered 361,453 361 17,712
Issuance of common stock
purchase warrants
Services rendered 600
Foreign currency translation
adjustment
Net loss
----------- ----------- ------------- ------------- -----------
Balances at December 31, 1995 2,200,000 2,200 -- -- 42,673
Common stock issued for
Cash, net of offering
costs of $11,467 850,000 850 362,683
Foreign currency translation
adjustment
Net loss
----------- ----------- ------------- ------------- -----------
Balances at December 31, 1996 3,050,000 $ 3,050 -- $ -- $ 405,356
Common stock contributed (135,000) (135) 135
Issuances of common stock,
par value $.001
Cash, net of offering costs
of $832,551 908,000 908 5,000,440
Services rendered 74,000 74 832,551
Exercise of options 374,548 375 3,370
Common stock subscriptions 16,000 100,000
Sale of Underwriters warrants 80
Stock options and warrants
granted 1,875,343
Amortization of deferred
compensation
Foreign currency translation
adjustment
Net loss
----------- ----------- ------------- ------------- -----------
Balances at December 31, 1997 4,271,548 4,272 16,000 100,000 8,117,275
Common stock subscriptions 16,000 16 (16,000) (100,000) 99,984
Common Stock forfeited (1,000,000) (1,000) 1000
Transfer of temporary equity to
permanent capital 15,000 15 77,141
Issuances of common stock,
par value $.001
Cash 41,667 42 24,958
Services rendered 244,000 244 620,344
Stock options and warrants
granted (cancelled) (255,992)
Discount relating to shares and
warrants issued 156,111 156 486,307
Amortization of deferred
compensation
Warrant exchange 432,000 432 (432)
Foreign currency translation
adjustment
Net loss
----------- ----------- ------------- ------------- -----------
Balances at December 31, 1998 4,176,326 $ 4,177 0 $ $ 9,170,585
=========== =========== ============= ============= ===========
<CAPTION>
Deficit
Foreign Accumulated
Currency During
Translation Development Deferred
Adjustment Stage Compensation Total
---------- ----- ------------ -----
<S> <C> <C> <C> <C>
Balances at July 14, 1994
(date of inception) $ -- $ -- $ -- $ --
Common stock issued for
Services rendered 1,200
Cash 25,000
Net loss (42,085) (42,085)
------------- -------------- -------------- -----------
Balances at December 31, 1994 -- (42,085) -- (15,885)
Common stock contributed --
Common stock issued for
Services rendered 18,073
Issuance of common stock purchase
warrants
Services rendered 600
Foreign currency translation
adjustment 22,652 22,652
Net loss (896,663) (896,663)
------------- -------------- -------------- -----------
Balances at December 31, 1995 22,652 (938,748) -- (871,223)
Common stock issued for
Cash, net of offering costs
of $11,467 363,533
Foreign currency translation
adjustment 35,044 35,044
Net loss (1,121,211) (1,121,211)
------------- -------------- -------------- -----------
Balances at December 31, 1996 $ 57,696 $ (2,059,959) $ -- (1,593,857)
Common stock contributed --
Issuances of common stock,
par value $.001 --
Cash, net of offering
costs of $832,551 5,001,348
Services rendered (500,000) 332,625
Exercise of options 3,745
Common stock subscriptions 100,000
Sale of Underwriters warrants 80
Stock options and warrants granted (1,875,343) --
Amortization of deferred compensation 972,567 972,567
Foreign currency translation
adjustment (19,667) (19,667)
Net loss (4,119,612) (4,119,612)
------------- -------------- -------------- -----------
Balances at December 31, 1997 38,029 (6,179,571) (1,402,776) 677,229
Common stock subscriptions --
Common Stock forfeited --
Transfer of temporary equity to
permanent capital 77,156
Issuances of common stock,
par value $.001
Cash 25,000
Services rendered (620,588) --
Stock options and warrants
granted (cancelled) 255,992 --
Discount relating to shares and
warrants issued 486,463
Amortization of deferred
compensation 1,173,139 1,173,139
Warrant exchange --
Foreign currency translation
adjustment 41,386 41,386
Net loss (5,578,540) (5,578,540)
------------- -------------- -------------- -----------
Balances at December 31, 1998 $ 79,415 $ (11,758,111) $ (594,233) $(3,098,167)
============= ============== ============== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
F-6
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From
Inception
Year (July 14,
Ended 1994) to
December 31, December 31,
1998 1997 1998
---- ---- ----
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,578,540) $ (4,119,612) $(11,758,111)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 187,298 184,290 627,629
Amortization of note discount 272,009 -- 272,009
Translation adjustment -- -- (1,528)
Amortization of deferred compensation 1,173,139 972,567 2,145,706
Stock and warrants issued for services
and legal settlement -- 565,125 583,798
Payment of common stock issued with
guaranteed selling price (155,344) (155,344)
Increase (decrease) in cash attributable
to changes in assets and liabilities
Accounts receivable (8,480) 478 (8,317)
Other current assets 99,113 (7,204) (26,805)
Other assets 69,000 (72,700) (3,700)
Accounts payable 793,297 (72,401) 899,065
Accrued expenses 789,348 22,297 913,134
Accrued severance 33,009 26,299 77,570
Interest payable 90,920 (234,508) 90,920
------------ ------------ ------------
Net cash used by operating activities (2,235,231) (2,735,369) (6,343,974)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (64,363) (175,507) (675,763)
Increase in organization costs -- -- (7,680)
------------ ------------ ------------
Net cash used by investing activities (64,363) (175,507) (683,443)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 125,000 5,520,837 6,035,570
Loans to officer 16,000 10,000 --
Deferred stock offering costs -- (309,565) (475,664)
Deferred financing costs (143,000) (19,000) (405,411)
Proceeds from short-term borrowings 306,553 200,000 1,356,155
Proceeds from long-term debt 1,637,688 -- 2,751,825
Repayment of short-term borrowings -- (1,049,602) (1,049,602)
Repayments of long-term debt (15,839) (1,053,455) (1,105,310)
------------ ------------ ------------
Net cash provided by financing
activities 1,926,402 3,299,215 7,107,563
------------ ------------ ------------
Effect of exchange rate changes
on cash (2,403) (1,955) (5,701)
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (375,595) 386,384 74,445
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 450,040 63,656 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 74,445 $ 450,040 $ 74,445
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 42,609 $ 345,258 $ 422,111
============ ============ ============
Transfer of common stock issued with
guaranteed selling price
to permanent capital 77,156 $
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
F-7
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
TTR Inc. (the "Company") was incorporated on July 14, 1994 under the laws
of the State of Delaware. In December 1998 the Company amended its
certificate of incorporation to change its name to TTR Technologies, Inc.
TTR Technologies Ltd., ("TTR 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 design, development and commercialization of
proprietary software security products.
The Company is considered to be in the development stage and has earned
limited revenues to date. Business activities to date have focused on
product and marketing research, product development, and raising capital.
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 (see Note 3).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, TTR 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.
Cash Equivalents
Cash equivalents consist of short-term, highly liquid debt investments
that are readily convertible into cash with original maturities when
purchased of three months or less.
Fair Value of Financial Instruments
Substantially all of the Company's financial instruments, consisting
primarily of cash
<PAGE>
F-8
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
equivalents, current receivables, accounts payable and notes payable, are
carried at, or approximate, fair value because of their short-term nature
or because they carry market rates of interest.
Revenue recognition
In October 1997, the American Institute of Certified Public Accountants
recently issued Statement of Position (SOP) 97-2, "Software Revenue
Recognition", which supersedes SOP 91-1. SOP 97-2 provides guidance in
recognizing revenue on software transactions and is required for
transactions entered into after December 15, 1997.
The Company recognizes revenues from software transactions upon delivery
to the customer. Revenues from maintenance and engineering services will
be recognized over the term of the respective contracts
Stock Based Compensation
Compensation expense arising from stock grants, and options and warrants
issued at exercise prices below the quoted market price of the underlying
Common Stock as of the grant date, is recognized over the vesting periods
of the related grants. Such stock-based compensation resulted in an
aggregate charge to operations of approximately $1,173,000 and $1,305,000
for the years ended December 31, 1998 and 1997.
Foreign Currency Translations
The financial statements of TTR Ltd. 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
The Company has adopted the provisions of Statement of Financial
Accounting Standards No.128 (SFAS 128) "Earnings per Share". SFAS 128
requires dual presentation of basic and diluted earnings per share (EPS)
for complex capital structures on the face of the Statements of
Operations. Basic EPS is computed by dividing net income (loss) by the
weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution from the exercise or
conversion of other securities into common stock. None of the stock
options and warrants issued in 1998 and 1997 has been included in the net
loss per share computation for the years presented, because their
inclusion would be anti-dilutive. Shares held in escrow are not treated as
outstanding during any period (see Note 11).
<PAGE>
F-9
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Depreciation and Amortization
Equipment, vehicles and leasehold improvements are stated at cost.
Equipment and vehicles are depreciated over the estimated useful lives of
the related assets, which range from three to seven years. Leasehold
improvements are amortized over the related lease term. Depreciation is
computed on the straight-line method.
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 uses the liability method to determine its income tax expense
as required under the Statement of Financial Accounting Standards No. 109,
(SFAS 109). SFAS 109 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, if it is more likely than not that all or a portion
of it will not be realized.
Long-lived assets
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", the
Company records impairment losses on long-lived assets used in operations,
including goodwill and intangible assets, when events and circumstances
indicate that the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying
amounts of those assets.
Stock Options
Under SFAS No. 123, "Accounting for Stock-based Compensation", the Company
must either recognize in its financial statements costs related to its
employee stock-based
<PAGE>
F-10
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
compensation plans, such as stock option and stock purchase plans, using
the fair value method, or make pro forma disclosures of such costs in a
footnote to the financial statements. The Company has elected to continue
to use the intrinsic value-based method of APB Opinion No. 25, as allowed
under SFAS No. 123, to account for its employee stock-based compensation
plans, and to include the required pro forma disclosures based on fair
value accounting.
Comprehensive Income (loss)
In January 1998, the Company adopted SFAS 130, "Reporting Comprehensive
Income," which establishes standards for reporting the components of
comprehensive income. The foreign currency translation adjustment is the
Company's only component of comprehensive income.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern 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 has an accumulated deficit at
December 31, 1998 of $11,758,111. The Company faces a number of risks and
uncertainties regarding its business, including among other factors, the
demand and market acceptance of its products, dependence on a single
product line, the effects of technological change, and the development of
new products. 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 which raises substantial
doubt about its ability to continue as a going concern.
The Company is continuing to pursue various alternatives for additional
financing. From April 1998 to April 1999, the Company realized net
proceeds of approximately $1,820,000 from various private placements. In
May 1999, the Company entered into an agreement for the sale of up to
$2,000,000 of 10% convertible debentures (see Note 15).
During 1998, due to its financing difficulties, the Company was forced to
terminate most of its employees. The abovementioned financing will allow
the Company to bring several suppliers and vendors current and to maintain
operations through November 1999. Thereafter, the Company will need
additional financing.
The ability of the Company to continue as a going concern is dependent
upon the success of the Company's products and its access to sufficient
funding to enable it to continue operations. There is no assurance that
sufficient revenues will be generated or that adequate financing will be
available to the Company. Insufficient funds from operations or the
inability to obtain adequate financing would have a material adverse
effect on the Company.
NOTE 4 - OTHER CURRENT ASSETS
<PAGE>
F-11
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, December 31,
1998 1997
---- ----
Research and development participation
from the Government of Israel -- 39,678
Management income receivable (1) -- 50,000
Other 21,250 41,860
------ -------
21,250 131,538
====== =======
(1) In October 1997, TTR Ltd. entered into a two-year management
agreement with Ultimus LTD, (Ultimus) an Israeli company. Under the
agreement, the Company provided management and administrative
services relating to Ultimus' day-to-day operations and earned fees
totaling $75,000. The agreement was terminated in April 1998. An
ex-officer of the Company holds approximately 7.5% of the
outstanding shares of Ultimus and, together with the Company's
Chairman, served on their Board of Directors.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, December 31,
1998 1997
---- ----
Leasehold improvements $109,350 $126,906
Office equipment 150,608 144,501
Computer equipment 205,477 219,895
Vehicles 84,601 86,732
-------- --------
550,036 578,034
Less: Accumulated depreciation 238,543 161,989
-------- --------
$311,493 $416,045
======== ========
Depreciation expense was $113,858 and $88,311 and for the years ended
December 31, 1998 and 1997, respectively.
NOTE 6 - DUE FROM OFFICER
This amount represents non-interest bearing advances to an officer of the
Company and was repaid in July 1998.
NOTE 7 - ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31, December 31,
1998 1997
---- ----
<PAGE>
F-12
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accrued payroll and related amounts $ 749,371 $ 49,750
Taxes 24,257 --
Accrued interest 90,920 --
Other 191,797 90,222
---------- --------
$1,056,345 $139,972
========== ========
NOTE 8 - ACCRUED SEVERANCE PAY
Under Israeli law, TTR Ltd. is required to make severance payments to
dismissed employees (including officers) and to employees leaving
employment under certain other circumstances. This liability is calculated
based on the years of employment for each employee, in accordance with the
"severance pay laws." The Company's liabilities for required severance
payments are covered by funding into severance pay funds and the purchase
of insurance policies.
NOTE 9 - DEBT FINANCINGS
Short-term Borrowings
December 31, December 31,
1998 1997
---- ----
(a) Promissory Note (net of
discount of $42,555) $ 57,445 $ --
(b) Other loans 81,455 --
Bank Loan 125,435 --
--------- --------
$ 264,335 $ --
========= ========
(a) In September 1998, the Company issued a short-term non-interest
bearing $100,000 promissory note to a private investor. In
connection with the loan, the company also sold to the investor
111,111 shares of Common Stock at par. For financial reporting
purposes, the Company recorded a note discount totaling $87,500, to
reflect the value of the stock. The discount is being amortized on a
straight-line basis over the term of the note. The note became due
on March 31, 1999 and has not been formerly extended.
(b) This amount represents non-interest bearing advances which were used
to purchase 100,517 additional shares of Common Stock in February
1999.
Long-Term Debt
December 31, December 31,
1998 1997
---- ----
(a) Bank loan $ 26,563 $20,368
<PAGE>
F-13
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(b) 10% Promissory Notes (net of
discount of $130,475) 1,332,025 --
(c) 8% Promissory Notes (net of
discount of $41,424) 108,576 --
---------- -------
1,467,164 20,368
Less: current portion 873,153 5,564
---------- -------
$ 594,011 $14,804
========== =======
(a) These loans are denominated in "New Israeli Shekel" (NIS), bear
interest at the Israeli prime rate (15% at December 31, 1998) plus
2.4%-3% per annum, and are secured by substantially all the assets
of TTR Ltd.. Principal payments are due in various installments
through 2001.
(b) From April through August 1998, the Company realized gross proceeds
of $1,462,500 from a private offering of 29.25 Units, each Unit
consisting of a $50,000 10% Promissory Note and Warrants to purchase
11,500 shares of Common Stock. For financial reporting purposes, the
Company recorded a total discount of $357,450, to reflect the value
of the Warrants. The discount is being amortized on a straight-line
basis over the terms of the respective notes. The notes and accrued
interest are due at the earlier of one year or 30 days following any
public or private equity or debt financing exceeding $1,000,000.
As of June 1, 1999, a total of $1,002,284 of note principal plus
accrued interest became due. The Company has obtained extensions for
one additional year with respect to note principal totaling $512,000
and is awaiting approval to extend from the other note-holders. In
consideration of the extension, the Company has reduced the warrant
exercise prices to $1.50 per share.
(c) In December 1998, the Company realized gross proceeds of $150,000
from a private offering of 5 Units, each Unit consisting of a
$30,000 8% Promissory Note, 9,000 shares of Common Stock and
Warrants to purchase an additional 3,000 shares. For financial
reporting purposes, the Company recorded a total note discount of
$41,513, to reflect the value of the Stock and Warrants. The
discount is being amortized on a straight-line basis over the term
of the notes. The notes and accrued interest are due at the earlier
of two years or 5 days following any public or private equity or
debt financing exceeding $800,000.
The aggregate maturities of long-term debt for the next three years ending
December 31, are as follows: 1999 - $873,153; 2000 - $586,541; and
2001-$7,470.
NOTE 10 - INCOME TAXES
At December 31, 1998, the Company had available $3,750,000 of net
operating loss carryforwards for U.S. federal income tax purposes which
expire in the years 2014 through 2019, and $5,471,000 of foreign net
operating loss carryforwards with no
<PAGE>
F-14
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 for U.S.
federal and Israel income taxes are as follows:
December 31, December 31,
1998 1997
---- ----
Net operating loss carryforwards $ 3,094,809 $ 1,839,669
Research and development 227,000 --
Stock based compensation 40,313 17,813
Accrued vacation and severance 32,000 20,000
----------- -----------
Total deferred tax assets 3,394,121 1,877,481
Valuation allowance (3,394,121) (1,877,481)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
Pre-tax losses from foreign (Israeli) operations were $5,471,000 and
$2,927,080 for the years ended December 31, 1998 and 1997, respectively.
NOTE 11 - STOCKHOLDERS EQUITY
Stock Options
1996 Incentive and Non-qualified 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. In December 1998,
the Plan was amended to increase the number of shares available for grant
to 750,000. 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
<PAGE>
F-15
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ISOs issued to employees who are less than 10% stockholders and employees
who are 10% stockholders. The Plan will terminate in 2006.
Non-Executive Directors Stock Option Plan
In July 1998, the Board of Directors adopted the Non-Executive Directors
Stock Option Plan ("the Directors' Plan") and has reserved up to 25,000
shares of common stock for issuance thereunder. The plan provides for the
grant of options to directors who are not otherwise employed by the
Company. Options are exercisable upon the date of grant and expire five
years from the date of the grant. Upon the termination of director, the
options expire within two months of such termination. The exercise price
of the option will be the fair market value of the share on the date of
the grant of the option. The plan will terminate in 2008. As of December
31, 1998, no options had been granted under the Directors' Plan.
A summary of the status of the Plan as of December 31, 1998 and 1997 and
changes during the years ending on that date are presented below:
Range of
Exercise
Shares Prices
---------------------
Options outstanding, January 1, 1997 5,000 6.00
Granted 175,600 5.00-13.94
Canceled (19,500) 7.00-13.94
Exercised -- --
-------- -----------
Options outstanding, December 31, 1997 161,100 $5.00-13.88
Granted 291,600 3.03-7.00
Canceled (294,950) 3.03-13.88
Exercised -- --
-------- -----------
Options outstanding, December 31, 1998 157,750 $4.00-13.88
======== ===========
Shares of common available for future grant 592,250
========
The following table summarizes information about stock options under the
plan outstanding at December 31, 1998:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Average Weighted Average
---------------- ----------------
Remaining
Number Contractual Exercise Number Exercise
Range of price Outstanding Life Price Exercisable Price
- --------------------------------------------------------------------------------
$4.00 - $6.00 106,500 8.54 $ 5.13 19,975 $5.23
7.00 8,000 8.07 7.00 1,875 7.00
<PAGE>
F-16
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10.00 - 13.88 43,750 8.20 10.33 10,938 10.33
------------- ------ ---- ----- ------ -----
$4.00-$13.88 157,750 8.42 $ 6.66 32,788 $7.03
=========== ======= ==== ==== ====== ====
The Company has elected to use the intrinsic value-based method of APB
Opinion No. 25 to account for all of its employee stock-based compensation
plans. Accordingly, no compensation cost has been recognized in the
accompanying financial statements for stock options issued to employees
where the exercise price of the option equals or exceeds the fair value of
the underlying common stock as of the grant date.
In March 1997, in connection with an employment agreement, the Company
granted 60,000 options with an exercise price below the fair value of the
underlying common stock. The issuance of the options resulted in a charge
to deferred compensation in the amount of $300,000 which is being
amortized over the four year vesting period.
A total of 24,000 stock options granted under the 1996 Plan to
non-employees in 1997 resulted in a charge to deferred compensation of
$53,032, which is being amortized over the four-year vesting period.
Weighted-average grant date fair value of options granted in 1998 and
1997, under the Black-Scholes option pricing model, was $1.14 and $5.82
per option, respectively.
Other Option Grants
In 1997, the Company issued options to purchase 217,473 shares to the
Chief executive Officer of TTR Ltd. The options have an exercise price of
$.01 per share and vest over a four- year period. The issuance of the
options resulted in a charge to deferred compensation expense of
$1,522,300 which was being amortized over the service period. In November
1998 the officer resigned and a settlement agreement was executed.
Pursuant to the agreement, 48,328 options were cancelled and the remaining
169,145 become exercisable at various dates in 1999.
In 1998, the Company issued options to purchase 250,000 shares to the
Company's Chief Executive Officer. The options have an exercise price of
$.93 per share, which was equal to the fair value of the share on the date
of the grant, and vest immediately.
The Company has adopted the pro forma disclosure provisions of SFAS No.
123. Had compensation cost for all of the Company's stock-based
compensation grants been determined in a manner consistent with the fair
value approach described in SFAS No. 123, the Company's net loss and net
loss per share as reported would have been increased to the pro forma
amounts indicated below:
Net loss 1998 1997
As reported $(5,578,540) $(4,119,612)
Proforma $(5,635,574) $(4,342,194)
<PAGE>
F-17
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loss per share
As reported $(1.54) $(1.35)
Proforma $(1.56) $(1.42)
The fair value of each option granted in 1997 and 1998 is estimated on the
date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
1998 1997
Risk free interest rates 5.51% 6.23%
Expected option lives 2.5 years 2.5 years
Expected volatilities 46.5% 46.5%
Expected dividend yields None None
Warrants
o In 1994 and 1995, the Company granted warrants to consultants
to purchase 200,000 shares of Common Stock at $.01 per share.
These warrants were exercised in February 1997.
o In April 1996, in connection with a private placement, the
Company issued warrants to purchase an additional 1,000,000
shares of Common Stock. The warrants were exercisable for a
period of three years commencing February 1997 at an exercise
price of $7.00 per share. In July 1998, the warrants were
exchanged for 400,000 shares of Common Stock.
o In February 1997, in connection with the Company's initial
public offering the Company sold to the underwriter, for $80,
five-year warrants to purchase up to an additional 80,000
shares of the Company's Common Stock at an exercise price
equal to $11.20 per share. In July 1998, the warrants were
exchanged for 32,000 shares of Common Stock.
o In December 1997, in connection with a private placement, the
Company issued warrants to purchase an additional 33,000
shares of Common Stock. The warrants are exercisable for a
period of four years at an exercise price of $7.80 per share.
However, in lieu of cash payments for exercising the shares,
the investor is entitled to accept a smaller number of shares
of Common Stock based on the spread between the exercise price
and the then public market price of the Company's Common
Stock.
o In April 1998, in connection with a proposed public offering
of additional shares of Common Stock, the Company issued to an
underwriter four-year Warrants to purchase up to 25,000 shares
of the Company Stock at an exercise price of $5.63.
o From April through August 1998, in connection with a private
placement, the
<PAGE>
F-18
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company issued warrants to purchase an additional 336,375
shares of Common Stock. The warrants are exercisable for a
period of four years at exercise prices ranging from $3.41 to
$6.47 per share. In consideration of extending the term of the
related notes, the Company has reduced the exercise price to
$1.50 per share on a total of 117,875 warrants.
o In June 1998 the Company issued warrants to purchase 25,000
shares of Common Stock to a consultant pursuant to a one-year
consulting agreements. The warrants were exercisable for a
period of four years at an exercise price of $5.75. In April
1999, the exercise price was reduced to $1.50 per share
o In December 1998, in connection with a private placement, the
Company issued warrants to purchase an additional 15,000
shares of Common Stock. The warrants are exercisable for a
period of five years at an exercise price of $6.00.
At December 31, 1998, the Company had outstanding warrants to purchase a
total of 434,375 shares of Common Stock with exercise prices ranging from
$1.50 to $7.80 per share.
Stock Issuances
During the year ended December 31, 1997, the Company completed the
following common stock transactions:
o In February 1997, the Company completed an initial public
offering of 860,000 shares of its Common Stock and realized
net proceeds of approximately $4,700,000 after stock offering
costs. The Company also made an advance payment of $120,000 to
the underwriter for a two-year management and financial
consulting agreement.
o In March 1997, the Company issued 5,000 shares of Common Stock
to a consultant and recorded a $50,000 compensation charge.
o In March 1997, the Company issued 50,000 shares of Common
Stock to an employee, pursuant to a one-year employment
agreement (see Note 16g). The Company recorded deferred
compensation in the amount of $500,000 relating to the
issuance of the shares, and amortized this over the term of
the agreement.
o In April 1997, the Company issued 19,000 shares of Common
Stock to two consultants and recorded a $282,625 compensation
charge.
o On December 24, 1997, the Company entered into a stock
subscription agreement for the sale of 64,000 shares of Common
Stock for an aggregate purchase price of $400,000. Pursuant to
the agreement, 48,000 shares were paid for and issued on that
date and the remaining 16,000 shares were paid for and issued
on February 20, 1998. The Company also issued warrants to the
investor to purchase an additional
<PAGE>
F-19
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33,000 shares of Common Stock.
During the year ended December 31, 1998, the Company completed the
following common stock transactions:
o An aggregate of 250,000 shares of the Company's Common Stock,
owned beneficially by its President, and designated as escrow
shares were forfeited and returned to the Company. In June
1998, the Company's President waived his rights to the
remaining 750,000 escrowed shares.
o During 1998, the Company issued a total of 244,000 shares of
Common Stock and 25,000 warrants to various consultants for
services rendered. The value of the services totaling $642,700
is being amortized over the one-year contract terms.
o In December 1998, the Company entered into an agreement with a
private investor for the sale of an additional 150,758 shares
of Common Stock. The total purchase price was $90,455, of
which $25,000 was received in 1998.
NOTE 12 - COMMON STOCK ISSUED WITH GUARANTEED SELLING PRICE
In 1997, the Company and TTR Ltd. were served with claims by an individual
demanding, among other things, royalties at the rate of 5% of the proceeds
from the sales of products in which the plaintiff claims to have provided
consulting services towards its development.
In May 1997, pursuant to a settlement agreement, the Company issued to the
individual 15,000 shares of Common Stock subject to a guaranteed selling
price of $15.50 per share. In 1998, the individual sold his shares in the
open market for $77,156, and the Company paid the shortfall of $155,344,
as required by the guarantee. In 1997, the Company recorded an expense of
$232,500 in connection with the settlement agreement.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Royalties
TTR Ltd. is committed to pay royalties to the Office of the Chief
Scientist of the Government of Israel (OCS) on proceeds from sales of
products of which the OCS has participated by way of grants. The royalties
are payable at the rate of 3% for the first three years of product sales,
4% for the following three years, and 5% thereafter up to a maximum of
100% of the grant. The total amount of grants received at December 31,
1998 was $210,000.
The research and development grants are presented in the statement of
operations as a reduction of research and development expenses.
The refund of the grant is contingent on future sales and the Company has
no obligation to
<PAGE>
F-20
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
refund these grants if sufficient sales are not generated.
Operating Leases
The Company and TTR Ltd. have each entered into lease agreements for
office space expiring through 2002. Future minimum rentals on these leases
as of December 31, 1998 are as follows:
December 31,
------------
1999 $ 68,549
2000 68,549
2001 40,785
2002 10,263
--------
$181,145
========
NOTE 14 - GEOGRAPHIC DATA
U. S. % of Total Israel % of Total
-----------------------------------------------
For the year ended
December 31, 1998:
Revenue $ -- -- $54,922 100%
Operating loss (2,162,337) 39.65% (3,033,901) 60.35%
Identifiable assets 100,966 24.05% 318,867 75.95%
For the year ended
December 31, 1997:
Revenue -- -- -- --
Operating loss (1,495,108) 38.68% (2,370,628) 61.32%
Identifiable assets 633,285 53.28% 555,342 46.72%
NOTE 15 - SUBSEQUENT EVENTS
Stock Grants
In January and February 1999 the Company issued 627,000 shares of Common
Stock and 10,000 warrants exercisable at $1.75 to various consultants
pursuant to one year consulting agreements. The Company will record a
charge to deferred compensation expense of $445,725 as a result of these
issuances. Also in January 1999, the Company issued 250,000 shares of
Common Stock as payment of an outstanding liability in the amount of
$168,750.
Private Placement
In February and April 1999, the Company received $160,000 from the
issuance of an additional 205,682 shares of its Common Stock.
<PAGE>
F-21
TTR TECHNOLOGIES INC. AND ITS SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Litigation
In June 1999, the Company received notice from a shareholder, threatening
to commence litigation, alledging that the Company failed to register his
stock. The shareholder is seeking the return of his investment in the
amount of $400,000 plus interest to date. The Company is seeking to settle
and is presently negotiating this matter. As present, management cannot
predict the outcome.
10% Convertible Debentures
In May 1999, the Company issued $1,000,000 of its 10% Convertible
Debentures to private investors. The Debentures were issued pursuant to
the terms of an agreement which further provides that, subject to certain
conditions, the Investors will purchase an additional $1,000,000 of
Debentures no later than five days after the effective date of a
registration statement covering the Common Stock into which the Debentures
may be converted. The Debentures mature on April 30, 2001.
The Debentures are convertible into shares of the Company's Common Stock
at a conversion rate based on the closing trading prices of the Common
Stock during certain specified periods, subject to certain minimum
conversion rates. In addition, upon conversion warrants will be issued to
purchase additional shares of Common Stock equal to one-half of the shares
of Common Stock issued. The warrants are exercisable at a price per share
equal to 120% of the conversion rate, subject to certain maximums and
expire in April 2002.
The Company is obligated to register with Securities Exchange Commission
200% of the number of shares issuable on conversion of $2,000,000 in
aggregate principal amount of the debentures and 200% of the number of
shares of common stock issuable upon exercise of the warrants that are
issuable upon conversion of the debentures.
In connection with the sale of Debentures, the Company also issued
warrants to purchase up to 1.3 million shares of Common Stock to an
independent consultant. These warrants expire in April 2002 and are
exercisable at a nominal price per share.
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TTR INC.
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, as amended on August 18, 1994.
3. Paragraph 1 of the Certificate of Incorporation is hereby amended to
change the name of the corporation to "TTR Technologies, Inc."
4. Paragraph 4 of the Certificate of Incorporation is hereby amended in
its entirety to read as follows:
4. The aggregate number of shares of stock which the
corporation shall have the authority to issue is 20,000,000, 15,000,000
of which are shares of Common Stock, each with a par value of $0.001,
each entitled to one vote per share, and 5,000,000 of which are shares
of Preferred Stock.
The shares of Preferred Stock may be issued from time to time
in one or more series, in any manner permitted by law, as determined
from time to time by the Board of Directors, and stated in the
resolution or resolutions providing for the issuance of such shares
adopted by the Board of Directors pursuant to authority vested in it.
Without limiting the generality of the foregoing, shares in such series
shall have voting powers, full or limited, or no voting powers, and
shall have such designations, preferences and relative, participating,
optional, or other special rights, and qualifications, limitations, or
restrictions thereof, permitted by law, as shall be stated in the
resolution or resolutions providing for the issuance of such shares
adopted by the Board of Directors pursuant to authority hereby vested
in it. The number of shares of any such series so set forth in the
resolution or resolutions may be increased (but not above the total
number of authorized shares of Preferred Stock) or decreased (but not
below the number of shares thereof then outstanding) by further
resolution or resolutions adopted by the Board of Directors pursuant to
authority hereby vested in it.
No holder of any of the shares of the stock of the
corporation, whether now or hereafter authorized and issued, shall be
entitled as of right to purchase or subscribe for any unissued stock of
any class, or any additional shares of any class to
<PAGE>
be issued by reason of any issuances of capital stock of the
Corporation or any increase of the authorized capital stock of any
class of the corporation, or bonds, certificates of indebtedness,
debentures, or other securities convertible into stock of any class of
the corporation, or carrying any right to purchase stock of any class
of the corporation, but any such unissued stock or any such additional
authorized issue of any stock or other securities convertible into
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations, or associations, and upon such terms, as
may be deemed advisable by the Board of Directors in the exercise of
its discretion."
IN WITNESS WHEREOF, this certificate of Amendment has been signed this
30th day of January 1999.
/s/ MARC TOKAYER
------------------------------
Marc D. Tokayer, President
2
BY-LAWS
of
TTR Inc.
(a Delaware corporation)
Article I
Offices
1.1 The Board of Directors (the "Board") of the corporation shall fix
the location of the principal executive office of the corporation at any place
within or outside the State of Delaware.
1.2 The Board may at any time establish branch or subordinate offices
at any place or places.
Article II
Meetings of Stockholders
2.1 All meetings of the stockholders for the election of directors
shall be held at the principal office of the corporation , at such place as may
be fixed from time to time by the Board or at such other place either within or
without the State of Delaware as shall be designated from time to time by the
Board and stated in the notice of the meeting. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
2.2 Annual Meeting. Annual meetings of stockholders shall be held at
such other date and time as shall be designated from time to time by the Board
and stated in the notice of the meeting, at which they shall elect by a Board,
and transact such other business as may properly be brought before the meetings.
2.3 Special Meetings. Special meetings of the stockholders may be
called for any purpose or purposes, unless otherwise prescribed by statute or by
the Certificate of Incorporation, at the request of the Board, the Chairman of
the Board, the President or the stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the meeting.
2.4 Notice of Meetings. Written notice of stockholders' meetings,
stating the place, date and time of the meeting and the purpose or purposes for
which the meeting is called, shall be given to each stockholder entitled to vote
at such meeting on not less than ten (10) nor more than sixty (60) days prior to
the meeting.
When a meeting is adjourned to another place, date or time, written
notice need not be furnished of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is taken,
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice
<PAGE>
of the place, date and time of the adjourned meeting shall be furnished in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
2.5 Business Matter of a Special Meeting. Business transacted at a
special meeting of stockholders shall be limited to the purposes stated in the
notice.
2.6 List of Stockholders. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place, if other than the place of the meeting,
shall be specified in the notice of the meeting. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
2.7 Organization and Conduct of Business. The Chairman of the Board, or
in his or her absence, the President of the corporation or, in their absence,
such person as the Board may have designated or, in the absence of such person,
such person as may be chosen by the holders of a majority of the shares entitled
to vote who are present, in person or by proxy, shall call to order any meeting
of the stockholders and act as Chairman of the meeting. In the absence of the
Secretary of the corporation, the Secretary of the meeting shall be such person
as the Chairman appoints.
The chairman of any meeting of the stockholders shall determine the
order of the business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of the discussion as seems to
him or her in order.
2.8 Quorum and Adjournments. Except where otherwise provided by law or
by the Certificate of Incorporation or these By-Laws, the holders of a majority
of the stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented.
2.9 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder.
2.10 Majority Vote. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
the Certificate of Incorporation or these By-
2
<PAGE>
Laws, a different vote is required in which case such express provision shall
govern and control the decision of such question.
2.11 Record Date for Stockholder Notice and Meeting. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any divided or other distribution, or entitled to
exercise any right in respect of any change, conversion or exchange of stock for
the purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days before
any other action.
If the Board does not fix a record date, the record date of determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of the business on the
business day next preceding the day on which the meeting is held.
2.12 Proxies. Every person entitled to vote for directors or any other
matter shall have the right to do so either in person or by one or more agents
authorized by written proxy signed by the person and filed with the Secretary of
the corporation. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telecopier
transmission or otherwise) by the stockholder or the stockholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy, by a writing
delivered to the corporation stating that such proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of the proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven months from the date of the proxy,
unless otherwise provided in the proxy.
2.13 Action Without a Meeting by Written Consent. Except for the
removal of a director, all actions required to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
corporation by delivery to its registered office, its principal place of
business, or an officer of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded.
Article III
Directors
3.1 Number; Qualification. The number of directors shall be determined
from time to time by resolution of the Board and the initial Board shall consist
of three (3) directors. All directors shall be elected et the annual meeting or
any special meeting of the stockholders, except as provided in Section 3.2 of
this Article, and each director so elected shall hold office until his successor
is elected and qualified or until his earlier resignation or removal. Directors
need not be stockholders.
3
<PAGE>
3.2 Resignation and Vacancies. A vacancy or vacancies in the Board
shall be deemed to exist in the case of the death, resignation or removal of any
director, or if the authorized number of directors be increased. Vacancies may
be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, unless otherwise provided in the
Certificate of Incorporation. If the Board accepts the resignation of a director
tendered to take effect at a future time, the Board shall have the power to
elect a successor to take office when the resignation is to become effective. If
there are no directors in office, then an election of the directors may be held
in the manner provided by law.
3.3 Removal of Directors. Unless otherwise restricted by statute, the
Certificate of Incorporation or these By-Laws, any director or the entire board
of directors may be removed, with or without cause, by the holders of a majority
of shares entitled to vote at an election of directors at the annual meeting or
any special meeting of the stockholders. In addition, an employee-director whose
employment with the Company is terminated for whatsoever reason shall,
automatically and without any further action, cease to be a director.
3.4 Powers. The business of the corporation shall be managed by or
under the direction of its board of directors which 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 or required
to be exercised or done by the stockholders.
Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to
(a) Select and remove all officers, agents and employees of the
corporation; prescribe any powers and duties for them that are consistent with
law, with the Certificate of Incorporation and with these By-Laws; fix their
compensation; and require from them security for faithful service;
(b) Confer upon any office the power to appoint, remove and suspend
subordinate officers, employees and agents;
(c ) Change the location of the principal executive office or the
principal business office; cause the corporation to be qualified to do business
in any state, territory, dependency or country and conduct business within or
without the State of Delaware for the holding of any stockholder meetings,
including annual meetings;
(d) Adopt, make and use a corporate seal; prescribe the forms of
certificate of stock; and alter the form of the seal and certificate;
(e) Authorize the issuance of shares of stock of the corporation on any
lawful terms, in consideration of money paid, labor done, service actually
rendered, debt or securities canceled, tangible or intangible property actually
received;
(f) Borrow money and incur indebtedness on behalf of the corporation,
and cause to be executed and delivered for the corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecation and other evidences of debt and securities;
(g) Declare dividends from time to time in accordance with law;
4
<PAGE>
(h) Adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees and agents of the
corporation and its subsidiaries as it may determine; and
(i) Adopt from time to time regulations not inconsistent with these
By-Laws for the management of the corporation's business and affairs.
3.5 Place of Meetings. The Board may hold meetings, both regular and
special, either within or without the State of Delaware.
3.6 Annual Meetings. The annual meeting of the Board shall be held
immediately following the annual meeting of the stockholders and no notice of
such meeting shall be necessary to the Board, provided, a quorum shall be
present. The annual meeting shall be the purposes of organization, and an
election of officers and the transaction of other business.
3.7 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
3.8 Special Meetings. Special meetings of the Board may be called by
the Chairman of the Board, the President, a Vice-President or a majority of the
Board upon one (1) day's notice to each director.
3.9 Quorum and Adjournments. At all meetings of the Board, a majority
of the directors shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board, except as may be otherwise specifically
provided by statute or by the Certificate of Incorporation. If a quorum is not
present at any meeting of the Board, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action is approved by at least a majority of the
required quorum for that meeting.
3.10 Action Without a Meeting. Unless otherwise restricted by the
Certificate of incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
3.11 Telephone Meetings. Unless otherwise restricted by the Certificate
of Incorporation or these by-laws, members of the Board, or any committee
designated by the Board, may participate in a meeting of the Board, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
3.12 Waiver of Notice. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or its commencement. Al
such waivers, consents and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting.
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3.13 Fees and Compensation of Directors. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, the Board shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board and may be paid a
fixed for attendance at each meeting of the Board or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.14 Rights of Inspection. Every director shall have the absolute right
at any reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the corporation and also of
its subsidiary corporations, domestic or foreign. Such inspection by a director
may be made in person or by agent or attorney and includes the right to copy and
obtain abstracts.
Article IV
Committees of Directors
4.1 Selection. The Board may, by resolution passed by a majority of the
entire board, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may unanimously
appoint another member of the Board to act at the meeting in the place of any
such absent or disqualified member.
4.2 Powers. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise all the powers and
authority of the directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the By-Laws of the corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock or to adopt a certificate of ownership and merger. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board.
4.3 Committee Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required.
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Article V
Officers
5.1 Officers Designated. The officers of the corporation shall be
chosen by the Board and shall be a President, a Chief Executive Officer, a
Secretary and a Treasurer. The Board may also choose a Chairman of the Board,
one or more vice-presidents, and one or more assistant Secretaries and
Treasurers. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these By-Laws otherwise provide.
5.2 Appointment of Officers. The Officers of the corporation, except
such officers as may be appointed in accordance with the provisions of Section
5.3 or 5.5 of this Article, shall be appointed by the Board, and each shall
serve at the pleasure of the Board, subject to the rights, if any, of an officer
under any contract of employment.
5.3 Subordinate Officers. The Board may appoint, and may empower the
President to appoint, such other officers and agents as the business of the
corporation may require, each of whom shall hold for such period, have such
authority and perform such duties as are provided in the By-Laws or as the Board
may from time to time determine.
5.4 Removal and Resignation of Officers. Subject to the rights, if any,
of any officer under any contract or employment, any officer may be removed,
either with or without cause, by an affirmative vote of the majority of the
Board, at a special meeting of the Board, or, except in the case of an officer
chosen by the Board, by any officer upon whom power of removal may be conferred
by the Board.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies in Office. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
5.6 Compensation. The salaries of all officers of the corporation shall
be fixed from time to time by the Board and no officer shall be prevented from
receiving a salary because he or she is also a director of the corporation.
5.7 Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, perform such other powers and duties as
may be assigned to him from time to time by the Board.
5.8 The President. Subject to such supervisory powers, if any, as may
be given to the Chairman of the Board, if there be such an officer, the
President or the Chief Executive Officer of the corporation, as the Board shall
decide, shall preside at all meetings of the stockholders and the Board, shall
have general and active management of the business of the corporation and shall
see that all orders and resolutions of the board of directors are carried into
effect. The President shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board to some
other officer or agent of the corporation.
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5.9 The Vice President. The Vice-President (or in the event there be
more than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall, in the absence of the President or in the event of his
disability or refusal to act, perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. The vice-presidents shall perform such other duties and have such
other powers as may from time to time be prescribed for them by the Board, the
President, the Chairman of the Board or these By-Laws.
5.10 The Secretary. The Secretary shall attend all meetings of the
Board and all meetings of the stockholders and record all the proceedings of the
meetings of the corporation and of the Board in a book to be kept for that
purpose and shall perform like duties for the standing committee when required.
The Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board, and shall perform such other
duties as may be prescribed by the Board, the Chairman of the Board or the
President, under whose supervision he or she shall act. The Secretary shall have
custody of the corporate seal of the corporation and he or she, or an assistant
secretary, shall have authority to affix the same to any instrument requiring
it, and when so affixed, the seal may be attested by his or her signature or by
the signature of such assistant secretary. The Secretary shall keep, or cause to
be kept, at the principal executive office or at the office of the corporation's
transfer agent or registrar, as determined by a resolution of the Board, a share
register, or a duplicate share register, showing the names of all the
stockholders and their addresses, the number and classes of shares held by each,
the number and date of the certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.
5.11 The Assistant Secretary. The assistant Secretary, or if there be
more than one, the assistant secretaries in the order determined by the Board
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board may
from time to time prescribe.
5.12 The Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board. The
Secretary shall disburse the funds of the corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
President and the Board, at its regular meetings, or when the Board so requires,
an account of all his or her transactions as Treasurer and of the financial
condition of the corporation.
5.13 The Assistant Treasurer. The assistant Treasurer, or if there
shall be more than one, the assistant Treasurers in the order determined by the
Board (or if there be no such determination, then in the order of their
election) shall, in the absence of the Treasurer or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
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Article VI
Certificates for Shares
6.1 Certificates for Shares. The shares of the corporation shall be
represented by a certificate or shall be uncertificated. Certificates shall be
signed by, or in the name of the corporation by, the Chairman of the board of
directors, or the President or a Vice-President, and by the Treasurer or an
assistant Treasure, or the Secretary or an assistant Secretary of the
corporation.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required by the General Corporation
Law of the State of Delaware or a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
6.2 Signature on Certificates. Any of or all the signatures on a
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
6.3 Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be cancelled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the corporation.
6.4 Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividend, and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and 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 the laws
of Delaware.
6.5 Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the Board may fix a new record date for the adjourned meeting.
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6.6 Lost Certificates. The Board may direct a new certificate or
certificates be issued to replace any certificate or certificates theretofore
issued by the corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that face by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such isue of a new
certificate or certificates or uncertificated shares, the Board may, in its
discretion and as a condition precedent to the issuance thereof, 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 shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Article VII
Notices
7.1 Notices. Whenever, under the provisions of the statutes or the
Certificate of Incorporation or these By-Laws, notice is required to be given to
any director or stockholder it shall be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his or her address as it appears on the records of the
corporation, with the postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram, telephone or facsimile.
7.2 Waiver. Whenever any notice is required to be given under the
provisions of the statutes or the Certificate of Incorporation or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Article VIII
General Provision
8.1 Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
8.2 Dividend Reserve. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conductive to the interests
of the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
8.3 Annual Statement. The Board shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
8.4 Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board may from time to time designate.
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8.5 Corporate Seal. The Board shall provide a suitable corporate seal,
containing the name of the corporation, which seal shall be in the care of the
Secretary.
8.6 Execution of Corporate Contracts and Instruments. The Board, except
as otherwise provided in these By-Laws, may authorize any officer, or agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the corporation; such authority may be general or confined to
specific instances. Unless so authorized or ratified by the Board or within the
agency power of an officer, no officer or agent shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
Article IX
Amendments
In addition to the right of the stockholders of the corporation to
make, alter, amend, change, add to or repeal the By-Laws of the corporation, the
Board shall have the power (without the assent or vote of the stockholders) to
make, alter, amend, change add to or repeal the By-laws of the corporation.
11
This Note and any securities into which it may be convertible have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
or under the provisions of any applicable state securities laws, but have been
acquired by the registered holder hereof for purposes of investment and in
reliance on statutory exemptions under the Securities Act, and under any
applicable state securities laws. Neither this Note nor any securities into
which it may be convertible, may be sold, pledged, transferred or assigned
except in a transaction which is exempt under the provisions of the Securities
Act and any applicable state securities laws or pursuant to an effective
registration statement; and in the case of an exemption, only if the Company has
received an opinion of counsel satisfactory to the Company that such transaction
does not require the registration of this Note or any securities into which this
Note may be convertible.
TTR INC.
_________, 1998 $25,000
10% PROMISSORY NOTE
TTR Inc., a Delaware corporation (the "Company"), for value received,
promises to pay to _________________ or registered assigns (the "Holder") on the
earlier of (i) the 30th day following the consummation by the Company of any
form of financing as described in subparagraph 2b below or (ii) twelve (12)
months from the date hereof (the earlier of such dates referred to herein as the
"Maturity Date"), at the principal offices of the Company, the principal sum of
Twenty Five Thousand ($25,000.00) Dollars in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts, and to pay simple interest on the
outstanding principal sum hereof at the rate of ten percent (10 %) per annum for
the date hereof until the Maturity Date (the "Note"). This Note is a part of
units being sold by the Company in a private offering, which units include notes
(the "Note") in the aggregate principal maximum amount of $1,000,000. Interest
shall be payable on the Maturity Date and shall accrue and be payable in like
coin or currency to the Holder hereof at the office of the Company as
hereinafter set forth. The Company will punctually pay or cause to be paid the
principal amount and interest on this Note. Any sums required to be withheld
from any payment of principal amount, or interest on this Note by operation of
Law or pursuant to any order, judgment, execution, treaty, rule or regulation
may be withheld by the Company and paid over in accordance therewith.
Nothing in this Note or in any other agreement between the Holder and
the Company shall require the Company to pay, or the Holder to accept, interest
in an amount which would subject the Holder to any penalty or forfeiture under
applicable law. In the event that the payment of any charges, fees or other sums
due under this Note, or in any other agreement between the Company and the
Holder are or could be held to be in the nature of interest and would subject
the Holder to any
<PAGE>
penalty or forfeiture under applicable law, then ipso facto the obligations of
the Company to make such payment to the Holder shall be reduced to the highest
rate authorized under the applicable law.
1. Transfer of Note to Comply with the Securities Act
The Holder agrees that this Note (the "Securities") may not be sold,
transferred, pledged, hypothecated or otherwise disposed of except as follows:
(1) to a person who, in the opinion of counsel to the Company, is a person to
whom the any of the Securities may legally be transferred without registration
and without delivery of a current prospectus under the Securities Act with
respect thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Section 1 with respect to any resale or other
disposition of any of the Securities; or (2) to any person who complies with the
provisions of this Section 1 with respect to any resale or other disposition of
any of the Securities; or (3) to any person upon delivery of a prospectus then
meeting the requirements of the Securities Act relating to such securities and
the offering thereof for such sale or disposition, and thereafter to all
successive assignees.
2. Prepayment
a. The principal amount of this Note may be repaid by the Company, in
whole or in part without premium or penalty, at any time. Upon any prepayment of
the entire principal amount of this Note, or portion thereof, all accrued, but
unpaid, interest shall be paid to the Holder on the date of prepayment with
respect to the principal amount prepaid.
b. The entire principal amount of this Note and accrued interest shall
be prepaid on the date that the Company, or any subsidiary, receives proceeds
from the consummation of any form of public or private equity or debt financing
other than financing in the aggregate amount of $1,000,000 and accounts
receivable financing.
3. Covenants of Company
a. The Company covenants and agrees that, so long as this Note shall be
outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or upon its income
and profits, or upon any of its property, before the same shall become a
lien upon the Company's assets or property, as well as all lawful claims
for labor, materials and supplies which, if unpaid, would become a lien or
charge upon such properties or any part thereof; provided, however, that
the Company shall be required to pay and discharge any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company shall
set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim so contested;
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(ii) Do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and franchises and
comply with all laws applicable to the Company as its counsel may advise;
(iii) At all times maintain, preserve, protect and keep its property
used and useful in the conduct of its business so that the business carried
on in connection therewith may be properly and advantageously conducted in
the ordinary course at all times;
(iv) Keep adequately insured by financially sound insurers, all
property of a character usually insured by corporations in the same
industry as the Company and carry such other insurance as is usually
carried by corporations in the same industry; and
(v) At all times keep true and correct books, records and accounts.
(vi) The Company, during the term of the Note, cannot issue dividends.
4. Events of Default
a. This Note become due and payable immediately upon any of the
following events, herein called "Events of Default":
(i) Default in the payment of the principal or accrued interest on
this Note, when and as the same shall become due and payable, whether by
acceleration or otherwise;
(ii) Default in the due observance or performance of any covenant,
condition or agreement on the part of the Company to be observed or
performed pursuant to the terms hereof, if such default shall continue
uncured for 10 days after written notice, specifying such default, shall
have been given to the Company by the Holder;
(iii) Default in the payment of any principal or interest due in
connection with any secured or institutional indebtedness now or hereafter
due and owing by the Company;
(iv) Application for, or consent to, the appointment of a receiver,
trustee or liquidator for the Company or of its property;
(v) Admission in writing of the Company's inability to pay its debts
as they mature;
(vi) General assignment by the Company for the benefit of creditors;
(vii) Filing by the Company of a voluntary petition in bankruptcy or a
petition or an answer seeking reorganization, or an arrangement with
creditors; or
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<PAGE>
(viii) Entering against the Company of a court order approving a
petition filed against it under the federal bankruptcy laws, which order
shall not have been vacated or set aside or otherwise terminated within 60
days.
b. The Company agrees that it shall give notice to the Holder at his or
her registered address by certified mail, of the occurrence of any Event of
Default within five (5) days after such Event of Default shall have occurred.
c. In the case any one or more of the Events of Default specified above
shall happen or be continuing, the Holder may proceed to protect and enforce his
or her right by suit in the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable rights as such Holder may have.
5. Miscellaneous
a. This Note has been issued by Company pursuant to authorization of
the Board of Directors of the Company.
b. The Company may consider and treat the person in whose name this
note shall be registered as the absolute owner thereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company shall not
be affected by any notice to the contrary. Subject to the limitations herein
stated, the registered owner of this Note shall have the right to transfer this
Note by assignment, and the transferee thereof shall, upon his registration as
owner of this Note, become vested with all the powers and rights of the
transferor. Registration of any new owner shall take place upon presentation of
this Note to the Company at its principal officer, together with a duly
authenticated assignment. In case of transfer by operation of law, the
transferee agrees to notify the Company of such transfer and of his address, and
to submit appropriate evidence regarding the transfer so that this Note may
registered in the name of the transferee. This Note is transferable only on the
books of the Company by the Holder hereof in person or by attorney, on the
surrender hereof, duly endorsed. Communications sent to any registered owner
shall be effective as against all holders or transferees of the Note not
registered at the time of sending the Communication.
c. Payment of interest shall be made as specified above to the
registered owner of this note. Payment of principal shall be made to the
registered owner of this Note upon presentation of this Note on or after
maturity. No interest shall be due on this Note for such period of time that may
elapse between the maturity of this Note and its presentation for payment.
d. The Holder shall not, by virtue hereof, be entitled to any rights of
a shareholder in the Company, whether at law or in equity, and the rights of the
Holder are limited to those expressed.
e. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Note, and (in the case
of loss, theft
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or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Note, if mutilated, the Company shall execute and
deliver a new Note of like tenor and date. Any such new Note executed and
delivered shall constitute and additional contractual obligation on the part of
the Company, whether or not this Note so lost, stolen, destroyed or mutilated
shall be art any time enforceable by anyone.
f. This Note shall be construed and enforce in accordance with the laws
of the State of New York. The Company and the Holder hereby consent to the
jurisdiction of the courts of the State of New York and the United States
District Courts situated therein in connection with any action concerning the
provisions of this Note instituted by the Holder against the Company.
g. No recourse shall be had for the payment of principal or interest on
this Note against any incorporator or any past, present, or future stockholder,
officer, director, agent or attorney of the Company, or of any successor
corporation, either directly or through the Company or any successor
corporation, otherwise, all such liability of the incorporators, stockholders,
officers, directors, attorneys and agents being waived, released and surrendered
by the Holder hereof by the acceptance of this Note.
h. The Company shall pay all costs and expenses incurred by te Holder
to enforce any of the provisions of this Note, including attorneys fees and
other expenses of collection.
IN WITNESS WHEREOF, the Company has caused this Note to be signed as of
the date first written above. TTR INC.
By: ____________
Title:
5
This Note and any securities into which it may be convertible have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
or under the provisions of any applicable state securities laws, but have been
acquired by the registered holder hereof for purposes of investment and in
reliance on statutory exemptions under the Securities Act, and under any
applicable state securities laws. Neither this Note nor any securities into
which it may be convertible, may be sold, pledged, transferred or assigned
except in a transaction which is exempt under the provisions of the Securities
Act and any applicable state securities laws or pursuant to an effective
registration statement; and in the case of an exemption, only if the Company has
received an opinion of counsel satisfactory to the Company that such transaction
does not require the registration of this Note or any securities into which this
Note may be convertible.
TTR INC.
December 31, 1998 $30,000
8% PROMISSORY NOTE
TTR Inc., a Delaware corporation (the "Company"), for value received,
promises to pay to _______________ or registered assigns at 727 Cornaga Court,
Far Rockaway, NY 11691(the "Holder") upon the earlier of (i) the 5th day
following the receipt by the Company, or any subsidiary, of aggregate net
proceeds (gross proceeds less commissions and non-accountable expense
allowances) exceeding $800,000 from the consummation of any equity or debt
financings whether or not such financings are done in one or more unrelated
transactions ("Financings"); provided, however, that the Company shall only
apply an amount equal to 30% of the proceeds over $800,0000 from Financings for
repayment, on a pro rata basis, of all Notes issued pursuant to the Confidential
Memorandum, (ii) the sale of all or substantially all of the Company's assets
and (iii) December 31, 2000 (the "Maturity Date"), the principal sum of Thirty
Thousand ($30,000.00) Dollars and to pay simple interest on the outstanding
principal sum hereof at the rate of six percent (8 %) per annum, both before and
after the Maturity Date. This Note is a part of units being sold by the Company
in a private offering, pursuant to a Confidential Memorandum, which units
include notes in the aggregate principal maximum amount of $1,500,000. Interest
shall be payable on the Maturity Date and shall accrue and be payable in like
coin or currency to the Holder hereof at the office of the Company as
hereinafter set forth. The Company will punctually pay or cause to be paid the
principal amount and interest on this Note. Any sums required to be withheld
from any payment of principal amount, or interest on this Note by operation of
Law or pursuant to any order, judgment, execution, treaty, rule or regulation
may be withheld by the Company and paid over in accordance therewith.
All capital terms used herein shall have the meaning set forth in the
confidential private placement memorandum of the Company dated December 1, 1998
with Roan Capital Partners LP as placement agent.
Nothing in this Note or in any other agreement between the Holder and
the Company shall require the Company to pay, or the Holder to accept, interest
in an amount which would subject the Holder to any penalty or forfeiture under
applicable law. In the event that the payment of any charges, fees or other sums
due under this Note, or in any other agreement between the Company and the
Holder are or could be held to be in the nature of interest and would subject
the Holder to any penalty or forfeiture under applicable law, then ipso facto
the obligations of the Company to make such payment to the Holder shall be
reduced to the highest rate authorized under the applicable law.
<PAGE>
1. Transfer of Note to Comply with the Securities Act
The Holder agrees that this Note (the "Securities") may not be sold,
transferred, pledged, hypothecated or otherwise disposed of except as follows:
(1) to a person who, in the opinion of counsel to the Company, is a person to
whom the any of the Securities may legally be transferred without registration
and without delivery of a current prospectus under the Securities Act with
respect thereto and then only against receipt of an agreement of such person to
comply with the provisions of this Section 1 with respect to any resale or other
disposition of any of the Securities; or (2) to any person who complies with the
provisions of this Section 1 with respect to any resale or other disposition of
any of the Securities; or (3) to any person upon delivery of a prospectus then
meeting the requirements of the Securities Act relating to such securities and
the offering thereof for such sale or disposition, and thereafter to all
successive assignees.
2. Prepayment
The principal amount of this Note may be prepaid by the Company, in
whole or in part without premium or penalty, at any time. Upon any prepayment of
the entire principal amount of this Note, or portion thereof, all accrued, but
unpaid, interest shall be paid to the Holder on the date of prepayment with
respect to the principal amount prepaid.
3. Covenants of Company
a. The Company covenants and agrees that, so long as this Note shall be
outstanding, it will:
(i) Do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and franchises and
comply with all laws applicable to the Company as its counsel may advise;
(ii) At all times maintain, preserve, protect and keep its property
used and useful in the conduct of its business so that the business carried
on in connection therewith may be properly and advantageously conducted in
the ordinary course at all times;
(iii) Keep adequately insured by financially sound insurers, all
property of a character usually insured by corporations in the same
industry as the Company and carry such other insurance as is usually
carried by corporations in the same industry; and
(iv) The Company, during the term of the Note, cannot issue dividends.
4. Events of Default
a. This Note become due and payable immediately upon any of the
following events, herein called "Events of Default":
(i) Default in the payment of the principal or accrued interest on
this Note, when and as the same shall become due and payable, whether by
acceleration or otherwise;
(ii) Default in the payment of any principal or interest due in
connection with any indebtedness, now or hereafter due and owing by the
Company above the amount of $50,000, provided, that non-payment shall not
be considered an event of default if the Company claims that such amount is
not owing and is taking appropriate procedures to defend itself from any
claim filed with respect to such amount;
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<PAGE>
(iii) Application for, or consent to, the appointment of a receiver,
trustee or liquidator for the Company or of its property;
(iv) Admission in writing of the Company's inability to pay its debts
as they mature;
(v) General assignment by the Company for the benefit of creditors;
(vi) Filing by the Company of a voluntary petition in bankruptcy or a
petition or an answer seeking reorganization, or an arrangement with
creditors; or
(vii) Entering against the Company of a court order approving a
petition filed against it under the federal bankruptcy laws, which order
shall not have been vacated or set aside or otherwise terminated within 60
days; or
(viii) The finding against the Company of any judgment of at least
$150,000 provided that that such finding shall not be considered an event
of default if the Company is taking appropriate procedures to appeal such
judgement, provided further, that default shall be deemed to occur upon
Company loosing the final appeal with respect to such judgment
b. In the case any one or more of the Events of Default specified above
shall happen or be continuing, the Holder may proceed to protect and enforce his
or her right by suit in the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable rights as such Holder may have.
5. Miscellaneous
a. This Note has been issued by Company pursuant to authorization of
the Board of Directors of the Company.
b. The Company may consider and treat the person in whose name this
note shall be registered as the absolute owner thereof for all purposes
whatsoever (whether or not this Note shall be overdue) and the Company shall not
be affected by any notice to the contrary. Subject to the limitations herein
stated, the registered owner of this Note shall have the right to transfer this
Note by assignment, and the transferee thereof shall, upon his registration as
owner of this Note, become vested with all the powers and rights of the
transferor. Registration of any new owner shall take place upon presentation of
this Note to the Company at its principal officer, together with a duly
authenticated assignment. In case of transfer by operation of law, the
transferee agrees to notify the Company of such transfer and of his address, and
to submit appropriate evidence regarding the transfer so that this Note may
registered in the name of the transferee. This Note is transferable only on the
books of the Company by the Holder hereof in person or by attorney, on the
surrender hereof, duly endorsed. Communications sent to any registered owner
shall be effective as against all holders or transferees of the Note not
registered at the time of sending the Communication.
c. The Holder shall not, by virtue hereof, be entitled to any rights of
a shareholder in the Company, whether at law or in equity, and the rights of the
Holder are limited to those expressed.
d. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Note, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Note, if mutilated, the Company shall
execute and deliver a new Note of like tenor and date. Any
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<PAGE>
such new Note executed and delivered shall constitute and additional contractual
obligation on the part of the Company, whether or not this Note so lost, stolen,
destroyed or mutilated shall be art any time enforceable by anyone.
e. This Note shall be construed and enforce in accordance with the laws
of the State of New York. The Company and the Holder hereby consent to the
jurisdiction of the courts of the State of New York and the United States
District Courts situated therein in connection with any action concerning the
provisions of this Note instituted by the Holder against the Company.
f. No recourse shall be had for the payment of principal or interest on
this Note against any incorporator or any past, present, or future stockholder,
officer, director, agent or attorney of the Company, or of any successor
corporation, either directly or through the Company or any successor
corporation, otherwise, all such liability of the incorporators, stockholders,
officers, directors, attorneys and agents being waived, released and surrendered
by the Holder hereof by the acceptance of this Note.
g. The Company shall pay all costs and expenses incurred by the Holder
to enforce any of the provisions of this Note, including attorneys fees and
other expenses of collection.
IN WITNESS WHEREOF, the Company has caused this Note to be signed as of
the date first written above.
TTR Inc.
By: ____________
Title:
4
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
MU & KANG CONSULTANTS LLC
DATE: JANUARY 15, 1999
WARRANT NO. 1-99 10,000 Shares of Common
Stock of TTR Inc.
FOR VALUE RECEIVED, TTR INC., a Delaware company (the "Company"),
hereby grants to MU & KANG CONSULTANTS LLC (the "Holder"), the right to
purchase, subject to the terms and conditions hereof, 10,000 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 $1.75, 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 froth 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 set forth above through
the third anniversary thereof (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.
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.
<PAGE>
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.
3. 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.
4. Limited Transfer
4.1 The Company may treat the registered holder of record as the holder
for all purposes.
4.2 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."
5. 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.
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<PAGE>
6. 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 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 TECHNOLOGIES INC.
By: /s/ MARC TOKAYER
--------------------------
Marc. D. Tokayer
Title: President
3
<PAGE>
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,
4
WARRANT
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
THE REPRESENTATIONS AND AGREEMENTS MADE BY THE RECORD HOLDER HEREOF SET FORTH IN
THIS WARRANT.
TTR INC.
COMMON STOCK PURCHASE WARRANT
in favor of
---------
Date: December 31, 1998
No. 1998 __ 3,000 Common Shares
FOR VALUE RECEIVED, TTR INC., a Delaware company (the "Company"),
hereby grants to __________ or its registered assignees (the "Holder"), the
right to purchase, subject to the terms and conditions hereof, Three Thousand
(3,000) fully paid and non-assessable shares of Common Stock of the Company, par
value $0.001 ("Shares"). The purchase price for each Share purchased pursuant to
this Warrant shall be US six dollars ($6.00) (the "Exercise Price").
Hereinafter, (i) the shares purchasable hereunder are referred to as the
"Warrant Shares"; (ii) and the price payable hereunder for each of the Warrant
Shares, as adjusted in the manner set froth hereinafter, is referred to as the
"Per Share Warrant Price"; and (iii) 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 or part at any time
commencing 9:00 a.m., New York City time, on any business day on or after the
issuance thereof and continuing up to the fifth anniversary thereof (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.
1.2 Upon such surrender of this Warrant, the Company will (a) issue a
certificate or certificates in the name of Holder for the Warrant Shares to
which the Holder shall be entitled and (b) deliver the other securities and
properties receivable upon the exercise of this Warrant, pursuant to the
provisions of this Warrant.
<PAGE>
1.3 Any stamp tax attributable to the issuance of the Shares shall be
borne solely by Holder.
2. Representations and Warranties
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 the 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
Warrant Shares; (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; 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.
3. Reservation of Shares
The Company covenants that at all times during the Warrant Period it
shall have authorized and in reserve, and will keep available solely for
issuance or delivery upon exercise of the Warrant, the Warrant Shares and other
securities and properties as from time to time shall be receivable upon the
exercise of this Warrant, free and clear of preemptive rights and restrictions
on sale or transfer except as otherwise set forth herein or in the Company
By-Laws.
4. Adjustment
4.1 In case of any consolidation or merger of the Company with or into
another corporation (other than a merger or consolidation in which the Company
is the surviving or the continuing corporation) or in the case of any sale or
conveyance to another corporation or other entity of the property, assets or
business of the Company as an entirety or substantially as an entirety, in any
such case, the Company or such successor or purchasing corporation or entity, as
the case may be, shall (i) execute with the Holder an agreement that the Holder
shall have the right thereafter to receive upon the exercise of the Warrant the
kind and amount of shares and/or other securities or other property which he
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Warrant been exercised
immediately prior to such action, (ii) make effective provision in its
certificate of its incorporation or otherwise, if necessary, in order to effect
such agreement, and (iii) set aside or reserve for the benefit of the Holder,
the stock, securities, property and cash to which the Holder would be entitled
to upon exercise of this Warrant.
4.2 In case the Company shall (A) pay a dividend or make a distribution
on its shares of Common Stock (B) subdivide or reclassify its outstanding Common
Stock into a greater number of shares, or (C) combine or reclassify its
outstanding Common Stock into a smaller number of shares or otherwise effect a
reverse split, (other than a change in par value or from no par value to a
specific par value), the Exercise Price shall be proportionately adjusted so
that the Holder shall have the right thereafter to receive upon exercise of this
Warrant solely the kind and
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<PAGE>
amount of shares, the Holder would have owned had this Warrant been exercised
immediately prior to such dividend, subdivision, combination or
reclassification.
4.3 The above provisions of this paragraph 4 shall similarly apply to
successive reclassifications and changes of Shares and to successive
consolidations.
4.4 In case the Company shall, subsequent to November 30, 1998, issue
rights or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price (or having a conversion price per share) less than the
current market price of the Common Stock, the Exercise Price shall be adjusted
so that the same shall equal the price determined by multiplying the Exercise
Price in effect immediately prior to the date of such issuance by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding on
the record date mentioned below plus the number of additional shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at such current market price per share of
the Common Stock, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered for subscription or purchased (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock or securities convertible into Common Stock are not
delivered after the expiration of such rights or warrants, the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
4.5 In case the Company shall, subsequent to November 30, 1998,
distribute to all holders of Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions paid out of current earnings
or subscription rights or warrants (excluding those referred to in Paragraph 4.4
of this Warrant), then in each such case the Exercise Price in effect thereafter
shall be determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, of which the numerator shall be the total number of
shares of common Stock outstanding multiplied by the current market price per
share of common Stock, less the fair market value (as determined by the
Company's Board of Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and of which the denominator shall be
the total number of shares of Common Stock outstanding multiplied by such
current market price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such distribution.
5. Limited Transfer
(a) This Warrant may not be sold, transferred, assigned or hypothecated
by the Holder and is so transferable only on the books of the Company which the
Company shall cause to be maintained for such purpose. The Company may treat the
registered holder of record as the Holder for all purposes. The Company shall
permit any holder of a Warrant or his duly
3
<PAGE>
authorized attorney, upon written request during ordinary business hours, to
inspect and copy or make extracts from its books showing the registered holders
of Warrants.
(b) 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 has 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 Warrants 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. Warrant Holder Not Shareholder
Except as otherwise provided herein, this Warrant does not confer upon
the Holder any right to vote or to consent or to receive notice as a shareholder
of the Company, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a shareholder, prior to the exercise hereof.
8. Headings
The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
9. Notices.
Unless otherwise provided, any notice required or permitted under this
Warrant shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or seven (7) days after deposit
with a National Post Office, for dispatch by registered or certified mail,
postage prepaid and addressed to the Holder at the address set forth in the
Company's books and to the Company at the address of its principal offices set
forth above.
10. Governing Law
This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and performed within such State.
4
<PAGE>
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: __________________________
5
<PAGE>
EXHIBIT A
WARRANT EXERCISE FORM
_________________, 199_
TO: TTR Inc.
RE: Exercise of Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
the extent of ___________________ Common Shares of TTR Inc. at the price of
$6.00 a share of Common Stock. Payment to the Company of the total purchase
price for such shares has been made simultaneously with the delivery of this
exercise of warrant.
By: ___________________
6
WARRANT
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
THE REPRESENTATIONS AND AGREEMENTS MADE BY THE RECORD HOLDER HEREOF SET FORTH IN
THIS WARRANT.
TTR INC.
COMMON STOCK PURCHASE WARRANT
in favor of
__________________.
_____, 1998
No. __ 23,000 Common Shares
FOR VALUE RECEIVED, TTR INC., a Delaware company (the "Company"),hereby
grants to _________________ or its registered assignees (the "Holder"), the
right to purchase, subject to the terms and conditions hereof, 23,000 fully paid
and non-assessable shares of Common Stock of the Company, par value $0.001
("Shares"). The purchase price for each Share purchased pursuant to this Warrant
shall be equal to115% of the offering price of a share of Common Stock in
connection with a subsequent sale to the public of the Company's Common Stock in
a bona fide, firm commitment underwriting with aggregate proceeds to the Company
of at least $1,000,000 (the "Public Offering"), 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 or in part at any time
commencing 9:00 a.m., New York City time, on any business day on or after the
date on which the Company's registration statement that is filed under the
Securities Act of 1933, as amended, in connection with the Public Offering has
been declared effective and continuing up to the fourth anniversary thereof (the
"Warrant Period"), by the surrender of this Warrant (with a duly executed
exercise form in the form attached at the
<PAGE>
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.
1.2 Upon such surrender of this Warrant, the Company will: a) issue a
certificate or certificates in the name of Holder for the Warrant Shares to
which the Holder shall be entitled and (b) deliver the other securities and
properties receivable upon the exercise of this Warrant, pursuant to the
provisions of this Warrant.
1.3 Any stamp tax attributable to the issuance of the Shares shall be
borne solely by Holder.
2. Representations and Warranties
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 the 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
Warrant Shares; (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; 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.
3. Reservation of Shares
The Company covenants that at all times during the Warrant Period it
shall have authorized and in reserve, and will keep available solely for
issuance or delivery upon exercise of the Warrant, the Warrant Shares and other
securities and properties as from time to time shall be receivable upon the
exercise of this Warrant, free and clear of preemptive rights and restrictions
on sale or transfer except as otherwise set forth herein or in the By-Laws.
4. Adjustment
4.1 In case of any consolidation or merger of the Company with or into
another corporation (other than a merger or consolidation in which the Company
is the surviving or the continuing corporation) or in the case of any sale or
conveyance to another corporation or other entity of the property, assets or
business of the Company as an entirety or substantially as an entirety, in any
such case, the Company or such successor or purchasing corporation or entity, as
the case may be, shall (i) execute with the Holder an agreement that the Holder
shall have the right thereafter to receive upon the exercise of the Warrant the
kind and amount of shares and/or other securities or other property which he
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Warrant been
2
<PAGE>
exercised immediately prior to such action, (ii) make effective provision in its
certificate of its incorporation or otherwise, if necessary, in order to effect
such agreement, and (iii) set aside or reserve for the benefit of the Holder,
the stock, securities, property and cash to which the Holder would be entitled
to upon exercise of this Warrant.
4.2 In case of any reclassification or change of the Warrant Shares
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specific par value, or as a result of a subdivision or
combination, including any change in the shares into two or more classes or
series of shares), or in the case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change in the
right to receive cash or other property) of the Shares (other than a change in
the par value, or from no par value to a specific par value or, as a result of a
subdivision or combination, including any change in the shares into two or more
classes or series of shares), Holder shall have the right thereafter to receive
upon exercise of this Warrant solely the kind and amount of shares of stock and
other securities, property, cash or combination thereof receivable upon such
reclassification, change, consolidation or merger by a holder of the number of
Shares for which this Warrant might have been exercised immediately prior to
such reclassification, change, consolidation or merger.
4.3 The above provisions of this paragraph 5 shall similarly apply to
successive reclassifications and changes of Shares and to successive
consolidations, sales, leases or conveyances.
5. Limited Transfer
(a) This Warrant may not be sold, transferred, assigned or hypothecated
by the Holder and is so transferable only on the books of the Company which the
Company shall cause to be maintained for such purpose. The Company may treat the
registered holder of record as the Holder for all purposes. The Company shall
permit any holder of a Warrant or his duly authorized attorney, upon written
request during ordinary business hours, to inspect and copy or make extracts
from its books showing the registered holders of Warrants.
(b) 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 has 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 Warrants 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."
3
<PAGE>
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. Warrant Holder Not Shareholder
Except as otherwise provided herein, this Warrant does not confer upon
the Holder any right to vote or to consent or to receive notice as a shareholder
of the Company, as such, in respect of any matters whatsoever, or any other
rights or liabilities as a shareholder, prior to the exercise hereof.
8. Headings
The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
9. Notices.
Unless otherwise provided, any notice required or permitted under this
Warrant shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or seven (7) days after deposit
with a National Post Office, for dispatch by registered or certified mail,
postage prepaid and addressed to the Holder at the address set forth in the
Company's books and to the Company at the address of its principal offices set
forth above. With respect to Holders located outside Israel, such notice shall
be deemed effectively given upon personal delivery to the party to be notified,
15 business days after deposit with a National Post Office for dispatch by
registered or certified airmail, or when given by telecopier or other form of
rapid written communication, provided that confirming copies are sent by such
airmail.
10. Governing Law
This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and performed within such State.
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: ________________________
/title
4
<PAGE>
EXHIBIT A
WARRANT EXERCISE FORM
_________________, 199_
TO: TTR Inc.
RE: Exercise of Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
the extent of ___________________ Common Shares of TTR Inc. at the purchase
price set forth in the attached Warrant. Payment to the Company of the total
purchase price for such shares has been made simultaneously with the delivery of
this exercise of warrant.
By: ___________________
5
Exibit 4.4.9
WARRANT
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
THE REPRESENTATIONS AND AGREEMENTS MADE BY THE RECORD HOLDER HEREOF SET FORTH IN
THIS WARRANT.
TTR INC.
COMMON STOCK PURCHASE WARRANT
in favor of
Plans Inc
June 11, 1998
No. 25,000 Common Shares
FOR VALUE RECEIVED, TTR INC., a Delaware company (the "Company"),hereby grants
to Plans Inc or its registered assignees (the "Holder"), the right to purchase,
subject to the terms and conditions hereof, 25,000 fully paid and non-assessable
shares of Common Stock of the Company, par value $0.001 ("Shares"). The purchase
price for each Share purchased pursuant to this Warrant shall be equal $1.50 per
share. 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 or in part at any time
commencing 9:00 a.m., New York City time, on any business day on or after the
date on which the Company's registration statement that is filed under the
Securities Act of 1933, as amended, in connection with the Public Offering has
been declared effective and continuing up to the fourth anniversary thereof (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.
<PAGE>
1.2 Upon such surrender of this Warrant, the Company will: a) issue a
certificate or certificates in the name of Holder for the Warrant Shares to
which the Holder shall be entitled and (b) deliver the other securities and
properties receivable upon the exercise of this Warrant, pursuant to the
provisions of this Warrant.
1.3 Any stamp tax attributable to the issuance of the Shares shall be
borne solely by Holder.
2. Representations and Warranties
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 the 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
Warrant Shares; (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; 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.
3. Reservation of Shares
The Company covenants that at all times during the Warrant Period it shall
have authorized and in reserve, and will keep available solely for issuance or
delivery upon exercise of the Warrant, the Warrant Shares and other securities
and properties as from time to time shall be receivable upon the exercise of
this Warrant, free and clear of preemptive rights and restrictions on sale or
transfer except as otherwise set forth herein or in the By-Laws.
4. Adjustment
4.1 In case of any consolidation or merger of the Company with or into
another corporation (other than a merger or consolidation in which the Company
is the surviving or the continuing corporation) or in the case of any sale or
conveyance to another corporation or other entity of the property, assets or
business of the Company as an entirety or substantially as an entirety, in any
such case, the Company or such successor or purchasing corporation or entity, as
the case may be, shall (i) execute with the Holder an agreement that the Holder
shall have the right thereafter to receive upon the exercise of the Warrant the
kind and amount of shares and/or other securities or other property which he
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the Warrant been exercised
immediately prior to such action, (ii) make effective provision in its
certificate of its incorporation or otherwise, if necessary, in order to effect
such agreement, and
<PAGE>
(iii) set aside or reserve for the benefit of the Holder, the stock, securities,
property and cash to which the Holder would be entitled to upon exercise of this
Warrant.
4.2 In case of any reclassification or change of the Warrant Shares
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specific par value, or as a result of a subdivision or
combination, including any change in the shares into two or more classes or
series of shares), or in the case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change in the
right to receive cash or other property) of the Shares (other than a change in
the par value, or from no par value to a specific par value or, as a result of a
subdivision or combination, including any change in the shares into two or more
classes or series of shares), Holder shall have the right thereafter to receive
upon exercise of this Warrant solely the kind and amount of shares of stock and
other securities, property, cash or combination thereof receivable upon such
reclassification, change, consolidation or merger by a holder of the number of
Shares for which this Warrant might have been exercised immediately prior to
such reclassification, change, consolidation or merger.
4.3 The above provisions of this paragraph 5 shall similarly apply to
successive reclassifications and changes of Shares and to successive
consolidations, sales, leases or conveyances.
5. Limited Transfer
(a) This Warrant may not be sold, transferred, assigned or hypothecated by
the Holder and is so transferable only on the books of the Company which the
Company shall cause to be maintained for such purpose. The Company may treat the
registered holder of record as the Holder for all purposes. The Company shall
permit any holder of a Warrant or his duly authorized attorney, upon written
request during ordinary business hours, to inspect and copy or make extracts
from its books showing the registered holders of Warrants.
(b) 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 has 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 Warrants 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."
<PAGE>
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. Warrant Holder Not Shareholder
Except as otherwise provided herein, this Warrant does not confer upon the
Holder any right to vote or to consent or to receive notice as a shareholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a shareholder, prior to the exercise hereof.
8. Headings
The headings of this Warrant have been inserted as a matter of convenience and
shall not affect the construction hereof.
9. Notices.
Unless otherwise provided, any notice required or permitted under this Warrant
shall be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or seven (7) days after deposit with a
National Post Office, for dispatch by registered or certified mail, postage
prepaid and addressed to the Holder at the address set forth in the Company's
books and to the Company at the address of its principal offices set forth
above. With respect to Holders located outside Israel, such notice shall be
deemed effectively given upon personal delivery to the party to be notified, 15
business days after deposit with a National Post Office for dispatch by
registered or certified airmail, or when given by telecopier or other form of
rapid written communication, provided that confirming copies are sent by such
airmail.
10. Governing Law
This Warrant shall be governed by and construed and enforced in accordance with
the laws of the State of New York applicable to contracts made and performed
within such State.
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: /s/ MARC TOKAYER
------------------------
MARC TOKAYER
/title President
<PAGE>
EXHIBIT A
WARRANT EXERCISE FORM
_________________, 199_
TO:TTR Inc.
RE: Exercise of Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
the extent of ___________________ Common Shares of TTR Inc. at the purchase
price set forth in the attached Warrant. Payment to the Company of the total
purchase price for such shares has been made simultaneously with the delivery of
this exercise of warrant.
By: ___________________
[Josephthal Letterhead]
April 1, 1998
TTR Inc.
The Columbus Circle Building
1841 Broadway, 11th Floor
New York, NY 10023
Attention: Marc D. Tokayer
Chairman of the Board,
President and Treasurer
Dear Marc:
This will confirm the understanding and agreement (the "Agreement")
between Josephthal & Co. Inc. ("Josephthal") and TTR Inc. ("TTR" or the
"Company") as follows:
1. The Company hereby engages Josephthal as the Company's financial advisor
with respect to the Company's continuing review of strategic and financial
planning matters.
2. Josephthal hereby accepts the engagement and in that connection agrees to:
(a) undertake, in consultation with the Company, a study and analysis of
the business, operations, financial condition and prospects of the
Company;
(b) review with the Company its financial plan and analyze its strategic
plans and business alternatives:
(c) be available to meet with the Company's Board of Directors to discuss
strategic alternatives and their financial implications; and
(d) assist the Company in the conversion of certain outstanding warrants
to common stock of the Company ("Warrant Solicitation").
3. In connection with Josephthal's engagement, the Company will furnish
Josephthal with any reasonable information concerning the Company which
Josephthal reasonably deems appropriate and will provide Josephthal with
reasonable access to the Company's officers, directors, accountants,
counsel and other advisors. The Company represents and warrants to
Josephthal that all such information concerning the Company will be true
and accurate in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein
Josephthal & Co. Inc.
200 Park Avenue - New York, NY 10166
Tel: 212.907.4000, 800.285.6200 - Fax: 212.907.4080
<PAGE>
April 1, 1998
Page 2
not misleading in light of the circumstances under which such statements
are made. In addition, Josephthal shall be kept fully informed of any
events which might have a material effect on the financial condition of the
Company. The Company acknowledges and agrees that Josephthal will be using
and relying upon such information supplied by the Company and its officers,
agents and others and any other publicly available information concerning
the Company without any independent investigation or verification thereof
or independent appraisal by Josephthal of the Company or its business
assets. If, in Josephthal's opinion after completion of its due diligence
process, the condition of the Company, financial or otherwise, and its
prospects are not substantially as represented or do not fulfill
Josephthal's expectations, Josephthal shall have the sole discretion to
review and determine its continued interest in the Agreement.
4. As compensation and in consideration for the services to be rendered by
Josephthal hereunder and such other services to be provided by Josephthal at the
request of the Company, the Company shall pay to Josephthal no later than May
1st 1998 as follows:
(a) a cash fee of $50,000:
(b) the Company shall issue to Josephthal warrants (the "Warrants") to
purchase 25,000 shares of the common stock of the Company. The
Warrants shall be purchased for a nominal sum and shall be exercisable
for a period of four (4) years at a price per share equal to the
closing market price of the common stock of the Company upon the date
of the signing of this Agreement. The terms of the Warrants shall be
set forth in one or more agreements (the "Warrant Agreements") in form
and substance reasonably satisfactory to Josephthal and the Company.
The Warrant Agreements shall contain customary terms, including
without limitation, provisions for "cashless" exercise, change of
control, anti-dilution, and piggyback registration rights; and
(c) a fee of 5% of the exercise price of each warrant converted to common
stock of the Company as a result of the Warrant Solicitation.
5. Since Josephthal will be acting on behalf of the Company in connection with
this engagement, the Company agrees to indemnify Josephthal as set forth in a
separate letter agreement, dated the date hereof, between Josephthal and the
Company.
6. The Company agrees that Josephthal has the right to place advertisements in
financial and other newspapers and journals at its own expense describing their
services to the Company hereunder.
7. Subject to the provisions of paragraphs 3 through 6 and 8 through 10 which
shall surivive any termination of this Agreement, either party may terminate
Josephthal's engagement hereunder at any time, with or without cause, by giving
the other party at least 10 days prior written notice.
<PAGE>
April 1, 1998
Page 3
Josephthal's engagement hereunder at any time, with or without cause, by giving
the other party at least 10 days prior written notice.
8. Any advice given to the Company by Josephthal under this Agreement shall not
be publicly disclosed or made available to third parties without Josephthal's
prior consent.
9. The benefits of this Agreement shall, together with the separate indemnity
letter, inure to the benefit of respective successors and assigns of the parties
hereto and of the indemnified parties hereunder and their successors and assigns
and representatives, and the obligations and liabilities assumed in this
Agreement by the parties hereto shall be binding upon their respective
successors and assigns.
10. This Agreement may not be amended or modified except in wirting and shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws.
We are delighted to accept this engagement and look forward to working
with you on this assignment. Please confirm that the foregoing correctly sets
forth our agreement by signing the enclosed duplicate of this letter in the
space provided and returning it, whereupon this letter shall constitute a
binding agreement as of the date first above written.
JOSEPHTHAL & CO. INC.
By: /s/ RANDY F. ROCK
---------------------
Randy F. Rock
Managing Director
AGREED:
TTR Inc.
By: /s/ MARC TOKAYER
--------------------
Name: Marc Tokayer
Title: Chairman & CEO
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 Company 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.
<PAGE>
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 to 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.
2
<PAGE>
(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. Acceleration, Extension, Etc.; Effect of Termination of Employment or other
Relationship. The Board of Directors or the Committee may, in its sole
discretion (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised, or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised, provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3 of the 1934 Exchange Act (if applicable to such Option).
Except as otherwise determined by the Board of Directors or the
Committee at the date of the grant of the Option, and subject to the provisions
of the Plan, an optionee may exercise an Option at any time within one (1) year
(or within such lesser period as may be specified in the applicable option
agreement) following termination of the optionee's employment or other
relationship with the Company if such relationship was due to the death or
Disability of the optionee but in no event later than the expiration date of the
Option. Except as otherwise determined by the Board of Directors or the
Committee at the date of the grant of an Option, if the termination of the
optionee's employment or other relationship is for any other reason the Option
shall expire immediately upon such termination. For all purposes of the Plan and
any option granted hereunder, "Disability" shall have the meaning set forth in
the employment agreement between the optionee and the Company, and if no such
agreement shall exist or if such term is not defined in such agreement, the term
"Disability" shall mean the determination by a physician selected by the Company
that the optionee is unable, by reason of physical or mental illness, to perform
his duties and responsibilities to the Company for a period of 60 consecutive
days or a period in excess of 120 days (whether or not consecutive) during any
calendar year during the term of the optionee's employment, or if a court of
competent jurisdiction declares the optionee is of unsound mind or otherwise
incapable of carrying out his duties and responsibilities to the Company.
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
3
<PAGE>
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 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.
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<PAGE>
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.
5
Non-Executive Director
Stock Option Plan of
TTR INC.
1. Purpose
The purpose of this Non-Executive Director Stock Option Plan (the
"Director Plan") is to provide a means by which each director of TTR INC. (the
"Company") who is not an employee of the Company or any subsidiary of the
Company (each such person being hereafter referred to as a "Non-Executive
Director") will be given an opportunity to purchase Common Stock, par value
$0.001, of the Company ("Common Stock"). The Company, by means of the Director
Plan, seeks to attract and retain the services of qualified independent persons
to serve as Non-Executive Directors of the Company and to provide incentives for
such persons to exert maximum efforts for the success of the Company.
2. Administration
(a) The Director Plan shall be administered by the Board of Directors
(the "Board") of the Company.
(b) All option awards under the Director Plan shall be in the Board's
discretion. All questions of interpretation of the Director Plan or of any
option issued under it shall be determined by the Board and such determination
shall be final and binding upon all persons having an interest in the Director
Plan. All determinations shall be made by a majority of the Board. Any
determination reduced to writing and signed by all of the members of the Board
shall be fully effective as if it had been made by a majority vote at a meeting
duly called and held.
3. Shares Subject to Plan
Subject to the provisions of Section 10 hereof, the shares that may be
acquired pursuant to options granted under the Director Plan shall not exceed in
the aggregate 25,000 shares of the Company's Common Stock.
The Common Stock subject to the Director Plan may be in whole or in
part authorized and unissued shares of Common Stock or issued shares of Common
Stock which shall have been reacquired by the Company. If any option shall
expire or terminate for any reason without having been exercised in full, the
unissued shares subject thereto shall again be available for purposes of the
Director Plan.
4. Eligibility
Options shall be granted to Non-Executive Directors serving on the
Board of Directors of the Company.
<PAGE>
5. Limitation on Grants
In no event will the grant amount, that is, the amount determined by
multiplying the number of shares with respect to which options have been granted
by the Fair Market Value (as defined in Section 6) of the Company's Common Stock
on the date of grant, exceed $100,000 with respect to an annual grant to a
Non-Executive Director. To the extent the grant amount exceeds the foregoing
limitations, the number of shares subject to the Option to be granted to the
Non-Executive Director will be reduced accordingly.
6. Option Provisions
Each Option shall be evidenced by a written agreement ("Stock Option
Agreement") and shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") five years from the date of grant. The term of each option may terminate
sooner than such Expiration Date if the optionee's service as a Non-Executive
Director of the company terminates for any reason whatsoever. In the event of
such termination of service, the option shall terminate for Non-Executive
Directors, on the earlier of the Expiration Date or the date two (2) months
following the date of termination of service as a Director. In any and all
circumstances, an option may be exercised following termination of the
optionee's service as a Non-Executive Director only as to that number of shares
as to which it was exercisable on the date of termination of such service, in
accordance with the provisions hereunder.
(b) The exercise price of each option shall be one hundred percent
(100%) of the Fair Market Value of the shares subject to such option on the date
such option is granted. "Fair Market Value" of a share of common stock shall
mean (i) if the common stock is traded on a national securities exchange or on
the NASDAQ National Market System ("NMS"), the per share closing price of the
Common Stock on the principal securities exchange on which they are listed or on
NMS, as the case may be, on the date of grant (or if there is no closing price
for such date of grant, then the last preceding business day on which there was
a closing price); or (ii) if the Common Stock is traded in the over-the counter
market and quotations are published on the NASDAQ quotations system (but not on
NMS), the per share closing bid price of the Common Stock on the date of grant
as reported by NASDAQ (or if there is no closing bid price for such date of
grant, then the last preceding business day on which there was a closing bid
price); or (iii) if the Common Stock is traded in the over-the-counter market
but bid quotations are not published on NASDAQ, the closing bid price per share
for the Common Stock as furnished by a broker - dealer which regularly furnishes
price quotations for the Common Stock; or (iv) if the Common Stock is not traded
on a securities exchange or the over-the-counter market, the valuation accorded
to each share by the Company's Board.
(c) The optionee may elect to make payment of the exercise price under
one of the following alternatives:
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<PAGE>
(i) Payment of the exercise price per share in cash at the time
of exercise; or
(ii) Payment by delivery of shares of Common Stock of the Company
already owned by the optionee, which Common Stock shall be valued at
Fair Market Value on the date of exercise; or
(iii) Payment by a combination of the methods of payment
specified in subsections 6-(c) (i) and 6-(c) (ii) above.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative.
(e) All options granted under the Director plan shall be non-qualified
stock options, which do not qualify as incentive stock options within the
meaning of Section 422, or any successor section, of the Internal Revenue Code
of 1986, as amended.
7. Right of the Company to Terminate Services as a Non-Executive Director
Nothing contained in the Director Plan or in any instrument executed
pursuant hereto shall confer upon any Non-Executive Director any right to
continue in the service of the company or any of its subsidiaries or interfere
in any way with the right of the Company or a subsidiary to terminate the
service of any Non- Executive Director at any time, with or without cause or
entitle the Non-Executive Director to be nominated for re-election as a
director.
8. Nonalienation of Benefits
No right or benefit under the Director Plan shall be subject to
alienation, sale, assignment, hypothecation, pledge, exchange, transfer,
encumbrance or charge, and any attempt to alienate, sell, assign, hypothecate,
pledge, exchange, transfer, encumber or charge the same shall be void. No right
or benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities or the person entitled to such benefit.
9. Adjustments Upon Changes in Capitalization
The stock option Agreements evidencing options may contain such
provisions as the Board shall determine to be appropriate for the adjustment of
the number and class of shares subject to all outstanding options and the option
prices thereof in the event of changes in the outstanding Common Stock of the
Company by reason of any stock dividend, distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation or
liquidation and the like, and, in the event of any such change in the
outstanding common stock, the aggregate number and class of shares available
under the Director plan and the number of shares subject to grants pursuant to
Section 6 hereof shall be appropriately adjusted by the Board, whose
determination shall be conclusive and binding on all persons.
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<PAGE>
10. Termination and Amendment
Unless the Director plan shall theretofore have been terminated as
hereinafter provided, no grant of Options may be made under the Director Plan
after July, 2008. The Board may at any time, but not more than once every six
months except to comply with the changes in applicable law, amend, alter,
suspend or terminate the Director Plan; provided, however, that the Board may
not, without the requisite vote of the stockholders of the Company approving
such action (i) materially increase (except as provided in Section 9 hereof) the
maximum number of shares which may be issued under the Director Plan; (ii)
extend the term of the Director Plan; (iii) materially increase the requirements
as to eligibility for participants under the Director Plan or (iv) materially
change the benefits accruing to participants under the Director Plan. No
termination, modification or amendment of the Director Plan or any outstanding
stock option agreement may, without the consent of the Non-Executive Director to
whom any option shall theretofore have been granted, adversely affect the rights
of such Director with respect to such option.
11. Effectiveness of the Plan
The Director Plan shall become effective upon the requisite vote of the
stockholders of the Company approving such action, and upon the approvals, if
required, of any other public authorities. Any grant of options under the
Director Plan prior to such approval shall be expressly subject to the condition
that the Director Plan shall have been so approved. Unless the Director Plan
shall be so approved, the Director Plan and all options theretofore granted
thereunder shall be and become null and void.
12. Government and Other Regulations
The obligation of the Company with respect to options shall be subject
to (i) all applicable laws, rules and regulations and approvals by the
governmental agencies as may be required, including, without limitation, the
effectiveness of a registration statement under the Securities Act of 1933, as
amended, and (ii) the rules and regulations of any stock exchange on which the
Common Stock may be listed.
13. Governing Law
The Director Plan Shall be governed by, and construed in accordance
with, the laws of the State of New York.
4
EMPLOYMENT AGREEMENT
between
TTR INC.
and
STEVEN L. BARSH
Employment Agreement ("Agreement") dated as of July 6, 1998 between
Steven L. Barsh, residing at 316 Winding Way, Merion Station, PA 19066 (the
"Executive") and TTR Inc., a Delaware corporation (the "Company"), with its
principal executive offices at The Columbus Circle Building, 1841 Broadway, 11th
floor, New York, NY 10023.
WHEREAS, the Company desires to employ the Executive as its Chief
Executive Officer, and the Executive desires to accept such employment, upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I.
Employment
Section 1.01 Position; Responsibilities.
(One) The Company hereby employs the Executive commencing on July
22, 1998 (the "Effective Date") in accordance with the terms
and conditions herein. The employment hereunder shall be for a
term of eighteen (18) months (the "Term") and shall be
terminable by either party on the terms and subject to the
conditions set forth in this Agreement. After expiration of
the initial Term, this Agreement shall be automatically
renewed for additional one year terms, unless either party
shall send notice of termination to the other party at least
ninety (90) days before the end of the initial Term or any
renewal term.
(Two) The Board of Directors of the Company has elected Executive as
Chief Executive Officer of the Company, effective upon the
Effective Date. The Executive's responsibilities from and
after the Effective Date shall include all matters customarily
associated with the position of Chief Executive Officer,
including, without limitation, subject to direction by the
Board (as defined below), or the President of the Company (the
"Company President"), currently Mr. Marc D. Tokayer, those
related to engaging and terminating employees, establishing
appropriate personnel and employment policies and benefits,
negotiating and entering into contracts, finance, and
financial reporting. The Executive shall perform such duties
and services consistent with his position as may be assigned
to him from time to time by the Company President. The
Executive shall report to the Company President.
(Three) It is the intention of the Board of Directors of the Company
(hereinafter the "Board") that the Executive serve on the
Board, in accordance with and subject to the terms and
conditions set forth in this Agreement. In addition, Executive
shall serve as a member on any nominating committee appointed
by the Board to nominate outside directors to serve on the
Board. In the event that Executive's employment hereunder
shall for any reason whatsoever terminate, then Executive's
membership on the Board shall, without any further action on
the part of the Company, Board or Executive, forthwith
terminate, subject to the requirements of the Company's
By-laws. Executive acknowledges and agrees that the Company's
By-laws currently provide for a Board comprised of no more
than three (3) individuals and that Executive's designation
and election to serve on the Board are subject to the approval
by the Company's shareholders of a proposal, to be considered
at the Company's next annual meeting of its shareholders, to
repeal the existing By-laws and adopt new proposed By-laws
that will enable the Board to fix the number of directors and
fill vacancies. The Company and the Board will use their best
efforts to obtain such approval.
<PAGE>
(Four) The Company will maintain a United States office in New York
City, where Executive will perform his duties and
responsibilities, and such office will be adequately staffed
for that purpose. The parties acknowledge and agree that (i)
in the performance of his services hereunder Executive need
not be present in the New York City office on a daily basis
but only as is warranted by the exercise of reasonable
judgment for the promotion of the Company's business, and (ii)
the nature of the Executive's duties under this Agreement will
also require substantial domestic and international travel.
Section 1.02 Performance of Duties. The Executive shall duly and
faithfully perform all of the duties assigned to him to the best of his
abilities, and Executive's services to the Company shall be full-time and
exclusive, it being understood that the Executive may engage in the activities
set forth on Schedule I annexed hereto provided that the same shall not
otherwise constitute a breach of Executive's obligations or covenants hereunder
or materially impair or materially interfere with the performance of Executive's
responsibilities hereunder.
Section 1.03 Representation and Warranty of Company. The Company hereby
represents and warrants to Executive that it has received all authorizations
necessary for the execution and performance of the Agreement on the terms and
conditions set forth herein.
Section 1.04 Representation and Warranty of Executive. The Executive
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 Executive is party, and
(ii) does not require the consent of any person. Additionally, the Executive
represents and warrants to the Company that he shall not utilize during the term
of his employment any proprietary information of any third party, including
prior employers of the Executive.
Section 1.05 Termination of Barsh Technology Ventures, Inc. Services
Agreement. The parties acknowledge and agree that effective upon the Effective
Date, the Services Agreement between the Company and Barsh Technology Ventures,
Inc. ("BTV") will be terminated. The Company shall pay to BTV all expense
reimbursements, upon evidence of appropriate receipts, and unpaid invoices for
services provided up to and including the termination date. BTV shall have no
obligation to destroy or return any Confidential Information of the Company as
defined under the Services Agreement, and any such Confidential Information
shall be transferred to or remain in the possession of Executive, and same shall
be subject to the provisions of this Agreement.
2
<PAGE>
ARTICLE II.
Compensation
Section 2.01 General. The Company shall compensate the Executive for
all of his services under this Agreement, as set forth below.
Section 2.02 Salary. The Executive's minimum annual salary ("Base
Salary") commencing on the Effective Date, shall be at the rate of $210,000 and
shall be payable in bi-weekly or other installments in accordance with the
Company's normal payment schedule for senior management. The Base Salary shall
be subject to annual review commencing at the end of 1999 and at the end of each
year thereafter, if the Executive is employed by the Company at that time, and
may be increased (but not decreased) for subsequent years.
Section 2.03 Stock Option. The Executive shall be entitled to
participate in the Company's existing Incentive Stock Option Plan (1996)
(hereinafter, the "1996 Plan") and shall be granted an option under the 1996
Plan to purchase shares of the Company's Common Stock, on the terms and
conditions set forth on the attached Option Agreement (the "Option"). The Option
is for the purchase of an aggregate of 250,000 Shares of common stock of the
Company. The Option is exercisable at $2 and 15/16 per Share (which is the Fair
Market Value per Share on the date of grant as defined in the 1996 Plan). The
Option vests over five years, as to 20% of the number of Shares covered thereby
during each year, prorated for each completed month of employment, and the
Option expires ten years from the date on which the Board approved the 1996
Plan. The terms of the Option are as set forth in the Option Agreement attached
as Exhibit A, and is otherwise subject to all other provisions of the 1996 Plan.
In the event that the Company shall approve or adopt any other stock
option plan, bonus plan or other compensation program ("Incentive Programs")
that the Company may hereafter establish for senior management, Executive shall
be entitled to participate in such Incentive Programs, and the Option granted
above may be issued and made subject to any stock option plan adopted as part of
any such Incentive Programs (in lieu of Executive participating in the 1996
Plan), provided that the terms and conditions of the Option are no less
favorable to Executive than those to which he is entitled under the 1996 Plan.
Section 2.04 Fringe Benefits. The Executive shall be entitled to
participate in all employee benefit plans, including retirement programs, if
any, group health care plans and Incentive Programs established for senior
management. Executive shall be entitled to such participation on a basis no less
favorable to the Executive than is made available to other senior management of
the Company and its affiliates. A list of all of the benefits to be provided to
Executive, and the benefit plans in which Executive will be a participant or
beneficiary at the date of commencement of this Agreement, is attached to this
Agreement as Exhibit B. In addition to the foregoing, the Executive shall be
entitled to receive the following:
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<PAGE>
(One) Vacation, Sick Leave and Personal Days. The Executive shall be
entitled to an aggregate of 20 business days of paid vacation
per contract year. In addition, the Executive shall be
entitled to paid sick leave until such date as the Executive
becomes entitled to receive long term disability benefits
under any disability insurance policy provided by the Company
or the date that Executive is terminated under this Agreement
by reason of disability. Vacation days shall be prorated for
any portion of a year to the date of termination. The
Executive shall consult with the Company President regarding
the timing of any vacation extending for a period of more than
10 consecutive business days. In addition to the foregoing,
the Executive shall be entitled to paid vacation for the
following legal holidays in the United States: New Year's,
President's Day, Memorial Day, July 4, Labor Day, Thanksgiving
Day (Thursday and Friday), and Christmas; and during the
holidays of Rosh Hashana, Yom Kippur, first two days and last
two days of Succot, Passover and Shavuot. Vacation days may
not be carried forward or accumulated for use by Executive
more than one year following the year in which such vacation
was earned.
(Two) Expense Reimbursements. The Company shall reimburse the
Executive promptly for all reasonable and proper expenses
incurred by him, in promoting the business of the Company and
the performance of his duties hereunder, upon presentation by
Executive of receipts or other appropriate evidence of
expenses incurred. The Company and Executive acknowledge and
agree that the Company will reimburse the Executive's
reasonable expenses and conference fees for attendance at
seminars, conferences and education courses that are relevant
to the Company's business and Executive's duties and
responsibilities under this Agreement.
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<PAGE>
(Three) Travel. Executive shall be entitled to fly business class in
any flight, or combination of flights to get to one
destination, of a duration of over five (5) hours.
(Four) Mobile Communication. The Company will provide Executive with,
or reimburse any reasonable expense incurred by Executive with
respect to, suitable tele-communications and computer
equipment used by Executive in the performance of his duties
and responsibilities under this Agreement.
Section 2.05 Withholding. The Base Salary and all other payments to the
Executive for his services to the Company shall be subject to all withholding
and deductions required by federal, state or local law, including those
authorized by the Executive but not otherwise required by law.
Section 2.06 Expense Reimbursement. The Company shall pay to Executive,
within five (5) business days after signing of this Agreement, a non-accountable
expense allowance of $10,000 for the purpose of reimbursing Executive for costs
and expenses incurred by Executive in the negotiation and execution of this
Agreement, including, but not limited to, travel, lodging, meals,
telecommunications charges, and attorney's fees and costs.
ARTICLE III.
Termination of Employment
Section 3.01 Events of Termination. Executive may terminate his
employment hereunder at any time for any reason by delivering to the Company 90
days' advance written notice of termination.
In addition, Executive may resign and terminate his employment
hereunder for "Good Reason" (which shall also be deemed a termination by the
Company other than for Cause). For purposes of this Agreement, "Good Reason"
means (i) the failure to elect and continue, except as otherwise provided in
this Agreement, Executive as Chief Executive Officer and a member of the Board,
or, except with respect to the Company 1998 annual meeting of shareholders, to
nominate Executive for re-election as a member of the Board (except where a
majority of the sitting directors vote against the nomination of Executive for
such re-election for reasons related to the best interests of the Company), (ii)
the failure to assign Executive duties, authorities, responsibilities and
reporting requirements that are in the aggregate substantially consistent with
his position, or if the scope of Executive's duties and responsibilities as
Chief Executive Officer of the Company are in the aggregate materially reduced,
except for any reduction in duties and responsibilities due to Executive's
illness or disability, provided, that, Good Reason shall not exist where a
majority of the sitting directors on the Board determine that certain duties and
functions which may otherwise have been assigned to the Executive are to be
assigned to an employee, consultant or agent of the Company other than Executive
for bona fide reasons related to the conduct of the Company's business or where
the failure to assign duties and responsibilities consistent with Executive's
position and any material reduction in the scope of Executive's responsibilities
are warranted, in the reasonable judgment of the Board, by Executive's
performance, (iii) a material reduction in or a material delay in the payment of
Executive's total cash compensation and benefits from those required to be
provided in accordance with the provisions of this Agreement, or a breach by the
Company of any other material provision of this Agreement or the Options
referred to in Section 2.03 where the Company has failed to cure such breach
within 10 business days following receipt of written notice from Executive
detailing the basis of the alleged breach, (iv) a requirement by the Company or
the Board that Executive be based outside of the greater New York City area
(which shall include New Jersey), other than on travel reasonably required to
carry out Executive's obligations under this Agreement, or (v) the failure of
the Company to obtain the assumption in writing of its obligations to perform
this Agreement by any successor to all or substantially all of the assets of the
Company at or before consummation of a merger, consolidation, sale or similar
transaction.
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Executive shall remit to the Board in writing notice of the existence
of Good Reason, specifying in reasonable detail the basis therefor, not later
than three months from the occurrence of the event which Executive is deeming as
Good Reason. Within 10 business days following the Company's receipt of
Executive's notice relating to Good Reason, the Executive and the entire Board
shall confer in a good-faith attempt to reach an amicable resolution of any
outstanding issue. In the event that the parties shall fail to reach such
amicable resolution, the parties jointly shall promptly refer this matter to an
Arbitrator in the manner prescribed below. Pending determination of the
Arbitrator as herein provided, at the option of Executive and upon notice to the
Company, Executive may continue in the employ of the Company. In any event,
pending a determination by the Arbitrator, no payments shall be due Executive
under Section 3.02 (i) or (ii) hereof until the conclusion of the arbitration
proceeding or further proceeding contemplated by Section 5.04 hereof and only if
an award is rendered by the Arbitrator in favor of Executive. If the Arbitrator
finds that the Executive does not have Good Reason for terminating his
employment with the Company then the Company may consider the notice of Good
Reason received from Executive as termination by Executive without Good Reason
as of the date of original receipt thereof (unless the Executive has elected to
continue in the employ of the Company during such arbitration proceeding, in
which case the date of termination shall be deemed to be the date of receipt of
the Arbitrator's determination).
The Company shall have the right to terminate for "Cause" upon notice
to the Executive only in the event of (a) a failure by the Executive (other than
any such failure resulting from Executive's incapacity due to physical or mental
illness or injury) substantially to perform his duties hereunder (not including,
however, failure to meet performance targets), or (b) a failure by the Executive
to substantially comply with the direct lawful and proper instructions of the
Board which causes material harm or loss to the Company or which in the
reasonable opinion of the Board is likely to cause material harm or loss to the
Company, or (c) Executive's illegal or unethical acts or conduct which causes
material harm or loss to the Company or otherwise brings notoriety to the
Company or has a material adverse effect on the name or public image of the
Company, provided, however that with respect to clauses (a), (b) and (c) the
foregoing shall not constitute "Cause" if Executive, after being notified in
writing by the Company of the particular acts or circumstances of such material
breach, cures such failure within 30 days after receipt of such notice (if such
failure is reasonably susceptible to cure).
Termination by the Company for Cause shall not be effective until and
unless (i) notice of intention to terminate for Cause has been given by the
Company within three months after the Board learns of the act, failure or event
constituting "Cause" and (ii) the Board has resolved to terminate Executive for
Cause after Executive has been given notice of the particular acts or
circumstances which are the basis for the termination for Cause and has been
afforded at least 10 business days notice of the meeting at which such
resolution is to be voted upon and an opportunity to present his position in
writing and the Company has given notice of termination to Executive within
three days thereafter (and the Executive's termination of employment shall be
effective immediately upon receipt of such notice but shall not be deemed a
termination of employment for Cause unless and until all of the conditions set
forth in clauses (i) through (iii) hereof have occurred), and (iii) if Executive
has commenced an arbitration in the manner prescribed below within 15 days after
such notice of termination, disputing the Company's right under this Agreement
to terminate for Cause, the Arbitrator shall thereafter have determined that the
Executive was terminated for Cause; provided, however, that (a) Company may
suspend the Executive with pay at any time during the period commencing with the
giving of notice to Executive under clause (i) above until final notice of
termination is given under clause (ii) above; and (b) payments due Executive
under Section 3.02 hereof shall not be payable until such time as the Arbitrator
shall have determined that the Executive was terminated without Cause. If
Executive or his representative fails to file a demand for arbitration with the
American Arbitration Association and file the requisite fees pursuant to Rule 4
of the National Rules for the Resolution of Employment Disputes effective June
1, 1996 within 20 days of receipt of notice of termination from the Board, and
diligently pursue such proceeding in accordance with the procedures set forth in
Section 5.04 hereof, such termination shall be conclusively presumed to have
been for Cause.
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If the Arbitrator does not rule that the Executive was terminated for
Cause, the Executive shall be treated as having been terminated without Cause
and Executive shall have the rights provided under Section 3.02 below with
respect to a termination without Cause.
For all purposes of this Agreement and the Option Agreement attached
hereto as Exhibit A, "Good Reason" and "Cause" shall have the applicable defined
meaning as set forth above in this Section 3.01.
Section 3.02 Severance Package. In the event the Executive's employment
under this Agreement is terminated by the Company other than for "Cause" (a
termination due to the Executive's death or disability, or notice by the Company
of non-renewal of this Agreement, shall be treated for purposes of this
Agreement as a termination by the Company other than for Cause) or by the
Executive for "Good Reason", then the Executive shall be entitled to receive, in
addition to all amounts of Base Salary, earned but unpaid incentive or bonus
compensation under any Incentive Programs (prorated for any partial year), and
other benefits due or payable to him through the date of termination, the
following ("Severance Package"):
(a) in the event that such termination occurs at any time
following the first anniversary of the Effective Date of this
Agreement, an amount, which shall be payable in one lump sum
within 90 days of the date of determination that the
Executive's termination is (x) other than for Cause, or (y)
for Good Reason, as applicable, equal to one year's Base
Salary based on the Base Salary then in effect; provided,
that, if such termination occurs at any time prior to the
first anniversary of the Effective Date of this Agreement,
then the amount payable hereunder shall be equal to one-half
(1/2) of one year's Base Salary, plus, in either case, an
amount equal to the value of all benefits (other than Base
Salary, expense reimbursement and medical insurance benefits)
that would be provided to Executive for the Base Salary
continuation period (one year or one-half year, as the case
may be) including but not limited to amounts due to Executive
under any Incentive Programs at the rate paid or otherwise
provided to Executive for the preceding contract year;
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(b) so long as Executive remains in the employ of the Company for
at least six months following the Effective Date, the
immediate vesting of the Options granted pursuant to Section
2.03 hereof which would have vested by the end of the contract
year in which Executive's employment is terminated, and,
following timely exercise of any such Options, the Executive
shall receive title to the Shares issued in respect of such
Options free and clear of any lien, claim or encumbrance by,
through or under the Company;
(c) in the event that such termination takes place after the end
of the sixth month following the Effective Date of this
Agreement, Company paid medical insurance benefits available
to all other senior executives of the Company during the
12-month period subsequent to termination of employment shall
be paid by the Company, and thereafter all COBRA rights
available to the Executive shall be paid by the Executive, but
COBRA rights shall be measured from the termination date.
During any delays permitted by Section 3.01 for arbitration to
determine whether the Executive's termination by the Company was other than for
"Cause" or by the Executive for "Good Reason," if a transaction is agreed to
which would constitute a Change of Control event as defined in this Agreement,
the Company will include appropriate provisions protective of the Executive's
rights hereunder as if the arbitration were resolved favorably to the Executive,
but subject to such a favorable resolution. For the purposes of this Agreement
""Change of Control"" means any agreement, transfer, conveyance, assignment,
acquisition, merger or other transaction which results in, directly or
indirectly, any entity acquiring (or obtaining the right to acquire) ownership
of all or substantially all of the assets of the Company or ownership of or
voting power with respect to 50% or more of the common stock (or other ownership
interests) in the Company or any parent or parents of the Company, directly or
indirectly.
Section 3.03 Rights on Termination for Cause or Without Good Reason. No
Severance Package shall be due or owing to the Executive in the event that the
Company shall terminate the Executive's employment for "Cause" or in the event
that the Executive shall terminate his employment with the Company for reasons
other than "Good Reason"; provided, however that Executive shall in all events
be paid all accrued but unpaid Base Salary earned, but unpaid incentive or bonus
compensation under any Incentive Programs (prorated for any partial year), and
other benefits due or payable to him through the date of termination. In
addition, in the event that the Company shall terminate the Executive's
employment for "Cause" or in the event that the Executive shall terminate his
employment with the Company for reasons other than "Good Reason", then except as
provided in the following two sentences, all unvested Options then held by
Executive shall automatically be forfeited (subject, however, to any contrary
determination of the Board in its sole discretion). No forfeiture of unvested
Options shall occur until 15 days after the later of (i) the conclusion of any
arbitration proceeding or further proceeding contemplated by Section 3.01 hereof
or, (ii) if no arbitration proceeding is commenced, until the time for
commencing such a proceeding has lapsed (the later of such two dates being
referred to herein as the "Forfeiture Date"), but no additional service-based or
time-based vesting shall occur with respect to any such Options following the
date Executive's employment is deemed terminated under Section 3.01. Executive
may exercise vested Options at any time as permitted under the Option Agreement.
In all other respects, the terms of the grant of any such Options shall govern.
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Section 3.04 Disability. For purposes of this Agreement "disability"
shall mean any physical or mental illness or injury as a result of which
Executive remains absent from work for a period of six (6) successive months, or
an aggregate of 180 days in any twelve (12) month period.
Disability shall occur at the end of any such period.
Section 3.05 Cooperation of Executive. During the period following
notice of termination until the effective date of termination by either party
for whatever reason, the Executive shall cooperate with the Company and use
reasonable efforts to assist the integration into the Company the person or
persons who will assume the Executive's responsibilities.
Section 3.06 Resignation from the Board. Upon the termination for
whatsoever reason of Executive's employment hereunder, Executive shall be deemed
to have resigned forthwith from his position on the Board of Directors, subject
to compliance with the Company's By-laws.
ARTICLE IV.
Non-competition; Confidential Information; Development Rights
Section 4.01 Other Business Ventures. During the term of the
Executive's employment hereunder, and for a period of twelve (12) months
following the date on which Executive's termination of employment with the
Company becomes effective, the Executive shall not, without the prior written
approval of the Board, directly or indirectly engage in, represent, be connected
with or have a financial interest in any business which is or, to the best of
his knowledge, is about to become engaged in the design, development,
production, sale or distribution of any product or component that directly
competes with a product or component (i) then being designed, produced, sold or
distributed by the Company or any of its affiliates, or (ii) to which the
Company or any of its affiliates shall then have proprietary rights to sell or
distribute (hereinafter the ""Company's Business""); provided, however, that
nothing herein contained shall be deemed to prohibit the Executive from (i)
being a passive investor owning up to 5% of any class of outstanding securities
of any company whose stock is publicly traded, or (ii) being an owner, officer,
director or trustee of family businesses or partnerships not engaged in the
Company's Business.
Executive acknowledges that the restricted period of time and the
geographical location specified under this section 4.01 are reasonable, in view
of the nature of the business in which the Company is engaged and Executive'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.
Section 4.02 Confidential Information. Except (i) in the course of his
employment with the Company, or (ii) as he may be required pursuant to any law
or court order or similar process, the Executive shall not at any time during or
after the term of the Executive's employment hereunder, directly or indirectly
disclose or use any Confidential Information (as defined below) or proprietary
data with respect to the Company. The term "Confidential Information" as used in
this section 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. Confidential Information shall
not include information that (a) was already known to or independently developed
by the Executive 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
or known generally in the Company's industry except as a result of breach of
this Agreement by the Executive, (c) shall have been received by the Executive
from another person or entity having no obligation to the Company, or (d) is
approved in writing by the Company for release by the Executive.
The Executive agrees to disclose the Information only to persons
necessary in connection with Executive's work with the Company as determined by
the Executive in good faith. The Executive agrees to prevent the unauthorized
disclosure by him of the Confidential Information,
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and shall take appropriate measures to ensure that persons acting on his behalf
are bound by a like covenant or other duty of secrecy.
The Executive acknowledges and agrees that the Confidential Information
furnished to him hereunder is and shall remain proprietary to the Company.
Unless otherwise required by statute or government rule or regulation, and
excluding Executive's personal financial and business records, all copies of the
Confidential Information shall be returned to the Company immediately upon
request without retaining copies thereof.
Section 4.03 Hiring of Company Employees. During the term of the
Executive's employment hereunder, and for a period of twelve (12) months
following the date on which Executive's termination of employment with the
Company becomes effective, the Executive shall not, except in the course of the
performance of his duties hereunder or with the prior approval of the Board, in
any way directly or indirectly, with respect to any person who to the
Executive's knowledge was employed by the Company or its affiliates ("Company
Employee") at any time during the period commencing six months prior to the date
of the hiring of such Company Employee, hire or cause to be hired any Company
Employee, or contract the services of any closely held private corporation or
other entity in which such Company Employee is an officer or director or holds a
25% or greater equity ownership interest.
Section 4.04 Development Rights. The Executive 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 Executive's efforts during his employment with the Company
shall be the sole property of the Company. Executive shall at Company's request
do all things and execute all documents as Company may reasonably require to
vest in Company the rights and protection herein referred to.
ARTICLE V.
Miscellaneous
Section 5.01 Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to the Chairman
of the Board of TTR, and if to the Executive, to his address on the books of the
Company (or to such other address as the Company or Executive may give to the
other for purposes of notice hereunder).
Notices given to Executive shall be sent to:
Steven L. Barsh
316 Winding Way
Merion Station, PA 19066
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With a copy to:
Connolly Epstein Chicco Foxman Oxholm & Ewing
1515 Market St. - 9th Floor
Philadelphia, PA 19102
Attention: Stephen M. Foxman, Esq.
Notices given to the Company shall be sent to:
TTR, Inc.
The Columbus Circle Bldg. - 11th Floor
1841 Broadway
New York, NY 10023
Attention: Moshe D. Tokayer.
With a copy to:
Aboudi & Brounstein
136 Rothschild Blvd.
Tel Aviv 65272, Israel
All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by facsimile or electronic mail with confirmation of
receipt, (c) by mailing in the United States mails to the last known address of
the party entitled thereto or (d) by express courier service. The notice,
request or other communication shall be deemed to be received upon personal
delivery, upon confirmation of receipt of facsimile or electronic mail
transmission or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
Section 5.02 Assignment and Succession. The rights and obligations of
the Company under this Agreement shall inure to the benefit of and be binding
upon its successors and assigns. The Executive's rights and obligations
hereunder are personal and may not be assigned; provided, however that in the
event of the termination of the Executive's employment due to the Executive's
death or disability, the Executive's legal representative shall have the right
to receive the Severance Package as set forth in Section 3.02 above.
Section 5.03 Headings. The Article, Section , paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 5.04 Arbitration. In the event of any controversy, dispute or
claim arising out of or related to this Agreement or the Executive's employment
by the Company, the parties shall negotiate in good faith in an attempt to reach
a mutually acceptable settlement of such dispute. If negotiations in good faith
do not result in a settlement of any such controversy, dispute or claim,
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it shall be finally settled by expedited arbitration in accordance with the
National Rules of the American Arbitration Association governing employment
disputes, except to the extent deemed modified by the following:
(One) The Arbitrator shall be determined from a list of names of
five impartial arbitrators each of whom shall be an attorney
experienced in arbitration matters concerning executive
employment disputes, supplied by the American Arbitration
Association (the "Association") chosen by Executive and the
Company each in turn striking a name from the list until one
name remains.
(Two) The expenses of the arbitration shall be borne equally by each
party; and each party shall bear its own legal fees and
expenses, except that the Arbitrator shall have authority to
award to the prevailing party his or its reasonable attorney's
fees and expenses if an award is rendered by the Arbitrator in
such party's favor.
(Three) The Arbitrator shall determine whether and to what extent any
party shall be entitled to damages under this Agreement. No
party shall be entitled to punitive damages, and each party
waives all such rights if any.
(Four) Each party shall prepare a submission and proposed finding
with such affidavits, memoranda of law, exhibits and other
documents as are appropriate to support the position taken by
such party. The Arbitrator shall take such evidence in the
hearing or request further submissions that the Arbitrator
believes would be necessary to evaluate the submission or the
credibility of the evidence, provided that the Arbitrator will
use every effort to avoid a general hearing. The Arbitrator
shall render a decision in writing, providing the reasons and
support therefor. Such determination by the Arbitrator is
intended to constitute an award and will be an award entitled
to full recognition under Article 75 of the New York Civil
Practice Law and Rules.
(Five) Subject to subparagraph (d) above, the Arbitrator shall have
the authority to award any remedy or relief provided for in
this Agreement, in addition to any other remedy or relief
(including provisional remedies and relief) that a court of
competent jurisdiction could order or grant. In addition, the
Arbitrator shall have the authority to decide issues relating
to the interpretation, meaning or performance of this
Agreement even if such decision would constitute an advisory
opinion in a court proceeding or if the issues would otherwise
not be ripe for resolution in a court proceeding, and any such
decision shall bind the parties in their continuing
performance of this Agreement. The Arbitrator's written
decision shall be rendered within sixty days of the submission
by both parties, or if the Arbitrator determines to hold a
hearing, then within sixty days of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the
parties as to the matter in dispute. To the extent that the
relief or remedy granted by the Arbitrator is relief or remedy
on which a court could enter judgment, a judgment upon the
award rendered by the Arbitrator shall be entered in any court
having jurisdiction thereof (unless in the case of an award of
damages, the full amount of the award is paid within 15 days
of its determination
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by the Arbitrator). Otherwise, the award shall be binding on
the parties in connection with their continuing performance of
this Agreement and in any subsequent arbitration or judicial
proceedings between the parties.
(Six) The arbitration shall take place in New York City or in the
locale of the Company's office in the United States where
Executive is based, as elected by the party commencing
arbitration.
(Seven) The arbitration proceeding and all filing, testimony,
documents and information relating to or presented during the
arbitration proceeding shall be disclosed exclusively for the
purpose of facilitating the arbitration process and for no
other purpose and shall be deemed to be information subject to
the confidentiality provisions of this Agreement.
(Eight) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence
of a dispute while the dispute is being resolved unless and
until such obligations are terminated or expire in accordance
with the provisions hereof.
(Nine) The parties may obtain an exchange of information including
depositions, interrogatories, production of documents,
exchange of summaries of testimony or exchange of statements
of position, and the Arbitrator shall limit such disclosure to
avoid unnecessary burden to the parties and shall schedule
promptly all discovery and other procedural steps and
otherwise assume case management initiative and control to
effect an efficient and expeditious resolution of the Dispute.
At any oral hearing of evidence in connection with an
arbitration proceeding, each party and its counsel shall have
the right to examine its witness and to cross-examine the
witnesses of the other party who testify at the hearing.
(Ten) Notwithstanding the dispute resolution procedures contained in
this Section 5.04, either party may apply to any court having
jurisdiction (i) to enforce this Agreement to arbitrate, (ii)
to seek provisional injunctive relief so as to maintain the
status quo until the arbitration award is rendered or the
Dispute is otherwise resolved, or (iii) to challenge or vacate
any final judgment, award or decision of the Arbitrator that
does not comport with the express provisions of this Section
5.04.
Section 5.05 Invalidity. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired.
Section 5.06 Waivers. No omission or delay by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof, or the exercise of
any other right, power or privilege.
Section 5.07 Counterparts. This Agreement may be executed in multiple
counterparts,
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each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
Section 5.08 Entire Agreement. This Agreement contains the entire
understanding of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof. No representation, promise
or inducement has been made by either party hereto that is not embodied in this
Agreement and neither party shall be bound by or liable for any alleged
representation, promise or inducement not set forth herein. This Agreement may
not be amended, except by a written instrument hereafter signed by each of the
parties hereto.
Section 5.09 Interpretation. The parties hereto acknowledge and agree
that each party and its or his counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its drafting. Accordingly,
(i) the rules of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party regardless of which party was generally responsible for the preparation of
this Agreement.
Section 5.10 Governing Law. This Agreement and the performance hereof
shall be construed and governed in accordance with the internal laws of the
State of New York without reference to principles of conflict of laws.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its duly authorized officer and the Executive has signed this Agreement as of
the day and year first above written.
TTR INC.
By /s/ MARC TOKAYER
------------------------
Name: Marc Tokayer
Its: Chairman &
President
/s/ STEVEN BARSH
---------------------------
STEVEN L. BARSH
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Schedule I
Other Business-related Activities of the Executive
Executive may continue to own and operate Barsh Technology Ventures,
Inc. (""Barsh Inc.""). The Executive shall not materially increase the scope or
breadth of the activities currently engaged in by Barsh Inc. beyond those
presently existing or incidental thereto without the prior written consent of
the Company. The Executive shall refer exclusively to the Company any business
opportunity in the line of the Company's business of which he shall become
aware.
The Executive shall have the right to appear or participate in any
trade, industry, professional, business or other forum, conference or meeting;
provided, however, that Executive shall disclose that he is affiliated with, and
appearing solely on behalf of, the Company.
The Executive shall have the right to participate in charitable,
religious and civic activities; provided, however, that such activities do not
materially impair or materially interfere with the performance of his duties and
responsibilities on behalf of the Company.
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Exhibit A
to Employment Agreement between TTR, Inc. and Steven L. Barsh dated July 1,
1998.
TTR INC.
INCENTIVE STOCK OPTION AGREEMENT
[SENT SEPARATELY]
17
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ATTACHMENT A
TO OPTION AGREEMENT BETWEEN TTR, INC. AND STEVEN L. BARSH DATED JULY __, 1998.
TERM SHEET
STEVEN L. BARSH
PERFORMANCE STANDARDS FOR ACCELERATION OF OPTIONS
1. All defined terms used in this Term Sheet and not defined in the
Employment Agreement and/or Option Agreement between TTR, Inc. and
Steven L. Barsh ("Executive") dated July __, 1998 (the "Employment
Agreement") shall have the meaning specified in the TTR, Inc. Stock
Option Plan (the "Plan").
2. This Term Sheet shall apply to 250,000 Shares under Option.
3. [to be inserted at a later date as provided for in the Employment
Agreement]
Notice and all other "Miscellaneous" provisions of Article V of the
Employment Agreement shall be equally applicable to this Term Sheet.
Date: _______________
TTR, Inc.
By:__________________________
Its:__________________________
-----------------------------
Steven L. Barsh
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Exhibit C
to Employment Agreement between TTR, Inc. and Steven L. Barsh dated July 1,
1998.
TTR, INC.
BENEFITS TO BE PROVIDED OR MADE AVAILABLE TO EXECUTIVE
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Exhibit A
to Employment Agreement between TTR, Inc. and Steven L. Barsh dated Jul y6,
1998.
TTR INC.
NON-QUALIFIED INCENTIVE STOCK OPTION AGREEMENT
TTR Inc., a corporation organized under the laws of Delaware (the
"Company"), hereby grants to Steven L. Barsh (the "Optionee") as of July __,
1998 (the "Option Date"), pursuant to the provisions of the TTR Inc. Stock
Option Plan (the "Plan"), an incentive stock option (the "Option") to purchase
from the Company 250,000 Shares, at the price of $2 and 15/16 per Share upon and
subject to the terms and conditions set forth below. References to employment by
the Company shall include employment by a subsidiary or affiliate of the
Company.
Capitalized terms not defined herein or in the Employment Agreement
entered into between Optionee and the Company dated July 6, 1998 (the
"Employment Agreement") shall have the meanings specified in the Plan.
1. Option Subject to Acceptance of Agreement.
The Option may not be exercised unless the Optionee shall accept this
Agreement by executing it in the space provided below and returning such
original execution copy to the Company.
2. Time and Manner of Exercise of Option.
2.1. Maximum Term of Option. In no event may the option be
exercised, in whole or in part, after ten years from the date on which
the Board approved the Plan (the "Expiration Date").
2.2. Exercise of Option.
(a) The Option shall become exercisable as to one-fifth of
the number of Shares subject to the Option during each year of
employment, prorated over the number of complete months which
Optionee is employed by the Company, and otherwise as provided
below in this Section 2.2. Notwithstanding the foregoing, in the
event that the Optionee resigns (other than for Good Reason) or
is terminated for Cause, as defined in the Employment Agreement,
prior to the first anniversary of the date of grant none of the
Shares exercisable under the Option shall vest in the Optionee.
(b) If the Optionee's employment by the Company terminates
for Cause, the Option, to the extent not then vested, shall
terminate automatically on the effective date of the Optionee's
termination of employment for Cause. For purposes of this Section
2.2, Optionee shall only be deemed terminated by the Company for
Cause if his termination for Cause has become effective under and
pursuant to the Employment Agreement (but, as provided in the
Employment Agreement, only upon the conclusion of an arbitration
proceeding, if it is timely commenced in accordance with such
Agreement).
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(c) If the performance standards set forth in the Term Sheet
attached to this Agreement are met, then that all or a portion of
the Option shall be accelerated and become fully vested and
exercisable to the extent provided for in such Term Sheet. If the
Term Sheet has not been completed and attached at the time of the
delivery of this Option Agreement to the Optionee, this Option
Agreement will be fully valid, enforceable and binding, and the
Company and the Optionee will act in good faith to agree upon a
Term Sheet and attach such Term Sheet to this Agreement within
the ninety (90) day period following delivery of this Option
Agreement to the Optionee.
(d) If there is a Change of Control, as defined in the
Employment Agreement, whereby shareholders of the Company
generally will be entitled to exchange or sell their shares, or
otherwise be entitled to participate in such event, then in such
case, the Option shall be accelerated and become fully vested and
exercisable, and may be exercised by the Optionee or the
Optionee's Legal Representative, so that Optionee may participate
in such event as a shareholder of the Company with respect to the
Shares that would be issued upon exericise of the Option.
(e) If (i) the Optionee's employment by the Company is
terminated by the Company other than for "Cause" within the
meaning of Section 2.2(b) hereof (a termination due to Optionee's
death or disability, as defined in the Employment Agreement, or
notice by the Company of non-renewal of the Employment Agreement,
shall be treated for purposes of this Agreement as a termination
by the Company other than for "Cause") , or (ii) the Optionee's
employment by the Company is terminated by the Optionee for "Good
Reason" as determined in accordance with the provisions of the
Employment Agreement, then in any such case, that portion of the
Option which would have vested on the next succeeding anniversary
of the date of grant but for the specified event shall be
accelerated and become fully vested and exercisable, and may
thereafter be exercised by the Optionee or the Optionee's Legal
Representative until and including the Expiration Date.
(d) If the Optionee's employment by the Company is treated
(after giving effect to any arbitration proceeding) as having
been terminated by the Optionee without Good Reason under the
Employment Agreement, the Option shall be exercisable only to the
extent it is exercisable on the effective date of the Optionee's
termination of employment and may thereafter be exercised by the
Optionee or the Optionee's Legal Representative until and
including the earlier of (i) the date which is three months after
the effective date of the Optionee's termination of employment or
service (or, if later, the date which is 15 days after the
Arbitrator's determination that Optionee's employment was
terminated by the Optionee without Good Reason) and (ii) the
Expiration Date.
(e) If the Optionee dies at any time prior to the Expiration
Date following termination of employment for a reason giving
Optionee the right to exercise until the Expiration Date under
paragraph (c) above, the Option shall be exercisable by the
Optionee's Legal Representative or Permitted Transferees, as the
case may be, until and including the Expiration Date.
2.3 Method of Exercise. Subject to the limitations set forth in
this Agreement, the Option may be exercised by the Optionee (1) by
giving written notice to the Company specifying the number of whole
Shares to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's
21
<PAGE>
satisfaction) either (i) in cash or by bank or certified check, (ii)
previously owned whole Shares (which the Optionee has held for at
least six months prior to the delivery of such Shares or which the
Optionee purchased on the open market and for which the Optionee has
good title, free and clear of all liens and encumbrances) having a
fair market value, determined as of the date of exercise, equal to the
aggregate purchase price payable pursuant to the Option by reason of
such exercise, (iii) a promissory note bearing interest as provided
for in the Plan, (iv) in cash by a broker-dealer acceptable to the
Company to whom the Optionee has submitted an irrevocable notice of
exercise or (v) a combination of (i), (ii) and (iii), and (2) by
executing such documents as the Company may reasonably request. Any
fraction of a Share which would be required to pay such purchase price
shall be disregarded and the remaining amount due shall be paid in
cash by the Optionee. No certificate representing a Share shall be
delivered until the full purchase therefor has been paid.
2.4 Termination of Option.
(a) In no event may the Option be exercised after it
terminates as set forth in this Section 2.4. The Option shall
terminate, to the extent not exercised pursuant to Section 2.3 or
earlier terminated pursuant to Section 2.2, on the Expiration
Date.
(b) In the event that rights to purchase all or a portion of
the Shares subject to the Option expire or are exercised,
cancelled or forfeited, the Optionee shall promptly return this
Agreement to the Company upon the Company's request for full or
partial cancellation, as the case may be. Such cancellation shall
be effective regardless of whether the Optionee returns this
Agreement. If the Optionee continues to have rights to purchase
Shares hereunder, the Company shall, within 10 days of the
Optionee's delivery of this Agreement to the Company, either (i)
mark this Agreement to indicate the extent to which the Option
has expired or been exercised, cancelled or forfeited or (ii)
issue to the Optionee a substitute option agreement applicable to
such rights, which agreement shall otherwise be identical to this
Agreement in form and substance.
3. Additional Terms and Conditions of Option.
3.1. Nontransferability of Option. The Option may not be
transferred by the Optionee other than (i) by will or the laws of
descent and distribution or pursuant to beneficiary designation
procedures approved by the Company or (ii) as otherwise permitted
under Rule 16b-3 under the Exchange Act (to the extent applicable).
Except to the extent permitted by the foregoing sentence, during the
Optionee's lifetime the Option is exercisable only by the Optionee or
the Optionee's Legal Representative. Except as permitted by the
foregoing, the Option may not be sold, transferred, assigned, pledged,
hypothecated, voluntarily encumbered or otherwise disposed of (whether
by operation of law or otherwise) or be subject to execution,
attachment or similar process.
3.2. Investment Representation. The Optionee hereby represents
and covenants that (a) any Shares purchased upon exercise of the
Option will be purchased for investment and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), unless such purchase has been
registered under the Securities Act and any applicable state
securities laws; (b) any subsequent sale of any such Shares shall be
made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant
to an exemption from registration under
22
<PAGE>
the Securities Act and such state securities laws; and (c) if
requested by the Company, the Optionee shall submit a written
statement, in form satisfactory to the Company, to the effect that
such representation (x) is true and correct as of the date of purchase
of any Shares hereunder or (y) is true and correct as of the date of
any sale of any such Shares, as applicable. As a further condition
precedent to any exercise of the Option, the Optionee shall comply
with all regulations and requirements of any regulatory authority
having control of or supervision over the issuance or delivery of the
Shares.
3.3. Withholding Taxes.
(a) As a condition precedent to the delivery of Shares upon
exercise of the Option, the Optionee shall, upon request by the
Company, pay to the Company in addition to the purchase price of the
Shares, such amount of cash as the Company may be required, under all
applicable federal, state, local or other laws or regulations, to
withhold and pay over as income or other withholding taxes (the
"Required Tax Payments") with respect to such exercise of the Option.
If the Optionee shall fail to advance the Required Tax Payments after
request by the Company, the Company may, in its discretion, deduct any
Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a
cash payment to the Company pursuant to Section 3.3(a), (2) delivery
to the Company of previously owned whole Shares (which the Optionee
has held for at least six months prior to the delivery of such Shares
or which the Optionee purchased on the open market and for which the
Optionee has good title, free and clear of all liens and encumbrances)
having a fair market value, determined as of the date the obligation
to withhold or pay taxes first arises in connection with the Option
(the "Tax Date"), equal to the Required Tax Payments, (3) a cash
payment by a broker-dealer acceptable to the Company to whom the
Optionee has submitted an irrevocable notice of exercise or (4) any
combination of (1) and (2). Shares to be delivered may not have a Fair
Market Value in excess of the minimum amount of the Required Tax
Payments. Any fraction of a Share which would be required to satisfy
any such obligation shall be disregarded and the remaining amount due
shall be paid in cash by the Optionee. No certificate representing a
Share shall be delivered until the Required Tax Payments have been
satisfied in full.
(c) Unless the Committee otherwise determines, if the Optionee is
subject to Section 16 of the Exchange Act, the Optionee may deliver to
the Company previously owned whole Shares in accordance with Section
3.3(b), but only if such delivery is in connection with the delivery
of Shares in payment of the exercise price of the option.
3.4 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Shares other
than a regular cash dividend, the number and class of securities subject to
the Option and the purchase price per security shall be appropriately
adjusted by the Committee without an increase in the aggregate purchase
price. If any adjustment would result in a fractional security being
subject to the Option, the Company shall pay the Optionee, in connection
with the first exercise of the Option, in whole or in part, occurring after
such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to
23
<PAGE>
the nearest hundredth) by (ii) the excess, if any, of (A) the fair market
value of a Share on the exercise date over (B) the exercise price of the
Option.
3.5. Compliance with Applicable Law. The Option is subject to the
condition that if the listing, registration or qualification of the Shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with,
the purchase or delivery of Shares hereunder, the Option may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained.
The Company agrees to use reasonable efforts to effect or obtain any such
listing, registration, qualification, consent or approval.
3.6. Delivery of Certificates. Upon the exercise of the Option, in
whole or in part, the Company shall deliver or cause to be delivered one or
more certificates representing the number of Shares purchased against full
payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as
otherwise provided in Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee shall not
be entitled to any privileges of ownership with respect to Shares subject
to the Option unless and until purchased and delivered upon the exercise of
the option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered Shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such Shares not
so purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no event
shall the granting of the Option or its acceptance by the Optionee give or
be deemed to give the Optionee any right to continued employment by the
Company or any affiliate of the Company.
3.9. Decisions of Board or Committee. The Board or the Committee shall
have the right to resolve all questions which may arise in connection with
the Option or its exercise. Any interpretation, determination or other
action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive (subject to the
provisions for termination by the Company for Cause and termination by the
Optionee for Good Reason, and arbitration of disputes, as set forth in the
Employment Agreement).
3.10. Company to Reserve Shares. The Company shall at all times prior
to the expiration or termination of the Option reserve or cause to be
reserved and keep or cause to be kept available, either in its treasury or
out of its authorized but unissued Shares, the full number of Shares
subject to the Option from time to time.
3.11. Agreement Subject to the Plan. Except to the extent otherwise
expressly provided herein, this Agreement is subject to the provisions of
the Plan and shall be interpreted in accordance therewith. The Optionee
hereby acknowledges receipt of a copy of the Plan. To the extent of any
inconsistency or conflict between (i) this Agreement or the terms of the
Employment Agreement and (ii) the Plan, upon approval of the Employment
Agreement by the Board the Plan shall be deemed amended in such respects as
to cause the provisions of the Employment Agreement and this Agreement to
take precedence and be fully valid, enforceable, effective, and legally
binding upon the Company.
24
<PAGE>
3.12. Gross-Up. In the event that a Change in Control as defined in
the Employment Agreement has occurred, and the aggregate of all payments or
benefits made or provided to the Optionee under this Agreement, the
Employment Agreement and under all other plans and programs of the Company
(the "Aggregate Payment") is determined by the Internal Revenue Service
("IRS") or by the "Auditor" (as hereinafter defined) to constitute a
Parachute Payment, as such term is defined in Section 28OG(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Company shall
pay to the Optionee, prior to the time any excise tax imposed by Section
4999 of the Code ("Excise Tax") is payable with respect to such Aggregate
Payment, an additional amount which, after the imposition of all income and
excise taxes thereon, is equal to the Excise Tax on the Aggregate Payment.
In no event shall the Company be obligated to pay the Optionee's income
taxes due with respect to his exercise of the Option or with respect to
payments or benefits received under any plans or programs of the Company.
Unless a determination is made by the IRS, the determination of whether the
Aggregate Payment constitutes a Parachute Payment and, if so, the amount to
be paid to the Executive and the time of payment pursuant to the preceding
sentence of this Section 3.12 shall be made by an a United States national
accounting firm reasonably acceptable to the Company (the "Auditor").
4. Miscellaneous Provisions.
[4.1. Designation as Incentive Stock Option. The Option is hereby
designated as constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code");
this Agreement shall be interpreted and treated consistently with such
designation. If, for any reason, any part of the Option granted herein is
not qualified to be treated as an incentive stock option at the time of
grant, then as to that portion of the Option only, the Option shall be
deemed a nonstatutory option, subject to and in accordance with the
provisions of the Code.
4.2. Meaning of Certain Terms. (a) As used herein, the term "Legal
Representative" shall include an executor, administrator, legal
representative, beneficiary or similar person and the term "Permitted
Transferee" shall include any transferee (i) pursuant to a transfer
permitted under the Plan and Section 3.1 hereof or (ii) designated pursuant
to beneficiary designation procedures which may be approved by the Company.
4.3. Successors. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided
for in this Agreement shall be made in accordance with the notice
provisions in the Employment Agreement.
4.5. Governing Law. The Option, this Agreement, and all determinations
made and actions taken pursuant hereto and thereto, to the extent not
governed by the laws of the United States, shall be governed by the laws of
the State of New York and construed in accordance therewith without giving
effect to principles of conflicts of laws.
4.6. Counterparts. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
25
<PAGE>
4.7 Dispute Resolution. The provisions of Section 5.04 of the
Employment Agreement relating to resolution of disputes shall also apply to
resolution of disputes under this Agreement.
TTR INC.
By /s/ MARC D. TOKAYER
--------------------------
Name Marc D. Tokayer
Its: Chairman & President
Accepted this 6th day of July, 1998.
/s/ STEVEN BARSH
- --------------------------
Steven L. Barsh
"Optionee"
Memorandum
26
SUBSCRIPTION AGREEMENT & CONFIDENTIONAL QUESTIONAIRE
Re: Private placement of Units, each Unit consisting of a 8%
$30,000 Promissory Note, 9,000 shares of Common Stock and
a warrant to purchase 3,000 shares of Common Stock
---------------------------------------------------------
Dear Subscriber:
TTR Inc., a Delaware corporation (the "Company"), is offering a minimum
of four (4) units up to a maximum of fifty (50) units (the "Units"), each Unit
consisting of (i) a 8% $30,000 promissory note, (ii) 9,000 shares of Company
Common Stock, par value $0.001 (the "Common Stock) and (iii) a warrant to
purchase 3,000 shares of Common Stock at an exercise price of $6.00 per share,
all as described more particularly in the Private Placement Memorandum, dated
December 1, 1998, accompanying this Subscription Agreement (the "Memorandum"),
through Roan Capital Partners LP. as exclusive placement agent. The Notes,
Shares and warrants are collectively referred to herein as the "Securities".
The Units are being offered on a "best efforts" basis, during an
offering period commencing on the date hereof and expiring on December 31, 1998,
subject to two sixty day extensions by the Company and the Placement Agent. The
Company expects to hold an interim closing of this Offering at such time as
subscriptions for 4 Units have been accepted by the Company. The final closing
of this Offering is expected to occur on or about December 31, 1998, when all 50
Units have been placed, subject to extensions as provided above. The Company and
the Placement Agent may extend the Offering or may cancel the Offering, rescind
any subscription and return funds received without deductions or interest. The
price for each Unit shall be payable upon execution of the Subscription
Agreement. The Company may accept subscription for fractional Units.
Pending the initial closing and any interim closings thereafter, each
prospective investor's payment accompanying the investor's Subscription
Agreement will be deposited in a segregated, non-interest bearing escrow. The
terms of the offering and of an investment in the Company are more fully
described in the Offering Materials. A check made to the order of "American
Stock Transfer & Trust Company" as agent for TTR Inc. in the amount equal to the
purchase price for the amount hereby subscribed for should accompany this
Subscription Agreement. In lieu of a check, a wire transfer can be made to
American Stock Transfer & Trust Company in accordance with the instructions of
the Placement Agent.
You have indicated your desire to participate in this private offering
and to subscribe to and agree to purchase Units in the principal amount of
$___________, receipt of which the Company acknowledges.
The Company will advise the Subscriber within 10 days after
receipt of this subscription whether this subscription has been accepted or
rejected. If this subscription is rejected, or if the offering is withdrawn, the
Company will return the amount paid by the Subscriber herewith as promptly as
practicable, without interest or deduction, and this subscription thereby shall
be canceled and of no further force or effect. If this subscription is rejected
or if the offering is withdrawn, the Subscriber agrees to return to the Company
the Offering Materials and all other documents concerning the offering. The
Subscriber may not withdraw this subscription or any amount paid pursuant
thereto except as otherwise provided below.
Neither the Units nor the securities underlying the Units have
been registered under the registration provisions of the Securities Act of 1933,
as amended (the "Act"), and
<PAGE>
are being offered and sold by the Company in reliance upon an exemption from
registration under Section 4(2) and 4(6) of the Act, and Regulation D
promulgated thereunder.
As an inducement to the company to accept your subscription,
you represent and warrant as follows:
(A) You acknowledge and understand that the offering and sale of the
Units are intended to be exempt from registration under the Act, by virtue of
Sections 4(2) and 4(6) of the Act and Regulation D promulgated thereunder
("Regulation D") and, in accordance therewith and in furtherance thereof, you
represent and warrant agree with the Company as follows [Please check statements
applicable to you]:
The undersigned is an accredited investor because the
undersigned is (check appropriate item):
__ (a) A Savings and loan association or other institution specified
in Section 3(a)(5)(A) of the Act whether acting in its individual
or fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; a plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of employees, if such
plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21)
of such Act, which is a savings and loan association, or if the
employee benefit plan has total assets excess of $5,000,000 or,
if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;
__ (b) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
__ (c) An organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, or partnership, not formed
for the specific purpose of acquiring the securities offered,
with total assets in excess of $5,000,000;
__ (d) A director or executive officer of the Company;
__ (e) A natural person whose net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds
$1,000,000;
__ (f) A natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same
income level in the current year;
__ (g) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii); and
__ (h) An entity in which all of the equity owners are accredited
investors. (If this alternative is checked, you must identify
each equity owner and provide statements signed by each
demonstrating how each qualifies as an accredited investor.)
2
<PAGE>
_____ You confirm that you have the capacity to protect your own interests
in connection with this transaction by reason of your business and
financial experience.
_____ You are able to bear the financial and economic risk of your
investment and bear the risk of the loss of your entire investment.
_____ Your investment does not exceed 10% of your net worth or joint net
worth with that of your spouse.
In addition to the above criteria, if you are a resident of the
Commonwealth of Pennsylvania, you represent that you will not sell or transfer
the Securities purchased for a period of twelve (12) months after the date of
purchase thereof unless they are subsequently registered under the Pennsylvania
Act of 1972 or under the Act. Moreover, you represent that you have been advised
of your right to withdraw acceptance of our offer to purchase the Units within
two (2) business days of the date receipt by the issuer of my binding contract
of purchase.
(B) You have such knowledge and experience in financial and business
matters as is required for evaluating the merits and risks of making this
investment., and you or your representatives have received such information
requested by you concerning the business, management and financial affairs of
the Company in order to evaluate the merits and risks of making this investment.
Further, you acknowledge that you, your attorney, accountant or adviser have had
the opportunity to ask questions of, and receive answers from, the officers of
the Company concerning the terms and conditions of this investment and to obtain
information relating to the organization, operation and business of the Company
and of the Company's contracts, agreements and obligations. Except as
specifically set forth herein, no representation of warranty is made by the
Company to induce you to make this investment, and any representation or
warranty not made herein is specifically disclaimed.
(C) You are making this investment for your own account and are purchasing
the Units for investment purposes only and not with a present view to the resale
or other distribution thereof:
(D) You are making the foregoing representations and warranties with the
intent that they may be relied upon by the Company in determining the
suitability of the sale Units to you for purposes of federal and state
securities laws.
(E) You further acknowledge that you have been advised that the Units or
the securities underlying the Units have not been registered under the
provisions of the Act and that the Company has represented to you that the Units
have been offered and sold by the Company in reliance upon an exemption from
registration provided in Section 4(2) and 4(6) of the Act and Section 25102 (f)
of the Code.
(F) In entering into this Agreement and in purchasing the Units, you
further acknowledge that:
(i) The Company has informed you that the Units have not been offered
for sale by means of general advertising or solicitation.
(ii) the Units may not be resold by you in absence of registration
under the Act or an available exemption from registration.
(iii) The following legend shall be placed on the Certificate(s)
evidencing the securities underlying the Units:
3
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
(iv) The Company may place a stop transfer order on its transfer books
against the transfer of the securities underlying the Units. Such stop
order will be removed, and further transfer of the Units or securities
underlying the Units will be permitted upon an effective registration of
the Units (as to the Company has no obligation to file), or the receipt by
the Company of an opinion of counsel that such further transfer may be
effected pursuant to an applicable exemption from registration.
(v) The purchase of the Units involves risks which you have evaluated,
and you are able to bear the economic risk of the purchase of the Units.
You have been advised of the current financial condition of the Company and
of the possible adverse effects of such financial condition on the
Company's general business.
(G) The undersigned has completed the accompanying Investor Questionnaire
and has delivered it herewith and represents and warrants that it accurately
sets forth the financial condition on the date hereof. The undersigned has no
reason to expect there will be any material adverse change in his or her
financial condition and will advise the Company of any such changes occurring
prior to acceptance of my subscription.
(H) The undersigned has relied only on the information otherwise provided
to him or her in writing by the Company relating to this investment.
(I) The undersigned understands that all documents, records, and books
pertaining to this investment have been made available for inspection by him or
her, his or her attorney and/or his or her accountant.
(J) The undersigned has had a reasonable opportunity to ask questions of
and receive answers from a person acting on behalf of the Company concerning the
offering of the Units and all such questions have been answered to the full
satisfaction of the undersigned.
(K) The undersigned is not purchasing the Units as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, any seminar or meeting, or any solicitation of a
subscription by a person not previously known to the undersigned in connection
with investments in securities generally.
(L) The undersigned has reached the age of majority in the state in which
the undersigned resides, has adequate means of providing for the undersigned's
current needs and personal contingencies, is able to bear the substantial
economic risks of an investment in the Units for an indefinite period of time,
has no need for liquidity in such investment, and the undersigned is prepared to
lose his or her entire investment in the Units.
(M) The undersigned's overall investments that are not readily marketable
is not, and his acquisition of the Units will not count such overall commitment
to become, disproportionate to his or her net worth.
4
<PAGE>
You acknowledge that you have made your own investigation concerning the
business and affairs of the Company and in that connection, you acknowledge the
previous receipt of the Offering Materials.
(N) The undersigned agrees to indemnify and hold harmless the Company and
the Placement Agent, the officers, directors, and affiliates of the Company or
the Placement Agent, and each other person , if any, who controls the Company or
the Placement Agent, within the meaning of Section 15 of the Act, against any
and all loss, liability, claim, damage and all expenses reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever arising out of or based upon any false
representation or warranty or breach or failure by the undersigned to comply
with any covenant or agreement made by the undersigned herein or in any other
document furnished by the undersigned to any of the foregoing in connection with
this transaction.
(O) The undersigned hereby acknowledges and agrees, subject to any
applicable state securities law, the subscription and application hereunder are
irrevocable, that the undersigned is not entitled to cancel, terminate or revoke
this Subscription Agreement or any agreements of the undersigned hereunder and
that this Subscription Agreement and such other agreements shall survive the
death or disability of the undersigned and shall be binding upon and inure to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and assigns. If the undersigned is more than
one person, the obligations of the undersigned hereunder shall be joint and
several, and the agreements, representations, warranties, and acknowledgments
herein contained shall be deemed to be made by and be binding upon each such
person and his heirs, executors, administrators, successors, legal
representatives, and assigns.
(P) The undersigned is not relying on the Company or any agent thereof
with respect to the financial or tax considerations with respect to an
investment in the Securities.
(Q) The undersigned shall provide, upon request, such information and
execute and deliver such documents as may be reasonably requested to comply with
all laws to which the Company may be subject, including without limitation, such
additional information as the Company may deem appropriate.
(R) The execution, delivery and performance of this Agreement by the
undersigned (i) will not constitute a default under or conflict with any
agreement or instrument to which the undersigned is a party or by which it or
its assets are bound, (ii) will not conflict with or violate any order,
judgment, decree, statute, ordinance or regulation applicable to the undersigned
(including, without limitation, any applicable laws relating to permissible
legal investments) and (iii) do not require the consent of any person or entity.
This Agreement has been duly authorized, executed and delivered by the
undersigned and constitutes the valid and binding agreement of the undersigned
enforceable against it in accordance with its terms.
(S) The undersigned has not retained, or otherwise entered into any
agreement or understanding with, any broker or finder in connection with the
purchaser of Securities by the undersigned other than Roan Capital Partners
L.P., and the undersigned acknowledges that the Company will not incur any
liability for any fee, commission or other compensation on account of any such
retention, agreement or understanding by the undersigned other than to Roan
Capital Partners L.P.
(T) The representations, warranties and agreements of the undersigned
contained herein shall be true and correct in all materials respects on and as
of the Closing Date of the sale of the Securities as if made on and as of such
date and shall survive the execution and delivery of this Agreement and the
purchase of the Securities.
5
<PAGE>
Neither this Subscription Agreement nor any provisions hereof shall
be waived, modified, discharged, or terminated except by an instrument in
writing signed by the party against whom any such waiver, modification,
discharge, or termination is sought.
Any notice, demand or other communication which any party hereto may
be required, or may elect, to give to anyone interested hereunder shall be
sufficiently given if (a) deposited, postage prepaid, in a United States mail
box, stamped, registered or certified mail, return receipt requested, addressed
to such address as may be listed on the books of the Company or (b) delivered
personally at such address.
This Subscription Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, or all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
This Subscription Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and there are no
representations, covenants or other agreements except as stated or referred to
herein.
Each provision of this Subscription Agreement is intended to be
severable from every other provisions, and the invalidity or illegality of any
portion hereof, shall not affect the validity or legality of the remainder
hereof.
This Subscription Agreement is not transferable or assignable by the
undersigned except as may be provided herein.
This Subscription Agreement shall be governed by and construed in
accordance with the laws of the State of New York as applied to residents of
that state executing contracts wholly to be performed in that state.
6
<PAGE>
We would appreciate your countersigning and returning two copies of this
Subscription Agreement. A countersigning copy of this Subscription Agreement
will be returned to you, together with certificates for the securities
underlying the Unit purchased. For the purpose of having the certificates for
the securities prepared, please indicate the exact manner in which the
certificates representing the Units is to be made out in the space provided for
below.
Date Executed: ______________, 1998.
Very truly yours,
TTR Inc.
By: ________________
Name: Marc Tokayer
Title: President
AGREED TO AND ACCEPTED:
(INDIVIDUAL) (CORP., PRTSHP OR TRUST)
- ------------------- ------------------------------
Signature of Subscriber Name of Corp., Prtshp or Trust
By: ____________________
Name:
Title:
When signing as guardian, executor, administrator, attorney, trustee, custodian,
or in any other similar capacity, please give full title. If a corporation, sign
in full corporate name by president or other authorized officer, giving title,
and affix corporate Fed. Ident. No. and seal if appropriate. If a partnership,
sign in partnership name by authorized person. In the case of joint ownership,
each Joint owner must sign.
Certificate for Units to be made out as follows:
- -------------------
Name
- ---------------------------------------------------------
Address & Fax
- ----------------------------------------- -------------
Social Security No. or Federal Ident. No. Telephone No.
7
<PAGE>
THE SECURITIES OFFERED PURSUANT TO THE CONFIDENTIAL MEMORANDUM DATED
DECEMBER 1, 1998 AND THE EXHIBITS ATTACHED THERETO (COLLECTIVELY, THE "OFFERING
MATERIALS") HAVE NOT BEEN FILED OR REGISTERED WITH OR APPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS. NO STATE SECURITIES LAW
ADMINISTRATOR HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR THE ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE SECURITIES OFFERED HEREBY ARE BEING OFFERED PURSUANT TO AN
EXEMPTION FROM THE REGISTERATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT") AND APPLICABLE STATE SECURITIES LAWS FOR NON-PUBLIC
OFFERINGS. SUCH EXEMPTIONS LIMIT THE TYPES OF INVESTORS TO WHICH THE OFFERING
WILL BE MADE AND RESTRICT SUBSEQUENT TRANSFER OF THE UNITS AND SECURITIES
UNDERLYING THE UNITS.
THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO
CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE
REQUIRED TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF
THIS OFFERING.
NO SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION
UNDER THE APPLICABLE FEDERAL OR STATE SECURITIES LAW IS NOT REQUIRED OR
COMPLIANCE IS MADE WITH SUCH REGISTRATION REQUIREMENTS.
THE OFFEREE, BY ACCEPTING DELIVERY OF THE OFFERING MATERIALS, AGREES TO
RETURN THE OFFERING MATERIALS AND ALL ACCOMPANYING OR RELATED DOCUMENTS TO THE
COMPANY UPON REQUEST IF THE OFFEREE DOES NOT AGREE TO PURCHASE ANY OF THE
SECURITIES OFFERED HEREBY.
THE OFFERING MATERIALS ARE SUBMITTED IN CONNECTION WITH THE PRIVATE
PLACEMENT OF THE SECURITIES AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED. IN ADDITION, THE OFFERING MATERIALS CONSTITUTE AN OFFER ONLY IF A
NAME AND IDENTIFICATION NUMBER APPEAR IN THE APPROPRIATE SPACES PROVIDED ON THE
COVER PAGE OF THE CONFIDENTIAL TERM SHEET AND CONSTITUTE AN OFFER ONLY TO THE
PERSON WHOSE NAME APPEARS THEREON. ANY REPRODUCTION OR DISTRIBUTION OF THE
OFFERING MATERIALS IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF THEIR
CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF THECOMPANY, IS PROHIBITED. ANY
PERSON ACTING CONTRARY TO THE FOREGOING RESTRICTIONS MAY PLACE HIMSELF AND THE
COMPANY IN VIOLATION OF FEDERAL OR STATE SECURITIES LAWS.
8
<PAGE>
BLUE SKY LEGENDS
NOTICE TO PRESIDENTS OF ALL STATES
THE UNITS AND SECURITIES UNDERLYING THE UNITS ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THE UNITS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
FOR NEW YORK RESIDENTS
THIS OFFERING MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED BY THE ATTORNEY
GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW
YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL
FOR RESIDENTS OF CONNECTICUT
THE SECURITIES OFFERED HEREBY ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION AND
HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE CONNECTICUT UNIFORM
SECURITIES ACT. THE SECURITIES OFFERED HEREBY CANNOT, THEREFORE, BE RESOLD OR
TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
FOR FLORIDA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES ACT IN
RELIANCE UPON EXEMPTION PROVISIONS THEREIN. SECTION 517.061 (11) (A) (5) OF THE
FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA ACT") PROVIDES THAT
ANY PURCHASER OF SECURITIES IN FLORIDA WHICH ARE EXEMPTED FROM REGISTRATION
UNDER SECTION 517.061 (11) OF THE FLORIDA ACT MAY WITHDRAW HIS SUBSCRIPTION
AGREEMENT AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN THREE BUSINESS
DAYS AFTER HE TENDERS CONSIDERATION FOR SUCH SECURITIES. THEREFORE ANY FLORIDA
RESIDENT WHO PURCHASES SECURITIES IS ENTITLED TO EXERCISE THE FOREGOING
STATUTORY RECISSION RIGHT WITHIN THREE BUSINESS DAYS AFTER TENDERING
CONSIDERATION FOR THE
9
<PAGE>
INVESTMENT PACKAGES BY TELEPHONE, TELEGRAM, OR LETTER NOTICE TO THE COMPANY AT
THE ADDRESS OR TELEPHONE NUMBER PROVIDED IN THIS MEMORANDUM. ANY TELEGRAM OR
LETTER SHOULD BE SENT OR POSTMARKED PRIOR TO THE END OF THE THIRD BUSINESS DAY.
A LETTER SHOULD BE MAILED BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE
ITS RECEIPT AND TO EVIDENCE THE TIME OF MAILING. ANY ORAL REQUEST SHOULD BE
CONFIRMED IN WRITING.
FOR PENNSYLVANIA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE PENNSYLVANIA SECURITIES ACT.
THE SECURITIES PURCHASED HEREUNDER CANNOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO A REGISTRATION UNDER THE PENNSYLVANIA SECURITIES ACT OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE REGULATORY SECURITIES AUTHORITY OF
THE COMMONWEALTH OF PENNSYLVANIA HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE MERITS OF THIS OFFERING OR THE ACCURACY OR
ADEQUACY OF THIS MEMORANDUM AND ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
SALES OF THESE SECURITIES TO THE RESIDENTS OF THE COMMONWEALTH OF PENNSYLVANIA
ARE SUBJECT TO THE FOLLOWING CONDITIONS:
(1) EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR THESE SECURITIES MUST AGREE IN
WRITING NOT TO SELL OR TRANSFER THESE SECURITIES FOR A PERIOD OF 12 MONTHS FROM
THE DATE OF THE CLOSING OF THE SALE OF THE SECURITIES OFFERED HEREBY IF SUCH
SALE OR TRANSFER WOULD VIOLATE SECTION 203 (D) OF THE PENNSYLVANIA SECURITIES
ACT OR THE REGULATIONS THEREUNDER; AND
(2) EACH PENNSYLVANIA RESIDENT WHO SUBSCRIBES FOR SECURITIES HAS THE RIGHT,
PURSUANT TO SECTION 207 (M) OF THE PENNSYLVANIA SECURITIES ACT OF 1972, TO
WITHDRAW HIS SUBSCRIPTION, AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN
TWO BUSINESS DAYS AFTER THE DATE OF RECEIPT BY THE ISSUER OF THE INVESTOR'S
EXECUTED SUBSCRIPTION AGREEMENT. WITHDRAWAL WILL BE WITHOUT ANY FURTHER
LIABILITY TO ANY PERSON. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY
SEND A LETTER OR TELEGRAM INDICATING HIS INTENTION TO WITHDRAW TO:
TTR Inc
The Columbus Circle Building
1841 Broadway, 11th Floor
New York, NY 10023
Fax: 212-333-7891
SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED SECOND BUSINESS DAY. IT IS PRUDENT TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO
TO EVIDENCE THE TIME WHEN IT WAS MAILED. IF THE REQUEST IS MADE ORALLY, YOU MUST
ALSO SEND A TELEGRAM CONFIRMING YOUR REQUEST.
10
<PAGE>
FOR TENNESSEE RESIDENTS ONLY
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT MAY BE REQUIRED TO BEAR THE FINANCIAL
RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
FOR TEXAS RESIDENTS ONLY
EACH PURCHASER OF THE UNITS MUST BEAR THE ECONOMIC RISKS OF AN INVESTMENT IN
SUCH SECURITIES FOR AN INDEFINITE PERIOD OF TIME PRIOR TO ANY SUBSEQUENT RESALE
OF SUCH UNITS BECAUSE THE UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
LAWS OF TEXAS OR THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR SOLD
BY A PURCHASER THERETO EXCEPT IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION
UNDER THE SECURITIES LAWS OF TEXAS AND THE SECURITIES ACT OF 1933 OR PURSUANT TO
AN EFFECTIVE REGISTRATION THEREUNDER.
FOR CALIFORNIA RESIDENTS
IT IS UNLAWFUL TO CONSUMMATE A SALE OF THE UNITS OR ANY INTEREST THEREIN OR TO
RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN
THE COMMISSIONER'S
11
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED PURSUANT TO THE CONFIDENTIAL TERM SHEET DATED
SEPTEMBER 1, 1998 AND THE EXHIBITS ATTACHED THERETO (COLLECTIVELY, THE "OFFERING
MATERIALS") HAVE NOT BEEN FILED OR REGISTERED WITH OR APPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS. NO STATE SECURITIES LAW
ADMINISTRATOR HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR THE ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE SECURITIES OFFERED HEREBY ARE BEING OFFERED PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT") AND APPLICABLE STATE SECURITIES LAWS FOR NON-PUBLIC OFFERINGS.
SUCH EXEMPTIONS LIMIT THE TYPES OF INVESTORS TO WHICH THE OFFERING WILL BE MADE
AND RESTRICT SUBSEQUENT TRANSFER OF THE UNITS AND SECURITIES UNDERLYING THE
UNITS.
THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE REQUIRED
TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF THIS
OFFERING.
NO SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION
UNDER THE APPLICABLE FEDERAL OR STATE SECURITIES LAW IS NOT REQUIRED OR
COMPLIANCE IS MADE WITH SUCH REGISTRATION REQUIREMENTS.
THE OFFEREE, BY ACCEPTING DELIVERY OF THE OFFERING MATERIALS, AGREES TO
RETURN THE OFFERING MATERIALS AND ALL ACCOMPANYING OR RELATED DOCUMENTS TO THE
COMPANY UPON REQUEST IF THE OFFEREE DOES NOT AGREE TO PURCHASE ANY OF THE
SECURITIES OFFERED HEREBY.
THE OFFERING MATERIALS ARE SUBMITTED IN CONNECTION WITH THE PRIVATE
PLACEMENT OF THE SECURITIES AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED. IN ADDITION, THE OFFERING MATERIALS CONSTITUTE AN OFFER ONLY IF A
NAME AND IDENTIFICATION NUMBER APPEAR IN THE APPROPRIATE SPACES PROVIDED ON THE
COVER PAGE OF THE CONFIDENTIAL TERM SHEET AND CONSTITUTE AN OFFER ONLY TO THE
PERSON WHOSE NAME APPEARS THEREON. ANY REPRODUCTION OR DISTRIBUTION OF THE
OFFERING MATERIALS IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF THEIR
CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, IS PROHIBITED. ANY
PERSON ACTING CONTRARY TO THE
<PAGE>
2
FOREGOING RESTRICTIONS MAY PLACE HIMSELF AND THE COMPANY IN VIOLATION OF FEDERAL
OR STATE SECURITIES LAWS.
BLUE SKY LEGENDS
NOTICE TO PRESIDENTS OF ALL STATES
THE UNITS AND SECURITIES UNDERLYING THE UNITS ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THE UNITS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
FOR NEW YORK RESIDENTS
THIS OFFERING MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED BY THE ATTORNEY
GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW
YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL
<PAGE>
3
Re: Private placement of Units, each Unit consisting of a 12.5%
$100,000 Promissory Note and Warrant to purchase _______
shares of Common Stock
Dear Subscriber:
TTR Inc., a Delaware corporation (the "Company"), is offering a
minimum of five (5) units up to a maximum of 5 units (the "Units"), each Unit
consisting of (i) a 12.5% $100,000 Promissory Note and (ii) Warrants to purchase
_____ shares of Company Common Stock, par value $0.001 (the "Common Stock) at a
price per share equal to 120% of the Public Offering Price (as defined in the
Memorandum referred to below) of the Common Stock or, 120% of the price per
share of the Common Stock on the date of the issuance of the Warrants if no
Public Offering is completed by January 30, 1998, all as described more
particularly in the Private Placement Memorandum, dated September 1, 1998,
accompanying this Subscription Agreement (the "Memorandum").
The Company expects to hold an interim closing of this Offering at
such time as subscriptions for 2 Units have been accepted by the Company. The
final closing of this Offering is expected to occur on or about September 15,
1998, when all 5 Units have been placed, subject to one or more extensions by
the Company. The Company may extend the Offering or may cancel the Offering,
rescind any subscription and return funds received without deductions or
interest. The price for each Unit shall be payable upon execution of the
Subscription Agreement. The Company may accept subscription for fractional
Units.
Pending the initial closing and any interim closings thereafter,
each prospective investor's payment accompanying the investor's Subscription
Agreement will be deposited in a segregated, interest bearing escrow. The terms
of the offering and of an investment in the Company are more fully described in
the Offering Materials. A check made to the order of "TTR Inc., Trust Account"
in the amount equal to the purchase price for the amount hereby subscribed for
should accompany this Subscription Agreement. In lieu of a check, a wire
transfer an be made to the Company's account at -------------.
The Company will advise the Subscriber within 10 days after receipt
of this subscription whether this subscription has been accepted or rejected. If
this subscription is rejected, or if the offering is withdrawn, the Company will
return the amount paid by the Subscriber herewith as promptly as practicable,
without interest or deduction, and this subscription thereby shall be canceled
and of no further force or effect. If this subscription is rejected or if the
offering is withdrawn, the Subscriber agrees to return to the Company the
Offering Materials and all other documents concerning the offering. The
Subscriber may not withdraw this subscription or any amount paid pursuant
thereto except as otherwise provided below.
Neither the Units nor the securities underlying the Units have been
registered under the registration provisions of the Securities Act of 1933, as
amended (the "Act"), and are being offered and sold by the Company in reliance
upon an exemption from registration under Section 4(2) and 4(6) of the Act, and
Regulation D promulgated thereunder.
You have indicated your desire to participate in this private
offering and to subscribe to and agree to purchase Units in the principal amount
of $_________, receipt of which the Company acknowledges.
<PAGE>
4
As an inducement to the company to accept your subscription, you
represent and warrant as follows:
(A) You acknowledge and understand that the offering and sale of the Units
are intended to be exempt from registration under the Act, by virtue of Sections
4(2) and 4(6) of the Act and Regulation D promulgated thereunder ("Regulation
D") and, in accordance therewith and in furtherance thereof, you represent and
warrant agree with the Company as follows [Please check statements applicable to
you]:
The undersigned is an accredited investor because the undersigned is
(check appropriate item):
|_| (a) A Savings and loan association or other institution specified in
Section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; a plan
established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political
subdivisions, for the benefit of employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of
1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is a savings and loan
association, or if the employee benefit plan has total assets excess
of $5,000,000 or, if a self-directed plan, with investment decisions
made solely by persons that are accredited investors;
|_| (b) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
|_| (c) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, or partnership, not formed for the
specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;
|_| (d) A director or executive officer of TTR Inc.;
|_| (e) A natural person whose net worth, or joint net worth with that
person's spouse, at the time of his or her purchase exceeds
$1,000,000;
|_| (f) A natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level
in the current year;
|_| (g) A trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii); and
|_| (h) An entity in which all of the equity owners are accredited
investors. (If this alternative is checked, you must identify each
equity owner and provide statements signed by each demonstrating how
each qualifies as an accredited investor.)
In addition to the above criteria, if you are a resident of the State of
California, [Please check each item]:
<PAGE>
5
|_| You confirm that you have the capacity to protect your own
interests in connection with this transaction by reason of your business
and financial experience.
|_| You are able to bear the financial and economic risk of your
investment and bear the risk of the loss of your entire investment.
|_| Your investment does not exceed 10% of your net worth or joint
net worth with that of your spouse.
In addition to the above criteria, if you are a resident of the
Commonwealth of Pennsylvania, you represent that you will not sell or transfer
the Securities purchased for a period of twelve (12) months after the date of
purchase thereof unless they are subsequently registered under the Pennsylvania
Act of 1972 or under the Act. Moreover, you represent that you have been advised
of your right to withdraw acceptance of our offer to purchase the Units within
two (2) business days of the date receipt by the issuer of my binding contract
of purchase.
(B) You have such knowledge and experience in financial and business
matters as is required for evaluating the merits and risks of making this
investment., and you or your representatives have received such information
requested by you concerning the business, management and financial affairs of
the Company in order to evaluate the merits and risks of making this investment.
Further, you acknowledge that you, your attorney, accountant or adviser have had
the opportunity to ask questions of, and receive answers from, the officers of
the Company concerning the terms and conditions of this investment and to obtain
information relating to the organization, operation and business of the Company
and of the Company's contracts, agreements and obligations. Except as
specifically set forth herein, no representation of warranty is made by the
Company to induce you to make this investment, and any representation or
warranty not made herein is specifically disclaimed.
(C) You are making this investment for your own account and are purchasing
the Units for investment purposes only and not with a present view to the resale
or other distribution thereof:
(D) You are making the foregoing representations and warranties with the
intent that they may be relied upon by the Company in determining the
suitability of the sale Units to you for purposes of federal and state
securities laws.
(E) You further acknowledge that you have been advised that the Units or
the securities underlying the Units have not been registered under the
provisions of the Act and that the Company has represented to you that the Units
have been offered and sold by the Company in reliance upon an exemption from
registration provided in Section 4(2) and 4(6) of the Act and Section 25102 (f)
of the Code.
(F) In entering into this Agreement and in purchasing the Units, you
further acknowledge that:
(i) The Company has informed you that the Units have not been
offered for sale by means of general advertising or solicitation.
(ii) the Units may not be resold by you in absence of registration
under the Act or an available exemption from registration.
<PAGE>
6
(iii) The following legend shall be placed on the Certificate(s)
evidencing the securities underlying the Units:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTION TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED."
(iv) The Company may place a stop transfer order on its transfer
books against the transfer of the securities underlying the Units. Such stop
order will be removed, and further transfer of the Units or securities
underlying the Units will be permitted upon an effective registration of the
Units (as to the Company has no obligation to file), or the receipt by the
Company of an opinion of counsel that such further transfer may be effected
pursuant to an applicable exemption from registration.
(v) The purchase of the Units involves risks which you have
evaluated, and you are able to bear the economic risk of the purchase of the
Units. You have been advised of the current financial condition of the Company
and of the possible adverse effects of such financial condition on the Company's
general business.
(G) The undersigned has completed the accompanying Investor Questionnaire
and has delivered it herewith and represents and warrants that it accurately
sets forth the financial condition on the date hereof. The undersigned has no
reason to expect there will be any material adverse change in his or her
financial condition and will advise the Company of any such changes occurring
prior to acceptance of my subscription.
(H) The undersigned is a resident of the State of __________ and a citizen
of the Country of the United States.
(I) The undersigned has relied only on the information otherwise provided
to him or her in writing by the Company relating to this investment.
(J) The undersigned understands that all documents, records, and books
pertaining to this investment have been made available for inspection by him or
her, his or her attorney and/or his or her accountant.
(K) The undersigned has had a reasonable opportunity to ask questions of
and receive answers from a person acting on behalf of the Company concerning the
offering of the Units and all such questions have been answered to the full
satisfaction of the undersigned.
(L) The undersigned is not purchasing the Units as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, any seminar or meeting, or any solicitation of a
subscription by a person not previously known to the undersigned in connection
with investments in securities generally.
(M) The undersigned has reached the age of majority in the state in which
the undersigned resides, has adequate means of providing for the undersigned's
current needs and personal contingencies, is able to bear the substantial
economic risks of an investment in the
<PAGE>
7
Units for an indefinite period of time, has no need for liquidity in such
investment, and the undersigned is prepared to lose his or her entire investment
in the Units.
(N) The undersigned's overall investments that are not readily marketable
is not, and his acquisition of the Units will not count such overall commitment
to become, disproportionate to his or her net worth.
You acknowledge that you have made your own investigation concerning the
business and affairs of the Company and in that connection, you acknowledge the
previous receipt of the Offering Materials.
(O) The undersigned agrees to indemnify and hold harmless the Company, the
officers, directors, and affiliates of the Company, and each other person, if
any, who controls the Company, within the meaning of Section 15 of the Act,
against any and all loss, liability, claim, damage and all expenses reasonably
incurred in investigating, preparing or defending against any litigation
commenced or threatened or any claim whatsoever arising out of or based upon any
false representation or warranty or breach or failure by the undersigned to
comply with any covenant or agreement made by the undersigned herein or in any
other document furnished by the undersigned to any of the foregoing in
connection with this transaction.
(P) The undersigned hereby acknowledges and agrees, subject to any
applicable state securities law, the subscription and application hereunder are
irrevocable, that the undersigned is not entitled to cancel, terminate or revoke
this Subscription Agreement or any agreements of the undersigned hereunder and
that this Subscription Agreement and such other agreements shall survive the
death or disability of the undersigned and shall be binding upon and inure to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives, and assigns. If the undersigned is more than
one person, the obligations of the undersigned hereunder shall be joint and
several, and the agreements, representations, warranties, and acknowledgments
herein contained shall be deemed to be made by and be binding upon each such
person and his heirs, executors, administrators, successors, legal
representatives, and assigns.
(Q) The undersigned is not relying on the Company or any agent thereof
with respect to the financial or tax considerations with respect to an
investment in the Securities.
(R) The undersigned shall provide, upon request, such information and
execute and deliver such documents as may be reasonably requested to comply with
all laws to which the Company may be subject, including without limitation, such
additional information as the Company may deem appropriate.
(S) The execution, delivery and performance of this Agreement by the
undersigned (i) will not constitute a default under or conflict with any
agreement or instrument to which the undersigned is a party or by which it or
its assets are bound, (ii) will not conflict with or violate any order,
judgment, decree, statute, ordinance or regulation applicable to the undersigned
(including, without limitation, any applicable laws relating to permissible
legal investments) and (iii) do not require the consent of any person or entity.
This Agreement has been duly authorized, executed and delivered by the
undersigned and constitutes the valid and binding agreement of the undersigned
enforceable against it in accordance with its terms.
(T) The undersigned has not retained, or otherwise entered into any
agreement or understanding with, any broker or finder in connection with the
purchaser of Securities by the undersigned, and the undersigned acknowledges
that the Company will not incur any liability
<PAGE>
8
for any fee, commission or other compensation on account of any such retention,
agreement or understanding by the undersigned.
(U) The representations, warranties and agreements of the undersigned
contained herein shall be true and correct in all materials respects on and as
of the Closing Date of the sale of the Securities as if made on and as of such
date and shall survive the execution and delivery of this Agreement and the
purchase of the Securities.
Neither this Subscription Agreement nor any provisions hereof shall
be waived, modified, discharged, or terminated except by an instrument in
writing signed by the party against whom any such waiver, modification,
discharge, or termination is sought.
Any notice, demand or other communication which any party hereto may
be required, or may elect, to give to anyone interested hereunder shall be
sufficiently given if (a) deposited, postage prepaid, in a United States mail
box, stamped, registered or certified mail, return receipt requested, addressed
to such address as may be listed on the books of the Company or (b) delivered
personally at such address.
This Subscription Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, or all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
This Subscription Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and there are no
representations, covenants or other agreements except as stated or referred to
herein.
Each provision of this Subscription Agreement is intended to be
severable from every other provisions, and the invalidity or illegality of any
portion hereof, shall not affect the validity or legality of the remainder
hereof.
This Subscription Agreement is not transferable or assignable by the
undersigned except as may be provided herein.
This Subscription Agreement shall be governed by and construed in
accordance with the laws of the State of New York as applied to residents of
that state executing contracts wholly to be performed in that state.
<PAGE>
9
We would appreciate your countersigning and returning two copies of this
Subscription Agreement, together with the completed Investor Questionnaire. A
countersigning copy of this Subscription Agreement will be returned to you,
together with certificates for the securities underlying the Unit purchased. For
the purpose of having the certificates for the securities prepared, please
indicate the exact manner in which the certificates representing the Units is to
be made out in the space provided for below.
Date Executed: ______________, 1998.
Very truly yours,
TTR INC.
By: ____________________________________
Name:
Title:
AGREED TO AND ACCEPTED:
(INDIVIDUAL) (CORP., PRTSHP OR TRUST)
___________________________ ________________________________________
Signature of Subscriber Name of Corp., prtshp or Trust
Certificate for Units to be By: __________________________________
made out as follows Name:
___________________________ Title:
Name
When signing as guardian, executor,
______________ administrator, attorney, trustee,
Address custodian, Or in any other similar
capacity, please give full title. If a
corporation, sign in full corporate name
__________________ by president or other authorized
Social Security No. or officer, giving title, and affix
Ident. No corporate Fed. seal if appropriate. If a
partnership, sign in partnership name by
authorized person. In the case of joint
ownership, each Joint owner must sign.
________________________________________
Address
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 20th day of
November, 1998 by and between TTR Inc., a Delaware corporation (hereafter "TTR"
or the "Company") and Jarvis Developments Ltd., a _____________ 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 software products and components;
WHEREAS, Consultant has experience and expertise in the providing
general financial and investment advice to high-tech companies, including
without limitation, locating and interesting strategic investors, considering
potential acquisition targets for the Company and locating other potential areas
of joint cooperation and development (hereinafter the "Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide advice and services to the Company regarding the Services as determined
from 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.
1.2 Consultant shall report regularly to the President of the Company
with respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder, the Company hereby issues to
Consultant 75,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
through October 7, 1999 unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the
<PAGE>
"Securities Act"), or (ii) counsel for Consultant shall have furnished the
Company with an opinion, reasonably acceptable to the Company, that no such
registration is required because of the availability of an exemption under the
Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act (either of which event, a "Public
Offering"), Consultant may sell at any time any of its Securities in a Rule
144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according
to Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
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.
2
<PAGE>
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.
5.5 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.
6. Ownership
6.1 '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.
6.2 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.
6.3 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 6 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.
6.4 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.
6.5 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.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
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;
3
<PAGE>
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. Registration
The Company has agreed to include the Securities in any registration
statement filed by the Company under the Securities Act of 1933, as amended, in
connection with a public offering of Common Stock, provided that the managing
underwriter in the public offering consents to such inclusion and subject to any
terms or conditions, including lock-ups, that such underwriter may place on the
Securities. There can be no assurance that a public offering will be undertaken
or consummated.
10. General Provisions
10.1 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
10.8 This Agreement shall be interpreted, construed and governed in
accordance with the law of the State of New York.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TTR Inc. Jarvis Developments Ltd.
/s/ MARC TOKAYER /s/ D. DOBSON
- -------------------- -------------------------
Marc Tokayer D. Dobson
For ATL Corporate Services ltd.
Director
5
<PAGE>
AMENDMENT TO CONSULTING AGREEMENT
WHEREAS the undersigned Parties entered into a Consulting Agreement
dated 20th day of November, 1998 ("Agreement"); and
WHEREAS, the Parties have agreed to amend the said Consulting Agreement
as set out herein:
W I T N E S S E T H
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Section 2 of the Agreement is hereby amended as follows:
"Compensation For services rendered hereunder, the Company
hereby issues to Consultant 372,000 shares of the Company's Common
Stock, par value $0.001 (the "Common Stock" or "Securities")."
2. All other terms and conditions of the Agreement remain the same.
IN WITNESS WHEREOF, the Parties have executed this Agreement this 28th
day of January 1999.
TTR Inc. Jarvis Developments Ltd.
/s/ MARC TOKAYER /s/ D. DOBSON
- ---------------------- -------------------------
Marc Tokayer D. Dobson
For ATL Corporate Services ltd.
Director
6
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 1st day of
October, 1998 by and between TTR Inc., a Delaware corporation (hereafter "TTR"
or the "Company") and Biscount Overseas Ltd. with offices at Freilanger St. 47,
Postfach 247, 8043 Zurich, Switzerland ( hereafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing
various software products and components;
WHEREAS, Consultant has experience and expertise in the providing
general financial and investment advice to high-tech companies;
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide, from time to time as requested by the Company, financial and investment
advice, including without limitation, locating and interesting strategic
investors, considering potential acquisition targets for the Company and
locating other potential areas of joint cooperation and development (hereinafter
the "Services"). Consultant shall devote such time and effort to the Services
hereunder as is necessary and proper for the fulfillment of Consultant's
obligations hereunder.
1.2 Consultant shall report regularly to the President of the Company
with respect to Consultant's activities hereunder.
2. Compensation For Services to be rendered hereunder, the Company shall issue
to Consultant 44,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
through September 28, 1999, unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an
<PAGE>
opinion, reasonably acceptable to the Company, that no such registration is
required because of the availability of an exemption under the Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act (either of which event, a "Public
Offering"), Consultant may sell at any time any of its Securities in a Rule
144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according
to Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
4.5 Legend. Each certificate representing the Securities shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AGREEMENT DATED AS OF June 1, 1998 (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY)."
5. Registration
The Company has agreed to include the Securities in any registration
statement filed by the Company under the Securities Act of 1933, as amended, in
connection with a public offering of Common Stock, provided that the managing
underwriter in the public offering consents to such inclusion and subject to any
terms or conditions, including lock-ups, that such underwriter may place on the
Securities. There can be no assurance that a public offering will be undertaken
or consummated.
6. Proprietary Information; Non- Competition
6.1 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
2
<PAGE>
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.
6.2 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.
6.3 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.
6.4 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.
6.5 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.
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. General Provisions
8.1 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.
8.2 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.
8.3 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.
3
<PAGE>
8.4 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.
8.5 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.
8.6 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.
8.7 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.
8.8 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 executed this Agreement as of the
date first above written.
TTR Inc. Biscount Overseas Ltd.
/s/ MARC TOKAYER /s/__________________
- ----------------------
Marc Tokayer
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 28th day of
January 1999 by and between TTR Technologies Inc., a Delaware corporation
(hereafter "TTR" or the "Company") and Mordecai Lerer ( hereafter the
"Consultant").
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing
various software products and components;
WHEREAS, Consultant has experience and expertise in the providing
general financial and investment advice to high-tech companies (hereinafter the
"Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide advice and services to the Company regarding the Services as determined
from 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.
1.2 Consultant shall report regularly to the President of the Company
with respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder, the Company hereby issues to
Consultant 40,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
for 12 months from the date first written above unless the parties mutually
agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an opinion, reasonably
acceptable to the Company, that no such registration is required because of the
availability of an exemption under the Securities Act.
<PAGE>
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act (either of which event, a "Public
Offering"), Consultant may sell at any time any of its Securities in a Rule
144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according
to Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
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
2
<PAGE>
statute or government rule or regulation, all copies of the Information, shall
be returned to the Company immediately upon request without retaining copies
thereof.
5.5 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.
6. Ownership
6.1 '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.
6.2 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.
6.3 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 6 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.
6.4 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.
6.5 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.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
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
3
<PAGE>
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. Registration
The Company has agreed to include the Securities in any registration
statement filed by the Company under the Securities Act of 1933, as amended, in
connection with a public offering of Common Stock, provided that the managing
underwriter in the public offering consents to such inclusion and subject to any
terms or conditions, including lock-ups, that such underwriter may place on the
Securities. There can be no assurance that a public offering will be undertaken
or consummated.
10. General Provisions
10.1 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
10.8 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 executed this Agreement as of the
date first above written.
4
<PAGE>
TTR Inc.
/s/ MARC TOKAYER /s/ MORDECHAI LERER
- -------------------- -------------------------
Marc TokAyer Mordechai Lerer
5
SETTLEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 28th day of January,
1999 by and between TTR Technologies, Inc., a Delaware corporation (hereafter
"TTR" or the "Company") and Ephod Israel Group ( hereafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing
various software products and components;
WHEREAS, Consultant has during the course of the previous 24 months
provided to the Company general financial and investment advice to the Company,
including without limitation, locating and interesting strategic investors,
considering potential purchasers of the Company and locating other potential
areas of joint cooperation and development (hereinafter the "Services") all of
which have been critical to the operations of the Company;
WHEREAS, the Company desires remunerate the Consultant in full for all
Services rendered to date;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Compensation For services rendered hereunder, and in full and final payment
thereof, the Company hereby issues to Consultant 265,000 shares of the Company's
Common Stock, par value $0.001 (the "Common Stock" or "Securities").
2. Representations of Consultant Respecting the Securities.
2.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
2.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an opinion, reasonably
acceptable to the Company, that no such registration is required because of the
availability of an exemption under the Securities Act.
2.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective
<PAGE>
registration statement under the Securities Act (either of which event, a
"Public Offering"), Consultant may sell at any time any of its Securities
in a Rule 144 Transaction (as hereinafter defined); provided, that, each
such sale shall be made in compliance with Section 4.4 below.
2.4 Rule 144 Sales. If any of the Securities are disposed of according
to Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
3. Proprietary Information;
3.1 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.
3.2 The Consultant agrees to hold in trust and confidence all
Information disclosed to it and further confirms that it did 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.
3.3 The Consultant acknowledges and agrees that the Information
furnished by the Company to it 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.
4. Registration
The Company has agreed to include the Securities in any registration
statement filed by the Company under the Securities Act of 1933, as amended, in
connection with a public offering of Common Stock, provided that the managing
underwriter in the public offering consents to such inclusion and subject to any
terms or conditions, including lock-ups, that such underwriter may place on the
Securities. There can be no assurance that a public offering will be undertaken
or consummated.
5. General Provisions
5.1 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.
2
<PAGE>
5.2 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.
5.3 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.
5.4 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.
5.5 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 executed this Agreement as of the
date first above written.
TTR Technologies, Inc. Ephod Israel Group
/s/ MARC TOKAYER /s/ Aaron Fischman
- ------------------------ -------------------------
Marc Tokayer Aaron Fischman
3
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 28th day of
January 1999 by and between TTR Technologies Inc., a Delaware corporation
(hereafter "TTR" or the "Company") and Cygni S.A. ( hereafter the "Consultant").
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing
various software products and components;
WHEREAS, Consultant has experience and expertise in the providing
general financial and investment advice to high-tech companies (hereinafter the
"Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the Consultant agrees to
provide advice and services to the Company regarding the Services as determined
from 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.
1.2 Consultant shall report regularly to the President of the Company
with respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder, the Company hereby issues to
Consultant 50,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
for 12 months from the date first written above unless the parties mutually
agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an opinion, reasonably
acceptable to the Company, that no such registration is required because of the
availability of an exemption under the Securities Act.
<PAGE>
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act (either of which event, a "Public
Offering"), Consultant may sell at any time any of its Securities in a Rule
144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according
to Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
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
2
<PAGE>
statute or government rule or regulation, all copies of the Information, shall
be returned to the Company immediately upon request without retaining copies
thereof.
5.5 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.
6. Ownership
6.1 '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.
6.2 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.
6.3 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 6 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.
6.4 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.
6.5 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.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
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
3
<PAGE>
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. Registration
The Company has agreed to include the Securities in any registration
statement filed by the Company under the Securities Act of 1933, as amended, in
connection with a public offering of Common Stock, provided that the managing
underwriter in the public offering consents to such inclusion and subject to any
terms or conditions, including lock-ups, that such underwriter may place on the
Securities. There can be no assurance that a public offering will be undertaken
or consummated.
10. General Provisions
10.1 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
10.8 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 executed this Agreement as of the
date first above written.
4
<PAGE>
TTR Technologies Inc. Cygni S.A.
/s/ MARC TOKAYER /s/__________
- ---------------------------
Marc Tokayer
5
Marketing, Sales, and Representation Agreement
between
Machtec Ltd. and TTR Technologies Inc.
This agreement is made between Machtec Inc. (Machtec), and TTT Technologies Inc.
(TTR)
1 Background
MACHTEC is a business service firm specializing in market development for
new services and technologies. MACHTEC also engages in interim project
management and consulting on technological projects. TTR is a technology
development firm engaged in marketing and developing software copy
protection products.
MACHTEC and TTR seek a relationship in which TTR shall retain MACHTEC on a
non-exclusive basis, to represent, market, and sell TTR technology to
companies in Europe and other countries which the parties agree upon (the
"Territory").
2 Agreement
Therefore, MACHTEC and TTR agree to the following with regard to:
a. Business Development
MACHTEC will provide to TTR a dedicated and focussed effort to develop
business for the DiscGuard product line. Specifically, MACHTEC will
introduce TTR to and represent TTR to potential customers in the
Territories.
Commencing upon the effectiveness of this Agreement and thereafter no later
than every 90 business days (the "Period"), MACHTEC shall furnish to TTR a
report (hereinafter, the "Report") relating to MACHTEC's planned activities
for the forthcoming Period in regard to the representation hereunder,
including, without limitation, a list of all of the persons or entities
that MACHTEC intends to contact in furtherance of the objectives of this
Agreement. Promptly upon its receipt of the Report, TTR shall review the
list of persons or entities included therein which MACHTEC intends to
contact during the following Period and furnish to MACHTEC, in writing,
TTR's list of approved contacts, comprised of the persons or entities
contained in the Report, who MACHTEC may approach in furtherance of the
objectives of this Agreement (the "Approved Contact List"). The makeup of
the Approved Contact List shall be in TTR's sole discretion. The Approved
Contact List shall be furnished to MACHTEC by the seventh (7th) business
day following TTR's receipt of the Reports under this Agreement.
MACHTEC shall be entitled to deal with any person or entity included in the
Approved Contact List, provided, that, if by the end of the six (6) month
period following the date of TTR's submission of an Approved Contact List
TTR has not entered into an agreement or a transaction or advanced
discussions as evidenced in writing for the entering into an agreement with
a person or entity included therein, then MACHTEC shall cease all contact
with such person or entity on TTR's behalf.
<PAGE>
MACHTEC will assist TTR personnel in gaining access to decision makers at
prospective clients; assist TTR in tailoring its business strategy and
presentations to prospects.
When asked by TTR, MACHTEC will participate in trade shows, briefings, and
meeting with prospects and clients outside of Europe. MACHTEC is prepared
to use its international network of contacts on the behalf of TTR.
TTR, will provide MACHTEC with marketing support in the form of
information, documentation, visits by experts, administrative support,
pricing and delivery schedules, as TTR deems appropriate.
In performance of its duties hereunder, MACHTEC shall act only in
accordance with TTR's instructions, terms and conditions as shall be
decided from time to time by TTR. No agreement of any kind or order for any
products or services shall be binding on TTR unless accepted by TTR in
writing.
b. Trademarks, Trade Names, Intellectual Property
Nothing contained in the Agreement will give MACHTEC any rights in TTR'
trademarks, trade names, copyrights, patents, trade secrets, logos or
designations (collectively referred to as Intellectual Property Rights).
MACHTEC will not at any time during or after this Agreement do anything
that may infringe or contribute to the infringement or such Intellectual
Property Rights.
Nothing in this agreement shall give TTR any rights in MACHTEC's
trademarks, trade names, copyrights, trade secrets, logos or designations
(collectively referred to as Intellectual Property Rights).
c. Compensation
TTR will pay to MACHTEC the following:
(a) in consideration of MACHTEC providing not less than four days of work
per month for a period of 12 months in rendering the services under this
Agreement TTR hereby grants to MACHTEC, 200,000 shares of its common stock.
("Fees").
(b)TTR shall bear MACHTEC's reasonable out-of-pocket expenses incurred in
the furtherance of the objectives of this Agreement, provided, that such
expenses of over $500 per month shall have been pre-approved, in writing,
by TTR. Reimbursement shall be made only against appropriate receipts
evidencing actual payment by MACHTEC.
d. Confidentiality
2
<PAGE>
MACHTEC and TTR acknowledge that they will have access to certain
information and material ("Confidential Information") concerning each
other's business, customers, technology and products that are confidential
and of substantial value to the disclosing party, which value would be
impaired if such Confidential Information was disclosed to third parties.
MACHTEC and TTR will not use such Confidential Information, except in
performance of this Agreement, nor will they disclose such Confidential
Information to third parties. MACHTEC and TTR will take every reasonable
precaution to protect the Confidential Information. For the purposes of the
forgoing obligations, Confidential Information does not include information
which was rightfully known to one party prior to its receipt hereunder by
the other party, is or becomes publicly available without breach of the
Agreement or wrongful act of the receiving party, is received by one party
without an obligation of confidentiality and without breach of this
Agreement or is developed independently by one party without using
Confidential Information of the other party.
v. Non Competition.
During the term of this Agreement and for 12 (twelve) months after its
termination or expiration, MACHTEC shall not deal in the Territory,
directly or indirectly, for its own account or for the account of
another person, in any products which may be competitive withTTR's
products. In order to avoid any dispute, TTR's determination, in its
sole reasonable discretion, as to whether a product competitive, shall
be final, conclusive and binding on MACHTEC.
vi. Indemnity.
MACHTEC shall defend, indemnify, and save TTR and the parent
enterprise harmless from and against injury, loss or damage to TTR or
the parent enterprise from any third party arising out of or resulting
from the acts or omissions of MACHTEC, including but not limited to
acts beyond the scope of this Agreement.
3. Miscellaneous
a. Notification
All notices, requests, and demands pertaining to this agreement shall be in
writing and will be delivered by telex, fax, certified or registered mail,
or express courier. Email via Internet will be considered informal
communication for operational purposes only.
b. Amendments
No amendment or modification of any kind, including waiver, will be
effective unless it is in writing and signed by both parties to this
agreement.
3
<PAGE>
c. Governing Law
This Agreement will be governed by the laws of the Netherlands.
d. Force Majeure
Neither party will be responsible for any failure to perform due to
unforeseen circumstances or causes beyond its control including but not
limited to acts of God, war, floods, accidents, and strikes. A party whose
performance is affected by force majeure conditions shall be excused from
performing under this Agreement to the extent imposed by the force majeure
so long as he takes all reasonable steps to immediately continue
performance when the force majeure condition is over.
e. Entire Agreement
This Agreement constitutes the entire Agreement between the parties and may
not be modified or amended except in writing by the parties below.
Non- Assignment
MACHTEC may not sell, assign or otherwise transfer any of its rights or
obligation under this Agreement without the prior written consent of TTR.
TTR Technologies Inc. Machtec Limited
Signature /s/ MARC TOKAYER Signature /s/ DAVID M. DOBSON
---------------- -------------------
Name (print)Marc Tokayer Name (print)David M. Dobson
Title Chairman & President Title Director
Date: February 1, 1999 Date: February 1, 1999
4
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made on the 10th day of December, 1998 by and
between TTR INC., a private company established under the laws of the State of
Delaware (the "Company") with offices at 1841 Broadway, New York, N.Y. and
Dalimore Consultants Ltd., a private company established under the laws of the
Isle of Man with offices at Suite 1, Empress House, Empress Dr., Isle of Man
(the "Purchaser").
W I T N E S S E T H
WHEREAS, the Purchaser desires to subscribe for and purchase up to
166,667 shares of Common Stock, par value $0.001, of the Company (the "Shares"),
for a per Share purchase price of $0.60 (up to an aggregate purchase price of
$100,000) (the "Purchase Price");
WHEREAS, the Company is willing to sell the Shares to the Purchaser on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and
considerations set forth herein, the parties hereby agree as follows.
1. Subscription for and Purchase of Stock; Issuance of Warrants
1.1 Purchase of Stock. Subject to the terms and conditions stated
herein, the Purchaser hereby subscribes for and agrees to purchase, and the
Company agrees to sell to the Purchaser, the Shares in consideration of the
payment by the Purchaser of the Purchase Price, on such dates as the Company may
demand from the Purchaser from time to time ("Purchase Dates").
1.2 Delivery. The Purchaser shall deliver to the Company, on each of
the Purchase Dates, the amount of the Purchase Price then requested by the
Company in immediately available funds by wire transfer to a bank account
designated by the Company or by check made payable to Company or as Company
designates. Upon and subject to receipt of the full amount of the Purchase Price
then requested, the Company shall deliver to the Purchaser stock certificate(s),
registered in the Purchaser's name for such number of the Shares then purchased.
2. Representations of the Purchaser; Restrictions on Transfer
2.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, the Purchaser agrees that it will
not transfer any of the Shares.
2.2 Not for Resale. The Purchaser represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof. The
Purchaser agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer
<PAGE>
complies with the provisions of this Agreement and (i) the Transfer is pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, and the rules and regulations in effect thereunder (the "Securities
Act"), or (ii) counsel for the Purchaser shall have furnished the Company with
an opinion, reasonably acceptable to the Company, that no such registration is
required because of the availability of an exemption under the Securities Act.
2.3 Certain Permitted Transfers. Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
2.4 Rule 144 Sales. The Purchaser may sell at any time any of the
Securities in a Rule 144 Transaction (as hereinafter defined); provided, that,
each such sale shall be made in compliance with this Section 2.4. If any of the
Securities are disposed of according to Rule 144 ("Rule 144 Transaction") under
the Securities Act or otherwise, the Purchaser shall promptly notify the Company
of such intended disposition and shall deliver to the Company at or prior to the
time of such disposition such documentation as the Company may reasonably
request in connection with such sale and, in the case of a disposition pursuant
to Rule 144, shall deliver to the Company an executed copy of any notice on Form
144 required to filed with the Securities and Exchange Commission.
2.5 Legend. Each certificate representing the Shares shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF A
STOCK PURCHASE AGREEMENT DATED AS OF NOVEMBER__, 1999 (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY)."
2.6 Qualified Investor The Purchaser hereby represents and warrants to
the Company as follows:
(a) it has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of this
investment and to make an informed investment decision with respect
thereto, and it or its advisors have received such information requested by
them concerning the Company in order to evaluate the merits or risks of
making this investment. Further, it is acknowledged that the Purchaser or
its attorney, accountant or advisor have had the opportunity to ask
questions of, and receive answers from, the officers of the Company
concerning the terms and conditions of this investment and to obtain
information relating to the Company.
2
<PAGE>
(b) The purchase of the Securities involves risks which it has
evaluated, and is able to bear the economic risk of such purchase including
the total loss of its investment. It has been advised of the current
financial condition of the Company and of the possible adverse effects of
such financial condition on the Company's general business.
3. Company's Representations and Warranties
3.1 The Company has all requisite power and authority to issue, sell
and deliver the Securities in accordance with and upon the terms and conditions
set forth in this Agreement, and all corporate action required to be taken by
the Company for the due and proper authorization, issuance and delivery of the
Securities will, upon delivery thereof, have been validly and sufficiently
taken. The Securities, when sold and paid for as contemplated in this Agreement,
will be duly authorized, validly issued, fully paid and non-assessable and,
except as otherwise provided by applicable law, free of all liens, claims and
encumbrances.
3.2 The Company has full corporate right, power and authority to enter
into this Agreement and to issue the Securities, and this Agreement and the
Securities have been or will be duly authorized, executed and delivered by the
Company and constitutes or will constitute the valid and binding agreement of
the Company.
4. Piggyback Registration
At any time that the Company proposes to register any of its stock or
other securities under the Securities Act of 1933, as amended, (other than
registration relating solely to the sale of securities to participants in a
Company stock plan), the Company shall, all at the Company's cost, include the
Shares in such registration statement. If such registration statement is being
filed in connection with an underwritten public offering, the Company shall
request that the managing underwriter (if any) of such underwritten offering
include the Shares. If such underwriter agrees to include the Shares in the
underwritten offering, the Company shall cause to be registered under the Act
all of the Shares; provided, that, if the managing underwriter of such
underwritten offering shall advise the Company that it declines to include a
portion or all of the Shares in the registration statement, then such Shares
shall be excluded from such registration statement.
In any event, the Company shall not be required to include the Shares
unless the Purchaser accepts the terms of the underwriting as agreed between the
Company and the underwriter.
5. Miscellaneous
5.1 Notices. All notices and other communications provided herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by certified mail, postage prepaid, to a party's designated
address set froth above, if sent by facsimile, to its facsimile number at such
address.
3
<PAGE>
5.2 Counterparts; Entire Agreement. This Agreement may be executed in
counterparts. This Agreement and the Warrant annexed hereto constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof.
5.3 Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
5.4 Amendment. This Agreement may be amended only by a written
instrument signed by the parties hereto which specifically states that it is
amending this Agreement.
5.5 Applicable Governing Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and construed and
enforced in accordance with, the laws of the State of New York.
5.6 Headings. The headings herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit, expand or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TTR INC.
By: /s/ MARC TOKAYER
---------------------------
Marc D. Tokayer
President
DALIMORE CONSULTING LTD.
By: /s/ IRENE MORRISON
---------------------------
Irene Morrison
Title: Director
4
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made on the 1st day of February, 1999 by and
between TTR TECHNOLOGIES INC., a company established under the laws of the State
of Delaware (the "Company") with offices at 1841 Broadway, New York, N.Y. and
Abraham Stephansky in trust (the "Purchaser").
W I T N E S S E T H
WHEREAS, the Purchaser desires to subscribe for and purchase up to
130,682 shares of Common Stock, par value $0.001, of the Company (the "Shares"),
for a per Share purchase price of $0.88 (up to an aggregate purchase price of
$115,000) (the "Purchase Price");
WHEREAS, the Company is willing to sell the Shares to the Purchaser on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and
considerations set forth herein, the parties hereby agree as follows.
1. Subscription for and Purchase of Stock; Issuance of Warrants
1.1 Purchase of Stock. Subject to the terms and conditions stated
herein, the Purchaser hereby subscribes for and agrees to purchase, and the
Company agrees to sell to the Purchaser, the Shares in consideration of the
payment by the Purchaser of the Purchase Price, on such dates as the Company may
demand from the Purchaser from time to time ("Purchase Dates").
1.2 Delivery. The Purchaser shall deliver to the Company, on each of
the Purchase Dates, the amount of the Purchase Price then requested by the
Company in immediately available funds by wire transfer to a bank account
designated by the Company or by check made payable to Company or as Company
designates. Upon and subject to receipt of the full amount of the Purchase Price
then requested, the Company shall deliver to the Purchaser stock certificate(s),
registered in the Purchaser's name for such number of the Shares then purchased.
2. Representations of the Purchaser; Restrictions on Transfer
2.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, the Purchaser agrees that it will
not transfer any of the Shares.
2.2 Not for Resale. The Purchaser represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof. The
Purchaser agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the
<PAGE>
rules and regulations in effect thereunder (the "Securities Act"), or (ii)
counsel for the Purchaser shall have furnished the Company with an opinion,
reasonably acceptable to the Company, that no such registration is required
because of the availability of an exemption under the Securities Act.
2.3 Certain Permitted Transfers. Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
2.4 Rule 144 Sales. The Purchaser may sell at any time any of the
Securities in a Rule 144 Transaction (as hereinafter defined); provided, that,
each such sale shall be made in compliance with this Section 2.4. If any of the
Securities are disposed of according to Rule 144 ("Rule 144 Transaction") under
the Securities Act or otherwise, the Purchaser shall promptly notify the Company
of such intended disposition and shall deliver to the Company at or prior to the
time of such disposition such documentation as the Company may reasonably
request in connection with such sale and, in the case of a disposition pursuant
to Rule 144, shall deliver to the Company an executed copy of any notice on Form
144 required to filed with the Securities and Exchange Commission.
2.5 Legend. Each certificate representing the Shares shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF A
STOCK PURCHASE AGREEMENT DATED AS OF NOVEMBER__, 1999 (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY)."
2.6 Qualified Investor The Purchaser hereby represents and warrants to
the Company as follows:
(a) it has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of this
investment and to make an informed investment decision with respect
thereto, and it or its advisors have received such information requested by
them concerning the Company in order to evaluate the merits or risks of
making this investment. Further, it is acknowledged that the Purchaser or
its attorney, accountant or advisor have had the opportunity to ask
questions of, and receive answers from, the officers of the Company
concerning the terms and conditions of this investment and to obtain
information relating to the Company.
2
<PAGE>
(b) The purchase of the Securities involves risks which it has
evaluated, and is able to bear the economic risk of such purchase including
the total loss of its investment. It has been advised of the current
financial condition of the Company and of the possible adverse effects of
such financial condition on the Company's general business.
3. Company's Representations and Warranties
3.1 The Company has all requisite power and authority to issue, sell
and deliver the Securities in accordance with and upon the terms and conditions
set forth in this Agreement, and all corporate action required to be taken by
the Company for the due and proper authorization, issuance and delivery of the
Securities will, upon delivery thereof, have been validly and sufficiently
taken. The Securities, when sold and paid for as contemplated in this Agreement,
will be duly authorized, validly issued, fully paid and non-assessable and,
except as otherwise provided by applicable law, free of all liens, claims and
encumbrances.
3.2 The Company has full corporate right, power and authority to enter
into this Agreement and to issue the Securities, and this Agreement and the
Securities have been or will be duly authorized, executed and delivered by the
Company and constitutes or will constitute the valid and binding agreement of
the Company.
4. Piggyback Registration
At any time that the Company proposes to register any of its stock or
other securities under the Securities Act of 1933, as amended, (other than
registration relating solely to the sale of securities to participants in a
Company stock plan), the Company shall, all at the Company's cost, include the
Shares in such registration statement. If such registration statement is being
filed in connection with an underwritten public offering, the Company shall
request that the managing underwriter (if any) of such underwritten offering
include the Shares. If such underwriter agrees to include the Shares in the
underwritten offering, the Company shall cause to be registered under the Act
all of the Shares; provided, that, if the managing underwriter of such
underwritten offering shall advise the Company that it declines to include a
portion or all of the Shares in the registration statement, then such Shares
shall be excluded from such registration statement.
In any event, the Company shall not be required to include the Shares
unless the Purchaser accepts the terms of the underwriting as agreed between the
Company and the underwriter.
5. Miscellaneous
5.1 Notices. All notices and other communications provided herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by certified mail, postage prepaid, to a party's designated
address set froth above, if sent by facsimile, to its facsimile number at such
address.
3
<PAGE>
5.2 Counterparts; Entire Agreement. This Agreement may be executed in
counterparts. This Agreement and the Warrant annexed hereto constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof.
5.3 Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
5.4 Amendment. This Agreement may be amended only by a written
instrument signed by the parties hereto which specifically states that it is
amending this Agreement.
5.5 Applicable Governing Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and construed and
enforced in accordance with, the laws of the State of New York.
5.6 Headings. The headings herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit, expand or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TTR TECHNOLOGIES INC.
By: /s/ MARC TOKAYER
------------------------------
Marc D. Tokayer
President
/s/ ABRAHAM STEPHANSKY
--------------------------------
Abraham Stephansky in Trust
4
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made on the 1st day of April, 1999 by and
between TTR TECHNOLOGIES INC., a company established under the laws of the State
of Delaware (the "Company") with offices at 1841 Broadway, New York, N.Y. and
Parnell Ltd. (the "Purchaser").
W I T N E S S E T H
WHEREAS, the Purchaser desires to subscribe for and purchase up to
75,000 shares of Common Stock, par value $0.001, of the Company (the "Shares"),
for a per Share purchase price of $0.60 (up to an aggregate purchase price of
$45,000) (the "Purchase Price");
WHEREAS, the Company is willing to sell the Shares to the Purchaser on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and
considerations set forth herein, the parties hereby agree as follows.
1. Subscription for and Purchase of Stock; Issuance of Warrants
1.1 Purchase of Stock. Subject to the terms and conditions stated
herein, the Purchaser hereby subscribes for and agrees to purchase, and the
Company agrees to sell to the Purchaser, the Shares in consideration of the
payment by the Purchaser of the Purchase Price, on such dates as the Company may
demand from the Purchaser from time to time ("Purchase Dates").
1.2 Delivery. The Purchaser shall deliver to the Company, on each of
the Purchase Dates, the amount of the Purchase Price then requested by the
Company in immediately available funds by wire transfer to a bank account
designated by the Company or by check made payable to Company or as Company
designates. Upon and subject to receipt of the full amount of the Purchase Price
then requested, the Company shall deliver to the Purchaser stock certificate(s),
registered in the Purchaser's name for such number of the Shares then purchased.
2. Representations of the Purchaser; Restrictions on Transfer
2.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, the Purchaser agrees that it will
not transfer any of the Shares.
2.2 Not for Resale. The Purchaser represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof. The
Purchaser agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the
<PAGE>
rules and regulations in effect thereunder (the "Securities Act"), or (ii)
counsel for the Purchaser shall have furnished the Company with an opinion,
reasonably acceptable to the Company, that no such registration is required
because of the availability of an exemption under the Securities Act.
2.3 Certain Permitted Transfers. Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
2.4 Rule 144 Sales. The Purchaser may sell at any time any of the
Securities in a Rule 144 Transaction (as hereinafter defined); provided, that,
each such sale shall be made in compliance with this Section 2.4. If any of the
Securities are disposed of according to Rule 144 ("Rule 144 Transaction") under
the Securities Act or otherwise, the Purchaser shall promptly notify the Company
of such intended disposition and shall deliver to the Company at or prior to the
time of such disposition such documentation as the Company may reasonably
request in connection with such sale and, in the case of a disposition pursuant
to Rule 144, shall deliver to the Company an executed copy of any notice on Form
144 required to filed with the Securities and Exchange Commission.
2.5 Legend. Each certificate representing the Shares shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF A
STOCK PURCHASE AGREEMENT DATED AS OF NOVEMBER__, 1999 (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY)."
2.6 Qualified Investor The Purchaser hereby represents and warrants to
the Company as follows:
(a) it has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of this
investment and to make an informed investment decision with respect
thereto, and it or its advisors have received such information requested by
them concerning the Company in order to evaluate the merits or risks of
making this investment. Further, it is acknowledged that the Purchaser or
its attorney, accountant or advisor have had the opportunity to ask
questions of, and receive answers from, the officers of the Company
concerning the terms and conditions of this investment and to obtain
information relating to the Company.
2
<PAGE>
(b) The purchase of the Securities involves risks which it has
evaluated, and is able to bear the economic risk of such purchase including
the total loss of its investment. It has been advised of the current
financial condition of the Company and of the possible adverse effects of
such financial condition on the Company's general business.
3. Company's Representations and Warranties
3.1 The Company has all requisite power and authority to issue, sell
and deliver the Securities in accordance with and upon the terms and conditions
set forth in this Agreement, and all corporate action required to be taken by
the Company for the due and proper authorization, issuance and delivery of the
Securities will, upon delivery thereof, have been validly and sufficiently
taken. The Securities, when sold and paid for as contemplated in this Agreement,
will be duly authorized, validly issued, fully paid and non-assessable and,
except as otherwise provided by applicable law, free of all liens, claims and
encumbrances.
3.2 The Company has full corporate right, power and authority to enter
into this Agreement and to issue the Securities, and this Agreement and the
Securities have been or will be duly authorized, executed and delivered by the
Company and constitutes or will constitute the valid and binding agreement of
the Company.
4. Piggyback Registration
At any time that the Company proposes to register any of its stock or
other securities under the Securities Act of 1933, as amended, (other than
registration relating solely to the sale of securities to participants in a
Company stock plan), the Company shall, all at the Company's cost, include the
Shares in such registration statement. If such registration statement is being
filed in connection with an underwritten public offering, the Company shall
request that the managing underwriter (if any) of such underwritten offering
include the Shares. If such underwriter agrees to include the Shares in the
underwritten offering, the Company shall cause to be registered under the Act
all of the Shares; provided, that, if the managing underwriter of such
underwritten offering shall advise the Company that it declines to include a
portion or all of the Shares in the registration statement, then such Shares
shall be excluded from such registration statement.
In any event, the Company shall not be required to include the Shares
unless the Purchaser accepts the terms of the underwriting as agreed between the
Company and the underwriter.
5. Miscellaneous
5.1 Notices. All notices and other communications provided herein shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by certified mail, postage prepaid, to a party's designated
address set froth above, if sent by facsimile, to its facsimile number at such
address.
3
<PAGE>
5.2 Counterparts; Entire Agreement. This Agreement may be executed in
counterparts. This Agreement and the Warrant annexed hereto constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof.
5.3 Binding Effect. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
5.4 Amendment. This Agreement may be amended only by a written
instrument signed by the parties hereto which specifically states that it is
amending this Agreement.
5.5 Applicable Governing Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by and construed and
enforced in accordance with, the laws of the State of New York.
5.6 Headings. The headings herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit, expand or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TTR TECHNOLOGIES INC.
By: /s/ MARC TOKAYER
----------------------------
Marc D. Tokayer
President
PARNELL LTD.
By: /s/ IRENE MORRISON
------------------------------
Irene Morrison
Title: Director
4
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 1st day of June,
1998 by and between TTR Inc., a Delaware corporation (hereafter "TTR" or the
"Company") and Limekiln Ltd., a _____________ 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 software products and components;
WHEREAS, Consultant has experience and expertise in the providing
general financial and investment advice to high-tech companies, including
without limitation, locating and interesting strategic investors, considering
potential acquisition targets for the Company and locating other potential areas
of joint cooperation and development (hereinafter the "Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the 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.
1.2 Consultant shall report regularly to the President of the Company
with respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder, the Company shall issue to
Consultant 50,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
through June 1, 1999, unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an
<PAGE>
opinion, reasonably acceptable to the Company, that no such registration is
required because of the availability of an exemption under the Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act (either of which event, a "Public
Offering"), Consultant may sell at any time any of its Securities in a Rule
144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according
to Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
2.5 Legend. Each certificate representing the Securities shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AGREEMENT DATED AS OF June 1, 1998 (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY)."
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.
2
<PAGE>
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.
5.5 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.
6. Ownership
6.1 '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.
6.2 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.
6.3 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 6 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.
6.4 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.
6.5 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.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
3
<PAGE>
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.
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 seven (7) days from the date of mailing by
registered mail or immediately if delivered by
4
<PAGE>
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 executed this Agreement as of the
date first above written.
TTR Inc. Limekiln Ltd.
/s/ MARC TOKAYER /s/___________
Marc Tokayer
5
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into as of the 1st day of June,
1998 by and between TTR Inc., a Delaware corporation (hereafter "TTR" or the
"Company") and Trax Investments Ltd., a _____________ 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 software products and components;
WHEREAS, Consultant has experience and expertise in the providing
general financial and investment advice to high-tech companies, including
without limitation, locating and interesting strategic investors, considering
potential acquisition targets for the Company and locating other potential areas
of joint cooperation and development (hereinafter the "Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the 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.
1.2 Consultant shall report regularly to the President of the Company
with respect to Consultant's activities hereunder.
2. Compensation For services rendered hereunder, the Company shall issue to
Consultant 50,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock" or "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
through June 1, 1999, unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities.
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Consultant agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (each a "Transfer")
any of the Securities unless such Transfer complies with the provisions of this
Agreement and (i) the Transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Securities Act"), or (ii) counsel for
Consultant shall have furnished the Company with an
<PAGE>
opinion, reasonably acceptable to the Company, that no such registration is
required because of the availability of an exemption under the Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act (either of which event, a "Public
Offering"), Consultant may sell at any time any of its Securities in a Rule
144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 4.4 below.
4.4 Rule 144 Sales. If any of the Securities are disposed of according
to Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise,
Consultant shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
2.5 Legend. Each certificate representing the Securities shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AGREEMENT DATED AS OF June 1, 1998 (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY)."
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.
2
<PAGE>
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.
5.5 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.
6. Ownership
6.1 '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.
6.2 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.
6.3 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 6 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.
6.4 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.
6.5 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.
6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
3
<PAGE>
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.
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 seven (7) days from the date of mailing by
registered mail or immediately if delivered by
4
<PAGE>
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 executed this Agreement as of the
date first above written.
TTR Inc. Trax Investments Ltd.
/s/ MARC TOKAYER /s/_______________
- -----------------------
Marc Tokayer
5
CONSULTING AGREEMENT
CONSULTING AGREEMENT made and entered into this 11th day of June 1998
by and between TTR Inc., a Delaware corporation (hereafter "TTR" or the
"Company") and Plans Inc., a New York corporation with offices at 250 S.End Ave.
(14F) New York NY 10280 ( hereafter the "Consultant")
W I T N E S S E T H
WHEREAS, the Company is in the business developing and marketing
various software products and components;
WHEREAS, Consultant has experience and expertise in the providing
general financial and investment advice to high-tech companies, including
without limitation, locating and interesting strategic investors, considering
potential acquisition targets for the Company and locating other potential areas
of joint cooperation and development (hereinafter the "Services");
WHEREAS, the Company desires to engage the services of Consultant to
provide the Services;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
undertakings of the parties, it is hereby agreed:
1. Engagement & Duties.
1.1 The Company hereby engages Consultant and the 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.
1.2 Consultant shall report regularly to the President of the Company
with respect to Consultant's activities hereunder.
2. Compensation
2.1 For services rendered hereunder, the Company shall issue to
Consultant (i)25,000 shares of the Company's Common Stock, par value $0.001 (the
"Common Stock") and (ii)warrants, exercisable through the fourth anniversary of
the date hereof, to purchase up to 25,000 shares of Common Stock, on the terms
and conditions on the attached Form of Warrant ("Warrants"; together with shares
of Common Stock issued hereunder, the "Securities").
3. Term & Termination. This Agreement shall continue in full force and effect
through June 1, 1999, unless the parties mutually agree otherwise.
4. Representations of Consultant Respecting the Securities
4.1 General Restriction on Transfer. Except for transfers otherwise
permitted by this Agreement or applicable law, Consultant agrees that it will
not transfer any of the Securities.
4.2 Not for Resale. Consultant represents that it is acquiring the
Securities for investment for its own account and not with a view to, or for
resale in connection with, the
<PAGE>
distribution or other disposition thereof. Consultant agrees that it will not,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of (each a "Transfer") any of the Securities unless such
Transfer complies with the provisions of this Agreement and (i) the Transfer is
pursuant to an effective registration statement under the Securities Act of
1933, as amended, and the rules and regulations in effect thereunder (the
"Securities Act"), or (ii) counsel for Consultant shall have furnished the
Company with an opinion, reasonably acceptable to the Company, that no such
registration is required because of the availability of an exemption under the
Securities Act.
4.3 Certain Permitted Transfers. (i) Notwithstanding the general
prohibition on Transfers contained herein, the Company acknowledges and agrees
that any Transfer in a private transaction which does not include a public
distribution is permitted and need not require an opinion of counsel, provided,
that prior to such Transfer, the transferee shall deliver to the Company a valid
written undertaking to be bound by the terms of this Agreement.
(ii) From and after the date on which the Company (i) shall have filed
a registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
respect of the Common Stock or (ii) engaged in a primary or secondary
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act (either of which event, a "Public
Offering"), the Purchaser may sell at any time any of its Shares in a Rule
144 Transaction (as hereinafter defined); provided, that, each such sale
shall be made in compliance with Section 4.4 below.
4.4 Rule 144 Sales. If any of the Shares are disposed of according to
Rule 144 ("Rule 144 Transaction") under the Securities Act or otherwise, the
Purchaser shall promptly notify the Company of such intended disposition and
shall deliver to the Company at or prior to the time of such disposition such
documentation as the Company may reasonably request in connection with such sale
and, in the case of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to filed with the
Securities and Exchange Commission.
4.5 Legend. Each certificate representing the Securities shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SUCH TRANSFER, SALE OR ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF A STOCK PURCHASE AGREEMENT DATED AS
JUNE 1, 1998 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY)."
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
2
<PAGE>
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.
5.5 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.
6. Ownership
6.1 '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.
6.2 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.
6.3 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 6 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.
6.4 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.
6.5 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.
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6.6 The provisions of this section shall survive the expiration or
termination of this agreement.
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.
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.
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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 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.
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 executed this Agreement as of the
date first above written.
TTR Inc.
BY /s/ MARC TOKAYER
---------------------------
Marc Tokayer
Plans Inc.
By: /s/ NICHOLAS A. LOBASSO
---------------------------
Nicholas A. Lobasso
President
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STANDARD OFFICE LEASE -- GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
[LOGO]
1. Basic Lease Provisions ("Basic Lease Provisions")
1.1 Parties: This Lease, dated, for reference purposes only, January 23,
1999, is made by and between Peppertree Properties Inc. (herein called "Lessor")
and TTR Inc. doing business under the name of TTR Inc., (herein called
"Lessee").
1.2 Premises: Suite Number(s) 215, First floors, consisting of
approximately 663 rentable feet, more or less, as defined in paragraph 2 and as
shown on Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located at 3425 S. Bascom Ave.
in the City of Campbell, County of Santa Clara, State of California, as more
particularly described in Exhibit A hereto, and as defined in paragraph 2.
1.4: Use: Software Sales, subject to paragraph 6.
1.5 Term: One (1) year commencing February 1, 1999 ("Commencement Date")
and ending January 31, 2000, as defined in paragraph 3.
1.6 Base Rent: One thousand five hundred ninety one & 20/100 per month,
payable on the 1st day of each month, per paragraph 4.1 ($1,591.20)
1.7 Base Rent Increase: On _______________________________________________
the monthly Base Rent payable under paragraph 1.6 above shall be adjusted as
provided in paragraph 4.3 below.
1.8 Rent Paid Upon Execution: $1,591.20 for February 1999.
1.9 Security Deposit: $1,591.20.
1.10 Lessee's Share of Operating Expense Increase: N/A% as defined in
paragraph 4.2.
2. Premises, Parking and Common Areas.
2.1 Premises: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project". Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises," including rights to the Common Areas as hereinafter specified.
2.2 Vehicle Parking: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use N/A parking spaces in the
Office Building Project at the monthly rate applicable from time to time for
monthly parking as set by Lessor and/or its licensee.
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor shall
have the right, without notice; in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.2.2 The monthly parking rate per parking space will be $ 0 per
month at the commencement of the term of this Lease, and is subject to change
upon five (5) days prior written notice to Lessee. Monthly parking fees shall be
payable one month in advance prior to the first day of each calendar month.
2.3 Common Areas--Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.
2.4 Common Areas--Rules and Regulations. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the noncompliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project,
2.5 Common Areas--Changes Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size, shape,
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries
of the Office Building Project to be a part of the Common Areas, provided that
such other land and improvements have a reasonable and functional relationship
to the Office Building Project:
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Office Building Project as Lessor
may, in the exercise of sound business judgment deem to be appropriate.
3. Term.
3.1 Term. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay in Possession. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease or
the obligations of Lessee hereunder or extend the term hereof; but, in such
case, Lessee shall not be obligated to pay rent or perform any other obligation
of Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee, Lessee may, at Lessee's
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option, by notice in writing to Lessor within ten (10) days thereafter, cancel
this Lease, in which event the parties shall be discharged from all obligations
hereunder; provided, however, that, as to Lessee's obligations, Lessee first
reimburses Lessor for all costs incurred for Non-Standard Improvements and, as
to Lessor's obligations, Lessor shall return any money previously deposited by
Lessee (less any offsets due Lessor for Non-Standard Improvements); and provided
further, that if such written notice by Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect.
3.2.1 Possession Tendered--Defined. Possession of the Premises shall
be deemed tendered to Lessee ("Tender of Possession") when (1) the improvements
to be provided by Lessor under this Lease are substantially completed, (2) the
Building utilities are ready for use in the Premises, (3) Lessee has reasonable
access to the Premises, and (4) ten (10) days shall have expired following
advance written notice to Lessee of the occurrence of the matters described in
(1), (2) and (3), above of this paragraph 3.2.1.
3.2.2 Delays Caused by Lessee. There shall be no abatement of rent,
and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors.
3.3 Early Possession. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the Lease term is
defined as the completion of the improvements, Lessee and Lessor shall execute
an amendment to this Lease establishing the date of Tender of Possession (as
defined in paragraph 3.2.1) or the actual taking of possession by Lessee,
whichever first occurs, as the Commencement Date.
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agency or shall be discontinued, then the index most nearly the same as the
C.P.I. shall be used to make such calculations. In the event that Lessor and
Lessee cannot agree on such alternative index, then the matter shall be
submitted for decision to the American Arbitration Association in the County in
which the Premises are located, in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties, notwithstanding one party failing to appear after due notice of the
proceeding. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
4.3.4 Lessee shall continue to pay the rent at the rate previously
in effect until the increase, if any, is determined. Within five (5) days
following the date on which the increase is determined, Lessee shall make such
payment to Lessor as will bring the increased rental current, commencing with
the effective date of such increase through the date of any rental instalments
then due. Thereafter the rental shall be paid at the increased rate.
4.3.5 At such time as the amount of any change in rental required by
this Lease is known or determined, Lessor and Lessee shall execute an amendment
to this Lease setting forth such change.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder, or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said deposit for the payment of any rent or other charge in
default for the payment of any other sum to which Lessor may become obligated by
reason of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any portion of
said deposit, Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to the
full amount then required of Lessee. If the monthly Base Rent shall, from time
to time, increase during the term of this Lease, Lessee shall, at the time of
such increase, deposit with Lessor additional money as a security deposit so
that the total amount of the security deposit held by Lessor shall at all times
bear the same proportion to the then current Base Rent as the initial security
deposit bears to the initial Base Rent set forth in paragraph 1.6 of the Basic
Lease Provisions. Lessor shall not be required to keep said security deposit
separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or, at Lessor's option, to the last assignee,
if any, of Lessee's interest hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the purpose set
forth in paragraph 1.4 of the Basic Lease Provisions or any other use which is
reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, does not violate any covenants or restrictions of record,
or any applicable building code, regulation or ordinance in effect on such Lease
term Commencement Date. In the event it is determined that this warranty has
been violated, then it shall be the obligation of the Lessor, after written
notice from Lessee, to promptly, at Lessor's sole cost and expense, rectify any
such violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any fire insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises and the occupation and use by Lessee of the Premises.
Lessee shall conduct its business in a lawful manner and shall not use or permit
the use of the Premises or the Common Areas in any manner that will tend to
create waste or a nuisance or shall tend to disturb other occupants of the
Office Building Project.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in possession) and
Lessor warrants to Lessee that the plumbing, lighting, air conditioning, and
heating system in the Premises shall be in good operating condition. In the
event that it is determined that this warranty has been violated, then it shall
be the obligation of Lessor, after receipt of written notice from Lessee setting
forth with specificity the nature of the violation, to promptly, at Lessor's
sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises and the Office Building Project in their condition existing
as of the Lease Commencement Date or the date that Lessee takes possession of
the Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessor's agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas, and
the equipment whether used exclusively for the Premises or in common with other
premises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily a part of the Building or are above
then Building standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any part
thereof. Lessee expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Premises in good order, condition and repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear, Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, ordinary wear and tear excepted, clean and free of debris. Any
damage or deterioration of the Premises shall not be deemed ordinary wear and
tear if the same could have been prevented by good maintenance practices by
Lessee. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of Lessee's trade fixtures, alterations, furnishings and
equipment. Except as otherwise stated in this Lease, Lessee shall leave the air
lines, power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall panelling,
ceilings and plumbing on the Premises and in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make
any alterations, improvements, additions, Utility Installations or repairs in,
on or about the Premises, or the Office Building Project. As used in this
paragraph 7.3 the term "Utility Installation" shall mean carpeting, window and
wall coverings, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and telecommunication wiring
and equipment. At the expiration of the term, Lessor may require the removal of
any or all of said alterations, improvements, additions or utility
Installations, and the restoration of the Premises and the Office Building
Project to their prior condition, at Lessee's expense. Should Lessor permit
Lessee to make its own alterations, improvements, additions or Utility
Installations, Lessee shall use only such contractor as has been expressly
approved by Lessor, and Lessor may require Lessee to provide Lessor, at Lessee's
sole cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, or use a contractor not
expressly approved by Lessor, Lessor may, at any time during the term of this
Lease, require that Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent to Lessee's making
such alteration, improvement, addition or Utility Installation, the consent
shall be deemed conditioned upon Lessee acquiring a permit to do so from the
applicable governmental agencies, furnishing a copy thereof to Lessor prior to
the commencement of the work, and compliance by Lessee with all conditions of
said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices of non-responsibility in or on the Premises
or the Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy
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any such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition. Lessor may require Lessee to
pay Lessor's reasonable attorneys' fees and costs in participating in such
action if Lessor shall decide it is to Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility
installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including but
not limited to, floor coverings, panelings, doors, drapes, built-ins, moldings,
sound attenuation, and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a).
Provided Lessee is not in default, notwithstanding the provisions of this
paragraph 7.3(e), Lessee's personal property and equipment, other than that
which is affixed to the Premises so that it cannot be removed without material
damage to the Premises or the Building, and other than Utility Installations,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.
7.4 Utility Additions. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.
8. Insurance; Indemnity,
8.1 Liability Insurance--Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard form
with Broad Form General Liability Endorsement (GL0404), or equivalent, in an
amount of not less than $1,000,000 per occurrence of bodily injury and property
damage combined or in a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor as an additional insured against liability
arising out of the use, occupancy or maintenance of the Premises. Compliance
with the above requirement shall not, however, limit the liability of Lessee
hereunder.
8.2 Liability Insurance--Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other risks
Lessor deems advisable from time to time, insuring Lessor, but not Lessee,
against liability arising out of the ownership, use, occupancy or maintenance of
the Office Building Project in an amount not less than $5,000,000.00 per
occurrence.
8.3 Property Insurance--Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease for the benefit of Lessee,
replacement cost fire and extended coverage insurance, with vandalism and
malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 Property Insurance--Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Office Building Project improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, plate glass, and such other perils as
Lessor deems advisable or may be required by a lender having a lien on the
Office Building Project. In addition, Lessor shall obtain and keep in force,
during the term of this Lease, a policy of rental value insurance covering a
period of one year, with loss payable to Lessor, which insurance shall also
cover all Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an insured loss as defined in paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Lessor. Lessee shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this Lease if the increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates evidencing the
existence and amounts of such insurance within seven (7) days after the
Commencement Date of this Lease. No such policy shall be cancellable or subject
to reduction of coverage or other modification except after thirty (30) days
prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to
the expiration of such policies, furnish Lessor with renewals thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this Lease
shall be endorsed to so provide.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, employees, or invitees, and from and against all costs, attorney's
fees, expenses and liabilities incurred by Lessor as the result of any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including but not limited to
the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
or injury to persons, in, upon or about the Office Building Project arising from
any cause and Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project.
8.9 No Representation of Adequate Coverage. Lessor makes no representation
that the limits or forms of coverage of insurance specified in this paragraph 8
are adequate to cover Lessee's property or obligations under this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent (50%) of the then Replacement Cost of
the building.
(c) "Premises Building Total Destruction" shall mean If the Building
of which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent (50%) or more of the then Replacement Cost of
the Building.
(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent (50%) or more of the then Replacement
Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
The fact that an Insured Loss has a deductible amount shall not make the loss an
uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to
be spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.
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9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Damage
or Premises Building Partial Damage, then Lessor shall, as soon as reasonably
possible and to the extent the required materials and labor are readily
available through usual commercial channels, at Lessor's expense, repair such
damage (but not Lessee's fixtures, equipment or tenant improvements originally
paid for by Lessee) to its condition existing at the time of the damage, and
this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is not
an Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.
9.3 Premises Building Total Destruction; Office Building Project Total
Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at any time
during the term of this Lease there is damage, whether or not it is an Insured
Loss, which falls into the classifications of either (i) Premises Building Total
Destruction, or (ii) Office Building Project Total Destruction, then Lessor may
at Lessor's option either (i) repair such damage or destruction as soon as
reasonably possible at Lessor's expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Lessee's fixtures, equipment or
tenant improvements, and this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial damage to the
Premises, Lessor may at Lessor's option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has
an option to extend or renew this Lease, and the time within which said option
may be exercised has not yet expired, Lessee shall exercise such option, if it
is to be exercised at all, no later than twenty (20) days after the occurrence
of an Insured Loss falling within the classification of Premises Damage during
the last twelve (12) months of the term of this Lease. If Lessee duly exercises
such option during said twenty (20) day period, Lessor shall, at Lessor's
expense, repair such damage, but not Lessee's fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease shall continue in
full force and effect. if Lessee fails to exercise such option during said
twenty (20) day period, then Lessor may at Lessor's option terminate and cancel
this Lease as of the expiration of said twenty (20) day period by giving written
notice to Lessee of Lessor's election to do so within ten (10) days after the
expiration of said twenty (20) day period, notwithstanding any term or provision
in the grant of option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises are
not usable (including loss of use due to loss of access or essential services),
the rent payable hereunder (including Lessee's Share of Operating Expense
Increase) for the period during which such damage, repair or restoration
continues shall be abated, provided (1) the damage was not the result of the
negligence of Lessee, and (2) such abatement shall only be to the extent the
operation and profitability of Lessee's business as operated from the Premises
is adversely affected. Except for said abatement of rent, if any, Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
or the Building under the provisions of this Paragraph 9 and shall not commence
such repair or restoration within ninety (90) days after such occurrence, or if
Lessor shall not complete the restoration and repair within six (6) months after
such occurrence, Lessee may at Lessee's option cancel and terminate this Lease
by giving Lessor written notice of Lessee's election to do so at any time prior
to the commencement or completion, respectively, of such repair or restoration.
In such event this Lease shall terminate as of the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 Termination--Advance Payments. Upon termination of this Lease pursuant
to this paragraph 9, an equitable adjustment shall be made concerning advance
rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes,
10.1 Payment of Taxes. Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 Additional Improvements. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 Definition of "Real Property Tax" As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Lessor in the Office Building Project or in any
portion thereof, as against Lessor's right to rent or other income therefrom,
and as against Lessor's business of leasing the Office Building Project. The
term "real property tax" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax," or (ii) the nature of which was hereinbefore included within the
definition of "real property tax," or (iii) which is imposed for a service or
right not charged prior to June 1,1978, or, if previously charged, has been
increased since June 1, 1978, or, (iv) which is imposed as a result of a change
in ownership, as defined by applicable local statutes for property tax purposes,
of the Office Building Project or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such change of
ownership, or (v) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
10.4 Joint Assessment. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. Utilities.
11.1 Services Provided by Lessor. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
11.2 Services Exclusive to Lessee. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately metered
to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
11.3 Hours of Service. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours as
may hereafter be set forth. Utilities and services required at other times shall
be subject to advance request and reimbursement by Lessee to Lessor of the cost
thereof.
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11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power,or suffer or permit any act that causes extra burden upon the utilities
or services, including but not limited to security services, over standard
office usage for the Office Building Project. Lessor shall require Lessee to
reimburse Lessor for any excess expenses or costs that may arise out of a breach
of this subparagraph by Lessee. Lessor may, in its sole discretion, install all
Lessee's expense supplemental equipment and/or separate metering applicable to
Lessee's excess usage or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating: (a) if Lessee is a corporation, more than
twenty-five percent (25%) of the voting stock of such corporation, or (b) if
Lessee is a partnership, more than twenty-five percent (25%) of the profit and
loss participation in such partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, all of which are referred to as "Lessee Affiliate";
provided that before such assignment shall be effective, (a) said assignee shall
assume, in full, the obligations of Lessee under this Lease and (b) Lessor shall
be given written notice of such assignment and assumption. Any such assignment
shall not, in any way, affect or limit the liability of Lessee under the terms
of this Lease even if after such assignment or subletting the terms of this
Lease are materially changed or altered without the consent of Lessee, the
consent of whom shall not be necessary.
12.3 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, no assignment or subletting
shall release Lessee of Lessee's obligations hereunder or alter the primary
liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense Increase, and to perform all other
obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent and such
action shall not relieve such persons from liability under this Lease or said
sublease; however, such persons shall not be responsible to the extent any such
amendment or modification enlarges or increases the obligations of the Lessee or
sublessee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or any one else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgement that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent null
and void.
12.4 Additional Terms and Conditions Applicable to Subletting. Regardless
of Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly incorporated
therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a default shall occur in the performance of Lessee's obligations under this
Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any sublease,
Lessee shall use only such form of sublessee as is satisfactory to Lessor, and
once approved by Lessor, such sublease shall not be changed or modified without
Lessor's prior written consent. Any sublease shall, by reason of entering into a
sublease under this Lease, be deemed, for the benefit of Lessor, to have assumed
and agreed to conform and comply with each and every obligation herein to be
performed by Lessee other than such obligations as are contrary to or
inconsistent with provisions contained in a sublease to which Lessor has
expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation to
do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee under
such sublease.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sub-lessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 Lessor's Expenses. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or sublessee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or of such assignment
or subletting, whichever is greater.
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
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(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee other than those referenced in subparagraphs (b) and (c), above, where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Lessor to Lessee; provided, however, that if the nature of
Lessee's noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Lessee shall not be deemed to be in default if
Lessee commenced such cure within said thirty (30) day period and thereafter
diligently pursues such cure to completion. To the extent permitted by law, such
thirty (30) day notice shall constitute the sole and exclusive notice required
to be given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors: (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. ss.101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days: (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.
13.2 Remedies. In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
pursues the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expense Increase or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any installment
of Base Rent, Operating Expense Increase, or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereof or the Office Building
Project are taken under the power of eminent domain, or sold under the threat of
the exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs; provided that if so
much of the Premises or the Office Building Project are taken by such
condemnation as would substantially and adversely affect the operation and
profitability of Lessee's business conducted from the Premises Lessee shall have
the option, to be exercised only in writing within thirty (30) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within thirty (30) days after the condemning authority shall have taken
possession), to terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the rent and Lessee's Share of
Operating Expense Increase shall be reduced in the proportion that the floor
area of the Premises taken bears to the total floor area of the Premises. Common
Areas taken shall be excluded from the Common Areas usable by Lessee and no
reduction of rent shall occur with respect thereto or by reason thereof. Lessor
shall have the option in its sole discretion to terminate this Lease as of the
taking of possession by the condemning authority, by giving written notice to
Lessee of such election within thirty (30) days after receipt of notice of a
taking by condemnation of any part of the Premises or the Office Building
Project. Any award for the taking of all or any part of the Premises or the
Office Building Project under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any separate award for loss of or
damage to Lessee's trade fixtures, removable personal property and unamortized
tenant improvements that have been paid for by Lessee. For that purpose the cost
of such improvements shall be amortized over the original term of this Lease
excluding any options. In the event that this Lease is not terminated by reason
of such condemnation, Lessor shall to the extent of severance damages received
by Lessor in connection with such condemnation, repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount in
excess of such severance damages required to complete such repair.
15. Broker's Fee.
(a) The brokers involved in this transaction are ___________________
as "listing broker" and _______________________ as "cooperating broker,"
licensed real estate broker(s). A "cooperating broker" is defined as any broker
other than the listing broker entitled to a share of any commission arising
under this Lease. Upon execution of this Lease by both parties, Lessor shall pay
to said brokers jointly, or in such separate shares as they may mutually
designate in writing, a fee as set forth in a separate agreement between Lessor
and said broker(s), or in the event there is no separate agreement between
Lessor and said broker(s), the sum of $_______________________, for brokerage
services rendered by said broker(s) to Lessor in this transaction.
(b) Lessor further agrees that (i) if Lessee exercises any Option,
as defined in paragraph 39.1 of this Lease, which is granted to Lessee under
this Lease, or any subsequently granted option which is substantially similar to
an Option granted to Lessee under this Lease, or (ii) if Lessee acquires any
rights to the Premises or other premises described in this Lease which are
substantially similar to what Lessee would have acquired had an Option herein
granted to Lessee been exercised, or (iii) if Lessee remains in possession of
the Premises after the expiration of the term of this Lease after having failed
to exercise an Option, or (iv) if said broker(s) are the procuring cause of any
other lease or sale entered into between the parties pertaining to the Premises
and/or any adjacent property in which Lessor has an interest, or (v) if the Base
Rent is increased, whether by agreement or operation of an escalation clause
contained herein, then as to any of said transactions or rent increases, Lessor
shall pay said broker(s) a fee in accordance with the schedule of said broker(s)
in effect at the time of execution of this Lease. Said fee shall be paid at the
time such increased rental is determined.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association, or other entity having
an ownership interest in said real property or any part thereof, when such fee
is due hereunder. Any transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this paragraph 15. Each listing and
cooperating broker shall be a third party beneficiary of the provisions of this
paragraph 15 to the extent of their interest in any commission arising under
this Lease and may enforce that right directly against Lessor; provided,
however, that all brokers having a right to any part of such total commission
shall be a necessary party to any suit with respect thereto.
(d) Lessee and Lessor each represent and warrant to the other that
neither has had any dealings with any person, firm, broker or finder (other than
the person(s), if any, whose names are set forth in paragraph 15(a), above) in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity is entitled to any commission or finder's fee in connection with said
transaction and Lessee and Lessor do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys' fees or liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
party.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date
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to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Lessee hereby agrees to deliver to any
lender or purchaser designated by Lessor such financial statements of Lessee as
may be reasonably required by such lender or purchaser. Such statements shall
include the past three (3) years' financial statements of Lessee. All such
financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such title
or interest, Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law or judgments from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Lessee
nor on any amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the Occupational Safety Health
Act, the legal use and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this
Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall be two hundred percent (200%) of the rent payable immediately preceding
the termination date of this Lease, and all Options, if any, granted under the
terms of this Lease shall be deemed terminated and be of no further effect
during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning this
Lease between the parties hereto shall be initiated in the county in which the
Office Building Project is located.
30. Subordination.
(a) This Lease, and any Option or right of first refusal granted
hereby, at Lessor's option, shall be subordinate to any ground lease, mortgage,
deed of trust, or any other hypothecation or security now or hereafter placed
upon the Office Building Project and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee's right to quiet possession of the Premises shall not be disturbed if
Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground lessor
shall elect to have this Lease and any Options granted hereby prior to the lien
of its mortgage, deed of trust or ground lease, and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease or such Options are
dated prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option, Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby
make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact and
in Lessee's name, place and stead, to execute such documents in accordance with
this paragraph 30(b).
31. Attorneys' Fees.
31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, trial or appeal thereon, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court in the same
or a separate suit, and whether or not such action is pursued to decision or
judgment. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notice of default
and consultations in connection therewith, whether or not a legal transaction is
subsequently commenced in connection with such default.
32. Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.
32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.
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32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forceable or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease. Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in violation
of this paragraph shall constitute a material default of this Lease.
34. Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Office Building Project.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder. Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease. The individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor and that such execution is binding upon
all parties holding an ownership interest in the Office Building Project.
39. Options.
39.1 Definition. As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property of Lessor or the right of first offer to
purchase other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
while occupying the Premises who does so without the intent of thereafter
assigning this Lease or subletting the Premises or any portion thereof, and may
not be exercised or be assigned, voluntarily or involuntarily, by or to any
person or entity other than Lessee; provided, however, that an Option may be
exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2 of
this Lease. The Options, if any, herein granted to Lessee are not assignable
separate and apart from this Lease, nor may any Option be separated from this
Lease in any manner, either by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1(c) or 13.1(d) and continuing until the noncompliance
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the day after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) and continuing
until the obligation is paid, or (iii) in the event that Lessor has given to
Lessee three or more notices of default under paragraph 13.1(c), or paragraph
13.1(d), whether or not the defaults are cured, during the 12 month period of
time immediately prior to the time that Lessee attempts to exercise the subject
Option. (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1(b), or is otherwise in default of
any of the terms, covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease. (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(d) within thirty (30)
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion, or
(iii) Lessor gives to Lessee three or more notices of default under paragraph
13.1(c), or paragraph 13.1(d), whether or not the defaults are cured, or (iv) if
Lessee has committed any non-curable breach, including without limitation those
described in paragraph 13.1(b), or is otherwise in default of any of the terms,
covenants and conditions of this Lease,
40. Security Measures--Lessor's Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option,
from providing security protection for the Office Building Project or any part
thereof, in which event the cost thereof shall be included within the definition
of Operating Expenses, as set forth in paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90 days
prior written notice;
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights expressly given
herein;
(d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas;
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the
roof of the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
41.2 The obstruction of Lessee's view, air. or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42. Performance Under Protest If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment. and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
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43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
47. Multiple Parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
48. Work Letter. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. Attachments. Attached hereto are the following documents which constitute a
part of this Lease:
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
PEPPERTREE PROPERTIES INC.
- -------------------------------------- --------------------------------------
By /s/ Linda Smith By
------------------------------------ ------------------------------------
Its PROPERTY MANAGER Its
------------------------------- -------------------------------
By By
------------------------------------ ------------------------------------
Its Its
------------------------------- -------------------------------
Executed at Campbell, CA Executed at
--------------------------- ---------------------------
on January 23, 1999 on
------------------------------------ ------------------------------------
Address 3425 S. BASCOM AVE. #220 Address
------------------------------ ------------------------------
Campbell, CA 95008
(C) 1984 American Industrial Real Estate Association FULL SERVICE--GROSS
PAGE 10 OF 10 PAGES
For these forms write or call the American Industrial Real Estate Association,
350 South Figueroa Street, Suite 275, Los Angeles, CA 90071, (213) 687-8777.
(C) 1984--By American Industrial Real Estate Association. All rights reserved.
No part of these words may be reproduced in any form without permission in
writing.
10
<PAGE>
43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
47. Multiple Parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
48. Work Letter. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. Attachments. Attached hereto are the following documents which constitute a
part of this Lease:
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
PEPPERTREE PROPERTIES INC. TTR Technologies, Inc.
- -------------------------------------- --------------------------------------
By /s/ Linda Smith By /s/ Robert Friedman - [ILLEGIBLE]
------------------------------------ ------------------------------------
Its PROPERTY MANAGER Its VP, Finance
------------------------------- -------------------------------
By By
------------------------------------ ------------------------------------
Its Its
------------------------------- -------------------------------
Executed at Campbell, CA Executed at New York, NY
--------------------------- ---------------------------
on January 23, 1999 on January, 1999
------------------------------------ ------------------------------------
Address 3425 S. BASCOM AVE. #220 Address 1841 Broadway Suite 1106
------------------------------- -------------------------------
Campbell, CA 95008 NY, NY 10023
(C) 1984 American Industrial Real Estate Association FULL SERVICE--GROSS
For these forms write or call the American Industrial Real Estate Association,
350 South Figueroa Street, Suite 275, Los Angeles, CA 90071, (213) 687-8777.
(C) 1984--By American Industrial Real Estate Association. All rights reserved.
No part of these words may be reproduced in any form without permission in
writing.
11
<PAGE>
43. Authority. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. Conflict. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications to
this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.
47. Multiple Parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
48. Work Letter. This Lease is supplemented by that certain Work Letter of even
date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. Attachments. Attached hereto are the following documents which constitute a
part of this Lease:
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
PEPPERTREE PROPERTIES INC.
- -------------------------------------- --------------------------------------
By /s/ Linda Smith By
------------------------------------ ------------------------------------
Its PROPERTY MANAGER Its
------------------------------- -------------------------------
By By
------------------------------------ ------------------------------------
Its Its
------------------------------- -------------------------------
Executed at Campbell, CA Executed at
--------------------------- ---------------------------
on January 23, 1999 on
------------------------------------ ------------------------------------
Address 3425 S. BASCOM AVE. #220 Address
------------------------------ ------------------------------
Campbell, CA 95008
(C) 1984 American Industrial Real Estate Association FULL SERVICE--GROSS
For these forms write or call the American Industrial Real Estate Association,
350 South Figueroa Street, Suite 275, Los Angeles, CA 90071, (213) 687-8777.
(C) 1984--By American Industrial Real Estate Association. All rights reserved.
No part of these words may be reproduced in any form without permission in
writing.
12
<PAGE>
STANDARD OFFICE LEASE
FLOOR PLAN
[LOGO]
[GRAPHIC OMITTED]
SPACE IS BEING PAINTED AND WALL IS BEING INSTALLED. THESE ITEMS WILL MOST LIKELY
BE DONE BEFORE THE 1st OF FEBRUARY.
EXHIBIT A
Initials:
--------
LS
--------
(C) 1984 American Industrial Real Estate Association FULL SERVICE--GROSS
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements accompanying the filing of Form 10KSB and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 74,445
<SECURITIES> 0
<RECEIVABLES> 7,793
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 103,488
<PP&E> 311,493
<DEPRECIATION> 0
<TOTAL-ASSETS> 490,545
<CURRENT-LIABILITIES> 2,937,936
<BONDS> 0
4,177
0
<COMMON> 0
<OTHER-SE> (3,102,344)
<TOTAL-LIABILITY-AND-EQUITY> 490,545
<SALES> 54,922
<TOTAL-REVENUES> 54,922
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,251,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 410,715
<INCOME-PRETAX> (5,578,540)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,578,540)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,578,540)
<EPS-BASIC> (1.54)
<EPS-DILUTED> (1.54)
</TABLE>
